Exemplary Costs in Litigation: A Fine Line Between Deterrence and Discretion.
14 November 2024
Civil Suits >> Civil & Consumer Law
In recent legal development of Pawan Advertising v/s State of Maharashtra & Others, the Bombay High Court had to resolve a difference of opinion between two judges of a Division Bench regarding the quantum of exemplary costs to be imposed on a petitioner in a writ petition challenging an order by the Mumbai Metropolitan Regional Development Authority (MMRDA). This case, which centers on the imposition of exemplary costs in the context of a writ petition, provides valuable insights into the Court's approach to discretion in awarding costs and the factors influencing such decisions.
Case Background:
The petitioner in this case had challenged an order dated 11th July 2024 passed by the MMRDA, which rejected the petitioner’s request for the retention of hoardings erected by them. The Division Bench of the Bombay High Court, in its judgment dated 24th July 2024, dismissed the writ petition, finding that the hoardings exceeded permissible limits as outlined by statutory guidelines. Additionally, the Court concluded that the petitioner had acted without obtaining permission from the MMRDA, instead seeking approval from the local Grampanchayat, which was not the competent authority. The bench also noted that the petitioner had made false statements and suppressed facts in the petition, which led to its dismissal.
While both judges agreed on the need to impose exemplary costs on the petitioner, they differed on the amount to be imposed. Justice M.S. Sonak suggested that a cost of Rs. 5,00,000/- would be appropriate, while Justice Kamal Khata believed that a higher amount of Rs. 25,00,000/- should be levied to act as a genuine deterrent against future misconduct. This difference of opinion led to a reference being made to a larger bench to resolve the disagreement.
Petitioner’s Counsel’s Argument:
The counsel for the petitioner, Ms. Minal Chandnani, argued that the imposition of exemplary costs of Rs. 25,00,000/- was excessive and unwarranted in the present case. She emphasized that the petitioner had merely sought permission from the Grampanchayat and had not acted with malice or fraud. It was contended that the petitioner was not a habitual law-breaker and had not made any deliberate attempt to mislead the Court or gain an illegal advantage. The counsel pointed to a similar case where a writ petition was dismissed but no costs were imposed, suggesting that the imposition of exemplary costs was not a standard response.
Chandnani further referred to several Supreme Court rulings, including Ashok Kumar Mittal v. Ram Kumar Gupta and Vinod Seth v. Devinder Bajaj, which dealt with costs in civil litigation, stressing that the imposition of such costs should be reasonable and based on actual evidence of harm or fraud.
MMRDA’s Counsel’s Argument:
On the other hand, Ms. Kavita Solunke, representing MMRDA, defended the higher costs, arguing that the petitioner’s actions were not merely procedural lapses but amounted to a serious violation. She pointed out that the petitioner’s hoardings were erected without proper authorization from the MMRDA, the competent authority, and that false statements and suppression of facts had been made in the petition. Furthermore, the petitioner had gained commercially from the illegal hoardings. Solunke emphasized that imposing exemplary costs was necessary to deter future violations of public authority regulations.
The MMRDA's counsel cited cases such as S.P. Chengalvaraya Naidu v. Jagannath and Dattaraj Nathuji Thaware v. State of Maharashtra, where courts had imposed substantial costs to deter fraudulent or vexatious litigation. Solunke argued that a cost of Rs. 25,00,000/- was justifiable, given the severity of the violation and the potential deterrent effect of such an amount.
Key Legal Principles at Play:
The issue primarily concerned the quantum of exemplary costs, which are meant to serve as a deterrent against improper or fraudulent conduct in litigation. Exemplary costs are typically levied when a party is found guilty of misrepresentation, fraud, or suppression of facts. The primary objective of such costs is not to compensate the opposing party but to penalize the erring party for their misconduct, thereby discouraging similar actions in the future.
The Court’s discretion in determining the amount of costs is guided by the principle that the award must be reasonable and proportionate to the nature of the wrongdoing. In this context, the Court cited National Insurance Co. Ltd v. Keshav Bahadur, emphasizing that discretion in awarding costs must be exercised judiciously, taking into account the facts and circumstances of the case.
Additionally, the Court referenced the Satyapal Singh v. Union of India decision, which reiterated that exemplary costs should be imposed sparingly and only when the party’s conduct involves fraud, misrepresentation, or suppression of facts. The imposition of costs must always aim to advance justice and not be unduly punitive or oppressive.
Resolution of the Disagreement:
After carefully considering the arguments, the Court determined that the quantum of exemplary costs should be based on a more factual and realistic approach. The petitioner had not provided sufficient evidence regarding the amount invested in the hoardings, the expenses incurred, or the commercial gains made from their installation. In the absence of such material, the Court found it difficult to support the imposition of the higher sum of Rs. 25,00,000/- as suggested by Justice Khata.
Instead, the Court found the figure of Rs. 5,00,000/- proposed by Justice Sonak to be more reasonable, as it was aligned with the nature of the misconduct, which involved the suppression of facts and false statements, but did not reach the level of fraud or egregious misrepresentation. The Court concluded that the imposition of Rs. 5,00,000/- in exemplary costs would be an appropriate and effective deterrent.
Conclusion:
The Bombay High Court’s resolution of the difference in opinion regarding exemplary costs highlights the importance of judicial discretion in imposing costs in writ petitions. While the nature of the misconduct and the commercial gains made by the petitioner were key factors, the absence of detailed evidence regarding the investment and profits made it difficult to justify a high quantum of costs. The Court’s decision to impose Rs. 5,00,000/- in exemplary costs reflects a balanced approach, ensuring that the punishment is proportional to the misconduct while preserving the principle of fairness and justice.
This case serves as a reminder of the careful considerations that judges must undertake when deciding on the imposition of exemplary costs, ensuring that such penalties are not arbitrary or excessive but serve the broader purpose of deterring wrongful conduct in litigation.