MANU/MH/0435/2014

Equivalent Citation: 2015(2)ALLMR858, 2014(5)BomC R521

IN THE HIGH COURT OF BOMBAY

Notice of Motion No. 381 of 2014 in Admiralty Suit No. 14 of 2008
Decided On: 08.04.2014
Appellants: Alpha Oil International
Vs.
Respondent: M.T. Chem Lily
Hon'ble Judges/Coram:
K.R. Shriram, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Mr. Bimal Rajasekhar Along with Ashwin Shankar
For Respondents/Defendant: Mr. Prashant Pratap, Sr. Advocate Along with Ashwini Sinha
JUDGMENT
K.R. Shriram, J.
1. This Notice of Motion is taken out on behalf of the defendant praying for (a) an order
and direction to the plaintiff to deposit sum of Rs. 24 lakhs as security for costs
incurred and likely to be incurred by the defendant or such other amount as this Hon'ble
Court deems fit and proper and (b) dismiss the suit in the event the plaintiff fails to
furnish security should the Court decide to allow the prayer for security for costs. Mr.
Pratap Senior Counsel for the defendant submitted that this Notice of Motion should be
heard and disposed before the matter proceeds further.
2 . Pursuant to an order dated 19.3.2008 the applicant as the owner of the defendant-
vessel furnished security in the sum of USD 460,000 + interest at 6% p.a. as security
for release of the defendant vessel. This was despite the fact that the original order of
arrest required the defendant to furnish security in the sum of USD 12,24,976.12 which
was shown to be incorrect at the time of applying for release of the vessel. The
defendant had furnished security without prejudice to their rights and contentions in the
matter. The defendant is disputing their liability in respect of bunkers alleged to have
been supplied to the defendant vessel.
3. The plaintiff then filed an affidavit of one Kim in lieu of examination in chief in which
the witness has stated that the plaintiff had received a sum of US$ 2,60,000/- from the
erstwhile demise charterers SH Marine, who is not a party to the suit and out of this the
plaintiff appropriated a sum of US$ 1,88,408.20 to the credit of its claim in the suit but
has not disclosed when this amount was received. The defendant has alleged in the
affidavit in support that as a result of this the defendant has been renewing the bank
guarantee for US$ 4,60,000/- from time to time and the guarantee is in force till March,
2015 and had the plaintiff disclosed this receipt of money the defendant would have
provided bank guarantee for a lesser sum and that would mean saving in bank
guarantee charges. The plaintiff subsequently took out a Chamber Summons to amend
the plaint to bring down its claim by a sum of US$ 1,88,408.20 which according to the
plaintiff they have received. This Chamber summons has been allowed. The revised

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claim in the suit now stood at US$ 2,71,197.75.
4 . It is the defendant's case that the applicant, viz. owner of the defendant vessel is
based in Norway and the plaintiff is also a foreign company incorporated under the laws
of Korea. The plaintiff has no place of business in India and has no asset or immovable
property in India and therefore, it is only just, fair and proper that the plaintiff be
directed to provide security for cost. Mr. Pratap counsel for the defendant submitted that
under order XXV of the Code of Civil Procedure 1908 (CPC) which deals with the
situation when the security for cost may be required from plaintiff, it is mandatory for
the court to direct the plaintiff, where the plaintiff is based outside India and has no
asset or immovable property within India, to furnish security for cost.
5. The plaintiff has filed an affidavit of one Ravindra Kumbhar dated 27.3.2014 in reply
opposing the Notice of Motion. In reply to the specific averment in paragraph-4 to the
affidavit in support stating that the plaintiff do not have any place of business in India
or assets in the form of immovable property or otherwise within India, the plaintiff has
not denied the same. In fact, during the course of argument, the Counsel for the
plaintiff confirmed that the plaintiff do not possess any asset or immovable property
within India.
6. Order XXV of the Code of Civil Procedure reads as under:-
1. When security for costs may be required from plaintiff-(1) At any stage of a
suit, the Court may, either of its own motion or on the application of any
defendant, order the plaintiff, for reasons to be recorded, to give within the
time fixed by it security for the payment of all costs incurred and likely to be
incurred by any defendant:
Provided that such an order shall be made in all cases in which it appears to the
Court that a sole plaintiff is, or (when there are more plaintiffs than one) that
all the plaintiffs are residing out of India and that such plaintiff does not
possess or that no one of such plaintiffs possesses any sufficient immovable
property within India other than the property in suit. (2) Whoever leaves India
under such circumstances as to afford reasonable probability that he will not be
forthcoming whenever he may be called upon to pay costs shall be deemed to
be residing out of India within the meaning of the proviso to sub-rule (1).
7. Sub Rule-1 in Rule 2 of order XXV provides for the effect of failure to furnish security
in terms of the court's order. Order XXV rule 2(1) of CPC provides as under:-
2. Effect of failure to furnish security-(1) In the event of such security not being
furnished within the time fixed, the Court shall make an order dismissing the
suit unless the plaintiff or plaintiffs are permitted to withdraw therefrom.
8 . The defendant's counsel submits that the facts of the present case clearly come
within the scope of the proviso to order XXV rule 1 sub-rule 1 of the CPC and the
provisions are mandatory as will be evident from the word "shall" and "in all cases"
contained therein. Therefore, the Court should pass an order for security as prayed in
this notice of motion. Mr. Pratap submits that if the plaintiff is residing out of India, it is
mandatory that security for cost should be awarded though the amount to be awarded
should be at the discretion of this court. However, he submits that this provision also
confers a discretion on the court to order the plaintiff to furnish security either on its
own motion or at the instance of the defendant. If the plaintiff is within India then the
court may have the discretion to decide whether any cost at all should be awarded, but

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when the plaintiff is a resident out side India then the court has to provide for security
for cost from the plaintiff in all cases. Counsel relied on the judgment of the Calcutta
High Court in the case of MANU/WB/0060/1987 : AIR 1987 CAL 285 Revlon Inc. V/s.
Kemco Chemicals and Ors., where the court has confirmed that it is mandatory in cases
where the plaintiff is residing out side India, security for cost should be provided under
Order XXV rule- 1 sub-rule 1. The Calcutta High Court has held as under:-
7............. I am unable to accept the contention of Mr. Chakraborty. The real
purpose and object of the Proviso to Order 25, Rule 1, Sub-rule (1) of C.P.C. is
to protect the defendant in case the decision goes against the plaintiff who
resides outside India and does not have any immovable property within India.
In that case the defendant will not be able to recover his costs. Hence the
proviso has been made mandatory. Rule 1, Sub-rule (1) gives the discretionary
power to Court to order for security for costs considering the facts and
circumstances of the case and after recording the reasons therefor in all cases
excepting the case covered by the proviso. In MANU/SC/0387/1985 : (1985) 1
SCC 591 para-43, the Supreme Court has shown, how a proviso can be
construed. It can qualify or except certain provisions from the main enactment.
A proviso can also entirely change the very concept of the intendment by
introducing a mandatory provision in order to make the enactment workable as
will be evident from the manner of construction shown in (1) and (2) of para
43 of MANU/SC/0387/1985 : (1985) 1 SCC 591 Craies on Statute Law, 17th
Edn. page 219 stated as follows:-
But sections, though framed as provisos upon preceding section, may
exceptionally contain matter which is in substance a fresh enactment,
adding to and not merely qualifying what goes before.
This observation applies in full force to the proviso under consideration. This
proviso is not an extension of the provisions contained in Rule 1, Sub-rule (1)
of Order 25 and has not been enacted for keeping Court's discretion unfettered.
If that was the intention of the legislature, then there was no necessity of
introducing this proviso at all. This proviso has been enacted for excluding the
situation contemplated therein from the main enactment by making it
mandatory in order to fulfil the very concept of the intendment of the main
enactment and to make it workable. As a matter of fact this proviso should be
construed in the manner as if in substance it is a fresh enactment making it
mandatory for the Court to direct the plaintiff to furnish security in all cases
where the requirements of the proviso are fulfilled with the view to make the
enactment effective. This proviso can also be construed as an exception to the
preceding portion of the enactment. In this connection the 1st and 2nd method
of construction as given in MANU/SC/0387/1985 : (1985) 1 SCC 591 is worth
noticing. I have carefully gone through the proviso and has given my anxious
thought before coming to this conclusion that this proviso is a mandatory
provision. Considering that all the plaintiffs are foreign companies having their
respective registered office outside India and that they have no immoveable
property in India, the facts of this case fulfil all the requirements of the proviso
to Order 25, Rule 1, Sub-rule (1) and as such the plaintiffs must furnish
security for costs.
(emphasis supplied)
Mr. Pratap also relied upon the judgment of the Apex Court in the matter of
MANU/SC/0450/2005 : (2005) 6 SCC 344 Salem Advocate Bar Association T.N. Vs.

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Union of India and in the matter of MANU/SC/0424/2010 : (2010) 8 SCC 1 Vinod Seth
Vs. Devinder Bajaj.
9. Per contra, the stand of the plaintiff is that in the affidavit in support, the defendant
has not voiced an apprehension that the plaintiff will not honour an order for cost and
therefore, the defendant has not made out a case for the court to exercise its discretion
and hence the court should not direct the plaintiff to provide security for cost. The
notice of motion taken out by the defendant is precisely for this reason. They are asking
for security for costs because they apprehend the plaintiff will not honour an order for
cost. There is no reason to take out this notice of motion otherwise. Moreover, the
Order 25 Rule 1(i) provides that "the Court may either of its own motion or on the
application of any defendant". Therefore, there is no need to express any such
apprehension. In the affidavit in support it is also alleged that the claim in the suit is
false, the plaintiff had suppressed material facts, the receipt of substantial payments
were not disclosed, the suit is bound to fail etc. This submission of the plaintiff's
counsel, therefore, is unacceptable.
10. The plaintiff has also contested (a) the accuracy of break up of cost in the affidavit
in support and (b) also submitted that the defendant has not explained as to why it
needs 3 witnesses and has not explained the role of each of the witness to be played in
the trial. I shall deal with these two points later.
11. Mr. Ashwin Shankar also submitted that the party who decides to apply for security
for cost must do it promptly. He submitted that the suit was filed in 2008, security was
furnished in 2008 and today after almost six years the defendant has taken out this
Motion for security for cost. He relied upon the judgment of the High Court of Calcutta
in the matter of MANU/WB/0165/1929 : AIR 1930 CAL 520 Sachindra Nath Dutt Vs.
Secretary of State for India and Ors. in support of his submission. I am unable to accept
this proposition particularly in the facts and circumstances of this matter. Only now has
the matter started and no sooner the preliminary issues were framed, the defendant has
taken out an application for security for cost. Moreover, in the Sachindra Nath Dutt
judgment (supra) it is not even clear whether the application was under order XXV of
CPC or not. The parties therein also are Indian parties and nobody had even appeared
for the respondents. Moreover, order XXV rule 1 provides "at any stage of a suit, the
Court may, either of its own motion or on the application of any defendant............. ".
Since the CPC itself provides that such an order for security for cost could be made at
any stage, either by the court on its own motion or on the application of any defendant,
I am not inclined to accept the submission of the plaintiff's counsel that there has been
a delay on the part of the defendant in taking out this application.
1 2 . Mr. Ashwin Shankar further submitted that the order of security for cost is not
mandatory but discretionary. He relied upon the judgment of the Delhi High Court in the
matter of MANU/DE/0332/2013 : (2013) ILR 2 Del 1018 Intertoll Ics Cecons. O & M Co.
Pvt. Ltd., Vs. National Highways Authority of India. He submitted that the Delhi High
Court has observed in paragraph-36 as under:-
................. It is clear from the said provision that it is not a mandatory
provision that in every case of such a nature the court must direct the plaintiff
to furnish security for costs.........
The said judgment is not applicable in this case in as much as there both the parties
were Indian parties. The plaintiff was an Indian company whereas in the present case
the plaintiff is not an Indian company. By Reading Order XXV, it is quite clear that in all

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cases, in case of the plaintiff residing out of India, the court shall direct the plaintiff to
furnish security for cost where the plaintiff also does not have any assets, immovable
property within India. As held in Revlon Inc. (supra) with which I am in total
agreement, the proviso in Order XXV Rule (1) sub-rule (1), should be construed in the
manner as if in substance it is a fresh enactment making it mandatory for the court to
direct the plaintiff to furnish security in all cases where the requirements are fulfilled
with the view to make the enactment effective. The proviso is a mandatory provision.
Reading order XXV itself shows that in cases where the plaintiff is a company in India
then it is not a mandatory provision that in every case of such a nature the Court must
direct the plaintiff to furnish security for cost.
13. Mr. Ashwin Shankar also submitted that assuming for the sake of argument, the
court is inclined to accept the submissions of the defendant that it is mandatory in every
case where the plaintiff is residing out of India and there are no assets or immovable
property within India security for cost is required to be furnished, then the cost that
would be provided should strictly be in conformity with the rules in this regard framed
by the Bombay High Court (O.S.) Rules. He relied upon the judgment of the Apex Court
in the matter of MANU/SC/1285/2011 : (2012) 1 SCC 455 Sanjeev Kumar Jain Vs.
Raghubir Saran Charitable Trust & Ors., where the Apex Court while agreeing that the
cost awarded should be realistic and practical also held that the cost to be awarded
should be in accordance with the rules. The Apex Court has also appreciated the fact
that the cost prescribed under the High Court Rules are not realistic in the present
scenario but unless the rules are modified, the cost cannot be awarded in excess of
what the rules prescribed. According to Mr. Ashwin Shankar Rule 606 of the Bombay
High Court (O.S.) rules prescribed a maximum of Rs. 25,000/- and the security for cost
should not exceed this amount.
14. Mr. Shankar also submitted that rule 183 of the Bombay High Court (O.S.) Rules
provides for traveling allowance and other allowance to be given to a witness. He
submitted that under the said rule, for person who falls under class-I itself, the witness
is entitled to only Rs. 20 for travel by rail or steamer fare and for local conveyance or
actual taxi or horse carriage fare each way from the place where he is put up to the
place where he is required to go to give evidence. Though he agreed that the amount of
Rs. 2 lakhs per witness is reasonable, he submitted that rules only provide for these
sums and the court should consider these sums while determining the security for cost
to be provided.
1 5 . It is true that rule 183 prescribes the allowance to be given. The allowance
prescribed, in present circumstances, is totally unrealistic. Therefore, while framing the
rules, further change in circumstances was taken into account and that is why note 8 of
rule 183 was included. Note 8 reads as under:-
Note 8-In cases not fully or clearly covered by this scale or in cases where the
Judge thinks special considerations should prevail the Judge shall award such
amount for travelling allowance, allowance and local conveyance allowance as
he deems proper.
In this case the plaintiff is based in Korea. The defendant is based in Norway. The cause
of action arose outside India. This court exercised jurisdiction because defendant no. 1-
vessel was within the territorial jurisdiction of this court. Certainly witnesses have to
travel from outside India to Bombay to give evidence in the matter. Mr. Pratap says the
witnesses will have to travel from Norway to Mumbai. The witnesses will also have to
be lodged somewhere. Boarding expenses will have to be incurred. These would entail

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substantial costs and certainly these are special considerations.
16. In response to Mr. Shankar's submission, Mr. Pratap submitted that Rs. 25,000/- as
provided under Section 606 is only relating to Advocates' fees. Rule 606 reads as
under:-
606. Computation of Advocate's fee-Where costs are awarded to a party in any
proceeding in the High Court the amount of the Advocate's fee to be taxed in
the bill of costs recoverable by such party, if represented by an Advocate from
his adversary, shall be computed in accordance with the rules herein below:-
(1) In the following matters, viz.:-
(a) Suits which are decided on merits.
...................... subject to a maximum of Rs. 25,000/-
17. When a party seeks cost it does not refer to only Advocates' fees. The cost will
include (a) the court fees paid; (b) process fees spent; (c) expenses of witnesses (d)
Advocates' fees and (e) such other amount as may be allowable under the rules as may
be directed by the court as cost. The cost should provide adequate indemnity to the
successful litigants for the expenditure incurred by him for the litigation. The Court
should award realistic actual cost for litigation as contrasted from nominal, or fixed or
unrealistic cost because this would persuade the litigants to settle many of the cases
before it comes up for trial. At the same time the cost should not come in the way to
obstruct the courts and justice but at the same time it should not be so low and
unrealistic that litigants end up gambling. In Salem Advocate Bar Association Judgment
(Supra), in paragraphs 36 & 37 the Court has held as under:-
36. Section 35 of the Code deals with the award of cost and Section 35A with
the award of compensatory costs in respect of false or vexatious claims or
defences. Section 95 deals with grant of compensation for obtaining arrest,
attachment or injunction on insufficient grounds. These three sections deal with
three different aspects of the award of costs and compensation. Under Section
95 cost can be awarded upto Rs. 50,000/- and under Section 35A, the costs
awardable are upto Rs. 3,000/-. Section 35B provides for the award of cost for
causing delay where a party fails to take the step which he was required by or
under the Code to take or obtains an adjournment for taking such step or for
producing evidence or on any other ground. In circumstances mentioned in
Section 35-B an order may be made requiring the defaulting party to pay to
other party such costs as would, in the opinion of the court, be reasonably
sufficient to reimburse the other party in respect of the expenses incurred by
him in attending the court on that date, and payment of such costs, on the date
next following the date of such order, shall be a condition precedent to the
further prosecution of the suit or the defence. Section 35 postulates that the
cost shall follow the event and if not, reasons thereof shall be stated. The
award of the cost of the suit is in the discretion of the Court. In Sections 35 and
35B, there is no upper limit of amount of cost awardable.
37. Judicial notice can be taken of the fact that many unscrupulous parties take
advantage of the fact that either the costs are not awarded or nominal costs are
awarded against the unsuccessful party. Unfortunately, it has become a practice
to direct parties to bear their own costs. In a large number of cases, such an
order is passed despite Section 35(2) of the Code. Such a practice also

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 encourages the filing of frivolous suits. It also leads to taking up of frivolous
defences. Further wherever costs are awarded, ordinarily the same are not
realistic and are nominal. When Section 35(2) provides for cost to follow the
event, it is implicit that the costs have to be those which are reasonably
incurred by a successful party except in those cases where the Court in its
discretion may direct otherwise by recording reasons thereof. The costs have to
be actual reasonable costs 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, regulations or practice direction so as
to provide appropriate guidelines for the subordinate courts to follow.
18. The Law Commission of India in its Report No. 240 of May-2012, relied upon by Mr.
Pratap, has observed that even after the observation made by the Apex Court in the
Salem Advocate Bar Association matter, at para-37, not much progress has been made
in the revision of relevant rules and regulations. The Law Commission, after considering
the same judgments that have been relied upon in this matter, has also observed that
so far as the High Court Rules governing taxation of cost and Advocates' fees are
concerned:
.......... (i) some or most of the rules are outdated; (ii) they are couched in
vague and complex language, lacking in clarity; and (iii) the scales of
advocate's fee as well as other elements of costs are quite low judged by the
present day standards. There is every need to undertake thorough revision of
the rules by the High Courts. We have merely indicated certain aspects broadly
for drawing the attention of Hon'ble High Courts as it is not proper to suggest
uniform rules applicable to the entire country.
19. Having considered order XXV, Rule 1 of CPC and the judgment in the matter of
Revlon Inc. (Supra), I have come to the conclusion that the proviso in Rule 1 is a
mandatory provision. Considering that the plaintiff is a foreign company, having its
registered office outside India and that they have no immovable property in India or any
other assets in India, the facts of this case fulfills the requirement of proviso of Order
XXV sub-rule 1 and as such the plaintiff must furnish security for cost.
2 0 . The cost to be awarded are in the nature of incidental damages allowed to
indemnify a party against the expense of successfully vindicating its rights in court and
consequently the party to blame pays costs to the party without fault. There are other
provisions in the CPC other than order XXV where cost could be provided. Section 35 of
the Code deals with award of costs and incident to all suits shall be in the discretion of
the Court and only where costs are not awarded then the Court shall state its reasons in
writing. In fact Section 35 also provides that the fact that the court has no jurisdiction
to try the suit shall be no bar to the exercise of such powers. Then section 35(A)
provides for award of compensatory cost in respect of false or vexatious claim or
defences. Section 35(B) provides for the award of cost for causing delay where the
party fail to take steps which he was required by or under the Code to take or obtains
an adjournment for taking such steps or for producing evidence or on any other ground
and then section 95 which provides for grant of compensation for obtaining arrest,
attachment or injunction on insufficient grounds. Though under section 95 there is a
cap of Rs. 50,000 and under Section 35(A) the cost awardable is upto Rs. 3000/-, under
Section 35 and section 35(B) there is no upper limit of amount of cost awardable and
the amount of cost to be awarded is at the discretion of the court.

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2 1 . Now comes the next stage of what is the quantum for which the plaintiff must
furnish security for cost. In paragraph-7 of the affidavit in reply, the defendant has
given the break up as under:-

22 (a) As regards items 1 & 2, in view of the Apex Court Judgments in the matters of
Sanjeev Kumar Jain (supra) and vinod Seth (supra) I am inclined to follow the
provisions of Rule 606 of Bombay High Court (O.S.) Rules. Since the rules provides
only for Rs. 25,000/- towards Advocates' fees, the plaintiffs have to provide security
only in the sum of Rs. 25,000/-.
(b) As regards item 3, the Counsel for the plaintiff submitted that the defendant has not
explained as to why he required 3 witnesses to depose in the matter though he agreed
that Rs. 2 lakhs per witness is a reasonable amount. In my view, it is not the business
of any party to decide how many witnesses the other side should produce. They may
have their own strategy. In my view, there is no necessity for any party to explain why
each of the witness is required unless the witness being called after the party closes its
case or as a rebuttal witness. Therefore, I am inclined to direct the plaintiff to provide
security in the sum of Rs. 6 lakhs for the 3 witnesses since Mr. Shankar also agreed that
Rs. 2 lakhs per witness is reasonable. Certainly if the defendant does not lead evidence
of 3 witnesses and leads evidence of only 1 or 2 witness, it will be open for the plaintiff
to apply for release of proportionate security. Of course, that will be decided when an
application is taken out and on the circumstances then prevailing.
(c) As regards item-4, in my view, it is a reasonable amount taking into account that
expenses to be incurred towards fees of the Commissioner, hiring of venue and
secretarial assistance.
23. In the circumstances, the plaintiff is directed to furnish security in the sum of Rs.
7,25,000/- within three weeks from today. The security should be either by way of cash
deposit to be made with the Prothonotary & Senior Master, High Court, Bombay or by
way of a bank guarantee issued by the Nationalized bank based in Mumbai in favour of
the Prothonotary & Senior Master, High Court, Bombay. Mr. Pratap prayed for prayer
clause-(b) also to be granted. The effect of failure to furnish security is provided in
order XXV rule 2 of CPC. The effect automatically follows. Should the plaintiff fail to

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furnish the security within the time fixed above, the suit shall stand dismissed.
The Notice of Motion is accordingly disposed of. Suit to be listed on 2nd May 2014 "for
directions." Liberty to apply.
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