ANANDJI HARIDAS AND CO. PVT. LIMITED v. STATE — 1976 DIGILAW 74 (GUJ)

P. D. DESAI, J. ( 1 ) ). THE following two questions of general importance with regard to the taxing of costs on the appellate side have been referred by a Division Bench of this Court (D. P. Desai and N. H. Bhatt JJ) to the Full Bench: (1) Where the appellate Court passes an order with regard to allowing proportionate costs to each of the two contesting parties in the appeal which succeeds partly are the court-fees to be taxed as payable according to the table of fees on the claim actually allowed or in proportion to the court-fees paid on the entire claim in appeal by finding out some percentage of success of the appeal as compared to the whole claim made ? (2) Whether advocates fees are to be taxed as per the table of fees on the amount of claim allowed or disallowed or whether they are to be taxed on percentage basis as stated above ? ( 2 ) THESE two questions arise as pointed out in its order of reference by the Division Bench out of a common practice prevalent in this State in the appellate Courts and in some cases even in the trial Courts to pass an order of costs in proportion to the success of the claims that is to say to award costs to the plaintiff or appellant in proportion to the success of his claim and to award to the defendant or respondent proportionate costs on the claim disallowed Such an order raises the question as to in what manner and proportion costs are to be taxed in relation to court-fees and advocates fees and it is to set at rest the doubt or debate if any on such question that this reference has been made to the Full Bench. ( 3 ) IT appears that the practice which prevailed in the former High Court of Bombay and which was adopted in this Court up to 1967 was that when an order of the aforesaid nature was passed costs in relation to court-fees and advocates fees were taxed so far as the appellant was concerned on that past of the claim which succeeded. In other words when costs were awarded in proportion to the success of the appeal such costs in relation to court-fees and advocates fees were taxed as if the appellant had restricted his appeal only to that part of the claim which succeeded and upon which he would have been ordinarily entitled to costs. So far as the respondent was concerned costs in relation to advocates fees were taxed on that part of the claim in the appeal which was disallowed and he was awarded such costs. To give an illustration if the claim in appeal was Rs. 20 0 and the appeal was allowed to the extent of Rs. 5 0 and an order was made to the effect that the parties would be entitled to costs in proportion to their success in the appeal court-fees as well as advocates fees were taxed on the amount of Rs. 5 0 so far as the appellant was concerned and advocates fees were taxed on Rs. 15 0 so far as the respondent was concerned and both were accordingly awarded costs in respect of those two items. It would appear that under the aforesaid practice the same standard was adopted in the matter of taxing costs on both the items namely court- fees and advocates fees. ( 4 ) THE question as to whether the aforesaid mode of taxing costs was correct came up for consideration before a Division Bench of this Court consisting of N. G. Shelat and A. S. Sarela JJ. in First Appeal No. 1033 of 1969. The appellant in that case had made a claim of Rs. 19 638. ( 5 ) AND the appeal was allowed to the extent of Rs. 4 358. 5 and disallowed to the extent of Rs. 15 280 While disposing of the appeal the Division Bench made an order to the effect that the appellant would be entitled to costs in proportion to his success in the appeal and he would pay to the respondent costs in proportion to his failure in the appeal. On the basis of the practice prevalent in this Court the bill of costs was prepared and thereunder court-fees and advocates fees were taxed so far as the appellant was concerned on the amount of Rs. 4 358. 5 and advocates fees were taxed so far as the respondent was concerned on Rs. On the basis of the practice prevalent in this Court the bill of costs was prepared and thereunder court-fees and advocates fees were taxed so far as the appellant was concerned on the amount of Rs. 4 358. 5 and advocates fees were taxed so far as the respondent was concerned on Rs. 15 280 An objection was taken to the aforesaid mode of taxing costs in relation to those two items and it was urged that having regard to the slab system both in respect of court-fees and advocates fees the proper method of taxing costs was to work out the total costs taxable on those items on the basis of the amount claimed in the appeal and then to apportion them amongst the parties in proportion to their success in the appeal. The matter was ultimately placed for decision before the Division Bench and by its judgment and order delivered on May 5 1967 the Division Bench partly accepted the said contention. It held so far as taxing of costs on the item of court-fees was concerned that the prevalent practice of treating that part of the claim which was ultimately allowed as the claim originally made and awarding to the appellant the amount which he would have paid byway of court-fees on such part of the claim as taxed costs was eminently just and fair and that it was not required to be revised. However in respect of costs on the stem of advocates fees the Division Bench held that having regard to the slab system of advocates fees the proper and just method was to determine the advocates fees on the whole amount claimed in the appeal and then to apportion them amongst the parties in proportion to their success in the appeal. The Taxing Officer was accordingly directed to prepare a fresh bill of costs and to retain in such bill the taxed costs in respect of the item of court-fees but to revise taxed costs in respect of the item of advocates fees in accordance with the ruling of the Court. The Taxing Officer was accordingly directed to prepare a fresh bill of costs and to retain in such bill the taxed costs in respect of the item of court-fees but to revise taxed costs in respect of the item of advocates fees in accordance with the ruling of the Court. 5 The question again raised its head in the present case and it was urged before the Division Bench which made the present reference that the decision of the earlier Division Bench which adopted two different standards with regard to taxation of costs on the items of court- fees and advocates fees was unjust. The Division Bench felt that there was some substance in the grievance and in this connection it observed as under:-WE also feel that court-fees and advocates fees both being payable according to the system of slab adopted by the relevant provisions of law it becomes difficult to adopt two different standards with regard to their taxation. In our opinion it would be desirable to lay down some uniform standard applicable to both the fees regarding the taxation of court-fees and advocates fees. So far as we are concerned we see good reason in concurring with the view of the Division Bench on the question of court-fees. With great respect however we find it difficult to agree with the view of the Division Bench on the question of advocates fees. It is under these circumstances that the present reference has come to be made to the Full Bench. ( 6 ) IT would be useful at this stage to refer to the relevant provisions of law in the matter of costs. Sec. 35 of the Code of Civil Procedure 1908 (hereinafter referred to as the Code) in so far as it is relevant 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 or out of what property and to what extent such costs are to be paid and to give all necessary directions for the purposes aforesaid. Order XLI Rule 35 of the Code deals with the drawing of the decree in appeal. Order XLI Rule 35 of the Code deals with the drawing of the decree in appeal. Sub-rule (3) of the said Rule provides that the decree shall also state the Amount of costs incurred in the appeal and by whom or out of what property and in what proportions such costs and the costs in the suit are to be paid. Chapter XIV of the Bombay High Court Appellate Side Rules 1960 prescribes the rules for computing the advocates fees in various kinds of proceedings. So far as the question under consideration is concerned however it does not throw much light except that it shows that generally in a large number of cases advocates fees are taxed on a slab system. The provisions of the Code referred to earlier show that the decree and bill of costs have to be drawn up in accordance with the order passed by the Court ( 7 ) BEFORE coming to grips with the problem reference may be made to the object underlying the provisions relating to awarding of costs to a litigant. Under the common law in England party and party costs were treated not as a complete indemnity but in the character of an indemnity. In GUNDRY V. SAINSBURY (1910) I K. B. 645 Cozens-Hardy Mh. quoted with approval the following observations by Bramwell B. in HAROLD V. SMITH (1860) 5 H. and N. 381 AT 385: costs as between party and party are given by the law as an indemnity to the person entitled to them they are not imposed as a punishment on the party who pays them nor given as a bonus to the party who receives them. Therefore if the extent of the damnification can be found out the extent to which costs ought to be allowed is also ascertained. Fletcher Moulton L. J. concurring with the Master of the Rolls observed in that case: i think the passage which the Master of the Rolls quoted from the judgment of Bramwell B. is sound law and is decisive of this case The principle that party and party costs are only an indemnity an imperfect indemnity it is true but never more than an indemnity - is so deeply rooted in our law that the pro viso is put in for the purpose of preventing the earlier part of sec. 5 from ever giving rise to a case in which costs could be made a profit. Buckley L. J. also concurred in the view that party and party costs were in the nature of an indemnity. ( 8 ) IN Firm of N. PEDDANNA V. K V. S. S. SONS A I. R. 1954 S. C. 26 there was an agreement between the respondent and his agent (advocate on record) to the affect that the latter would be paid as his remunerations a consolidated sum of Rs. 300. 00 to which all out-pocket expenses would be added but that in the event of the case being decided in favour of the respondent the agent would have the benefit of the taxed costs. The appeal was ultimately dismissed and the appellants were directed to pay to the respondent the costs of the appeal. The question which arose in this context was whether in taxing costs between party and party the appellants should be directed to pay to the respondent only what the latter agreed to pay to his Agent or the respondent would have the full benefit of the taxed costs that were normally allowed in such cases. The Taxing Officer held that the respondent could have from the appellants not the ordinary taxed costs but a sum of Rs. 300. 00 only plus the out-pocket expenses incurred by his Agent- The propriety of this decision was challenged before the Court on an application for review made by the respondent. B. K. Mukherjea J. who heard the matter in Chambers referred to the decision in Gundry v. Sainsbury (supra) and observed that the principle of English law was that party and party costs are only an indemnity-an imperfect indemnity it is true-but never more than indemnity and that consequently the successful party should not be allowed to make any profit out of the order for costs made in his favour. The learned Judge observed that there was no doubt as to the soundness of the principle upon which the said rule was based and no doubt also that the said rule should be applied to the Supreme Court there being no specific provision on that point in the rules of the Court. The learned Judge observed that there was no doubt as to the soundness of the principle upon which the said rule was based and no doubt also that the said rule should be applied to the Supreme Court there being no specific provision on that point in the rules of the Court. Accordingly if the agreement between the Agent and the respondent had been merely this namely that the respondent would pay the Agent in addition to his out-pocket expenses a sum of Rs. 300. 00as his remuneration the order of the Taxing Officer would have been a perfectly good order. However the agreement in that case provided in the latter part that in case the respondent succeeded in the litigation the Agent would be entitled to recover from him whatever sum might be allowed to him on proper taxation. Under the circumstances in view of the latter part of the agreement even on the application of the English doctrine upon the happening of the contingency of the success of the respondent the Agent of the respondent became entailed to fees on proper taxation and on the principle of indemnity the appellants were liable to pay to the respondent such fees on proper taxation. ( 9 ) IN MANINDRA CHANDRA V. ASWINI KUMAR A. I. R. 1921 CALCUTTA 185 a Division Bench of the Calcutta High Court (Mookerjee Ag. C. J. and Fletcher J.) was concerned with the question whether costs on a special scale should be granted in that case. While dealing with the said question the eminent Acting Chief Justice made the following observations in relation to the principle underlying the award of costs : we must remember that whatever the origin of costs might have been they are now awarded not as a punishment of the defeated party but as a recompense to the successful party for the expenses to which he had been subjected or as Lord Coke puts it for whatever appears to the Court to be the legal expenses incurred by the party in prosecuting his suit or his defence. We are now far removed from the days when the plaintiff who failed was punished in amercement pro falso clamore and the defendant where the judgment was against him in miserecordia cum expensis litis for his unjust detention of the plaintiffs right. We are now far removed from the days when the plaintiff who failed was punished in amercement pro falso clamore and the defendant where the judgment was against him in miserecordia cum expensis litis for his unjust detention of the plaintiffs right. The theory on which costs are now awarded to the plaintiff is that default of the defendant made it necessary to sue him and to a defendant is that the plaintiff sued him without patty against the expenses of successfully vindication his regulates in Court and consequently the party to blame pays costs to the party without fault. ( 10 ) THE principle of common law in England which has been held to be applicable even in this country in the matter of laying party and party costs thus is that the costs are awarded not as punishment to the defeated party nor as a bonus to the party which receives them but as a recompense to the successful party in order to indemnify him though not completely for legal expenses to which he has been subjected in prosecuting his suit or his defence. As Buckley L. J. pointed out in Gundry v. Sainsbury (supra) a successful party would be entitled to come to the Court and say: his is a matter in respect of which I am entitled to get costs because I have been put to expenses and the law as administered in this Court allows me in that state of things to be indemnified by the defendant to the extent of party and party costs It is this principle which lies at the root of the order awarding proportionate costs in cases where the plaintiff or the appellant succeeds partly in his claim As pointed out by the Judicial Committee in MUDHOBUN DOSS V. GOKUL DOSS 10 MOORES INDIAN APPEALS 363 (AT P. 575) the costs of an action in this country particularly the stamp duties payable on the proceedings depend a good deal on the value of the thing claimed. It is accordingly the practice of the Courts in this country when a plaintiff has recovered less than what he has claimed to apportion the costs in the proportion which the amount recovered bears to that which was claimed. It is accordingly the practice of the Courts in this country when a plaintiff has recovered less than what he has claimed to apportion the costs in the proportion which the amount recovered bears to that which was claimed. In working out an order made according to this practice however practical difficulties arise as is evident from the earlier decision of this Court and from the present reference. Such difficulties must necessarily be solved in the ultimate analysis bearing in mind the salient principle underlying the provisions relating to costs to which reference has been made here in above. ( 11 ) COMING now to the question of taxing of costs on the item relating to court-fees when an order as to proportionate costs is made in an appeal which has not succeeded wholly we are inclined to think in concurrence with the view expressed by two Division Benches of this Court that the current practice of taxing court-lees on the amount of claim allowed according to the table of fees as if the appellant had originally restricted his claim to the extent of the claim allowed only is just and proper. The appellant in such a case was justified in bringing appeal to the extent of the claim allowed and had he initially restricted his claim to the amount allowed he would have been entitled to recover from the respondent the amount of court-fees payable on such claim on the principle of indemnity. There is no reason why the result should be any the different merely because he claimed a larger amount which the Court found he was not entitled to. Since an order of costs - even an order awarding proportionate costs - is not made as a matter of punishment to penalise the appellant and it is essentially made as a recompense to the appellant for whatever appears to the Court to be the legal expenses incurred by him in prosecuting his appeal there is no reason why he should not be awarded court-fees on the amount Which he has successfully recovered in the appeal. It cannot be-overlooked that court-fees are payable on a slab system and that when the value of the subjectmatter is at a lower level the court-fees are payable at a comparatively higher rate than that at which they would be payable if the value of the subject-matter is at a higher level. It cannot be-overlooked that court-fees are payable on a slab system and that when the value of the subjectmatter is at a lower level the court-fees are payable at a comparatively higher rate than that at which they would be payable if the value of the subject-matter is at a higher level. To illustrate the point: when the amount or the value of the subject-matter exceeds Rs. 1 0 but does not exceed Rs. 1 100 the court-fees payable would be Rs. 106. 25. As against this when the amount or value of the subject-matter exceeds Rs. 10 0 but does not exceed Rs 10 500 the court-fees payable would be Rs. 785. 00. It would thus appear that the court-fees do not increase in the same proportion as the claim Now take for example a case where the appellant initially claims in the appeal an amount of Rs. 10 0 On the said claim he would have to pay court-fees in the sum of Rs. 785. 00. At the hearing of the appeal the appellant succeeds in proving that he is entitled not to the full amount claimed in the appeal but only to Rs. 1 0 and an order awarding proportionate costs is made. On the basis of the prevalent practice the appellant would be entitled to a sum of Rs. 103-25 as taxed costs because that is the court-fees which he would have paid had he restricted his claim originally to Rs. 10 only. If on the other hand he is to be awarded costs on the basis of the proportion of his success in the appeal he would be entitled to only one-tenth of the amount of Rs. 785. 00 that is to say Rs. 78. 05. It would thus appear that if the latter method is adopted the appellant would suffer a loss of Rs. 28. 25 and such loss is occasioned to him merely because he claimed an amount in excess of what was found due to him. 785. 00 that is to say Rs. 78. 05. It would thus appear that if the latter method is adopted the appellant would suffer a loss of Rs. 28. 25 and such loss is occasioned to him merely because he claimed an amount in excess of what was found due to him. Such mode of taxing costs on the item of court-fees is thus inconsistent with the basic principle underlying the award of costs inasmuch as it is in the nature of a penalty imposed upon a party because of his Failure to establish the validity of his claim to higher amount and it is also in the nature of a bonus to the other party for had the appellant restricted his claim to the amount ultimately found due to him the other party would have been required to reimburse him to the full extent of the court-fees paid by him on such restricted claim. Besides the respondent in appeal has not to incur any expenditure on account of court-lees and it is therefore not a head or item of costs in which the principle of proportion could be appropriately applied i That manner The principle of proportion could obviously be applied in that manner only when a common item of expenditure is incurred by both the sides and it is required to indemnify both the sides in respect of such expenditure in accordance with the failure or success of each party. In our opinion therefore the practice prevalent in this Court with regard to taxing of costs in relation to the item of court-fees in an appeal where an order of proportionate costs is made is just and proper and there is no need to depart from the same. ( 12 ) TAKING up next the question relating to taxed costs on the item of advocates fees we concur in the view of the Division Bench which held that the advocates fees should in the first instance be taxed on the aggregate claim in appeal and it should then be divided proportionately between the two parties in proportion of their success in the appeal. The reason why this is required to be done is not difficult to discern. Advocates fees are to be paid by both the parties and normally such fees are paid by both the sides on the basis of the total claim in the appeal. The reason why this is required to be done is not difficult to discern. Advocates fees are to be paid by both the parties and normally such fees are paid by both the sides on the basis of the total claim in the appeal. It is true that as in the case of court-fees so in the case of advocates fees taxed costs are on a slab basis and that like court-fees the advocates fees also do not increase in the same proportion as the appreciation of the claim. These two cases are however not otherwise similar. In the case of court-fees the table of fees is strictly adhered to and the party is never required to ray anything more than what is prescribed. So far as the advocates fees are concerned however the higher the claim the higher the advocates fees in practice and reality and the taxed costs at the rate prescribed in the table are seldom adhered to and they are illusory Besides unlike court-fees the expenditure on advocates fees is incurred by both In case of such an expenditure there. fore the proper principle of proportionate costs to apply would be to take the original claim in the appeal and to ascertain as to what would be the amount of advocates fees either single or double allowable on such claim and then to apportion such fees amongst the parties in proportion to the success of each party in the case Such a course would indemnify parties as nearly and fairly as possible for the legitimate expenditure incurred by them in prosecuting and defending the appeal. In out opinion therefore the prevalent practice adopted by this Court since 1967 in the matter of taxing of costs on the item of advocates fees is just and proper and no cogent ground is made out to depart from the same. ( 13 ) IT is true as pointed out in the order of reference that the. current practice adopts two different standards with regard to taxation of two different items in the bill of costs. ( 13 ) IT is true as pointed out in the order of reference that the. current practice adopts two different standards with regard to taxation of two different items in the bill of costs. However having regard to the basic difference in the nature and character of these two items and in view of the fact that whereas court-fees are payable by only one of the parties the advocates fees are payable by both the parties and bearing in mind the fundamental principle behind the rule of awarding costs we are of the opinion that the adoption of different standards is not only not incongruous but is just and proper. ( 14 ) WE might incidentally mention that there are certain other items in the bill of costs such as stamp on copies of decrees or orders and judgments stamp on Vakalatnama bhaththa for process printing charges and copying charges which are always allowed to the appellant even if his success is only partial and that appears to be the correct practice. Those costs are necessary to be incurred irrespective of whether the success is full or partial and on the principle of indemnity or recompense the appellant would in any event be entitled to those costs such costs cannot therefore be apportioned between the parties on the basis of any proportion founded on the success or failure in the matter. Similar view was also taken by the Division Bench in 1967 and wager with the same. ( 15 ) BEFORE parting with the case it might be observed that in the view which we are taking we have been influenced also by the fact that the current practice has been prevalent in this Court for nearly a decade now. In numerous cases bill of costs must have been drawn on the basis of such practice. Even assuming therefore that another view is possible or preferable having regard to the fact that for such length of time the rights of the parties have been regulated by this practice we should be slow to overturn the decision unless it is found that the practice is so clearly and patently erroneous that it should in the larger interest of justice be upset. Such is not the case here and we are of the opinion that it is desirable that in such matters a practice which has been evolved after due consideration by the Court should be adhered to. ( 16 ) IN the result we answer the two questions referred to us as follows :- question No. 1: Where the appellate Court passes an order allowing proportionate costs between two contesting parties in an appeal which succeeds partly court-fees are to be taxed according to the slab system on the claim actually allowed in the appeal. Question No. 2: In a similar case advocates fees either single or double are to be taxed as per the table of fees on the entire claim in the appeal and the amount so taxed has to be apportioned between the parties on the basis of the percentage of success in the appeal. The matter will now go back to the Division Bench for passing necessary orders in the light of the observations made in this judgment. Answer accordingly. .