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

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The ‘model rule’ relating to first Appellate Court is as under:-“7. Costs. – Awarding of costs must be treated generally asmandatory inasmuch as it is the liberal attitude of the courts innot awarding costs that has led to frivolous points being raised inappeals or frivolous appeals being filed in the courts. Costsshould invariably follow the event and reason must be assignedby the appellate court for not awarding costs. If any of theparties have unreasonably protracted the proceedings, the Judgeshall have the discretion to impose exemplary costs after takinginto account the costs that may have been imposed at the time ofadjournments.” (Page 398)(h) In Vinod Seth vs. Devinder Bajaj (2010) 8 SCC 1, the Supreme Courtdealt with the need for reform in regard to costs. In paragraph 45, the Courtexpressed the view that the absence of effective provisions for costs has led tomushrooming of vexatious, frivolous and speculative civil litigation. This hasbeen referred to in Para 48 (d) as one of the goals intended to be achieved by aproper provision for costs. This is reiterated again in Para 53 and the Court hasexpressed the view that the provisions for costs should be an incentive for eachlitigant to adopt Alternative Dispute Resolution (ADR) process and to arrive at asettlement even before the trial commences. The Supreme Court while indicatingthat cost should provide adequate indemnity to the successful litigant for thelitigation expenditure incurred by him for the litigation, which necessitates theaward of adequate costs of litigation as contrasted from nominal or unrealisticcosts, has also entered a caution that provisions relating to costs should nothowever obstruct access to courts and justice and under no circumstances, thecosts should be a deterrent to a citizen with a genuine or bona fide claim or to aperson belonging to the weaker sections whose rights have been affected, fromapproaching the Courts. This overriding consideration should always be keptin view.26
as under:(i) In Sanjeev Kumar Jain’s case, the Supreme Court, at paragraph 8, held“8. Though, Section 35 does not impose a ceiling on the costs that couldbe levied and gives discretion to the Court in the matter, it should benoted that Section 35 starts with the words “subject to such conditionsand limitations as may be prescribed, and to the provisions of law for thetime being in force”. Therefore, if there are any conditions or limitationsprescribed in the Code or in any rules, the Court, obviously, cannotignore them in awarding costs.”The Court in paragraph 9 observed that while award of realistic costsshould be encouraged, it should be done in accordance with law. The Court said:“as the law presently stands there is no provision for award of ‘actual costs’ andthe award of costs will have to be within the limitation prescribed by Section35”. In para 10.1, the Court clarified that “Section 35 does not impose arestriction on actual realistic costs. Such restriction is generally imposed by theRules made by the High Court”.(j) Therefore, to ensure that actual/realistic costs are awarded, it isnecessary to make the required changes in the rules framed by the High Courts.It is very important that the existing Rules are suitably revised to ensure theaward of realistic costs in compliance with the observations of the Supreme Courtin Salem Advocates bar Association case and the latest case of Sanjeev KumarJain. The outdated/inappropriate rules still hold the field in many States, though,after Salem Advocate Bar Assn. case, some High Courts did revise the rules.Further, the revised and pre-revised rules lack in clarity in many respects andthey do not comprehensively address the relevant factors that ought to enter intoascertainment of costs. We shall deal with this aspect in more detail a little later.The Commission feels that there is scope for further refinement of rulesespecially in view of the principles laid down in Sanjeev Kumar Jain’s case.27
Page 1 and 2: GOVERNMENT OF INDIALAWCOMMISSIONOFI
Page 3 and 4: INDEXSl.No.ParticularsPage numbers1
Page 5 and 6: speculative suits, apart from rende
Page 7 and 8: “… the sum of money which the c
Page 10 and 11: 2.11 A bill of costs is a certified
Page 12 and 13: of the parties has behaved unreason
Page 14 and 15: two competing views, to cite, (i) t
Page 16 and 17: inflation and vexatious litigation,
Page 18 and 19: is a commercial dispute? In a matte
Page 20 and 21: “The process of taxation of costs
Page 22 and 23: 54. While imposing costs we have to
Page 24 and 25: (d) The sub-section (2) lays down:
Page 28 and 29: Moreover, the revision of rules inc
Page 30 and 31: notification dated 7.12.2006. The r
Page 32 and 33: are quite low judged by the present
Page 34 and 35: advocate. It appears that the High
Page 36 and 37: for enhanced court-fee; especially,
Page 38 and 39: However, if any practical difficult
Page 40 and 41: 8.3 Section 35-A can be invoked in
Page 42 and 43: The above two cases, however, arise
Page 44 and 45: the Legislature may consider award
Page 46 and 47: (3) The expression ‘exemplary’
Page 48 and 49: Section 94(c), if the Court is sati
Page 50 and 51: expenses incurred for attending the
Page 52 and 53: significant. The quantum of costs u
Page 54 and 55: (2)…………..12.2 The effect of
Page 56 and 57: The format of bill of costsneeds to
Page 58 and 59: Annexure-ICosts in Civil litigation
Page 60 and 61: from the officer concerned and the
Page 62 and 63: 5,00,000/- (Five Lakhs)” and dire
Page 64 and 65: In Oswal Fats & Oils Ltd. vs. Addit
Page 66 and 67: quantum are a matter entirely in th
Page 68 and 69: 6, In all such suits, referred to a
Page 70 and 71: 22. In all interlocutory applicatio
Page 72 and 73: 39. The fee shall be fixed at half

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

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