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Saturday, December 17, 2016

interest on costs - it is delted in indian Laws whereas in UK court granted interest of costs - it is executable in India = The appellant relied upon Section 35 of the CPC which enables Courts in India to impose litigation costs at the discretion of the Court. However, there is no provision under the CPC or the Interest Act, 1978 which permits imposition of interest on litigation costs. Further tried to impress upon that the amended Section 35(3) of the CPC permitted a Civil Court to grant interest on costs. The unamended Section 35(3) stated as follows: The Court may give interest on costs at any rate not exceeding six per cent per annum, and such interest shall be added to the costs and shall be recoverable as such. This Provision was consciously omitted in 1956 (pursuant to Act 66 of 1956). In view of the deletion of Section 35(3) of the CPC, it is argued that grant of interest on costs is no longer recognized under India law. In this context, it is educative to read the following comments made in the Debate on the Bill against the deletion of Section 35 (3), by Hon’ble Member of Lok Sabha Shri Tek Chand; “..In this connection, a reference has been made to section 35, sub- section (3), which according to clause 3 of the Bill, is to be omitted. Not that I have usurious propensities, but I do not like this provision. It is true that there should not be any profiteering by the people; I concede that, but there are instances when the costs amount to five figures or more, and there is no reason why, when an unsuccessful party is subjecting the successful party not only to a long dilatory and unending dispute, but also to frivolous and vexatious litigation whereby he is out of pocket to the tune of several thousands, the law or the legislature should be so solicitous that such person should not pay interest, if he does not propose to pay or if he intends to delay the payment of the costs. One unfortunate and unhappy feature of administration of civil law in our land, is apart from delays and objections of frivolous and vexatious nature, justice is made available, if at all, at a very high and exorbitant price”. The Hon’ble Member of Lok Sabha thus articulated that omitting sub-section (3) would encourage delay in realization of decree costs. A reference to the Report of Law Commission and the views expressed in Debate on the Bill, as extracted in the Law Commission Report (supra), would indicate that the consequences of deletion of sub-section (3) of Section 35 were very much considered by the Parliament. When the idea of deletion is not to encourage interest on costs as a source of income to the litigants, the Parliament did not choose positively to prohibit interest on costs by inserting suitable clause in Section 35. It is to the reciprocal advantage of the Courts of all nations to enforce foreign rights as far as practicable. To this end, broad recognition of substantive rights should not be defeated by some vague assumed limitations of the Court. When substantive rights are so bound up in a foreign remedy, the refusal to adopt the remedy would substantially deprive parties of their rights. The necessity of maintaining the foreign rights outweighs the practical difficulties involved in applying the foreign remedy. In India, although the interest on costs are not available due to exclusion of Section 35(3), the same does not mean that Indian Courts are powerless to execute the decree for interest on costs. Indian Courts are very much entitled to address the issue for execution of the interest amount. The right to 8% interest as per the Judgments Act, 1838 of UK can be recognized and as well as implemented in India.Therefore, we are of the considered opinion that the Execution Petition filed by the Respondents for execution of the order dated 19th October, 2006 passed by the English Court is maintainable under the relevant provisions.


                                                                  REPORTABLE



                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO. 10106 OF 2016
                               ARISING OUT OF
              SPECIAL LEAVE PETITION (CIVIL) NO. 19791 OF 2013


M/S ALCON ELECTRONICS PVT. LTD.                       ...APPELLANT
                                   VERSUS
Celem s.a. OF fos 34320 ROUJAN, FRANCE & ANR. ..RESPONDENTS

                                  JUDGMENT
N.V. RAMANA, J.
In this appeal by special leave, the appellant—judgment debtor  assails  the
impugned judgment dated 8th April, 2013 passed by the High Court  of  Bombay
in Civil Revision Application No. 680 of 2011, whereby the  High  Court  has
dismissed the application filed by the appellant  seeking  declaration  that
the Judgment and Order dated 19th October, 2006 passed by the High Court  of
Justice, Chancery Division, Patents Court, England (hereinafter referred  to
as ‘the English Court’) is not  executable  before  the  District  Court  at
Nasik, by confirming  the  order  dated  15th  April,  2011  passed  by  the
District Judge-2, Nasik.

The facts in nutshell are that the respondents herein filed a  Suit  against
the appellant before the English Court for infringement of patent vested  in
the respondents besides other reliefs. In  the  said  suit,  the  appellant-
defendant filed an application challenging the jurisdiction of  the  English
Court. In that application, the reliefs sought by the appellant include  the
relief that the respondents—original claimants  have to  pay  the  costs  to
the  appellant  occasioned  by  filing  the  application  to  be   summarily
assessed. The English Court by its Order dated 19th October, 2006  dismissed
the claim of the appellant and further directed  it  to  pay  the  costs  of
application  to  the  respondents—original  claimants  set  at             £
12,229.75. Thereafter it appears that the appellant agreed to pay the  costs
and sought for  some  time.  When  the  respondents  filed  a  petition  for
execution in India, the appellant  opposed  it  in  an  application  on  the
ground that the order of English Court  is  not  executable.  The  executing
Court dismissed the same which was confirmed by the High  Court.  Hence  the
appellant is before us by way of this appeal.

The appellant made following  submissions  assailing  the  Judgment  of  the
Courts below-

An  interlocutory  Order  of  English  Court  with  respect   to   its   own
jurisdiction (with or without a direction for payment  of  costs)  does  not
amount to  a  judgment  ‘on  merits  of  the  case’  and  is  therefore  not
conclusive under Section 13(b) of the Civil Procedure Code (CPC for short).

In the alternative, the Order of the English Court in the present case  does
not amount to ‘decree’ under Explanation 2 to Section 44A of the CPC.
Without prejudice to the aforesaid, the part of the  order  of  the  English
Court relating to the payment of interest on costs should  not  be  executed
in view of the deletion of the erstwhile Section 35(3) of the CPC.

The Respondents have responded in the following manner.  The  decree  passed
by the English Court is very much a decree on merits as  the  English  Court
has not only given a detailed Judgment on merits  of  the  matter  but  also
considered the entire evidence as produced by  the  parties  including  oral
evidence by way of witness statements, documentary evidence produced by  the
parties and the application challenging  the  jurisdiction  of  the  English
Court has been decided finally on merits  of  the  case  put  forth  by  the
defendants.  Nothing  further  was  required   to   be   done   insofar   as
consideration  of  the  application  of  the   appellant   challenging   the
jurisdiction of the English Court is concerned.

It is submitted that Explanation-II to Section 44A is  concerned,  the  same
does not refer to costs which are defined under Section 35 of the  CPC.  The
costs having been quantified have assumed the character of  a  money  decree
for costs which cannot be equated, either with a fines or penalty  which  is
imposed on a party by the Court or taxes payable to a local authority or  to
a Government or other charges of like nature. It is the  submission  of  the
respondent that the legislative intent was to keep out  of  the  purview  of
Section 44A the execution of the foreign decree if it related to payment  of
either taxes or charges of a like nature or  a  fine  or  penalty.  Even  an
arbitration award has been  excluded.  At  best  it  could  be  argued  that
compensatory costs in respect of false or vexatious claims which  have  been
defined under Section 35A could be excluded.

It is further submitted that  Section  13,  CPC  specifically  excludes  the
execution of such decrees which are  mentioned  under  Clauses  (a)  to  (f)
thereof and this Section does not mention decrees for the costs.

Furthermore they respond that the Judgments Act, 1838 of United Kingdom,  as
amended in 1993, provides that every judgment debt shall  carry  interest  @
8%. The rules framed in U.K. provide for interest to run from the  date  the
Judgment is given. The rules also provide that a  judgment  or  order  takes
effect from the day when it is given on merits or such dates  as  Court  may
specify. The Rules further provide that a party must comply with a  judgment
or order for the Payment of an amount of money (including costs)  within  14
days of the  date  of  Judgment  or  order  unless  the  judgment  or  order
specifies a different date for compliance or  any  of  the  rule  specify  a
different date for compliance or the Court has  stayed  the  proceedings  or
execution.

Moreover, all the Orders  of  the  Court  are  required  to  be  obeyed  and
implemented, unless the Court itself sets  a  date  for  its  non-execution.
Otherwise orders will only remain a piece of paper and merely  decorate  the
file of litigant, which would lead to an impression  being  created  in  the
minds of the litigants that they could  with  impunity  avoid  to  obey  the
Court Order. It is neither the legislative intent  nor  the  desire  of  the
Judiciary.

Legislative intent of executing Orders relating  to  payments  of  costs  is
clear from amendment carried out to section 36,  CPC  to  clarify  that  the
provisions relating to execution of decree or order include payment under  a
decree or order as well.

We have heard the learned counsel on either side at length and perused the
record. The following issues fall for our consideration:

Whether the order passed by the Foreign Court falls  within  the  Exceptions
to Section 13 of the CPC?

Whether the order passed by the Foreign Court amounts to a “decree” and  the
same is executable?

If answer to issue No. 2 is in affirmative, whether  the  decree  for  costs
would fall within the ambit of Explanation 2 of Section    44A  (3)  of  CPC
and makes it inexecutable?

Whether interest on costs would fall within the ambit of  Explanation  2  of
Section 44A of CPC?

Whether the interest on costs can be executed in India in view  of  deletion
of Section 35(3) of CPC?

In re Issue No. 1 — Admittedly the English Court passed an order dated  19th
October,  2006  dismissing  the  application   passed   by   the   appellant
questioning the jurisdiction of the Court. The appellant itself at the  time
of filing the application has prayed  the  Court  to  summarily  assess  the
costs to be paid to him in the event of his application being allowed.  Both
the appellant—defendant as well the  respondents—claimants  participated  in
the proceedings by adducing their respective oral  as  well  as  documentary
evidence. Skelton arguments on behalf of  both  parties  were  filed  before
Court. The appellant herein has filed schedule  of  costs  at  £  25,406.30.
Then the English Court has passed a detailed order on 19th October, 2006  on
the question of jurisdiction holding that it has jurisdiction  to  entertain
the Suit  and  also  directed  the  defendants  to  pay  the  costs  of  the
application which was summarily assessed at a sum of   £ 12,429.75.

It appears that the appellant herein has accepted the order and  sought  for
time to pay  the  costs.  Moreover,  it  did  not  choose  to  approach  the
appellate Court assailing the order and the same has attained  finality.  In
spite of  the  same,  the  appellant  filed  the  application  opposing  the
execution petition filed by the respondents. The first and  foremost  ground
of attack against the order passed by the English Court is  that  the  order
is not conclusive as per Section 13(b), CPC. Such  argument  appears  to  be
attractive but we are not able to appreciate  the  same  in  the  facts  and
circumstances of the case. Before we proceed further, it is  appropriate  to
have a look at Sections 13 and 14 of CPC which read as under:
Section 13. When foreign judgment not conclusive : A foreign judgment  shall
be conclusive as to any matter thereby  directly  adjudicated  upon  between
the same parties or between parties under whom they or  any  of  them  claim
litigating under the same title except—

where it has not been pronounced by a Court of competent jurisdiction;

where it has not been given on the merits of the case;

where it appears on the  face  of  the  proceedings  to  be  founded  on  an
incorrect view of international law or a refusal to  recognise  the  law  of
India in cases in which such law is applicable;

where the proceedings in which the judgment  was  obtained  are  opposed  to
natural justice;

where it has been obtained by fraud;

where it sustains a claim founded on a breach of any law in force in India.

Section 14. Presumption as to foreign judgments:  The  Court  shall  presume
upon the production of any document purporting to be a certified copy  of  a
foreign judgment that such judgment was pronounced by a Court  of  competent
jurisdiction,  unless  the  contrary  appears  on  the  record;   but   such
presumption may be displaced by proving want of jurisdiction.

 A plain reading of Section 13, CPC would show  that  to  be  conclusive  an
order or decree must have been obtained after  following  the  due  judicial
process by giving reasonable notice and opportunity to all  the  proper  and
necessary parties to put forth their case. When once these requirements  are
fulfilled, the executing Court cannot enquire into  the  validity,  legality
or otherwise of the judgment.

 A glance on the enforcement  of  the  foreign  judgment,  the  position  at
common law is very clear that a foreign judgment which has become final  and
conclusive between the parties is not impeachable either  on  facts  or  law
except on limited grounds enunciated under Section 13,  CPC.  In  construing
Section 13, CPC we have to look at  the  plain  meaning  of  the  words  and
expressions used therein and need not look at any  other  factors.  Further,
under Section 14, CPC there is a presumption that the  Foreign  Court  which
passed the order is a Court of competent jurisdiction which of course  is  a
rebuttable presumption. In the present case, the appellant does not  dispute
the jurisdiction of the English Court  but  its  grievance  is,  it  is  not
executable on other grounds which are canvassed before us.

The appellant contends that the order of the English Court is not  given  on
merits and that it falls under Section 13(c) of  the  CPC  as  a  result  of
which it is not conclusive and  therefore  inexecutable.  We  cannot  accept
such submission. A judgment can  be  considered  as  a  judgment  passed  on
merits when the Court deciding the case gives opportunity to the parties  to
the  case  to  put  forth  their  case  and  after  considering  the   rival
submissions, gives its decision in the form of an order or judgment,  it  is
certainly an order on merits of the case in the  context  of  interpretation
of Section 13(c) of the CPC.

Applying the same analogy to the facts of the  case  on  hand,  we  have  no
hesitation to hold that the order passed by the English Court  is  an  order
on merits. The appellant who has submitted itself  to  the  jurisdiction  of
the Court and on its own requested the Court to assess the costs  summarily.
While passing a reasoned order by dismissing the application  filed  by  the
appellant, English Court granted the costs against  the  appellant.  Had  it
been the case where appellant’s  application  was  allowed  and  costs  were
awarded to it, it would have as well filed a petition for the  execution  of
the order. Be that as it is, the appellant did not  prefer  any  appeal  and
indeed sought time to pay the costs. The  appellant,  therefore,  cannot  be
permitted to object the execution. It cannot be permitted to  blow  hot  and
cold at the same time. In our opinion, it is a pure abuse of process of  law
and the Courts should be very cautious in entertaining such petitions.

In International Woollen Mills v. Standard Wool  (UK)  Ltd.[1],  this  Court
observed :
“...Even where the defendant chooses to remain ex parte and to keep out,  it
is possible for the plaintiff to adduce evidence in  support  of  his  claim
(and such evidence is generally insisted on  by  the  Courts  in  India), so
that the Court may give a decision on the merits of his  case  after  a  due
consideration  of  such   evidence   instead   of   dispensing   with   such
consideration and giving a decree  merely  on  account  of  the  default  of
appearance of the defendant.

In the former case the judgment will be one  on  the  merits  of  the  case,
while in the latter the judgment will be  one  not  on  the  merits  of  the
case. Thus it is obvious that the non-appearance of the defendant  will  not
by itself determine the nature of the judgment one way or  the  other.  That
appears to  be  the  reason  why  Section 13 does  not  refer  to  ex  parte
judgments falling under a separate category by themselves...”

The principles of comity of  nation  demand  us  to  respect  the  order  of
English Court. Even in regard to an interlocutory order, Indian Courts  have
to give due  weight  to  such  order  unless  it  falls  under  any  of  the
exceptions under Section 13 of the CPC. Hence we feel that the order in  the
present case passed by the English Court does not  fall  under  any  of  the
exceptions to Section 13 of  the  CPC  and  it  is  a  conclusive  one.  The
contention of the appellant  that  the  order  is  the  one  not  on  merits
deserves no consideration and therefore liable to be rejected.  Accordingly,
Issue No. 1 is answered.

In re Issue No. 2 — The next ground put forth by the appellant is  that  the
order being an interlocutory order does not have the shades of a  ‘judgment’
to be executed before the Indian Court and  hence  the  order  not  being  a
‘decree’ is in executable. To appreciate this, it is appropriate to  have  a
look at Section 44A of CPC
44A. Execution of decrees passed by Courts in reciprocating territory—

Where a certified copy of decree of  any  of  the  superior  Courts  of  any
reciprocating territory has been filed in a District Court, the  decree  may
be executed in India as if it had been passed by the District Court.

Together with the certified copy of the decree shall be filed a  certificate
from such superior Court stating the extent, if any,  to  which  the  decree
has been satisfied or adjusted and such certificate shall, for the  purposes
of proceedings under this section, be conclusive  proof  of  the  extent  of
such satisfaction or adjustment.

The provisions of section 47 shall as from the filing of the certified  copy
of the decree apply to the proceedings  of  a  District  Court  executing  a
decree under this section, and the District Court shall refuse execution  of
any such decree, if it is shown to the satisfaction of the  Court  that  the
decree falls within any of the exceptions specified in clauses  (a)  to  (f)
of section 13.

Explanation 1— "Reciprocating territory"  means  any  country  or  territory
outside India which the Central  Government  may,  by  notification  in  the
Official Gazette, declare to be a reciprocating territory for  the  purposes
of  this  section;  and  "superior  Courts",  with  reference  to  any  such
territory, means such Courts as may be specified in the said notification.

Explanation 2.— "Decree" with  reference  to  a  superior  Court  means  any
decree or judgment of such Court under which a sum of money is payable,  not
being a sum payable in respect of taxes or other charges of  a  like  nature
or in respect to a fine or other penalty, but shall in no  case  include  an
arbitration award, even if such an award  is  enforceable  as  a  decree  or
judgment.

  As  far  as  the  explanation  with  regard  to  reciprocal  territory  is
concerned, there is no dispute that England  is  a  reciprocating  territory
for  the  purpose  of  above  Section.  Section  44A  of  CPC  indicates  an
independent right conferred on a foreign decree holder for enforcement of  a
Decree/Order in India. Section 44A was inserted by Section 2  of  the  Civil
Procedure Code (Amendment) Act, 1937 (Act No. 8 of 1937).  This  Section  is
meant to give effect to  the  policy  contained  in  the  Foreign  Judgments
(Reciprocal Enforcement) Act, 1933. It is a part of  the  arrangement  under
which on one part decrees of Indian Courts are  made  executable  in  United
Kingdom and on the other part, decrees of Courts in the United  Kingdom  and
other notified parts of Her  Majesty’s  dominions  are  made  executable  in
India. It is to be seen that as United Kingdom is a reciprocating  territory
and  the  High  Court  of  Justice,  Chancery  Division,  England  being   a
recognized superior Court in England. Therefore, the order  passed  by  that
Court is executable in India under Section 44A of the CPC. Now  we  come  to
the next limb of the argument put forth by  the  appellant  that  the  order
passed by the English Court does not amount to a decree and hence it is  not
executable.  It  is  no  doubt  correct,  Section  44A  of  CPC  deals  with
“execution of decrees passed by Courts in reciprocating  territory”.  Before
we further decide this issue it  is  appropriate  to  have  a  look  at  how
decree, order and foreign judgment are defined under the CPC.

As per Section 2(2) of the CPC, "decree" means the formal expression  of  an
adjudication which, so far as regards the Court expressing it,  conclusively
determines the rights of the parties with  regard  to  all  or  any  of  the
matters in controversy in the suit and may be either preliminary  or  final.
It  shall  be  deemed  to  include  the  rejection  of  a  plaint  and   the
determination of any question within  Section  144  of  CPC  but  shall  not
include (a) any adjudication from which an appeal lies as an appeal from  an
order, or (b) any order of dismissal for default.

Then a “foreign judgment” is defined under Section 2(6)  as  judgment  of  a
foreign  Court.   “Judgment”  as  per  Section  2(9)  of  C.P.C.  means  the
statement given by the Judge on the grounds of a decree or order.  Order  is
defined under Section 2(14) of CPC as a formal expression  of  any  decision
of the Civil Court which is not a ‘decree’. Then Explanation  2  to  Section
44A (3) says "decree" with reference to a superior Court means any  ‘decree’
or ‘judgment’. As per the plain reading of the definition  ‘Judgment’  means
the statement given by the Judge on the  grounds  of  decree  or  order  and
order is a formal expression of a Court.  Thus  “decree”  includes  judgment
and  “judgment”  includes  “order”.   On  conjoint  reading   of   ‘decree’,
‘judgment’ and ‘order’ from any angle,  the  order  passed  by  the  English
Court falls within  the  definition  of  ‘Order’  and  therefore,  it  is  a
judgment and thus becomes a “decree” as per Explanation  to  Section  44A(3)
of CPC.  In this case, the Court at England, after following the  principles
of natural justice, by recording reasons and very importantly basing on  the
application of the appellant itself, has conclusively decided  the     issue
with regard to jurisdiction and passed the order coupled with  costs.  Hence
in our considered  opinion,  the  order  passed  by  the  Foreign  Court  is
conclusive in that respect and on merits. Hence executable as a  decree  and
accordingly the issue is answered.

In re Issue Nos. 3 & 4 — The next contention advanced  is  that  the  decree
for costs does not attract the Explanation II of Section 44A which  concerns
itself with taxation or other charges of like nature or in respect  of  fine
or other penalty. We have to first see the nature of the  costs  imposed  by
the decree for interpreting the relevant explanation.  Before  referring  to
the principles/guidelines in the decisions cited, it would  be  apposite  to
advert to the concept of ‘costs’ and the general  principles  governing  the
award of costs. Law Commission in  its  240th  Report  on  “Costs  on  Civil
Litigation” provides valuable resource on nature of costs in India  as  well
as England.

The ‘costs’ signifies the sum of money which the Court orders one  party  to
pay to another party in respect of  the  expenses  of  litigation  incurred.
Except where specifically provided by the statute or by rules of the  Court,
the costs of proceedings are in the Court’s discretion.

 In Johnstone v. The Law Society of Prince Edward Island [2],  the  Canadian
Court  of  Appeal  speaking  through  McQuaid,  J  described  costs  in  the
following words :

“… the sum of money which the court orders one party to  pay  another  party
in an action as compensation for the expense  of  litigation  incurred.  The
definition continues to the effect that costs are  awarded  as  compensation
(i.e. reimbursement); there is, unlike damages, no restitution in  integrum,
that is to say, no concept in costs, as there exists in  damages,  that  the
injured person should be placed, in so far as money can do so, in  the  same
position as he occupied before the injury was suffered”.

 Under the Federal Rules of Civil Proceeding (USA), “costs shall be  allowed
as of course to the prevailing party unless the  court  otherwise  directs.”
In most of  the  States  in  US,  the  attorney’s  fee  is  not  allowed  as
litigation cost. Costs can even be on interim Application. A bill  of  costs
is a certified, itemized statement of the amount of  the  expenses  incurred
in  bringing  or  defending  a  law  suit/proceeding.  The  charges/expenses
claimed are taxed by the Court or its officer according  to  the  procedural
rules and set of norms.

 The basis of  assessment  of  costs  in  UK  has  been  explained  thus  in
Halsbury’s Laws of England:

“Where the court is to assess the amount of costs  (whether  by  summary  or
detailed assessment) it will assess those costs on the standard basis or  on
the indemnity basis, but the court will  not  in  either  case  allow  costs
which have been unreasonably incurred or are unreasonable in  amount.  Where
the amount of costs is to be assessed on the standard basis, the court  will
only allow costs which are proportionate to the matters in  issue  and  will
resolve any doubt which it may have as  to  whether  costs  were  reasonably
incurred or reasonable and proportionate in amount in favour of  the  paying
party. Where the amount of costs is to be assessed on the  indemnity  basis,
the court will resolve any doubt which it may have as to whether costs  were
reasonably incurred or were reasonable in amount in favour of the  receiving
party. Where the court makes an order about  costs  without  indicating  the
basis on which the costs are to be assessed, or makes an order for costs  to
be assessed on a basis other  than  the  standard  basis  or  the  indemnity
basis, the costs will be assessed on the standard basis.”

 The Part 44 of the Civil Procedure Rules (CPR) in the USA contains  general
rules about costs and entitlement to costs. The rules  are  supplemented  by
practice direction. However, part 44 does not apply  to  the  assessment  of
costs to the extent different provisions exist, for eg,  Access  to  Justice
Act, 1999 and the Legal Aid Act, 1988. Further, the general  rule  that  the
unsuccessful party will be ordered to pay the costs of the successful  party
unless  the  court  makes  a  different  order  does  not  apply  to  family
proceedings.
 It is important to note that a penalty in this sense normally means  a  sum
payable to the State, not to a private claimant, so  the  costs  imposed  on
the basis of  the  indemnity  is  not  a  penalty  or  tax.  Therefore,  the
Explanation II to Section 44A does not refer to the  costs  as  contemplated
under Section 35 of the CPC. The costs having been quantified  have  assumed
the character of a money decree for costs  and  cannot  be  equated,  either
with a fine or penalty which is imposed on a party by  the  Court  or  taxes
claimed and are taxes payable to a local  authority,  Government,  or  other
charges of a like nature.
The appellant has advanced an argument that as per Section 35A of  the  CPC,
no Court should pass  any  order  for  the  payment  of  compensatory  costs
exceeding Rs.3,000/- or exceeding the limits of its  pecuniary  jurisdiction
of the said Court whichever amount  is  less.  It  is  thus  argued  by  the
appellant that in the present case, since the costs imposed exceed  the  bar
imposed by Section 35A, therefore, the order of the  English  Court  is  not
executable in the present case.
This argument lacks merit and deserves to be rejected.  A  bare  perusal  of
Section 35A shows that bar operates on the  Indian  Courts  with  regard  to
imposition of costs in respect of false or  vexatious  claims  or  defences.
The bar is not attracted in the present case as the Court that  has  ordered
the costs is the High Court of Justice in England which is not  governed  by
the provisions of the CPC and that  the  respondent  merely  approached  the
Indian Courts for the  satisfaction  of  a  foreign  decree.  Moreover,  the
nature of compensatory costs prescribed  in  Section  35A  of  the  CPC  are
different from ‘costs’ dealt with in Section 35 of the  CPC  as  the  former
are limited to the claims of defences of a  party  which  are  frivolous  or
vexatious. It is settled that before awarding costs  under  Section  35A  of
the CPC, the Court should  satisfy  itself  that  the  claim  was  false  or
vexatious to the knowledge of the party who put  it  forward  and  that  the
interests of justice require the award of such compensatory  costs.  In  the
present case, no claim has been advanced by the  appellant  that  the  claim
filed by the respondents is  false  or  vexatious,  therefore,  the  bar  in
Section 35A is not applicable. Accordingly the issue is answered.
In re Issue No. 5 — It is the case of  the  appellant  that  the  claim  for
interest on costs is not recognized in the Indian law. It  is  to  be  noted
that matters of procedure are to be governed by the lex  fori,  whereas  the
matters of the substance are governed by  lex  causae.  In  this  case,  the
question whether the interest on sum of decree of costs to  be  executed  in
India is a matter of substance as the interest on decree  is  a  substantive
right of the decree holder and does not concern itself with  the  procedural
law of the forum.
The appellant relied upon Section 35 of the  CPC  which  enables  Courts  in
India to impose litigation costs at the discretion of  the  Court.  However,
there is no provision under the CPC or the Interest Act, 1978 which  permits
imposition of interest on litigation costs. Further tried  to  impress  upon
that the amended Section 35(3) of the CPC permitted a Civil Court  to  grant
interest on costs. The unamended Section 35(3) stated as follows:
The Court may give interest on costs at any rate not exceeding six per  cent
per annum, and such interest shall be  added  to  the  costs  and  shall  be
recoverable as such.

This Provision was consciously omitted  in  1956  (pursuant  to  Act  66  of
1956). In view of the deletion of Section 35(3) of the  CPC,  it  is  argued
that grant of interest on costs is no longer recognized under India law.
 In this context, it is educative to read the  following  comments  made  in
the Debate on the Bill against the deletion of Section 35  (3),  by  Hon’ble
Member of Lok Sabha Shri Tek Chand;
 “..In this connection, a reference  has  been  made  to  section  35,  sub-
section (3), which according to clause 3 of the Bill, is to be omitted.  Not
that I have usurious propensities, but I do not like this provision.  It  is
true that there should not be any profiteering  by  the  people;  I  concede
that, but there are instances when the  costs  amount  to  five  figures  or
more, and there is no reason why, when an unsuccessful party  is  subjecting
the successful party not only to a long dilatory and unending  dispute,  but
also to frivolous and vexatious litigation whereby he is out  of  pocket  to
the tune of several thousands, the law  or  the  legislature  should  be  so
solicitous that such person should not pay interest, if he does not  propose
to pay or if he intends to delay the payment of the costs.  One  unfortunate
and unhappy feature of administration of civil law in  our  land,  is  apart
from delays and objections of frivolous and  vexatious  nature,  justice  is
made available, if at all, at a very high and exorbitant price”.

The Hon’ble Member of Lok Sabha thus articulated that  omitting  sub-section
(3) would encourage delay in realization of decree  costs.  A  reference  to
the Report of Law Commission and the views expressed in Debate on the  Bill,
as extracted in the Law Commission Report (supra), would indicate  that  the
consequences of deletion of sub-section (3) of Section  35  were  very  much
considered by the Parliament. When the idea of deletion is not to  encourage
interest on costs as a source of income to  the  litigants,  the  Parliament
did not choose  positively  to  prohibit  interest  on  costs  by  inserting
suitable clause in Section 35.

It is to the reciprocal advantage of the Courts of all  nations  to  enforce
foreign rights as far as practicable. To  this  end,  broad  recognition  of
substantive rights should not be defeated by some vague assumed  limitations
of the Court. When substantive rights are so bound up in a  foreign  remedy,
the refusal to adopt the  remedy  would  substantially  deprive  parties  of
their rights. The necessity of maintaining the foreign rights outweighs  the
practical difficulties involved in applying the foreign  remedy.  In  India,
although the interest on  costs  are  not  available  due  to  exclusion  of
Section 35(3), the same does not mean that Indian Courts  are  powerless  to
execute the decree for interest  on  costs.  Indian  Courts  are  very  much
entitled to address the issue for execution  of  the  interest  amount.  The
right to 8% interest as per the Judgments Act, 1838 of UK can be  recognized
and as well as implemented in India.

Therefore, we are of the considered  opinion  that  the  Execution  Petition
filed by the Respondents for execution of  the  order  dated  19th  October,
2006 passed  by  the  English  Court  is  maintainable  under  the  relevant
provisions. Therefore, we do not find  any  reason  to  interfere  with  the
impugned order. Resultantly, the appeal is dismissed with costs.



……………………………………J.
               (A.K. SIKRI)



NEW DELHI,                         ……………………………………J.
DECEMBER 09, 2016                       (N.V. RAMANA)
































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[1]     AIR 2001 SC 2134
[2]    2 PEIR B-28 (1988)

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