Civil Procedure Code, 1908

Section 35 CPC - Costs in Civil Suits and Commercial Disputes

Section 35 of the Code of Civil Procedure, 1908 (CPC) empowers courts to decide who should bear the costs of civil litigation. Commercial disputes of specified value are subject to a distinct, more detailed costs framework introduced by the Commercial Courts Act, 2015.

Key distinction: The ordinary text of Section 35 applies generally to civil suits, subject to applicable law and rules. In qualifying commercial disputes, the substituted Section 35 under the Commercial Courts Act governs costs. The two versions should not be read as cumulative provisions.

Section 35 CPC: Costs in ordinary civil suits

The general provision gives the court discretion over the costs of and incidental to a suit, including who must pay them, the property from which they may be recovered, and the extent of liability. This power remains subject to prescribed conditions, limitations, and other applicable laws.

Section 35(1) - Court's discretion

"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."

Section 35(2) - Reasons when costs do not follow the event

"Where the Court directs that any costs shall not follow the event, the Court shall state its reasons in writing."

Meaning: "Costs follow the event" describes the usual approach that the unsuccessful party bears the successful party's costs. The court may depart from that approach, but Section 35(2) requires written reasons when it does so.

Costs are not automatically identical to every expense claimed by a litigant. The court determines what is allowable under the governing procedural rules and the circumstances of the case.

Section 35 CPC in commercial disputes

For commercial disputes of specified value, the Commercial Courts Act, 2015 substitutes a special Section 35 through its Schedule. Its application depends on the definitions and scope of that Act, including Sections 2(1)(c) (commercial dispute), 2(1)(i) (specified value), and 12 (determination of specified value), as applicable.

Section 35(1) - Whether, how much and when costs are payable

In a commercial dispute, the court may determine:

whether one party must pay costs to another;
the amount of those costs; and
when the costs must be paid.

For this purpose, reasonable costs include witness fees and expenses, legal fees and expenses, and other expenses connected with the proceedings.

Section 35(2) - General rule and exception

The general rule is that the unsuccessful party pays the successful party's costs. A court may depart from that rule if it records its reasons in writing.

Statutory illustration: A plaintiff obtains a money decree for breach of contract, but the claim for additional damages is found to be frivolous and vexatious. The court may order the plaintiff to pay costs attributable to that claim even though the plaintiff succeeded on the principal claim.

Section 35(3) - Factors considered by the court

The court must have regard to relevant circumstances, including:

the conduct of the parties;
whether a party succeeded on part, but not all, of its case;
whether a frivolous counterclaim delayed disposal;
whether a reasonable settlement offer was unreasonably refused; and
whether frivolous claims or vexatious proceedings wasted the court's time.

Section 35(4) - Types of costs orders

The court may direct payment of:

a proportion of another party's costs;
a specified sum towards another party's costs;
costs from or until a particular date;
costs incurred before proceedings began;
costs relating to particular procedural steps;
costs relating to a distinct part of the proceedings; or
interest on costs from or until a particular date.

The commercial costs regime is designed to permit proportionate, reasoned allocation of litigation expenses, taking account of both the outcome and the parties' conduct.

How courts decide litigation costs

In ordinary civil proceedings, Section 35 operates with the applicable rules, including Order XXA CPC (costs) where applicable, and relevant High Court or state amendments. In commercial litigation, the substituted Section 35 provides a more express framework for reasonable legal expenses, partial success, conduct, settlement offers and targeted costs orders.

A successful party should not assume that all claimed legal fees will necessarily be reimbursed. The court considers the statutory framework, applicable rules, supporting material and the reasonableness of the amounts sought. A court may also take account of abuse of process, needless adjournments and unnecessary litigation steps under the appropriate provisions.

Examples

Successful defendant: A defendant who defeats an unfounded suit may request an award of allowable litigation costs.
Partial success: A court may apportion costs where a party wins one claim but fails on another.
Unnecessary delay: Costs for adjournments or failure to take required steps may arise separately under Section 35B CPC.
False or vexatious claims: Section 35A CPC addresses compensatory costs in the circumstances it specifies, subject to applicable amendments.