Exemplary Costs? No Sir, It is Now a Right!

Exemplary costs are costs imposed by a court on a party for abuse of the court's process or for some conduct that is deprecable. These are imposed in exceptional cases where the party's conduct clearly demonstrates abuse of process or deprecable conduct.

In the recent decision of the Supreme Court in LMJ International Ltd. and Ors. vs. Sleepwell Industries Co. Ltd. (20.02.2019 - SC) : MANU/SC/0251/2019, the Supreme Court rejected the plea for overturning a decision of the court refusing to entertain the plea to refuse to recognise or enforce a GAFTA award. After rejecting the arguments of the Petitioner/ Award Debtor, the court went on to award "exemplary costs" on the Petitioner:

"18. In view of the above, these special leave petitions are dismissed with exemplary costs, quantified at an aggregate amount of Rs. 20,00,000/- (Rupees Twenty Lakh only). The amount towards costs be paid to the Respondent within six weeks from today."

While the eventual decision to award costs and the quantum was reasonable, branding it a "exemplary" is not in accordance with the recent amendments in the form of Section 31A where the court was obligated to award costs on the winning party. Detailed reasons may be found in this blog post and this paper. The long and short of it is that under Section 31A the losing side bears the costs is the norm and the court is obligated to grant reasons for not doing so. Considering the fee that the Supreme Court counsels charge and the likely costs incurred by the Respondent/ Award-Holder in briefing the counsels, stay, time spent,etc., the costs awarded in this case seem reasonable.