A PROJECT

ON

SECURITY FOR COSTS

[submitted as partial fulfillment of the requirement for B.A.L.L.B- 5-year integrated course]

Session:2022-23

Submitted on: 25 Jan, 2023

Submitted by: Supervised by:

Ashwina Yadav Dr. Ghan Shyam Bera

Roll no-13

Semester – IX A

UNIVERSITY FIVE YEAR LAW COLLEGE

UNIVERSITY OF RAJASTHAN

JAIPUR

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 DECLARATION
 
I, Ashwina Yadav, hereby declare that this project titled “Security for Costs” is
based on the original research work carried out by me under the guidance and
supervision of Dr. Ghan Shyam Bera.

The interpretations put forth are based on my reading and understanding of

original texts. The books, articles, websites etc. which have been relied upon by
me have been duly acknowledged at the respective places in the text.

For the present project which I am submitting to the university, no degree or

diploma has been conferred on me before, either in this or any other university.

Date: 25 Jan, 2023

                                                                                    Ashwina Yadav

                                                                        Roll No: 13

                                                                        Semester: IX A

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 ACKNOWLEDGEMENT
 
In the accomplishment of this project successfully, many people have best
owned upon me their blessings and heart pledged support, this time I am
utilizing to thank all people concerned with this project.

First of all, I would like to thank our Director Dr. Aruna Chaudhary for giving
me an opportunity. I would like to thank our supervisor Dr. Ghan Shyam Bera
whose valuable guidance and suggestions helped me complete this project
within time.

I would like to thank librarian and library staff who have been a great support
throughout.

Last but not the least, I would like to thank my parents and friends for their
valuable suggestions which helped me in completing this project successfully.

  

Ashwina Yadav 
 

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 CERTIFICATE
 

Dr. Ghan Shyam Bera                                                 Date: 25 Jan, 2023

Faculty

University Five Year Law College

University of Rajasthan, Jaipur

This is to certify that Ms. Ashwina Yadav of IX Semester, Section A of

University Five Year Law College, University of Rajasthan, Jaipur has carried
out the project entitled ‘Security for Costs’ under my supervision and guidance.
It is an investigation report of a minor project. The student has completed
research work in my stipulated time and according to the norms prescribed for
the purpose.

Supervi
sor

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 TABLE OF CONTENTS

 Declaration 2
 Acknowledgement 3
 Certificate 4
 Abstract 6
 Introduction 7
 Research Methodology 8
 Chapter 1: Transfer of Suit 9-10
 Chapter 2: Causes and Consequences 11
 Conclusion 12
 Bibliography 13

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 ABSTRACT

Security for costs is a common law legal concept of application only in costs jurisdictions and
is an order sought from a court in litigation.

The general rule in costs jurisdiction is that "costs follow the event". In other words, the loser
in legal proceedings must pay the legal costs of the successful party. Where a defendant has a
reasonable apprehension that its legal costs will not be paid for by the plaintiff if the
defendant is successful, the defendant can apply to the court for an order that the plaintiff
provides security for costs. Furthermore, the amount that is ordered by the Judge is in direct
correlation to the strength or weakness of the plaintiff's case brought herewith. The weaker
the probability of the plaintiff prevailing, the higher the security order.

Typically a claimant will be outside the jurisdiction of the court: the law of security for costs
recognizes that orders of the court relating to the payment of a party's legal costs can be very
difficult to enforce in non-common law jurisdictions, and so will order security to be
provided. Security can also be ordered where a plaintiff is insolvent or prone to vexatious
litigation.

Security is usually provided in the form of a bank cheque paid into the court, or held in
a trust account operated jointly by both the plaintiff's and defendant's lawyers.

If the defendant is successful, the money can be applied against the costs order. If the
claimant is successful, the security is returned to the claimant.

There are conditions that need to be satisfied for the court to grant the security of costs. The
first condition is if it is satisfied, having regard to all the circumstances of the case, that it is
just to make such an order.

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 INTRODUCTION

An order which requires a party (often the claimant) to pay money into court, or provide a
bond or guarantee, as security for their opponent's costs of litigation. It is available for
specific situations set out in the Civil Procedure Rules and statute, subject to the court's
discretion.

An order for security for costs protects a party (often a defendant) against the risk that they
will win at trial and be awarded their costs, but then not be able to enforce a costs order
against the other (losing) party, either within the jurisdiction or abroad. The order for security
to be given, if complied with, will provide a fund available within England and Wales,
against which the party who has obtained the security order can enforce any costs order they
may obtain. The claim may be stayed (and so cannot continue) until the security is provided.
If the claim does not stay, there may be other provisions for default, such as giving the
claimant (or another relevant party) a reasonable time within which to provide the security,
and the other party liberty to apply to the court in the event of default. This enables the court
to put the claimant to its election and then, if appropriate, to dismiss the case.

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 RESEARCH METHODOLOGY

The research methodology for this project is doctrinal. The student has relied on secondary
sources of data. For obtaining necessary information, various books, journals as well as
websites have been explored by the researcher which has been mentioned in the reference
section.

STATEMENT OF PROBLEM

This project aims to study about the provisions regarding Security for Costs under Civil
Procedure Code, of 1908. To understand the effect of failure to furnish Security for Costs
under the code.

OBJECTIVES

The main objective of the study is-

1. To know about the concept of Security for Costs under the Civil Procedure
Code,1908.
2. To know about the effect of failure to furnish Security for Costs.

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 CHAPTER 1: SECURITY FOR COSTS

Order XXV Rule 1, of the Civil Procedure Code, 1908 talks about security for costs:

1. When security for costs may be required from the plaintiff. - (1) At any stage of a suit, the
court may, either of its own motion or on the application of any defendant, order the plaintiff,
for reasons to be recorded, to give within the time fixed by it security for the payment of all
costs incurred and likely to be incurred by any defendant:

Provided that such an order shall be made in all cases in which it appears to the court that a
sole plaintiff is, or (when there are more plaintiffs than one) that all the plaintiffs are residing
out of India and that such plaintiff does not possess or that no one of such plaintiffs possesses
any sufficient immovable property within India other than the property in suit.

(2) Whoever leaves India under such circumstances as to afford reasonable probability that he
will not be forthcoming whenever he may be called upon to pay costs shall be deemed to be
residing out of India within the meaning of the proviso to sub-rule (1).1

The purpose of an application for an order for security for costs is to offer the defendant in a
legal proceeding peace of mind by forcing the plaintiff to pay to the court a fixed sum that the
court considers appropriate to secure the defendant’s costs of and incidental to the
proceeding. Security for costs orders serves as protection for defendants with a legitimate
concern that a plaintiff may not be able to pay the costs of the proceeding in the event the
defendant was to be successful in his or her defense.

In these circumstances, the defendant may apply to the court for an order for security for
costs to be paid by the plaintiff into a court fund covering all or part of the defendant’s
estimated costs of the proceeding pending the outcome. However, the path to a successful
application for a security for costs order is not as simple as it may appear. The courts have
wide discretionary powers to determine whether or not to make an order and have historically
been reluctant to do so unless the defendant brings an exceptionally strong case.

The amount of security awarded is at the discretion of the court, which will fix such sum as it
thinks just having regard to all the circumstances of the case. In any cause or matter in which
Security for Costs is required, the security shall be of such amount, and be given at such
times, and in such manner and form, as the court shall direct.

1
Order XXV Rule 1, of the Civil Procedure Code, 1908 Bare Act.

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Where an order for security is given by the court, the plaintiff will be required to provide
security for the defendant’s costs by paying the amount ordered into a court fund. Until that
security is provided, there will effectively be a stay of the proceedings; in other words, there
will be a halt of any further legal process until the plaintiff has met the requirements of the
court order.2 Naturally, this could have a detrimental impact on a plaintiff’s case as it may
effectively stop the plaintiff from pursuing their claim.

Due to the weight an order for security for costs may carry, the courts are required to take
into account the rights and interests of both opposing parties to the proceedings at all stages
during the proceeding. Specifically, in deciding whether or not to make an application for
security for costs, the courts must consider factors such as:

 the inherent legal right of a plaintiff to bring legal proceedings, and not be deprived of
the opportunity to pursue a claim to its conclusion; and

 the right of a defendant not to be forced to “waste” money by defending an inevitably

hopeless case.

In some cases, the amount of security may be limited to the extra burden or risk involved in
seeking to enforce costs orders subsequently obtained. In other cases, the amount of security
may relate to the total costs likely to be incurred in opposing the claim or appeal but it is
seldom the practice to order security on a full indemnity basis.

If security for costs is sought at an early stage of the proceedings, as is often the case, then
the court will fix an amount having regard to the costs already incurred by the parties and the
costs likely to be incurred in the future. One of the factors for the court to consider is the
possibility that the proceedings may soon settle. In such a case it may be a wise decision to
make an arbitrary discount of the costs estimated as likely future costs, but there is no hard
and fast rule. In essence, the court considers each case on its own circumstances.

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 CHAPTER 2: EFFECT OF FAILURE TO FURNISH SECURITY

Rule 2 Order XXV of the Code of Civil Procedure 1908 talks about the Effect of failure to
furnish security:

1) In the event of such security not being furnished within the time fixed, the Court shall
make an order dismissing the suit unless the plaintiff or plaintiffs are permitted to withdraw
therefrom.

(2) Where a suit is dismissed under this rule, the plaintiff may apply for an order to set the
dismissal aside and, if it is proved to the satisfaction of the Court that he was prevented by
any sufficient cause from furnishing the security within the. time allowed, the Court shall set
aside the dismissal upon such terms as to security, costs, or otherwise as it thinks fit, and shall
appoint a day for proceeding with the suit.

(3) The dismissal shall not be set aside unless notice of the such application has been served
on the defendant.

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 CONCLUSION

A defendant who is engaged in litigation, but feels the claimant may be unable to satisfy any
costs order made against him may, in certain circumstances, apply to the court for an order
for security for costs. The rationale behind this is that a defendant will not usually have
chosen to be embroiled in litigation (although his behavior may have been such that the
claimant had no other option but to commence proceedings). Defending a claim can cost a
considerable amount of money.

Security for costs is a common law legal concept of application only in costs jurisdictions and
is an order sought from a court in litigation. The general rule in costs jurisdiction is that
"costs follow the event". In other words, the loser in legal proceedings must pay the legal
costs of the successful party. Security is usually provided in the form of a bank cheque paid
into the court, or held in a trust account operated jointly by both the plaintiff's and defendant's
lawyers.

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 BIBLIOGRAPHY

BOOK REFERENCES

 The Civil Procedure Code 1908, Bare Act, (Universal Law Publishing- Lexis Nexis,
2020).
 Sir D.F. Mulla, The Key to Indian Practice, (Universal Law Publishing House - Lexis
Nexis, 12th ed. 2019).
 C.K.Takwani, Civil Procedure, (Eastern Book company, 9th ed. 2021).

WEB REFERNECES

 https://en.wikipedia.org/wiki/Security_for_costs.
 https://lawrato.com/indian-kanoon/cpc/order-25.
 https://www.mondaq.com/isleofman/trials-appeals-compensation/258786/anexplanatory-
note-on-security-for-costs-applications.
 https://indiankanoon.org/doc/257238/.
 https://www.lawzonline.com/bareacts/civil-procedure-code/order25-rule1-code-of-civil-
procedure.htm.

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