LLC
- Jan 25, 2021
- 72 min read

cost

"In deciding what order (if any) to make about costs, the court

must have regard to all the circumstances, including:

(i) The conduct of all the parties;

(ii) Whether a party has succeeded on part of his case, even if

he has not been wholly successful; and

(iii) Any payment into court or admissible offer to settle made

by a party which is drawn to the court's attention.

The conduct of the parties includes:

(a) Conduct before, as well as during, the proceedings and in

particular the extent to which the parties followed any relevant

pre-action protocol;

(b) Whether it was reasonable for a party to raise, pursue or

contest a particular allegation or issue;

case or a particular allegation or issue; and

(d) Whether a claimant who has succeeded in his claim, in

whole or in part, exaggerated his claim".

Supreme Court of India

Vinod Seth vs Devinder Bajaj & Anr on 5 July, 2010

The need for reform :

22. Before concluding, it is necessary to notice the reason why the High Court was trying to find some way to protect the interests of defendants, when it felt that they were being harassed by plaintiff. It made the impugned order because it felt that in the absence of stringent and effective provision for costs, on the dismissal of the suit, it would not be able to compensate the defendants for the losses/hardship suffered by them, by imposing costs. If there was an effective provision for levy of realistic costs against the losing party, with reference to the conduct of such party, the High Court, in all probability would not have ventured upon the procedure it adopted. This draws attention to the absence of an effective provision for costs which has led to mushrooming of vexatious, frivolous and speculative civil litigation.

23. The principle underlying levy of costs was explained in Manindra Chandra Nandi v. Aswini Kumar Acharaya - ILR (1921) 48 Cal. 427 thus:

"We must remember that whatever the origin of costs might have been, they are now awarded, not as a punishment of the defeated party but as a recompense to the successful party for the expenses to which he had been subjected, or, as Lord Coke puts it, for whatever appears to the Court to be the legal expenses incurred by the party in prosecuting his suit or his defence. * * * * The theory on which costs are now awarded to a plaintiff is that default of the defendant made it necessary to sue him, and to a defendant is that the plaintiff sued him without cause; costs are thus in the nature of incidental damages allowed to indemnify a party against the expense of successfully vindicating his rights in court and consequently the party to blame pays costs to the party without fault. These principles apply, not merely in the award of costs, but also in the award of extra allowance or special costs. Courts are authorized to allow such special allowances, not to inflict a penalty on the un-successful party, but to indemnify the successful litigant for actual expenses necessarily or reasonably incurred in what are designated as important cases or difficult and extraordinary cases."

In Salem Advocate Bar Association v. Union of India [2005 (6) SCC 344] this after noticing that the award of costs is in the discretion of the court and that there is no upper limit in respect of the costs awardable under Section 35 of the Code, observed thus:

"Judicial notice can be taken of the fact that many unscrupulous parties take advantage of the fact that either the costs are not awarded or nominal costs are awarded against the unsuccessful party. Unfortunately, it has become a practice to direct parties to bear their own costs. In a large number of cases, such an order is passed despite Section 35 (2) of the Code. Such a practice also encourages the filing of frivolous suits. It also leads to the taking up of frivolous defences. Further, wherever costs are awarded, ordinarily the same are not realistic and are nominal. When Section 35(2) provides for cost to follow the event, it is implicit that 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. The costs have to be actual reasonable costs including the cost of the time spent by the successful party, the transportation and lodging, if any, or any other incidental costs besides the payment of the court fee, lawyer's fee, typing and other costs in relation to the litigation. It is for the High Courts to examine these aspects and wherever necessary make requisite rules, regulations or practice direction so as to provide appropriate guidelines for the subordinate courts to follow."

23. The provision for costs is intended to achieve the following goals :

(a) It should act as a deterrent to vexatious, frivolous and speculative litigations or defences. The spectre of being made liable to pay actual costs should be such, as to make every litigant think twice before putting forth a vexatious, frivolous or speculative claim or defence.

(b) Costs should ensure that the provisions of the Code, Evidence Act and other laws governing procedure are scrupulously and strictly complied with and that parties do not adopt delaying tactics or mislead the court.

(c) Costs should provide adequate indemnity to the successful litigant for the expenditure incurred by him for the litigation. This necessitates the award of actual costs of litigation as contrasted from nominal or fixed or unrealistic costs.

(d) The provision for costs should be an incentive for each litigant to adopt alternative dispute resolution (ADR) processes and arrive at a settlement before the trial commences in most of the cases. In many other jurisdictions, in view of the existence of appropriate and adequate provisions for costs, the litigants are persuaded to settle nearly 90% of the civil suits before they come up to trial.

(e) The 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 bonafide claim, or to any person belonging to the weaker sections whose rights have been affected, from approaching the courts.

24. At present these goals are sought to be achieved mainly by sections 35,35A and 35B read with the relevant civil rules of practice relating to taxing of costs. Section 35 of the Code vests the discretion to award costs in the courts. It provides that normally the costs should follow the event and court shall have full power to determine by whom or out of what property, and to what extent such costs are to be paid. Most of the costs taxing rules, including the rules in force in Delhi provide each party should file a bill of cost immediately after the judgment is delivered setting out: (a) the court fee paid; (b) process fee spent; (c) expenses of witnesses; (d) advocate's fee; and

(e) such other amount as may be allowable under the rules or as may be directed by the court as costs. We are informed that in Delhi, the advocate's fee in regard to suits the value of which exceeds Rs.5 lakhs is : Rs.14,500/- plus 1% of the amount in excess of Rs.5 lakhs subject to a ceiling of Rs. 50,000/-. The prevalent view among litigants and members of the bar is that the costs provided for in the Code and awarded by courts neither compensate nor indemnify the litigant fully in regard to the expenses incurred by him.

25. The English civil procedure rules provide that a court in deciding what order, if any, to make in exercising its discretion about costs should have regard to the following circumstances: (a) the conduct of all the parties;

(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and (c) any payment made into court or admissible offer to settle made by a party which is drawn to the courts attention. `Conduct of the parties' that should be taken note by the court includes : (a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the relevant pre-action protocol; (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (c) the manner in which a party has pursued or defended his case or a particular allegation or issue; and (d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim. Similar provisions, with appropriate modifications may enable proper and more realistic costs being awarded. As Section 35 of the Code does not impose any ceiling the desired object can be achieved by the following : (i) courts levying costs, following the result, in all cases (non-levy of costs should be supported by reasons); and (ii) appropriate amendment to Civil Rules of Practice relating to taxation of costs, to make it more realistic in commercial litigation.

26. The provision relating to compensatory costs (Section 35A of the Code) in respect of false or vexatious claims or defences has become virtually infructuous and ineffective, on account of inflation. Under the said section, award of compensatory costs in false and vexatious litigation, is subject to a ceiling of Rs.3,000/-. This requires a realistic revision keeping in view, the observations in Salem Advocates Bar Association (supra). Section 35B providing for costs for causing delay is seldom invoked. It should be regularly employed, to reduce delay.

27. The lack of appropriate provisions relating to costs has resulted in a steady increase in malicious, vexatious, false, frivolous and speculative suits, apart from rendering Section 89 of the Code ineffective. Any attempt to reduce the pendency or encourage alternative dispute resolution processes or to streamline the civil justice system will fail in the absence of appropriate provisions relating to costs. There is therefore an urgent need for the legislature and the Law Commission of India to re-visit the provisions relating to costs and compensatory costs contained in Section 35 and 35A of the Code.

Conclusion

26. In the result, we allow this appeal in part, set aside the order of the Division Bench and Learned Single Judge directing the plaintiff-appellant to file an affidavit undertaking to pay Rs. 25 lakhs to defendants-respondents in the event of failure in the suit. Instead, we permit the defendants-respondents under section 52 of TP Act, to deal with or dispose of the suit property in the manner they deem fit, in spite of the pendency of the suit by the plaintiff, subject to their furnishing security to an extent of Rs. Three lakhs to the satisfaction of the learned Single Judge.

( The Supreme Court having noted that Section 35 of the Code does not impose any ceiling on the quantum of costs to be awarded, indicated that the object of Section 35 can be achieved by the following two measures: (i) Courts levying costs following the results in all cases (non-levy of costs should be supported by reasons); and (ii) appropriate amendments to Civil Rules of practice relating to taxation of costs to make it more realistic in commercial litigation. 3.7 Further, as regards Sections 35A and 35B, the Supreme Court made the following observations in Vinod Seth's case:

"The provision relating to compensatory costs (section 35A of the Code) in respect of false or vexatious claims or defences has become virtually infructuous and ineffective, on account of inflation. Under the said Section, award of compensatory costs inflation and vexatious litigation, is subject to a ceiling of Rs. 3,000/-. This requires a realistic revision keeping in view the observations in Salem Advocate Bar Association (II) (supra). Section 35B providing for costs for causing delay is seldom invoked. It should be regularly employed, to reduce delay."

Supreme Court of India)

Now we shall refer to the latest decision in Sanjeev Kumar Jain (2011). In that case, the Supreme Court was concerned with the question whether a sum of Rs. 45 lakhs awarded as costs by the High Court while dismissing an appeal preferred against an order vacating temporary injunction in an Injunction Suit was sustainable. The said Suit was in respect of some commercial litigation. The High Court took into account the Advocate's fee said to have incurred in the Appeal by the Respondent. This order of the High Court was set aside by the Supreme Court and the Hon'ble Court ordered that "the Appellant shall pay the costs of the Appeal before the High Court as per Rules plus Rs. 3000/- as exemplary costs to the Respondent." It is relevant to take stock of the principles laid down in the judgment and its ratio.

3.9 The Supreme Court held in the case of Sanjeev Kumar Jain (2011) that the order of the High Court awarding heavy costs was unsustainable in the light of the existing provisions of CPC read with the Delhi High Court Rules dealing with award of costs in Civil Suits. The Supreme Court referred to the relevant Rule that enjoins the Advocate fee to be taxed to the tune of an amount not exceeding the scale prescribed in the Schedule to Chapter XXIII. The Supreme Court then clarified the legal position as follows:

"Therefore, the Court could not have awarded costs exceeding the scale that was prescribed in the schedule to the Rules. Doing so would be contrary to the Rules. If it was contrary to the Rules, it was also contrary to Section 35 also which makes it subject to the conditions and limitations as may be prescribed and the provisions of law for the time being in force. Therefore, we are of the view that merely by seeking a consent of the parties to award litigation expenses as costs, the High Court could not have adopted the procedure of awarding what it assumed to be the 'actual costs' nor could it proceed to award a sum of Rs.45,28,000/- as costs in an appeal relating to an interim order in a civil suit. While 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. When this Court observed that it is in favour of award of actual realistic costs, it means that the relevant Rules should be amended to provide for actual realistic costs. As the law presently stands, there is no provision for award of 'actual costs' and the award of costs will have to be within the limitation prescribed by Section 35."

Supreme Court of India

Sanjeev Kumar Jain vs Raghubir Saran Charitable Trust & ... on 12 October, 2011

6. Section 35 of the Code of Civil Procedure, 1908, (for short 'the Code') relates to costs and is extracted below:

"35. Costs. (1) Subject to such conditions and limitations as may be prescribed, and to the provisions of law for the time being in force, the costs of and incident to all suits shall be in the discretion of the Court, and the Court shall have full power to determine by whom or out of what property and to what extent such costs are to be paid, and to give all necessary directions for the purposes aforesaid. The fact that the Court has no jurisdiction to try the suit shall be no bar to the exercise of such powers. (2) Where the Court directs that any costs shall not follow the event, the Court shall state its reasons in writing."

6.1) Section 35A relates to compensatory costs in respect of false or vexatious claims and is extracted below:

"35A. Compensatory costs in respect of false or vexatious claims or defenses (1) If any suit or other proceedings including an execution proceedings but excluding an appeal or a revision any party objects to the claim of defence on the ground that the claim or defence or any part of it is, as against the objector, false or vexatious to the knowledge of the party by whom it has been put forward, and if thereafter, as against the objector, such claim or defence is disallowed, abandoned or withdrawn in whole or in part, the Court if it so thinks fit, may, after recording its reasons for holding such claim or defence to be false or vexatious, make an order for the payment to the object or by the party by whom such claim or defence has been put forward, of cost by way of compensation.

(2) No Court shall make any such order for the payment of an amount exceeding three thousand rupees or exceeding the limits of it pecuniary jurisdiction, whichever amount is less:

Provided that where the pecuniary limits of the jurisdiction of any Court exercising the jurisdiction of a Court of Small Causes under the Provincial Small Cause Courts Act, 1887 (9 of 1887) or under a corresponding law in force in any part of India to which the said Act does not extend and not being a Court constituted under such Act or law, are less than two hundred and fifty rupees, the High Court may empower such Court to award as costs under this section any amount not exceeding two hundred and fifty rupees and not exceeding those limits by more than one hundred rupees : Provided, further, that the High Court may limit the amount or class of Courts is empowered to award as costs under this Section. (3) No person against whom an order has been made under this section shall, by reason thereof, be exempted from any criminal liability in respect of any claim or defence made by him.

(4) The amount of any compensation awarded under this section in respect of a false or vexatious claim or defence shall be taken into account in any subsequent suit for damages or compensation in respect of such claim or defence."

6.2) Section 35B relates to costs for causing delay and is extracted below :

"35B. Costs for causing delay. - (1) If, on any date fixed for the hearing of a suit or for taking any step therein, a party to the suit--

(a) fails to take the step which he was required by or under this Code to take on that date, or

(b) obtains an adjournment for taking such step or for producing evidence or on any other ground, the Court may, for reasons to be recorded, make an order requiring such party to pay to the other party such costs as would, in the opinion of the Court, be reasonably sufficient to reimburse the other party in respect of the expenses incurred by him in attending the Court on that date, and payment of such costs, on the date next following the date of such order, shall be a condition precedent to the further prosecution of--

(a) the suit by the plaintiff, where the plaintiff was ordered to pay such costs,

(b) the defence by the defendant, where the defendant was ordered to pay such costs.

Explanation.--Where separate defences have been raised by the defendants or groups of defendants, payment of such costs shall be a condition precedent to the further prosecution of the defence by such defendants or groups of defendants as have been ordered by the Court to pay such costs.

(2) The costs, ordered to be paid under sub-section (1), shall not, if paid, be included in the costs awarded in the decree passed in the suit; but, if such costs are not paid, a separate order shall be drawn up indicating the amount of such costs and the names and addresses of the persons by whom such costs are payable and the order so drawn up shall be executable against such persons."

6.3) Order XXA of the Code provides for costs being awarded in regard to the following six items enumerated in Rule 1:

"1. Provisions relating to certain items.- Without prejudice to the generality of the provisions of this Code relating to cots, the Court may award costs in respect of, -

(a) expenditure incurred for the giving of any notice required to be given by law before the institution of the suit;

(b) expenditure incurred on any notice which, though not required to be given by law, has been given by any party to the suit to any other party before the institution of the suit;

(d) charges paid by a party for inspection of the records of the court for the purposes of the suit;

(e) expenditure incurred by a party for producing witnesses, even though not summoned through courts; and

(f) in the case of appeals, charges incurred by a party for obtaining any copies of judgments and decrees which are required to be filed along with the memorandum of appeal."

Rule 2 of Order XXA provides that award of costs under this Rule shall be in accordance with such rules as the High Court may make in this behalf.

Decisions dealing with costs

7. Sections 35 and 35A have been considered recently by this Court in Salem Advocates Bar Association v. Union of India [2005 (6) SCC 344], Ashok Kumar Mittal Vs. Ram Kumar Gupta & Anr. [2009 (2) SCC 656] and Vinod Seth Vs. Devender Bajaj & Anr. [2010 (8) SCC 1]. Before referring to them, we may refer to the principle underlying award of costs stated in Manindra Chandra Nandi vs. Aswini Kumar Acharjya [ILR (1921) 48 Ca.

427] :

"....We must remember that whatever the origin of costs might have been, they are now awarded, not as a punishment of the defeated party but as a recompense to the successful party for the expenses to which he had been subjected, or, as Lord Coke puts it, for whatever appears to the Court to be the legal expenses incurred by the party in prosecuting his suit or his defence. * * * The theory on which costs are now awarded to a plaintiff is that default of the defendant made it necessary to sue him, and to a defendant is that the plaintiff sued him without cause; costs are thus in the nature of incidental damages allowed to indemnify a party against the expense of successfully vindicating his rights in court and consequently the party to blame pays costs to the party without fault. These principles apply, not merely in the award of costs, but also in the award of extra allowance or special costs. Courts are authorized to allow such special allowances, not to inflict a penalty on the un-successful party, but to indemnify the successful litigant for actual expenses necessarily or reasonably incurred in what are designated as important cases or difficult and extraordinary cases."

7.1) In Salem Advocates Bar Association, this Court held:

"Judicial notice can be taken of the fact that many unscrupulous parties take advantage of the fact that either the costs are not awarded or nominal costs are awarded on the unsuccessful party. Unfortunately, it has become a practice to direct parties to bear their own costs. In large number of cases, such an order is passed despite Section 35(2) of the Code. Such a practice also encourages filing of frivolous suits. It also leads to taking up of frivolous defences. Further wherever costs are awarded, ordinarily the same are not realistic and are nominal. When Section 35(2) provides for cost to follow the event, it is implicit that 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 thereof. The costs have to be actual reasonable costs including the cost of the time spent by the successful party, the transportation and lodging, if any, or any other incidental cost besides the payment of the court fee, lawyer's fee, typing and other cost in relation to the litigation. It is for the High Courts to examine these aspects and wherever necessary make requisite rules, regulations or practice direction so as to provide appropriate guidelines for the subordinate courts to follow."

7.2) In Ashok Kumar Mittal, this Court pointed out that present system of levying meagre costs in civil matters (or no costs in some matters), 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 and that a more realistic approach relating to costs may be the need of the hour. This Court had also observed that the question whether we should adopt suitably, the western models of awarding actual and more realistic costs is a matter that requires to be debated and that should engage the attention of Law Commission of India. This Court also observed:

"One view has been that the provisions of Sections 35 and 35A CPC do not in any way affect the wide discretion vested in by High Court in exercise of its inherent power to award costs in the interests of justice in appropriate civil cases. The more sound view however is that though award of costs is within the discretion of the court, it is subject to such conditions and limitations as may be prescribed and subject to the provisions of any law for the time being in force; and where the issue is governed and regulated by Sections 35 and 35A of the Code, there is no question of exercising inherent power contrary to the specific provisions of the Code. Further, the provisions of Section 35A seems to suggest that even where a suit or litigation is vexatious, the outer limit of exemplary costs that can be awarded in addition to regular costs, shall not exceed Rs. 3000/-. It is also to be noted that huge costs of the order of Rs. Fifty thousand or Rs. One lakh, are normally awarded only in writ proceedings and public interest litigations, and not in civil litigation to which Sections 35 and 35A are applicable. The principles and practices relating to levy of costs in administrative law matters cannot be imported mechanically in relation to civil litigation governed by the Code."

7.3) In Vinod Seth, this Court observed as under:

"48. The provision for costs is intended to achieve the following goals:

At present these goals are sought to be achieved mainly by sections 35,35A and 35B read with the relevant civil rules of practice relating to taxing of costs.

49. Section 35 of the Code vests the discretion to award costs in the courts. It provides that normally the costs should follow the event and court shall have full power to determine by whom or out of what property, and to what extent such costs are to be paid. Most of the costs taxing rules, including the rules in force in Delhi provide each party should file a bill of cost immediately after the judgment is delivered setting out: (a) the court fee paid; (b) process fee spent; (c) expenses of witnesses; (d) advocate's fee; and (e) such other amount as may be allowable under the rules or as may be directed by the court as costs. We are informed that in Delhi, the advocate's fee in regard to suits the value of which exceeds Rs.5 lakhs is :

Rs.14,500/- plus 1% of the amount in excess of Rs.5 lakhs subject to a ceiling of Rs.50,000/-. The prevalent view among litigants and members of the bar is that the costs provided for in the Code and awarded by courts neither compensate nor indemnify the litigant fully in regard to the expenses incurred by him.

50. The English Civil Procedure Rules provide that a court in deciding what order, if any, to make in exercising its discretion about costs should have regard to the following circumstances:

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

'Conduct of the parties' that should be taken note by the court includes:

(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the relevant pre-action protocol;

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.

Similar provisions, with appropriate modifications may enable proper and more realistic costs being awarded.

51. As Section 35 of the Code does not impose any ceiling the desired object can be achieved by the following:

(i) courts levying costs, following the result, in all cases (non-levy of costs should be supported by reasons); and

(ii) appropriate amendment to Civil Rules of Practice relating to taxation of costs, to make it more realistic in commercial litigation.

52. The provision relating to compensatory costs (Section 35A of the Code) in respect of false or vexatious claims or defences has become virtually infructuous and ineffective, on account of inflation. Under the said section, award of compensatory costs in false and vexatious litigation, is subject to a ceiling of Rs.3,000/-. This requires a realistic revision keeping in view, the observations in Salem Advocates Bar Association (supra). Section 35B providing for costs for causing delay is seldom invoked. It should be regularly employed, to reduce delay.

53. The lack of appropriate provisions relating to costs has resulted in a steady increase in malicious, vexatious, false, frivolous and speculative suits, apart from rendering Section 89 of the Code ineffective. Any attempt to reduce the pendency or encourage alternative dispute resolution processes or to streamline the civil justice system will fail in the absence of appropriate provisions relating to costs. There is therefore an urgent need for the legislature and the Law Commission of India to re-visit the provisions relating to costs and compensatory costs contained in Section 35 and 35A of the Code."

8. Though, Section 35 does not impose a ceiling on the costs that could be levied and gives discretion to the Court in the matter, it should be noted that Section 35 starts with the words "subject to such conditions and limitations as may be prescribed, and to the provisions of law for the time being in force". Therefore, if there are any conditions or limitations prescribed in the Code or in any rules, the Court, obviously, cannot ignore them in awarding costs.

9. Chapter 11 Part C of the Delhi High Court Rules (`Rules' for short) deals with award of costs in civil suits. Chapter XXIII of the said Rules deals with taxation of costs. Rule 1 relates to appointment of Taxing Officer. Rule 6 provides that advocate's fee should be taxed on the basis of a certificate filed under Rule 2 Chapter 5 but not exceeding the scale prescribed in the schedule to Chapter XXIII. Therefore, the Court could not have awarded costs exceeding the scale that was prescribed in the schedule to the Rules. Doing so would be contrary to the Rules. If it was contrary to the Rules, it was also contrary to Section 35 also which makes it subject to the conditions and limitations as may be prescribed and the provisions of law for the time being in force. Therefore, we are of the view that merely by seeking a consent of the parties to award litigation expenses as costs, the High Court could not have adopted the procedure of awarding what it assumed to be the `actual costs' nor could it proceed to award a sum of Rs.45,28,000/- as costs in an appeal relating to an interim order in a civil suit. While 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. When this Court observed that it is in favour of award of actual realistic costs, it means that the relevant Rules should be amended to provide for actual realistic costs. As the law presently stands, there is no provision for award of `actual costs' and the award of costs will have to be within the limitation prescribed by section 35.

10. Learned counsel for the respondents submitted that in awarding actual costs, the High Court was merely following the decision of a three-Judge Bench of this court in Salem Advocates Bar Association. He drew our attention to para 37 of the said decision (which is extracted in the judgment of the High Court), in particular, the observation that "costs have to be actual reasonable costs including the cost of time spent by the successful party, the transportation and lodging, if any, and any other incidental costs besides the payment of the court fee, lawyer's fee, typing and other costs in relation to the litigation." The High Court has also assumed that the above observations of this Court in Salem Advocates Bar Association enabled it to award "actual" costs. The High Court has opened its order with the following words:

"The importance of this decision lies not in any substantial question of law having been decided - indeed, no question of law was urged before us, only issues touching upon facts. The importance lies in the nature of the dispute between the parties, which is a purely commercial dispute in which litigation expenses have touched the sky. In our opinion, the only way in which a successful litigant can be compensated financially is by awarding actual costs incurred by him in the litigation. The Supreme Court has recommended this course of action and we think the time has come to give more than serious weight and respect to the views of the Supreme Court. We have endeavoured to do just that in this appeal by awarding to the respondents the actual litigation expenses incurred by them, which is a staggering Rs.45,00,000/."

We are afraid that the respondents and the High Court have misread the observations of this Court in Salem Advocates Bar Association. All that this Court stated was that the actual reasonable cost has to be provided for in the rules by appropriate amendment. In fact, the very next sentence in para 37 of the decision of this Court is that the High Courts should examine these aspects and wherever necessary, make requisite rules, regulations or practice directions. What has been observed by this court about actual realistic costs is an observation requiring the High Courts to amend their rules and regulations to provide for actual realistic costs, where they are not so provided. We have noticed that section 35 does not impose a restriction on actual realistic costs. Such restriction is generally imposed by the rules made by the High Court. The observation in Salem Advocates Bar Association is a direction to amend the rules so as to provide for actual realistic costs and not to ignore the existing rules. The decision in Salem Advocates Bar Association is therefore of no assistance to justify the award of such costs. The Rules permit costs to the awarded only as per the schedule. Therefore, as the Rules presently stand. Whatever may be the `actual' expenditure incurred by a party, what could be awarded as costs is what is provided in the Rules.

11. There is one more aspect which requires serious consideration. What is the meaning of the words `actual realistic costs' assuming that costs could be awarded on such basis? Whether it can be said that ` 45,28,000/-

said to have been incurred (made up of ` 29,73,000/- paid to Mr. S, Senior Advocate, ` 14,41,000/- paid to Mr. G, Senior Advocate, ` 85,500/- paid to Mr. M, Advocate, ` 16,750/- paid to Mr. V, Advocate and ` 11,750/-

incurred as miscellaneous expenses) was the `actual realistic cost' of an appeal against an interim order in a suit for injunction? The actual realistic cost should have a correlation to costs which are realistic and practical. It cannot obviously refer to fanciful and whimsical expenditure by parties who have the luxury of engaging a battery of high-charging lawyers. If the logic adopted by the High Court is to be accepted, then the losing party should pay the costs, not with reference to the subject matter of the suit, but with reference to the fee paying capacity of the other side. Let us take the example of a suit for recovery of ` One lakh. If a rich plaintiff wants to put forth his case most effectively, engages a counsel who charges ` One lakh per hearing and the matter involves 30 hearings, should the defendant be made to pay costs of ` 30 lakhs, in a suit for recovery of ` One lakh merely because it is a commercial dispute? In a matter relating to temporary injunction, merely because the court adjourns the matter several times and one side engages a counsel by paying more than a lakh per hearing, should the other side be made to bear such costs? The costs memo filed by the respondents show that ` 45,28,000/- was paid to four counsel? If a rich litigant engages four counsel instead of one, should the defendant pay the fee of four counsel? If a party engages five senior Advocates and five ordinary counsel because he is capable, should the losing party pay the fees of all these counsel? The appeal came up on several occasions, but the final hearing of the appeal was only on a few days and other days were mere appearances. Should the losing party pay for such appearances? If respondents had engaged two senior counsel who charged ` Two lakhs per appearance, should the other side be made liable to pay ` 1.5 crore as costs?

Even if actual costs have to be awarded, it should be realistic which means what a "normal" advocate in a "normal" case of such nature would charge normally in such a case. Mechanically ordering the losing party to pay costs of ` 45,28,000/- in an appeal against grant of a temporary injunction in a pending suit for permanent injunction was unwarranted and contrary to law.

It cannot be sustained.

12. Though this takes care of the actual dispute between the parties, it is also necessary to refer to the larger question of costs in civil suits. For this purpose, during the hearing, this Court requested Dr. Arun Mohan, learned senior counsel to assist as an Amicus Curiae in the matter. In pursuance of it, Dr. Arun Mohan collected and made available considerable material with reference to practices relating to levy of costs in several other jurisdictions.

We find that the schemes/processes for assessment of costs in some of the western countries may not be appropriate with reference to Indian conditions. The process of taxation of costs has developed into a detailed and complex procedure in developed countries and instances are not wanting where the costs awarded has been more than the amount involved in the litigation itself. Having regard to Indian conditions, it is not possible or practical to spend the amount of time that is required for determination of `actual costs' as done in those countries, when we do not have time even to dispose of cases on merits. If the Courts have to set apart the time required for the elaborate procedure of assessment of costs, it may even lead to an increase in the pendency of cases. Therefore, we requested Dr. Arun Mohan to suggest ways and means of simplifying costs procedures to suit Indian conditions so that appropriate suggestions could be made to the Government. He has put forth several suggestions. Law Commission of India has also intervened and made several valuable suggestions. Notices were issued to the High Courts to ascertain the Rules and procedures in force in regard to costs. For convenience, we will refer to Delhi High Court Rules as the present matter arises from Delhi.

Strict enforcement of Section 35(2) of the Code

13. The discretion vested in the courts in the matter of award of costs is subject to two conditions, as is evident from section 35 of the Code:

(i) The discretion of the court is subject to such conditions and limitations as may be prescribed and to the provisions of law for he time being in force (vide sub-section (1)]

(ii) Where the court does not direct that costs shall follow the event, it shall state the reasons in writing [vide sub-section (2)].

The mandate of sub-section (2) of Section 35 of the Code that "where the Court directs that any costs shall not follow the event, the Court shall state its reasons in writing" is seldom followed in practice by courts. Many courts either do not make any order as to costs or direct the parties to bear their respective costs without assigning or recording the reasons for giving such exemption from costs. Unless the Courts develop the practice of awarding costs in accordance with Section 35 (that is, costs following the event) and also give reasons where costs are not awarded, the object of the provision for costs would be defeated. Prosecution and defence of cases is a time consuming and costly process. A plaintiff/petition/ appellant who is driven to the court, by the illegal acts of the defendant/respondent, or denial of a right to which he is entitled, if he succeeds, to be reimbursed of his expenses in accordance with law. Similarly a defendant/respondent who is dragged to court unnecessarily or vexatiously, if he succeeds, should be reimbursed of his expenses in accordance with law. Further, it is also well recognised that levy of costs and compensatory costs is one of the effective ways of curbing false or vexatious litigations.

Section 35A of the Code - Exemplary costs.

14. Section 35A refers to compensatory costs in respect of false or vexatious claims or defenses. The maximum amount that could be levied as compensatory costs for false and vexatious claims used to be ` 1,000/-. In the year 1977, this was amended and increased to ` 3,000/-. At present, the maximum that can be awarded as compensatory costs in regard to false and vexatious claims is ` 3,000/-. Unless the compensatory costs is brought to a realistic level, the present provision authorizing levy of an absurdly small sum by present day standards may, instead of discouraging such litigation, encourage false and vexatious claims. At present Courts have virtually given up awarding any compensatory costs as award of such a small sum of ` 3,000/- would not make much difference. We are of the view that the ceiling in regard to compensatory costs should be at least `1,00,000/-.

15. We may also note that the description of the costs awardable under Section 35A "as compensatory costs" gives an indication that is restitutive rather than punitive. The costs awarded for false or vexatious claims should be punitive and not merely compensatory. In fact, compensatory costs is something that is contemplated in Section 35B and Section 35 itself.

Therefore, the Legislature may consider award of 'punitive costs' under section 35A.

Court fees

16. Though there is a general impression that the court fee regarding litigation is high, in fact, it is not so. Except in the case of few categories of suits (that is money suits, specific performance suits etc., and appeals therefrom), where court fee is ad volerem, in majority of the suits/petitions and appeals arising therefrom, the court fee is a fixed nominal fee. The fixed fees that are payable, prescribed decades ago have not undergone a change and in many cases, the fixed fee is not worth the cost of collection thereof.

There is therefore a need for a periodical revision of fixed court fees, that is payable in regard to suits/petitions/appeals filed in civil courts, High Court, Tribunals and Supreme Court. For example, in Supreme Court, the maximum court fee payable is only ` 250/-, whether it is a suit or special leave petition or appeal.

17. A time has come when at least in certain type of litigations, like commercial litigations, the costs should be commensurate with the time spent by the courts. Arbitration matters, company matters, tax matters, for example, may involve huge amounts. There is no reason why a nominal fixed fee should be collected in regard to such cases. While we are not advocating an ad valorem fee with reference to value in such matters, at least the fixed fee should be sufficiently high to have some kind of quid-

pro-quo to the cost involved. Be that as it may.

Award of Realistic Costs

18. In Salem Advocates Bar Association, this Court suggested to the High Courts that they should examine the Model Case Flow Management Rules and consider making rules in terms of it, with or without modification so that a step forward is taken to provide to the litigating public a fair, speedy and inexpensive justice. The relevant rules therein relating to costs are extracted below:

"Re: Trial Courts So far as awarding of costs at the time of judgment is concerned, awarding of costs must be treated generally as mandatory in as much as the liberal attitude of the Courts in directing the parties to bear their own costs had led parties to file a number of frivolous cases in the Courts or to raise frivolous and unnecessary issues. Costs should invariably follow the event. Where a party succeeds ultimately on one issue or point but loses on num- ber of other issues or points which were unnecessarily raised, costs must be appropriately apportioned. Special reasons must be assigned if costs are not being awarded. Costs should be assessed according to rules in force. If any of the parties has unreasonably protracted the proceedings, the Judge should consider exercising discretion to impose exemplary costs after tak- ing into account the expense incurred for the purpose of attendance on the adjourned dates.

Re: Appellate Courts Awarding of costs must be treated generally as mandatory in as much 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."

19. The costs in regard to a litigation include (a) the court fee and process fee; (b) the advocate's fee; (c) expenses of witnesses; and (d) other expenses allowable under the Rules. We have already referred to the need to revise and streamline the court fee. Equally urgent is the need to revise the advocate's fee provided in the Schedule to the Rules, most of which are outdated and have no correlation with the prevailing rates of fees. In regard to money suits, specific performance suits and other suits where ad valorem court fee is payable, the Advocate's fee is also usually ad valorem. We are more concerned with the other matters, which constitute the majority of the litigation, where fixed Advocates' fees are prescribed. In Delhi in regard to any proceedings (other than suits where the ad valorem court fee is payable), the maximum fee that could be awarded is stated to be ` 2000 and for appeals of the scale if that is payable to original suits.

20. The Supreme Court Rules (Second Schedule) prescribes a fee of `2400/- for leading counsel and `1200/- for Associate Advocate in regard to defended appeals and suits or writ petitions. For special leave petitions, it is `800/- for leading counsel and `400/- for Advocate-on-Record. It is of some interest to note that the fee paid to amicus curiae in criminal appeals in Supreme Court and to the Legal Aid counsel appointed by Supreme Court Legal Services Committee is much higher than the above scale of fees.

There is need to provide for awarding realistic advocates' fee by amending the relevant rules periodically. This Court, of course, in several cases has directed payment of realistic costs. But this Court could do so, either because of the discretion vested under the Supreme Court Rules, 1966 or having regard to Article 142 of the Constitution under which this Court has the power to make such orders as are necessary to do complete justice between the parties.

21. A serious fallout of not levying actual realistic costs should be noted.

A litigant, who starts the litigation, after sometime, being unable to bear the delay and mounting costs, gives up and surrenders to the other side or agrees to settlement which is something akin to creditor who is not able to recover the debt, writing off the debt. This happens when the costs keep mounting and he realizes that even if he succeeds he will not get the actual costs. If this happens frequently, the citizens will lose confidence in the civil justice system. When a civil litigant is denied effective relief in Courts, he tries to take his grievances to `extra judicial' enforcers (that is goons, musclemen, underworld) for enforcing his claims/right thereby criminalising the civil society. This has serious repercussions on the institution of democracy.

22. We therefore, suggest that the Rules be amended to provide for `actual realistic costs'. The object is to streamline the award of costs and simplify the process of assessment, while making the cost `actual and realistic'. While ascertainment of actuals in necessary in regard to expenditure incurred (as for example travel expenses of witnesses, cost of obtaining certified copies etc.) in so far as advocates' fee is concerned, the emphasis should be on `realistic' rather than `actual'. The courts are not concerned with the number of lawyers engaged or the high rate of day fee paid to them. For the present, the Advocate fee should be a realistic normal single fee.

Costs in Arbitration matters

23. We have referred to the effect of absence of provisions for award of actual costs, on civil litigation. At the other end of the spectrum is an area where award of actual but unrealistic costs and delay in disposal is affecting the credibility of an alternative dispute resolution process. We are referring to arbitration proceedings where usually huge costs are awarded (with reference to actual unregulated fees of Arbitrators and Advocates).

24. Clause (a) of section 31(8) of Arbitration and Conciliation At, 1996 (`Act' for short) deals with costs. It provides that unless otherwise agreed by the parties, the costs of an arbitration shall be fixed by the arbitral tribunal.

The explanation to sub-section (8) of section 31 makes it clear that `costs' means reasonable costs relating to (i) the fees and expenses of the arbitrators and witnesses, (ii) legal fees and expenses, (iii) any administration fees of the institution supervising the arbitration, and (iv) any other expenses incurred in connection with the arbitral proceedings and the arbitral award. Clause (b) of section 31(8) of the Act provides that unless otherwise agreed by parties, the arbitral tribunal shall specify (i) the party entitled to costs, (ii) the party who shall pay the costs, (iii) the amount of costs or method of determining the amount, and (iv) the manner in which the costs shall be paid. This shows that what is awardable is not `actual' expenditure but `reasonable' costs.

25. Arbitrators can be appointed by the parties directly without the intervention of the court, or by an Institution specified in the arbitration agreement. Where there is no consensus in regard to appointment of arbitrator/s, or if the specified institution fails to perform its functions, the party who seeks arbitration can file an application under section 11 of the Act for appointment of arbitrators. Section 11 speaks of Chief Justice or his Designate `appointing' an arbitrator. The word `appoint' means not only nominating or designating the person who will act as an arbitrator, but is wide enough to include the stipulating the terms on which he is appointed.

For example when we refer to an employer issuing a letter of appointment, it not only refers to the actual act of appointment, but includes the stipulation of the terms subject to which such appointment is made. The word `appoint' in section 11 of the Act, therefore refers not only to the actual designation or nomination as an arbitrator, but includes specifying the terms and conditions, which the Chief Justice or Designate may lay down on the facts and circumstances of the case. Whenever the Chief Justice or his Designate appoint arbitrator/s, it will be open to him to stipulate the fees payable to the arbitrator/s, after hearing the parties and if necessary after ascertaining the fee structure from the prospective Arbitrator/s. This will avoid the embarrassment of parties having to negotiate with the Arbitrators, the fee payable to them, after their appointment.

26. This Court in Union of India v. Singh Builders Syndicate - 2009 (4) SCC 523, dealt with the complaints about the arbitration cost in India:

"20. Another aspect referred to by the appellant, however requires serious consideration. When the arbitration is by a Tribunal consisting of serving officers, the cost of arbitration is very low. On the other hand, the cost of arbitration can be high if the Arbitral Tribunal consists of retired Judge/s.

21. When a retired Judge is appointed as Arbitrator in place of serving officers, the government is forced to bear the high cost of Arbitration by way of private arbitrator's fee even though it had not consented for the appointment of such non-technical non-serving persons as Arbitrator/s. There is no doubt a prevalent opinion that the cost of arbitration becomes very high in many cases where retired Judge/s are Arbitrators. The large number of sittings and charging of very high fees per sitting, with several add-ons, without any ceiling, have many a time resulted in the cost of arbitration approaching or even exceeding the amount involved in the dispute or the amount of the award.

22. When an arbitrator is appointed by a court without indicating fees, either both parties or at least one party is at a disadvantage. Firstly, the parties feel constrained to agree to whatever fees is suggested by the Arbitrator, even if it is high or beyond their capacity. Secondly, if a high fee is claimed by the Arbitrator and one party agrees to pay such fee, the other party, who is unable to afford such fee or reluctant to pay such high fee, is put to an embarrassing position. He will not be in a position to express his reservation or objection to the high fee, owing to an apprehension that refusal by him to agree for the fee suggested by the arbitrator, may prejudice his case or create a bias in favour of the other party who readily agreed to pay the high fee.

23. It is necessary to find an urgent solution for this problem to save arbitration from the arbitration cost. Institutional arbitration has provided a solution as the Arbitrators' fees is not fixed by the Arbitrators themselves on case to case basis, but is governed by a uniform rate prescribed by the institution under whose aegis the Arbitration is held. Another solution is for the court to fix the fees at the time of appointing the arbitrator, with the consent of parties, if necessary in consultation with the arbitrator concerned. Third is for the retired Judges offering to serve as Arbitrators, to indicate their fee structure to the Registry of the respective High Court so that the parties will have the choice of selecting an Arbitrator whose fees are in their `range' having regard to the stakes involved.

24. What is found to be objectionable is parties being forced to go to an arbitrator appointed by the court and then being forced to agree for a fee fixed by such Arbitrator. It is unfortunate that delays, high cost, frequent and sometimes unwarranted judicial interruptions at different stages are seriously hampering the growth of arbitration as an effective dispute resolution process. Delay and high cost are two areas where the Arbitrators by self regulation can bring about marked improvement."

(emphasis supplied)

27. There is a general feeling among consumers of arbitration (parties settling disputes by arbitration) that ad-hoc arbitrations in India - either international or domestic, are time consuming and disproportionately expensive. Frequent complaints are made about two sessions in a day being treated as two hearings for purpose of charging fee; or about a sessions for two hours being treated as full sessions for purposes of fee; or about non-

productive sittings being treated as fully chargeable hearings. It is pointed out that if there is an arbitral tribunal with three arbitrators and if the arbitrators are from different cities and the arbitrations are to be held and the Arbitrators are accommodated in five star hotels, the cost per hearing, (Arbitrator's fee, lawyer's fee, cost of travel, cost of accommodation etc.) may easily run into Rupees One Million to One and half Million per sitting.

Where the stakes are very high, that kind of expenditure is not commented upon. But if the number of hearings become too many, the cost factor and efficiency/effectiveness factor is commented. That is why this Court in Singh Builders Syndicate observed that the arbitration will have to be saved from the arbitration cost.

28. Though what is stated above about arbitrations in India, may appear rather harsh, or as an universalisation of stray aberrations, we have ventured to refer to these aspects in the interest of ensuring that arbitration survives in India as an effective alternative forum for disputes resolution in India.

Examples are not wanting where arbitrations are being shifted to neighbouring Singapore, Kuala Lumpur etc., on the ground that more professionalized or institutionalized arbitrations, which get concluded expeditiously at a lesser cost, are available there. The remedy for healthy development of arbitration in India is to disclose the fees structure before the appointment of Arbitrators so that any party who is unwilling to bear such expenses can express his unwillingness. Another remedy is Institutional Arbitration where the Arbitrator's fee is pre-fixed. The third is for each High Court to have a scale of Arbitrator's fee suitably calibrated with reference to the amount involved in the dispute. This will also avoid different designates prescribing different fee structures. By these methods, there may be a reasonable check on the fees and the cost of arbitration, thereby making arbitration, both national and international, attractive to the litigant public. Reasonableness and certainty about total costs are the key to the development of arbitration. Be that as it may.

Salem Advocate Bar ... vs Union Of India on 2 August, 2005

Report No.3 Report No.3 deals with the Case Flow Management and Model Rules. The case management policy can yield remarkable results in achieving more disposal of the cases. Its mandate is for the Judge or an officer of the court to set a time-table and monitor a case from its initiation to its disposal. The Committee on survey of the progress made in other countries has come to a conclusion that the case management system has yielded exceedingly good results.

Model Case Flow Management Rules have been separately dealt with for trial courts and first appellate subordinate courts and for High Courts. These draft Rules extensively deal with the various stages of the litigation. The High Courts can examine these Rules, discuss the matter and consider the question of adopting or making case law management and model rules with or without modification, so that a step forward is taken to provide to the litigating public a fair, speedy and inexpensive justice.

The Model Case Flow Management Rules read as under: "MODEL CASE FLOW MANAGEMENT RULES (A) Model Case Management Rules for Trial Courts and First Appellate Subordinate Courts I. Division of Civil Suits and Appeals into Tracks II. Original Suits

1. Fixation of time limits while issuing notice

2. Service of Summons/notice and completion of pleadings

3. Calling of Cases (Hajri or Call Work or Roll Call)

4. Procedure on the grant of interim orders

5. Referral to Alternate Dispute Resolution

6. Procedure on the failure of Alternate Dispute Resolution

7. Referral to Commissioner for recordal of evidence

8. Costs

9. Proceedings for Perjury

10. Adjournments

11. miscellaneous Applications.

III. First Appeals to Subordinate Courts

1. Service of Notice of Appeal

2. Essential Documents to be filed with the Memorandum of Appeal

3. Fixation of time limits in interlocutory matters

4. Steps for completion of all formalities (Call Work Hajri)

5. Procedure on grant of interim-orders

6. Filing of Written submissions

7. Costs IV. Application/Petition under Special Acts V. Criminal Trial and Criminal Appeals to Subordinate Courts

(a) Criminal Trials

(b) Criminal Appeals VI. Notice under section 80 of Code of Civil Procedure VII. Note (B) Model Case Flow Management Rules in High Court I. Division of Cases into Tracks II. Writ of Habeas Corpus III. Mode of Advance Service IV. First Appeals to High Court V. Appeals to Division Bench VI. Second Appeals.

VII. Civil Revisions VIII. Criminal Appeals IX. Note.

..High Court Rules, 2003 In exercise of the power conferred by Part X of the Code of Civil Procedure 1908, (5 of 1908) and .. High Court Act, and all other powers enabling, the . High Court hereby makes the following Rules, in regard to case flow management in the subordinate courts. (A) Model Rules for Trial Courts and First Appellate Subordinate Courts I. Division of Civil Suits and Appeals into Tracks

1. Based on the nature of dispute, the quantum of evidence to be recorded and the time likely to be taken for the completion of suit, the suits shall be channeled into different tracks. Track I may include suits for maintenance, divorce and child custody and visitation rights, grant of letters of administration and succession certificate and simple suits for rent or for eviction (upon notice under Section 106 of Transfer of Property Act). Track 2 may consist of money suits and suits based solely on negotiable instruments. Track 3 may include suits concerning partition and like property disputes, trademarks, copyrights and other intellectual property matters. Track 4 may relate to other matters. All efforts shall be taken to complete the suits in track 1 within a period of 9 months, track 2 within 12 months and suits in track 3 and 4 within 24 months.

This categorization is illustrative and it will be for the High Court to make appropriate categorization. It will be for the judge concerned to make an appropriate assessment as to which track any case can be assigned.

2. Once in a month, the registry/administrative staff of each Court will prepare a report as to the stage and progress of cases which are proposed to be listed in next month and place the report before the Court. When the matters are listed on each day, the judge concerned may take such decision as he may deem fit in the presence of counsel/parties in regard to each case for removing any obstacles in service of summons, completion of pleadings etc. with a view to make the case ready for disposal.

3. The judge referred to in clause (2) above, may shift a case from one track to another, depending upon the complexity and other circumstances of the case.

4. Where computerization is available, the monthly data will be fed into the computer in such a manner that the judge referred to in clause (2) above, will be able to ascertain the position and the stage of every case in every track from the computer screen. Over a period, all cases pending in his Court will be covered. Where computerization is not available, the monitoring must be done manually.

5. The judge referred to in clause (2) above, shall monitor and control the flow or progress of every case, either from the computer or from the register or data placed before him in the above manner or in some other manner he may innovate.

II. Original Suit :

1. Fixation of time limits while issuing notice :

(a) Wherever notice is issued in a suit, the notice should indicate that the Code prescribes a maximum of 30 days for filing written statement (which for special reasons may be extended upto 90 days) and, therefore, the defendants may prepare the written statement expeditiously and that the matter will be listed for that purpose on the expiry of eight weeks from the date of issue of notice (so that it can be a definite date). After the written statement is filed, the replication (if any, proposed and permitted), should be filed within six weeks of receipt of the written statement. If there are more than one defendant, each one of the defendant should comply with this requirement within the time-limit.

(b) The notice referred to in clause (a) shall be accompanied by a complete copy of the plaint and all its annexure/enclosures and copies of the interlocutory applications, if any.

(c) If interlocutory applications are filed along with the plaint, and if an ex-parte interim order is not passed and the Court is desirous of hearing the respondent, it may, while sending the notice along with the plaint, fix an earlier date for the hearing of the application (than the date for filing written statement) depending upon the urgency for interim relief.

2. Service of Summons/notice and completion of pleadings :

(a) Summons may be served as indicated in clause (3) of Rule 9 of Order V.

(b) In the case of service of summons by the plaintiff or a courier where a return is filed that the defendant has refused notice, the return will be accompanied by an undertaking that the plaintiff or the courier, as the case may be, is aware that if the return is found to be false, he can be punished for perjury or summarily dealt with for contempt of Court for abuse of the provisions of the Code. Where the plaintiff comes forward with a return of 'refusal', the provisions of Order 9A Rule (4) will be followed by re-issue of summons through Court.

(c) If it has not been possible to effect service of summons under Rule 9 of Order V, the provisions of Rule 17 of Order V shall apply and the plaintiff shall within 7 days from the date of its inability to serve the summons, to request the Court to permit substituted service. The dates for filing the written statement and replication, if any, shall accordingly stand extended.

3. Calling of Cases (Hajri or Call Work or Roll Call) :

The present practice of the Court-master or Bench-clerk calling all the cases listed on a particular day at the beginning of the day in order to confirm whether counsel are ready, whether parties are present or whether various steps in the suit or proceeding has been taken, is consuming a lot of time of the Court, sometimes almost two hours of the best part of the day when the judge is fresh. After such work, the Court is left with very limited time to deal with cases listed before it. Formal listing should be first before a nominated senior officer of the registry, one or two days before the listing in Court. He may give dates in routine matters for compliance with earlier orders of Court. Cases will be listed before Court only where an order of the Court is necessary or where an order prescribing the consequences of default or where a peremptory order or an order as to costs is required to be passed on the judicial side. Cases which have to be adjourned as a matter of routine for taking steps in the suit or proceeding should not be unnecessarily listed before Court. Where parties/counsel are not attending before the Court-officer or are defiant or negligent, their cases may be placed before the Court. Listing of cases on any day before a Court should be based on a reasonable estimate of time and number of cases that can be disposed of by the Court in a particular day. The Courts shall, therefore, dispense with the practice of calling all the cases listed adjourned to any particular day. Cases will be first listed before a nominated senior officer of the Court, nominated for the purpose.

4. Procedure on the grant of interim orders:

(a) If an interim order is granted at the first hearing by the Court, the defendants would have the option of moving appropriate applications for vacating the interim order even before the returnable date indicated in the notice and if such an application is filed, it shall be listed as soon as possible even before the returnable date.

(b) If the Court passes an ad-interim ex-parte order in an interlocutory application, and the reply by the defendants is filed, and if, thereafter, the plaintiff fails to file the rejoinder (if any) without good reason for the delay, the Court has to consider whether the stay or interim order passed by the Court should be vacated and shall list the case with that purpose. This is meant to prevent parties taking adjournment with a view to have undue benefit of the ad interim orders. The plaintiff may, if he so chooses, also waive his right to file a rejoinder. A communication of option by the plaintiff not to file a rejoinder, made to the registry will be deemed to be the completion of pleadings in the interlocutory application.

5. Referral to Alternate Dispute Resolution: (In the hearing before the Court, after completion of pleadings, time limit for discovery and inspection, and admission and denials, of documents shall be fixed, preferably restricted to 4 weeks each) After the completion of admission and denial of documents by the parties, the suit shall be listed before the Court (for examination of parties under Order X of the Civil Procedure Code. A joint statement of admitted facts shall be filed before the said date.) The Court shall thereafter, follow the procedure prescribed under the Alternative Dispute Resolution and Mediation Rules, 2002.

6. Procedure on the failure of Alternate Dispute Resolution :

On the filing of report by the Mediator under the Mediation Rules that efforts at Mediation have failed, or a report by the Conciliator under the provisions of the Arbitration and Conciliation Act, 1996, or a report of no settlement in the Lok Adalat under the provisions of the Legal Services Authority Act, 1987 the suit shall be listed before the registry within a period of 14 days. At the said hearing before the registry, all the parties shall submit the draft issues proposed by them. The suit shall be listed before the Court within 14 days thereafter for framing of issues.

When the suit is listed after failure of the attempts at conciliation, arbitration or Lok Adalat, the Judge may merely inquire whether it is still possible for the parties to resolve the dispute. This should invariably be done by the Judge at the first hearing when the matter comes back on failure of conciliation, mediation or Lok Adalt. If the parties are not keen about settlement, the Court shall frame the issues and direct the plaintiff to start examining his witnesses. The procedure of each witness filing his examination- in-chief and being examined in cross or re- examination will continue, one after the other. After completion of evidence on the plaintiff's side, the defendants shall lead evidence likewise, witness after witness, the chief examination of each witness being by affidavit and the witness being then cross-examined or re-examined. The parties shall keep he affidavit in chief-examination ready whenever the witness's examination is taken up. As far as possible, evidence must be taken up day by day as stated in clause (a) of proviso to Rule 2 of Order XVII. The parties shall also indicate the likely duration for the evidence to be completed, and for the arguments to be thereafter heard. The Judge shall ascertain the availability of time of the Court and will list the matter for trial on a date when the trial can go on from day to day and conclude the evidence. The possibility of further negotiation and settlement should be kept open and if such a settlement takes place, it should be open to the parties to move the registry for getting the matter listed at an earlier date for disposal.

7. Referral to Commissioner for recordal of evidence :

(a) The High Court shall conduct an examination on the subjects of the Code of Civil Procedure and Evidence Act. Only those advocates who have passed an examination conducted by the High Court on the subjects of 'Code of Civil Procedure' and Evidence Act, - shall be appointed as Commissioners for recording evidence. They shall be ranked according to the marks secured by them.

(b) It is not necessary that in every case the Court should appoint a Commissioner for recording evidence. Only if the recording of evidence is likely to take a long time, or there are any other special grounds, should the Court consider appointing a Commissioner for recording the evidence. The Court should direct that the matter be listed for arguments fifteen days after the Commissioner files his report with the evidence.

The Court may initially fix a specific period for the completion of the recording of the evidence by the Commissioner and direct the matter to be listed on the date of expiry of the period, so that Court may know whether the parties are co-operating with the Commissioner and whether the recording of evidence is getting unnecessarily prolonged.

(c) Commissioners should file an undertaking in Court upon their appointment that they will keep the records handed over to them and those that may be filed before them, safe and shall not allow any party to inspect them in the absence of the opposite party/counsel. If there is delay of more than one month in the dates fixed for recording evidence, it is advisable for them to return the file to the Court and take it back on the eve of the adjourned date.

8. Costs :

So far as awarding of costs at the time of judgment is concerned, awarding of costs must be treated generally as mandatory in as much as the liberal attitude of the Courts in directing the parties to bear their own costs had led parties to file a number of frivolous cases in the Courts or to raise frivolous and unnecessary issues. Costs should invariably follow the event. Where a party succeeds ultimately on one issue or point but loses on number of other issues or points which were unnecessarily raised, costs must be appropriately apportioned. Special reasons must be assigned if costs are not being awarded. Costs should be assessed according to rules in force. If 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.

9. Proceedings for Perjury :

If the Trial Judge, while delivering the judgment, is of the view that any of the parties or witnesses have willfully and deliberately uttered blatant falsehoods, he shall consider (at least in some grave cases) whether it is a fit case where prosecution should be initiated for perjury and order prosecution accordingly.

10. Adjournments :

The amendments to the Code have restricted the number of adjournments to three in the course of hearing of the suit, on reasonable cause being shown. When a suit is listed before a Court and any party seeks adjournment, the Court shall have to verify whether the party is seeking adjournment due to circumstances beyond the control of the party, as required by clause (b) of proviso to Rule 2 of Order XVII. The Court shall impose costs as specified in Rule 2 of Order XVII.

11. Miscellaneous Applications :

The proceedings in a suit shall not be stayed merely because of the filing of Miscellaneous Application in the course of suit unless the Court in its discretion expressly thinks it necessary to stay the proceedings in the suit. III. First Appeals to Subordinate Courts

1. Service of Notice of Appeal :

First Appeals being appeals on question of fact and law, Courts are generally inclined to admit the appeal and it is only in exceptional cases that the appeal is rejected at the admission stage under Rule 11 of Order XLI. In view of the amended CPC, a copy of the memorandum of appeal is required to be filed in the subordinate Court. It has been clarified by the Supreme Court that the requirement of filing a copy of appeal memorandum in the sub-ordinate Court does not mean that appeal memorandum cannot be filed in the Appellate Court immediately for obtaining interim orders.

Advance notice should simultaneously be given by the counsel for the party who is proposing to file the appeal, to the counsel for the opposite party who appeared in the sub-ordinate Court so as to enable the respondents to appear if they so choose, even at the first hearing stage.

2. Essential Documents to be filed with the Memorandum of Appeal :

The Appellant shall, as far as possible, file, along with the appeal, copies of essential documents marked in the suit, for the purpose of enabling the appellate Court to understand the points raised or for purpose of passing interim orders.

3. Fixation of time limits in interlocutory matters :

Whenever notice is issued by the appellate Court in interlocutory matters, the notice should indicate the date by which the reply should be filed. The rejoinder, if any, should be filed within four weeks of receipt of the reply. If there are more parties than one who are Respondents, each one of the Respondent should comply with this requirement within the time limit and the rejoinder may be filed within four weeks from the receipt of the last reply.

4. Steps for completion of all formalities/ (Call Work) (Hajri) :

The appeal shall be listed before the registry for completion of all formalities necessary before the appeal is taken up for final hearing. The procedure indicated above of listing the case before a senior officer of the appellate Court registry for giving dates in routine matters must be followed to reduce the 'call work' (Hajri) and only where judicial orders are necessary, such cases should be listed before Court.

5. Procedure on grant of interim-orders : If an interim order is granted at the first hearing by the Court, the Respondents would have the option of moving appropriate applications for vacating the interim order even before the returnable date indicated in the notice and if such an application is filed, it shall be listed as soon as possible even before the returnable date.

If the Court passes an ad-interim ex-parte order, and if the reply is filed by the Respondents and if, without good reason, the appellant fails to file the rejoinder, Court shall consider whether it is a fit case for vacating the stay or interim order and list the case for that purpose. This is intended to see that those who have obtained ad interim orders do not procrastinate in filing replies. The appellant may also waive his right to file the rejoinder. Such choice shall be conveyed to the registry on or before the date fixed for filing of rejoinder. Such communication of option by the applicant to the registry will be deemed to be completion of pleadings.

6. Filing of Written submissions :

Both the appellants and the respondents shall be required to submit their written submissions two weeks before the commencement of the arguments in the appeal. The cause-list should indicate if written submissions have been filed or not. Wherever they have not been filed, the Court must insist on their being filed within a particular period to be fixed by the Court and each party must serve a copy thereof on the opposite side before the date of commencement of arguments. There is no question of parties filing replies to each other's written submissions.

The Court may consider having a Caution List/Alternative List to take care of eventualities when a case does not go on before a court, and those cases may be listed before a court where, for any reason, the scheduled cases are not taken up for hearing.

7. Costs :

Awarding of costs must be treated generally as mandatory in as much 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.

IV. Application/Petition under Special Acts This chapter deals with applications/petitions filed under Special Acts like the Industrial Disputes Act, Hindu Marriage Act, Indian Succession Act etc. The Practise directions in regard to Original Suits should mutatis mutandis apply in respect of such applications/petitions.

V. Criminal Trials and Criminal Appeals to Subordinate Courts

(a) Criminal Trials

1. Criminal Trials should be classified based on offence, sentence and whether the accused is on bail or in jail. Capital punishment, rape and cases involving sexual offences or dowry deaths should be kept in Track I. Other cases where the accused is not granted bail and is in jail, should be kept in Track II. Cases which affect a large number of persons such as cases of mass cheating, economic offences, illicit liquor tragedy and food adulteration cases, etc. should be kept in Track III. Offences which are tried by special courts such as POTA, TADA, NDPS, Prevention of Corruption Act, etc. should be kept in Track IV. Track V all other offences.

The endeavour should be to complete Track I cases within a period of nine months, Track II and Track III cases within twelve months and Track IV within fifteen months.

2. The High Court may classify criminal appeals pending before it into different tracks on the same lines mentioned above.

(b) Criminal Appeals

3. Wherever an appeal is filed by a person in jail, and also when appeals are filed by State, as far as possible, the memorandum appeal may be accompanied by important documents, if any, having a bearing on the question of bail.

4. In respect of appeals filed against acquittals, steps for appointment of amicus curie or State Legal Aid counsel in respect of the accused who do not have a lawyer of their own should be undertaken by the registry/(State Legal Services Authority) immediately after completion of four weeks of service of notice. It shall be presumed that in such an event the accused is not in a position to appoint counsel.

5. Advance notice should simultaneously be given by the counsel for the party who is proposing to file the appeal, to the counsel for the opposite party in the subordinate Court, so as to enable the other party to appear if they so choose even at the first hearing stage.

VI. Notice issued under S.80 of Code of Civil Procedure :

Every public authority shall appoint an officer responsible to take appropriate action on a notice issued under S.80 of the Code of Civil Procedure. Every such officer shall take appropriate action on receipt of such notice. If the Court finds that the concerned officer, on receipt of the notice, failed to take necessary action or was negligent in taking the necessary steps, the Court shall hold such officer responsible and recommend appropriate disciplinary action by the concerned authority. VII. Note Whenever there is any inconsistency between these rules and the provisions of either the Code of Civil Procedure, 1908 or the Code of Criminal Procedure 1973 or the High Courts Act or any other Statutes, the provisions of such Codes and Statutes shall prevail.

(B) Model Case Flow Management Rules in High Court ..High Court Rules, 2003 In exercise of the power conferred by Article 225 of the Constitution of India, and Chapter X of the Code of Civil Procedure, 1908 (5 of 1908) and Section .. of the .. High Court Act and all other powers enabling it, the High Court hereby makes the following Rules : I. Division of Cases into different tracks :

1. Writ Petitions : The High Court shall, at the stage of admission or issuing notice before admission categorise the Writ Petitions other than Writ of Habeas Corpus, into three categories depending on the urgency with which the matter should be dealt with : the Fast Track, the Normal Track and the Slow Track. The petitions in the Fast Track shall invariably be disposed of within a period not exceeding six months while the petitions in the Normal Track should not take longer than a year. The petitions in the Slow Track, subject to the pendency of other cases in the Court, should ordinarily be disposed of within a period of two years.

Where an interim order of stay or injunction is granted in respect of liability to tax or demolition or eviction from public premises etc. shall be put on the fast track. Similarly, all matters involving tenders would also be put on the Fast Track. These matters cannot brook delays in disposal.

2. Senior officers of the High Court, nominated for the purpose, shall at intervals of every month, monitor the stage of each case likely to come up for hearing before each Bench (Division Bench or Single Judge) during that month which have been allocated to the different tracks. The details shall be placed before the Chief Justice or Committee nominated for that purpose as well as the concerned Judge dealing with cases.

3. The Judge or Judges referred to in Clause (2) above may shift the case from one track to another, depending upon the complexity, (urgency) and other circumstances of the case.

4. Where computerization is available, data will be fed into the computer in such a manner that the court or judge or judges, referred to in Clause (2) above will be able to ascertain the position and stage of every case in every track from the computer screen.

5. Whenever the roster changes, the judge concerned who is dealing with final matters shall keep himself informed about the stage of the cases in various tracks listed before him during every week, with a view to see that the cases are taken up early.

6. Other matters : The High Court shall also divide Civil Appeals and other matters in the High Court into different tracks on the lines indicated in sub-clauses (2) to (5) above and the said clauses shall apply, mutatis mutandis, to the civil appeals filed in the High Court. The High Court shall make a subject-wise division of the appeals/revision application for allocation into different tracks.

(Division of criminal petitions and appeals into different tracks is dealt with separately under the heading 'criminal petitions and appeals'.) II. Writ of Habeas Corpus :

Notices in respect of Writ of Habeas Corpus where the person is in custody under orders of a State Government or Central Government shall invariably be issued by the Court at the first listing and shall be made returnable within 48 hours. State Government or Central Government may file a brief return enclosing the relevant documents to justify the detention. The matter shall be listed after notice on the fourth working day after issuance of notice, and the Court shall consider whether a more detailed return to the Writ is necessary, and, if so required, shall give further time of a week and three days' time for filing a rejoinder. A Writ of Habeas Corpus shall invariably be disposed of within a period of fifteen days. It shall have preference over and above fast-track cases. III. Mode of Advance Service :

The Court rules will provide for mode of service of notice on the standing counsel for Respondents wherever available, against whom, interim orders are sought. Such advance service shall generally relate to Governments or public sector undertakings who have Standing Counsel. FIRST APPEALS TO HIGH COURT

1. Service of Notice of Appeal :

First Appeals being appeals on questions of fact and law, Courts are generally inclined to admit the appeal and it is only in exceptional cases that the appeal is rejected under Order XLI Rule 11 at the admission stage. In view of the amended CPC, a copy of the appeal is required to be filed in the Trial Court. It has been clarified by the Supreme Court that the requirement of filing of appeal in the Trial Court does not mean that the party cannot file the appeal in the appellate Court (High Court) immediately for obtaining interim orders.

In addition to the process for normal service as per the Code of Civil Procedure, advance notice should simultaneously be given by the counsel for the party who is proposing to file the appeal, to the counsel for the opposite party in the Trial Court itself so as to enable them to inform the parties to appear if they so choose even at the first hearing stage.

2. Filing of Documents :

The Appellant shall, on the appeal being admitted, file all the essential papers within such period as may be fixed by the High Court for the purpose the High Court understanding the scope of the dispute and for the purpose of passing interlocutory orders.

3. Printing or typing of Paper Book :

Printing and preparation of paper-books by the High Court should be done away with. After service of notice is effected, counsel for both sides should agree on the list of documents and evidence to be printed or typed and the same shall be made ready by the parties within the time to be fixed by the Court. Thereafter the paper book shall be got ready. It must be assured that the paper books are ready at lease six months in advance before the appeal is taken up for arguments. (Cause lists must specify if paper books have been filed or not).

4. Filing of Written Submissions and time for oral arguments :

Both the appellants and the respondents shall be required to submit their written submissions with all the relevant pages as per the Court paper- book marked therein within a month of preparation of such paper-books, referred to in para 3 above.

Cause list may indicate if written submissions have been filed. If not, the Court must direct that they be filed immediately. After the written submissions are filed, (with due service of copy to the other side) the matter should be listed before the Registrar/Master for the parties to indicate the time that will be taken for arguments in the appeal. Alternatively, such matters may be listed before a judge in chambers for deciding the time duration and thereafter to fix a date of hearing on a clear date when the requisite extent of time will be available. In the event that the matter is likely to take a day or more, the High Court may consider having a Caution List/Alternative List to meet eventualities where a case gets adjourned due to unavoidable reasons or does not go on before a court, and those cases may be listed before a court where, for one reason or another, the scheduled cases are not taken up for hearing.

5. Court may explore possibility of settlement :

At the first hearing of a First Appeal when both parties appear, the Court shall find out if there is a possibility of a settlement. If the parties are agreeable even at that stage for mediation or conciliation, the High Court could make a reference to mediation or conciliation for the said purpose.

If necessary, the process contemplated by Section 89 of CPC may be resorted to by the Appellate Court so, however, that the hearing of the appeal is not unnecessarily delayed. Whichever is the ADR process adopted, the Court should fix a date for a report on the ADR two months from the date of reference.

V. Appeals to Division Bench from judgment of Single Judge of High Court [Letter Patent Appeals (LPA) or similar appeals under High Courts Acts] :

An appeal to a Division Bench from judgment of a Single Judge may lie in the following cases :

(1) Appeals from interlocutory orders of the Single Judge in original jurisdiction matters including writs; (2) appeals from final judgments of a Single Judge in original jurisdiction; (3) other appeals permitted by any law to a Division Bench.

Appeals against interlocutory orders falling under category (1) above should be invariably filed after advance notice to the opposite counsel (who has appeared before the Single Judge) so that both the sides will be represented at the very first hearing of the appeals. If both parties appear at the first hearing, there is no need to serve the opposite side by normal process and at least in some cases, the appeals against interlocutory orders can be disposed of even at the first hearing. If, for any reason, this is not practicable, such appeals against interim orders should be disposed of within a period of a month. In cases referred to above, necessary documents should be kept ready by the counsel to enable the Court to dispose of the appeal against interlocutory matter at the first hearing itself.

In all Appeals against interim orders in the High Court, in writs and civil matters, the Court should endeavour to set down and observe a strict time limit in regard to oral arguments. In case of Original Side appeals/LPAs arising out of final orders in a Writ Petition or arising out of civil suits filed in the High Court, a flexible time schedule may be followed.

The practice direction in regard to First Appeal should mutatis mutandis apply in respect of LPAs/Original Side appeals against final judgments of the Single Judge.

Writ Appeals/Letters Patent Appeals arising from orders of the Single Judge in a Writ Petition should be filed with simultaneous service on the counsel for the opposite party who had appeared before the Single Judge or on service of the opposite party.

Writ Appeals against interim orders of the Single Judge should invariably be disposed of early and, at any rate, within a period of thirty days from the first hearing. Before Writ Appeals against final orders in Writ Petitions are heard, brief written submissions must be filed by both parties within such time as may be fixed by the Court.

VI. Second Appeals :

Even at the stage of admission, the questions of law with a brief synopsis and written submissions on each of the propositions should be filed so as to enable the Court to consider whether there is a substantial question of law. Wherever the Court is inclined to entertain the appeal, apart from normal procedure for service as per rules, advance notice shall be given to the counsel who had appeared in the first appeal letter Court. The notice should require the respondents to file their written submissions within a period of eight weeks from service of notice. Efforts should be made to complete the hearing of the Second Appeals within a period of six months.

VII. Civil Revision :

A revision petition may be filed under Section 115 of the Code or under any special statute. In some High Courts, petitions under Article 227 of the Constitution of India are registered as civil revision petitions. The practise direction in regard to LPAs and First Appeals to the High Courts, should mutatis mutandis apply in respect of revision petitions.

VIII. Criminal Appeals :

Criminal Appeals should be classified based on offence, sentence and whether the accused is on bail or in jail. Capital punishment cases, rape, sexual offences, dowry death cases should be kept in Track I. Other cases where the accused is not granted bail and is in jail, should be kept in Track II. Cases which affect a large number of persons such as cases of mass cheating, economic offences, illicit liquor tragedy, food adulteration cases, offences of sensitive nature should be kept in Track III. Offences which are tried by special courts such as POTA, TADA, NDPS, Prevention of Corruption Act, etc. should be kept in Track IV. Track V all other offences.

The endeavour should be to complete Track I cases within a period of six months, Track II cases within nine months, Track III within a year, Track IV and Track V within fifteen months. Wherever an appeal is filed by a person in jail, and also when appeals are filed by State, the complete paper-books including the evidence, should be filed by the State within such period as may be fixed by Court.

In appeals against acquittals, steps for appointment of amicus curie or State Legal Aid counsel in respect of the accused who do not have a lawyer of their own should be undertaken by the Registry/(State Legal Services Committee) immediately after completion of four weeks of service of notice. It shall be presumed that in such an event the accused is not in a position to appoint counsel, and within two weeks thereafter counsel shall be appointed and shall be furnished all the papers.

IX. Note Wherever there is any inconsistency between these rules and the provisions of either the Code of Civil Procedure, 1908 or the Code of Criminal Procedure, 1973 or the High Court Act, or any other statute, the provisions of such Codes and statute, the provisions of such Codes and statutes shall prevail."

Law Commission Report

240Th Report On Costs In Civil Litigation

13. Summary of Recommendations:

(1) Costs in civil suits/proceedings should be such as to curb false and frivolous litigation and to discourage adjournments on feeble grounds or for ulterior purpose. Further, the costs to be awarded to a successful party should be realistic and reasonable and to this effect the rules in vogue should be revisited by the High Courts.

(2) The principle that costs should follow the event which finds statutory recognition in Section 35 of CPC ought to be given effect to by the Courts with all seriousness and the deviations should be rare. The recent decision of Supreme Court in Sanjeev Kumar Jain (2011, JT (12), 435) has laid stress on this aspect.

However, the award of costs should not cause undue hardship to the parties who by virtue of their socio-economic circumstances may not have paying capacity.

(3) a) The rules framed by the High Courts in relation to costs especially the advocate's fee should be thoroughly revised so as to accord with the principle of realistic and adequate costs [The aspects on which the Committee of the High Courts should focus their attention while revising the rules in this regard are discussed at various places, especially paras 4.2, 4.3, 5 and 6.

b) The rules must be updated and language to be made simpler so as to impart clarity. Unnecessary and outdated rules ought to be weeded out. The format of bill of costs needs to be revised. The procedure for filing fees certificate also needs a change.

(4) Adjournment costs should be sufficiently high and with a view to ensure this, the High Courts may, by virtue of practice directives or circulars, lay down guiding principles. Uniformity in approach on the part of the trial judges in granting costs for adjournments ought to be developed.

(5) The following legislative amendments in CPC are suggested:

(i) Section 35A (Compensatory costs for false or vexatious claim/defence) should be recast as set out in paragraph 8.19 to have a better check against false and frivolous litigation. The thrust of the proposed amendment is to raise the ceiling from Rupees three thousand to Rupees One lakh and creation of Judicial Infrastructure Fund into which part of the costs shall be ordered to be deposited;

(ii) Amendment of Section 95 (compensation for obtaining arrest, attachment etc. on insufficient grounds) in order to raise the ceiling limit of Rupees fifty thousand to Rupees One lakh vide paragraph 9.2.

(iii) Order XXV of CPC (Security for costs) should be so amended as to include the defendant within its purview;

(iii) In order to facilitate easy recovery of costs, Order LXI has to be amended so as to make it obligatory to file proof of payment of costs before the appeal is entertained subject to the discretion vested in the appellate Court to dispense with payment to the extent of half the costs for special reasons.

(v) In Order XX, Rule 6A(preparation of decree), the words '30 days' may be substituted for the words "15 days" so that sufficient time is given to the parties to claim all the admissible items of costs and the Costs Taxation Officer will be able to ascertain costs more satisfactorily.

Costs in Civil litigation - Some illustrative cases of Supreme Court Even though the Code of Civil Procedure contemplates award of costs as a rule, and if costs are not awarded, reasons should be recorded, no consistent principles could be seen from the judgments of the Supreme Court as to when cost could be denied to a party. Even in cases where the court felt that exemplary costs are called for, the quantification of costs seems to be ad hoc and does not furnish any guidance. There are situations where the Court felt that the conduct of the parties to the suit in fact called for award of exemplary costs but actually did not impose any exemplary cost; even cost ordinary allowable was not awarded. For instance, see Amarendra Komalam Vs. Usha Sinha & Anr. , (2005) 11 SCC 251, "For the forgoing reasons, the appeal succeeds. Though it is eminently a fit case for awarding exemplary cost, we refrain from doing so. No costs."

Similarly in Gayatri De vs. Mousumi Cooperative Housing Society Ltd. & Ors. (2004) 5 SCC 90, even though the Court was of the view that it was a fit case for award of exemplary costs, eventually it did not even allow the cost which ordinarily the petitioner would have been entitled to, holding as under:- "The appeal stands allowed. Though this case is eminently a fit case to award exemplary cost, we, by taking a lenient view of the matter say no cost".

Again, in Sumer vs. State of U. P. (2005) 7 SCC 220, the Supreme Court held "Ordinarily a curative petition of this nature deserves dismissal by imposing exemplary cost on the petitioner, but in the present case, we refrain from imposing cost, considering that the petition arises out of a criminal appeal".

In Dattaraj Nathuji Thaware vs. State of Maharashtra & Ors. (2005) 1 SCC 590, even though the Court felt exemplary cost should be imposed, eventually refrained from imposing any cost, in so far as proceedings before the Supreme Court is concerned, observing as under: "We would have imposed exemplary cost in this regard but taking note of the fact that the High Court had already imposed cost of Rs. 25,000/-, we do not propose to impose any further cost."

Similarly in Rajender Singh vs. Lt. Governor Andaman & Nicobar Island & Ors. (2005) 13 SCC 289, the Court noticed that the petitioner had been unnecessarily harassed by the authorities, but however noticing that the High Court had imposed a cost of Rs. 25,000/- did not even allow the costs before it and disposed of the matter with an order, "No costs". In Ravinder Kaur vs. Ashok Kumar & Anr. (2003) 8 SCC 289 relating to disputes between land lord and tenant where the Court felt that the dispute raised by the tenant in regard to the identity of suit schedule property was only a bogey to delay the eviction, imposed an exemplary cost of Rs. 25,000/-.

In State of Kerala vs. Thressia & Anr. 1995 supplement (2) SCC 449, a matter arising out of a dispute between the landlord and tenant the Court felt that exemplary cost should be imposed on the State Government and imposed a cost of Rs. 10,000/- with a direction that it shall be collected from the officer concerned and the counsel who recommended filing of the Special Leave Petition.

In Ram Awatar Agarwal & Ors. Vs. Corporation of Calcutta & Ors. (1999) 6 SCC 532 the Court, noticing that various proceedings, title suit etc. were filed by a party with a view to frustrate an order for demolition made by the Corporation, took the view that the proceedings by the appellant is an abuse of the process of the Court and in these circumstances quantified the cost as Rs. 1 lakh.

In Kabari Pvt. Ltd. Vs. Shivnath Shroff and Ors. (1996) 1 SCC 690, in relation to a suit which commenced in the year 1981 and was eventually decided finally by the Supreme Court in the year 1996 after giving through the hierarchy of courts, the Court while awarding costs quantified the cost at Rs. 10,000/- in each appeal. It is not clear whether if costs as per provisions of CPC were to be claimed by the party succeeding, the said party would have been entitled to the amount of costs so quantified.

In Bhupinder Pal Singh vs. Director General of Civil Aviation & Ors. (2003) 3 SCC 633, in a service dispute decided by a Single Judge and Division Bench of the High Court, the Supreme Court while allowing the appeal, quantified the cost at Rs. 10,000/-.

In Union of India & Ors. vs. Shaik Ali 1989 supplement (2) SCC 717 involving a dispute relating to premature retirement, while setting aside the same, the Court quantified the cost as Rs. 3000/- even though the matter involved adjudication initially by the Central Administrative Tribunal and thereafter by the Supreme Court.

In Srinivasa Cooperative House Building Society Ltd. Vs. Madam Gurumurthy Sastry & Ors. (1994) 4 SCC 675 involving a dispute concerning land acquisition, while holding that the Section 6 declaration was a colourable exercise of power, quantified the cost at Rs. 10,000/- even though the matter involved adjudication by the Single Judge, the Division Bench of the High Court and thereafter by the Supreme Court. In Life Insurance Corporation of India vs. Shanta (2004) 13 SCC 748, in a dispute relating to insurance, while dismissing the appeal filed by LIC, the Court directed cost to the respondent and quantified the litigation cost at Rs.25,000/-.

In Oriental Insurance Company Ltd. Vs. Ozma Shipping Company & Anr. (2009) 9 SCC 159, in a dispute relating to Marine Insurance of the value of Rs. 21.50 lakhs which culminated in proceedings in National Commission under the Consumer Protection Act and thereafter before the Supreme Court, while dismissing the appeal of the Insurance Company, the Court quantified the cost at Rs. 25,000/-.

In P.H. Dayanand vs. S. Venugopal Naidu & Ors. (2009) 2 SCC 323, arising out of a suit relating to title, while dismissing the appeal taking note of the fact that the appellant had been prolonging the hearing of the suit, the Court observed that "he must pay and bear the cost of 1 st respondent. Counsel's fee assessed at Rs. 75,000/-" In Mohinder Singh vs. State of Punjab & Ors. (2007) 10 SCC 724, in a matter involving redemption of mortgage the Court dismissed the appeal with costs and provided, "counsels fee is assessed at Rs. 25,000/-". In Udyami Evam Khadi Gramodyog Welfare Sanstha Vs. State of U.P & Ors. (2008) 1 SCC 560, taking a view that the appellant has resorted to legal proceedings over and over again, which amounted to abuse of the process of law while dismissing the appeal with cost, quantified counsel's fee at Rs. 50,000/-.

In Mumbai International Airport Pvt. Ltd. vs. Golden Chariot Airport and Anr. (2010) 10 SCC 422, relating to proceedings under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, which proceedings were pursued initially before the Estate Officer and thereafter before the City Civil Court, Mumbai etc. the Court noticed that the contesting respondent had taken inconsistent stands and prolonged several proceedings for more than a decade and imposed "cost assessed at Rs. 5,00,000/- (Five Lakhs)" and directed that it shall be paid to the Supreme Court Mediation Centre.

It may be recalled that the Hon'ble Supreme Court in Ashok Kumar Mittal vs. Ram Kumar Gupta & Anr. (2009) 2 SCC 656, had expressed its displeasure about giving directions to deposit amounts with State Legal Services Authority, NGOs etc. In Ali Jawad Ameerhanan Rizvi vs. Indo-French Biotech Enterprises Ltd. & Ors. (2000) 9 SCC 373, in a proceeding challenging an order of the High Court whereby the High Court imposed a cost of Rs. 1 lakh while dismissing the writ petition, the Court noticed that on the findings arrived at by the High Court, there cannot be any doubt that the Court was justified in awarding the cost, but, however, reduced the same from Rs. 1 lakh to Rs. 50,000/- while maintaining the order of the High Court that the same shall be paid to the National Association for the Blind, who was not a party to the proceedings, a practice adversely commented upon in (2009) 2 SCC 656 (supra).

In Haryana Urban Development Authority vs. K.C. Kad (2005) 9 SCC 469, in a dispute under the Consumer Protection Act relating to allotment of plots, the Court while awarding the cost before the Supreme Court quantified the same at a meager amount of Rs. 500/- and directed that the same shall be paid to the Legal Aid Society of the Supreme Court. This was a matter involving adjudication at various Consumer Fora. In Associated Construction vs. Pawan Hans Helicopters Ltd. (2008) 16 SCC 128, involving arbitration proceedings where the Court felt that Pawan Hans had taken advantage of a beleaguered contractor and therefore the contractor is entitled to cost, however, quantified the same only at Rs. 10,000/-.

In India Cements Ltd. vs. Collector of Central Excise 1989 (2) SCR 715, a matter under the Central Excise Act involving adjudication at the level of Appellate Collector, Appellate Tribunal and thereafter the Supreme Court, where cost was directed to be paid, it was quantified at Rs. 10,000/-.

In Delhi Electricity Supply Undertaking vs. Basanti Devi and Anr (1999) 8 SCC 229, noticing that there was a lapse on the part of Delhi Electricity Supply Undertaking in remitting the LIC premium on account of which the respondent had suffered, the Court while allowing the appeal with cost, quantified the same at Rs. 25,000/- whereas the amount which was to be paid by LIC to the respondent was specified as Rs. 50,000/- with interest.

In Burn Standard Company Ltd. vs. McDeromott International Inc. & Anr. (1991) 2 SCC 669, dealing with Technical Collaboration Agreement and arbitration agreement, the Supreme Court taking the view that the conduct of the appellant was such as to tarnish the image and credibility of our entrepreneurs abroad, while dismissing the appeal with cost, quantified the cost at Rs. 5,000/-.

In Smt. Lata Kamat vs. Vilas (1989) 2 SCC 613 involving a matrimonial dispute, the Court quantified the cost as Rs. 2500/-. In M.S. Patil (Dr.) vs. Gulbarga University (2010) 10 SCC 63, covering appointment of the petitioner as a Reader in the University, the Court dismissed the appeal with cost and quantified the same at Rs. 50,000/-. A perusal of the judgment would show that the Court felt strongly about the manner in which interim orders were obtained and the petitioner continued in the post for about 17 years even though he was not entitled to the post.

In Union of India vs. R. Padmanabhan (2003) 7 SCC 270 involving dispute under the Rent Control Act, when appeal was dismissed, cost was quantified at Rs. 15,000/-.

In Bonder & Anr. vs. Hem Singh & Ors. (2009) 12 SCC 310, on finding that the defendant did not have any case, either in law or equity, the Court allowed the appeal and quantified the cost to be paid by the defendant at Rs. 50,000/-.

In Oswal Fats & Oils Ltd. vs. Additional Commissioner, (Administration),Bareilly (2010) 4 SCC 728 the Court taking the view that the appellant had not approached the Quasi Judicial and Judicial Forums, the High Court and the Supreme Court with clean hands and succeeded in securing interim orders, directed payment of cost quantifying the same at Rs. 2 lakhs.

In Sita Ram Bhandar Society, New Delhi vs. Lt. Governor, Government of NCT, Delhi (2009) 10 SCC 501, dealing with Land Acquisition Proceedings, the Court taking a view that the pleas raised were frivolous in nature and meant to frustrate and delay an acquisition which is in public interest, dismissed the appeals with costs which was determined at Rs. 2 lakhs.

In N.V. Srinivasa Murthy vs. Mariyamma (2005) 5 SCC 548, the Court not only directed "cost incurred throughout by the respondents to be paid by the appellants" and in addition directed that a further cost in the sum of Rs, 10,000/- to be paid by the appellant to the respondent "for prosecuting and prolonging litigation upto this Court in a hopelessly barred suit".

In Indian Council for Enviro-Legal Action & Ors. V. Union of India & Ors (1996)3 SCC 212, in a litigation involving a matter of public interest and spread over a period of six years, the court awarded a sum of Rs. 50,000/-.

However, in Mohammad Mahibulla & Anr. V. Seth Chaman Lal & Ors. (1991) 4 SCC 529 where the litigation was dragged on and prolonged for ten years, the cost imposed was only Rs. 1000/-. "We are inclined to agree with counsel for the respondents that this is a case of negligence on the part of the appellants and, therefore, the respondents who have been dragged in these proceedings for about 10 years should be compensated. We direct that the restoration of the appeal in the appellate court on payment of appropriate court-fee shall be subject to the further condition of payment by way of cost of Rs. 1000" (para 7) In Union of India v. R.Padmanabhan (2003) 7 SCC 270, the Court while finding that the Government has been unreasonable directed as under:

"The respondent has been driven to unnecessary litigation by completely denying anything initially for all his efforts and had to face proceedings in this Court also. The Appellant will pay Rs. 15,000 for the costs of the respondent, while bearing their own costs."

In State of Punjab & Ors. V. Bhajan Singh & Anr. (2001) 3 SCC 565, on giving a finding that the conduct of the official concerned was responsible for the situation complained of, the Court directed the officer involved to personally pay the cost pr Rs. 25,000/-.

In Comptroller & Auditor General of India v. K.S.Jagannathan (1986) 2 SCR 17 the Court directed:-

"For the purpose of this appeal the Respondents have been compelled to come to New Delhi to appear before this Court time and again and also had to spend money on their board and lodging. The Appellants will therefore will pay to each of the Respondents a sum of Rs.1500/- by way of cost of this appeal." This was a case involving weaker sections of society and interpretation of certain constitutional provisions. The above judgments which are merely a representative sample dealing with different situations and different subject matters ranging from family disputes, eviction proceedings, service disputes to commercial disputes, tax disputes, land acquisitions, etc., would show that there are no discernible norms in regard to award of costs or quantification of costs and it so even in regard to exemplary costs. There are also instances where cost is directed to be paid to a person other than a party to the proceeding whereas in some judgments, the Court has deprecated and cautioned against such practice. Judgments of the Court seen with reference to cost being imposed or cost not being imposed, do not give any indication of any underlying principle and no guidelines or norms can be s deduced therefrom. Representative sample of judgments of apex Courts only reinforce the belief that at present award of costs and quantum are a matter entirely in the discretion of the Court and that such discretion is being exercised without any discernible principles.

Supreme Court - Daily Orders

Mahavir Institute Of Medical Science vs Union Of India on 6 August, 2018

The Petitioner is not entitled to any relief as he does not meet the required standards for renewal of permission for admission to third batch of MBBS students. We take serious note of the fraud played by the Petitioner in projecting healthy persons as patients in their hospital for the purpose of showing compliance of the minimum standards. We, therefore, dismiss the above Writ Petition with exemplary cost of Rupees Two Crores to be paid by the Petitioner, within a period of four weeks from today, to the Supreme Court Advocates-on-Record Welfare Trust.

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