The law of costs wears the modest dress of procedure, yet it performs a substantive and disciplinary function. It allocates the economic burden of a dispute, indemnifies the vindicated litigant, and prices the abuse of process. Where costs are real, error carries a price and dishonesty a penalty; where they are nominal, litigation degenerates into a cost-free wager upon delay. Of the many causes advanced for the formidable pendency afflicting our courts, one is seldom named and never remedied: the litigant who institutes a hopeless claim, resists an unanswerable one, or seeks his fifteenth adjournment risks nothing beyond the passage of time, which is frequently his very object.
The Indian framework is not, upon its face, deficient. The Code of Civil Procedure, 1908 embodies the venerable principle that costs lie in the discretion of the court and should ordinarily follow the event. Section 35 vests that discretion and obliges the court to record reasons whenever costs do not follow the event; Section 35A provides compensatory costs against a false or vexatious claim; Section 35B, imperative in its language, requires costs against a party who causes delay. Upon paper, India possesses a costs jurisdiction of considerable sophistication.
In practice, almost none of it operates. Section 35A confines compensatory costs to Rs. 3,000, a ceiling fixed in 1976 and untouched since; it is today worth less than the cost of filing. Section 35B is a dead letter. Advocates’ fees are certified under antiquated High Court scales bearing no relation to what advocates are in truth paid, so that the costs awarded to a successful litigant are a fraction of what he expended to obtain his decree. India’s difficulty is not the absence of a law of costs; it is that the law it possesses is capped by rules the courts cannot exceed, and is not enforced even to that limit.
That this is so has been said by the Supreme Court, repeatedly and without visible effect, for two decades. In Salem Advocate Bar Association (II) v. Union of India, (2005) 6 SCC 344, the Court held that costs have to be actual reasonable costs and called upon the High Courts to frame requisite rules. It returned to the theme with mounting impatience in Ashok Kumar Mittal v. Ram Kumar Gupta, (2009) 2 SCC 656, and Vinod Seth v. Devinder Bajaj, (2010) 8 SCC 1. In Ramrameshwari Devi v. Nirmala Devi, (2011) 8 SCC 249, it held that courts ought ordinarily to award actual, realistic and proper costs, which would go far towards controlling the pernicious tendency to introduce false pleadings and fabricated documents.
The most candid of these pronouncements is Uflex Ltd. v. Government of Tamil Nadu,[2] Justice Sanjay Kishan Kaul speaking for the Court diagnosed the malady in a sentence:
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“There seems to be often a hesitancy in our judicial system to impose costs, presuming as if it is a reflection on the counsel.”
It reiterated the governing principles that (i) costs should ordinarily follow the event (ii) realistic costs ought to be awarded keeping in view the ever increasing litigation expenses and (iii) the cost should serve the purpose of curbing frivolous and vexatious litigation. The Court further awarded costs of Rs. 23,25,750/- and Rs. 7,58,000/-.
The magnitude of what is at stake may be gauged from the arrears. The National Judicial Data Grid[3] at present discloses a pendency in the District and Taluka courts of some 5.03 crore cases, nearly 10 per cent of them pending for over ten years; the High Court Data Grid[4] discloses a further 64.66 lakh cases in the High Courts, of which a startling 15.01 lakh, very nearly a quarter of the entire docket, have been pending for over ten years. No augmentation of judicial strength will absorb such a volume so long as no price attaches to litigating without cause.
The Law Commission of India examined precisely this question, and its 240th Report, Costs in Civil Litigation (May 2012)[5] remains a brief, practical and almost wholly unimplemented document. It recommended raising the ceiling under Section 35A from Rs. 3,000 to Rs. 1,00,000, a portion credited to a Judicial Infrastructure Fund; extending Order XXV to defendants; making proof of payment of costs a condition of an appeal being entertained; and revision by the High Courts of their rules upon costs and advocates’ fees. Fourteen years have elapsed and substantially none of it has been enacted.
What has been done has been done piecemeal, and for the commercial litigant alone. The Commercial Courts Act, 2015 substituted Section 35 of the Code for commercial disputes of a Specified Value, defining costs broadly, requiring reasons for any departure from the general rule, and directing the court to the conduct of the parties and to the unreasonable refusal of a settlement offer. Chapter XXIII of the Delhi High Court’s Original Side Rules, 2018 [6] likewise provides for actual costs, carried into the Intellectual Property Division by Rule 35 of the IPD Rules, 2022.[7] These are genuine advances sharing one consequential defect: they prescribe the heads of costs without any scale by which the quantum is to be arrived at, and unstructured discretion, within a culture habituated to awarding nothing, tends to be exercised in favour of awarding nothing.
It is here that the practice of the courts of England and Wales draws attention, not because their law differs in principle, for it does not, but because their machinery compels the principle to work. Following the review conducted by Sir Rupert Jackson, whose Review of Civil Litigation Costs: Final Report[8] was published in January 2010, the Civil Procedure Rules[9] provided two devices we conspicuously lack. The first is summary assessment: at the conclusion of any hearing lasting not more than a day the court assesses costs. The second is fixed recoverable costs under the recast CPR Part 45,[10] settled by published grid across four bands of complexity: England met the objection of arbitrariness not by withholding costs but by promulgating a scale.
Whether such machinery has reduced unmeritorious litigation is a question upon which the evidence, though not conclusive, points steadily one way. The Ministry of Justice’s Post-Implementation Review of Part 2 of the LASPO Act 2012[11] of February 2019 recorded that base costs in personal injury and clinical negligence litigation had fallen in real terms and that early settlement had markedly improved. It noted that the available data on the volumes of court claims suggested that the number of claims had reduced slightly and in a manner consistent with the Government’s objective of reducing unmeritorious claims and not to an extent that would indicate a negative effect on access to justice.
India has a costs regime and practice where no consequences visit a party upon defeat particularly in a frivolous or vexatious case. The result is corrosive and is also visible in litigation against the State. Citizens driven to court by administrative inaction are met with vague and evasive counter-affidavits; appeals are preferred and languish as a matter of departmental routine; and none of it costs the department anything. In Urban Improvement Trust, Bikaner v. Mohan Lal, (2010) 1 SCC 512, the Supreme Court held that authorities which compel citizens into litigation over settled questions must expect to pay for the privilege. So long as the State litigates without cost, it will litigate without cause.
The need to recalibrate is pressing and no longer deferrable. Legislatively, the recommendations of the 240th Report should be enacted, and above all proof of payment of costs made a condition of an appeal being entertained (unless the appellate court for special reasons dispenses with it), for a costs order which may be ignored while an appeal is prosecuted is not, in any practical sense, an order at all. Regulatorily, the High Courts must do what Salem Advocate Bar Association (II) asked of them twenty years ago and revise their rules, with published scales differentiated by the nature of the proceeding and assessed by identified parameters: a reasonable professional fee, the conduct of the parties, the adjournments sought, the adoption of dilatory tactics, and whether the claim or defence was illusory from its inception. However, it must be cautioned that this needs to be balanced so as not to deny access to justice to the poor or deserving categories of cases for example in case of marginalised sections, violation of personal liberty, personal injury etc. Procedurally, summary assessment requires neither legislation nor expenditure and may be introduced by practice direction forthwith and realistic costs must extend to the appellate, revisional and writ jurisdictions. Articles 32 and 226 were never intended to be immune from the discipline of costs, especially against the State. Further the filing of false affidavits also needs to be visited with penal consequences.[12]
Alternative Dispute Resolution is frequently advanced as the answer to pendency, and it is a valuable bypass. But a bypass does not clear the clogged artery. So long as no consequence attaches to instituting or defending a claim that ought never to have been instituted/defended or to seeking the adjournment sought only for delay, filing of false claims etc., the volumes will not fall. The Supreme Court has said everything that needs saying and has in Uflex,[13] used its powers to award costs; the Law Commission has drafted the amendments. What is required is a change in the High Court rules governing costs, amendment of the Code of Civil Procedure, and a change in the mindset of presiding officers when it comes to awarding costs. The machinery to quantify costs should also be clearly enunciated in the practice directions. Until costs are made real, the cheapest thing available in an Indian court will remain an unmeritorious case.
[1] Arjun Harkauli is an Advocate practising before the Delhi High Court and the Supreme Court of India. A graduate of the National Law School of India University, Bangalore, he has over 24 years of experience in commercial disputes and arbitration. He may be reached at Arjunharkauli@ahchambers.com.
[2]Uflex Ltd. v. Government of Tamil Nadu (2021) 17 SCC 179
[3]NJDG-National Judicial Data Grid
[4]HC NJDG – National Judicial Data Grid
[6]Delhi High Court Rules 2018.pdf
[7]notificationfile_wd6kndkfb4g.pdf
[9]Rules & Practice Directions – Civil Procedure Rules – Justice UK
[10]PART 45 – FIXED COSTS – Justice UK
[11]Post-Implementation Review of Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO)
[12] Please see Maria Margarida Sequeira Fernandes v. Erasmo Jack de Sequeira, (2012) 5 SCC 370