In the Court of Small Causes, the law on costs and compensation does two very different jobs at once. On one side sit the ordinary cost provisions of the Code of Civil Procedure, 1908 — Sections 35, 35A and 35B — which Section 17 of the Provincial Small Cause Courts Act, 1887 imports wholesale to indemnify the winner, punish the false claimant and price the delay-monger out of the system. On the other side sits a provision unique to Small Cause practice: the proviso to Section 17(1), which conditions any application to set aside an ex parte decree on the applicant either depositing the decretal amount or furnishing security. This is not “costs” in the textbook sense, but it is the most litigated money-question in the Small Cause arena, and the Supreme Court has held it to be mandatory. This chapter works through both strands — the imported CPC costs regime and the indigenous deposit-or-security rule — with the case law a judiciary or CLAT-PG aspirant must be able to cite cold.
Two strands of “money” in Small Cause practice
The phrase “costs and compensation” in the Small Cause context covers two analytically distinct ideas that students routinely conflate. The first is costs of the suit — the indemnity that follows the event under the Code of Civil Procedure, 1908, supplemented by the deterrent powers in Sections 35A (compensatory costs for false or vexatious claims) and 35B (costs for causing delay). These travel into the Small Cause Court untouched because Section 17 of the Act directs that the procedure prescribed in the CPC “shall be the procedure followed” in a Court of Small Causes save where the Act or the Code provides otherwise. There is nothing in the 1887 Act that displaces the costs sections, so a Small Cause judge awards costs exactly as a regular civil court does, subject only to the Court’s small pecuniary limits.
The second strand is the deposit-or-security condition in the proviso to Section 17(1). This is not a cost at all — it is a procedural toll-gate. A defendant who has suffered an ex parte decree (commonly a tenant decreed to pay arrears and vacate) cannot even be heard on an application to set the decree aside unless he first deposits the decretal money or gives security. Because Small Cause decrees are largely final and non-appealable, this condition is the pressure-point of the whole scheme, and it generates more reported litigation than every other money-question in the Act combined. The rest of this chapter takes the two strands in turn.
Section 17: the gateway that imports the CPC costs regime
Section 17(1) of the Provincial Small Cause Courts Act, 1887 provides that “the procedure prescribed in the Code of Civil Procedure, 1908 shall, save in so far as is otherwise provided by that Code or by this Act, be the procedure followed in a Court of Small Causes” in all suits cognisable by it and in proceedings arising out of such suits. Costs are part of that procedure. There is no costs provision indigenous to the 1887 Act, so the entire CPC apparatus — the general power in Section 35, compensatory costs under Section 35A, and delay-costs under Section 35B — applies of its own force in the Small Cause Court.
The practical consequence is that a litigant cannot argue, “this is only a Small Cause matter, so costs do not arise.” They arise exactly as in a regular suit. What changes is scale: because the Court’s pecuniary jurisdiction is capped, the costs that flow are correspondingly modest, and — as we will see — the compensatory-cost ceiling in Section 35A is itself pegged to the Court’s pecuniary limits. Section 17 is therefore the silent foundation of everything that follows: every cost a Small Cause Court awards is a CPC cost wearing Small Cause clothing.
Section 35 CPC: costs follow the event, in the Court’s discretion
Section 35 of the Code is the general charging provision. Subject to such conditions and limitations as may be prescribed and to the provisions of any law in force, the costs of and incident to all suits are in the discretion of the Court, and the Court has full power to determine by whom and to what extent such costs are to be paid. Crucially, where the Court directs that costs shall not follow the event, it must state its reasons in writing. The default rule, in other words, is that the loser pays; a departure must be reasoned.
The Supreme Court in Ashok Kumar Mittal v. Ram Kumar Gupta, (2009) 2 SCC 656, located costs firmly within this statutory framework and warned against importing extravagant practices. The Court held that the primary object of levying costs under Sections 35 and 35A is to recompense a litigant for the expense incurred in vindicating or defending his right, and that the heavy, exemplary costs sometimes seen in writ proceedings and public interest litigation cannot be mechanically transplanted into ordinary civil litigation governed by the Code. For the Small Cause Court — the archetypal forum of ordinary, small-value civil litigation — this is the governing temper: costs are compensatory and bounded, not punitive windfalls.
Section 35A CPC: compensatory costs for false or vexatious claims and defences
Section 35A is the Code’s answer to the litigant who advances a claim or defence he knows to be false. Where, in any suit or other proceeding (the provision expressly includes execution proceedings but excludes appeals and revisions), a party objects that the opponent’s claim or defence is false or vexatious to the knowledge of the party putting it forward, and that claim or defence is thereafter disallowed, abandoned or withdrawn in whole or in part, the Court may, after recording its reasons, order that party to pay the other compensation by way of costs.
Three conditions are cumulative and strictly construed. First, there must be an objection by the aggrieved party on the ground of falsity or vexatiousness. Second, the claim or defence must be false or vexatious to the knowledge of its proponent — mere failure to prove a case is not enough; there must be conscious falsity. Third, the impugned claim or defence must be disallowed, abandoned or withdrawn. Only then does the discretion arise, and it must be exercised by a reasoned order. In Ashok Kumar Mittal the Supreme Court reiterated that Section 35A is the dedicated vehicle for penalising vexatious litigation in the civil courts and that its ceiling cannot be circumvented by dressing up exemplary costs under Section 35.
The Rs 3,000 ceiling — and the Small Cause carve-out
Section 35A(2) caps the compensatory cost: no Court may order payment of an amount exceeding three thousand rupees, or exceeding the limits of its pecuniary jurisdiction, whichever is less. For the Small Cause Court this double limit bites hard, because its pecuniary jurisdiction is itself modest — the lesser-of formula often pulls the maximum well below Rs 3,000.
The section then contains a carve-out written specifically for Small Cause practice. Where the pecuniary limits of a Court exercising Small Cause jurisdiction under the Provincial Small Cause Courts Act, 1887 (or a corresponding law) are less than two hundred and fifty rupees, the High Court may empower such a Court to award compensatory costs up to two hundred and fifty rupees — exceeding its ordinary limits by not more than one hundred rupees. This is a rare instance of the CPC reaching back to name the 1887 Act expressly, and it confirms that Parliament contemplated Section 35A operating inside Small Cause Courts. The Supreme Court in Ashok Kumar Mittal v. Ram Kumar Gupta, (2009) 2 SCC 656, treated the Rs 3,000 cap as a hard statutory limit on compensatory costs and observed that whether India should move to more realistic cost figures was a question for the Law Commission, not for judicial improvisation around the cap.
Section 35B CPC: costs for causing delay as a condition precedent
Section 35B targets the party who stalls. If, on any date fixed for hearing, a party fails to take a step he was required to take, or obtains an adjournment for taking such a step or for producing evidence or witnesses, the Court may order him to pay the other party the costs occasioned by the failure or adjournment — costs reasonably sufficient to reimburse the other side for its expenses in attending court on that date. The sting lies in the tail: payment of those costs by the next date is made 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.
In the Small Cause Court — designed for speed and summary disposal — Section 35B is a natural fit. The Court can price each unjustified adjournment and stop a delaying defendant from proceeding until he pays. Courts have read the provision pragmatically: while non-payment ordinarily bars further prosecution, the power under Section 148 of the Code to enlarge time has been applied so that a party who defaults non-wilfully may seek extension to deposit the cost. The Small Cause judge thus wields a calibrated tool — firm enough to deter delay, flexible enough to avoid shutting out a bona fide litigant for a slip.
Vinod Seth: the modern philosophy of costs
The leading modern exposition of why costs exist is Vinod Seth v. Devinder Bajaj, (2010) 8 SCC 1. The Supreme Court catalogued the purposes of the cost provisions in Sections 35, 35A and 35B: to deter vexatious, frivolous and speculative litigation or defences; to ensure that parties do not adopt delaying tactics or mislead the court; to provide adequate indemnity to the successful litigant for the expenditure incurred; and to encourage litigants to settle or to adopt alternative dispute resolution before trial.
But Vinod Seth also sounded a caution that is vital in the Small Cause setting, where claims are small and litigants often unrepresented. The Court held that provisions relating to costs must not obstruct access to justice, and that under no circumstances should costs operate as a deterrent to a citizen with a genuine or bona fide claim. The Court further noted that, in practice, awarded costs are usually nominal and unrealistic, which itself encourages frivolous litigation — but the answer is reform of cost-figures, not the throttling of access. For the Small Cause Court, the lesson is balance: use Sections 35A and 35B to punish the dishonest and the dilatory, but never let the spectre of costs frighten away the small honest claimant the Court was built to serve.
Salem Advocate Bar Association: actual, realistic costs
The companion authority is Salem Advocate Bar Association, Tamil Nadu v. Union of India (II), (2005) 6 SCC 344, in which the Supreme Court considered the working of the costs provisions after the CPC amendments. The Court emphasised that under Sections 35, 35A, 35B and 95 there is no upper limit on the costs awardable (save the specific Rs 3,000 cap built into Section 35A itself), and that costs should be actual reasonable costs, including the cost of the time spent by the successful party, rather than the token sums then routinely awarded.
The Court directed High Courts to frame rules and guidelines for subordinate courts so that costs reasonably incurred by the successful party are awarded as a matter of course, with departure only for recorded reasons. This judgment supplies the doctrinal backdrop against which a Small Cause judge exercises the Section 35 discretion: the aspiration is realism and indemnity, not nominal, ritualistic costs. Read together, Salem Advocate Bar Association and Vinod Seth set the two poles of the modern costs jurisprudence — realistic indemnity for the winner, and unobstructed access for the bona fide litigant — between which the Small Cause Court must steer.
The proviso to Section 17(1): deposit or security to set aside an ex parte decree
We now turn to the strand peculiar to Small Cause practice. The proviso to Section 17(1) provides that an applicant for an order to set aside a decree passed ex parte, or for a review of judgment, shall at the time of presenting his application either (a) deposit in the Court the amount due from him under the decree or in pursuance of the judgment, or (b) give such security for the performance of the decree or compliance with the judgment as the Court may, on a previous application made by him in that behalf, have directed.
The architecture is deliberate. The default mode is a cash deposit of the full decretal amount, presented simultaneously with the application. The alternative — security — is available only if the applicant has first moved a separate, earlier application asking the Court to fix the security, and the Court has directed what security it will accept. A defendant cannot unilaterally offer security; he must obtain the Court’s prior sanction for it. The proviso thus protects the decree-holder: a tenant decreed to pay arrears and vacate cannot reopen the decree while keeping the landlord out of his money. This condition is the Small Cause counterpart to the procedure governing ex parte decrees and their setting aside under Order IX of the Code.
Kedar Nath v. Mohan Lal Kesarwari: the proviso is mandatory
The authoritative interpretation comes from Kedar Nath v. Mohan Lal Kesarwari, (2002) 2 SCC 16. The landlord had obtained an ex parte decree for arrears of rent and eviction. The tenants applied under Order IX Rule 13 to set the decree aside but neither deposited the decretal amount nor made a prior application for permission to furnish security; they sought to file a security application later. The Supreme Court (R.C. Lahoti and Brijesh Kumar, JJ.) held the proviso to Section 17(1) to be mandatory, not directory, and dismissed the application as incompetent.
The Court explained the two modes precisely. The applicant must either deposit the decretal amount along with the setting-aside application, or, if he wishes to furnish security instead, he must move a previous application for that purpose before or at the time of presenting the main application, leaving it to the Court to make a prompt order on the security. What the applicant cannot do is present the setting-aside application bare — without deposit and without a prior security application — and hope to regularise the position afterwards. Because the tenants had done exactly that, their application could not be entertained. Kedar Nath is the single most important authority in this chapter and must be cited for the mandatory character of the proviso and for the rule that the security route requires a prior application.
The two modes in detail — deposit versus security
Kedar Nath v. Mohan Lal Kesarwari, (2002) 2 SCC 16, repays close reading on the mechanics of the two modes. Under the deposit mode, the applicant simply pays into court the whole amount due under the decree at the time he files his application to set it aside; no permission is needed and no discretion is engaged — the deposit is a self-executing precondition. Under the security mode, by contrast, the applicant has no right to dictate the form of security. He must first invite the Court to direct what security it considers adequate, and only security so directed will satisfy the proviso.
The Court was emphatic that the obligation on the applicant is to move the previous application for security; it is then for the Court to pass a prompt order. The applicant who moves such an application in time is not prejudiced if the Court takes a little time to fix the security, because the proviso looks to the applicant’s diligence in applying, not to the date the Court ultimately rules. This careful allocation — strict compliance demanded of the applicant, reasonable accommodation for court delay — keeps the proviso mandatory without making it a trap for the genuinely diligent defendant. The deposit is not a “cost” in the indemnity sense, but it functions as the financial price of admission to a rehearing.
Why the deposit rule matters: finality and the excluded-suits backdrop
The deposit-or-security rule cannot be understood in isolation from the Small Cause Court’s defining feature — the near-total finality of its decrees. Because a Small Cause decree is generally final and unappealable, and the only routes of challenge are the setting-aside application and the High Court’s revisional power, the proviso to Section 17(1) is effectively the gate to the only realistic re-hearing a defendant will get. Conditioning that gate on money keeps the litigation honest: a defendant who genuinely intends to contest must put the disputed money beyond his own reach.
This also explains why the Small Cause forum is reserved for simple, summary money-claims and why a long list of suits is excluded from its jurisdiction. The summary, deposit-gated scheme is suitable only for straightforward debt and rent recoveries; complex title and equity disputes are routed to the regular courts precisely because the rough justice of the deposit rule would be unfair there. The costs regime and the deposit regime thus serve the same institutional purpose — to keep small claims cheap, fast and final, while pricing dishonesty and delay out of the system.
A practical checklist for the Small Cause litigant and examinee
Pulling the threads together yields a working checklist. On costs: Section 35 makes costs discretionary but loser-pays by default, with reasons required to depart; Section 35A allows compensatory costs for claims or defences false to the knowledge of the proponent, capped at Rs 3,000 (or the Court’s pecuniary limit, whichever is less), with a special Small Cause carve-out permitting up to Rs 250 for the lowest-jurisdiction courts; and Section 35B prices delay, making payment a condition precedent to further prosecution. The governing philosophy, from Ashok Kumar Mittal, Vinod Seth and Salem Advocate Bar Association, is compensatory realism without obstructing access.
On the deposit-or-security proviso: a defendant seeking to set aside an ex parte Small Cause decree must, at the time of his application, either deposit the full decretal amount or have obtained a prior court direction as to security and complied with it. Per Kedar Nath v. Mohan Lal Kesarwari, (2002) 2 SCC 16, this is mandatory; a bare application is incompetent; and the security route turns on the applicant’s having moved a previous application in time. For the examinee, the highest-value facts to retain are the mandatory character of the proviso, the two distinct modes, the Rs 3,000 / Rs 250 cost ceilings, and the four leading citations. For the wider framework, return to the Provincial Small Cause Courts Act hub.
Frequently asked questions
Does the Provincial Small Cause Courts Act, 1887 contain its own costs provisions?
No. The 1887 Act has no indigenous costs section. Section 17 imports the Code of Civil Procedure procedure, so costs are governed by Sections 35 (general costs), 35A (compensatory costs for false or vexatious claims) and 35B (costs for causing delay) of the CPC, applied within the Court’s small pecuniary limits.
What is the maximum compensatory cost a Small Cause Court can award under Section 35A?
Section 35A(2) caps it at Rs 3,000 or the Court’s pecuniary jurisdiction, whichever is less. A special carve-out lets the High Court empower a Court whose limits are below Rs 250 to award up to Rs 250 (exceeding its limits by not more than Rs 100). In Ashok Kumar Mittal v. Ram Kumar Gupta, (2009) 2 SCC 656, the Supreme Court treated the Rs 3,000 figure as a hard statutory cap.
What does the proviso to Section 17(1) require before an ex parte Small Cause decree can be set aside?
At the time of presenting the application, the applicant must either deposit the full decretal amount in court, or give such security as the Court has directed on a previous application made by him for that purpose. He cannot file a bare setting-aside application and regularise the money condition later.
Why is Kedar Nath v. Mohan Lal Kesarwari the leading authority on Section 17?
In Kedar Nath v. Mohan Lal Kesarwari, (2002) 2 SCC 16, the Supreme Court held the proviso to Section 17(1) to be mandatory, not directory. The applicant must deposit the decretal amount, or move a prior application for permission to furnish security; an application made without either is incompetent and must be dismissed.
Is the deposit under Section 17 a kind of 'costs'?
No. It is a procedural condition precedent to a rehearing, not an indemnity for the successful party. It protects the decree-holder by ensuring the disputed money is secured before the decree is reopened. True costs in the Small Cause Court flow only from Sections 35, 35A and 35B CPC.
Can costs in a Small Cause Court be used to punish frivolous or dilatory parties?
Yes, within limits. Section 35A penalises claims or defences false to the knowledge of the party, and Section 35B prices delay by making payment a condition precedent to further prosecution. But Vinod Seth v. Devinder Bajaj, (2010) 8 SCC 1, warns that costs must never deter a citizen with a bona fide claim, and Ashok Kumar Mittal bars importing the heavy exemplary costs of PIL into ordinary civil litigation.