Supreme Court Upholds State Authority on Court Fee Refunds in Mediation Settlements: Analysis of Sanjeevkumar Harakchand Kankariya v. Union of India (2024 INSC 1004)

Introduction

The Supreme Court of India, in its judgment dated December 19, 2024, in Sanjeevkumar Harakchand Kankariya v. Union of India (2024 INSC 1004), addressed a pivotal question concerning the interplay between state and central legislations regarding the refund of court fees upon settlement of disputes through alternative dispute resolution (ADR) mechanisms under Section 89 of the Code of Civil Procedure, 1908 (CPC). The appellant, Mr. Sanjeevkumar Kankariya, sought a complete refund of court fees after his civil suit was settled through mediation. The High Court of Bombay had denied this relief, leading to an appeal before the Supreme Court.

The case delves into the constitutional distribution of legislative powers between the Union and the States, specifically examining whether state legislation can override central legislation in matters of court fees and refunds in the context of ADR. It also explores the broader implications for the promotion of ADR mechanisms in India.

Summary of the Judgment

The Supreme Court dismissed the appeal, holding that the Maharashtra Court Fees Act, 1959 (MCFA) governs the refund of court fees in the state, and there is no inconsistency or repugnancy with the central legislation, namely, the Court Fees Act, 1870 (CFA), or provisions under the Legal Services Authorities Act, 1987 (LSA Act). The Court affirmed that court fees fall under Entry 3 of List II (State List) of the Seventh Schedule of the Constitution, granting states exclusive legislative competence over the matter.

However, recognizing the peculiar facts and the small amount involved, the Supreme Court, in exercise of its powers under Article 142 of the Constitution, granted the appellant a full refund of the court fees. The Court noted that the state legislature had subsequently amended the MCFA in 2018 to align with Section 16 of the CFA, allowing a full refund of court fees in cases settled under Section 89 of the CPC.

Analysis

Precedents Cited

The Court referred to several landmark judgments to interpret the constitutional provisions related to legislative powers and the doctrine of repugnancy:

• Jamshed N. Guzdar v. State of Maharashtra: Clarified the scope of Entry 11-A of List III (Concurrent List), emphasizing that "administration of justice" includes the constitution and organization of courts, but excludes matters exclusively under state jurisdiction like court fees.
• In Re: The Special Courts Bill, 1978: Discussed the impact of constitutional amendments on federalism and legislative competence.
• State of Tamil Nadu v. G.N. Venkataswamy: Reiterated that state legislatures have the power to legislate on matters under Entry 11-A of List III, including the administration of justice.
• M. Karunanidhi v. Union of India: Established the principles to determine repugnancy between state and central laws, outlining scenarios where state laws prevail or are rendered void.
• Ujagar Prints (II) v. Union of India: Highlighted that legislative competence can be drawn from multiple entries in the legislative lists, reinforcing the state's authority in matters of court fees.

Legal Reasoning

The Court's reasoning hinged upon the constitutional framework governing legislative powers. It noted that Entry 3 of List II explicitly empowers state legislatures to enact laws regarding "fees taken in all courts except the Supreme Court." Therefore, the MCFA, 1959, enacted by Maharashtra, is a valid exercise of legislative power, governing court fees and their refund within the state.

The appellant's argument that the resolution of disputes through ADR falls under "administration of justice" in Entry 11-A of List III was rejected. The Court clarified that while ADR mechanisms relate to the administration of justice, the specific issue of court fee refunds remains within the state's exclusive domain under Entry 3 of List II.

Furthermore, the Court addressed the contention regarding Section 21 of the LSA Act, 1987, which references the CFA, 1870 for court fee refunds in Lok Adalat settlements. It held that this provision does not extend to settlements achieved through mediation under Section 89 of the CPC, as Lok Adalats and mediation are distinct mechanisms with different statutory underpinnings.

Impact

This judgment reaffirms the state's authority to legislate on court fees and their refunds, thereby upholding the constitutional distribution of legislative powers. It clarifies that in matters of court fee refunds upon settlement through ADR mechanisms other than Lok Adalats, state laws prevail.

The decision may influence future cases where litigants seek refunds of court fees based on central legislation provisions in states with specific laws on the subject. It underscores the need for parties to be cognizant of state-specific statutes governing court fees and refunds.

Additionally, the Court's recognition of the amendment to the MCFA, 1959, aligning it with Section 16 of the CFA, 1870, reflects a legislative trend towards promoting ADR by providing incentives such as full court fee refunds. This could encourage more litigants to opt for settlement mechanisms under Section 89 of the CPC, reducing the burden on courts and fostering quicker dispute resolution.

Complex Concepts Simplified

Doctrine of Pith and Substance

This legal doctrine is applied to determine the true nature of legislation when there is a question of legislative competence or repugnancy between central and state laws. Essentially, it involves looking at the substance of the law to ascertain which legislative field it falls under. If a law primarily deals with a matter within the legislature's jurisdiction, incidental encroachments on another field do not render it invalid.

Doctrine of Repugnancy

Under Article 254 of the Constitution, if there is a conflict between central and state laws on a subject in the Concurrent List, the central law prevails, and the state law is void to the extent of the inconsistency. However, if the state law has received the President's assent, it can prevail within the state unless Parliament enacts a subsequent law on the same subject.

Entries in the Seventh Schedule

The Seventh Schedule of the Constitution divides legislative subjects between the Union and the States:

• List I (Union List): Subjects on which only Parliament can legislate.
• List II (State List): Subjects exclusively under state legislative competence.
• List III (Concurrent List): Subjects on which both Parliament and state legislatures can make laws.

In this case, Entry 3 of List II pertains to 'fees taken in all courts except the Supreme Court,' granting states exclusive power over court fee legislation.

Conclusion

The Supreme Court's judgment in Sanjeevkumar Harakchand Kankariya v. Union of India clarifies the constitutional distribution of legislative powers concerning court fees and their refund upon settlement through mediation under Section 89 of the CPC. The Court upheld the state's authority to legislate exclusively on court fees, affirming that the MCFA, 1959 governs such matters in Maharashtra.

The decision underscores the importance of adhering to state-specific legislation in matters of court fees and reinforces the constitutional provisions that allocate legislative competence. By granting the appellant a full refund under Article 142 in the peculiar facts of the case, the Court balances the interests of justice while maintaining the supremacy of constitutional processes.

This judgment serves as a significant precedent, emphasizing that while ADR mechanisms are encouraged to expedite dispute resolution, the incidental benefits such as court fee refunds are subject to state legislation. It highlights the necessity for harmonizing state laws with the central legislative intent to promote ADR, as reflected in the subsequent amendment of the MCFA, 1959.