Costs

In one line

Costs are what the losing side pays towards the winner's expenses, and the Code has three separate provisions: section 35 for ordinary costs, section 35A for costs punishing a false or vexatious case, and section 35B for costs punishing delay.

Keep those three apart. Almost every question on this topic is really asking which of the three applies.

Why the Code gives the court this power

Litigation costs money whether or not you were right. If a person is dragged into court on a claim that fails, and has to pay his own lawyer for the privilege, then winning has cost him. Costs exist to shift some of that burden onto the party who caused it.

But costs also do a second job, and sections 35A and 35B are entirely about that job: they discipline conduct. One punishes a party for advancing a case he knew was false; the other punishes a party for wasting a hearing. Those are penalties, and the Code treats them quite differently from ordinary costs.

Section 35: ordinary costs

Section 35(1): subject to such conditions and limitations as may be prescribed and to any law 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, out of what property, and to what extent costs are to be paid, and to give all necessary directions. The fact that the Court has no jurisdiction to try the suit shall be no bar to the exercise of such powers.

Section 35(2): where the Court directs that costs shall not follow the event, it shall state its reasons in writing.

Three points.

The discretion is real but not arbitrary. The general principle, expressed in sub-section (2) by implication, is that costs follow the event: the loser pays. A court departing from that must record why.

A court without jurisdiction can still award costs. That is expressly provided, and it makes sense: a defendant dragged before the wrong court has still incurred expense.

For commercial disputes the Code now sets this out at length. The Court has discretion whether costs are payable, in what amount, and when; "costs" means reasonable costs of witnesses' fees and expenses, legal fees and expenses, and other expenses of the proceedings; and the general rule is that the unsuccessful party pays the costs of the successful party, with any departure to be for reasons recorded in writing. The Code's own illustration is instructive: where a plaintiff wins his money decree but his claim for damages is found frivolous and vexatious, the Court may impose costs on the successful plaintiff for having raised it.