When a civil court refers a dispute to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, it constitutes a settlement mode under Section 89 of the Code of Civil Procedure, 1908, entitling the plaintiff to a full refund of court fees.

Headnote:(A) Code of Civil Procedure, 1908 - Section 89 - Arbitration and Conciliation Act, 1996 - Section 8 - Court Fees Act, 1870 - Section 16 - Refund of court fee - Lawful to return court fees upon reference to arbitration - Referral to arbitration is one of the modes of settlement under Section 89 of the Code of Civil Procedure, 1908. (Paras 4, 5)

(B) Alternate Dispute Resolution - The object of Section 89 of the Code of Civil Procedure, 1908 is to encourage the settlement of disputes outside of court, thereby reducing the burden on the judiciary - Parties should not be denied a refund simply because they have not reached a stage of settlement before a specific forum. (Paras 4, 13, 15)

Facts of the case:
The petitioner filed a suit for eviction. Following an application by the respondent under Section 8 of the Arbitration and Conciliation Act, 1996, the trial court referred the dispute to arbitration. Subsequently, the trial court rejected the petitioner's request for a refund of the court fees paid upon filing the suit.

Findings of Court:
The court held that once a matter is referred to arbitration under Section 8 of the Arbitration and Conciliation Act, the civil court ceases to deal with the matter regarding the merits of the dispute. Being a recognized mode of settlement under Section 89 of the Code of Civil Procedure, 1908, the entitlement to a refund of court fee should vest in the party upon such reference itself, irrespective of whether the matter culminates in a settlement or not, to fulfill the object of encouraging alternative dispute resolution.

Issues: Whether the plaintiff is entitled to a refund of the court fee in a civil suit when the matter is referred to arbitration pursuant to Section 8 of the Arbitration and Conciliation Act, 1996.

Ratio Decidendi: Arbitration is a recognized mode of settlement under Section 89 of the Code of Civil Procedure, 1908. The beneficial and purposive interpretation of legislative intent indicates that parties who facilitate the decongestion of courts by opting for alternative dispute resolution mechanisms incentivized by law should not be deprived of the economic benefit of court fee refunds.

Result: Writ petition allowed; the order refusing the refund of court fee is set aside, and the trial court is directed to process the refund in accordance with the law.

THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA, PRAYING TO SET ASIDE THE ORDER DATED 22.01.2025 IN COM. O.S. NO.936 OF 2024 PASSED BY THE LXXXV ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT, BENGALURU (CCH 86) (AS PER ANNEXURE–A) TO THE EXTENT THAT IT REFUSES THE REQUEST FOR REFUND OF COURT FEES AND ETC.

THIS WRIT PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE H.T. NARENDRA PRASAD

ORAL ORDER

1. In this writ petition, the petitioner-plaintiff is challenging the order dated 22.01.2025 passed by the LXXXV Addl. City Civil & Sessions Judge, Bengaluru (for short ‘Trial Court’), in Com.O.S.No.936/2024, only to the extent of refusal of the request of the plaintiff for refund of court fees.

2. For the sake of convenience, the parties are referred to as per their ranking before the Trial Court in Original Suit.

3. The plaintiff filed a suit in Com.O.S.No.936/2024 before the Trial Court for eviction. On appearance, the defendant filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 seeking the Court to refer the matter to Arbitration. The Trial Court by order dated 22.01.2025 has allowed the application and referred the matter to Arbitration. However, the request of the plaintiff for refund of Court fee has been rejected. Being aggrieved by the order of the Trial Court refusing to refund the Court fee, the present writ petition is filed.

4. This Court in W.P.No.9801/2025 disposed of on 19.08.2025 while considering an identical issue, relying upon decisions of various High Courts and the Hon’ble Supreme Court has held that the reference of a dispute to arbitration is one of the modes of settlement contemplated under Section 89 of the Code of Civil Procedure. Consequently, a party would be entitled to refund of court fee upon such reference. The consistent judicial view, as noticed therein, is that once the matter is relegated to arbitration, the litigant ought not to be deprived of refund of the Court fee, as the very object of Section 89 CPC is to encourage alternative dispute resolution and reduce the burden on courts. Relevant paragraphs of the order passed in W.P.No.9801/2025 is extracted hereinbelow.

“9. The High Court of Madras in the case of TIDEL PARK LIMITED v. ARKAY ENERGY (RAMESWARM) LIMITED¹1 MANU/TN/2457/2018 considering the interplay between Section 16 of the Court Fees Act and Section 69A of the Tamil Nadu Court Fees Act, which is in parimateria with the Court Fees Act quoted hereinabove, has held as follows:

“2 . Vide separate proceedings in the main Suit today (26.2.2018) and an order in Application No. 1101 of 2018 (Amendment Application), Plaint prayers contained in sub paragraphs 'a' to 'c' have been given up in the light of a reference to Arbitration made in a Section 8-Application being Application No. 4804 of 2011 by an Order dated 17.1.2013 made by a learned Single Judge of this Court. I am informed that the Order of the learned Single Judge was carried in Appeal by way of an Intra Court Appeal in O.S.A. No. 313 of 2013 and by an Order dated 8.2.2017, the aforesaid Appeal was dismissed confirming the Order of the learned Single Judge. In other words, there is a reference to Arbitration as far as Plaint prayers 'a', 'b' & 'c' are concerned. In such circumstances, refund of Court-fee paid on the Plaint with regard to sub paragraphs 'a', 'b' & 'c' alone are sought for by the Plaintiff. In sum and substance, this is the prayer in this Application. In this regard, I deem it appropriate to extract the Memo of Valuation Paragraph in the Plaint, which is in Tabular Column form. The same reads as follows:

Sl. No.	Description of Claim	Amount(₹)	C.F. Paid(₹)
1	Prayer (a) & (b) being claim for Discount	₹4,85,32,773	₹4,88,853
2	Prayer (d) being claim for guaranteed interest	₹77,79,945	₹81,325
3	Prayer (f) being declaration by a Preliminary Decree	₹1000	₹75
4	Prayer (g) being claim

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2026 Supreme(Online)(Kar) 17965

When a civil court refers a dispute to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, it constitutes a settlement mode under Section 89 of the Code of Civil Procedure, 1908, entitling the plaintiff to a full refund of court fees.

Cases Referred (1)