Suit can not be dismissed on default to pay costs

Section 35B of CPC deals with costs for causing delay. Relevant portion of the said section extracted below :

  "35B. 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.

            ----------------------------"

Thus, section 35B provides that if costs are levied on the plaintiff for causing delay, payment of such costs on the next hearing date, shall be a condition precedent to the further prosecution of the suit by the plaintiff.

If the Legislature intended that the suit should be dismissed in the event of non-payment of costs by plaintiff, or that the defence should be struck off and suit should be decreed in the event of non-payment of costs by the defendant, the Legislature would have said so. On the other hand, Legislature stated in the rule that payment of costs on the next date shall be a condition precedent to the further prosecution of the suit by plaintiff (where the plaintiff was ordered to pay such costs), and a condition precedent to the further prosecution of the defence by the defendant (where the defendant was ordered to pay such costs). This would mean that if the costs levied were not paid by the party on whom it is levied, such defaulting party is prohibited from any further participation in the suit. In other words, he ceases to have any further right to participate in the suit and he will not be permitted to let in any further evidence or address arguments. The other party will of course be permitted to place his evidence and address arguments, and the court will then decide the matter in accordance with law.

With the above observations the Supreme Court in CIVIL APPEAL NO. 7554-7555 OF 2009 Manohar Singh  v. D. S. Sharma & Anr.   Decided on   13/11/2009, rejected the contention of the that section 35B contemplates or requires dismissal of the suit as an automatic consequence of non-payment of costs by plaintiff.

The Supreme Court also discussed some incidental and related provisions and said that when section 35B states that payment of such costs on the date next following the date of the order shall be a condition precedent for further prosecution, it clearly indicates that when the costs are levied, it should be paid on the next date of hearing and if it is not paid, the consequences mentioned therein shall follow. But the said provision will not come in the way of the court, in its discretion extending the time for such payment, in exercise of its general power to extend time under section 148 of CPC. Having regard to the scheme and object of section 35B, it is needless to say that such extension can be only in exceptional circumstances and by subjecting the defaulting party to further terms. No party can routinely be given extension of time for payment of costs, having regard to the fact that such costs under section 35B were itself levied for causing delay.

Referring  to the provisions of Rule 1 of Order XVII of CPC which deals with grant of time and adjournments, the Court observed that it is evident from Rule 1(2) proviso (e) of Order 17 that where a witness is present in court but the other side is not ready to cross-examine the witness, the court can dispense with his cross-examination. But where a genuine and bona fide request is made for adjourment, instead of resorting to forfeiture of the right to cross-examine, the court may grant time by levying costs.

Thus the Supreme  Court held that “a conspectus of the above provisions clearly demonstrates that under the scheme of CPC, a suit cannot be dismissed for non-payment of costs. Non-payment of costs results in forfeiture of the right to further prosecute the suit or defence as the case may be. Award of costs, is an alternative available to the court, instead of dispensing with the cross- examination and closing the evidence of the witness. If the costs levied for seeking an adjournment to cross-examine a witness are not paid, the appropriate course is to close the cross-examination of the witness and prohibit the further prosecution of the suit or the defence, as the case may be by the defaulting party.

In this case, the supreme court observed that  “the plaintiff has harassed the defendants and its witness by seeking repeated adjournments. In view of it, plaintiff's right to cross-examine DW2 stood forfeited. However, as costs were levied, but were not paid, the court should have closed the evidence of DW2, permitted the defendants to produce any further evidence (without any right to plaintiff to cross-examine such witnesses) and then ought to have proceeded to dispose of the suit on merits by considering the material available and hearing the arguments of defendant. The court could not have dismissed the suit.”

 In view of the above, the Supreme Court allowed the appeals and set aside the judgments of the High Court and the trial court and  restored the suit to its file, subject to the following :

 “ (i)     The right of the plaintiff to cross-examine DW2 stands forfeited and he is barred from prosecuting the suit further.

  (ii)    The trial court shall however permit the defendants to let in any further evidence, hear arguments and then dispose of the suit.

  (iii)   However, if plaintiff-appellant tenders the costs with an appropriate application under section 148 CPC, the trial court may consider his request in accordance with law. Even if the court extends the time for deposit, permits the plaintiff to pay the costs and prosecute the suit further, that will not entitle the  plaintiff to cross-examine DW2.”