Costs are the part of a civil judgment most often written carelessly and most frequently challenged. After the issues are answered and the operative relief is settled, the judge must still decide who pays for the litigation and how much. That decision is not a flourish at the end of the decree; it is a reasoned adjudication governed by Sections 35, 35A and 35B of the Code of Civil Procedure, 1908, and by a settled line of Supreme Court authority. This chapter explains how to award costs in an exam-grade civil judgment: the governing rule that costs follow the event, the discretion the court enjoys and its statutory limits, how to fix the quantum, the special heads of compensatory and delay costs, and the precise way to draft the costs clause in the operative portion.
What "costs" means in a civil judgment
In civil litigation, "costs" is a term of art. It does not mean damages, mesne profits or the principal relief; it means the expenses a party has incurred in prosecuting or defending the suit, awarded to indemnify the successful litigant for being dragged to court. The classical heads are court-fees, advocate's fees (within the limits fixed by the High Court's fee rules), process and service charges, expenses of witnesses, and the miscellaneous charges of the proceeding. In Salem Advocate Bar Association v. Union of India (2005), the Supreme Court accepted that realistic costs ought to extend to the time, transport and lodging a litigant actually spends, not merely the nominal heads taxed by the office.
Three distinct statutory species of costs run through the Code and a judgment-writer must keep them apart. Section 35 deals with general costs of the suit. Section 35A provides for compensatory costs in respect of false and vexatious claims or defences. Section 35B provides for costs imposed during the proceeding for causing delay. Each has its own trigger, its own ceiling and its own consequence, and conflating them is a common drafting error. For the architecture into which the costs paragraph fits, see our chapter on the structure of a civil judgment, and for the enabling provisions generally, the statutory basis of judgment writing.
Section 35: the charging provision
Section 35 of the Code is the source of the court's power to award the general costs of and incident to a suit. Sub-section (1) provides that, 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 and incident to all suits shall be in the discretion of the court, and the court shall have full power to determine by whom, out of what property and to what extent such costs are to be paid, and to give all necessary directions for the purpose. The opening words are not decorative; they tie the court's discretion to the rules framed by the High Court and to other statutory limits, a point the Supreme Court has repeatedly enforced.
Sub-section (2) supplies the governing rule of decision: where the court directs that any costs shall not follow the event, the court shall state its reasons in writing. The structure of the sub-section is therefore the reverse of how it is often described. Costs following the event is the norm built into the provision; departure from it is the exception that must be reasoned. A judgment that orders parties to bear their own costs without a word of explanation is, strictly, in breach of the sub-section.
The rule: costs follow the event
"Costs follow the event" means the losing party ordinarily pays the winner's costs. The "event" is the result on each issue or relief, so where a plaintiff succeeds on the suit, the defendant ordinarily bears the costs; where the suit is dismissed, the plaintiff does. The rule serves two purposes: it indemnifies the successful party for the expense of vindicating or defending a right, and it discourages speculative litigation by attaching a financial consequence to defeat.
In Salem Advocate Bar Association v. Union of India (2005) the Supreme Court reaffirmed that the general rule is that costs follow the event, and that if the court chooses to depart from it the court must record its reasons. The Court, echoing the Malimath Committee, deprecated the prevailing practice of routinely directing parties to bear their own costs and called for the award of actual, realistic costs. The judgment-writer should therefore treat "each party to bear its own costs" not as a default but as a reasoned exception requiring justification — for instance, where success is genuinely divided, where the litigation arose from the conduct of the successful party, or where a pure question of law of general importance was being tested.
Discretion and its statutory limits
The discretion conferred by Section 35 is judicial, not arbitrary. It must be exercised on settled principles and within the limits the Code itself prescribes. The leading authority is Ashok Kumar Mittal v. Ram Kumar Gupta (2009), where the Supreme Court held that although the award of costs is in the discretion of the court, that discretion is subject to such conditions and limitations as may be prescribed and to the provisions of any law in force; and that where the matter is governed by Sections 35 and 35A, there is no question of invoking inherent power under Section 151 to award costs in excess of, or contrary to, those specific provisions. The Court underscored that the object of costs under Sections 35 and 35A is to recompense a litigant for the expense incurred in vindicating or defending a right.
This principle was carried further in Vinod Seth v. Devinder Bajaj (2010) 8 SCC 1. The High Court had imposed, as a condition for entertaining a suit for specific performance, an undertaking by the plaintiff to pay a large sum as damages if he failed. The Supreme Court set aside that condition, holding that there is no provision enabling a court to impose such a deposit as a price of access to justice, and that the power to award costs must be exercised within the framework of the Code. Justice Raveendran nonetheless catalogued the legitimate purposes of costs: to deter vexatious, frivolous and speculative litigation, to ensure compliance with procedure, to indemnify the successful litigant, and to encourage settlement and resort to alternative dispute resolution.
Fixing the quantum: actual and realistic costs
Once the court decides who pays, it must fix how much. Historically costs were taxed by the office on a meagre tariff that bore no relation to what litigation actually cost, which is why courts and litigants treated them as trivial. The modern direction, beginning with Salem Advocate Bar Association (2005) and reinforced in Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust (2012) 1 SCC 455, is that costs must be actual and realistic and must reasonably reflect the expense genuinely incurred — court-fee paid, advocate's fee, witness expenses and the incidental charges of the litigation.
At the same time, the quantum is fenced by the conditions and limitations of the High Court's cost and fee rules, as Ashok Kumar Mittal insists. A trial judge cannot award an arbitrary lump sum untethered to those rules under the banner of "realistic costs". The disciplined approach is to identify the recoverable heads, fix a figure that is realistic yet within the prescribed limits, and, where a substantial or unusual sum is awarded, record brief reasons. In Sanjeev Kumar Jain the Supreme Court, dealing with a very large costs order, stressed that even realistic costs must be reasonable and computed on identifiable heads rather than plucked from the air. For how the quantum is then expressed in the body of the judgment, compare the treatment of relief in the plaintiff's case.
Section 35A: compensatory costs for false or vexatious claims
Section 35A is a penal provision distinct from ordinary costs. It empowers the court, where a claim or defence is found to be false or vexatious to the knowledge of the party raising it, to award compensatory costs to the party who has suffered. The conditions are strict and cumulative. First, an objection must have been taken at the earliest opportunity that the claim or defence was false or vexatious. Second, the court must, after hearing the parties, record its finding that the claim or defence was false or vexatious to the knowledge of the party, and must record its reasons for that finding.
Crucially, the amount of compensatory costs under Section 35A is capped: it shall not exceed three thousand rupees or the limits of the court's pecuniary jurisdiction, whichever is less. This statutory ceiling is the limit the Supreme Court had in mind in Ashok Kumar Mittal when it held that inherent power cannot be used to award compensatory costs beyond what Section 35A permits. An order under Section 35A does not bar a separate suit for damages such as malicious prosecution, but it must be supported by an express finding of falsity or vexatiousness — a bare adverse comment will not do. Because it is penal, the judgment-writer should set out the finding squarely, much as one would when recording the deficiencies of a defendant's case.
Section 35B: costs for causing delay
Section 35B, inserted by the 1976 amendment, targets the party who stalls the proceeding. Where a party fails to take a step it was required to take by a date fixed by the court, or obtains an adjournment for taking such a step or for producing evidence or any other reason, the court may, for reasons to be recorded, order that party to pay to the other the costs occasioned by the default or the adjournment — costs that may include the expenses of the other party's attendance and witnesses for that day.
The teeth of the provision lie in its proviso: the payment of the costs so ordered shall be a condition precedent to the further prosecution of the suit by the plaintiff, or of the defence by the defendant, as the case may be. Sub-section (2) provides that costs ordered under Section 35B are not to be included in the costs awarded in the final decree, and that an order for such costs may be executed as a decree. Because the proviso operates as a bar on further prosecution, it must be applied with care; the Supreme Court's reasoning in Mahanth Ram Das v. Ganga Das, AIR 1961 SC 882 — that a court which fixes a time for compliance retains the power to extend it under Section 148 where the default is not wilful — has been applied to soften the rigour of Section 35B, so that a defaulting party may be allowed to deposit the delay costs belatedly rather than have the suit or defence struck out outright.
By whom, and out of what property
Section 35(1) expressly empowers the court to determine by whom and out of what property the costs are to be paid. This matters in suits with multiple parties or representative capacities. Where several defendants are sued and only some are found liable, costs should ordinarily be apportioned so that a successful co-defendant is not saddled with the costs of a contest it did not provoke. In suits by or against a trustee, executor or representative, the court may direct that costs be paid out of the estate or trust property rather than personally, unless the representative's own misconduct justifies a personal order.
The judgment must therefore be specific. It is not enough to write "with costs"; where the position is not straightforward, the court should name the party liable, the party entitled, and, if relevant, the fund out of which payment is to be made. A precise costs direction is also essential for execution, since a vague order invites a fresh round of litigation over its meaning.
When to make no order as to costs
Departing from the costs-follow-the-event rule is legitimate, but it must be reasoned, as Section 35(2) commands. The recognised situations include: where success is genuinely divided, each party prevailing on substantial issues; where the litigation was necessitated by the successful party's own conduct, such as ambiguous documents it drafted; where the suit raised a bona fide and difficult question of law of public importance; where the relationship between the parties (for instance, close family members in a partition) makes an adverse order inappropriate; and where the winning party was itself guilty of suppression, delay or misconduct during the trial.
In each case the judgment must say why. "Parties to bear their own costs" followed by a one-line reason — "as the suit involved a genuine dispute over the construction of an ambiguous family settlement" — satisfies the sub-section; the same words with no reason at all do not. Salem Advocate Bar Association makes the recording of reasons a substantive requirement, not a formality, and an unreasoned no-costs order is vulnerable in appeal.
Costs distinguished from interest and damages
A judgment-writer must not let costs bleed into the heads that precede them. Interest is governed by Section 34 of the Code, which deals with interest on the principal sum adjudged from the date of suit to the date of decree and thereafter; it is part of the money relief, not a litigation expense. Damages and mesne profits are substantive reliefs flowing from the cause of action and must be pleaded and proved. Costs, by contrast, are the indemnity for the act of litigating, awarded once the merits are decided. The three are determined sequentially in the operative portion: first the principal relief, then interest under Section 34, then costs under Sections 35 and, where applicable, 35A and 35B.
Keeping them analytically separate avoids a frequent error — treating a generous costs order as a substitute for damages the plaintiff could not strictly prove, or using "costs" loosely to describe interest. Each head rests on a different provision and attracts a different ceiling, and the appellate court reads the operative paragraph expecting that discipline. The Supreme Court's insistence in Ashok Kumar Mittal that costs stay within their statutory limits is, at bottom, a demand that the judge respect these boundaries rather than blur them into the relief.
Drafting the operative costs clause
The costs direction belongs in the operative portion of the judgment, after the relief and any interest, and it should be drafted as a self-contained, executable command. A clean decree for a successful plaintiff reads: "The suit is decreed. The defendant shall pay the plaintiff a sum of Rs. ____ together with interest at ___% per annum from the date of suit till realisation, and the costs of the suit." Where costs are quantified, the figure is stated: "... and the costs of the suit assessed at Rs. ____."
Where the court departs from the rule, the clause carries its reason: "In the circumstances, and as the suit turned on a genuine question of construction, the parties shall bear their own costs." Where compensatory or delay costs are imposed, they are recorded separately with the finding that supports them, and Section 35B costs are kept out of the final decree costs as sub-section (2) requires. The aim is a paragraph that an executing court can enforce without interpretation. For the placement of this clause within the overall judgment, return to the chapter on the structure of a civil judgment and the civil judgment writing hub.
Common errors to avoid
Several recurring mistakes mar costs paragraphs in mains answers and in practice. The first is the unreasoned "no order as to costs", which violates Section 35(2). The second is awarding compensatory costs under Section 35A without recording the express finding of falsity or vexatiousness, or in excess of the three-thousand-rupee ceiling — both fatal under Ashok Kumar Mittal. The third is treating Section 35B delay costs as part of the final decree, contrary to its sub-section (2), or applying its condition-precedent bar so rigidly as to strike out a defence where time could lawfully be extended under the Mahanth Ram Das principle.
A fourth error is invoking inherent power under Section 151 to award a lump-sum cost beyond the Code's limits — exactly what Vinod Seth and Ashok Kumar Mittal forbid. A fifth is a vague "with costs" in a multi-party suit that leaves apportionment unclear. Avoiding these requires the same discipline urged throughout this series: state the rule, apply it to the facts, record reasons for any departure, and keep the order within statutory limits.
An exam checklist for the costs paragraph
For the examination hall, reduce the law to a short sequence. One: identify the successful party on each issue or relief — the "event". Two: apply the default that costs follow the event under Section 35. Three: if departing, state the reason in writing as Section 35(2) requires. Four: fix the quantum on actual, realistic heads within the High Court's cost rules, following Salem Advocate Bar Association and Sanjeev Kumar Jain. Five: consider whether the facts attract compensatory costs under Section 35A (with a recorded finding and within the Rs. 3,000 ceiling) or delay costs under Section 35B.
Six: specify by whom and out of what property the costs are payable where that is not obvious. Seven: draft a clean, executable operative clause, keeping interest, the principal relief and costs analytically separate. A candidate who walks through these seven steps will produce a costs paragraph that is both legally sound and recognisably the work of someone who has read the cases rather than merely the bare section.
It helps to remember the spirit behind the rules. Costs are not a vindictive levy on the loser; they are the law's modest attempt to make litigation cost something to those who pursue it without merit and to repair, in part, the expense forced on those who must defend a right. Vinod Seth and Salem Advocate Bar Association both pull in the same direction — towards realistic indemnity, discipline of frivolous litigation, and encouragement of settlement — while Ashok Kumar Mittal keeps that purpose within the four corners of the Code. A costs paragraph written with that balance in mind, and with reasons recorded wherever the court departs from the ordinary rule, will rarely be disturbed in appeal.
Frequently asked questions
What is the general rule for awarding costs in a civil suit?
The general rule is that costs follow the event — the unsuccessful party ordinarily pays the successful party's costs. This is embedded in Section 35 CPC, and Section 35(2) requires the court to record reasons in writing whenever it directs that costs shall not follow the event. The Supreme Court reaffirmed the rule in Salem Advocate Bar Association v. Union of India (2005) and deprecated the routine practice of leaving parties to bear their own costs.
Is the court's discretion to award costs unlimited?
No. Section 35 makes costs discretionary but expressly subject to such conditions and limitations as may be prescribed and to any law in force. In Ashok Kumar Mittal v. Ram Kumar Gupta (2009) the Supreme Court held that where the matter is governed by Sections 35 and 35A, a court cannot use inherent power under Section 151 to award costs in excess of, or contrary to, those provisions. Vinod Seth v. Devinder Bajaj (2010) similarly confined the power within the Code's framework.
What is the maximum compensatory cost under Section 35A?
Compensatory costs for a false or vexatious claim or defence under Section 35A cannot exceed three thousand rupees, or the limits of the court's pecuniary jurisdiction, whichever is less. The court must also record an express finding that the claim or defence was false or vexatious to the knowledge of the party raising it, after an objection was taken at the earliest opportunity. This ceiling cannot be evaded through inherent power, as confirmed in Ashok Kumar Mittal.
What happens if a party does not pay costs ordered under Section 35B?
Under Section 35B, payment of delay costs is a condition precedent to the further prosecution of the suit or defence, and such costs are not included in the final decree and may be executed as a decree. However, applying the principle of Mahanth Ram Das v. Ganga Das, AIR 1961 SC 882, a court that fixed the time can extend it under Section 148 where the default is not wilful, so the bar is not always an automatic dismissal.
How should the court fix the quantum of costs?
Costs must be actual and realistic, reasonably reflecting court-fee, advocate's fee, witness expenses and incidental charges, as directed in Salem Advocate Bar Association (2005) and Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust (2012) 1 SCC 455. At the same time the figure must remain within the conditions and limitations of the High Court's cost and fee rules; a court cannot award an arbitrary lump sum untethered to those rules under the label of realistic costs.
How are costs distinguished from interest in a judgment?
Interest is governed by Section 34 CPC and forms part of the money relief, running on the principal sum adjudged from the date of suit. Costs under Sections 35, 35A and 35B are the indemnity for the expense of litigating, not part of the substantive relief. In the operative portion the court decides them in sequence — principal relief, then interest under Section 34, then costs — keeping each head on its own statutory footing.