Section 35A of the Code - Exemplary costs.
14. Section 35A refers to compensatory costs in respect of false or vexatious claims or defenses. The maximum amount that could be levied as compensatory costs for false and vexatious claims used to be ` 1,000/-. In the year 1977, this was amended and increased to ` 3,000/-. At present, the maximum that can be awarded as compensatory costs in regard to false and vexatious claims is ` 3,000/-. Unless the compensatory costs is brought to a realistic level, the present provision authorizing levy of an absurdly small sum by present day standards may, instead of discouraging such litigation, encourage false and vexatious claims. At present Courts have virtually given up awarding any compensatory costs as award of such a small sum of ` 3,000/- would not make much difference. We are of the view that the ceiling in regard to compensatory costs should be at least `1,00,000/-.