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Synopsis

The Supreme Court recently observed that the statutory provision under the Court Fees Act (the CFA), 1870, allowing for a refund when disputes are resolved through a Lok Adalat, cannot be automatically applied to disputes settled through mediation.

A bench of Justices C T Ravikumar and Sanjay Karol said that there are certain similarities in the two processes of Lok Adalat and mediation, however, there are certain undeniable differences, foremost among them being that the former is governed by independent legislation, and now, so are the certain aspects of the latter (Mediation Act, 2023).

The court rejected the equivalence between the two as misplaced.

It rejected a submission made before it that since a Central legislation, i.e., the Legal Services Authority Act, 1987, in connection with an alternate method of dispute resolution makes reference to the CFA, 1870, the same should be extended to other similar modes of dispute resolution as well. 

"In a sense, an effort has been made on part of the appellant to equate the Award of Lok Adalat to the resolution of his dispute by way of reference under Section 89 of the CPC, i.e., mediation. This equivalence is misplaced," the bench said.

Court was dealing with an appeal filed by Sanjeevkumar Harakchand Kankariya against a Bombay High Court's 2014 judgment which refused the plea for a direction to the State of Maharashtra to initiate a complete refund of court fees of all litigants including the appellant whose proceedings before the Civil Courts were disposed of in accordance with Section 89 of the Code of Civil Procedure 1908.

The appellant also sought quashing of notification of May 8, 2013, issued by the Law and Judiciary Department, Government of Maharashtra as contrary to the provisions of the Court Fees Act, 1870 read with certain provisions of the Legal Services Authorities Act, 1987. He also sought a declaration to the effect that the State of Maharashtra had no authority in law to issue a notification contrary to the provisions of the CFA, 1870.

The appellant was granted a refund of 50% of court fees, following the settlement of dispute in terms of compromise.

The court examined the issue of whether in view of the inconsistency between the CFA, 1870 and the MCFA, 1959, if any, would the appellant be entitled to a complete refund of court fees per the former, since it is a Central legislation and whether the Maharashtra State Legislature could have enacted the provision and brought out a notification giving refunds in ways contrary to and distinct from the manner and method provided in the Central Legislation.

It noted the primary argument was that the resolution of disputes by alternate mechanisms is an aspect of the administration of justice and, therefore, anything connected thereto inclusive of refund of court fees as a result of out of Court settlement, would be governed by Entry 11A of List III.

Further, the inconsistency between the Central and State Act would have to be resolved, giving the Central Act primacy over the State Act, it was argued.

"This argument is difficult to countenance," the bench said.

The court pointed out the administration of justice pertains to investment in all Courts with general, territorial and pecuniary jurisdiction. All the powers necessary for constitution and organisation of courts except the Supreme Court, and the High Courts, to some extent, have been invested with the State as well as the Centre, under this Entry, it said.

"Laws made by the Centre would necessarily prevail over the State made laws, should there be any inconsistency between the two, and the laws made by the latter shall be unconstitutional to the extent that they are inconsistent with the Central laws, by virtue of the Doctrine of Repugnancy," the bench said.

The bench pointed out court fees finds mention in the Seventh Schedule in Entry 3 of List II. 

"However, as is obvious, there is no inconsistency between Central and State legislation here," it said. 

The court pointed out the reason why it was difficult to accept the argument of the appellant was because court fees were explicitly governed by Entry 3 List II.

When that is the case, no argument pertaining to inconsistency between the two entries and the respective laws made thereunder can be entertained in law, the bench said.

Still further, the law-making power given as delineated in the Seventh Schedule is not constricted, but wide. When the competence to legislate is called into question, it is permissible to demonstrate the same from a conjoint reading of multiple entries and it need not flow directly from one particular entry, the court said.

"A natural conclusion that can be drawn is that if legislative competence can be demonstrated, drawing on multiple entries, the same can be taken to be beyond the pale of any doubt when there is a particular entry to that effect. Entry 3, List II specifically empowers the Stare to legislate in respect of fees taken in all courts, save this Court," the bench said.

Ergo, the court said, there is no reason to accept the appellant’s contention that simply because it involves settlement of the dispute per alternative dispute mechanisms, the matter pertaining to the court fee payable in such a case, would travel out of the purview of Entry 3, List II, and would instead fall within the amplitude of Entry 11-A, List III.

The court also dealt with the argument of the appellant that differentiation in the refund of fees applicable between the Central and State legislation would defeat the overall, salutary purpose of Section 89 CPC.

The bench said the only purpose of the provision is the resolution of the dispute by the means prescribed therein, aiding the reduction of pendency and backlog of cases. 

"The refund of court fees, either partial or complete, as the case may be, is a benefit, incidental to the resolution of the dispute. Undoubtedly, the added pecuniary advantage may serve as a reason to galvanize and buoy the position of ADR, leading an increasing number of persons involved in disputes to opt therefor, however, that aspect, is not in the realm of primary considerations when examining the growth of ADR, or the object and purpose of the introduction of Section 89 into the CPC," the bench said.

The court thus found it difficult to accept the submission that Section 89, CPC will be negated if the scheme of refund as envisaged by the MCFA, 1959 is given effect. 

"It cannot be doubted that the settlement of a dispute outside court is a cause for celebration in as much as it translates to early resolution of the dispute inter se the parties and it means also, that there is one less file to add on to already overflowing record rooms of the concerned civil courts. It also cannot be gainsaid that all efforts should be made to encourage the adoption of ADR mechanisms," the bench said.

Examining the submission regarding the reference in LSA Act, 1987 of the CFA, 1870 and its effect, if any, on MCFA, 1959, the bench said one is a Central legislation and the other is a State legislation. 

The LSA Act, 1987, the court pointed out, was enacted by the legislature to give effect to Article 39A of the Constitution of India which places responsibility upon the State to secure the operation of a legal system which promotes justice and further casts a responsibility upon the State to provide free legal aid by way of suitable legislation or schemes so as to ensure that justice is not the province of only those who are unaffected by economic or other disabilities. The primary mode of dispute settlement prescribed in the Act is the ‘Lok Adalat’, the constitution and functioning of which are discussed in Chapters 6 and 6A of the Act, it said.

"It is inconceivable as to how a reference to mediation under the CPC can be read to be the same or equal to proceeding before a Lok Adalat for any reference thereto, to be helpful to the case put forward by the appellant," the bench held.

The court opined that no error could be found with the reasoning of the High Court. 

The bench came to the inescapable conclusion, holding that Entry 11A List III cannot govern the refund of court fees when a matter is settled by methods of alternate dispute resolution, in the face of Entry 3 List II simply by the use of the words “administration of justice” in the former and, that reference to CFA, 1870 in respect of refund of court fees when the matter is settled by way of an Award of Lok Adalat does not mean that the same would be extended to the settlement of dispute by mediation for the simple reason that Lok Adalat and mediation are two distinct methods and cannot be equated.

The court held the appeal lacked merit and was liable to be dismissed. 

Following the High Court's suggestion to the State legislature that the differences in the court fees in Lok Adalat, vis-à-vis, the forms of ADR should be done away with the view to promote the adaptation of such methods of dispute resolution among the public, the court noted that the State legislature had indeed carried out such an amendment to the MCFA, 1959 and Section 16A had been introduced therein.

For the time when the amendment to the MCFA, 1959 granting partial or complete refund, as the case may be, in accordance with Section 43 as amended, the persons whose matters were settled by way of ADR would not be entitled to 100% refund, the bench said.

"Any matter settled under the processes mentioned in Section 89 CPC after the coming into force of the amendment, such parties would receive refund of court fees in its entirety," the bench said.

The total amount of court fees paid by the appellant, in respect to refund of which the matter had travelled up to the Supreme Court was approximately Rs 5 lakhs. Court found it not excessive and using jurisdiction under Article 142 of the Constitution, ordered that it shall be refunded in peculiar facts of the case.

Case Title: Sanjeevkumar Harakchand Kankariya Vs Union of India & Ors