Costs in Indian Litigation: Sections 35, 35A and 35B CPC and the Commercial Courts Regime

{ "title": "Costs in Indian Litigation: From Nominal Awards to Meaningful Recovery Under Sections 35, 35A, 35B CPC and Commercial Courts Rules", "excerpt": "Indian litigation costs have shifted from nominal to substantial. Learn how Sections 35, 35A, and 35B of the CPC work, and how the 2015 Commercial Courts Amendment changed the game with mandatory costs orders, counsel fees, and enforceable recovery mechanisms.", "content": "## The Quiet Revolution in Indian Litigation Costs\n\nFor decades, Indian litigation was synonymous with one uncomfortable truth: winning rarely meant recovering your actual legal expenses. Costs awards were nominal—often a few thousand rupees—bearing no relation to the advocate's fees, expert witness charges, or the genuine cost of mounting a credible defence or prosecution. This disconnect between effort and recovery left practitioners frustrated and clients bearing real financial losses despite victory.\n\nBut that landscape is changing. The Civil Procedure Code's cost provisions have evolved, and the 2015 amendment introducing the Commercial Courts Act fundamentally altered how courts approach cost awards in commercial disputes. Advocates and litigants who understand this shift—and know how to place evidence before the court—can now recover meaningful sums. Those who ignore it leave substantial money on the table.\n\nThis guide walks you through the traditional cost regime under Sections 35, 35A, and 35B of the CPC, then explains the materially different world created by the Commercial Courts Amendment, and offers practical guidance on securing and enforcing costs orders.\n\n## Section 35 CPC: The Foundational Discretion\n\nSection 35 of the Code of Civil Procedure, 1908 establishes the court's foundational power to award costs. The section grants courts broad discretion to determine by whom and to what extent costs shall be paid. The overarching principle is simple: costs follow the event. The unsuccessful party ordinarily bears the costs of the successful party.\n\nHowever, that discretion is not absolute. Courts have consistently held that costs should be reasonable, proportionate to the claim, and awarded only where the successful party has genuinely incurred them. A party cannot recover costs for work not done or expenses never paid. This is why many traditional cost awards have been modest—litigants often fail to place adequate evidence of their actual expenditure before the court.\n\nUnder Section 35, a court may also refuse costs or award costs against the successful party where the latter's conduct has been unreasonable, where the claim was unnecessarily prolonged, or where the successful party has acted in bad faith. The discretion cuts both ways.\n\n## Section 35A CPC: Compensatory Costs for False and Vexatious Claims\n\nSection 35A introduces a sharper tool: compensatory costs for claims or defences that are false, frivolous, or vexatious. This section recognises that some litigation is not merely unsuccessful—it is abusive. A party pursuing a claim known to be false, or raising a defence designed to harass rather than genuinely contest, should pay a penalty beyond ordinary costs.\n\nUnder Section 35A, the court may award costs against a party whose claim or defence is determined to be false or vexatious. Importantly, the section imposes a statutory ceiling: such costs cannot exceed the amount in controversy or ten per cent of the claim value, whichever is lower. This ceiling protects litigants from unlimited penalties while still providing meaningful deterrence.\n\nTo invoke Section 35A, the court must find not merely that the claim failed, but that it was pursued in a manner that was dishonest, frivolous, or designed to cause harassment. The threshold is higher than simple loss. Courts have applied this section sparingly, reserving it for cases where the abuse of process is clear.\n\n## Section 35B CPC: Costs for Causing Delay\n\nSection 35B addresses a chronic problem in Indian litigation: unnecessary adjournments and delay. Under this section, the court may award costs against any party that causes delay in the proceedings. This includes parties who seek repeated adjournments without justification, fail to comply with procedural timelines, or otherwise obstruct the progress of the case.\n\nThe logic is straightforward: delay imposes real costs on the opposing party—advocate fees accumulate, witnesses must be recalled, preparation must be repeated. Section 35B allows courts to shift some of that burden back to the party causing the delay. The costs awarded under this section are typically modest but serve an important disciplinary function, incentivising parties to move cases forward.\n\n## The 2015 Commercial Courts Amendment: A Watershed Moment\n\nThe Commercial Courts Act, 2015 introduced a fundamentally different costs regime for commercial disputes. This amendment was not a minor tweak—it was a conscious policy shift to align Indian practice with international commercial litigation norms, where meaningful cost recovery is the norm.\n\nUnder the Commercial Courts Rules, the court must ordinarily direct the unsuccessful party to pay the successful party's costs. This is a sea change from the discretionary approach of Section 35. The word "ordinarily" creates a presumption: costs will be awarded unless the court finds a good reason not to award them.\n\nMore importantly, the 2015 amendment expanded the definition of "costs" far beyond what Section 35 contemplated. Costs now include counsel's fees, fees of junior counsel, witness expenses, court fees, costs of obtaining transcripts and certified copies, expenses for expert reports, and other expenditure directly related to the proceedings. This is closer to the "full costs" model familiar in common law jurisdictions.\n\n## Factors Guiding the Court's Discretion in Commercial Disputes\n\nThe Commercial Courts Rules enumerate specific factors the court must consider when awarding costs:\n\nConduct of the parties. How have both sides behaved? Have they complied with court orders? Have they acted reasonably in settlement discussions? Unreasonable conduct can reduce or eliminate a costs award even if the party ultimately succeeds.\n\nExaggerated claims. If a party has claimed more than was justified, or inflated the quantum of loss, the court may reduce the costs award proportionately. A party that claims ₹100 lakhs and recovers ₹10 lakhs may not recover full costs.\n\nRejected settlement offers. If the unsuccessful party refused a reasonable settlement offer and went on to lose, the court may award costs on an enhanced scale. Conversely, if the successful party rejected a reasonable offer and then barely exceeded it at trial, costs may be reduced.\n\nComplexity of the case. More complex cases justify higher costs.\n\nDuration of proceedings. Longer cases naturally incur higher costs.\n\n## What Must Be Placed on Record: The Critical Evidence Gap\n\nHere lies the practical challenge that many advocates overlook: courts cannot award costs for expenditure not proved. A verbal assertion that you spent ₹5 lakhs on this case is worthless without evidence.\n\nTo obtain a meaningful costs order in a commercial dispute, you must place on record:\n\nA costs statement. This is a detailed, itemised breakdown of all costs incurred: counsel's fees (with dates and hourly rates or fixed fees for specific tasks), junior counsel fees, court fees paid, costs of obtaining certified copies, transcripts, expert reports, and any other expenditure directly related to the proceedings. The statement should be filed well before the final hearing so the opposing party has opportunity to respond.\n\nFee particulars and invoices. Oral testimony that you charged a certain amount is insufficient. File invoices, fee agreements, or bills issued by counsel. Courts want documentary evidence.\n\nEvidence of settlement attempts. If you are relying on the factor of rejected settlement offers, place on record the correspondence showing what was offered and when, and why it was rejected. Email chains, letters, or settlement conference notes all serve this purpose.\n\nWitness expense records. If you claim costs for witness travel, accommodation, or fees, produce receipts or affidavits from the witnesses confirming the expenses.\n\nWithout this evidence, even a successful party may recover only nominal costs because the court has no basis to award more.\n\n## Costs in Writ Jurisdiction and Exemplary Costs\n\nWrit petitions under Article 226 of the Constitution occupy a special place. Traditionally, costs in writ jurisdiction have been even more nominal than in ordinary civil suits, on the theory that writ petitions serve a public law function and should not be deterred by cost penalties.\n\nHowever, courts have increasingly awarded exemplary costs where a writ petition is frivolous, vexatious, or filed in bad faith. An exemplary costs order is punitive—it is meant to deter abuse of the writ jurisdiction and compensate the respondent for the harassment of defending a baseless petition. Such orders are rare but significant when granted.\n\n## Enforcement of a Costs Order\n\nA costs order is not self-executing. If the unsuccessful party does not pay, the successful party must enforce the order. Under the CPC, a costs order can be enforced through:\n\nExecution proceedings under Chapter XXI of the CPC, where the court can attach and sell the judgment debtor's property.\n\nContempt proceedings if the judgment debtor wilfully disobeys the order.\n\nRecovery as arrears of land revenue in some jurisdictions, allowing attachment of immovable property.\n\nIn practice, enforcement of costs orders can be as time-consuming as the original litigation. This underscores why placing evidence on record at the outset is critical—a costs order based on clear, documented evidence is far more likely to be enforced than one based on vague assertions.\n\n## Key Takeaways for Practitioners\n\nThe landscape of litigation costs in India is shifting. In commercial disputes, meaningful cost recovery is now the norm, not the exception. But recovery requires preparation: document your expenditure, file detailed costs statements, prove settlement attempts, and ensure the court has a clear record of what you have actually spent.\n\nIn traditional civil suits, Section 35 remains discretionary, but the principles are the same—costs follow the event, and evidence determines quantum. Section 35A and 35B provide additional tools for addressing abuse of process and delay.\n\nAdvocates and litigants who master this framework, and who understand the critical importance of placing evidence on record, will find that winning now means recovering real money. Those who ignore it will continue to see nominal costs awards despite substantial victory. The shift has happened. The question is whether you are ready to capitalise on it." }