Report No. 253

(ii) Costs

3.21.1 As recommended by the Supreme Court of India See Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust, (2012) 1 SCC 455 and the Law Commission44 costs will have to follow the event as a meaningful deterrent against frivolous litigation. In the Sahara judgment, the Court observed:

He [the innocent suffering litigant] spends invaluable time briefing counsel and preparing them for his claim. Time which he should have spent at work, or with his family, is lost, for no fault of his. Should a litigant not be compensated for, what he has lost, for no fault? The suggestion to the legislature is, that a litigant who has succeeded, must be compensated by the one, who has lost.

The suggestion to the legislature is to formulate a mechanism, that anyone who initiates and continues a litigation senselessly, pays for the same. It is suggested that the legislature should consider the introduction of a "Code of Compulsory Costs.... The effort is only to introduce consequences, if the litigant's perception was incorrect, and if his cause is found to be, not fair and legitimate, he must pay for the same. Subrata Roy Sahara v. Union of India, (2014) 8 SCC 470, at para 150.

44. Law Commission of India, Costs in Civil Litigation, Report No. 240 (2012).

3.21.2 In Rameshwari Devi v. Nirmala Devi, (2011) 8 SCC 249, at para 55, the Supreme Court noted that another factor to be considered while imposing costs is "for how long the defendants or respondents were compelled to contest and defend the litigation in various courts.

3.21.3 Therefore, the proposed 2015 Bill shall also contain a clause ensuring that costs shall necessarily follow the event in all cases, except where the court gives reasons in writing explaining why costs should not follow. The model of costs proposed in the amendments to the A&C Act, 1996 by the Law Commission in its 246th Report will also be adopted in this Bill. This will entail amendments to Section 35 and Section 35-A of the CPC, which govern the award of costs.

3.21.4 As proposed in the amendments to the A&C Act, 1996 in awarding costs, the court/arbitral tribunal will have regard to all circumstances including-

(a) The conduct of all parties;

(b) Whether a party has succeeded in part of its case, even if the party has not been wholly successful;

(c) Whether the party had made a frivolous counter claim leading to delay in the disposal of the case;

(d) Whether any reasonable offer has been made by a party to settle; and

(e) Whether the Party had made a frivolous claim and instituted a vexatious proceeding wasting the time of the Court.

3.21.5 "Costs" here will mean reasonable costs relating to:

(a) Fees and expenses of the arbitrators, courts and witnesses;

(b) Legal fees and expenses; and

(c) Any other expenses incurred in connection with the proceedings.

3.21.6 It is proposed to adopt the above model with suitable changes, to empower the Commercial Divisions and Commercial Courts to award costs along the above lines, and to also make it mandatory to give reasons for not awarding costs. This, it is intended, will deter parties from making frivolous claims or engaging in vexatious litigation, thereby adding to the burden of pendency and delays.

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