Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION [CIVIL] NOS.30991-30992/2008

ASHOK KUMAR MITTAL PETITIONER VS. RAM KUMAR GUPTA & ANR.       RESPONDENTS

O R D E R

R. V. Raveendran J.,  

Mrs.  Amita  Gupta,  learned  counsel,  appears  for respondents and waives notice.

2. The petitioner filed a suit for specific performance of an alleged agreement of sale dated 15.7.2003. The trial court  dismissed  the  suit  by  judgment  and  decree  dated 19.5.2008. The High Court dismissed the petitioner’s appeal on  29.9.2008.  Both  courts  held  that  petitioner  had  not approached  the  court  with  clean  hands  and  that  he  had failed to prove any concluded contract for sale. High Court found that the defendants in the suit were also not above

board  in  their  conduct.  It  found  that  both  sides  were guilty  of  having  lied  on  oath  and  deserved  to  be prosecuted. On the ground that courts were over-burdened with  litigation,  the  High  Court  decided  that  instead  of directing prosecution, heavy costs should be levied on both petitioner and respondents “to be paid to the state which spends money on providing the judicial infrastructure.” It then proceeded to impose exemplary costs of Rs.1,00,000/- on the petitioner and Rs.1,00,000/- on the respondents, and directed that the costs should be deposited with the Delhi High Court Legal Services Committee.

3. Feeling aggrieved by the dismissal of his appeal, the petitioner is before this Court. On merits, we find that the concurrent findings of the trial court and the High Court do not warrant interference and therefore this is not a fit case for grant of leave.  

4. The learned counsel for the petitioner submitted that levying costs of Rupees one lakh against the petitioner was not warranted. He submitted that as the appeal before the High Court arose out of a civil suit, costs were governed by  section  35  and  35A  of  the  Code  of  Civil  Procedure

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(‘Code’ for short) and cannot exceed what is leviable under those provisions.  

5. Under  section  35  of  the  Code,  award  of  costs  is discretionary but subject to the conditions and limitations as may be prescribed and the provisions of any law for the time being in force. Under section 35A, compensatory costs for  vexatious  claims  and  defences  may  not  exceed  to Rs.3,000/-.  Further  the  primary  object  of  levying  costs under sections 35 and 35A CPC, is to recompense a litigant for the expense incurred by him in litigation to vindicate or defend his right. It is therefore payable by a losing litigant to his successful opponent. When an appellant or a plaintiff  has  already  paid  the  prescribed  court  fee  in regard to the appeal or suit, to the state at the time of institution,  it  is  debatable  whether  any  costs  can  be awarded to the state by way of penalty, in a litigation between two private parties. Courts will have to act with care while opening new frontiers.  

6. One view has been that the provisions of sections 35 and 35A CPC do not in any way affect the wide discretion vested in by High Court in exercise of its inherent power to award costs in the interests of justice in appropriate

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civil cases. The more sound view however is that though award of costs is within the discretion of the court, it is subject  to  such  conditions  and  limitations  as  may  be prescribed and subject to the provisions of any law for the time being in force; and where the issue is governed and regulated by sections 35 and 35A of the Code, there is no question  of  exercising  inherent  power  contrary  to  the specific provisions of the Code. Further, the provisions of section  35A  seems to suggest  that even where  a suit or litigation is vexatious, the outer limit of exemplary costs that can be awarded, in addition to regular costs, shall not  exceed  Rs.3000/-. It is  also to be  noted that huge costs of the order of Rs. Fifty thousand or Rs.One lakh, are normally awarded only in writ proceedings and public interest litigations, and not in civil litigation to which sections  35  and  35A  are  applicable.  The  principles  and practices relating to levy of costs in administrative law matters  cannot  be  imported  mechanically  in  relation  to civil litigation governed by the Code.  

7. The present system of levying meagre costs in civil matters (or no costs in some matters), no doubt, is wholly unsatisfactory and does not act as a deterrent to vexatious or luxury litigation borne out of ego or greed, or resorted

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to  as  a  ‘buying-time’  tactic.  More  realistic  approach relating to costs may be the need of the hour. Whether we should  adopt  suitably,  the  western  models  of  awarding actual and more realistic costs is a matter that requires to be debated and should engage the urgent attention of the Law Commission of India.   

8. We do not however propose to examine or decide the above issues here, except to observe that courts should not exceed or overlook the limitations placed by the Code with reference to costs in civil litigation. In so far this case is concerned, even though the order relating to costs may not strictly be correct, we do not propose to interfere with  the  same,  in  exercise  of  our  jurisdiction  under Article  136,  as  the  order  has  not  resulted  in  any injustice. It is stated that the respondents have already deposited the costs. The time for deposit of costs by the petitioner  is  extended  at  his  request  by  a  month  from today.             

9. We would however like to refer to two aspects of the order of the High Court relating to costs. The first is, whether a court, having reached a conclusion that a party deserves to be prosecuted for perjury, should let him off

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with what it considers to be a stiff penalty by way of costs,  on  the  ground  that  courts  are  overburdened  with work.  We  propose  to  leave  open  for  the  present,  this question involving moral and ethical issues.    10. The  second  aspect  relates  to  the  recipient  of  the costs. In para 38 of the impugned judgment, the High Court specifically  stated  that  it  had  decided  to  saddle  the parties  with  heavy costs to  be paid to  the state which spends money on judicial infrastructure. Having said so, in para 39, the High Court directed that the costs should be paid to the Delhi High Court Legal Services Committee. The High Court Legal Services Committee, a statutory authority under the Legal Services Authorities Act, 1987, is not the ‘state’  that  spends  money  on  providing  judicial infrastructure,  referred  in  the  earlier  para.  Once  the Court  held  that  costs  had  to  be  paid  to  the  state,  it should have directed payment of the costs to the state and not the High Court Legal Services Committee. No litigant should be made to feel that heavy costs are being levied in some cases by Judges to create a corpus or expense fund for the High Court Legal Services Committee or the State Legal Services Authority. While levy of an uniform token sum, as costs payable to the Legal Service Authority/Committee by

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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.  

11. 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.  

12. With the above said observations regarding costs, the special leave petitions are dismissed.

_________________J. (R V Raveendran)

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New Delhi; _________________J. January 9, 2009. (J M Panchal)

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