Delhi High Court Rules for Court Fee Refund Post IBC Settlement

The Delhi High Court has recently determined that plaintiffs withdrawing a civil lawsuit after accepting payment under an insolvency resolution plan are eligible for a complete refund of court fees. This decision was made under the interpretation of the settlement provision within the Court Fees Act, as observed in the case of Sainik Industries Pvt Ltd v. Indian Sugar Manufacturing Co. Ltd.

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Case Background and Ruling

Justice Subramonium Prasad delivered this verdict while considering an application from Sainik Industries. The company filed a lawsuit against Indian Sugar Manufacturing Company Ltd in 2019, aiming to recover approximately ₹19.55 crore, plus interest, on a 2016 agreement concerning the supply of 5,200 metric tons of sugar. The court’s decision drew upon precedents set by the Supreme Court, which emphasized that any resolution of a dispute bringing a ‘quietus to the lis’ should qualify for a court fee refund, regardless of the settlement mechanism.

Although there was no direct traditional settlement, the court recognized the plaintiff’s acceptance of the resolution plan amount, thereby concluding the dispute. Justice Prasad noted, “Sainik Industries has accepted the amount under the CIRP process as full and final settlement of claims under the Suit and will not pursue further legal actions based on this cause of action.”

Legal Proceedings and Resolution

Sainik Industries initially paid significant court fees while filing the commercial lawsuit for recovery from Indian Sugar Manufacturing Company Ltd. Concurrent to the lawsuit, Sainik Industries initiated corporate insolvency resolution proceedings under the Insolvency and Bankruptcy Code (IBC) against Indian Sugar. Subsequently, a resolution plan proposed by a consortium led by Dutt India Pvt. Ltd. was approved by the National Company Law Tribunal (NCLT) on February 6, 2024.

As an operational creditor, Sainik Industries lodged its claim with the resolution professional and accepted the payment stipulated in the approved plan, choosing not to contest the NCLT’s order. Following this, Sainik Industries applied to the High Court to withdraw the lawsuit and sought a refund of the court fees, arguing that the IBC-based resolution should be seen as a settlement as per the Court Fees Act and a Delhi government notification that allows court fee refunds upon settlement withdrawal.

Conclusion and Legal Implications

Justice Prasad approved the withdrawal of the lawsuit and ordered the full refund of court fees by the High Court. Sainik Industries was represented by advocates Preeti Gupta and Urvashi Tyagi.

The ruling reinforces the interpretation that various mechanisms leading to dispute resolution, including IBC resolutions, can be treated as settlements for court fee refund purposes.

[Read Judgment]