240th Report on Costs in Civil Litigation - Law Commission of India

in accordance with law. Further, it is also well recognized thatlevy of costs and compensatory costs is one of the effective ways ofcurbing false or vexatious litigations.”3.5 The next decision which deserves notice is the case of Vinod Seth (supra).The Court highlighted the deficiencies in the prevailing Rules and practices inregard to costs in civil matters:“Section 35 of the Code vests the discretion to award costs in theproperty, and to what extent such costs are to be paid. Most ofthe costs taxing rules, including the rules in force in Delhiprovide each party should file a bill of cost immediately after thejudgment is delivered setting out: (a) the court fee paid; (b)process fee spent; (c) expenses of witnesses; (d) advocate’s fee;and (e) such courts. It provides that normally the costs shouldfollow the event and court shall have full power to determine bywhom or out of what other amount as may be allowable underthe rules or as may be directed by the court as costs. We areinformed that in Delhi, the advocate’s fee in regard to suits thevalue of which exceeds Rs. 5 lakhs is: Rs. 14,500/- plus 1% of theamount in excess of Rs. 5 lakhs subject to a ceiling of Rs.50,000/-. The prevalent view among litigants and members of thebar is that the costs provided for in the Code and awarded bycourts neither compensate not indemnify the litigant fully inregard to the expenses incurred by him.”3.6 The Supreme Court having noted that Section 35 of the Code doesnot impose any ceiling on the quantum of costs to be awarded, indicated that theobject of Section 35 can be achieved by the following two measures: (i) Courtslevying costs following the results in all cases (non-levy of costs should besupported by reasons); and (ii) appropriate amendments to Civil Rules of practicerelating 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 thefollowing observations in Vinod Seth’s case:“The provision relating to compensatory costs (section 35A ofthe Code) in respect of false or vexatious claims or defenceshas become virtually infructuous and ineffective, on account ofinflation. Under the said Section, award of compensatory costs15