Critical Study: 240TH Report of Law Commission (2012) on “Costs in Civil Litigation”

6.1 Code of Civil Procedure and Law of Limitation

SUBMITTED BY

DHYANESHWARI REHPADE

UID: UG18-28

B.A.L.LB. (Hons.) 6th SEMESTER 2020-21

SUBMITTED TO

Ms. Priyanka Mardikar

(Visiting faculty)

MAHARASHTRA NATIONAL LAW UNIVERSITY, NAGPUR

TABLE OF CONTENT

Introduction……………………………………………………………………..................…02

Research Design……………………………………………………………………………...02

 Aims and Objective………………………………………………………………….02

 Research Questions…………………………………………………………………..02
 Research Methodology……………………………………………………................02

Law Commission 20th Report………………………………………………………………...03

Costs………………………………………………………………………………………….03

Expensive Legal System……………………………………………………………………...05

Conclusion…………………………………………………………………………................06

Bibliography………………………………………………………………………………….07

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INTRODUCTION
The“Law regulating the procedure to be followed in civil court is governed by the Civil
Procedure Code, 1908 and this Code is one of the most important branches of the procedural
law. The civil procedure code, 1908 is an adjective law, which deals with the administration of
civil proceedings in India. This code is divided into two parts, first part contains of total 158
sections, which is substantial in nature and second part contains first schedule, which has total
51 orders and rules, which is procedural in nature. If we examine, the first part is different from
the other substantial law as other substantial law provides, some rights to the person or impose
some restriction, as the case may be, but here, this only talks about the general principal relating
to the jurisdiction of the court. The second part of this code i.e. orders and rules prescribe
procedures and method that govern civil proceeding in India. This article focuses on the
provisions of cost. ‘Costs’ have been incorporated in section 35, 35-A, 35-B and section 95 of
CPC for the purpose of acting as a deterrence against frivolous vexatious claims made.1
Dictionary meaning of the term Cost is ‘‘Cost is a pecuniary allowance made to the successful
party for his expenses in prosecuting or defending a suit or a distinct proceeding with a suit”.”

RESEARCH DESIGN
Aims and Objectives
The aim of this project is to critically analyse the various pros and cons of civil litigation cost.
While studying the project topic researcher has made certain objectives. Firstly to observe the
changes in the definition of cost before the commencement of the code. Secondly to study the
various judgements for the critical analysis.

Research Questions

1. What is the impact of this report in civil litigation?

2. Does the legal system is expensive?
3. What is the role of section 35-A of CPC?

Research Methodology
The Researcher has attempted to study the nature and 240th report on cost in Civil Litigation
along with the general theoretical stances as well as the Indian law provisions which tackles
the report which come under the aforementioned topic. The mode of study has involved a
combination of facts, cases and explanation derived from books, journals, online sources as

1
Saurabh Kumar, Critical Analysis of Provision for ‘Cost’ under civil procedure code, 1908, IJL, 2019.

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well as authorities. . The sources used were secondary in nature. The researcher has attempted
to fist define the concepts involved, followed by the explanation and the provisional aspects
coupled with case authorities wherever possible.

LAW COMMISSION 240th REPORT

Law commission 240th report on the “Cost of civil litigation” aims mainly at three goals: “(i)
ensuring realistic and reasonable costs to the successful party, (ii) curbing false and frivolous
litigation and (iii) discouraging unnecessary adjournments”2. Researcher will deal with each
goal and also suggestive recommendations given by the Law commission of India for making
certain legislative changes in Civil Procedure Code, 1908.

But firstly, one should know what cost exactly means. According to C.K Takwani’s Civil
Procedure with Limitation Act, 1963 “Costs signifies the sum of money which the court orders
one party to pay another party in respect of the expenses of litigation incurred. Except where
specifically provided by the statute or by rule of Court, the costs of proceedings are in the
Courts discretion”.3

“In Johnstone v. The Law Society of Prince Edward Island4, the Canadian Court of Appeal
speaking through Mc Quaid, J. described costs in the following words”: “the sum of money
which the court orders one party to pay another party in an action as compensation for the
expense of litigation incurred. The definition continues to the effect that costs are awarded as
compensation (i.e. reimbursement); there is, unlike damages, no restitutio in integrum, that is
to say, no concept in costs, as there exists in damages, that the injured person should be placed,
in so far as money can do so, in the same position as he occupied before the injury was
suffered”. Therefore, Cost basically means that a party that loses must pay winning parties’
expenses and winners legal fees.

COSTS

‘Costs’“are statutory allowance to a party to an action for his expenses incurred in the action.
They are in the nature of incidental damages allowed to the successful party to indemnify him
against the expenses of asserting his rights in Court, when the necessity for so doing caused by
the other's breach of legal duty Otherwise defined, costs the sums prescribed by law as charges
for the services enumerated in the fee bill. They have reference only to the parties and the

2
240th Law Commission Report, pg 2.
3
Civil Procedure with Limitation Act, 1963, C.K Takwani, 8 th edition page no. 448.
4
2 PEIR B-28 (1988).

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amounts paid them, and only those expenditures which are by statute taxable and to be included
in the judgement fall within the term ‘costs’5. The general rule is that the successful party is
entitled to costs unless he is guilty of misconduct, negligence or omission or unless there is
some other good cause for not allowing costs. The same rule is expressed by the expression
“Costs follow the event”, i.e., costs follow the result of the suit.”The drastic step of imposing
costs must be taken and used very cautiously, sparingly and only in cases where the Court is
certain that there is an absolutely false case of defence. To the Supreme Court it is clear that
merely because a court does not accept a case or defence is no ground for granting high interest
or costs. It must also be mentioned that the special courts Act provides that the Civil Procedure
Code does not apply. Provision of costs have been incorporated in section 35, 35A, 35-B and
section 95 of CPC for the purpose of acting as a deterrence against frivolous vexatious claims
made. But the working of the provision shows that many unscrupulous parties take advantage
of the fact that either the costs are not awarded or nominal costs are awarded on the
unsuccessful party.“In Salem Advocates Bar Association V. Union of India6, the Supreme court
held that the costs have to be actual and reasonable, including the cost of the time spent by the
successful party, the transportation and lodging, if any, or any other incidental cost besides the
payment of the court fee, lawyer’s fee, typing and other cost in relation to the litigation. It is
for the High Courts to examine these aspects and wherever necessary make requisite rules.”

Cost“are an allowance to the party for expenses incurring in prosecuting or defending a suit,
an incident to the judgment. In England the term is also used to designate the charges which an
attorney or solicitor is entitled to make and recover from his client, as his remuneration for
professional services, such a legal advice, attendances, drafting, conducting legal proceedings
etc. Costs are at the discretion of the court. The said discretion must be exercised on sound
legal principles and not by caprice, chance or humour. No hard and fast rules can be laid down
and the discretion must be exercised considering the facts and circumstances of each case.
Normally, costs to follow the event and the successful party are entitled to costs unless there
are good grounds for depriving him of that right7. To put it differently the loser pays costs to
the winner. However it does not always depend on who wins and losses in the end. Even a
successful party may be deprived of costs if he is guilty of misconduct or there are other reasons

5
Basu’s commentary, code of civil procedure, 1091, (whytes & co. 14 th Ed., 2015).
6
2005 (6) SCC 344.
7
Jugraj Singh v. Jaswant Singh (1970) 2 SCC 386.

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to do so8. Section 35 (2) expressly provides that when the court orders that cost should not
follow the event, it must record reasons for doing so.”

EXPENSIVE LEGAL SYSTEM

With lawyers charging exorbitant fees and presence of large amount of frivolous appeals, can
a litigant quest his justice? Speaking on the issue of lawyers charging an enormous amount of
fees, President of India, Ram Nath Kovind on his speech on National law day said: “India has
acquired a reputation of an expensive legal system. In part, this is because of delays but there
is also a question of affordability of fees. The idea is that a relatively poor person cannot reach
the doors of justice for a fair hearing only because of financial or similar constraints while it’s
in our constitutional values and republic ethics. It is a burden on our collective conscience.”9
Ram Nath Kovind was a practicing lawyer before he came into politics and he knows very well
how the legal system works. Here is a list of senior advocates from Supreme Court and High
Courts and the fees that they charge.10

The 240th Report of the Law Commission states”: “A litigant, who starts the litigation, after
some time, being unable to bear the delay and mounting costs, gives up and surrenders to the
other side or agrees to settlement which is something akin to creditor who is not able to recover
the debt, writing off the debt. This happens when the costs keep mounting and he realizes that
even if he succeeds he will not get the actual costs. If this happens frequently, the citizens will
lose confidence in the civil justice system.”11

If a litigant hire lawyer for a frivolous litigation then after losing, he should give cost according
to section 3512 to the successful party, but it is very easy for all the losing parties to incur the
costs if they are very less and will certainly not cause any deterrence, therefore it is the duty of
the court to ensure “realistic and reasonable costs to the successful party. The Supreme Court,
in Salem Advocate Bar Association vs. Union of India13, noticed that “unfortunately, it has
become a practice to direct parties to bear their own costs” and that wherever costs are awarded,
ordinarily the same are not realistic and are nominal.” “The principle that costs should follow
the event which finds statutory recognition in Section 359 of CPC ought to be given effect to

8
Colash Iyer v. Balasubramanyam (1980) 1 SCC 634.
9
https://www.livemint.com/news/india/judicial-process-has-become-very-expensive-says-president-ram-nath-
kovind-11575735258918.html.
10
https://www.livemint.com/Politics/BvOZE6z7Oyl6LiHZxWVlzL/How-much-do-Delhis-top-advocates-
charge.html.
11
240th Law Commission report, pg. 20.
12
Section 35, The Code of Civil Procedure, 1908.
13
2005 6 SCC 344.

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by the Courts with all seriousness and the deviations should be rare. The recent decision of
Supreme Court in Sanjeev Kumar Jain14” has laid stress on this aspect. “In same case, the
Supreme Court observed that the ceiling of Rupees one lakh appears to be reasonable. In the
written submissions of Law Commission of India filed before the Court in that case, the same
suggestion was made and the Hon’ble Court has apparently endorsed it. This suggestion,
therefore, deserves to be acted upon and section 35-A15 has to be suitably amended.”

Curbing frivolous litigation by imposition of heavy costs is a well-recognized norm and there
should be adequate legislative support for it. Closely allied to Section 35-B is Order XVII, Rule
(2) of CPC which bears the heading “Costs of adjournment”16

The“quantum of costs under Order XVII, Rule 2, can be so fixed as to include advocate’s feel
to a reasonable extent. If a party is seeking repeated adjournments, naturally, heavy costs can
be awarded depending on the various relevant factors such as the over-all conduct of the party,
the stakes involved and so on. It is common knowledge that the quantum of costs awarded by
the Courts against a party seeking unnecessary adjournments are by and large meagre. It may
be couple of hundreds or even less in some parts of the country.”

By“awarding such meagre costs, the desired objective of discouraging adjournments is

stultified. It is desirable that the High Courts should issue circular instructions to the judicial
officers to stop the practice of awarding minimal or meagre costs for adjournments and to
award reasonable costs adequate enough to reimburse the expenditure that would have been
incurred by the other party and it may, in appropriate cases, include an estimated amount of
advocate’s fee.”

CONCLUSION

According to Justice (retired) B.S Chauhan “The question is why our legal system and bail
conditions are so complicated, that a poor person cannot afford to look towards the courts while
a rich person can approach it in advance even before his arrest,” Between costly legal
counsellors, frequent adjournments and delaying strategies, no disputant ever recognizes what
his legitimate costs will be till the judgment is conveyed and the bill shows up. In the landmark
case of Ashok Kumar Mittal vs. Ram Kumar Gupta14 same issue was talked about, where the
apex court observed: “The present system of levying meagre costs in civil matters (or no costs

14
2011, JT (12), (435).
15
Section 35-A, The Code of Civil Procedure, 1908.
16
Order XVII Rule (2), The Code of Civil Procedure, 1908.

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in some matters), no doubt, is wholly unsatisfactory and does not act as a deterrent to vexatious
or luxury litigation born out of ego or greed, or resorted to as a buying- time tactic. A more
realistic approach relating to costs may be the need of the hour.” The Law Commission opined
that expenses in common procedures ought to be reasonable and with the end goal that they
control frivolous suis. Regardless of the proposals of the Law Commission, Section 35-A was
not amended.

BIBLIOGRAPHY

1. 240th Law Commission Report. Law Commission of India, 9 May 2012.

2. “SCC Online® | The Surest Way To Legal Research.” Scconline.Com, 2020,

www.scconline.com/. Accessed 10 Jan. 2020.

3. Simmons, Lord. Halsbury’s Law of England, Vol. 14. 3rd ed., Butterworths, London, 1956.