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Report No. 240

Costs in Civil Litigation

1. Introductory Remarks

1.1 The subject relating to award of costs in civil matters has been taken up by the Law Commission of India pursuant to the observations made by the Supreme Court that the legal provisions relating to costs needs to be revisited by the legislature and the Law Commission. The first case which it is relevant to mention in this context is that of Ashok Kumar Mittal v. Ram kumar Gupta, (2009) 2 SCC 656.

The second is the case of Vinod Seth v. Devinder Bajaj, (2010) 8 SCC 1. In another judgment rendered very recently, the Supreme Court took note of various suggestions placed before the court by the Law Commission and Sri Arun Mohan (Sr. Advocate), and reiterated the need to consider appropriate changes in the relevant provisions including the rules of various High Courts.

1.2 This is what the Supreme Court said in Ashok Kumar Mittal's case,:

"9. The present system of levying meagre costs in civil matters (or no costs in some matters), no doubt, 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. More realistic approach relating to costs may be the need of the hour. Whether we should adopt suitably, the western models of awarding actual and more realistic costs is a matter that requires to be debated and should engage the urgent attention of the Law Commission of India."

1.3 Similar views were echoed in Vinod Seth's case. The Supreme Court observed as under after discussing various aspects relating to costs:

"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 revisit the provisions relating to costs and compensatory costs contained in Section 35 and 35-A of the Code."

1.4 Accordingly, the Law Commission took up for consideration the subject relating to award of costs in civil litigation. While so, in yet another case, i.e., Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust, ibid the Supreme Court had to address the issues relating to costs. The Law Commission felt that it would be appropriate to present its views before the Supreme Court and to assist the Court in the matter. Accordingly, written submissions which, inter alia, contained specific suggestions were filed before the Supreme Court.

One of the Part-time Members of the Commissio.- Shri A. Mariarputham (Sr. Advocate.- assisted the court. Dr. Arun Mohan (Sr. Advocate, who was appointed as amicus curiae in that case) also rendered considerable assistance to the court. The learned Judges of the Supreme Court extensively referred to the suggestions made by the Law Commission and the amicus, recorded their views broadly on the approach to be adopted in awarding costs or framing the rules governing costs and finally observed thus:

"We suggest appropriate changes in the provisions relating to costs contained as per paras 14-29 above to the Law Commission of India, the Parliament and the respective High Courts for making appropriate changes." It may be mentioned here that paras 14 to 22 deal with costs in civil litigation and the subsequent paras are about arbitration costs.

1.5 There is one more case decided by the Supreme Court recently i.e., the case of Ramrameshwari Devi v. Nirmala Devi, (2011) 8 SCC 249 in which also certain principles relating to costs were set out.

1.6 The common thread running through all these cases is the reiteration of three salutary principles:

(i) costs should ordinarily follow the event;

(ii) realistic costs ought to be awarded keeping in view the ever increasing litigation expenses; and

(iii) the cost should serve the purpose of curbing frivolous and vexatious litigation. It is worth quoting Justice Bowen in Copper v. Smith (1884). He said:

"I have found in my experience that there is one panacea which heals every sore in litigation and that is costs".

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