M/S. Progressive Constructions ... vs M/S. Sharma Associates And ...
2001 Latest Caselaw 426 Del

ORDER

Devinder Gupta, J.

1. The appellant has challenged the order passed on 19.2.2001 by which learned Single Judge allowed adjournment to the appellant to cite a few decisions subject to payment of Rs. 20, 000/- as costs. The impugned order reads as under:-

"After completing his arguments, learned counsel for respondent No. 1 wants to cite some judgments. He requests for an adjournment for this purpose.

On this request, adjourned to 23rd April, 2001 subject to payment of Rs. 20,000/- as costs for unnecessarily taking up everyone's time."

2. Respondent No. 1 has filed a petition under Section 20 of the Arbitration Act, 1940 seeking direction against the appellant to file arbitration agreement in Court and consequently for referring the disputes for adjudication through arbitration as per terms of the agreement.

3. The petition was instituted on 30.4.1996. The appellant by its reply dated 11.8.1997 opposed the prayer for appointment of an arbitrator. Respondent No. 2, who is only a performa respondent was served in the petition for 9.10.1998 but remained absent. Time was sought by respondent No. 1 to file rejoinder to the reply of the appellant, which was field on 24.2.1999. The petition was directed to be posted for final disposal on 12.5.1999.

4. Arguments in the petition could not be heard on the appointed day for quite some time. Thereafter on 8.12.1999 a statement was made by learned counsel for respondent No. 1 that the parties had compromised pursuant to which it had been agreed that the appellant would be executing a power of attorney for prosecuting the disputes with respondent No. 2 by seeking arbitration in the matter. As there was no written application for compromise, time was allowed to the parties to file appropriate application, if any, within two weeks. Petition was adjourned to 22.12.1999. No such application was filed. It appears that in the meanwhile, respondent No. 1 had forwarded a proposal for compromise to the appellant, which according to learned counsel for the appellant was under consideration. Petition accordingly was adjourned to 12.1.2000 to enable learned counsel for the appellant to have appropriate instructions. Arguments could not be heard thereafter since it was stated that there was possibility of compromise. Compromise could not materialise. Accordingly, on 18.10.2000 the case was directed to be posted for 19.2.2001 for hearing arguments. On the adjourned date, as per the impugned order, arguments were completed. A request appears to have been made by learned counsel for the appellant that he would like to cite few decisions in support of his submissions. He prayed for an adjournment for the said purpose. Adjournment prayed for was granted but subject to payment of Rs. 20,000/- as costs. The order is under challenge in this appeal.

5. The challenge, inter alia, is on the ground that the costs are punitive in nature and se arbitrary. The appellant at no point of time had tried to delay the proceedings in the suit and had in fact addressed arguments also. Only a list of decisions relied upon was to be tendered. No further arguments were to be addressed and in such circumstances, learned Single Judge did not exercise discretion properly in the matter of awarding costs while granting adjournment.

6. Learned counsel for respondent No. 1 has tried to support the order urging that the discretion has been exercised rightly and Learned Single Judge was perfectly justified in imposing costs since the adjournment was opposed on behalf of respondent No. 1.

7. Order 17 of the Code of Civil Procedure (for short "C.P.C.") deals with adjournments. Rule 1 or Order 17 C.P.C. vests in Court a discretion to grant adjournment to a party at any stage of the suit. Granting of an adjournment to a party to a suit is left to eh discretion of the Court. The discretion is not subject to any definite rules, but has to be exercised in a judicial and reasonable manner. Once the Court decides to exercise discretion of granting adjournment, it is enjoined upon it to fix a date for further hearing of the suit. Clause (2) of Rule 1 of Order 17 C.P.C. enables and empowers the Court to award costs occasioned by the adjournment. It says "make such order as it thinks fit with respect to the costs occasioned by the adjournment".

8. The only question arising for determination is of the excessiveness of the costs imposed upon the appellant while allowing the appellant's prayer for adjournment in order to enable learned counsel for the appellant to cite fe decisions in support of the appellant's case.

9. Costs, which can be imposed by the Court and as are referred to in clause (2) of Rule 1 of Order 17 C.P.C. are also at the discretion of the Court. The discretion has to be exercised judiciously and within the parameters of law. The clause under consideration limits the extent of the costs, which can be imposed. In other words, costs can be imposed within the limit prescribed i.e. "which are occasioned by the adjournment".

10. As has been noticed above, arguments were concluded. Nothing more was required to be done except as per submission of learned counsel for the appellant only a few decisions were to be cited, which according to learned counsel for the appellant, would not have taken much time of the Court. Moreover the decision to be cited had already been incorporated in the notes of submission filed on behalf of the appellant on 29.11.1999 and are available on the record of learned Single Judge. No inconvenience was caused to the respondent and moreover no objection was raised by the respondents, which fact is disputed by learned counsel for respondent No.1.

11. We need not go into the disputed question that whether or not adjournment was opposed, except to take note of the fact that in the impugned order it is not so stated that the adjournment was opposed by respondent No. 1. In any case proceedings had to be adjourned only because of the conduct of the appellant. In case appellant. In case appellant had to cit ea few decisions, it would have been but appropriate to have the same made a part of the submissions. Appellant could not have taken the Court for grated to assume that adjournment prayed for would be allowed. The fault lay with the appellant. But was this conduct of such a magnitude, which called for upon imposing heavy adjournment costs. There is nothing on record even to suggest that the appellant had in any manner tried to delay the proceedings on any earlier occasion. From the facts of the case, we find that no adjournment was occasioned because of the appellant's conduct prior to the passing of the impugned order. The order is also silent as to why such heavy costs were imposed. It would have been proper had some reason been assigned for imposing heavy costs, while granting adjournment, which the Court thought amounted to wastage of everybody's time. From a bare reading of the order an impression is carried that it was in order to penalise the appellant that heavy costs were imposed.

12. The question of reasonableness of costs has been subject matter of judicial decisions. In Gajendra Shah v. Ram Charan AIR 1930 Oudh 171 it was held that costs should be such which would be sufficient to compensate the opposite party for expenses incurred for that day and should not be imposed by way of penalty. Court observed:

"The principle which the Court awarding the costs should always bear in mind is that it should order the payment of a sum commensurate with the costs, which in the opinion of the Court the party ready to proceed will have to incur owing to the adjournment. The amount to be awarded should not be one of the nature of penalty or of punishment."

13. A Division Bench of Lahore High Court in Mohammad Bakhsh v. Shahu and others AIR (29) 1942 Lahore 162(2) observed:-

"The costs must be such as can reasonably be held to be occasioned by the adjournment and should not be in the nature of a penalty or punishment, nor should costs be awarded against a party who is not substantially at fault in the matter of adjournment."

14. The Court relied upon an earlier decision of the same Court reported as Mst. Umat-ul-Mughni Begum v. Saliq Ram AIR 1915 Lahore 476.

15. A Division Bench of Bombay High Court in Jadavbai Narayandas v. Shrikisan AIR (33) 1946 Bombay 113 also interpreted clause (2) of sub-rule (1) of Order 17 to the same effect. N.S.Lokur, J. speaking for the bench observed:-

"In granting an adjournment under Order 17, R.1, sub-rule (1) civil P.C., the Court is empowered by sub-rule (2) "to make such orders as it thinks fit with respect to the costs occasioned by the adjournment". The expression "occasioned by the adjournment" is deliberately used in order that the discretion of the Court should not be restricted to the taxable costs of the day. The principle underlying the sub-rule is that the party who is ready to proceed with the suit should be awarded such costs as can reasonably be held to be "occasioned by the adjournment", and as might reasonably compensate him for the expenses incurred by reason of the adjournment. Of course the condition imposed should not be in the nature of a penalty or punishment to the party asking for adjournment, and hence the costs awarded should in no case exceed a sum commensurate with the expenses, which, in the opinion of the Court, the party ready to proceed reasonably incurs as a result of the adjournment."

16. Same view was followed in Sharafat Husain v. Shakil Ahmed AIR 1953 Bhopal 6; Ashwani Kumar and others v. Smt. Moti Kumari and others ; Timber Private Ltd. v. Chandu Lal AIR 1964 J & K 58 and Junaram Bora v. Saruchoali Kuchuni and others AIR 1976 Gauthati 3.

17. Judicial opinion thus has been consistent that the adjournment costs must not be arbitrary or imposed by way of penalty, rather it should be to meet the reasonable expenses that the party who is ready to go ahead with the suit has to bear for the short adjournment granted at the instance of the other party.

18. Similar view was expressed in Smt. Ram Piyari v. Lala Ram Narain and others and Jagar Nath and another v. Shambhu .

19. In The Managing Director Tourism Development Corporation, Himachal Pradesh and another v. Smt. Halya Devi and others 1982 Sim. L.C. 79 V.D. Misra, C.J., held that the statute has used the words "costs" which are in the discretion of the Court depending upon the subjective approach of the trial Judge. Discretion has to be exercised according to the well settled judicial principles and not capriciously or whimsically. Relying upon the decision in Mohd. Baksh's: Ram Piyari's: Sharafat Husain's and Jadavbai Narayandas's cases (supra), it was observed that from the ratio of these decisions one thing is clear that wherever costs were high, the same were treated as punitive and it was held that the Court had acted without jurisdiction while awarding such punitive costs.

20. The question of reasonableness of costs was also considered in a subsequent decision of Himachal Pradesh High Court in M/s. Rai Singh Roshan Negi and others v., Surjit Bawa and others I.L.R. 1986 H.P. 143. P.D. Desai, C.J., on the object underlying the provisions relating to award of costs to a litigant made reference to the common law of England where party and party costs are treated not as a complete indemnity but in the character of an indemnity. He referred to the observations made by Branwell B. in Harold v. Smith (1860) 5 H & N 381, which had been quoted with approval in Gundry v. Sainsbury (1910) 1 K.B.645 particularly in the observations of Fletcher Moulton, L.J., concurring with the Master of the Rolls that the costs as between party and party are given by the law as an indemnity to the person entitled to them; they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them. P.D. Desai, C.J., in Rai Singh Roshan Lal Negi's case (supra) also quoted with approval the following passage from the decision in The Managing Director, Tourism Development Corporation, H.P. and another v. Smt. Halya Devi and others 2nd 1981 H.P. 545, which reads:-

".....That leads me to the question as to what the word 'costs' means. As I understand, the concept of awarding costs is to compensate a person fort the expenses which he has incurred in the litigation. The object is merely to compensate a party and not to enable it to make a profit. (See: The Firm of N. Peddanna Oqeti Balayya and others v. Katta V. Srinivasayya Setti Sons, ). It is not meant to penalise the party in default. It is only section 35-A which empowers the courts to take deterrent action against a party in default by awarding compensatory costs. (See: T.Arivandandam v. T.V. Satyapal and another, AIR 1877 SC 2421)..... In other words, the purpose of awarding compensatory costs is something more than the expenses which a party has incurred.

My attention has been drawn to Mukherjee's Law lexicon, second Edition, Vol. I, page 395, where the meaning of the term 'costs' has been given thus:

'The term 'costs' in the literal sense is limited to statutory allowances to reimburse him for expenses incurred in defending or prosecuting the proceedings. Costs are, therefore,m meant to be given to a successful party to mitigate to a greater or lesser extent, the necessary expenses incurred in the conduct of litigation.

The word 'costs' has been defined in the American Jurisprudence, Second Edition, Volume XX, page 5, as under:

'Costs are statutory allowance to a party to an action for his expenses incurred in the action. They are in the nature of incidental damages allowance to the successful party to indemnify him against the expenses of asserting his rights in Court, when the necessity for so doing was caused by the other's breach of legal duty. Otherwise defined, costs are the sums prescribed by law as charges for the services enumerated in the fee bill. They have reference only to the parties and the amounts paid by them, and only those expenditures which are by statute taxable and to be included in the judgment fall within the term 'costs'.

.....as long ad the costs awarded are reasonable, they will remain within the definition of the word 'costs'. But whenever the costs are so high that they shock the conscience of the court, they have to be treated as punitive irrespective of the fact that they have been termed as costs. When does such a situation arise? It will depend on the facts and circumstances of each case and neither it is possible nor desirable to lay down hard and fast rules. If the facts clearly show that the amount awarded as 'costs' will not protect the amount awarded. It is true that the discretion given to the trial courts is not to be lightly interfered with simply on the ground that if the matter was before this Court it would have taken another view. But where a subordinate courts acts without jurisdiction r with material irregularity or exercises discretion arbitrarily, then this Court has jurisdiction to interfere with the order passed by the Court ..... I cannot accept the contention of the learned counsel for the respondents that a court is entitled to award costs without any limit since it is in the discretion of the trial court depending on the subjective approach of the trial Judge and as no limitation has been placed by rule 7 of Order 9. It is true that a discretion has been given to the court. But this discretion has to be exercised according to well laid judicial principles and not capriciously or whimsically ..... To me it appears a glaring instance where the learned Senior Sub Judge has failed to exercise his discretion judiciously. He decided to penalise the petitioners though calling the penalty as 'costs'. The plaintiffs have indeed made a profit out of it..... The demand of 'heavy costs' and the consent of the petitioners to pay 'heavy costs' does not by any stretch of imagination authorise the court to award the amount which on the face of it appears to be punitive. I have, therefore, no hesitation in concluding that the amount ordered as 'costs' against the petitioners was nothing but a penalty which the court had no jurisdiction to order."

21. The aforementioned decisions affirm the principle of common law in England governing the taxing of party and party costs. The principle is that costs are awarded not as punishment to the defeated party, nor as a bonus to the party which receives them but as a recompense to the successful party in order to indemnify him, though not completely, for legal expenses to which he has been subjected in prosecuting his suit or his defense.

22. The above principles have ultimately received legislative recognition in Section 35-B of the Code of Civil Procedure, which provides for award of costs for causing delay in the progress of a suit. It, on any day 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 the 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 is there under empowered, for reasons to be recorded, to make an order requiring such a 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.

23. In the matter of award of costs in their discretion , the Courts have to be guided by the judicial dicta and the legislative prescription aforementioned.

24. What we have stated is with respect to the costs for causing delay and the adjournment costs as can be imposed under Section 35-B of the Code of Civil Procedure and Order 17 Rule 1 of the Code. We need hardly reiterate the wide discretion, which vests in the High Court to award costs, in exercise of its inherent powers apart from the aforementioned provisions, in suitable cases, if it finds it necessary in the interests of justice to do so. In such like case the extent to which costs may be imposed will be dependent on other considerations as may be found relevant. Reference in this regard be made to a Division Bench judgment of Orissa High Court in A.Krishna Rao v. State of Orissa .

25. In view of the fact that the costs occasioned by the adjournment ought to be reasonable and not by way of penalty, we are of the view that in the instant case award of Rs. 20,000/- as coasts after arguments are concluded and that also to enable learned counsel for the appellant to cite a few decisions are by way of penalty. The same cannot be treated as adjournment costs to compensate the opposite party. The costs imposed in the facts and circumstances cannot be said to be reasonable one. They are punitive in nature and cannot be said to be the costs, which in our opinion would be costs commensurate with the costs occasioned by the adjournment. Thus in our view, discretion in the case was not properly exercised in the matter of imposing costs.

26. Consequently, while allowing the appeal, we modify the impugned order and direct that the appellant will pay adjournment costs of Rs.2,000/- instead of Rs.20,000/- as ordered by the impugned order.