Principles for grant of exemplary costs: Supreme Courts

In a recent decision the Supreme Court has laid down the principles for the grant of exemplary costs by the courts. The Supreme Court was dealing with an appeal against the decision of a High Court of Allahabad where it noted that the decision of the High Court was correct. However what irked the Supreme Court was the fact that costs of Rs. 50,000/- were imposed by the High Court, being of the view that the conduct of a government employee in retaining the possession of a government house in an unauthorized manner “amounted to indiscipline and that cannot be tolerated and he should therefore be saddled with exemplary costs.” This was directed to be paid to the ‘High Court Legal Services Committee”.

In these circumstances, the Supreme Court being called upon to decide “whether levy of such costs and that too for the benefit of legal service authority is proper”, the Court stated the legal position as under;

Exemplary costs are levied where a claim is found to be false or vexatious or where a party is found to be guilty of misrepresentation, fraud or suppression of facts. In the absence of any such finding, it will be improper to punish a litigant with exemplary costs. When the appellate court did not choose to levy any costs while dismissing the appeal filed by the petitioner after nine years of pendency with interim stay, the High Court, while dismissing the writ petition at preliminary hearing, ought not to have levied exemplary costs with reference to the period of pendency before the Appellate Court. We do not find any ground on which the exemplary costs of Rs.50,000/- could be sustained. Levy of exemplary costs on ordinary litigants, as punishment for merely for approaching courts and securing an interim order, when there was no fraud, misrepresentation or suppression is unwarranted. In fact, it will be bad precedent.

5. Even if any costs are to be levied on a petitioner, for any default or delaying tactics, where the respondents have entered appearance, costs should be ordered to be paid to the respondents, who were the affected parties on account of the litigation. There is no justification for levying costs of Rs.50,000/- on the petitioner payable to the High Court Legal Service Committee. There is also no justification for directing the state government to act as the collecting agent for the costs payable to the Legal Services Committee. Directing a government servant, an ordinary employee, to pay Rs. 50,000/- as costs within one month and further directing the use of coercive process for recovery of costs as arrears of land revenue was unwarranted. The levy of such exemplary costs in favour of the High Court Legal Services Committee, is not a healthy practice.

6. The costs may be justifiably made payable to the High Court Legal Services Committee or other Legal Services Authorities, where before the other side is served or represented, the court wants to penalise a petitioner for lapses/omissions/delays, as for example, where the petitioner fails to pay the process fee for service of respondents, or fails to cure defects or comply with office objections, or where there is delay in refiling of petitions. Once the other side is represented, the costs levied by reason of any attempt by a party to delay the proceedings, should normally be for the benefit of the other party who has suffered due to such conduct. Only where both the parties are at fault, costs may be ordered to be paid to Legal Services Authority. At all events, the power to levy exemplary costs, it is needless to say, should be used sparingly to advance justice. It should not be threatening and oppressive.

Have a look at the decision.

Post Script Supplement

The decision has now been reported as Satpal Singh v. Union of India, AIR 2010 SC 1138.