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Section 35 deals with costs. It provides that:

(1) The costs of an incident to all suits shall be in the direction of the court;

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(2) The court shall have full power to determine by whom or out of what property and to what extent costs are to be paid; and (3) where costs are not to follow the event the court shall state its reasons in writing.

Object of Awarding Cost—indemnity for expenses by party:

The object of awarding costs is to indemnify a party against the expenses incurred in successfully vindicating his rights. The section provides that the costs of suits and applications are in the discretion of the court. That discretion is very wide, but it has to be exercised judicially and on fixed principles.

The general rule is that the successful party is entitled to costs unless he is guilty of misconduct, negligence or omission or unless there is some other good cause for not allowing costs. The same rule is expressed by the expression “Costs follow the event”, i.e., costs follow the result of the suit. The following are the main rules with regard to the provision of costs:

Rules Regulating Award of Costs:

1. The general rule is that costs shall follow the event unless the court, for good reasons, otherwise orders.

Normally costs should follow the event and it is not the rule that costs should be left to be borne by the parties.

2. Where a party successfully enforces a legal right and in no way misconducts himself, he is entitled to costs as of right.

3. Everything which is done by a party to increase the litigation and costs, i.e., raising unnecessary issues, is a good cause for depriving him of his costs.

4. A person wrongfully made a party should get his costs.

5. If a plaintiff succeeds only with regard to part of his claim and fails on important issues, he may be ordered to pay the whole cost of the suit to the defendant.

6. If the defence is common to all the defendants, separate costs are not to be awarded.

7. Orders for costs on any application should be made when the application is disposed of.

8. In case of unreasonable, vexatious and improper interrogatories, the costs occasioned by the said interrogatories and the answers thereto shall be paid in any event by the party in fault.

9. Where the plaintiff withdraws from a suit or abandons part of a claim without the permission of the court, he shall be liable for such costs as the court may award.

10. When a court refuses costs, no separate suit for it is maintainable. Where costs are awarded in a decree an appeal lies for costs when ; (1) a question of principle is involved; (2) the order proceeds upon a misapprehension of fact or law; (3) there has been no exercise of the discretion in making the order as to costs; or (4) when the order is erroneous in law and improper.

In case of disconnection of telephone on account of non-payment of bill, evidence showed that the subscriber was making payment of bills regularly and nothing was due against him. On failure of the authorities to inform the subscriber about disconnection on account of non-payment of bill, the authorities were found to have acted arbitrarily in disconnecting the telephone. In view of the facts and circumstances of the case, special costs of Rs. 20,000 was awarded to the subscriber, a medical practitioner.

The election petition, alleging corrupt practices against candidate contesting election and persons campaigning for him, was not proved. Costs were awarded only to the candidate and persons who appeared personally as witness to rebut allegations made against them.

In public interest litigation against arbitrary allotment of Petrol Pumps by Minister of State for Petroleum and Natural gas, the petitioner gave able assistance to the Court. Costs of Rs. fifty thousand were awarded to the petitioner in favour of the petitioner payable by concerned Minister of State personally.

Rs. 50,000/- costs were awarded against polluter industries in favour of petitioner environmentalist organisation bringing to light pollution hazards caused by chemical in Bichhri village.

Though normally when a respondent is not contesting its case, costs would not be awarded. But an exception would be carved out and in a suitable case cost should be awarded on persons that set the law in motion, had benefit thereof and remained obviously ex parte.

The Supreme Court under Article 142 of the Constitution has plenary power “to pass such orders as is necessary for doing complete justice in any cause or matter coming before it”. It is a fit case for exercising our power, observed their lordships of the Supreme Court, under Article 142 to impose cost on the non-contesting respondents.

Decree for costs against benamidar:

A decree for costs against a benamidar is not executable against a beneficial owner, it is open to a defendant in a suit by a benamidar to ask the court to implead the real plaintiff and award him costs as against the real plaintiff. But if the defendant in such a suit does not adopt such a course, he cannot, after the termination of litigation, raise the question of costs by a separate suit.

Under section 35, C.P.C., the court may in exceptional cases award costs even against a stranger to the litigation. The course of court will not, and cannot, award costs against a person without giving him an opportunity of being heard.

Imposition of adjournment costs:

Held, that cost should be reasonable and not by way of penalty. The Court was of the view that in the instant case award of Rs. 20,000/- as costs after arguments were concluded, that also to enable the counsel for the appellant to cite few decisions, the same would be treated as adjournment costs to compensate the opposite party. The costs should not be punitive in nature. Therefore, the appellant was held to pay adjournment costs of Rs. 2,000/- instead of Rs. 20,000/-.

Parties shall bear their own costs:

Where suit for specific performance was dismissed and the defendant was found entitled to cost throughout. But due to pecuniary position of plaintiff, it was held that parties shall bear their own costs.

Order of costs declined:

Where the application had practiced fraud and suppressed material facts before the Tribunal under Forest (Conservation) Act, 1980 as well as before the High Court. On the other hand, Forest officials the then in charge as well as the counsel engaged at that time had not properly conducted the case. Therefore, order for costs was declined.

Order striking off defence not proper:

Where there was failure of petitioner to appear on a particular date and non-payment of costs, hence, he could be proceeded with ex parte. As such, order striking off his defence was not proper.

35-A. Compensatory costs in respect of false or vexatious claims or defences:

(1) If in any suit or other proceedings, including an execution proceeding but excluding an appeal or a revision, any party objects to the claim or 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 objector by the party by whom such claim or defence has been put forward, of costs 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 its 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, or under a corresponding law in force in any part of India to which they 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 which any Court 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 the 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.

Award of compensatory costs—Conditions:

Section 35-A of the Code lays down the conditions under which the court may award compensatory costs in respect of false or vexatious claims or defences. There must be a suit or other proceeding, including an execution proceeding (but excluding an appeal) in which any party objects to the claim or 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 objector by the party by whom such claim or defence has been put forward, of costs by way of compensation, to the extent of Rs. 3,000 or within the limits of its pecuniary jurisdiction whichever is less.

False or Vexatious—Discretion of Court:

The court is entitled to award costs by way of compensation only in a case where the defendant objects that the claim is false or vexatious to the knowledge of the plaintiff and the same was ultimately found to be so false or vexatious. Then at the discretion of the court, the defendant can claim costs by way of compensation.

The costs that are thus awarded are compensatory and not penal. Every dismissal of the suit need not necessarily be false or vexatious to the knowledge of the plaintiff. It has to be specifically found on the material placed before the court, and by assigning reasons that the claim was false or vexatious to the knowledge of the plaintiff and that in spite of the objection of the defendant he persisted in that and ultimately the court found that the claim was, to the knowledge of the plaintiff, vexatious or false.

Exemplary costs of Rs. 50,000/- were awarded to prevent the proceedings instituted in court mala fide, by way of sharp practice and designed to abuse process of law. The suit in U.P. was filed against the assessment order passed by Delhi Municipal Corporation.

It was falsely alleged in plaint that officers of Delhi Corporation went in U.P. to attach movables of the plaintiff and her grand children and fact of pendency of appeal against the assessment order was concealed. The U.P. Court granted prohibitory injunction only to properties on U.P. but it has granted a declaration that the very assessment order was void and illegal. Thus assessment order cannot be enforced even within the limits of Delhi Municipal Corporation. Such practices are gross abuse of the process of Court.

Compensatory costs can be awarded even against a co-defendant who has instigated the plaintiff to put forward a false claim and support the plaintiff in his conduct.

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. The amount of any compensation awarded under section 35-A in respect of a false or vexatious claim or defence shall, however, be taken into account in any subsequent suit for damage or compensation in respect of such claim or defence.

Exemplary Costs:

Three Police Inspectors challenged the appointment of Chairman, Vice-chairman, members of Administrative Tribunal with a view to derive personal benefits and not for public interest. The motive was to paralyse the working of the Tribunal. It is a glaring case of abuse of process of court in the garb of public interest. Supreme Court awarded costs of Rs. 15,000/- against each petitioner.

Arbitrary allotment of petrol pumps made by Minister of State for Petroleum and Natural Gas was set aside with costs of Rs. 50,000/- payable by the Minister concerned to the petitioner assisting the court. In addition to that Supreme Court directed the Minister concerned to show cause for initiating prosecution against him for criminal breach of trust or any other offence under law and to fix his personal liability of damages for his mala fide action.

Before awarding compensatory costs the court has to satisfy itself that the claim or defence was false or vexatious to the knowledge of the party by whom it has been put forward, i.e., the plaintiff, that the interest of justice requires compensatory costs to be awarded and that the objector had put forward his objection that the suit was false or vexatious at the earliest opportunity.

The Code of Civil Procedure (Amendment) Act, 1956 (66 of 1956), has, however, enlarged the powers of the court to grant compensatory costs even in cases where the objection had not been taken at the earliest opportunity, if the court thinks fit to grant the same. This has been done to check frivolous litigation. The section has been made applicable to execution proceedings as well. The section is wide enough to bring within it not only a party who actually puts forward a false claim or defence but also a person who instigates and supports the latter.

Supreme Court found the decision of full court suspending the Registrar under suspension and gave time to reconsider the decision to High Court. On reconsideration High Court reiterated its earlier decision. Supreme Court awarded Rs. 10,000/- as costs against the High Court and quashed disciplinary proceeding and suspension.

The Government of India defaulted in making pensionary benefits and payments of encashment leaves, certain increments, etc. promptly inspite of consistent demands made by employee while in service and even after retirement. The Government of India in such circumstances cannot plead bar of limitation. Supreme Court directed department to pay rupees 2 lacs towards interest and compensation and expenses in addition to claim amount.

In case of abuse of process of court, the stringent costs are imposed to deter the party abusing the process of court and all other likeminded persons. The assessee managed to stall assessment proceedings pursuant to show cause notice for 11 years by filing writ petitions and appeals to Supreme Court. Supreme Court dismissed the appeal with costs of Rs. 15,000/- and further direction to Excise Authorities to charge 18% interest in case any duty is found payable pursuant to show cause notice.

The statement given by the land owner was technically right but it was factually wrong. Cost of Rs. 10,000/- was awarded against the land owner. Though he was not guilty of contempt or perjury yet he was unfair to court.

Arguable and Complicated Case—Not frivolous or vexatious:

A suit involving arguable and complicated questions of fact and law cannot be held to be “frivolous and vexatious” to warrant the awarding of compensatory costs.

Pecuniary jurisdiction of Court for award of compensation:

The pecuniary jurisdiction of a Court is not decided on the strength of the valuation of the suit put forth by the plaintiff. It depends upon distribution memo issued under Civil Courts Act and not upon by the Court fee paid by the plaintiffs.

35-B. Costs for causing delay:

(1) If, on any date fixed for the hearing of a suit 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.

Object of Provision—to avoid delay:

Section 35-B has been inserted by the Amendment Act, 1976, so as to avoid delay in the disposal of suits. Payment of compensatory costs for causing delay is a condition precedent to the further prosecution of the suit or the defence by the plaintiff or defendant concerned. The new provisions give discretion to the court to impose compensatory costs on parties responsible for causing delay in the disposal of the litigation, and such costs would be irrespective of the ultimate result of the litigation.

Procedural Provision—Directory and not mandatory:

Section 35-B is a procedural provision. Its language indicates that it is directory. If the provision is taken to be mandatory it will take away the court’s right to exercise its discretion in the interest of justice.

Manner of Payment of Costs:

Under section 35-B payment of costs for adjournment is a condition precedent to further prosecution of the suit by the plaintiff where the plaintiff is ordered to pay such cost. It is reasonable to conclude from the section that where the costs imposed are not paid on that very date when the costs are ordered to be paid, attention of the court should be drawn so that further prosecution of the suit may take place only if necessary compliance has been made.

If no such step is taken by the party who intends to invoke the provisions of section 35-B and remains silent and allows the court to proceed with the suit, he cannot thereafter be allowed to agitate the alleged non-payment, if any, after that date. In such a situation the provisions of section 35-B are not at all attracted.

Discretionary:

The language of section 35-B of the Code of Civil Procedure neither suggests explicitly nor by way of implication, a command to the Court, that the Court shall not grant further adjournment at the request of such party in whose favour it has once exercised its discretion to grant adjournment on payment of costs, notwithstanding the fact that he had complied with the order of payment of costs in terms of the said section. To hold otherwise would lead to far reaching consequences and result in failure of justice.

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