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

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the Legislature may consider award of ‘punitive costs’ undersection 35A.”8.14 Apart from awarding additional costs in the nature ofexemplary costs to the party succeeding, the Courts should also beempowered to impose punitive costs for wasting court’s time andresources by filing a frivolous or vexatious suit/proceeding or taking upa defence of the same character. The amount so realized shouldappropriately go to “Judicial Infrastructure Fund” to be created for thispurpose. Thus while raising the ceiling limit under section 35A, thereshall be a combination of two factors, that is to say, the punitiveelement and the compensatory element in awarding costs subject to theoverall ceiling prescribed. Accordingly, the Commission suggests therecasting of Section-35A.8.15 The Supreme Court, in Vinod Seth vs. Devinder Bajaj 2010 (8)SCC 1, observed in paragraph 52 that the ceiling of Rs. 3,000/-requires a realistic revision. The reason obviously is that the saidamount would hardly act as a deterrent against false and vexations suitsand defences. The ceiling amount prescribed more than three decadesback has lost its relevance and purpose. In Sanjeev Kumar Jain, theSupreme Court observed that the ceiling of Rupees one lakh appears tobe reasonable. In the written submissions of Law Commission of Indiafiled before the Court in that case, the same suggestion was made andthe Hon’ble Court has apparently endorsed it.This suggestion,therefore, deserves to be acted upon and section 35-A has to besuitably amended. Curbing frivolous litigation by imposition of heavy44
costs is a well-recognized norm and there should be adequatelegislative support for it.8.16 It may be mentioned that at the conference of Judl. Officers andlawyers held at various places, the subject of costs also came up fordiscussion. There was unanimous opinion that the ceiling prescribedby S,35-A has to be raised substantially and further the quantum ofcosts should be realistic.8.17 As the Section stands at present, compensatory costs underSection 35-A is awardable only if a party raises an objection that theclaim or defence or any part of it, is false and vexatious to theknowledge of the party, after recording its reasons. The provisionneeds to be suitably amended to additionally empower the Court on itsown to award exemplary costs if the Court is satisfied that the claim ordefence is false or vexatious to the knowledge of the party, irrespectiveof the other party making a specific claim in this regard.8.18 In light of the foregoing discussion, the Commission is of theview that Section 35-A has to be amended to provide for the following:(1) Ceiling limit of Rs. 3,000/- prescribed in the year 1976 needs to beenhanced to Rs. 1,00,000/-.(2) Out of the costs awarded under Section 35-A (maximum being Rs.1,00,000/-), part of the costs should be allowed in favour of theparty who has been subjected to frivolous or vexatious litigationand a part of the amount of costs should be directed to bedeposited in the Judicial Infrastructure Fund to be created by eachHigh Court;45
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 26 and 27: The ‘model rule’ relating to fi
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 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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