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SECTION 34, 35, 35A, 35B OF CODE OF CIVIL PROCEDURE 1908

What is Interest? What is Costs? What is Compensatory costs in respect of false or vexatious claims or defenses? What is Costs for causing delay? Section 34, 35, 35A and 35B of Code of Civil Procedure 1908

Interest, Costs, Compensatory costs in respect of false or vexatious claims or defenses and Costs for causing delay are defined under Section 34, 35, 35A and 35B of Code of Civil Procedure 1908. Provisions under these Sections are:


 

Section 34 of Code of Civil Procedure 1908 "Interest"

(1) Where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, 1 [with further interest at such rate not exceeding six per cent. per annum as the Court deems reasonable on such principal sum], from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit :

2[Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent. per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions.

Explanation I.-In this Sub-section, "nationalised bank" means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970).

Explanation II.- For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.]

(2) Where such a decree is silent with respect to the payment of further interest 3[on such principal sum] from the date of the decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest, and a separate suit therefor shall not lie.

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1. Subs. by Act 66 of 1956, s. 2, for certain words.

2. Ins. by Act 104 of 1976, s. 13 (w.e.f. 1-7-1977).

3. Subs. by Act 66 of 1956, s. 2, for "on such aggregate sum as aforesaid" (w.e.f. 1-1-1957

 

Section 35 of Code of Civil Procedure 1908 "Costs"

(1) 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 an 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.

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

1* * * * *

*[35. Costs.(1) In relation to any commercial dispute, the Court, notwithstanding anything contained in any other law for the time being in force or Rule, has the discretion to determine:

(a) whether costs are payable by one party to another;

(b) the quantum of those costs; and

(c) when they are to be paid.

Explanation.- For the purpose of clause (a), the expression costs shall mean reasonable costs relating to-

(i) the fees and expenses of the witnesses incurred;

(ii) legal fees and expenses incurred;

(iii) any other expenses incurred in connection with the proceedings.

(2) If the Court decides to make an order for payment of costs, the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party:

Provided that the Court may make an order deviating from the general rule for reasons to be recorded in writing.

Illustration
The Plaintiff, in his suit, seeks a money decree for breach of contract, and damages. The Court holds that the Plaintiff is entitled to the money decree. However, it returns a finding that the claim for damages is frivolous and vexatious.

In such circumstances the Court may impose costs on the Plaintiff, despite the Plaintiff being the successful party, for having raised frivolous claims for damages.

(3) In making an order for the payment of costs, the Court shall have regard to the following circumstances, including-

(a) the conduct of the parties;

(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful;

(c) whether the party had made a frivolous counterclaim leading to delay in the disposal of the case;

(d) whether any reasonable offer to settle is made by a party and unreasonably refused by the other party; and

(e) whether the party had made a frivolous claim and instituted a vexatious proceeding wasting the time of the Court.

(4) The orders which the Court may make under this provision include an order that a party must pay-

(a) a proportion of another partys costs;

(b) a stated amount in respect of another partys costs;

(c) costs from or until a certain date;

(d) costs incurred before proceedings have begun;

(e) costs relating to particular steps taken in the proceedings;

(f) costs relating to a distinct part of the proceedings; and

(g) interest on costs from or until a certain date.]

STATE AMENDMENTS
Jammu and Kashmir and Ladakh (UTs).-

In Section 35, in sub-section (1) omit "Commercial".

[Vide the Jammu and Kashmir Reorganisation (Adaptation of Central Laws) Order, 2020, notification No. S.O. 1123(E) dated (18-3-2020) and vide Union Territory of Ladakh Reorganisation (Adaptation of Central Laws) Order, 2020, Notification No. S.O. 3774(E), dated (23-10-2020).]
---

1. Sub-section (3) omitted by Act 66 of 1956, s. 3 (w.e.f. 1-1-1957).

*. Shall be applicable to commercial disputes of a specified value by Act 4 of 2016, s. 16 and the Schedule (w.e.f. 23-10-2015).
 

 

Section 35A of Code of Civil Procedure 1908 "Compensatory costs in respect of false or vexatious claims or defenses"

(1) If in any suit or other proceedings 2[including an execution proceeding but 3[excluding an appeal or a revision] any party objects to the claim or defence on the ground that the claim or defence or any part of it is, as against the objector, false or vexatious to the knowledge of the party by whom it has been put forward, and if thereafter, as against the objector, such claim or defence is disallowed, abandoned or withdrawn in whole or in part, the Court, 4[if it so thinks fit], may, after recording its reasons for holding such claim or defence to be false or vexatious, make an order for the payment to the object or by the party by whom such claim or defence has been put forward, of cost by way of compensation.

*[(2) No Court shall make any such order for the payment of an amount exceeding 5[three thousand rupees] or exceeding the limits of its pecuniary jurisdiction, whichever amount is less:

Provided that where the pecuniary limits of the jurisdiction of any Court excercising the jurisdiction of a Court of Small Causes under the Provincial Small Cause Courts Act, 1887 (9 of 1887), 6[or under a corresponding law in force in 7[any part of India to which the said Act does not extend]] and not being a Court constituted 8[under such Act or law], are less than two hundred and fifty rupees, the High Court may empower such Court to award as costs under this section any amount not exceeding two hundred and fifty rupees and not exceeding those limits by more than one hundred rupees :

Provided, further, that the High Court may limit the amount which any Court or class of Courts is empowered to award as costs under this section.]

(3) No person against whom an order has been made under this section shall, by reason thereof, be exempted from any criminal liability in respect of any claim or defence made by him.

(4) The amount of any compensation awarded under this section in respect of a false or vexatious claim or defence shall be taken into account in any subsequent suit for damages or compensation in respect of such claim or defence.]

STATE AMENDMENTS
Jammu and Kashmir and Ladakh (UTs).-

In Section 35A, omit sub-section (2).

[Vide the Jammu and Kashmir Reorganization (Adaptation of Central Laws) Order, 2020, notification No. S.O. 1123(E) dated (18-3-2020) and vide Union Territory of Ladakh Reorganisation (Adaptation of Central Laws) Order, 2020, Notification No. S.O. 3774(E), dated (23-10-2020).]

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1. Section 35A ins. by Act 9 of 1922, s. 2, which, under section 1(2) thereof may be brought into force in any State by the State Government on any specified date. It has been so brought into force in Bombay, Bengal, U.P., Punjab, Bihar, C.P., Assam, Orissa and Madras.

2. Subs. by Act 66 of 1956, s. 4, "not being an appeal " (w.e.f. 1-2-1957).
3. Subs. by Act 104 of 1976, s. 14, for "excluding an appeal " (w.e.f. 1-2-1977).

4. Subs. by Act 66 of 1956, s. 4, for certain words (w.e.f. 1-2-1957).
5. Subs. by Act 104 of 1976, s. 14, for "one thousand rupees " (w.e.f. 1-2-1977).

6. Ins. by Act 2 of 1951, s. 7.

7. Subs. by the Adaptation of Laws (No. 2) Order, 1956, for "a Part B State ".

8. Subs. by Act 2 of 1951, s. 7, for "under that Act " (w.e.f. 1-4-1951).

*. Shall be applicable to commercial disputes of a specified value by Act 4 of 2016, s. 16 and the Schedule (w.e.f. 23-10-2015).

 

Section 35B of Code of Civil Procedure 1908 "Costs for causing delay"

 (1) If, on any date fixed for the hearing of a suit or for taking any step therein, a party to the suit

(a) fails to take the step which he was required by or under this Code to take on that date, or

(b) obtains an adjournment for taking such step or for producing evidence or on any other ground, the Court may, for reasons to be recorded, make an order requiring such party to pay to the other party such costs as would, in the opinion of the Court, be reasonably sufficient to reimburse the other party in respect of the expenses incurred by him in attending the Court on that date, and payment of such costs, on the date next following the date of such order, shall be a condition precedent to the further prosecution of

(a) the suit by the plaintiff, where the plaintiff was ordered to pay such costs,

(b) the defence by the defendant, where the defendant was ordered to pay such costs.

Explanation.- Where separate defences have been raised by the defendant or groups of defendants, payment of such costs shall be a condition precedent to the further prosecution of the defence by such defendants or groups of defendants as have been ordered by the Court to pay such costs.

(2) The costs, ordered to be paid under sub-section (1), shall not, if paid, be included in the costs awarded in the decree passed in the suit; but, if such costs are not paid, a separate order shall be drawn up indicating the amount of such costs and the names and addresses of the persons by whom such costs are payable and the order so drawn up shall be executable against such persons.]

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1. Ins. by Act 104 of 1976, s. 15 (w.e.f. 1-2-1977).

 

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