Costs

Order XX Rule 6(2) and (3) connect this to the decree: the decree must state the amount of costs and by whom, or out of what property, and in what proportions they are to be paid, and the Court may direct costs payable by one party to be set off against sums due from him.

Order XXA allows costs in respect of certain specified expenses, including expenditure incurred on notices required to be given by law, on typing and writing or printing of pleadings, on inspecting court records, on producing witnesses, and on obtaining copies.

Section 35A: compensatory costs for a false or vexatious claim or defence

This is the provision MU asked about in December 2023, and it is narrow, so the conditions matter.

Section 35A(1): if in any suit or other proceeding, including an execution proceeding but excluding an appeal or a revision, any party objects to the claim or defence on the ground that it, or any part of it, is as against the objector false or vexatious to the knowledge of the party putting it forward, and if thereafter, as against the objector, that claim or defence is disallowed, abandoned or withdrawn in whole or in part, the Court may, if it so thinks fit, and after recording its reasons for holding the claim or defence false or vexatious, order the party who put it forward to pay the objector costs by way of compensation.

Take the conditions in order, because all of them must be present:

One, a suit or proceeding, including execution, but NOT an appeal or a revision. Two, an objection must have been taken by the party who wants the costs. The court does not act on its own. Three, the claim or defence must be false or vexatious TO THE KNOWLEDGE of the party advancing it. A claim that merely fails is not enough; a claim that is weak is not enough. Knowledge is the test. Four, it must afterwards be disallowed, abandoned or withdrawn, wholly or in part. Five, the Court must record its reasons.

Section 35A(2) caps the amount: no order shall exceed three thousand rupees, or the limits of the Court's pecuniary jurisdiction, whichever is less.

Section 35A(3): no person against whom an order has been made under the section shall, by reason of it, be exempted from any criminal liability in respect of the claim or defence.

The cap is the practical point to remember. Section 35A is a penalty rather than an indemnity, which is why it is small and why the conditions are strict.

Section 35B: costs for causing delay

Section 35B(1): if on any date fixed for the hearing of a suit or for taking any step in it, a party (a) fails to take the step he was required by the Code to take on that date, or (b) obtains an adjournment for taking such a step or producing evidence or on any other ground, the Court may, for reasons to be recorded, order him to pay the other party such costs as would reasonably reimburse that other party for the expenses of attending the Court on that date.

Then comes the sting: payment of those costs, on the date next following the order, shall be a CONDITION PRECEDENT to the further prosecution of the suit by the plaintiff, or of the defence by the defendant, according to who was ordered to pay.

The Explanation applies the same rule where separate defences have been raised by different defendants or groups of them.

Section 35B(2): costs ordered under sub-section (1), if paid, shall not be included in the costs awarded in the decree; but if they are not paid, they may be recovered separately.

So section 35B is unlike anything else in the costs provisions. It is not merely an order to pay. It is a gate: fail to pay and you cannot go on with your suit or your defence. And because paid section 35B costs are kept out of the decree, they are a genuine penalty on the delaying party rather than a credit against the final bill.

The three compared

A worked example

Chirag sues Deepa. At the first hearing Deepa is present and ready, and Chirag's advocate seeks an adjournment because he is not prepared.

Section 35B applies. The Court may, for reasons recorded, order Chirag to pay Deepa such costs as would reasonably reimburse her expenses of attending that day. If it does, payment on the next date is a condition precedent to Chirag prosecuting his suit further. If he pays, that sum is not included in the costs in the eventual decree; if he does not pay, it can be recovered separately and he cannot go on.

Later, Deepa raises a defence that the goods were never delivered. Chirag objects at the time that the defence is false to Deepa's knowledge, and points to her own signed receipt. At trial the defence is disallowed.

Now section 35A can apply. There was an objection, the defence was false to her knowledge, and it was disallowed. The Court may, after recording reasons, order her to pay compensatory costs, but not more than Rs. 3,000 or its pecuniary limit, whichever is less.

Chirag wins the suit. Section 35 governs the ordinary costs. The general position is that costs follow the event, so Deepa pays; if the Court decides otherwise it must record its reasons in writing under section 35(2). The decree states the amount and who pays, under Order XX Rule 6(2).

Change one fact. Suppose Deepa's defence was simply wrong rather than knowingly false. Section 35A does not apply at all: without knowledge there is no false or vexatious defence within the section, and the only costs are ordinary costs under section 35.

Change another. Suppose the vexatious defence appeared for the first time in an appeal. Section 35A is expressly unavailable there, because appeals and revisions are excluded.

And another. Suppose the suit was filed in a court that turns out to have no jurisdiction. Section 35(1) still allows that court to award costs, because want of jurisdiction is expressly no bar.

What it does not mean

Costs are not damages. They are a contribution towards the expense of litigating, not compensation for the wrong sued on.

"Costs follow the event" is not an absolute rule. It is the general principle, and a court may depart from it under section 35(2) by recording reasons.

Section 35A is not available for a claim that merely fails. It requires the claim or defence to have been false or vexatious to the knowledge of the party advancing it, and it requires an objection to have been taken.

Section 35A is not available in an appeal or a revision. Expressly excluded.

Section 35B costs are not part of the decree if paid. They are kept out by sub-section (2), which is what makes them a penalty.

Non-payment under section 35B is not merely a debt. It bars the further prosecution of the suit or the defence.

Quick revision

Section 35, ordinary costs: in the discretion of the Court, which decides by whom, out of what property, and to what extent. Want of jurisdiction is no bar. If costs do not follow the event, reasons in writing. In commercial disputes, the general rule that the unsuccessful party pays is spelled out, with any departure for reasons recorded.

Section 35A, compensatory costs: suit or proceeding including execution but excluding appeal and revision; an objection taken; the claim or defence false or vexatious to the knowledge of the party advancing it; afterwards disallowed, abandoned or withdrawn; reasons recorded; capped at Rs. 3,000 or the court's pecuniary limit, whichever is less; no exemption from criminal liability.

Section 35B, costs for delay: on failure to take a step, or on obtaining an adjournment; for reasons recorded; costs equal to the other party's expenses of attending that day; payment is a condition precedent to further prosecution of the suit or defence; if paid, excluded from the decree; if unpaid, recoverable separately.

Order XX Rule 6(2) and (3): the decree states the costs, who pays, and in what proportions, and they may be set off. Order XXA: costs for notices, typing and printing of pleadings, inspection, producing witnesses and obtaining copies.

Test yourself

1. Who decides who pays the costs of a suit? The Court. Under section 35(1) the costs of and incident to all suits are in the discretion of the Court, which has full power to determine by whom, out of what property, and to what extent they are to be paid, and the fact that it has no jurisdiction to try the suit is no bar to the exercise of that power.

2. What is meant by compensatory costs? Costs awarded under section 35A against a party who has put forward a claim or defence which is, as against the objector, false or vexatious to that party's knowledge, and which is afterwards disallowed, abandoned or withdrawn. They are ordered only where an objection was taken and after the Court records its reasons, and they may not exceed three thousand rupees or the limits of the Court's pecuniary jurisdiction, whichever is less.

3. Are compensatory costs available in an appeal? No. Section 35A applies to any suit or other proceeding including an execution proceeding, but expressly excludes an appeal or a revision.

4. What happens if a party ordered to pay costs under section 35B does not pay them? Payment on the date next following the order is a condition precedent to the further prosecution of the suit by the plaintiff, or of the defence by the defendant, according to who was ordered to pay. So non-payment bars him from proceeding, and the unpaid costs may also be recovered separately.

5. Are section 35B costs included in the costs awarded by the decree? Not if they are paid. Section 35B(2) provides that costs ordered under sub-section (1), if paid, shall not be included in the costs awarded in the decree, though if they are not paid they may be recovered separately.

6. What are the various types of costs under the Code? Ordinary costs in the discretion of the court under section 35; compensatory costs for false or vexatious claims or defences under section 35A; and costs for causing delay under section 35B. Order XXA further provides for costs in respect of specified expenses such as notices, typing and printing of pleadings, inspection of records, producing witnesses and obtaining copies.