Apex court for higher penalty for false civil claims

NEW DELHI - The Supreme Court has favoured increasing the costs that are imposed on litigants to deter false or vexatious civil claims aimed at delaying cases.

The maximum cost that can be imposed under the existing provisions is Rs.3,000.

The court has suggested to the central government to revisit the provisions of the Civil Procedure Code (CPC) providing for the imposition of costs as the effect of the existing provisions has been severely eroded on account of inflation.

The apex court bench of Justices R.V. Raveendran and R.M. Lodha said: “The provision (section 35A, CPC) relating to compensatory costs in respect of false or vexatious claims or defences has become virtually infructuous and ineffective, on account of inflation”.

Under the said Section of the CPC the maximum cost that could be imposed is Rs.3,000. “This requires a realistic revision…,” the court said.

The court’s judgment Monday also directed the subordinate courts to invoke section 35B to deal with parties delaying cases. “It should be regularly invoked to reduce delay,” the bench said.

The court lamented that “lack of appropriate provisions relating to costs has resulted in a steady increase in malicious, vexatious, false, frivolous and speculative suits”.

The verdict also noted that the absence of such laws stood in the way of arriving at settlements of these cases outside the court in civil matters.

The court’s observations came in a case in which a builder-cum-real estate dealer filed a suit to enforce an “oral” agreement for “commercial collaboration for business profits” with some people in possession of a plot in Paschim Vihar in west Delhi.

However, after he made a payment to the alleged plot owners, no progress was made on the contract. He was to build a multi-storeyed building in which all would have got a share.

He then moved the court for enforcing the contract.

The high court, while hearing his petition, ordered him to file an undertaking that he would pay Rs.25 lakh as damages to the owners if he were to lose the case.

“Affluent speculators in immovable properties cannot be permitted to misuse the process of the court to compel owners to transact with them only,” the high court said.

The real estate dealer then appealed to the division bench of the high court but lost the case. He then moved the apex court.

The apex court said that there was a possibility that the owners would win the case as the entire case was built on an oral agreement.

It also noted that any future damages could not gloss over the fact that the case would take 10 years to decide and that it cast a cloud over the property and restricted the right of the owners to dispose of the property in the meantime.

It, however, set aside the high court order to deal with this by prescribing future costs. The courts cannot slap costs that will deter genuine litigants from moving court, it said.

Nor can they slap costs when a person has not committed any default or delayed proceedings or filed frivolous applications, the apex court said.