Code of Civil Procedure, 1908 (CPC)
Costs under the CPC: Sections 35, 35A, 35B and Order XX-A
Litigation costs money, and the Code decides who bears it. Section 35 of the Code of Civil Procedure, 1908 gives the court a discretion over costs and lays down the general rule that costs follow the event. Section 35A allows compensatory costs against a party who makes a false or vexatious claim or defence. Section 35B attaches costs to delay, and makes their payment a condition of proceeding further. Order XX-A lists the specific items that may be provided for. These notes cover all four, together with the far stronger costs regime the Commercial Courts Act, 2015 has installed for commercial suits.
1. Section 35: The General Rule
§ Section 35, CPC 1908 (in substance, as generally applicable) (1) Subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the time being in force, the costs of and incident to all suits shall be in the discretion of the Court, and the Court shall have full power to determine by whom or out of what property and to what extent such costs are to be paid, and to give all necessary directions for the purposes aforesaid. The fact that the Court has no jurisdiction to try the suit shall be no bar to the exercise of such powers. (2) Where the Court directs that any costs shall not follow the event, the Court shall state its reasons in writing. (3) The Court may give interest on costs at any rate not exceeding six per cent per annum, and such interest shall be added to the costs and shall be recoverable as such. |
§ Costs follow the event The general rule is that the unsuccessful party pays the costs of the successful one. The rule is not absolute: costs are in the court's discretion, and it may depart from the rule. But the discretion is judicial, not arbitrary. Sub-section (2) requires the court to state its reasons in writing where it directs that costs shall not follow the event, so a departure must be explained. The grounds on which courts depart include the successful party's own conduct in prolonging the litigation, success on only part of the claim, the novelty or difficulty of the question, and litigation between close relations or on a public question. |
Two further points on Section 35. The want of jurisdiction to try the suit is no bar to awarding costs, so a court that returns or rejects a plaint may still make a costs order. And by sub-section (3) the court may award interest on costs at a rate not exceeding six per cent per annum, which is added to the costs and recovered as part of them.
2. Section 35A: Compensatory Costs for False or Vexatious Claims
§ Section 35A, CPC 1908 (in substance) (1) Where 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 the claim or defence or any part of it is, as against the objector, false or vexatious to the knowledge of the party by whom it has been put forward, and if thereafter, as against the objector, such claim or defence is disallowed, abandoned or withdrawn in whole or in part, the Court, if it so thinks fit, may, after recording its reasons for holding such claim or defence to be false or vexatious, make an order for the payment to the objector by the party by whom such claim or defence has been put forward, of costs by way of compensation. (2) No Court shall make any such order for the payment of an amount exceeding three thousand rupees or exceeding the limits of its pecuniary jurisdiction, whichever amount is less. (4) An order under this section shall be final and no further suit for damages in respect of such false or vexatious claim or defence shall lie. |
The four conditions
i. An objection must be taken. The party affected must object to the claim or defence on the ground that it is false or vexatious, and must do so during the proceeding, not afterwards.
ii. Knowledge. The claim or defence must be false or vexatious to the knowledge of the party putting it forward; a claim that merely fails is not enough.
iii. Disallowance, abandonment or withdrawal. The claim or defence must thereafter be disallowed, abandoned or withdrawn, in whole or in part, as against the objector.
iv. Reasons recorded. The court must record its reasons for holding the claim or defence to be false or vexatious before making the order.
§ The ceiling and its consequence The cap of three thousand rupees in sub-section (2) was fixed by the 1976 amendment and has not been revised. It is today so far below the real cost of defending a false claim that the section is, in practice, of limited deterrent value. The practical answer has been found elsewhere: in realistic costs under Section 35, which the Supreme Court in Salem Advocate Bar Association v. Union of India (II), (2005) 6 SCC 344 urged courts to award, and in the costs-follow-the-event regime for commercial suits under the Commercial Courts Act, 2015. Note sub-section (4): an order under Section 35A is final, and no further suit for damages lies in respect of the same false or vexatious claim or defence. |
3. Section 35B: Costs for Causing Delay
§ Section 35B, CPC 1908 (in substance) (1) If, on any date fixed for the hearing of a suit or for taking any step therein, a party to the suit — (a) fails to take the step which he was required by or under this Code to take on that date, or (b) obtains an adjournment for taking such step or for producing evidence or on any other ground, the Court may, for reasons to be recorded, make an order requiring such party to pay to the 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 — (a) the suit by the plaintiff, where the plaintiff was ordered to pay such costs, (b) the defence by the defendant, where the defendant was ordered to pay such costs. Explanation. The costs ordered to be paid under sub-section (1) shall not be included in the costs awarded in the decree passed in the suit; but they shall not be deemed to be costs of the day for the purposes of any other provision of law. (2) The costs, ordered to be paid under sub-section (1), shall not, if paid, be included in the costs awarded in the decree passed in the suit; but if such costs are not paid, a separate order shall be drawn up indicating the amount of such costs and the names and addresses of the persons by whom such costs are payable and the order so drawn up shall be executable against such persons. |
Section 35B is the sharpest costs provision in the Code, for three reasons. Its measure is the actual expense of attending court on the wasted day, not a nominal figure. Its sanction is conditional: payment on the next date is a condition precedent to the defaulting party's further prosecution of the suit or defence, so non-payment stops the case rather than merely adding to the bill at the end. And the costs are separately executable under sub-section (2) if they are not paid. The provision works alongside Order XVII Rule 1(2), under which the court shall make an order as to the costs occasioned by every adjournment.
4. Order XX-A: Costs in Respect of Specific Items
§ Order XX-A Rule 1 Without prejudice to the generality of the court's powers, the court may award costs in respect of: • Expenditure incurred for the giving of any notice required to be given by law before the institution of the suit; • Expenditure incurred on any notice which, though not required to be given by law, has been given by any party to the suit before the institution of the suit, where the court holds that such notice was necessary; • Expenditure incurred on the typing, writing or printing of pleadings filed by any party; • Charges paid by a party for inspection of the records of the Court for the purposes of the suit; • Expenditure incurred by a party for producing witnesses, even though not summoned through Court; and • In the case of appeals, charges incurred for obtaining copies of judgments and decrees which are required to be filed along with the memorandum of appeal. |
The Order, inserted by the Amendment Act of 1976, does not create a new power; it makes explicit that the court's general discretion under Section 35 extends to these ordinary and often substantial items, which had previously been the subject of doubt. Rule 2 provides that the award of costs under the Order is in the discretion of the court.
5. Realistic Costs and the Commercial Courts Regime
📖 Salem Advocate Bar Association v. Union of India (II), (2005) 6 SCC 344 Among the matters the Supreme Court addressed in settling the working of the 1999 and 2002 amendments was the practice of awarding nominal costs. The Court observed that the award of unrealistic costs is a principal reason why litigation is protracted and false claims are pursued: a party who knows that an unsuccessful defence will cost him little has every incentive to raise one, and the successful party is left out of pocket even after winning. The Court directed that costs should be realistic, reflecting the actual expenses reasonably incurred, including the costs of attending court, the fees of advocates and the expenses of witnesses, and emphasised that adjournments should carry costs commensurate with the loss caused. Rule: the general power in Section 35 is to be exercised so as to indemnify the successful party in substance, not by a token figure. This reasoning prepared the ground for the costs provisions of the Commercial Courts Act, 2015. |
§ Costs in commercial litigation For commercial disputes of a Specified Value, the Schedule to the Commercial Courts Act, 2015 substitutes a new Section 35. Its central rule is that the court has discretion as to costs, and the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party. Costs are defined to include the fees and expenses of witnesses, legal fees and expenses, and any other expenses incurred in connection with the proceedings. In deciding whether to depart from the general rule and in fixing the amount, the court considers the conduct of the parties, whether a party has succeeded on part of its case, whether any reasonable offer to settle was made and refused, and whether a party has raised an issue frivolously or caused unnecessary delay. The contrast to state in an answer: in an ordinary suit costs are discretionary with a general rule; in a commercial suit costs follow the event as a rule, are actual, and the refusal of a settlement offer is expressly relevant. |
6. The Four Provisions Compared
Provision | What it addresses | Measure and limit | Distinctive feature |
|---|---|---|---|
Section 35 | Costs of and incident to all suits | In the court's discretion; reasons in writing required where costs do not follow the event | The general rule that costs follow the event; interest on costs up to six per cent |
Section 35A | False or vexatious claims and defences | Compensatory costs, capped at three thousand rupees or the court's pecuniary limit, whichever is less | Requires an objection, knowledge of falsity, disallowance and recorded reasons; the order is final |
Section 35B | Delay: failure to take a step, or obtaining an adjournment | Costs sufficient to reimburse the other party's expenses of attending on that date | Payment is a condition precedent to further prosecution of the suit or defence, and is separately executable |
Order XX-A | Specific items of expenditure | In the court's discretion | Makes explicit that pre-suit notices, pleadings, inspection, witnesses and appeal copies are compensable |
7. Landmark Points on Costs
- Section 35(1) and (2). Costs are in the court's discretion, but reasons must be recorded in writing where costs are directed not to follow the event.
- Section 35A. Compensatory costs for a false or vexatious claim or defence, subject to four conditions and a ceiling of three thousand rupees; the order is final and bars a suit for damages.
- Section 35B. Costs of the day for delay, payment of which is a condition precedent to further prosecution of the suit or defence, and which are separately executable if unpaid.
- Salem Advocate Bar Association v. Union of India (II), (2005) 6 SCC 344. Costs must be realistic, indemnifying the successful party in substance rather than nominally.
- Commercial Courts Act, 2015, Schedule, recast Section 35. In commercial suits, costs follow the event as a general rule, include legal fees and witness expenses, and take account of conduct and refused settlement offers.
8. Frequently Asked Questions on Costs
What is the general rule as to costs under the CPC?
That costs follow the event, so the unsuccessful party pays the costs of the successful one. Costs are nevertheless in the court's discretion under Section 35, and where the court directs that costs shall not follow the event, it must state its reasons in writing.
What are compensatory costs under Section 35A?
Costs awarded to a party who objected that the claim or defence against him was false or vexatious to the knowledge of the party raising it, where that claim or defence is thereafter disallowed, abandoned or withdrawn. The court must record reasons, and the amount cannot exceed three thousand rupees or the court's pecuniary limit, whichever is less.
Can a suit for damages be filed after an order under Section 35A?
No. Sub-section (4) provides that an order under the section is final and that no further suit for damages in respect of the same false or vexatious claim or defence shall lie.
What does Section 35B provide?
That where a party fails to take a step required on a date fixed, or obtains an adjournment, the court may order him to pay the other party costs reasonably sufficient to reimburse the expenses of attending court on that date, and payment on the next date is a condition precedent to his further prosecution of the suit or defence.
Are Section 35B costs included in the decree?
No. If paid, they are not included in the costs awarded in the decree. If not paid, a separate order is drawn up stating the amount and the persons liable, and that order is executable against them.
What items can be awarded as costs under Order XX-A?
Expenditure on statutory pre-suit notices and on necessary non-statutory notices, on typing, writing or printing pleadings, charges for inspection of court records, expenditure on producing witnesses not summoned through the court, and in appeals the charges for obtaining copies of judgments and decrees.
How do costs work in commercial suits?
Under the recast Section 35 in the Schedule to the Commercial Courts Act, 2015, the general rule is that the unsuccessful party pays the costs of the successful party; costs include legal fees, witness expenses and other expenses of the proceedings; and the court considers conduct, partial success and any refused settlement offer in deciding the amount and whether to depart from the rule.
9. Related Topics in This CPC Series
- Section 34: Interest on Decrees
- Order XVII: Adjournments and the Three-Adjournment Rule
- Commercial Courts Act Amendments to the CPC
- Section 33 and Order XX: Judgment and Decree