Cost Regime in Civil Litigation in India – A Paper Tiger – Civil Law

To print this article, all you need to do is be registered or log in to Mondaq.com.

From my experience, I have found that there is a panacea that heals all wounds in litigation and that is costs.– Judge Bowen in Copper vs. Smith (1884).

Civil litigation in India is a long and arduous process. Among the many factors that contribute to the anti-aging process of civil litigation nationwide, vexatious and frivolous litigation, born out of greed and the delaying tactics of seeking constant adjournments, are the primary drawbacks. To deter litigants from engaging in such misconduct, a mechanism was put in place under the Code of Civil Procedure 1908 (the code) for the award of costs. The Code’s costs provisions are intended to ensure that realistic and reasonable costs are awarded to a prevailing party, thereby limiting spurious and frivolous litigation and discouraging unnecessary adjournments.1 Despite the express provisions of the Code, the collection of costs has been a rather underestimated and neglected aspect. The usual overuse of phrases such as “no fees granted” Where “the parties bear their own costs“undermined the purpose and purpose of imposing costs in civil litigation.

Existing frame

Provisions for the award of costs in civil litigation in India are enshrined in the Code under Sections 35, 35A and 35B, and Orders XX-A and XXV. Sections 35, 35A and 35B of the Code contain provisions relating to the awarding of “overhead fees”, “compensatory fees” for false/vexatious claims and “late fees”, respectively. Order XX-A of the Code provides for fees related to certain specific expenses, such as costs incurred for the issuance of notices and the printing of process. Discretion is given to courts to grant “security for costs” under Order XXV of the Code where a party suing must post security to secure payment of expenses incurred by the other party in pursuit.

Regulations differ for commercial cases under the Commercial Courts Act 2015 (the act): here, the courts have the discretion to determine, among others, (a) the amount of those costs; and (b) when such fees must be paid.2 Additionally, the applicability of Section 35A(2) of the Code requiring courts to levy fees not exceeding INR 3,000 has been omitted from the Act.

Unquestionably, the general rule in the civil justice system of India is that costs should be awarded after a dispute has been concluded and a party in whose favor the decree is passed. Provisions for costs are in line with India’s adversarial dispute resolution system, in which the prevailing party must be compensated for expenses incurred during the litigation. Although courts are bound to follow the Code when awarding costs, they have some discretion in this regard. However, this discretionary power is not absolute, but rather subject to certain limits. For example, Section 35A(2) of the Code prohibits courts from awarding compensatory costs exceeding the meager amount of INR 3,000.

Practical obstacles

Although the elaborate framework provided by the Code appears to be ideal, in practice it provides only negligible assistance to the courts in the collection of costs: it provides a set of rules on the awarding of costs in civil litigation, but the actual implementation of the stated rules is theoretical and often restricted. within the limits set out in the Code. For example, frivolous lawsuits often go unpunished, despite the specific provision on compensatory costs for frivolous and vexatious litigation under the Code. Such a provision imposing a fee to be imposed for frivolous litigation has become ‘unsuccessful’3given the limitation that caps the total cost that can be levied by a court for frivolous lawsuits at a paltry sum of INR 3,000. On several occasions, the courts have had no choice but to reduce the higher costs to INR 3,000 to meet this upper limit. prescribed by the Code.4

The goal of streamlining the civil litigation process by imposing costs that discourage speculative or frivolous litigation is further diluted when parties are almost routinely asked to bear their own costs. It is common practice for such instructions to be adopted without recording specific reasons. In doing so, not only do the courts contravene the mandatory provisions of the Code5 but, what is more, the purpose and intent of incorporating such provisions is also undermined in the process.

Further, while courts are generally reluctant to impose even minimal costs on parties to civil litigation under the Code, exemplary costs are generally awarded to deter frivolous litigation in the exercise of judicial jurisdiction by the courts. .6 or full powers under article 142 of the constitution.seven

Observations of the Supreme Court of India

Considering the limitations and inefficiency of the cost regime under the Code, the Supreme Court of India has often recommended that the provisions of the Code be reviewed and a more practical approach adopted by the legislature. In its recommendation, the Supreme Court of India has, among others, proposed that (i) the upper limit under the Code be raised from the nominal amount of INR 3,000 to at least INR 1 lakh, to effectively deter litigants from filing false/vexatious lawsuits;8 and (ii) instead of awarding a nominal fee, realistic real costs be imposed, that is, practical fees and fees that a normal lawyer in a normal case of a particular nature would charge.9

The Law Commission of India in its 240th Law Commission Report has, among others, endorsed the recommendation of the Supreme Court of India proposing that the ceiling of INR 3000, as imposed under Section 35A(2) of the Code, be raised to INR 1 lakh, in order to ensure a better control against frivolous disputes.

Further, the Supreme Court of India has also suggested that a separate “compulsory fee code” be enacted by the legislature to effectively discourage litigants from filing frivolous lawsuits and dissuade them from adopting delaying tactics in court cases. procedures.ten. However, such suggestions from the Supreme Court of India and the Law Commission of India are pending statutory recognition by the Legislature.

In the absence of any strong, adequate and effective legislative measure to remedy the inadequacies of the costs framework under the Code, courts normally refrain from awarding even nominal costs, and all costs in civil litigation are not generally adjudged only by the courts of their writ or plenary jurisdiction.

Suggested improvements

The legislative reforms proposed to address the shortcomings of the cost framework under the Code are long overdue and long overdue. Ideally, the Code’s costs scheme would also be amended to harmonize with the analogous provisions of the Act which do not specify any restrictions on the amount of costs to be awarded. However, pending these reforms, the practice of systematically awarding costs, though nominal, by the courts could be a step in the right direction to curb frivolous litigation and reduce the backlog of cases. Further, as the Supreme Court noted,11 courts could consider ordering prosecutions to discourage frivolous delays and vexatious litigation.

When awarding costs, due consideration should be given to such factors as court costs, attorneys’ fees, length of proceedings and appropriate restitution for the successful litigant. It is time that the recommendations of the Law Commission’s 240th Report be implemented in letter and spirit to make the Code’s costs regime more robust. As recommended by the Supreme Court of India, the respective High Court Rules should also be amended to ensure more realistic and reasonable costs. An effective costs scheme should take into account case-specific considerations in order to effectively indemnify or compensate the successful litigant and deter litigants from bringing frivolous and vexatious suits.

Without fundamental legislative reforms, the courts are powerless to deter or discourage frivolous litigation, thereby ensuring that genuine litigants receive timely decisions and recover their actual expenses under the Code. Such reforms to the cost regime will go a long way to curbing frivolous litigation that clogs the system and ensuring that the cost regime under the Code is not just an illusory paper tiger.

Footnotes

1. Ministry of Law, The 240th Law Commission Report on ‘Civil litigation costs’,May 2012.

2. Section 16 Commercial Courts Act 2015.

3. Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust and others. (2012)1SCC 455.

4. Identifier.

5. Salem Advocate Bar Association TN Vs. Indian Union (2005) 6 SCC 244.

6. Ashok Kumar Mittal vs. Ram Kumar Gupta & Ors. (2009) 2 SCC 656.

7. Ministry of Law, The 240th Law Commission Report on ‘Civil litigation costs’,May 2012.

8. Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust and others. (2012)1 SCC 455.

9. Identifier.

10. Subrata Roy Sahara v. Indian Union (2014) 8 SCC 470.

11. Rameshwari Devi v. Nirmala Devi (2011)8 SCC 249.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

Comments are closed.