Increase costs on frivolous litigation to Rs 1 lakh: Supreme Court

[CA.BHUPENDRASHAH]

Increase costs on frivolous litigation to Rs 1 lakh: Supreme Court

November, 02nd 2011
The Supreme Court has suggested a 3,000% hike in the cost imposed on a person indulging in frivolous and vexatious litigation, saying unless it is raised from the current Rs 3,000 to Rs 1 lakh, the system will fail to control false cases being foisted to victimize innocent citizens.

A bench of Justices R V Raveendran and A K Patnaik, in a judgment delivered last month but made available on Tuesday, said, "At present, courts have virtually given up awarding any compensatory costs as such a small sum of Rs 3,000 will not make much difference. We are of the view that the ceiling in regard to compensatory costs should be at least Rs 1 lakh." It referred to Section 35A of the Civil Procedure Code, which provides for compensatory cost in respect of false or vexatious claims or defence. The maximum amount to be levied on a person indulging in false litigation was amended in 1977 from Rs 1,000 to Rs 3,000.

Justice Raveendran expressed dismay at the cost remaining unchanged for 34 years and said, "Unless the cost is brought to a realistic level, the provision authorizing the levy of an absurdly small sum by present day standards may, instead of discouraging such litigation, encourage false and vexatious claims."

The bench also did not approve of the current tendency of courts not to award even normal litigation cost-different from exemplary cost-to the litigant who wins a case. "The prosecution and defence of cases is a time-consuming and costly process. A plaintiff/petitioner/appellant who is driven to the court by the illegal acts of the defendant/respondent or denial of a right to which he is entitled, if he succeeds, is to be reimbursed his expenses in accordance with law," it said.

 
The court made it clear that it was talking of normal litigation cost and it should not be calculated on the basis of the actual cost of fighting a case. For, it said, a wealthy person may engage five senior advocates paying fees running into lakhs per day and the other side cannot be asked to reimburse such astronomical amounts.

Appreciating the assistance rendered to the court by Dr Arun Mohan and senior advocate A Mariarputham, the bench said there was a misconception among people that court fees for litigation were high. It said in the Supreme Court, the maximum court fee payable was Rs 250, be it a suit or a special leave petition. However, it added that it was time the courts sought fees commensurate with that spent by them on high-value litigation. "Arbitration matters, company matters, tax matters, for example, may involve huge amounts. There is no reason why a nominal fee should be collected in such cases. While we are not advocating ad valorem fee with reference to value in such matters, at least the fixed fee should be sufficiently high to have some kind of quid pro quo to the cost involved," Justice Raveendran, who authored the judgment, said.

Times View
We have consistently maintained that the judiciary needs to take a tough stance against frivolous litigation. The Supreme Court's observation should go a long way towards curbing the menace, at least as far as individual litigants are concerned. It remains to be seen whether the much stiffer monetary penalty becomes a serious deterrent also for organizations out to earn cheap publicity. If this too fails to rein them in, the court should think in terms of going beyond just monetary fines for dealing with the problem. That step, however, can wait till the current measure has had a fair trial.