Costs orders are only as good as the assets they can be executed against. When the plaintiff is a foreign entity, an NRI without Indian immovable property, or a shell with nothing in its name, a defendant can win the suit and still be left holding an irrecoverable costs decree. Order XXV of the Code of Civil Procedure exists for this situation: the court may order the plaintiff to give security for the defendant's costs, and must consider doing so in defined cases involving plaintiffs outside India without sufficient immovable property here. In commercial litigation — where the Commercial Courts Act has sharpened the costs regime generally — the application is an underused piece of defensive craft. This explainer covers when it lies, how courts exercise the discretion, and what follows default.
The problem the rule solves
Litigation is an asymmetric bet when one side has nothing to lose. A plaintiff beyond the practical reach of execution can prosecute a weak claim, extract settlement value from the defendant\'s litigation costs, and face no consequence on dismissal. Order XXV rebalances that bet: it converts the plaintiff\'s continued prosecution of the suit into a funded commitment, by requiring money or security in court that will answer the defendant\'s costs if the claim fails.
The two limbs
Discretionary limb
Any suit, any plaintiff: the court "may" order security for costs where the justice of the case demands — habitually vexatious claims, admitted impecuniosity coupled with speculative claims, or conduct suggesting the suit is leverage rather than adjudication.
Mandatory-inclination limb
Plaintiff(s) residing outside India without sufficient immovable property in India (other than the suit property): the rule says such an order "shall" be made. This is the workhorse in cross-border commercial disputes.
Building the application
Security for costs is not a merits filter and must not be argued as one. The court is not asked to disbelieve the claim, only to ensure that the defendant\'s eventual costs decree is executable. Framing the application in that neutral register improves its reception markedly.
Default and its consequences
If security is not furnished within the time fixed, Rule 2 directs dismissal of the suit — unless the plaintiff withdraws. A plaintiff dismissed for default may apply for restoration by proving it was prevented by sufficient cause from furnishing security, and courts impose terms on restoration. For defendants, a dismissal under Order XXV is a complete answer to the claim as framed; for plaintiffs, the rule is a reminder that access to Indian courts, while open to all, carries the ordinary responsibility of answering for costs.
Strategic place in Delhi commercial defence
In the Delhi High Court\'s commercial division and the district commercial courts, the application pairs naturally with other threshold defences: challenges to valuation, Order VII Rule 11 objections, and demands for discovery under Order XI. Where the plaintiff is offshore — increasingly common in IP, shareholder and trading disputes — the Order XXV application should be a standing item on the defence checklist. Even where the court fixes a modest amount, the order changes the economics of the litigation and signals early that the defendant intends to make costs consequences real.
Frequently Asked Questions
When can a court order security for costs?
Order XXV Rule 1 empowers the court, at any stage, on the defendant's application or its own motion, to order the plaintiff to give security for the defendant's costs within a fixed time. The power is discretionary in general, but the rule specifically directs that such an order shall be made where the sole plaintiff (or all plaintiffs) resides outside India and does not possess sufficient immovable property within India, apart from the suit property.
Does it apply to foreign companies and NRIs?
That is its core constituency. A plaintiff company incorporated abroad, or an individual settled overseas, suing in Delhi without sufficient Indian immovable property, is squarely within the mandatory limb. The defendant should place on record the plaintiff's residence/incorporation and the absence of disclosed Indian assets — often demonstrable from the plaint and its own filings.
What happens if security is not furnished?
Order XXV Rule 2: the court shall dismiss the suit unless the plaintiff is permitted to withdraw. Dismissal for default of security operates as a serious sanction, though the rule allows restoration on an application showing sufficient cause for the failure, on terms.
Is the remedy available in arbitration-related and commercial proceedings?
The CPC applies to commercial suits with the Act's modifications, and the costs-shifting philosophy of Section 35 CPC (as amended for commercial disputes) makes security applications more consequential, since realistic costs awards are now the norm rather than the exception. In arbitral proceedings, tribunals draw on their own powers over interim measures and costs; the Order XXV application belongs to court litigation.