Sainik Industries v. Indian Sugar (2026): accepting payment under an IBC resolution plan is a 'settlement' that earns a court-fee refund

When a company you are suing for money goes into insolvency, and you take the amount the resolution plan offers you instead of pressing the suit, have you "settled"? Section 16 of the Court Fees Act, 1870 promises a refund of court fee where a dispute is settled — but it is worded around the modes of alternative dispute resolution in Section 89 of the Code of Civil Procedure, and an insolvency resolution plan is not, on a strict reading, one of them. In Sainik Industries Pvt. Ltd. v. Indian Sugar Manufacturing Company Ltd., decided on 1 June 2026, Subramonium Prasad, J. of the Delhi High Court answered that the substance of what happened was a settlement, and ordered the plaintiff's court fee refunded in full.

The facts in brief

Sainik Industries Pvt. Ltd. and Indian Sugar Manufacturing Company Ltd. had entered into an agreement dated 28 July 2016 for the supply of 5,200 MT of sugar for a total consideration of Rs. 16,71,80,000. According to the plaintiff, the defendant supplied only part of the contracted quantity — 1,942.9 MT, priced at Rs. 6,24,64,235 — and retained the balance of a substantial advance without supplying the corresponding sugar within the agreed period.

Sainik Industries therefore filed a commercial suit, CS(COMM) 474/2019, to recover Rs. 19,55,30,723 together with pendente lite and future interest at 15% per annum.

While the suit was pending, proceedings under the Insolvency and Bankruptcy Code, 2016 were initiated against the defendant. Sainik Industries lodged its claim before the Insolvency Resolution Professional and was categorised as an operational creditor. 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 National Company Law Tribunal by an order dated 6 February 2024. The plaintiff accepted the amount granted to it under that plan and did not challenge it. It then applied, under Order XXIII Rule 1 of the CPC, to withdraw the suit and for a refund of the court fee it had paid.

The question

The narrow question was whether the plaintiff's acceptance of the resolution-plan amount qualified as a "settlement" that triggers a refund of court fee under Section 16 of the Court Fees Act, 1870.

The difficulty was textual. Section 16, on its face, entitles a plaintiff to a refund where "the Court refers the parties to the suit to anyone of the mode of settlement of dispute referred to in Section 89 of the Code of Civil Procedure, 1908" — that is, the recognised alternative-dispute-resolution channels such as arbitration, conciliation, mediation and Lok Adalat. As the Court itself acknowledged, "strictly speaking, there is no settlement arrived at between the parties" here: there was no compromise negotiated across the table, no reference under Section 89, only the plaintiff's acceptance of what an insolvency resolution plan, approved by a tribunal, conferred upon it. The question was whether that substance could be read into Section 16.

What the Court held

The Court held that it could, and allowed the application: the suit was disposed of as withdrawn under Order XXIII Rule 1(4) of the CPC, and the entire court fee was ordered to be refunded under Section 16.

The reasoning moved from substance over form. Though there was no negotiated settlement, the plaintiff had submitted its claim, agreed to the amount decided to be paid to it under the resolution plan, and thereby brought an end to its claim against the defendant:

The Court anchored that conclusion in the Supreme Court's decision in High Court of Judicature at Madras through its Registrar General v. M.C. Subramaniam, (2021) 3 SCC 560, which it held applied "squarely" to the facts. M.C. Subramaniam had read Section 89 CPC and the cognate refund provision purposively, holding that parties who privately settle their dispute and so spare the court's time should not be denied a refund merely because they did not route the settlement through a Section 89 reference; a narrow reading would produce an "absurd and unjust outcome." Drawing the principle through to Section 16 — which it noted is in pari materia with the Tamil Nadu provision considered in M.C. Subramaniam — the Delhi High Court distilled the test:

The plaintiff's authorised representative confirmed in court that the amount accepted under the corporate insolvency resolution process was taken towards full and final settlement of the claims in the suit, and that no further proceedings would be initiated on the same cause of action. That statement was accepted and taken on record, and the refund was ordered.

Analysis

The judgment is short and the result intuitive, but the move it makes is worth marking. Section 16 is, as the Court reiterated through the precedents it cited, part of a taxing statute, and the orthodox instinct with a fiscal provision is to read it strictly and against the subject. Sainik Industries runs the other way, applying the now-settled gloss from M.C. Subramaniam that the refund provision is beneficial in purpose — designed to incentivise parties to take disputes off the court's docket — and is therefore to be read by what it achieves rather than by the precise channel through which the dispute ends.

What the case adds is the application of that gloss to the insolvency context, where the "settlement" is not the product of bilateral negotiation at all. The amount the operational creditor received was fixed not by agreement with the defendant but by a resolution plan, prepared by a third-party resolution applicant and sanctioned by the NCLT. The Court's logic is that the creditor's acceptance of that amount, coupled with its decision not to challenge the plan and to abandon the suit, supplies the consensual element: the plaintiff has, of its own volition, chosen to take the plan amount in lieu of pursuing its decree, and so has agreed to bring a quietus to the lis. On that view the resolution plan is the mechanism, and the creditor's acceptance is the settlement.

The Court was careful to note the supporting infrastructure for its conclusion. It pointed to the Division Bench decision in Nutan Batra v. Buniyaad Associates, 2018 SCC OnLine Del 12916, holding that court fee can be refunded even where the plaintiff withdraws a suit on the ground that the parties have settled, and to a notification of the Government of the NCT of Delhi permitting refund of court fee where a plaintiff withdraws a suit on the basis of settlement — a scenario covered by Order XXIII Rule 1(4) of the CPC. The plaintiff had also relied on the coordinate-bench decision in Proud Securities and Credits Private Limited v. Urrshila Kerkar, 2023 SCC OnLine Del 2270, itself built on M.C. Subramaniam. The refund here therefore sits within an established and consistent line, extended to a new factual setting rather than invented for it.

Why it matters

For commercial litigants, Sainik Industries closes a practical gap. A creditor that has both a pending money suit and a claim in the debtor's insolvency frequently finds, once a resolution plan is approved and accepted, that the suit has become pointless — the binding effect of an approved plan under Section 31 of the IBC means the creditor's entitlement is now whatever the plan provides, and the separate decree it was chasing is, for the same money, no longer available to pursue. The question that then arises is mundane but real: what happens to the court fee, often substantial on a high-value recovery claim, that was paid when the suit was filed?

This judgment answers that the fee is refundable, treating acceptance of the plan amount as a settlement within Section 16. The practitioner's takeaway is procedural and concrete: where a client withdraws a suit because it has accepted what an approved resolution plan offers, the withdrawal application — properly framed under Order XXIII Rule 1 with a clear statement that the plan amount is accepted in full and final settlement and that no fresh proceedings will follow — should carry a prayer for refund of court fee, and Sainik Industries supplies the authority for granting it. More broadly, the decision is another instance of courts reading Section 16 by its beneficial purpose, declining to let the mode of settlement defeat a refund where the dispute has, in substance, been brought to rest.

Related on Valkya

• Ghanashyam Mishra v. Edelweiss ARC
• Kalyani Transco v. Bhushan Power and Steel
• Committee of Creditors of Essar Steel v. Satish Kumar Gupta

Sources

• Bar & Bench, "Plaintiff can get court fee refund after IBC plan 'settlement': Delhi High Court"
• LiveLawBiz, "IBC Weekly Digest: June 1 – June 6, 2026"
• LiveLawBiz, judgment copy — Sainik Industries Pvt. Ltd. v. Indian Sugar Manufacturing Company Ltd., CS(COMM) 474/2019 (1 June 2026)