Costs and Interest

Chapter One: Introduction

The concept of Interest has been discussed in Section 34 of the Code of Civil Procedure, which gives the court the discretion to grant interests on the principle sum in a money suit. The concept has multiple facets to it, like the duration for and the time at which the interest would be provided, rate of interest to be paid, existence of a stipulation in this regard, et al. Interest is something that affects a lot of proceedings, including proceedings under various other statutes. Therefore, this makes this concept prone to overlaps and contradictions. This would be the first broad area of focus of this article.

Further, the concept of Costs would be taken under consideration. Costs have been provided in Section 35 and 35A of the Code of Civil Procedure and it empowers court to order any party to bear the cost of litigation of the other party or for both the parties to bear their own costs. The costs are generally provided in case a party is wrongfully drawn into a legal battle by the other party because of which this party had to bear heavy litigation expenses and is now at a disadvantageous position. This beats the aim of the adjudication, which is to restore the aggrieved party to the status at which it was before the suit. Thus, costs are levied on the malicious party to do complete justice to the other party.

But this understanding doesn't address the issue of Advocates' involvement and liability in such vexatious proceedings. They are an integral part of the entire process. The scope of their liability for the same would be another area of consideration with which this article will deal.

Chapter Two: Different Provisions for Interest

Interest is a very general and regularly used concept whenever compensation is one of the reliefs sought by the parties and provided by the governing law. The Code of Civil Procedure provides for rules for providing interest in section 34 of the Act. This chapter would discuss some other statutes that provide for interests and would compare the provisions therein with the provisions in CPC.

i) The Interest Act 1978

The first Interest Act came in 1839, which was overtaken by the Interest Act of 1978. The Interest Act contains general statutory provisions in regard to awarding interests to a party by any court. The difference between the provisions under the Interest Act and CPC is that the Interest Act does not provide for interest pendente lite. Neither the 1839 Act nor does the 1978 Act provide for the award of such an interest.

But Section 34 of the Code of Civil Procedure provides for pendente lite interest. It is an interest that is provided in case a matter pending litigation is referred to an arbitrator in a suit. It is because of the logic that if such is the situation, all the powers of the court would be available to the arbitrator, that section 34 would find its applicability to situation of arbitrators in suits, and thus it provides for interest pendente lite.

ii) The Consumer Protection Act 1986

Treatment of interests under Consumer Protection Act is a bit different, as the same cannot be claimed under Section 34 of the Civil Procedure Code if the proceeding is under the Consumer Protection Act as the provisions of CPC have not been specifically made applicable to the Consumer Protection Act. Although the Court has given certain relaxation in this regard by holding that since the provisions of CPC are made in justice, equity and good conscience, general provisions of CPC would authorize the consumer forum or commission to grant any such interest based on the circumstances of a case.

However, it is imperative to note that the provision to provide interest is not put in place to provide extraordinary benefit to the claimant. The nature of award in interest is that of compensation, which is given to recompense for a loss incurred or an injury sustained by the claimant. Thus, the rate of interest has to necessarily depend on the kind of loss or injury and has to correlate with the amount of such loss or injury.

Although, a fixed rate of interest might be provided in cases where compensation has been ordered by the forum or commission to be provided to the claimant, and such a compensation has not been paid. In the case of Ghaziabad Development Authority v. Balbir Singh, the Supreme Court held that where compensation has been directed to be paid, the commission or forum must also give a particular period within which the payment has to be made, failing which interest must be provided on the amount of compensation. The rate of interest to be provided must be based on the current rate of interest.

iii) The Motor Vehicles Act 1988

The Motor Vehicles Act has specifically provided its own structure for providing interest to the claiming parties, thereby, the provisions of Code Civil Procedure would not be applicable on the cases lying under Motor Vehicles Act. Section 171 of the MV Act confers power on the tribunal to grant interest on the amount of compensation provided and at a rate that it deems fit.

The noteworthy thing about the section is that it confers discretion upon the tribunal for providing interest on the amount of compensation and also a discretion to decide the rate at which such interest must be provided. Therefore, no fixed rate of interest or a cap on the maximum rate of interest that can be provided can be put on the cases falling under Motor Vehicles Act. The legislature, in all its wisdom, thought it fit to confer such discretion on the tribunal or court with the view that while awarding such a rate of interest, the tribunal would take into account relevant facts and circumstances of a case. Thus, no principle could be deduced or any rate of interest be fixed to have application on all the cases befalling under Motor Vehicles Act, and inferring the fixed rate of interest from CPC would go counter to the intention of the Legislature.

iv) The Workmen's Compensation Act 1923

Section 4A(3) of the Workmen's Compensation Act specifically mentions providing twelve percent interest if an employer is unable to provide the compensation due under this Act within one month of it falling due. Thus, the rate of interest of six percent per annum provided under S. 34 of the CPC would not be applicable in such cases.

Though various high courts have taken the view that this is not the hard and fast rule that a fixed rate of interest only would be granted. It was held in the case of Union Bank of India, Bhavnagar v. Narendra Plastics that the rate of interest on the compensation shall be awarded by the tribunal or court of law based on the facts and circumstances of each particular case and in consideration of above guiding principle (provisions of S. 4A(3).

Chapter Three: Costs on Advocates

The costs being levied on the advocates or pleaders is not a very common feature in the Code of Civil Procedure. There are certain very specific situations and circumstances in which the pleaders can be ordered by the court to pay the costs incurred or as is deemed fit by the court. Much of the development in this area has been done by the courts through judicial pronouncements. This way, the lacunae in the code itself have been and are being fulfilled by the courts, and since such specific instances cannot be tracked and concentrated upon by the legislature, it is the duty of the judiciary to do case base justice and levy costs even on the advocates when it serves the purpose of law and delivers justice in the truest sense.

A specific mention for liability of pleaders for costs can be found in Order 32 of the Code, which talks about suits by or against any minor or person of unsound mind.Rule 2 of the above order categorically states that if a suit is instituted by or on behalf of a minor without the presence of a next friend, such a plaint is liable to be taken off the file dependent on the filing of an application by the defendant, and in such a case, the costs are to be borne by the pleader who presented such a plaint. The right has been given to the defendant here to get the plaint annulled, and it is not a provision that comes into action on its own.

Another mention can be found in the Rule 5 of the same order. This rule further extends the provisions as laid down in the Rule 2 discussed above. The rule says that if there is case against or by a minor which is not instituted with the next friend, any order made in such a suit concerning or affecting the minor can be discharged, and a necessary obligation has been put on the pleader to pay the costs incurred if the pleader had the knowledge of the minority of the minor.

This principle was further broadened by the judgement of the Supreme Court in the case of Vidya Verma v. Shiv Narain.In this case the court made an observation that an advocate is personally liable to bear the costs of the litigation if the petition filed by the advocate was not maintainable in the first place, and above that the parties to the petition was not consulted by the advocate.Therefore, the court extended the burden of advocates to bear costs from just in cases of minors to all cases in general where the parties were not consulted and the case was not maintainable. The court is taking a practical view and is doing individual justice.

Another ground for imposing costs on the advocates that has been recognized by the judiciary is that of misconduct by the advocates as governed by The Advocates Act, 1961.It is the discretionary power of the court to award costs against any advocate who has been accused of professional misconduct and found guilty thereby.The reference can also be to the case of Myers v. Elman, wherein the court held that the jurisdiction of the court over practitioners as officers of court extends to the level wherein the court can order payment of costs to the client or the other party or both in case of misconduct, negligence or default on part of the counsel.

Although a contrary line of jurisprudence also exists. It is an argument which was accepted by the court that the Section 35 of CPC does not confer any disciplinary jurisdiction on the court, and thus it would be an abuse of the process of the court to order a legal practitioner to pay any costs personally. But the precedents that hold otherwise far outweigh these, and thus, these cases should be considered per incuriam.