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Report No. 240

9. Section 95

9.1 Section 95 of the Code provides that where, in any suit, an arrest or attachment has been effected or a temporary injunction has been granted under Section 94(c), if the Court is satisfied that the arrest, attachment or injunction was applied for on insufficient grounds or there were no reasonable or probable grounds for instituting the suit, on an application made by the defendant, the Court could award a reasonable compensation to the defendant but not exceeding an amount of Rs. 50,000/-or exceeding the limits of its pecuniary jurisdiction.

Prior to the amendment by Act 46 of 1999, w.e.f. 1.7.2002, the amount that could be awarded under this provision was "not exceeding Rs. 1,000/-". Sub-section (2) of Section 95 imposes a bar on any suit for compensation in respect of such arrest, attachment or injunction, if the provisions of Section 95 are invoked by the defendant and an order is passed by the Court.

The Supreme Court in Bank of India v. Lekhimoni Das 2000 (3) SCC 640 had an occasion to consider the scope of Section 95 and held that the scope of the said provision is very limited and is in the nature of summary proceeding and that it is alternative to a suit; that what would be required to be established in a suit would be quite different from adjudication of an application under Section 95; that if a party avails of remedies under Section 95, the amount that could be awarded would be limited to the amount specified in the Section.

9.2 To subserve the purpose of this provision, it is necessary to enhance the limit further by substituting the figure of Rs. 1,00,000/-in place of Rs. 50,000/-. In this connection, it may be recalled that the Commission has recommended supra that the ceiling under section 35A (costs for frivolous or vexatious litigation) should be enhanced to Rs. 1,00,000/-. By parity of reasoning, it is just and proper to increase the ceiling under section 95 prescribed a decade back, to Rs. 1,00,000/

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