Schedule explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Paragraph 2 of the Schedule substitutes a new section 35 in the Code of Civil Procedure, 1908 for commercial disputes, and paragraph 3 omits sub-section (2) of section 35A. The new section gives the court discretion over whether costs are payable, how much and when, sets the general rule that the unsuccessful party pays, and lists the factors and the orders the court can make. This article reads both paragraphs as amended up to 3 May 2018, as per the text consulted, for anyone planning a commercial suit filing who wants to understand the cost risk. The Schedule prints "judgement" in other places; this series writes "judgment".
In a commercial dispute the court has discretion to determine whether costs are payable, the quantum and when they are to be paid, notwithstanding any other law or Rule. If the court orders costs, the general rule is that the unsuccessful party pays the costs of the successful party, and the court may deviate only for reasons recorded in writing. Costs mean reasonable costs of witnesses, legal fees and expenses, and other expenses in connection with the proceedings. The text gives no amounts and no scale.
Paragraph 2: the new section 35
The Schedule applies to a suit in respect of a commercial dispute of a Specified Value (section 16(1)); see our article on section 16. Paragraph 2 says: "For section 35 of the Code, the following section shall be substituted". The heading of the new section is "Costs".
Sub-section (1): the court's discretion
"In relation to any commercial dispute, the Court, notwithstanding anything contained in any other law for the time being in force or Rule, has the discretion to determine: (a) whether costs are payable by one party to another; (b) the quantum of those costs; and (c) when they are to be paid."
The overriding words "notwithstanding anything contained in any other law ... or Rule" make the discretion wide. Three decisions are left to the court: whether, how much and when.
The Explanation. For the purpose of clause (a), "costs" shall mean reasonable costs relating to:
- (i) the fees and expenses of the witnesses incurred;
- (ii) legal fees and expenses incurred;
- (iii) any other expenses incurred in connection with the proceedings.
The word "reasonable" qualifies all three heads. The text sets out no table of fees and no cap.
Sub-section (2): the general rule and its proviso
"If the Court decides to make an order for payment of costs, the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party."
The proviso: "Provided that the Court may make an order deviating from the general rule for reasons to be recorded in writing."
So the rule is "loser pays", but only "if the Court decides to make an order for payment of costs", and the court can deviate if it records written reasons.
The Illustration. The text gives this: a plaintiff seeks a money decree for breach of contract and damages. The Court holds that the plaintiff is entitled to the money decree but finds that the claim for damages is frivolous and vexatious. In such circumstances the Court may impose costs on the plaintiff, despite the plaintiff being the successful party, for having raised frivolous claims for damages. The lesson for pleadings: a claim added only for pressure can cost a winning party.
Sub-section (3): circumstances the court must regard
In making an order for payment of costs the Court "shall have regard to the following circumstances, including":
| Clause | Circumstance |
|---|---|
| (a) | The conduct of the parties |
| (b) | Whether a party has succeeded on part of its case, even if not wholly successful |
| (c) | Whether the party had made a frivolous counterclaim leading to delay in the disposal of the case |
| (d) | Whether any reasonable offer to settle is made by a party and unreasonably refused by the other party |
| (e) | Whether the party had made a frivolous claim and instituted a vexatious proceeding wasting the time of the Court |
The word "including" shows that the list is not closed. Clause (d) matters for settlement strategy: an offer to settle that is reasonable and unreasonably refused can count against the refusing party in the order on costs. The text does not say how the offer must be made or recorded.
Sub-section (4): orders the court may make
The orders the Court may make "include an order that a party must pay":
- (a) a proportion of another party's costs;
- (b) a stated amount in respect of another party's costs;
- (c) costs from or until a certain date;
- (d) costs incurred before proceedings have begun;
- (e) costs relating to particular steps taken in the proceedings;
- (f) costs relating to a distinct part of the proceedings; and
- (g) interest on costs from or until a certain date.
Clause (d), costs incurred before proceedings have begun, is notable: a party's pre-suit expenses can come within an order. The text does not say what pre-suit expenses are included.
Paragraph 3: section 35A(2) omitted
Paragraph 3, headed "Amendment if section 35A" in the copy consulted (it reads as "of"), says: "In section 35A of the Code, sub-section (2) shall be omitted." The text does not reproduce section 35A and this article describes nothing about its contents.
Where else the Schedule speaks of costs
| Provision | Costs reference |
|---|---|
| Order V Rule 1 and Order VIII Rule 1 provisos | A late written statement is allowed "on payment of such costs as the Court deems fit" |
| Order XI Rule 3(6) | Exemplary costs against a party who wilfully or negligently failed to disclose documents or wrongfully withheld inspection |
| Order XI Rule 4(6) | Costs, including exemplary costs, where a party unduly refuses to admit a document |
| Order XIII-A Rule 8 | Costs on a summary judgment application in accordance with sections 35 and 35A of the Code |
| Order XV-A Rule 7(1) proviso and Rule 8(a) | Costs on an adjournment sought in advance, and on condoning non-compliance |
Those rules are explained in our articles on the written statement, summary judgment orders and inspection and admission of documents. The comparable rule on costs in arbitration is in the sister article listed under Read next.
What this means for a business
- Plead only what you can support. The Illustration shows that a frivolous claim can attract costs even for a winning plaintiff.
- Keep records of settlement offers. Sub-section (3)(d) gives weight to a reasonable offer that is unreasonably refused.
- Track expenses. The Explanation covers witness fees and expenses, legal fees and expenses, and other expenses, all as reasonable costs incurred.
- Expect reasons. A departure from "loser pays" must be recorded in writing.
Example. Triveni Paper Ltd sues a distributor for an unpaid price and adds a speculative claim for damages. The court gives Triveni the price but finds the damages claim vexatious. Under section 35(2) and (3)(e), the court may order Triveni to pay the distributor's costs relating to that claim, a distinct part of the proceedings under sub-section (4)(f), even though Triveni won on the price.
Points to check in the text
- Paragraph 3 is headed "Amendment if section 35A" in the copy consulted.
- The text gives no amounts or scale of costs; check the court's orders and the rules.
- The word "including" in sub-section (3) shows that the list of circumstances is not closed.
Need help managing cost risk in a commercial suit?
Costs can turn on conduct, settlement offers and the claims you choose to plead. If you want your claim and settlement approach reviewed before filing, see our commercial suit filing page.
Key takeaways
- The court has discretion over whether costs are payable, the quantum and when they are paid.
- The general rule is that the unsuccessful party pays the successful party's costs; deviation needs reasons in writing.
- Costs mean reasonable costs of witnesses, legal fees and expenses and other expenses.
- Conduct, partial success, frivolous counterclaims, refused reasonable settlement offers and frivolous claims are factors.
- Sub-section (2) of section 35A is omitted.
Read next
- Section 16: amendments to the Code of Civil Procedure
- Written statement within 120 days: Order V and Order VIII
- Order XIII-A: summary judgment orders, conditional order and costs
- Section 31A of the Arbitration and Conciliation Act, 1996: regime for costs
Disclaimer: Based on a text of the Commercial Courts Act, 2015 as amended up to 3 May 2018 and on the Ninth Schedule to the Mediation Act, 2023 as enacted, as consulted on 2 October 2026. Later amendments, the current Specified Value, the pre-institution mediation rules and High Court rules should be checked. This article is general information, not legal advice; check the official text before acting.