Payment into Court and Security for Costs

In one line

Two short Orders, each protecting one side against the other's use of the litigation itself as a weapon: Order XXIV lets a defendant stop the interest clock by paying the money in, and Order XXV lets a defendant demand security from a plaintiff who may not be around to pay costs.

Order XXIV: payment into court

Why it exists

Suppose a defendant accepts he owes Rs. 1,00,000 and offers it, but the plaintiff insists on Rs. 5,00,000 and sues. The suit runs three years. If nothing could be done, the defendant would pay interest for three years on money he was willing to hand over on day one, and would pay the costs of a trial he never wanted.

Order XXIV lets him take that away. He deposits what he says is due, and from the moment the plaintiff has notice of the deposit, interest stops running on that sum. If the court later finds the deposit was enough, the plaintiff pays the costs of the litigation he insisted on.

The four rules

Rule 1: the defendant in any suit to recover a debt or damages may, at any stage of the suit, deposit in Court such sum of money as he considers a satisfaction in full of the claim.

Rule 2: notice of the deposit shall be given through the Court by the defendant to the plaintiff, and the amount shall, unless the Court otherwise directs, be paid to the plaintiff on his application.

Rule 3, and this is the operative sanction: no interest shall be allowed to the plaintiff on any sum deposited by the defendant from the date of the receipt of such notice, whether the sum deposited is in full of the claim or falls short of it.

Read Rule 3 carefully. The interest stops even if the deposit turns out to be too small. It stops on the sum deposited, from the date the plaintiff receives notice.

Rule 4(1), where the plaintiff accepts it as part satisfaction: he may prosecute his suit for the balance; and if the Court decides that the deposit was a full satisfaction of the claim, the plaintiff shall pay the costs of the suit incurred after the deposit, and also the costs incurred before it so far as they were caused by the excess in his claim.

That is the sting. A plaintiff who refuses a sufficient deposit and presses on pays for the rest of the case himself, and may pay for part of the earlier costs too, to the extent his own inflated claim caused them.

Rule 4(2), where he accepts it as full satisfaction: he shall present a statement to that effect, which is filed, and the Court shall pronounce judgment accordingly; and in directing by whom the costs of each party are to be paid, the Court shall consider which of the parties is most to blame for the litigation.