# SANJEEV KUMAR JAIN v. RAGHUBIR SARAN CHARITABLE TRUST & ORS

- **Citation:** [2011] 12 S.C.R. 744
- **Court:** Supreme Court of India
- **Decided:** 2011-10-12
- **Case number:** Civil Appeal No. 8610 of 2011
- **Bench:** R.V. Raveendran, A.K. Patnaik
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sanjeev-kumar-jain-v-raghubir-saran-charitable-trust-ors-27241
- **Pages:** 37

## Headnote

CODE OF CIVIL PROCEDURE, 1908:
c
s. 35(1), CPC read with Chapters 11, 5 and 23 of Delhi
High Coult Rules - Costs - Appeal against vacating of an
interim order - Dismissed by High Coult with costs of Rs.
45, 28, 0001- - Appeal to Supreme Coult confined only to
legality and validity of order of High Court as regards costs -
0
The Court also referred to the larger question of costs in civil
litigation - The Law Commission of India also intervened -
Notices were also issued to High Coutts to ascerlain the
Rules and procedures in force in regard to costs - HELD:
High Court could not have awarded costs exceeding the scale
E that was prescribed in the Schedule to the Rules - Doing so
would be contrary to the Rules and, as such, also contrary to
s. 35, CPC which makes it subject to the conditions and
/imitations as may be prescribed and the provisions of law for
the time being in force - Therefore, merely by seeking a
consent of the patties to award litigation expenses as costs,
F the High Courj could not have adopted the procedure of
awarding what it assumed to be the 'actual costs' nor could it
proceed to award a sum of Rs.45,28,0001- as costs in an
appeal relating to an interim order in a civil suit - Awarding
of realistic costs should be in accordance with law - If the law
G does not permit award of actual costs, coutts cannot award
actual costs -
The 'actual realistic cost' should have a
correlation to costs which are realistic and practical - It cannot
refer to fanciful and whimsical expenditure by patties engaging
high-charging lawyers, as is the case on hand - It is
~
7AA
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
745
CHARITABLE TRUST & ORS.
suggested that the Rules be amended to provide for 'actual A
realistic costs' - The object is to streamline the award of costs
and simplify the process of assessment, while making the
cost 'actual and realistic' - Sa/em Advocates Bar Association
case. explained.
ss. 35(1) and (2) - Costs - Discretion of court - HELD:
The discretion of the court is subject to such conditions and
/imitations as may be prescribed and to the provisions of law
B
for the time being in force - Where the court does not direct
that costs shall follow the event, it shall state the reasons in
writing - The mandate of sub- s. (2) should be strictly followed.
C
s.35-A - Exemplary costs in respect of false or vexatious
litigation - HELD: In order to discourage false and vexatious
claims, the compensatory costs has to be brought to a realistic
level- A small sum of Rs. 3, 0001- would not make much
D
difference - The Court is of the view that the ceiling in regard
to compensatory costs should be at least Rs. 1,00,000- The
description of the costs awardable uls. 35 A "as compensatory
costs" gives an indication that is restitutive rather than punitive
- The costs awarded for false or vexatious claims should be
E
punitive and not merely compensatory - In fact, compensatory
costs is something that is contemplated in s. 358 and s.35
itself - Therefore, the Legislature may consider award of
punitive costs' u/s. 35 A.
Arbitration and Conciliation Act, 1996:
F
s.31(8), Explanation, rlw s.11 - Costs - HELD: The
Explanation to sub-s. (8) of s. 31 makes it clear that 'costs'
means reasonable costs - What is awardable is not 'actual'
expenditure but 'reasonable' costs - Whenever the Chief G
Justice or his Designate appoints arbitrator/s, it will be open
to him to stipulate the fees payable to the arbitrator/s ..
Court Fees:
Litigation - Court fees - HELO· Except in the case oUew
H
746
SUPREME COURT ~EPORTS
[2011] 12 S.C.R.
A categories of suits where courl fee is ad valorem, in majority
of the suits/petitions and appeals arising therefrom, the court
fee is a fixed nominal amount -
The fixed fees that are
payable, prescribed decades ago, have not undergone a
change and in many cases, the fixed fee is not worth the cost
B of collection thereof -
There is, therefore, a need for a
periodical revision of fixed courl fees that is payable in reg

## Text

_Characters 0–39,838 of 70,196. This is a partial read: ask again with offset=39838 for what follows._

A
B
[2011] 11 S.C.R. 744
SANJEEV KUMAR JAIN
v.
RAGHUBIR SARAN CHARITABLE TRUST & ORS.
(Civil Appeal No. 8610 of 2011)
OCTOBER 12, 2011
[R.V. RAVEENDRAN AND A.K. PATNAIK, JJ.]
CODE OF CIVIL PROCEDURE, 1908:
c
s. 35(1), CPC read with Chapters 11, 5 and 23 of Delhi
High Coult Rules - Costs - Appeal against vacating of an
interim order - Dismissed by High Coult with costs of Rs.
45, 28, 0001- - Appeal to Supreme Coult confined only to
legality and validity of order of High Court as regards costs -
0
The Court also referred to the larger question of costs in civil
litigation - The Law Commission of India also intervened -
Notices were also issued to High Coutts to ascerlain the
Rules and procedures in force in regard to costs - HELD:
High Court could not have awarded costs exceeding the scale
E that was prescribed in the Schedule to the Rules - Doing so
would be contrary to the Rules and, as such, also contrary to
s. 35, CPC which makes it subject to the conditions and
/imitations as may be prescribed and the provisions of law for
the time being in force - Therefore, merely by seeking a
consent of the patties to award litigation expenses as costs,
F the High Courj could not have adopted the procedure of
awarding what it assumed to be the 'actual costs' nor could it
proceed to award a sum of Rs.45,28,0001- as costs in an
appeal relating to an interim order in a civil suit - Awarding
of realistic costs should be in accordance with law - If the law
G does not permit award of actual costs, coutts cannot award
actual costs -
The 'actual realistic cost' should have a
correlation to costs which are realistic and practical - It cannot
refer to fanciful and whimsical expenditure by patties engaging
high-charging lawyers, as is the case on hand - It is
~
7AA
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
745
CHARITABLE TRUST & ORS.
suggested that the Rules be amended to provide for 'actual A
realistic costs' - The object is to streamline the award of costs
and simplify the process of assessment, while making the
cost 'actual and realistic' - Sa/em Advocates Bar Association
case. explained.
ss. 35(1) and (2) - Costs - Discretion of court - HELD:
The discretion of the court is subject to such conditions and
/imitations as may be prescribed and to the provisions of law
B
for the time being in force - Where the court does not direct
that costs shall follow the event, it shall state the reasons in
writing - The mandate of sub- s. (2) should be strictly followed.
C
s.35-A - Exemplary costs in respect of false or vexatious
litigation - HELD: In order to discourage false and vexatious
claims, the compensatory costs has to be brought to a realistic
level- A small sum of Rs. 3, 0001- would not make much
D
difference - The Court is of the view that the ceiling in regard
to compensatory costs should be at least Rs. 1,00,000- The
description of the costs awardable uls. 35 A "as compensatory
costs" gives an indication that is restitutive rather than punitive
- The costs awarded for false or vexatious claims should be
E
punitive and not merely compensatory - In fact, compensatory
costs is something that is contemplated in s. 358 and s.35
itself - Therefore, the Legislature may consider award of
punitive costs' u/s. 35 A.
Arbitration and Conciliation Act, 1996:
F
s.31(8), Explanation, rlw s.11 - Costs - HELD: The
Explanation to sub-s. (8) of s. 31 makes it clear that 'costs'
means reasonable costs - What is awardable is not 'actual'
expenditure but 'reasonable' costs - Whenever the Chief G
Justice or his Designate appoints arbitrator/s, it will be open
to him to stipulate the fees payable to the arbitrator/s ..
Court Fees:
Litigation - Court fees - HELO· Except in the case oUew
H
746
SUPREME COURT ~EPORTS
[2011] 12 S.C.R.
A categories of suits where courl fee is ad valorem, in majority
of the suits/petitions and appeals arising therefrom, the court
fee is a fixed nominal amount -
The fixed fees that are
payable, prescribed decades ago, have not undergone a
change and in many cases, the fixed fee is not worth the cost
B of collection thereof -
There is, therefore, a need for a
periodical revision of fixed courl fees that is payable in regard
to suits/petitions/appeals filed in courts/tribunals at different
levels.
c
D
Legislation:
Litigation - Costs and court fees - HELD: The Law
Commission of India, Parliament and the respective High
Coutts are suggested to make appropriate changes in the
provisions relating to costs.
Words and Phrases:
Expression, to 'appoint' an arbitrator - Connotation of
In an appeal arising out of an order vacating the
E interim injunction in a suit for permanent injunction, the
High Court of Delhi suggested to the parties that since
the dispute was purely a commercial one, the party
succeeding in the appeal should be entitled to the
litigation expenses from the other party, and asked the
F parties to give their respective statements of the total
litigation expenses incurred in the appeal only. The
appellant filed a memo stating that a sum of Rs. 25,50,000/
- was incurred as advocates' fe"es; whereas the
respondents filed an affidavit stating that an amount of
G Rs. 45,28,000/- was spent as advocates' fees in the
appeal. The High Court dismissed the appeal and
awarded to the respondents Rs. 45,28,000/- as costs in
respect of the appeal to be paid by the appellant.
H
In the instant appeal, the only issue for decision of
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
747
CHARITABLE TRUST & ORS.
the Court was the legality and validity of the order of the
A
High Court directing the appellant to pay costs of Rs.
45,28,000/- to the respondents.
Disposing of the appeal, the Court
HELD: 1.1. Though, s.35 of the Code of Civil
Procedure, 1908 does not impose a ceiling on the costs
that could be levied, and gives discretion to the court in
8
the matter, it should be noted that s.35 starts with the
words "subject to such conditions and limitations as
may be prescribed, and to the provisions of law for the
C
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~
[para 8] [765-G-H]
.. 1:, " r
1.2. In the instant case, the High Court could not have
awarded costs exceeding the scale that was prescribed
in the Schedule to the Rules. Doing so would be contrary
D
to the Delhi Court Rules and, as such, also contrary to
s.35 of the Code which makes it subject to the conditions
E
and limitations as may be prescribed and the provisions
of law for the time being in force. Therefore, merely by
seeking a consent of the parties to award litigation
expenses as costs, the High Court could not have
adopted the procedure of awarding what it assumed to
be the 'actual costs' nor could it proceed to award a sum
F
of Rs.45,28,000/- as costs in an appeal relating to an
interim order in a civil suit. Awarding of realistic costs
should be in accordance with law. If the law does not
permit award of actual costs, obviously courts cannot
award actual costs. As the law presently stands, there is
G
no provision for award of 'actual costs' and the award of
costs will have to be within the limitation prescribed by
s.35. [para 9] [766-A-F]
1.3. The respondents and the High Court have
H
748
SUPREME COURT REPORTS
[2011] 12 S.C.R.
A misread the observations of this Court in Sa/em
Advocates Bar Association*. All that this Court stated was
that the actual reasonable cost has to be provided for in
the rules by appropriate amendment. In fact, the very next
sentence in para 37 of the decision of this Court is that
s the High Courts should examine these aspects and
wherever necessary, make requisite rules, regulations or
practice directions. What has been observed by this
Court about actual realistic costs is an observation
requiring the High Courts to amend their rules and
c regulations to provide for actual realistic costs, where
they are not so provided. Section 35 does not impose a
restriction on actual realistic costs. Such restriction is
generally imposed by the rules made by the High Courts.
The oLservation in Sa/em Advocates Bar Association is
0 a direction to amend the rules so as to provide for actual
1
reaiistic costs and not to ignore the existing rules. The
decision in Sa/em Advocates Bar Association is,
therefore, of no assistance to justify the award of such
costs. The Rules permit costs to be awarded only as per
the Schedule. Therefore, as the Rules presently stand,
E whatever may be the 'actual' expenditure incurred by a
party, what could be awarded as costs is what is
provided in the Rules. [para 10] [767-E-H; 768-A-B]
*Salem Advocates Bar Association v. Union of India
F 2005 (1) Suppl. SCR 929 = 2005 (6) sec 344; Ashok
Kumar Mittal Vs. Ram Kumar Gupta & Anr. 2009 (1)
SCR 125 = 2009 (2) SCC 656; and Vinod Seth Vs.
Devender Bajaj & Anr. 2010 (7) SCR 424 = 2010 (8) SCC
1 ; Manindra Chandra Nandi vs. Aswini Kumar Acharjya ILR
G (1921) 48 Ca. 427 -referred to.
1.4. The 'actual realistic cost' should have a
correlation to costs which are realistic and practical. It
cannot obviously refer to fanciful and whimsical
H expenditure by parties who have the luxury of engaging
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
-749
CHARITABLE TRUST & ORS.
,,
,
a battery of high-charging lawyers, as is the case on
A
hand. In a matter relating to temporary injunction, merely
because the court adjourns the matter several times and
one side engages a counsel by paying exorbitant fees per
hearing, the other side cannot be made to bear such
costs; In the instant case, the costs memo filed by the
B
respondents show that a sum of Rs. 45,28,000/- was paid
to four counsel. Even if actual costs have to be awarded,
it should be realistic which means what a "normal"
advocate in a "normal" case of such nature would
charge. Mechanically ordering the losing party to pay c
costs of Rs. 45,28,000/- in an appeal against grant of a
temporary injunction in a pending suit for permanent
injunction was unwarranted and contrary to law. It
cannot be sustained. [para 11] [768-C-H; 769-8-D]
1.5. The order dated 20.1.2010 of the High Court, to D
the extent it levies costs of Rs.45,28,000/- on the appellant
is set aside and in its place it is directed that the appellant
shall pay the costs of the appeal before the High Court
as per Rules plus Rs. 3000/- as exemplary costs to the
respondents. [para 29] [779-H; 780-A-B]
E
Strict enforcement of Section 35(2) of the Code
2.1. The discretion vested in the courts in the matter
of award of costs, as is evident from s. 35 of the Code, is
subject to two conditions: (i)the discretion of the court
F
is subject to such conditions and limitations as may be
prescribed and to the provisions of law for the time being
in force (sub-s.(1)]; and (ii) where the court does not
direct that costs shall follow the event, it shall state the
reasons in writing (sub-s. (2)]. The mandate of sub-s. (2)
G
of s. 35 that "where the Court directs that any costs shall
not follow the event, the Court shall state its reasons in
writing" is seldom followed in practice by courts. Many
courts either direct the parties to bear their respective
costs or do not make any order as to costs without H
750
SUPREME COURT REPORTS
[2011] 12 S.C.R
A assigning or recording the reasons for giving such
exemption from costs. Unless the courts develop the
practice of awarding costs in accordance with s.35 (that
is, costs following the event) and also give reasons where
costs are not awarded, the object of the provision for
s costs would be defeated. [para 13) [770-C-H]
Section 35A of the Code - Exemplary costs.
2.2. Section 35A refers to compensatory costs in
respect of false or vexatious claims or defenses. As on
C date, the maxir.num that can be awarded as
compensatory costs in regard to false and vexatious
claims is Rs. 3,000/-. In order to discourage false and
vexatious claims, the compensatory costs has to be
brought to a realistic level. At present courts have
D virtually given up awarding any compensatory costs, as
award of such a small sum of Rs. 3,000/- would not make
much difference. The Court is of the view that the ceiling
in regard to compensatory costs should be at least Rs.
1,00,000/-. [para 14) [771-C-F]
E
2.3. The description of the costs awardable u/s. 35A
"as compensatory costs" gives an indication that is
restitutive rather than punitive. The costs awarded for
false or vexatious claims should be punitive and not
merely compensatory. In fact, compensatory costs is
F something that is contemplated in s.358 and s.35 itself.
G
H
Therefore, the Legislature may consider award of
'punitive costs' u/s. 35A. [para 15) [771-G]
Award of Realistic Costs
2.4. In Salem Advocates Bar Association, this Court
suggested to the High Courts that they should examine
the Model Case Flow Management Rules and consider
making rules in terms of it, with or without modification
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
751
CHARITABLE TRUST & ORS.
so that a step forward is taken to provide to the litigating
A
public a fair, speedy and inexpensive justice. [para 18]
[772-G]
2.5. The costs in regard to a litigation include (a) the
court fee and process fee; (b) the advocate's fee; (c)
8
expenses of witnesses; and (d) other expenses allowable
under the Rules. The need to revise and streamline the
court fee has already been emphasized. Equally urgent
is the need to revise the advocate's fee provided in the
Schedules to the Rules, most of which are outdated and
have no correlation with the prevailing rates of fees. In C
regard to money suits, specific performance suits and
other suits where ad valorem court fee is payable, the
Advocate's fee is also usually ad valorem. However,
majority of the litigation constitutes where fixed
Advocates' fees are prescribed. There is need to provide
D
for awarding realistic advocates' fee by amending the
relevant rules periodically. This Court, of course, in
several cases has directed payment of realistic costs. But
this Court could do so, either because of the discretion
vested under the Supreme Court Rules, 1966 or having
E
regard to Article 142 of the Constitution under which this
Court has the power to make such orders as are
necessary to do complete justice between the parties.
[para 19 and 20] [773-G-H; 774-A-B-E-F]
2.6. It is suggested that the. Rules be amended to
provide for 'actual realistic costs'. The object is to
streamline the award of costs and simplify the process
F
of assessment, while making the cost 'actual and
.realistic'. While ascertainment of actuals in necessary in
G
regard to expenditure incurred (as for example travel
expenses of witnesses, cost of obtaining certified copies
etc.) in so far as advocates' fee is concerned, the
emphasis should be on 'realistic' rather than 'actual'. The
Advocate fee should be a realistic normal single fee. [para
H
22] [775-C-D]
752
SUPREME COURT REPORTS
[2011] 12 S.C.R.
A Costs in Arbitration matters
2.7. In arbitration proceedings where usually huge
costs are awarded (with reference to actual unregulated
fees of Arbitrators and Advocates), awarding of actual but
8 unrealistic costs and delay in disposal is affecting the
credibility of an alternative dispute resolution process.
The provisions of s. 31 (8) of Arbitration and Conciliation
Act, 1996 which deal with costs, show that what is
awardable is not 'actual' expenditure, but 'reasonable'
C costs. [para 23) [775-E-F]
2.8. Section 11 speaks of Chief Justice or his
Designate 'appointing' an arbitrator. The word 'appoint'
means not only nominating or designating the person
who will act as an arbitrator, but is wide enough to
D include stipulating the terms on which he is appointed.
The word 'appoint' in section 11 of the Act, therefore,
refers not only to the actual designation or nomination
as an arbitrator, but includes specifying the terms and
conditions, which the Chief Justice or Designate may lay
E down on the facts and circumstances of the case.
Whenever the Chief Justice or his Designate appoints
arbitratorls, it will be open to him to stipulate the fees
payable to the arbitratorls, after hearing the parties and
if necessary after ascertaining the fee structure from the
F prospective Arbitratorls. [para 25) [776-C-H]
G
H
Union of India v. Singh Builders Syndicate 2009 (3)
SCR 563 = 2009 (4) SGC 523 - relied on
Court fees
2.9. Though there is a general impression that the
court fee regarding litigation is high, in fact, it is not so.
Except in the case of few categories of suits (that is
money suits, specific performance suits etc., and the
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
753
CHARITABLE TRUST & ORS.
appeals therefrom), where court fee is ad valorem, in
A
majority of the suits/petitions and the appeals arising
therefrom, the court fee is a fixed nominal fee. The fixed
fees that are payable, prescribed decades ago, have not
undergone a change and in many cases the fixed fee is
not worth the cost of collection thereof. There is,
B
therefore, a need for a periodical revision of fixed court
fees, that is payable in regard to suits/petitions/appeals
filed in civil courts·, High Courts, Tribunals and the
Supreme Court. [para 16) £7?2-A-D]
2.10. The Law Commission of India, Parliament and
the respective High Courts are suggested to make
appropriate changes in the provisions relating to costs.
[para 30] [780-8)
Case Law Reference:
2005 (1) Suppl. SCR 929
referred to
para 7
2009 (1) SCR 125
referred to
para 7
2010 (7) SCR 424
referred to
para 7
ILR (1921) 48 Ca. 427 referred to
para 7
2009 (3) SCR 563
relied on
para 26
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
c
D
E
8610 of 2011.
F
From the Judgment & Order dated 8610 of 2011 of the
High Court of Delhi at New Delhi in FAO (O.S.) No. 244 of
2004.
Dr. Arun Mohan, (AC.}, A. Mariarputham, Jawahar Lal
G
Gupta, Arvind Bhatt, Megha Gaur, Yusuf Khan, P.N. Puri, Indra
Sawhney, Simran Mehta, Sibo Sankar Mishra for the appering
parties.
The Order of the Court was delivered by
H
754
SUPREME COURT REPORTS
[2011] 12 S.C.R.
A
ORDER
R.V. RAVEENDRAN, J. 1. Notice had been issued limited
to the question whether a sum of Rs. 45,28,000/- could be
awarded as costs in an appeal against a vacating temporary
8 injunction in an injunction suit. Leave is granted in regard to that
aspect only.
2. The appellant is a tenant under the respondents in
regard to a first floor unit bearing No.E-67, Connaught Place,
New Delhi. He was also a tenant under the respondents in
C respect of a mezzanine floor unit bearing No.E-11 of the said
building situated below the first floor tenement. When he was
a tenant of both these portions, the respondents granted
permission on 4.7.1986 to the appellant to put up an internal
staircase connecting the mezzanine floor with the first floor. The
D respondents initiated proceedings for eviction of the appellant
in regard to mezzanine floor unit and obtained vacant
possession thereof. Even after vacating the mezzanine floor unit,
the appellant claimed a right to use the staircase which had
been constructed in the mezzanine floor unit to reach the first
E floor unit. In that behalf, he filed a suit for permanent injunction
to restrain the respondents from obstructing him from using the
said staircase to reach the first floor unit. Interim protection was
given in favour of appellant on 30.12.2003. The said interim
order was vacated on 8.11.2004. Feeling aggrieved, the
F appellant filed an appeal. The appeal was pending for nearly
six years. During the final hearing of the appeal, the Division
Bench appears to have suggested to the parties that as the
dispute was purely a commercial dispute, the party succeeding
in the appeal should be entitled to the litigation expenses from
G the party who did not succeed. Both counsel, agreed to the said
proposal in principle and the court made the following order on
21.12.2009:
"Arguments heard. Order reserved.
H
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
755
CHARITABLE TRUST & ORS. [R.V. RAVEENDRAN, J.)
· Learned counsel for the parties should give to the Court
A
Master, statement of the total litigation expenses incurred
in this appeal only, within two dayS<."
In pursuance of it, the parties filed memos indicating the
respective expenses incurred in the appeal. The appellant filed
B
a memo dated 22.12.2009 stating that Rs. 25,50,000/- was
incurred as advocates' fees in the appeal. The respondents
filed an affidavit dated 23.12.2009 stating that Rs. 45,28,000/
- was spent as advocates' fees in regard to the appeal. By the
impugned judgment dated 20.1.2010, the Division Bench of the
C
High Court, dismissed the appeal by the appellant. Taking note
of the said memos regarding fees, the High Court awarded to
the respondents Rs. 45,28,000/- as costs in respect of the
appeal to be paid by the appellant within six months. The
appellant has challenged the said order both on merits and
costs. But leave is restricted only ·to the question of costs.
D
3. The only question for consideration is the legality and
validity of the order of the High Court directing the appellant to
pay costs of '45,28,000/- to the respondents.·
4. The appellant contended that award of such costs by E
the High Court was erroneous and contrary to law. The
respondents drew our attention to para 20 of the order. of the
High Court in which it has been observed that the learned
counsel for the parties had agreed for the suggestion of the
F
Court for litigation costs being payable to the succeeding party
by the losing party. The respondents contended that the award
of actual costs incurred in the appeal was by consent of parties;
and the same being a consent order, there was no question of
the matter being challenged by the appellant.
5. On a careful consideration, we find that the impugned
order, including the portion regarding costs, was not a consent
order. During hearing on merits, the division bench indicated
that the losing party should pay the 'litigation expenses' relating
G
to the appeal. This is nothing but a reiteration of what is stated
H
756
SUPREME COURT REPORTS
[2011] 12 S.C.R.
A in law, namely section 35 of the Code of Civil Procedure. The
. counsel naturally agreed for the suggestion. But there was no
consent for Rs. 45,28,000/- being determined or being
awarded as costs. There was no assessment of the costs by
the Taxing Officer of the High Court. We may therefore examine
B whether the award of such costs is contrary to law.
c
D
E
F
G
H
Relevant provisions of the Code
6. Section 35 of the Code of Civil Procedure, 1908, (for
short 'the Code') relates to costs and is extracted below:
"35. Costs. (1) Subject to such conditions and limitations
as may be prescribed, and to the provisions of law for the
time being in force, the costs of and incident to all suits
shall be in the discretion of the Court, and the Court shall
have full power to determine by whom or out of what
property and to what extent such costs are to be paid, and
to give all necessary directions for the purposes aforesaid.
The fact that the Court has no jurisdiction to try the suit shall
be no bar to the exercise of such powers.
(2) Where the Court directs that any costs shall not follow
the event, the Court shall state its reasons in writing."
6.1) Section 35A relates to compensatory costs in respect
of false or vexatious claims and is extracted below:
"35A. Compensatory costs in respect of false or vexatious
claims or defenses (1) If any suit or other proceedings
including an execution proceedings but excluding an
appeal or a revision any party objects to the claim of
defence on the ground that the claim or defence or any part
of it is, as against the objector, false or vexatious to the
knowledge of the party by whom it has been put forward,
and if thereafter. as against the objector, such claim or
defence is disallowed, abandoned or withdrawn in whole
or in part, the Court if it so thinks fit, may, after recording
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN ·
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CHARITABLE TRUST & ORS. [R.V. RAVEENDRAN, J.]
its reasons for holding such claim or defence to be false
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or vexatious, make an order for the payment to the object
or by the party by whom such claim or defence has been
put forward, of cost by way of compensation.
(2) No Court shall make any such order for the payment
8
of an amount exceeding three thousand rupees or
exceeding the limits of it pecuniary jurisdiction, whichever
amount is less:
Provided that where the pecuniar1 limits of the jurisdiction
of any Court exercising the jurisdiction of a Court of Small
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Causes under the Provincial Small Cause Courts Act,
1887 (9 of 1887) or under a corresponding law in force in
any part of India to which the said Act does not extend and
not being a Court constituted under such Act or law, are
less than two hundred and fifty rupees, the High Court may
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empower such Court to award as costs under this section
any amount not exceeding two hundred and fifty rupees and
not exceeding those limits by more than one hundred
rupees :
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Provided, further, that the High Court may limit the amount
or class of Courts is empowered to award as costs under
this Section.
(3) No person against whom an order has been made
under this section shall, by reason thereof, be exempted
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from any criminal liability in respect of any claim or defence
made by him.
(4) The amount of any compensation awarded under this
section in respect of a false or vexatious claim or defence
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shall be taken into account in any subsequent suit for
damages or compensation in respect of such claim or
defence."
6.2) Section 358 relates to costs for causing delay and is
·extracted below :
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"358. Costs for causing delay. - (1) If, on any date fixed
for the hearing of a suit or for taking any step therein, a
party to the suit-
(a) fails to take the step which he was required by or under
this Code to take on that date, or
(b) obtains an adjournment for taking such step or for
producing evidence or on any other ground, the Court may,
for reasons to be recorded, make an order requiring such
party to pay to the other party such costs as would, in the
opinion of the Court, be reasonably sufficient to reimburse
the other party in respect of the expenses incurred by him
in attending the Court on that date, and payment of such
costs, on the date next following the date of such order,
shall be a condition precedent to the further prosecution
of-
(a) the suit by the plaintiff, where the plaintiff was
ordered to pay such costs,
(b) the defence by the defendant, where the
defendant was ordered to pay such costs.
Explanation.-Where separate defences have been raised
by the defendants or groups of defendants, payment of
such costs shall be a condition precedent to the further
prosecution of the defence by such defendants or groups
of defendants as have been ordered by the Court to pay
such costs.
(2) The costs, ordered to be paid under sub-section (1 ),
shall not, if paid, be included in the costs awarded in the
decree passed in the suit; but, if such costs are not paid,
a separate order shall be drawn up indicating the amount
of such costs and the names and addresses of the
persons by whom such costs are payable and the order
so drawn up shall be executable against such persons."
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
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CHARITABLE TRUST & ORS .. [R.V . .RAVEENDRAN, J.]
6.3) Order XXA of the Code provides for costs being
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awarded in regard to the following six items enumerated in Rule
1:
"1. Provisions relating to certain items.- Without prejudice
to the generality of the provisions of this Code relating to
cots, the Court may award costs in respect of, -
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(a)
expenditure incurred for the giving of any notice
required to be given by law before the institution of
the suit;
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(b)
expenditure incurred on any notice which, though
not required to be given by law, has been given by
any party to the suit to any other party before the
institution of the suit;
(c)
expenditure incurred on the typing, writing or printing
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·of pleadings filed by any party;
(d)
charges paid by a party for inspection of the
records of the court for the purposes of the suit;
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(e)
expenditure incurred by a party for producing
witnesses, even though not summoned through
courts; and
(f)
in the case of appeals, charges incurred by a party
for obtaining any copies of judgments and decrees
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which are required to be filed along with the
memorandum of appeal."
Rule 2 of Order XXA provides that award of costs under
this Rule shall be in accordance with such rules as the High
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Court may make in this behalf.
Decisions dealing with costs
7. Sections 35 and 35A have been considered recently by ·
this Court in Salem Advocates Bar Association v. Union of · H
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SUPREME COURT REPORTS
[2011] 12 S.C.R.
A India [2005 (6) SCC 344], Ashok Kumar Mittal Vs. Ram
Kumar Gupta & Anr. [2009 (2) SCC 656] and Vinod Seth Vs.
Devender Bajaj & Anr. [2010 (8) SCC 1]. Before referring to
them, we may refer to the principle underlying award of costs
stated in Manindra Chandra Nandi vs. Aswini Kumar Acharjya
B [ILR (1921) 48 Ca. 427]:
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" .... We must remember that whatever the origin of costs
might have been, they are now awarded, not as a
punishment of the defeated party but as a recompense to
the successful party for the expenses to which he had been
subjected, or, as Lord Coke puts it, for whatever appears
to the Court to be the legal expenses incurred by the party
in prosecuting his suit or his defence. * * * The theory on
which costs are now awarded to a plaintiff is that default
of the defendant made it necessary to sue him, and to a
defendant is that the plaintiff sued him without cause; costs
are thus in the nature of incidental damages allowed to
indemnify a party against the expense of successfully
vindicating his rights in court and consequently the party
to blame pays costs to the party without fault. These
principles apply, not merely in the award of costs, but also
in the award of extra allowance or special costs. Courts
are authorized to allow such special allowances, not to
inflict a penalty on the un-successful party, but to indemnify
.the successful litigant for actual expenses necessarily or
reasonably incurred in what are designated as important
cases or difficult and extraordinary cases."
7.1) In Salem Advocates Bar Association, this Court held:
"Judicial notice can be taken of the fact that many
unscrupulous parties take advantage of the fact that either
the costs are not awarded or nominal costs are awarded
on the unsuccessful party. Unfortunately, it has become a
practice to direct parties to bear their own costs. In large
number of cases, such an order is passed despite Section
35(2) of the Code. Such a practice also encourages filing
· SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
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CHARITABLE TRUST & ORS. [R.V. RAVEENDRAN, J.]
of frivolous suits. It also leads to taking up of frivolous
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defences. Further wherever costs are awarded, ordinarily
the same are not realistic and are nominal. When Section
35(2) provides for cost to follow the event, it is implicit that
the costs have to be those which are reasonably incurred
by a successful party except in those cases where the ·s
Court in its discretion may direct otherwise by recording
reasons thereof. The costs have to be actual reasonable
costs including the cost of the time spent by the successful
party, the transportation and lodging, if any, or any other
incidental cost besides the payment of the court fee, c
lawyer's fee, typing and other cost in relation to the
litigation. It is for the High Courts to examine these aspects
and wherever necessary make requisite rules, regulations
or practice direction so as to provide appropriate
guidelines for the subordinate courts to follow."
7.2) In Ashok Kumar Mittal, this Court pointed out that
present system of levying meagre costs in civil matters (or no
costs in some matters), is wholly unsatisfactory and does not
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act as a deterrent to vexatious or luxury litigation borne out of
ego or greed, or resorted to as a 'buying-time' tactic and that
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a more realistic approach relating to costs may be the need of
the hour. This Court had also observed that the question whether
we should adopt suitably, the western models of awarding
actual and more realistic costs is a matter that requires to be
debated and that should engage the attention of Law
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Commission of India. This Court also observed:
"One view has been that the provisions of
Sections 35 and 35A CPC do not in any way affect the
wide discretion vested in by High Court in exercise of its
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inherent power to award costs in the interests of justice in
appropriate civil cases. The more sound view however is
that though award of costs is within the discretion of the
court, it is subject to such conditions and limitations as may
be prescribed and subject to the provisions of any law for
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the time being in force; and where the issue is governed
and regulated by Sections 35 and 35A of the Code, there
is no question of exercising inherent power contrary to the
specific provisions of the Code. Further, the provisions of
Section 35A seems to suggest that even where a suit or
litigation is vexatious, the outer limit of exemplary costs that
can be awarded in addition to regular costs, shall not
exceed Rs. 3000/-. It is also to be noted that huge costs
of the order of Rs. Fifty thousand or Rs. One lakh, are
normally awarded only in writ proceedings and public
interest litigations, and not in civil litigation to which
Sections 35 and 35A are applicable. The principles and
practices relating to levy of costs in administrative law
matters cannot be imported mechanically in relation to civil
litigation governed by the Code."
7.3) In Vinod Seth, this Court observed as under:
"48. The provision for costs is intended to achieve the
following goals:
(a) It should act as a deterrent to vexatious, frivolous and
speculative litigations or defences. The spectre of being
made liable to pay actual costs should be such, as to make
every litigant think twice before putting forth a vexatious,
frivolous or speculative claim or defence.
(b) Costs should ensure that the provisions of the Code,
Evidence Act and other laws governing procedure are
scrupulously and strictly complied with and that parties do
not adopt delaying tactics or mislead the court.
(c) Costs should provide adequate indemnity to the
successful litigant for the expenditure incurred by him for
the litigation. This necessitates the award of actual costs
of litigation as contrasted from nominal or fixed or
unrealistic costs.
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
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(d) The provision for costs should be an incentive for each
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. litigant to adopt alternativ·e dispute resolution (ADR)
processes and arrive at a settlement before the trial
commences in most of the cases. In many other
jurisdictions, in view of the existence of appropriate and
adequate provisions for costs, the litigants are persuaded
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to settle nearly 90% of the civil suits before they come up
to trial.
(e) The provisions relating to costs should not however
obstruct access to courts and justice. Under no
circumstances the costs should be a deterrent, to a citizen
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with a genuine or bonafide claim, or to any person
belonging to the weaker sections whose rights have been
affected, from approaching the courts.
At present these goals are sought to be achieved mainly
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by sections 35,35A and 358 read with the relevant civil
rules of practice relating to taxing of costs.
49. Section 35 of the Code vests the discretion to award
costs in the courts. It provides that normally the costs
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should follow the event and court shall have full power to
determine by whom or out of what property, and to what
extent such costs are to be paid. Most of the costs taxing
rules, including the rules in force in Delhi provide each
party should file a bill of cost immediately after the
judgment is delivered setting out: (a) the court fee paid;
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(b) process fee spent; (c) expenses of witnesses; (d)
advocate's fee; and (e) such other amount as may be
allowable under the rules or as may be directed by the
court as costs. We are informed that in Delhi, the
advocate's fee in regard to suits the value of which
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exceeds Rs.5 lakhs is: Rs.14,500/- plus 1% of the amount
in excess of Rs.5 lakhs subject t() a ceiling of Rs.50,000/
-. The prevalent view among litigants and members of the
bar is that the costs provided for in the Code and awarded
by courts neither compensate nor indemnify the litigant fully
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in regard to the expenses incurred by him.
50. The English Civil Procedure Rules provide that a court
in deciding what order, if any, to make in exercising its
discr.etion about costs should have regard to the following
circumstances:
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of his case, even
if he has not been wholly successful; and
(c) any payment made into court or admissible offer to
settle made by a party which is drawn to the courts
attention.
'Conduct of the parties' that should be taken note by the
'court includes:
(a) conduct before, as well as during, the proceedings and
in particular the extent to which the parties followed the
relevant pre-action protocol,
(b) whether it was reasonable for a party to raise, pursue
or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended
his case or a particular allegation or issue; and
(d) whether a claimant who has succeeded in his claim,
in whole or in part, exaggerated his claim.
·
Similar provisions, with appropriate modifications may
enable proper and more realistic costs being awarded.
51. As Section 35 of the Code does not impose any ceiling
the desired object can be achieved by the following:
(i) courts levying costs, following the result, in all
SANJEEV KUMAR JAIN v. RAGHUBIR SARAN
765
CHARITABLE TRUST & ORS. [R.V. RAVEENDRAN, J.]
cases (non-levy of costs should be supported by
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reasons); and
(ii) appropriate amendment to Civil Rules of
Practice relating to taxation of costs, to make it
more realistic in commercial litigation.
8
52. The provision relating to compensatory costs (Section
35A of the Code) in respect of false or vexatious claims
or defences has become virtually infructuous and
ineffective, on account of inflation. Under the said section,
award of compensatory costs in false and vexatious
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litigation, is subject to a ceiling of Rs.3,000/-. This requires
a realistic revision keeping in view, the observations in
Salem Advocates Bar Association (supra). Section 358
providing for costs for causing delay is seldom invoked. It
should be regularly employed, to reduce delay.
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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 re-visit the provisions
relating to costs and compensatory costs contained in
Section 35 and 35A of the Code."
8. Though, Section 35 does not impose a ceiling on the
costs that could be levied and gives discretion to the Court in
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the matter, it should be noted that Section 35 starts with the
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words "subject to such conditions and limitations as may be
prescribed, and to the provisions of law for the time being in
force".