IBC Resolution Plan Acceptance Is “Settlement” Under Section 16 Court Fees Act: Delhi High Court

On 1 June, the Delhi High Court held that acceptance of claims under a resolution plan in insolvency proceedings amounts to a “settlement” within the meaning of Section 16 of the Court Fees Act, 1870, thereby entitling a plaintiff to refund of court fee upon withdrawal of the suit.

Justice Subramonium Prasad allowed Sainik Industries Pvt. Ltd. to withdraw its recovery suit against Indian Sugar Manufacturing Company Ltd. and directed refund of the entire court fee. He held:

“However, the proceedings under the IBC were initiated against the Defendant and the Plaintiff submitted its claims before the Resolution Professional and has agreed to the amount that has been decided to be paid under the settlement process in the Resolution Plan to the Plaintiff herein. The net effect is that the Plaintiff has settled for an amount in order to bring a quietus to its claims and since the Plaintiff has agreed to accept the said amount, the ingredients of settlement are attracted to the facts of this case.”

The plaintiff had instituted a commercial suit seeking recovery of Rs 19.55 crore along with interest at 15% per annum. The dispute arose from a 2016 agreement for supply of 5,200 MT of sugar valued at Rs 16.71 crore. The plaintiff paid an advance of Rs 10 lakh, while the defendant supplied 1,942.9 MT worth Rs 6.24 crore. The remaining advance of Rs 3.75 crore was allegedly retained without corresponding supply, leading to the recovery action.

During the pendency of the suit, insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 were initiated against the defendant. The plaintiff filed its claim before the Insolvency Resolution Professional and agreed to the amount provided under the resolution plan approved by the National Company Law Tribunal.

On 18 May 2026, the plaintiff informed the Court of its decision to withdraw the suit after accepting the Corporate Insolvency Resolution Process settlement. It thereafter moved an application under Order XXIII Rule 1 of the Code of Civil Procedure seeking withdrawal and refund of court fees.

The Court examined Section 16 of the Court Fees Act, which permits refund of court fee where disputes are settled through modes recognised under Section 89 of the Code of Civil Procedure. It held that although the case did not involve a direct bilateral settlement between parties, the plaintiff's acceptance of the resolution plan under the insolvency framework brought finality to its claims and satisfied the ingredients of settlement.

The Bench relied on Registrar General v. M.C. Subramaniam & Ors and reiterated:

“The Apex Court is of the opinion that any kind of settlement by which the Plaintiff agrees to bring quietus to the dispute comes within the four corners of Section 16 of the Court Fees Act and that one cannot distinguish cases on the mode of settlement.”

It disposed of the suit as withdrawn under Order XXIII Rule 1(4) of the Code of Civil Procedure and directed refund of the entire court fee under Section 16 of the Court Fees Act.

Accordingly, the High Court allowed the application, recorded the statement of the plaintiff's authorised representative that the amount under the resolution plan had been accepted in full and final settlement, and that no further proceedings would be initiated on the same cause of action.