Litigants will not be entitled to refund of court fees if disputes get settled out of court after commencement of trial, rules Madras High Court

The Madras High Court ruled that litigants cannot claim a court-fee refund when a civil dispute is settled out of court after the trial has begun. The key cutoff is whether evidence has been recorded on the merits of the claim. This ruling limits the financial benefit of late settlements.

The court dismissed two civil revision petitions. One petitioner sought to challenge a refund of only 50 percent, while another challenged denial of a refund of ₹2.54 lakh. Justice P.B. Balaji held that neither was entitled to a refund because settlement came after trial commenced. He left the first petitioner’s 50 percent refund intact because the State had not challenged it.

The ruling followed the 2010 Afcons Infrastructure judgment rather than the 2021 M.C. Subramaniam decision. The court said an earlier decision by an equal-strength bench binds a later bench unless referred to a larger bench. The decision also protects fees already used for court administration and infrastructure.

Court fees are charges paid by litigants when they bring or pursue civil cases. The Madras High Court explained that Tamil Nadu requires these payments for a practical reason. They support the court system rather than serving only as a procedural formality.

The collected money helps meet infrastructure costs, including facilities needed to operate courts. It also supports the conduct of trials and pays salaries and allowances for court staff. These expenses arise whether a case ends in judgment or settlement, especially after court work has already begun.

This explains why the timing of settlement matters. A full refund after a lengthy trial could reduce money available for services already provided. The court therefore treated the refund rules as connected to the State exchequer and the continuing costs of running courts. The decision did not eliminate every refund, but tied eligibility to statutory conditions and the stage reached by the case.

Tamil Nadu’s rules provide two important refund routes. Section 69 originally allowed a 50 percent refund when a suit was dismissed as settled out of court before evidence was recorded on the merits. A 2017 amendment raised that provision to 100 percent without removing the timing condition.

Section 69A, introduced in 2007, provides a 100 percent refund when a dispute is referred to an approved alternative dispute resolution process and is then settled. The listed routes include arbitration, mediation, conciliation, Lok Adalat, and other mechanisms under Section 89 of the Code of Civil Procedure.

The Madras High Court stressed that a full refund is not automatic simply because parties settle. Under its reading of the law, settlement after trial begins does not qualify. The court also noted that an early refund under Section 69A could harm public funds if the ADR process failed to produce a settlement.

Alternative dispute resolution means resolving a dispute through a process other than completing a conventional court trial. In the article’s setting, these processes are routes courts may use under Section 89 of the Code of Civil Procedure. They are intended to help parties reach an outcome without continuing through every trial stage.

Arbitration generally places the dispute before an arbitrator for a decision. Mediation uses a neutral facilitator to help parties negotiate. Conciliation also assists settlement, while Lok Adalat provides a formal forum for resolving disputes. These descriptions use established legal meanings; the article itself mainly lists the methods.

Their importance here is financial as well as procedural. Section 69A allows a full court-fee refund when a court refers a dispute to such an ADR process and the dispute is settled. The Madras High Court said the relevant opportunity comes before trial begins. Otherwise, referral could become a way to prolong proceedings after substantial court work.

Justice P.B. Balaji relied on Afcons Infrastructure Limited versus Cherian Varkey Construction Company Private Limited, decided by the Supreme Court in 2010. He accepted the Advocate General’s argument that the 2021 M.C. Subramaniam judgment had not considered that earlier ruling. Both decisions came from benches of co-equal strength.

The court applied the rule that a later bench of equal strength must follow an earlier coordinate-bench ratio. If it disagrees, it should refer the issue to a larger bench. It should not simply adopt a contrary view. On that basis, Justice Balaji said he was following Afcons instead of M.C. Subramaniam.

Afcons also held that civil courts should refer disputes to Section 89 ADR mechanisms only before trial starts. Referral after that point could become a device for prolonging the trial. That principle matched the wording of Section 69, which preserves the phrase requiring settlement before evidence is recorded.

Timing matters because the refund rules distinguish early settlement from settlement after trial begins. Under Section 69, the suit must be settled before evidence has been recorded on the merits. The Madras High Court treated that wording as deliberate, especially after the legislature increased the possible refund to 100 percent in 2017.

For litigants, settling early can preserve eligibility for a refund. Settling after evidence begins can remove that entitlement, even if the parties avoid a final judgment. The two petitioners in the case settled only after trial commenced, so the judge held that neither was entitled to any refund, although one earlier 50 percent refund remained undisturbed.

For the State, court fees help pay for infrastructure, trials, and staff. Section 69A’s 2017 wording also raised concern because immediate repayment after referral could waste public funds if ADR failed. The judgment therefore connects refund policy with work already performed and public expenditure.

A civil trial is the formal court process through which parties present their claims, evidence, and arguments for a judicial decision. The article focuses especially on evidence recorded on the merits. Once that stage begins, the court and its staff have undertaken more of the work needed to resolve the dispute.

Courts may encourage settlement before evidence begins because alternative dispute resolution can end a dispute without completing the full trial process. The article identifies arbitration, mediation, conciliation, and Lok Adalat as possible ADR mechanisms. An early settlement can also qualify for a court-fee refund under the statutory conditions.

The Supreme Court’s Afcons ruling supplied an additional reason for an early cutoff. It said courts could refer disputes to Section 89 ADR mechanisms only before trial begins, because later referral might be used as a ruse to prolong proceedings. The Madras High Court used that reasoning to interpret the refund provisions.