“Proportionality & Judicial Discretion over Peremptory Cost-Orders”
A Detailed Commentary on VI-John Healthcare India LLP v. Dabur India Ltd. (2025 DHC 6269)

1. Introduction

The Delhi High Court’s judgment delivered by Hon’ble Mr. Justice Tejas Karia on 31 July 2025 addresses the condonation of delay in filing a written statement in a trademark infringement suit and, more importantly, the limits of peremptory cost orders passed by trial courts in commercial litigation.

The petitioner, VI-John Healthcare India LLP, challenged two orders of the Commercial Court, Tis Hazari (“First Impugned Order” dated 07.08.2024 and “Second Impugned Order” dated 06.02.2025). The first, passed at the very outset of the suit, warned that any delay in filing a written statement or replication would attract costs of ₹25,000 per day. The second order, relying entirely on the first, actually imposed those costs—₹25,000 for each of 48 days’ delay, totalling a staggering ₹12,00,000—while allowing the written statement to be taken on record.

Justice Karia’s ruling sets aside both cost components, holds that courts cannot bind their future discretion through such forewarning orders, and insists that costs must be proportionate to the relief claimed and to the conduct of the litigant.

2. Summary of the Judgment

• The High Court allowed the petition under Article 227 of the Constitution and set aside the portions of both impugned orders that levied costs.
• Delay of 48 days (within the statutory outer limit of 120 days in Commercial Courts) was condoned without any cost.
• The trial court’s reliance on the earlier “cautionary” order was held to be erroneous; every application for condonation must be decided afresh on its own merits.
• The imposed cost (₹12,00,000) was declared grossly disproportionate to the damages claimed (₹2,50,000) and contrary to the principle of proportionality.
• The High Court emphasised that on-going bona fide settlement negotiations constitute a justifiable ground for short delay and courts should encourage such settlements.

3. Analysis

3.1 Precedents Cited & Their Influence

Although the Judgment does not catalogue case-law exhaustively, several legal anchors are visible:

• Order VIII Rule 1 CPC & Section 5 Limitation Act: Form the statutory bedrock for filing written statements and condonation of delay. The judgment reiterates that while commercial courts must honour timelines strictly, discretion survives within the 120-day ceiling.
• Santosh Hindusthan Construction v. Chandra & Sons (SC, 2020): Frequently cited for the proposition that the 120-day outer limit is mandatory; however, it also recognises judicial discretion to condone within that limit. Justice Karia echoes this balance.
• Desh Raj v. Balkishan (2021) 5 SCC 706: The Supreme Court underscored that costs imposed should be realistic and proportionate. This principle is mirrored in the instant reasoning on disproportionate costs.
• IPR suits of the Delhi High Court 2022–24 (unnamed in the text): The petitioner referenced several orders where delay costs for IPR matters were between ₹5,000–₹10,000 despite high-value claims. These orders guided the High Court’s sense of proportionality.

3.2 Legal Reasoning Explained

1. Nature of the First Impugned Order.
   • It was prospective and cautionary, not an adjudication on any actual delay.
   • Therefore it could not operate as a self-executing penalty clause binding the court when delay eventually occurred.
   • Courts possess inherent power (S.151 CPC) and statutory discretion (O VIII R 1 CPC) to evaluate each condonation plea independently.
2. Requirement of Proportionality.
   • Costs serve compensatory, not punitive, ends (relying implicitly on Salem Bar Association v. Union of India, 2003).
   • Imposing costs five times the suit-claim (₹12,00,000 vs ₹2,50,000) violates proportionality and equity.
   
3. Encouragement of Settlement.
   • Settlement discussions constitute a bona fide ground for limited delay.
   • Judicial policy (reflected in S.89 CPC & Commercial Courts Act’s emphasis on ADR) dictates that courts should facilitate, not penalise, compromise efforts.
4. Outer Time-Limit Compliance.
   • Delay was only 48 days from the 30-day cut-off; total time consumed (< 120 days) lies within statutory bounds. Consequently, refusing condonation or imposing prohibitive costs would defeat the legislative scheme that already defines consequences for delay beyond 120 days (i.e., forfeiture of right to file written statement).

3.3 Likely Impact on Future Litigation

• A Precedent on Peremptory Orders: Trial courts in Delhi (and potentially other jurisdictions) must avoid framing “fixed daily cost” directions at the first hearing. Any such directions will now be viewed as indicative rather than binding, ensuring subsequent discretion.
• Proportionality Doctrine Strengthened: Costs must correlate with
  (a) the claim amount,
  (b) the length and reasons for delay, and
  (c) litigant conduct. Unjust enrichment through procedural penalties is discouraged.
• Settlement-Friendly Approach: Litigants may safely continue bona fide negotiations without fear that minor procedural lapses will attract crippling sanctions.
• Commercial Court Practice: The judgment tempers the otherwise stringent timeline regime under the Commercial Courts Act by reaffirming a residuum of judicial discretion.

4. Complex Concepts Simplified

5. Conclusion

The Delhi High Court’s ruling in VI-John v. Dabur installs a clear doctrinal checkpoint: peremptory directions that pre-fix exorbitant daily costs cannot fetter later judicial discretion, especially when delay remains within statutory confines and is explained by bona fide settlement efforts. By linking the quantum of costs to the magnitude of the claim and actual prejudice, the court re-energises the principle of proportionality in procedural adjudication.

Going forward, commercial courts must evaluate each condonation plea on its individual merits, entertain settlement-driven delays with circumspection, and calibrate costs to ensure they compensate rather than punish. The judgment offers litigants a fairer procedural landscape and underscores the High Court’s readiness to intervene when subordinate courts overstep by mechanically enforcing cautionary orders.