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Report No. 240

The 'model rule' relating to first Appellate Court is as under:

"7. Costs.- Awarding of costs must be treated generally as mandatory inasmuch as it is the liberal attitude of the courts in not awarding costs that has led to frivolous points being raised in appeals or frivolous appeals being filed in the courts. Costs should invariably follow the event and reason must be assigned by the appellate court for not awarding costs. If any of the parties have unreasonably protracted the proceedings, the Judge shall have the discretion to impose exemplary costs after taking into account the costs that may have been imposed at the time of adjournments." (Page 398)

(h) In Vinod Seth v. Devinder Bajaj, (2010) 8 SCC 1, the Supreme Court dealt with the need for reform in regard to costs. In paragraph 45, the Court expressed the view that the absence of effective provisions for costs has led to mushrooming of vexatious, frivolous and speculative civil litigation. This has been referred to in Para 48 (d) as one of the goals intended to be achieved by a proper provision for costs. This is reiterated again in Para 53 and the Court has expressed the view that the provisions for costs should be an incentive for each litigant to adopt Alternative Dispute Resolution (ADR) process and to arrive at a settlement even before the trial commences.

The Supreme Court while indicating that cost should provide adequate indemnity to the successful litigant for the litigation expenditure incurred by him for the litigation, which necessitates the award of adequate costs of litigation as contrasted from nominal or unrealistic costs, has also entered a caution that provisions relating to costs should not however obstruct access to courts and justice and under no circumstances, the costs should be a deterrent to a citizen with a genuine or bona fide claim or to a person belonging to the weaker sections whose rights have been affected, from approaching the Courts. This overriding consideration should always be kept in view.

(i) In Sanjeev Kumar Jain's case, the Supreme Court, at paragraph 8, held as under:

"8. Though, Section 35 does not impose a ceiling on the costs that could be levied and gives discretion to the Court in the matter, it should be noted that Section 35 starts with the words "subject to such conditions and limitations as may be prescribed, and to the provisions of law for the time being in force". Therefore, if there are any conditions or limitations prescribed in the Code or in any rules, the Court, obviously, cannot ignore them in awarding costs."

The Court in paragraph 9 observed that while award of realistic costs should 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' and the award of costs will have to be within the limitation prescribed by Section 35". In para 10.1, the Court clarified that "Section 35 does not impose a restriction on actual realistic costs. Such restriction is generally imposed by the Rules made by the High Court".

(j) Therefore, to ensure that actual/realistic costs are awarded, it is necessary 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 the award of realistic costs in compliance with the observations of the Supreme Court in Salem Advocates bar Association case and the latest case of Sanjeev Kumar Jain.

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 and they do not comprehensively address the relevant factors that ought to enter into ascertainment 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 rules especially in view of the principles laid down in Sanjeev Kumar Jain's case. Moreover, the revision of rules including those relating to Advocate's fee should be a regular and periodical exercise and due consultation with the members of Bar should be an integral part of such exercise.

Costs in Civil Litigation Back

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