For decades, costs in Indian civil litigation were nominal — a few thousand rupees against lakhs actually spent, making obstruction cheap and vindication expensive. The Commercial Courts Act, 2015 rewrote the rule for commercial disputes: it substituted Section 35 of the Code of Civil Procedure with a regime in which the unsuccessful party ordinarily pays the successful party's costs, costs are defined realistically to include lawyers' fees, and the conduct of the parties expressly shapes the order. This explainer sets out the regime and the practices Delhi's commercial courts have built around it.
Two costs regimes, one Code
Ordinary civil suits
Costs remain discretionary under the unamended provisions, and in practice are modest. The gap between costs awarded and money actually spent is absorbed by the winner — a standing subsidy for weak defences and dilatory tactics.
Commercial disputes
The Commercial Courts Act substitutes Section 35 CPC for commercial disputes of a specified value: costs follow the event as the default, are defined to include legal fees and witness expenses, and are calibrated to the parties' conduct, stage by stage.
The change is jurisdictional, not cosmetic: it applies to commercial disputes within the meaning of the Act — the commercial-relationship categories in Section 2(1)(c) meeting the specified value — litigated before Commercial Courts, Commercial Divisions and the Appellate Divisions.
The default rule and its levers
The substituted Section 35 makes three moves. It vests discretion in the court over whether costs are payable, their amount and when they are to be paid; it declares the general rule that the unsuccessful party will be ordered to pay the costs of the successful party, requiring reasons in writing for departure; and it lists what the court shall have regard to — the conduct of the parties, success on part of the case, frivolous claims and counter-claims leading to costs against the party who advanced them, and settlement offers under sub-section (4).
- Conduct: adjournments sought and granted, compliance with timelines for pleadings and disclosure, discipline in admission and denial of documents, and the genuineness of applications all feed the final order.
- Partial success: a plaintiff who recovers a fraction of an inflated claim should expect costs shaped accordingly — issue-wise or proportionate costs are increasingly common.
- Frivolous pleas: a counterclaim raised to complicate, or a defence maintained against the documents, invites costs independently of the overall result.
- Settlement behaviour: pre-institution mediation under Section 12A and offers during the suit generate the record on which sub-section (4) operates.
Building the costs record from day one
Practice note: Costs discipline cuts both ways. A client should be advised at engagement that in a commercial suit the downside of losing now includes the other side's realistic legal fees — which changes the calculus on marginal defences, inflated claims and tactical applications. The cheapest procedural default to avoid is the missed deadline for the written statement: beyond the outer limit of 120 days in commercial suits the right to file is forfeited, and no costs order can repair that.
Costs at the interlocutory and appellate stages
Costs are not reserved for judgment day. Case management hearings carry their own costs consequences for non-compliance; applications found frivolous can be dismissed with costs payable forthwith; and the Commercial Appellate Division applies the same principles to appeals, including for appeals that ought never to have been filed through the narrow Section 13 gate. An order of costs payable by a date is enforceable, and non-payment can be met with consequences the court attaches, including the striking of defences in appropriate procedural contexts.
The takeaway
In commercial litigation, costs are no longer an afterthought recited in the prayer clause — they are a running account that both sides write through their conduct. The party that litigates lean, complies with timelines, offers settlement sensibly and proves its expenses arrives at judgment holding a second claim worth arguing. The party that treats the timetable as optional finances its opponent's victory. Between them, the amended Section 35 has quietly become one of the most effective case management tools the commercial courts possess.
Frequently Asked Questions
What do "costs" include in a commercial suit?
Under the substituted Section 35 CPC, costs mean reasonable costs relating to: the fees and expenses of witnesses; legal fees and expenses; and any other expenses incurred in connection with the proceedings — including, in practice, court fees and expenses of inspection and discovery. The definition is designed to approximate the real cost of litigating, not a token figure.
Is the loser always ordered to pay?
The general rule is that the unsuccessful party pays the successful party's costs, but it is a rule with recorded-reasons exceptions: the court may make a different order having regard to the parties' conduct, partial success, frivolous claims or counterclaims, and unreasonable refusal of settlement offers. Costs discretion is structured, not abolished.
Can a winning party be denied costs — or made to pay them?
Yes. A party who succeeds on the whole but pursued exaggerated claims, disobeyed case management orders, sought unnecessary adjournments or made frivolous applications can be denied costs for the wasted phases, and can even be ordered to compensate the other side for costs those phases inflicted.
Do settlement offers really matter to costs?
Expressly so. Section 35(4) empowers the court, in fixing costs, to take into account whether a party made a reasonable offer to settle and the stage at which it was made, together with the reasonableness of any refusal. A documented, reasonable offer refused without reason is among the strongest costs cards a party can hold at judgment.