Strict Consequences for Non‑Payment of Conditional Costs in Commercial Suits: Commentary on Om Fire Safety Co. Pvt. Ltd. v. Umakant

Case: M/s Om Fire Safety Company Pvt. Ltd. v. Umakant
Citation: 2025 DHC 10289
Court: High Court of Delhi at New Delhi
Coram: Justice Girish Kathpalia
Date of Decision: 21 November 2025
Provision involved: Order VIII Rule 1 CPC, Section 35B CPC, Order XIII‑A CPC, Commercial Courts Act, 2015, Article 227 of the Constitution

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1. Introduction

This judgment of the Delhi High Court in Om Fire Safety Co. Pvt. Ltd. v. Umakant is a significant addition to the jurisprudence on the consequences of non‑payment of costs in civil procedure, particularly within the framework of commercial disputes under the Commercial Courts Act, 2015.

The case arose from a commercial suit where the defendant (M/s Om Fire Safety Company Pvt. Ltd.) filed its Written Statement belatedly. The commercial court condoned the delay under Order VIII Rule 1 of the Code of Civil Procedure, 1908 (“CPC”), but imposed costs as a condition. The defendant failed to pay those costs despite repeated opportunities. The commercial court then ordered that the Written Statement be taken off the record.

Aggrieved, the defendant invoked the Delhi High Court’s supervisory jurisdiction under Article 227 of the Constitution, challenging the order dated 17 October 2025 by which the Written Statement was removed from the record due to non‑payment of costs. The High Court declined to interfere and upheld the commercial court’s order.

Two core issues emerge:

1. The effect of non‑payment of costs imposed as a condition for condonation of procedural default (delay in filing Written Statement) in a commercial suit.
2. The interpretation of a costs order that is silent as to the recipient of the costs, and the extent of High Court’s interference under Article 227 in such procedural matters in the commercial courts regime.

At a broader level, the decision reinforces the strict procedural discipline expected in commercial litigation, and clarifies that conditional costs are not a mere formality but a substantive tool to ensure expedition and fairness.

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2. Summary of the Judgment

2.1 Factual and Procedural Background

The key factual steps are:

1. In a commercial suit filed by the plaintiff/respondent (Umakant), the defendant/petitioner (M/s Om Fire Safety Co. Pvt. Ltd.) failed to file its Written Statement (WS) within the prescribed time.
2. On 07.08.2025, the commercial court allowed the defendant’s application under Order VIII Rule 1 CPC and condoned the delay in filing the WS subject to payment of costs.
   • The WS was treated as taken on record conditionally.
   • The plaintiff’s counsel stated he was not inclined to file a replication.
   • The court proceeded to admission/denial of documents but the defendant’s authorised representative, main counsel, and documents were absent; opportunity to admit/deny plaintiff’s documents was closed.
3. On the next date (01.09.2025), the costs were still not paid. The plaintiff’s application under Order XIII‑A CPC (summary judgment in commercial disputes) was listed for reply and arguments on 17.10.2025.
4. On 17.10.2025:
   • In the first call, the matter was passed over, awaiting the defendant’s side.
   • In the second call, when the plaintiff’s counsel raised the issue of non‑payment of costs, the defendant’s counsel claimed unawareness of the costs order and, when offered another pass‑over, made a casual remark “de denge” (“we will pay”).
   • In these circumstances, the commercial court ordered that the WS be taken off the record.
5. The defendant challenged this order by filing a petition under Article 227 of the Constitution before the Delhi High Court.

2.2 Contentions Before the High Court

The primary contention of the defendant was:

• There was “confusion” as to whom the costs were to be paid because the order dated 07.08.2025 did not expressly specify the payee (court or opposite party).

The defendant also disclosed, in response to a specific query from the High Court, that its defence in the suit was that the goods supplied were defective. However, it was admitted that no prior notice alleging defects had been sent to the plaintiff before filing the WS.

2.3 Findings and Decision

Justice Girish Kathpalia dismissed the petition, holding:

1. The alleged “confusion” regarding the payee of costs was flimsy and unconvincing. When a costs order is silent as to the payee, it is plain that the costs are to be paid to the opposite party who has suffered the adjournment.
2. No effort had been made by the defendant’s counsel between 07.08.2025 and 17.10.2025 to clarify any such doubt from the court, which undermined the credibility of the explanation.
3. Costs are not about the quantum but about compensating the other side for delay and ensuring procedural discipline. The failure to pay such costs, especially in a commercial suit, cannot be treated lightly.
4. Relying on the Supreme Court’s decision in Manohar Singh v. D.S. Sharma, (2010) 1 SCC 53, the Court reaffirmed that non‑payment of costs entails the consequence that the defaulting party must be prohibited from participating further in the proceedings.
5. The Commercial Courts Act, 2015 is designed to expedite commercial disputes. Any interpretation of procedural law that dilutes this objective is impermissible. Litigants and counsel cannot be permitted to treat commercial suits like ordinary civil suits or to adopt casual approaches.
6. On the facts, the defendant’s conduct showed disregard for timelines and for the conditional order. The commercial court’s order striking the WS from the record could not be termed perverse or infirm so as to justify interference under Article 227.

The High Court accordingly upheld the commercial court’s order and dismissed the petition and all pending applications.

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3. Precedents and Authorities Cited

3.1 Manohar Singh v. D.S. Sharma, (2010) 1 SCC 53

This is the principal Supreme Court precedent cited and forms the backbone of the High Court’s reasoning regarding the consequences of non‑payment of costs.

In Manohar Singh, the Supreme Court:

• Considered Section 35B CPC, which deals with costs for causing delay.
• Clarified the object of Section 35B: to discourage dilatory tactics and to compensate the non‑defaulting party for costs incurred due to adjournments or failure to take necessary steps.
• Interpreted the statutory language that makes payment of such costs a condition precedent to the further prosecution of the suit or defence by the defaulting party.

The Delhi High Court paraphrases the practical consequence as follows:

Thus, the High Court applies Manohar Singh to hold that when costs are imposed for delay and made a precondition for continuing the litigation, non‑payment is not a mere irregularity: it structurally disables the defaulting party from prosecuting the suit or defence further.

3.2 Statutory Framework Underpinning the Decision

Although not all are cited by name in the short order, the following provisions are directly engaged:

1. Order VIII Rule 1 CPC:
   • Prescribes the time limit for filing Written Statements by the defendant.
   • In commercial disputes (post‑Commercial Courts Act), this is read with the strict timelines under the Act and related amendments.
2. Section 35B CPC:
   • “Costs for causing delay”.
   • Empowers the court to impose costs on the party that defaults in taking required procedural steps or causes adjournment.
   • Expressly makes payment of such costs, on the next date, a condition precedent to the further prosecution of the suit/defence by that party.
3. Order XIII‑A CPC (as introduced for commercial disputes):
   • Provides for summary judgment in commercial disputes, allowing disposal without recording oral evidence where there is no real prospect of success and no compelling reason for trial.
   • In the present case, the plaintiff’s application under Order XIII‑A was already on board when the costs issue arose, increasing the potential prejudice from delay.
4. Commercial Courts Act, 2015:
   • Establishes commercial courts/commercial divisions with an overriding aim of speedy disposal of commercial disputes.
   • Introduces stricter timelines and procedural discipline, particularly as to filing of pleadings and conduct of trial.
5. Article 227 of the Constitution of India:
   • Confers supervisory jurisdiction on High Courts over all subordinate courts/tribunals within their territory.
   • This jurisdiction is limited and is ordinarily invoked to correct jurisdictional errors, grave procedural irregularities, or perverse findings, and not to re‑appreciate routine procedural discretion.

Taken together, these authorities reinforce the idea that in commercial litigation, once a conditional cost order is passed to regularise a default (such as delayed filing of a Written Statement), non‑compliance is a serious matter, attracting the statutory sanction of disabling the defaulting party from further participation.

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4. Legal Reasoning in Detail

4.1 On the Alleged “Confusion” About the Payee of Costs

The defendant’s core justification for not paying the costs was that the order dated 07.08.2025 did not specify whether the costs were to be deposited in court or paid to the opposite party. The High Court deals with this argument in two distinct steps:

1. Conduct‑based assessment:
   • From 07.08.2025 to 17.10.2025, no attempt was made by the defendant’s counsel to seek clarification from the trial court.
   • This prolonged inaction undermined the bona fides of the “confusion” explanation.
2. Substantive legal clarification:
   • The Court declared that when an order imposing costs is silent about the payee, the natural and legal inference is that the costs are to be paid to the opposite party—the party who has had to attend and suffer the adjournment or delay.

The Court emphasises that the purpose of such costs is compensatory, not penal in the abstract. Costs belong to the party who has been put to extra expense or inconvenience due to the default or delay of the opposite side.

Thus, a new, clear principle is articulated:

This clarification will be particularly useful in practice, because trial courts frequently impose “costs” without spelling out the payee in detail, relying on standard practice; this decision codifies that understanding in an authoritative form.

4.2 Costs as a Serious Procedural Sanction, Not a Triviality

The High Court underscores that the issue is not the amount of the costs, but their purpose:

This aligns with Section 35B CPC and Manohar Singh:

• Costs for causing delay are meant to reimburse the party who has incurred unnecessary expenditure due to the other side’s default.
• They also function as a procedural lever to ensure that parties do not treat the court’s time casually.

By focusing on the rationale—compensation and deterrence—the Court rejects the suggestion that non‑payment can be excused as a minor lapse. Especially in a commercial court, such laxity undermines the statutory objective of expedited disposal.

4.3 Consequence of Non‑Payment of Costs: Prohibition from Further Participation

Drawing directly from Manohar Singh and Section 35B CPC, the Court reaffirms that:

In the present case, this consequence is implemented concretely through:

• Taking the Written Statement off the record, thereby disabling the defendant from prosecuting its defence.

This is consistent with the structure of Section 35B:

• When costs for delay are ordered, their payment on the next date is a “condition precedent” to the further prosecution of the suit or defence.
• If the condition is not satisfied, the legal consequence is that the defaulting party cannot continue its participation on that side of the record (either as plaintiff prosecuting the suit or as defendant prosecuting the defence).

The High Court’s approach indicates that, particularly in commercial suits, courts should not hesitate to enforce this statutory consequence where conduct demonstrates habitual or unexplained non‑compliance.

4.4 Commercial Courts Act and the “Philosophy” of Expedition

A central theme of the judgment is the special character of commercial litigation under the Commercial Courts Act, 2015. Justice Kathpalia observes:

And further:

The legal reasoning here is two‑fold:

1. Purposive interpretation: Procedural rules (like Order VIII Rule 1, Section 35B, and Order XIII‑A) in the context of commercial disputes must be interpreted in a way that promotes speed, efficiency and certainty, consistent with the legislative object of the Commercial Courts Act.
2. Elevated expectation from litigants and counsel: Parties in commercial suits—and particularly their counsel—are expected to adhere rigorously to timelines and conditions imposed. The casual remark “de denge” in response to a conditional costs order pending for months is treated as emblematic of an unacceptable attitude towards commercial court processes.

The judgment thus reinforces a jurisprudential trend seen in earlier Supreme Court decisions (such as SCG Contracts India Pvt. Ltd. v. K.S. Chamankar Infrastructure Pvt. Ltd., 2019, though not cited here) that timelines and procedural rigour in commercial suits are to be treated as strict and generally inflexible.

4.5 Limited Scope of Interference Under Article 227

The Court concludes that there is no “infirmity, much less any perversity” in the commercial court’s order that would warrant interference under Article 227. This is significant because it affirms:

• The commercial court acted within its jurisdiction and in line with the statutory framework (Section 35B and the Commercial Courts Act).
• Its order was a reasonable procedural response to repeated non‑compliance, and not arbitrary or capricious.

This reflects a restrained use of the High Court’s supervisory power in matters of case‑management and procedural discipline in commercial courts, thereby:

• Empowering trial/commercial courts to enforce timelines and conditions robustly; and
• Discouraging litigants from routinely invoking Article 227 to reverse such orders merely because they are strict or inconvenient.

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5. Impact and Future Implications

5.1 Reinforcement of Procedural Rigour in Commercial Litigation

The judgment strengthens the message that:

• Conditional costs orders in commercial suits must be treated with utmost seriousness.
• Non‑payment, especially without a bona fide explanation, is likely to result in severe consequences such as:
  • Striking off the Written Statement;
  • Closing of the right to lead evidence or cross‑examine; or
  • Other sanctions consistent with Section 35B CPC.

This will likely encourage:

• Defendants to take deadlines and conditional orders more seriously, recognising the real risk of losing their defence.
• Counsel to be proactive—paying costs promptly, seeking clarification immediately where needed, and avoiding casual conduct before commercial courts.

5.2 Clarification on Recipient of Costs When Order is Silent

By expressly holding that costs—when the order is silent—are payable to the opposite party who suffered the adjournment, the High Court has provided useful guidance for day‑to‑day practice:

• Parties can no longer reasonably plead “confusion” as to the payee of such costs.
• Trial courts may also rely on this precedent to infer that their own silence on payee does not create ambiguity.

This clarification reduces room for tactical excuses and streamlines compliance.

5.3 Interaction with Summary Judgment (Order XIII‑A CPC)

In this case, the plaintiff’s application under Order XIII‑A (summary judgment) was already in play. Removal of the WS significantly enhances the prospects of a summary adjudication in the plaintiff’s favour, because:

• Without a WS on record, the defendant’s substantive defence is absent from the pleadings.
• In summary judgment regimes, the absence of a pleaded factual defence can make it easier to conclude that there is “no real prospect” of the defendant succeeding.

This case thus illustrates how procedural defaults (non‑payment of costs, failure to appear prepared at admission/denial stage) can interact with Order XIII‑A to drastically alter the dynamics of a commercial suit, often to the defendant’s detriment.

5.4 Signalling Effect on Counsel and Professional Responsibility

The Court’s specific reference to the counsel’s “casual” manner and the remark “de denge” is more than incidental; it serves as a caution:

• Commercial court proceedings demand professional seriousness and preparedness from advocates.
• Supervisory courts will not be sympathetic where counsel’s conduct contributes to procedural abuse or delay.

In future, counsel may be more cautious about:

• Ignoring or downplaying cost orders; and
• Adopting off‑hand or informal attitudes when key procedural questions (like compliance with conditional orders) are raised in court.

5.5 Limited Room for “Equitable” Rescue Under Article 227

The judgment also signals that High Courts will rarely exercise Article 227 jurisdiction to rescue parties from the consequences of their own procedural neglect in commercial suits, unless:

• There is a clear jurisdictional error;
• A manifest violation of natural justice; or
• An order that is perverse or shocks the conscience.

Mere harshness or strictness consistent with statute will not suffice. This further strengthens the autonomy and authority of commercial courts in enforcing procedural discipline.

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6. Complex Concepts and Terms Simplified

6.1 Written Statement (WS)

A Written Statement is the defendant’s formal written response to the plaintiff’s plaint. It:

• Admits or denies the plaintiff’s averments;
• Sets out the defendant’s version of the facts;
• Raises legal defences and counter‑arguments.

In commercial suits, timelines for filing the WS are far stricter than in ordinary civil suits. Delay ordinarily requires formal condonation (i.e., the court must excuse and regularise the delay), often on terms such as payment of costs.

6.2 Order VIII Rule 1 CPC

This provision requires the defendant to file the WS within a prescribed period after service of summons. In commercial disputes (after amendments), courts are less flexible about extending this time, reflecting the need for speedy adjudication.

6.3 Section 35B CPC – “Costs for Causing Delay”

Section 35B empowers a court to impose costs on a party who:

• Fails to take a required step (like filing a pleading, producing evidence) on a date fixed; or
• Seeks an adjournment to take such a step, or otherwise causes delay.

Key features:

• The court may order the defaulting party to pay such costs as would reimburse the other party for attending court that day.
• Payment of those costs on the next date is a condition precedent to further prosecuting the suit (if imposed on the plaintiff) or the defence (if imposed on the defendant).
• Non‑payment, therefore, legally disables the defaulting party from continuing its participation, unless the court grants some exceptional indulgence.

6.4 Order XIII‑A CPC – Summary Judgment in Commercial Disputes

Order XIII‑A, applicable to commercial disputes of a specified value, allows:

• Either party to seek judgment without a full trial, on the ground that the other side has no real prospect of successfully defending or prosecuting the claim or part of it.
• The court to consider documents, pleadings, and limited evidence to decide such an application early in the life of the suit.

If a Written Statement is struck off, the defendant may be left with nothing on record to show a “real prospect” of defending the claim, making summary judgment more likely.

6.5 Commercial Courts Act, 2015

The Act created specialised courts and divisions to handle commercial disputes (typically high‑value business or trade disputes). Its goals include:

• Speedy disposal of commercial cases;
• Greater predictability and efficiency for business litigants; and
• Streamlined procedural rules, including strict timelines for filing pleadings and managing trial.

The present judgment exemplifies how courts interpret procedural rules in light of this overarching objective.

6.6 Article 227 of the Constitution – Supervisory Jurisdiction

Article 227 gives every High Court the power to supervise the work of all courts and tribunals within its territory. However:

• It is not an appeal and does not allow routine re‑examination of facts or minor procedural orders.
• Interference is reserved for serious errors—such as jurisdictional overreach, manifest injustice, or perversity.

In this case, the High Court held that the commercial court’s decision to strike the WS for non‑payment of costs was within its powers and was not perverse, and therefore refused to interfere.

6.7 “Perversity” in Judicial Review

When courts speak of “perversity” as a ground for interference, they generally mean:

• A decision so unreasonable that no sensible judicial mind could have reached it on the material before the court; or
• A decision that ignores material evidence or takes into account irrelevant considerations.

The High Court’s statement that no “infirmity, much less any perversity” existed indicates that the trial court’s order was within the range of reasonable responses to the situation.

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7. Conclusion: Key Takeaways and Significance

Om Fire Safety Co. Pvt. Ltd. v. Umakant articulates and reinforces several important principles for commercial litigation in India:

1. Conditional costs are substantive, not symbolic.
   When a court condones delay in filing a Written Statement subject to costs, the costs are a binding condition. Non‑payment—without a convincing and timely explanation—can legitimately lead to the striking off of the Written Statement and preclusion from further participation.
2. Silence in a costs order does not create ambiguity about the payee.
   Where an order imposing costs is silent about the recipient, the costs are to be paid to the opposite party who suffered the adjournment. This closes a frequent line of argument that “confusion” existed about where the costs were to be deposited.
3. Commercial courts demand heightened procedural discipline.
   The decision emphasises that commercial suits cannot be treated like ordinary civil suits. The legislative aim of expedition under the Commercial Courts Act informs the interpretation and enforcement of procedural rules and sanctions.
4. Section 35B CPC and Manohar Singh are robustly applied.
   Non‑payment of costs imposed for delay attracts the consequence that the defaulting party is prohibited from further prosecuting the suit or defence. The High Court applies this directly to justify the removal of the Written Statement from the record.
5. Limited intervention under Article 227 in procedural case‑management orders.
   The High Court refuses to interfere, reaffirming that strict, but legally grounded, procedural orders by commercial courts will not be easily disturbed under supervisory jurisdiction.

In practical terms, the case serves as a clear warning to defendants (and plaintiffs) in commercial litigation: delay‑condonation orders on terms are to be scrupulously complied with; any laxity—particularly in relation to costs—can lead to the loss of crucial procedural rights, including the right to maintain a defence. Counsel are equally reminded of their professional obligation to take commercial court processes seriously, avoid casual conduct, and ensure meticulous compliance with conditional orders.

As commercial litigation continues to expand in India, this judgment will likely be cited as an authoritative precedent on:

• The consequences of non‑payment of conditional costs in commercial suits;
• The inference as to the payee of costs where orders are silent; and
• The deference High Courts owe to commercial courts in enforcing strict procedural discipline consistent with the Commercial Courts Act’s philosophy of expedition.