This article was written by Suhana, pursuing a Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles from LawSikho and edited by Koushik Chittella.
It has been published by Rachit Garg.
Table of Contents
Introduction
The law that governs the procedure and practise of civil courts is the Code of Civil Procedure, 1908, also commonly referred to as the CPC. One of the crucial aspects of civil litigation is the payment of costs and interest by the parties involved in the suit. The provisions for payment in court were given under Order 24 of the Code of Civil Procedure, 1908. There are four rules under this order. It talks about the provisions of payment in court by the defendant to the plaintiff’s claim or suit. This article briefly covers Order 24 and the rules contained in it.
Features of Order 24
The features of Order XXIV can be summarised as follows:
- Under this order, payment is made by the defendant to the plaintiff’s claim. This rule is not applicable to the plaintiffs.
- Payment into court is an attempt to reach a compromise rather than a defence. It means that payment made by the defendant to the plaintiff’s claim is to dispose of the claim, not admission about the merit of the cause of action of the suit.
- The defendant may at any time deposit the amount in satisfaction of claim as soon as an appearance has been filed and until a decree or judgement has been passed.
- A payment into court is simply an offer to dispose of the claim on terms.
- A notice shall be given through the court by the defendant to the plaintiff after the deposit of the amount. This rule applies to all claims related to recovery of debts or damages.
- If a payment is made/deposited into court during the final argument stage by the defendant only to save the interest amount, the application can be rejected.
Provisions for payment in a court
Payment into court is governed under Order XXIV of the Code of Civil Procedure, 1908. Whereas the security for such costs is covered under Order XXV of CPC, 1908. The provisions under Order 24 are Rules 1, 2, 3, and 4.
Rule 1: Deposit by defendant
Under this rule, the payment to the court is made by the defendant to satisfy the plaintiff’s claim. The suit is to receive or recover debts or damages. It is open to the defendant to deposit the amount at any stage of suit but before passing any decree or judgement. The amount can be deposited as much as he considers a satisfaction of his full claim.
According to this rule, it’s only applicable to the defendant, not to the plaintiff. This defendant is eligible to deposit the amount to the suit for debts or damages by the plaintiff. In the case of a deposit at the stage of the final argument, the application of such a sum of deposit can be dismissed.
In the case of Digipulse India Pvt. Ltd. vs. J.K. Corp. Ltd. (2004), the plaintiff made an application under Order 24 Rule 1 read with Section 151 of the CPC, seeking directions to the defendant company to pay or deposit the claim amount into court. Here, the Delhi High Court stated that the provisions of Order 24 Rule 1 CPC are in fact meant to be used by the defendant and not by the plaintiff. Order 24 Rule 1 CPC applies to the defendant. Hence, the application without merit has to be dismissed.
In the case of Vasanthakumari vs. Sarojini (2007), the High Court of Kerala stated that “Order 24 makes provision to enable a deposit or payment into court being made and to stop the accrual of future interest.”
Rule 2: Notice of deposit
Under this, a notice of deposit shall be given through the court by the defendant to the plaintiff. The deposit amount shall be paid to the plaintiff on his application (unless the court otherwise directs).
In this case, the plaintiff shall apply for acceptance of the deposit amount. Such a deposit must be unconditional; here, unconditional means not subjected to any other conditions.
Rule 3: Interest on the deposit after the notice
Accordingly, a notice of deposits shall be given by the defendant to the plaintiff through the court. After the issuance of such notice, no interest shall be available to the plaintiff. The plaintiff is eligible for interest on his claim before the issuance of such notice, but after such notice, the plaintiff cannot claim for the same. The plaintiff has the right to claim for the remaining amount of interest before the issuance of such notice. Whether the deposited sum is in full or short of the claim, it means that when a defendant deposits the amount, whether in full or short, there shall be no interest from the date of notice.
If the amount is deposited at the final stage of argument only to save payment of interest, the application of the defendant for such a deposit can be rejected. The plaintiff has the right to receive interest from the date of the institution of such a suit.
Rule 4: Procedures
Procedure when the amount deposited accepted as in part of his claim
Where the plaintiff accepts such an amount as satisfaction in part of his claim, he may continue the suit for the balance. If the court considers that the deposit amount by the defendant was the full satisfaction of the plaintiff’s claim, then the court may decide the suit on its merits. If the plaintiff is not satisfied with the deposit, he may continue the suit and shall pay the costs of the suit pursued after the deposit and the costs pursued previously to that, so far as they were caused by excess in the plaintiff’s claim.
Procedure when he accepts it as full of his claim
Where the plaintiff accepts the amount as satisfaction in full of his claim, he shall present to the court a statement to that effect. The statement shall be filed by the plaintiff as he is satisfied with the amount deposited by the defendant. The court shall pronounce judgement accordingly and shall direct the parties by whom the costs of each party are to be paid. The court shall consider which of the parties is most to blame for the litigation.
According to Rule 4 of this order, if the plaintiff accepts the deposit amount as full, then the court shall record his statement and pronounce judgement accordingly. On the other hand, if the plaintiff accepts such an amount as half of the claim, he may prosecute the suit for the remaining amount, but if it’s found that the deposit amount was in full satisfaction of the plaintiff’s claim, then he will have to pay the costs incurred by the defendant after the amount of the deposit. If the amount offered by the defendant is accepted by the plaintiff and the dispute is settled through a compromise, it can be withdrawn by the plaintiff.
To summarise the provisions, Rules 1 and 3 of Order 24 are as follows; Order 24, Rule 1, provides that the defendant in any suit for the recovery of debts may deposit in court such money as he considers satisfaction in full of the claim, and Rule 3 of Order 24 mentions that no interest shall be allowed to the plaintiff on the deposit of the sum by the defendant from the date of notice issued through the court by the defendant.
Order 24 of CPC is meant to be used by the defendant and not by the plaintiff.
Illustrations
- Ram owes Shyam a sum of Rs. 10,000. When Shyam asked for the repayment of the same, no reply or answer was given by Ram. Shyam filed a suit for non-payment. After the institution of the suit, Ram immediately deposited the amount with the court under Order 24. Shyam accepts the amount as full of his claim. The court should also give Shyam his cost of suit, as the conduct of Ram has shown that the litigation was necessary.
- Mr. Rohan owes Rs. 20,000 to Mr.Sohan and is ready to pay him that amount without any suit. Mr.Sohan claims Rs. 25,000 and sues Mr.Rohan for that amount. In the suit being filed by Mr.Sohan, Mr. Rohan pays Rs. 20,000 into court and argues that he is not liable to pay the remaining Rs. 5000. Mr.Sohan accepts the Rs. 20,000 in full satisfaction of his claim. The court should order him to pay Mr. Rohan’s cost of suit.
- Raj owes Paras Rs. 4000. There was no demand for the payment made by Paras, and he filed a suit against him. Raj immediately pays the amount into court, and Paras accepts the amount as full of his claim. Still, the court may not allow him any cost, as the suit has been filed without making any demand to the defendant, and the litigation is groundless on the part of Paras (plaintiff).
Problems afflicting costs under CPC
In India, civil litigation is growing at alarming rates. The awareness regarding litigation is better for the nation, but however, there are equally higher chances for a party to file a frivolous and vexatious suit in court due to various reasons, including the personal vendetta against the other party, and it might also be the inefficiency of the court to impose proper and adequate costs on the party making false claims and wasting the precious time of the court. The provisions of CPC related to costs are not exhaustive enough for the current period and need changes. The major problems afflicting costs highlighted by the 240th report of the Law Commission are:
- The cost doesn’t generally follow the event.
- The cost awarded is very different from the actual, realistic cost.
- The current cost imposed doesn’t curb frivolous and vexatious litigation.
Amendments made to CPC by the Commercial Courts Act, 2015
The Commercial Courts Act, 2015, brought some changes to the Code of Civil Procedure, 1908. These changes were related to the costs under Section 35 of the CPC. These provisions were made applicable to commercial disputes of specified value. The substitution of Section 35 was done as a result of the fact highlighted by the Law Commission in its 240th report. provided for a general rule for the payment of costs by one party to another. It also mentions that the Court can determine whether the costs are payable or not, the quantum of the costs, and when they are to be paid. The costs include the fees and expenses of the witnesses, legal fees, and any other expenses incurred by them in connection with the proceedings. If the Court is deviating from this general rule, it has to record the reasons for the same in writing, as per the amendment brought by this Act. The Act also amended Section 35A of the CPC and omitted sub-section 2.
Conclusion
Payment into courts is defined under Order 24 of the CPC, 1908. There are four rules under this order. This order applies to all suits instituted to recover debts or damages. the payment under this order made by the defendant of the amount in satisfaction of the plaintiff’s claim. The payment under this order can be made at any stage of the suit but before the passing of a decree or judgement. If it is found by the court that the payment made by the defendant at the stage of the final argument was only to save payment of interest, then the application for deposit of such an amount can be dismissed by the court.
References
- https://www.casemine.com/judgement/in/56090b5be4b0149711174788
- https://indiankanoon.org/doc/101288/
- https://www.indiacode.nic.in/bitstream/123456789/2191/1/A1908-05.pdf
- https://indiankanoon.org/doc/1714286/
- https://lexinsight.wordpress.com/2019/10/08/problems-afflicting-costs-under-section-35-of-civil-procedure-code-1908/
- https://www.indiacode.nic.in/bitstream/123456789/2156/1/a2016-04.pdf
- https://articles.manupatra.com/article-details/Provision-of-Cost-under-Civil-Procedure-Code-A-Need-for-Change-in-Todays-Time
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