2009 (1) TMI 547 - SC - Indian Laws

Recipient of the costs - Held that - SLP dismissed. While levy of an uniform token sum as costs payable to the Legal Service Authority/Committee by way of a deterrent fine in regard to non-compliance with procedural requirements delays in re-presentation of papers etc. may not be objectionable levy of huge amounts as costs in selected cases made payable to the Legal Service Authorities may invite adverse comments and evoke hostility to legal services in general. We have also come across cases of costs being levied and made payable to some non-party charitable organizations. Levy of such costs should be avoided. The Delhi High Court Legal Services Committee when it receives the sum of Rs. Two Lakhs as costs from the parties shall make over the same to the state government as directed in para 38 of the impugned judgment. Let a copy of this order be sent to the Delhi Legal Services Committee for compliance.

Summary

Issues:
1. Award of exemplary costs by High Court in a civil suit.
2. Applicability and limitations of Sections 35 and 35A of the Code of Civil Procedure.
3. Discretion of courts in awarding costs and inherent power of High Court.
4. Recipient of costs and implications of directing payment to a non-state entity.

Analysis:
1. The High Court imposed exemplary costs of Rs. 1,00,000 on both the petitioner and respondents in a civil suit for specific performance. The petitioner challenged the costs levied, arguing that they exceeded the limits set by Sections 35 and 35A of the Code of Civil Procedure. The courts found both parties guilty of dishonest conduct and decided to levy heavy costs instead of prosecution due to the burden of pending cases.

2. Under Section 35 of the Code, costs are discretionary but subject to prescribed conditions and limitations. Section 35A limits compensatory costs for vexatious claims to Rs. 3,000. The primary purpose of costs is to recompense a litigant for expenses incurred in defending their rights. The debate arose whether costs can be awarded to the state in a private litigation where court fees have already been paid, emphasizing the need for caution in expanding cost boundaries.

3. The court discussed the inherent power of the High Court to award costs, noting that discretion is subject to prescribed conditions and limitations. The court should not exceed or overlook the limitations set by the Code in civil litigation matters. While the court did not interfere with the costs imposed in this case, it highlighted the unsatisfactory nature of the current cost system and the need for a more realistic approach.

4. The High Court directed the costs to be paid to the Delhi High Court Legal Services Committee, a statutory authority, despite stating that costs should be paid to the state for judicial infrastructure. The Supreme Court emphasized that costs should not be levied to create funds for non-state entities, like legal service authorities or charitable organizations. The Court directed the Legal Services Committee to transfer the costs to the state government, underscoring the importance of clarity in directing cost payments.

This judgment raises critical issues regarding the imposition of exemplary costs, the interpretation of Sections 35 and 35A of the Code of Civil Procedure, the discretion of courts in awarding costs, and the recipient of costs. It emphasizes the need for a more realistic approach to costs in civil litigation and the importance of directing payments to the appropriate entities to maintain transparency and avoid adverse perceptions.