Delhi High Court holds acceptance of IBC resolution plan constitutes “settlement” for court fee refund

The Hon’ble Delhi High Court, in its oral judgment dated June 1, 2026, delivered by Justice Subramonium Prasad in Sainik Industries Pvt. Ltd. v. Indian Sugar Manufacturing Company Limited, addressed whether a plaintiff withdrawing a recovery suit after approval of a Resolution Plan under the Insolvency and Bankruptcy Code, 2016 (IBC) is entitled to a refund of court fees under Section 16 of the Court Fees Act, 1870.

The Plaintiff, Sainik Industries Pvt. Ltd., had filed a commercial suit seeking recovery of Rs. 19,55,30,723/- with interest against the Defendant, Indian Sugar Manufacturing Company Limited, arising from an agreement dated July 28, 2016 for supply of 5,200 MT of sugar for Rs. 16,71,80,000/-. The Plaintiff paid an advance, but the Defendant supplied only 1,942.9 MT valued at Rs. 6,24,64,235/- and retained the balance amount of Rs. 3,75,35,765/- without supplying the remaining sugar.

During the pendency of the suit, CIRP proceedings were initiated against the Defendant. The Plaintiff submitted its claims to the Insolvency Resolution Professional and was categorized as an “Operational Creditor other than workmen and employee.” A Resolution Plan submitted by a consortium of M/s Shri Dutt India Private Limited and M/s Shri Dutt Biofuels Private Limited was approved by the NCLT on February 6, 2024. The Plaintiff accepted the amount allocated under the Plan, did not challenge it, and sought withdrawal of the suit with refund of court fees.

The key question before the Court was whether acceptance of the amount under the Resolution Plan could be treated as a “settlement” for Section 16 purposes, even though no formal bilateral settlement had been executed between the parties.

The Hon’ble Court, while allowing withdrawal of the suit and directing refund of court fees, held as follows:

1. Settlement by Acceptance of Resolution Plan: Although no formal bilateral settlement was executed, the Plaintiff’s acceptance of the amount allocated under the approved Resolution Plan constituted a settlement. By accepting a specified amount in lieu of its full claim, the Plaintiff agreed to bring quietus to the dispute.

2. Purposive Interpretation of Section 16: Applying the Supreme Court’s reasoning in High Court of Judicature at Madras through its Registrar General v. M.C. Subramaniam & Ors. [2021 (3) SCC 560], the Court held that any mode of settlement that brings quietus to the dispute falls within Section 16.

3. Incentivizing Dispute Resolution: A narrow interpretation would create the absurd result that parties settling through court-referred mediation receive refunds, while parties achieving the same resolution privately or through an IBC Resolution Plan do not. Section 16 must be construed to encourage final resolution and reduce litigation.

4. IBC as a Settlement Mechanism: Acceptance of a CIRP distribution is analogous to settlement because the Plaintiff agrees to a specific sum in lieu of its full claim. The Plaintiff’s authorized representative confirmed that the amount was accepted in full and final settlement and that no further proceedings would be initiated on the same cause of action. 

Conclusion

The ruling extends the court-fee refund framework to IBC resolution outcomes and harmonizes civil litigation with insolvency resolution. It clarifies that a dispute resolution process that brings quietus to the lis—whether mediation, arbitration, private settlement, or acceptance of an IBC Resolution Plan—can attract a refund under Section 16. Ultimately, the Court allowed withdrawal under Order XXIII Rule 1(4) of the CPC and directed refund of the entire court fee, reinforcing that litigants should not be penalized for accepting an approved resolution outcome that finally resolves their claims.