2023 (5) TMI 18 - HC - Insolvency and Bankruptcy

Refund of Court Fee in Summary Suit Due to Insolvency Proceedings: Impact on Alternative Dispute Resolution

The Court allowed the refund of court fee in a summary suit that could not proceed due to the initiation of insolvency proceedings under the Insolvency ... Refund of court-fee - settlement of claims - Section 16 of the Court-Fees Act, 1870 - interim moratorium upon commencement of insolvency proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 - participation in collective insolvency resolution process - purposive interpretation of settlement provisionsRefund of court-fee - Section 16 of the Court-Fees Act, 1870 - settlement of claims - interim moratorium upon commencement of insolvency proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 - participation in collective insolvency resolution process - purposive interpretation of settlement provisions - Whether the plaintiff is entitled to refund of the court-fee under Section 16 of the Court-Fees Act, 1870 where the summary suit could not proceed because insolvency proceedings under Section 95 IBC were instituted and the plaintiff's remedy is to file a claim and participate in the collective insolvency process. - HELD THAT: - The Court held that commencement of personal insolvency proceedings under Section 95 IBC triggers the interim moratorium and confines the plaintiff to the statutory remedy of filing a claim and participating in the collective resolution process. Because that course amounts to a settlement of claims by way of collective insolvency proceedings, it falls within the ambit of settlements contemplated by Section 16 of the Court-Fees Act when construed purposively. The Court relied on the reasoning in High Court of Madras v. M.C. Subramaniam as approving a broad, purposive construction of settlement provisions (including analogous provisions) to encompass out-of-court or privately arrived settlements and to extend refund benefits where the dispute is settled without further court adjudication. Applying that principle, the High Court found the facts here to justify extending the benefit of Section 16 and ordering refund of the court-fee deposited. [Paras 4, 5]Application allowed; registry directed to refund the court-fee deposited.Final Conclusion: The High Court allowed the application for refund of court-fee, holding that where insolvency proceedings under Section 95 IBC bar continuation of a suit and require the claimant to participate in the collective insolvency process, such collective settlement falls within the scope of Section 16 of the Court-Fees Act and warrants refund of the court-fee. Issues involved: Refund of court fee in a summary suit due to initiation of insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.The judgment dealt with an application for the refund of court fee in connection with a summary suit that could not proceed further due to the initiation of insolvency proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016. The learned counsel argued that although the situation did not strictly fall within the settlement ambit of Section 16 of the Court-Fees Act, 1870, the plaintiff would now participate in the collective settlement of claims under the IBC. Citing the Supreme Court judgment in High Court of Madras vs. M.C. Subramaniam, it was emphasized that Section 89 CPC aims to divert civil disputes towards alternative dispute resolution processes for speedy justice and settlement outside of court. The Court considered extending the benefits of Section 16 in this unique case.The Supreme Court judgment highlighted the importance of Section 89 CPC in diverting civil disputes towards alternative dispute resolution processes for speedy justice and settlement outside of court. It was noted that Section 16 of the Court Fees Act, 1870 is in pari materia with Section 69-A of the 1955 Act, and the principles regarding the refund of court fees for settlements were equally applicable. The Court affirmed that Section 89 CPC should be interpreted liberally, and the benefit of Section 69-A of the 1955 Act should extend to all methods of out-of-court dispute settlement legally arrived at, including private settlements that lead to the withdrawal of appeals.The Court observed that once personal insolvency proceedings begin under Section 95 of the IBC, the interim moratorium takes effect immediately. With the initiation of proceedings under the IBC, the plaintiff's only remedy would be to file a claim and participate in the collective statutory settlement process against the defendants. Since this process involves a settlement of claims, it falls within the scope of Section 16. Consequently, the Court allowed the prayer for the refund of the court fee deposited and directed the Registry to take necessary steps for the refund.