Court Holds Court Fee Cannot Be Retained For Non-Maintainable Appeal: Madras High Court

The Madras High Court on 6 August held that court fee paid for an appeal that is not maintainable cannot be retained by the State, as such collection would be without the authority of law and result in unjust enrichment.

A Division Bench comprising Justices G.R. Swaminathan and K.K. Ramakrishnan refused to entertain J. Murugavel's appeal against Pichai, Proprietor of Vel Murugan Traders, filed under Section 37(2) of the Arbitration and Conciliation Act, 1996, challenging a final arbitral award. It held:

“When an arbitration appeal against a final award will not lie before the High Court under Section 37 of the 1996 Act, the acceptance of court-fee paid therefor is without the authority of law. This is one more reason for ordering refund. If refund is not ordered, there would be unjust enrichment for the State.”

The matter arose from a final arbitral award passed on 24 October 2024 in a dispute between Murugavel and Pichai. Murugavel approached the Madurai Bench by filing an appeal under Section 37(2) of the Arbitration and Conciliation Act, 1996, directly challenging the final award instead of filing an application under Section 34 of the Act, which provides for setting aside an arbitral award.

The Court found that the appeal could not be entertained. It explained that Section 37 specifies the orders against which an appeal can be filed and that a final arbitral award is not among them. Such an award can instead be challenged through an application under Section 34.

Further, the Bench noted that the appeal had “unfortunately” been filed and, more significantly, had also been numbered by the Registry despite being “ex-facie not maintainable”. It therefore, closed the appeal while granting Murugavel liberty to pursue the remedy available to him in accordance with law.

At this stage, Murugavel's counsel S. Arjun sought a refund of the court fee already paid. The Bench then considered Section 70 of the Tamil Nadu Court-Fees and Suits Valuation Act, 1955, which provides for the refund of a fee paid by “mistake or inadvertence”. It stressed that the use of the word “shall” makes refund mandatory when the statutory requirements are satisfied.

Applying the provision, the Bench held that Murugavel had filed the appeal without properly understanding the scope of Section 37 and that the mistake of law amounted to “inadvertence” for the purposes of Section 70. It held:

“We are clearly of the view that this appeal has been filed without properly understanding the scope of Section 37 of the Arbitration and Conciliation Act, 1996. This certainly amounts to 'inadvertence' within the meaning of Section 70 of the Court-Fees Act,”

Moreover, the Court reasoned that where a proceeding cannot be adjudicated because it was not maintainable from the outset, the litigant receives no judicial service in return for the court fee paid. It observed:

“Litigants come to the courts for adjudication of their lis. If the matter could not be taken up for adjudication at all because it was not maintainable in the first instance, the litigant did not receive any service. There has been a failure of consideration and a case for refund stands made out.”

Accordingly, the High Court closed Murugavel's appeal as not maintainable and directed the Registry to refund the court fee “forthwith and without any delay”. It also granted Murugavel liberty to pursue the appropriate remedy and directed that the time spent prosecuting the defective appeal be excluded while computing limitation. No costs were imposed.

Appearances for appellant (J. Murugavel): Advocate S. Arjun.