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16 March 2021
Litigation often turns out to be a drawn-out, tedious and expensive pursuit. This is particularly true in civil suits or disputes, which may last for years and often culminate in a decision which makes even the victorious party feel the brunt of the prolonged process. The 222nd Report of the Law Commission(1), among other things, acknowledged that "delay in disposal of cases in law Courts, for whatever reason it may be, has really defeated the purpose for which the people approach the courts for redressal". It is a universally recognised principle that justice delayed is justice denied. In Delhi Bar Assn (Regd) v Union of India,(2) the Supreme Court, while recognising that population growth has resulted in a constant upward spiral of litigation, observed that a:
very high volume of litigation both on the civil side and on the criminal side has led to a huge backlog of cases and great delays in dispensation of justice, putting the common man and the layman litigant to great inconvenience.
The judiciary has frequently acknowledged the ill effects of lingering litigation and the adverse consequences for litigants. Accordingly, several mechanisms – such as alternative dispute resolution (ADR), the establishment of special courts and tribunals and fast-track proceedings – have been introduced to provide some respite to clogged judicial instruments. At the same time, the courts have professed for an effective application of existing devices to reduce vexatious and frivolous claims. The awarding of actual realistic costs is one such step towards better employment of the legal provisions to tame the ever-growing expanse of false, frivolous and vindictive claims before the courts. Simultaneously, an award of costs not only provides monetary respite to genuine and patient litigants, but also deters parties from indulging in deliberate delay tactics. In this regard, Lord Justice Bowen observed in Cropper v Smith(3): "I have found in my experience that there is one panacea which heals every sore in litigation, and that is costs."
In Vinod Seth v Devinder Bajaj,(4) the apex court held that the purpose of imposing costs is, among other things, to:
At the same time, the Supreme Court emphasised that:
provisions relating to costs should not however obstruct access to courts and justice. Under no circumstances the costs should be a deterrent, to a citizen with a genuine or bona fide claim, or to any person belonging to the weaker sections whose rights have been affected, from approaching the courts.
In Ramrameshwari Devi v Nirmala Devi(5), the Supreme Court reiterated the following:
Imposition of actual, realistic or proper costs and/or ordering prosecution would go a long way in controlling the tendency of introducing false pleadings and forged and fabricated documents by the litigants. Imposition of heavy costs would also control unnecessary adjournments by the parties.
'Costs' are not defined under the Code of Civil Procedure (CPC) 1908. As per Black's Law Dictionary,(6) 'costs' are defined as "[a] pecuniary allowance, made to the successful party, (and recoverable from the losing party,) for his expenses in prosecuting or defending a suit or a distinct proceeding within a suit". 'Costs' further signifies a sum of money which the court orders one party to pay another in respect of the litigation expenses incurred.(7)
Sections 35, 35A and 35B of the CPC deal with costs.(8) Section 35 of the CPC confers discretion on the courts to grant costs for all incidents of the suit proceedings, "subject to such conditions and limitations as may be prescribed". In addition, in terms of Sections 35A and 35B of the CPC, the courts have the option of granting compensatory costs in respect of false and vexatious claims or defences and costs for causing delay, respectively. Sections 35A(9) and 35B(10) of the CPC were subsequently added by means of amendments. Although no amount of costs is specified under Sections 35 and 35B of the CPC, a maximum limit is prescribed under Section 35A.(11) In fact, as per the apex court:
[t]he provision relating to compensatory costs (Section 35-A of the Code) in respect of false or vexatious claims or defences has become virtually infructuous and ineffective, on account of inflation.(12)
In practice, the costs of suits are usually awarded at the conclusion of the proceedings and are payable by the party against which the decree or judgment is passed(13) to the party in whose favour(14) the decree or judgment is passed. The existing legal provisions(15) mandate that if the court decides that no costs will be awarded, it must state its reasons in writing. Thus, the decision to award costs and the quantity thereof depends on the court's discretion.(16) However, it is settled law that discretion must be judicially exercised based on legal principles and not:
Despite a clear mandate under law, often the courts are reluctant to award costs or the amount awarded is so meagre that it defeats the purpose of the provision. In Salem Advocate Bar Assn (II) v Union of India,(17) the Supreme Court acknowledged that the practice of awarding low or no costs encourages the filing of frivolous suits and the taking up of frivolous defences. According to the court, "the costs have to be those which are reasonably incurred by a successful party except in those cases where the court in its discretion may direct otherwise by recording reasons therefor". Further, in Ashok Kumar Mittal v Ram Kumar Gupta,(18) the apex court – while deprecating the practice of levying meagre costs – observed that the:
present system of levying meagre costs in civil matters (or no costs in some matters), no doubt, is wholly unsatisfactory and does not act as a deterrent to vexatious or luxury litigation borne out of ego or greed, or resorted to as a 'buying-time' tactic.
Clearly, the courts have consistently emphasised the importance of adopting a more realistic approach to costs, calling it an "imminent need of the hour". Simultaneously, it has frequently been argued that the reasonable and realistic costs of litigation should include:
Adopting the practice of awarding costs must correlate to costs which are realistic and practical and not dependent on the fanciful and whimsical expenditure of the parties. At the same time, such practice must conform with the existing rules and policies. In this regard, the Supreme Court in Sanjeev Kumar Jain v Raghubir Saran Charitable Trust(20) elucidated that "[w]hile we would like to encourage award of realistic costs, that should be in accordance with law. If the law does not permit award of actual costs, obviously courts cannot award actual costs". The court clarified that its previous observations,(21) in favour of awarding actual realistic costs, were meant for the high courts to amend their rules and regulations and provide for costs, not as a means to transgress the existing provisions under law.(22)
In Salem, the Supreme Court examined, among other things, the model rules for costs prepared by a committee headed by the former chair of the Law Commission, wherein it was suggested, among other things, that:
It was further suggested that:
[i]f any of the parties has unreasonably protracted the proceedings, the Judge should consider exercising discretion to impose exemplary costs after taking into account the expense incurred for the purpose of attendance on the adjourned dates.
Similarly, the committee also provided provisions for awarding costs during the course of first appellate court proceedings.(24)
The 240th Report of the Law Commission(25) provided an exhaustive review of the provisions relating to costs and – while "[k]eeping in view the triple goals of (i) ensuring realistic and reasonable costs to the successful party; (ii) curbing false and frivolous litigation; and (iii) discouraging unnecessary adjournments" – suggested certain legislative changes to the CPC. The Law Commission accordingly, among other things, recommended a revision of the high court rules to:
Unfortunately, the courts have largely ignored these recommendations and there has been a general reluctance of the legislatures to transform them into a statutory form. While the power to levy costs may be adequately deployed under the existing mechanisms, several courts are deliberately reluctant to do so.
However, the situation is not totally without hope. Recently, under the Delhi High Court (Original Side) Rules 2018, provisions have been formulated that, among other things:
These provisions are a welcome step in the direction of ensuring stringency towards unscrupulous litigants and safeguarding precious judicial time.
The problem of delays in the dispensation of justice is largely dependent on the dilatory tactics adopted by litigants. The courts have not shied away from acknowledging that the imposition of heavy costs is an effective measure to reduce the judicial burden, opining that:
delinquent litigant should be penalized at every stage by imposing heavy costs and only when this message is given to all the litigants and their advocates they will restrain themselves from adopting delaying tactics.(31)
Despite this, the reluctance and apathy of several executive and judicial bodies in reforming and effectively implementing the legal provisions is incomprehensible. The use of the costs provisions to inflict vengeance or penalties of a vindictive nature is deprecated. Nevertheless, harmony must be maintained wherein the existing provisions are both suitably modified and invoked, considering the urgency and necessity on a case-by-case basis. Costs, as a means of comfort, should be suitably accorded in appropriate cases; otherwise, the decree would additionally bestow on the victorious party a feeling of winning a battle, but losing the war.
For further information on this topic please contact Varun Sharma at Clasis Law by telephone (+91 11 4213 0000) or email (firstname.lastname@example.org). The Clasis Law website can be accessed at www.clasislaw.com.
(19) Salem; Harish Relan v Kaushal Kumari Relan, 2015 SCC OnLine Del 11528; Venezia Mobili (India) Pvt Ltd v Ramprastha Promoters and Developers Pvt Ltd, 259 (2019) DLT 13 and Super Cassettes Industries Private Limited v HRCN Cable Network, 244 (2017) DLT 350.
7. Costs. – Awarding of costs must be treated generally as mandatory inasmuch as it is the liberal attitude if the courts in not awarding costs that has led to frivolous points being raised in appeals or frivolous appeals being filed in the courts. Costs should invariably follow the event and reasons must be assigned by the appellate court for not awarding costs. If any of the parties have unreasonably protracted the proceedings, the Judge shall have the discretion to impose exemplary costs after taking into account the costs that may have been imposed at the time of adjournments" (p 398 of Salem).
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