ASHOK KUMAR MITTALversusRAM KUMAR GUPTA & ANR.

                              [2009] 1 S.C.R. 125


'"'                       ASHOK KUMAR MITTAL                                A
                                       V.
                      RAM KUMAR GUPTA & ANR.
            (Special Leave Petition (Civil) Nos. 30991-92/2008)
                              JANUARY 9, 2009
                                                                            8
             [R.V. RAVEENDRAN AND J.M. PANCHAL, JJ.)

             COSTS:

              Exemplary costs - Imposition of- Recipient- High Court        c
        in an appeal arising out of a suit, imposed costs of Rs. 1 lac
        on each side finding them guilty of false deposition, and
        directed costs to be deposited with High Court Legal Services
         Committee - HELD: Courts should not exceed the limitations
~
        placed by CPC in this regard - Principles and practice relating     0
        to administrative law matters cannot be imported
        mechanically to civil litigation governed by the Code - Levy
        of huge costs in selected matters made payable to legal
        Services Authorities or non-party charitable organizations
        should be avoided - Though the order of High Court
                                                                            E
        imposing costs, in view of ss. 35 and 35-A CPC, may not
        strictly be correct, the same is not interfered with in exercise
        ofjurisdiction under Article 136 of the Constitution - However,
....    Legal Services Authority of High Court when it receives the
        costs from the parties, shall make over the same to State
        Government - Awarding actual and more realistic costs so
                                                                            F
        that it may work as a deterrent to vexatious or luxury litigation
        is a matter that requires urgent attention of Law Commission
        of India - Code of Civil Procedure, 1908 - ss. 35 and 35-A -
        Constitution of India, 1950 - Article 136.
                                                                            G
~
             In an appeal, the High Court of Delhi, while upholding
         the judgment and decree passed by the trial court
       . dismissing a suit for specific performance of an
         agreement of sale, held that both the sides were guilty of
                                     125                                    H
    126        SUPREME COURT REPORTS             [2009] 1 S.C.R.


A having lied on oath and deserved to be prosecuted. It,
  however, observed that since courts were overburdened
  with litigation, instead of directing prosecution, heavy
  costs should be levied on both sides "to be paid to the
  State which spends money on providing the judicial
B infrastructure", and imposed exemplary costs of
  Rs.1,00,000/ - to be paid by each side. But, the amounts
  were directed to be deposited with the Delhi High Court
  Legal Services Committee. Aggrieved, the plaintiff filed
  the petitions for special leave to appeal.
c         Dismissing the petitions, the Court

        HELD:1. On merits, 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. [Para
D 3) (128-F)

       2.1. As regards the costs, courts should not exceed
  or overlook the limitations placed by the Code of Civil
  Procedure, 1908 with reference to costs in civil litigation.
E 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. In so far the instant case is concerned, keeping in
  view the provisions of ss. 35 and 35-A of the Code, even
  though the order relating to costs may not strictly be
F correct, the same is not interfered with, in exercise of
  jurisdiction under Article 136 of the Constitution of India,
  as the order has not resulted in any injustice. [Para 6 and
  8) (129-G-H; 130-C-D]

G      2.2. On the aspect of the recipient of the costs, once
  the High Court held that costs had to be paid to the State,
  it should not have directed payment of the costs to the
  High Court Legal Services Committee, which being a
  statutory authority under the Legal Services Authorities
H Act, 1987, is not the 'State' that spends money on
         ASHOK KUMAR MITTAL v. RAM KUMAR GUPTA &ANR.              127


         providing judicial infrastructure. Levy of huge amounts         A
         as costs in selected cases, made payable to Legal
         Services Authorities, may invite adverse comments and
         evoke hostility to legal services in general. The Court has
         also come across cases of costs being levied and made
         payable to some non-party charitable organizations. Levy        B
         of such costs should be avoided. Therefore, the Delhi
         High Court Legal Services Committee when it receives
    ~-
         the sum of Rs.2 lacs as costs from the parties, shall make
)        over the same to the State Government as directed in
         para 38 of the judgment of the High Court. [Para 10 and         c
         11] (130-G-H; 131-A-B-E]

              2.3. 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,       D
         or resorted to as a 'buying-time' tactic. More realistic
         approach relating to costs may be the need of the hour.
         Whether courts should adopt suitably, western models of
         awarding actual and more realistic costs is a matter that
         requires to be debated and should engage the urgent             E
         attention of the Law Commission of India. [Para 7] [130-
         A-8]

              CIVIL APPELLATE JURISDICTION : Special Leave
         Petition (Civil) Nos. 30991-92/2008.                            F
             From the Judgment and final Order dated 29.9.2008 and
         31.10.2008 of the High Court of Delhi at New Delhi in R.F.A.
         No. 250 of 2008 respectively.

              V. Shekhar, S. Ganesh, Z. Sherpa and KL. Janjani for the   G

    ·-   Petitioner.

             Amar Dave and Amit Gupta for the Respondents.

             The Order of the Court was delivered:
                                                                         H
    128        SUPREME COURT REPORTS                (2009] 1 S.C.R.


A                                ORDER

        R.V. RAVEENDRAN J. 1. Mrs. Arnita Gupta, learned
    counsel, appears for respondents and waives notice.

         2. The petitioner filed a suit for specific performance of an
B   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           \.,
C   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
D   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
E   should be deposited with the Delhi High Court Legal Services
    Committee.

        3. Feeling aggrieved by the dismissal cf 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
F 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
G 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 ('Code' for short)
  and cannot exceed what is leviable under those provisions.

          5. Under section 35 of the Code, award of costs is
H
 ASHOK KUMAR MITTAL v. RAM KUMAR GUPTA & ANR. 129
             [R.V. RAVEENDRAN, J.]

discretionary but subject to the conditions and limitations as          A
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                B
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        c
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                D
vested in by High Court in exercise of its inherent power to
award costs in the interests of justice in appropriate 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                 E
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              F
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,       G
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.
                                                                        H
    130        SUPREME COURT REPORTS                 [2009) 1 S.C.R.


A      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 to as a
  'buying-time' tactic. More realistic approach relating to costs
B 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
c 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,
D 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.
E
        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 with what it considers
F 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
G 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    f
  directed that the costs should be paid to the Delhi High Court
  Legal Services Committee. The High Court Legal Services
H Committee, a statutory authority under the Legal Services
 ASHOK KUMAR MITIAL v. RAM KUMAR GUPTA & ANR. 131
             [RV. RAVEENDRAN, J.]
Authorities Act, 1987, is not the 'state' that spends money on          A
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              B
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 way of a deterrent
fine, in regard to non-compliance with procedural requirements,         c
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           D
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            E
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.                                  F

R.P.                                         Petitions dismissed.