RAHEEL KAMRAN, J.- This single judgment shall decide the instant civil revision along with Civil Revision No. 588 of 2013 as common questions of law and facts are involved in these petitions.
2. The instant revision petitions challenge separate orders dated 28.09.2013 passed by the learned Additional District Judge, Rawalpindi in two identical suits instituted by the petitioner for the grant of perpetual inunction whereby the petitioner has been directed to deposit a sum of Rs.15,000,000/- in cash or furnish bank guarantee equivalent to the same amount as a security for costs under rule 1 of Order XXV of the Code of Civil Procedure (V of 1908) [herein after referred to as the 'Code'].
3. Facts in background of the case are that the petitioner filed two identical suits for the grant of perpetual injunction to restrain the respondents from committing any infringement and/or counterfeiting and/or imitation of petitioner's rights in its Patent Nos.139307 and 139310 in relation to the product "Sitagliptin" for the treatment of Diabetes Mellitus type 2, restraining the respondents from committing the act of unfair competition, under section 67 of the Trademarks Ordinance, 2001 and for damages etc. [herein after referred to as 'suits']. In both suits, respondent No.1 filed application under Order XXV read with section 151 of the Code alleging therein that as the petitioner/plaintiff is a foreign company, permanently based and having its place of business abroad and it also does not possess sufficient immovable property in Pakistan, therefore, it is liable to furnish security of cost in the sum of Rs.15,000,000/ (rupees fifteen million). The aforementioned application was contested by the petitioner, who did not dispute its status as that of a foreign company nor did it point out to be in possession of any sufficient immovable property within Pakistan, however, claimed inapplicability of the provisions of rule 1 of Order XXV of the Code in this case which could only be pressed into service in very exceptional cases where main relief sought for is recovery of money. The aforementioned application of respondent No.1 was accepted by the learned trial court by passing the impugned orders dated 28.9.2013, which are under challenge in these revision petitions.
4. Learned counsel for the petitioner contends that the impugned order has been passed without judicious application of mind to the facts of the suit and the law applicable thereon; that the nature and scope of rule 1 of Order XXV of the Code has not been correctly appreciated and applied by the learned trial court while passing the impugned order; that the respondent failed to make out any case for passing the order for security of cost and the impugned order has been passed as a matter of course instead of manifesting exercise of judicial discretion; that the amount secured for costs has been fixed arbitrarily; and that contrary to the provisions of rule1 of Order XXV of the Code the learned trial court directed the petitioner to deposit the amount of partial compensation of damages claimed by it in the suit i.e. Rs.15 million.
5. Learned counsel for the respondents on the other hand has defended the impugned order to the extent that the respondents were entitled to the security for costs under the provisions of rule 1 of Order XXV of the Code.
6. Arguments heard. Record perused.
7. For proper understanding of the nature and scope of security for costs under Order XXV of the Code, it is imperative to first refer to the provisions governing costs and compensatory costs under sections 35 and 35A of the Code, which provide:
35. Costs. Subject to such conditions and limitations, as may be prescribed, and to the provisions of law for the time being in force, the costs of an incident to all suits and other proceedings in the suit including execution proceedings, shall follow the event, and the Court shall have full power to determine by whom or out of which property and to what extent such costs are to be paid, and to give all necessary directions for the purposes aforesaid.
(2) Where the Court directs that any costs shall not follow the event, the Court shall state its reasons in writing.
(3) The Court may give interest on costs at any rate not exceeding six per cent per annum, and such interest shall be added to the costs and shall be recoverable as such.
35A. Compensatory costs in respect of false or vexatious claims or defences. (1) If in any suit or other proceeding, including an execution proceeding, not being an appeal, any party objects to the claim or defense on the ground that the claim or defense or any part of it is, as against the objector, false or vexatious to the knowledge of the party by whom it has been put forward, and if thereafter, as against the objector, such claim or defense is disallowed, abandoned or withdrawn in whole or in part, the Court, if the objection has been taken at the earliest opportunity and if it is satisfied of the justice thereof, may, after recording its reasons for holding such claim or defence to be false or vexatious, make an order for the payment to the objector by the party by whom such claim or defense has been put forward, of costs by way of compensation.
(2) No Court shall make any such order for the payment of an amount exceeding one hundred thousand rupees or exceeding the limits of its pecuniary jurisdiction, whichever amount is less: Provided further, that the High Court may limit the amount which any Court or class of Courts is empowered to award as costs under this section.
(3) No person against whom an order has been made under this section shall, by reason thereof, be exempted from any criminal liability in respect of any claim or defence made by them.
(4) The amount of any compensation awarded under this section in respect of a false or vexatious claim or defence shall be taken into account in any subsequent suit for damages or compensation in respect of such claim or defense.
8. Without going into elaborate discussion on construction of the above provisions, which is not necessary in view of the controversy involved in this case and it will suffice to refer to some fundamental principles embodied in the aforementioned provisions. Section 35 of the Code essentially deals with the actual costs of the suit while under section 35-A of the Code, the costs are compensatory. Actual costs are awarded by a court in order to secure the expense incurred by a successful litigant in the assertion of his right before a court. Section 35-A of the Code visualizes compensatory costs against an unsuccessful party, which can be taken into account while awarding damages[1]. Whether or not to make an order for costs under Section 35-A of the Code is a discretion of the court. Generally, the question, who has to pay for the costs of claim, is not determined until the claim is finally decided, whether by consent, interim process or trial. As a general rule, costs follow the event[2], meaning thereby that the successful party recovers costs from the loser and outcome on the claim, on merits, is known only when the final judgment is announced. No order as to costs is an exception to the aforementioned general rule to be exercised by the court only after recording reasons[3]. Incidents of exceptions include where the successful party is guilty of misconduct or negligence, often changed its contention, made untrue statements or raised dishonest pleas[4]or the case is of first impression and where new law is being laid down.
9. Turning now to the security for costs under rule 1 of Order XXV of the Code, which is reproduced below:
1. When security for costs may be required from plaintiff. (1) Where at any stage of a suit 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 Pakistan and that such plaintiff does not, or that no one of such plaintiffs does, possess any sufficient immovable property within Pakistan other than the property in suit, the Court may, either of its own motion or on the application of any defendant, order the plaintiff or plaintiffs, within a time fixed by it, to give security for the payment of all costs incurred and likely to be incurred by any defendant.
Residence out of Pakistan, etc. -(2) Whoever leaves Pakistan 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 Pakistan within the meaning of sub-rule (1).
(3) On the application of any defendant in a suit for the payment of money, in which the plaintiff is a woman, the Court may at any stage of the suit make a like order if it is satisfied that such plaintiff does not possess any sufficient immovable property within Pakistan.
2. 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 such application has been served on the defendant.
10. The cases in hand do not relate to sub rule (2) & (3) but sub rule (1) of Rule 1 of Order XXV of the Code. On plain reading of rule 1 of Order XXV of the Code, it is manifest that an order of security for costs can only be made against plaintiff(s) and in favour of defendant(s). It applies in cases where plaintiff(s) are residing out of Pakistan and is subject to the condition that such a plaintiff or none of the plaintiffs possesses any sufficient immovable property within Pakistan other than the suit property. The court may make an order for security of costs at any stage of the suit. Such order may be made either on an application of the defendant or of its own motion by the court and the same may cover all costs incurred and likely to be incurred by any defendant but not the amount of any claim or decree. No amount is to be paid to the defendant and all that Order XXV of the Code does at this stage is to secure the costs incurred and likely to be incurred by a defendant in defending a claim filed by a foreign plaintiff who does not possess any sufficient immovable property within Pakistan. Sub rule (1) of Rule (1) of Order XXV of the Code applies to all kinds of suits and not just a suit for the payment of money, which restriction has been imposed by the legislature under sub rule (3) in relation to the suits where the plaintiff is a woman.
11. Whether or not to make an order for security of costs under rule 1 of Order XXV of the Code is a discretion of the trial court. This Court is of the view that in every case where a defendant has to defend with no real prospect of being able to recover costs in the event of success, an order of security for costs ought to be passed as a general rule and an exception with reasons to be recorded. This is for a number of reasons: firstly, since costs follow the event as a general rule, it is unjust to expose any defendant to incur costs without providing him reasonable assurance for recovery of the same in the event of success; secondly, conferring of suo moto powers on the court in this regard highlights significance that legislature attaches to the security for costs; thirdly, the effect of failure to furnish security for costs within the time fixed by the court i.e. dismissal of the suit reveals how seriously the legislature takes any violation of an order for security of costs; and lastly, making of an order for security of costs by the trial court has been allowed by the legislature subject to satisfaction of statutory preconditions that the plaintiff is residing out of Pakistan and that it does not possesses sufficient immovable property within Pakistan other than the suit property for securing costs of the defendant.
12. How much amount of security for costs should be given by the plaintiff in a case is again a matter of discretion of the court, however, the only legislative guideline provided in this regard is that the security for the payment should cover all costs incurred and likely to be incurred by any defendant. This invariably involves a claim by the defendant of all costs incurred by as on the date of the order and the costs likely to be incurred in proceedings in the suit, as well as an assessment thereon for the purpose of security, keeping in view particular circumstances of the each case in accordance with well established principle that the same is just and reasonable and not arbitrary, fanciful or capricious. Needless to observe that in Commonwealth countries, it is usual to exhibit a summary statement of costs incurred and likely to be incurred by any defendant in support of an application such as the one under Order XXV of the Code. Inasmuch as an order of security for costs can be passed by the court not only on application of a defendant but also on its own motion, therefore, for proper exercise of judicial discretion qua determination of the amount of security for costs, an application under Rule 1(1) of Order XXV of the Code should either contain within it or be supported by a summary of costs incurred and to be incurred and in any case, in exercise of inherent powers under Section 151 of the Code, the court can direct an applicant or defendant to file such a summary before passing an order under the said provision. Be that as it may, the summary of costs does not control or curtail the discretion of the court in the determination of amount of security for costs but is only meant to provide particulars of defendant's claim of costs incurred and likely to be incurred in defending the suit, which may be accepted or rejected wholly or partially by the court in exercise of its discretion.
13. Admittedly, the petitioner in these cases is a company incorporated under the laws of State of New Jersy, United States of America, possessing no immovable property within Pakistan other than the property claimed to be subject matter of the suit. The learned trial court legitimately invoked the provision of rule 1 of Order XXV of the Code to direct the petitioner to give security for payment of all costs likely to be incurred by respondent No.1/defendant.
14. As regards the quantum of security for costs, it is noteworthy that respondent No.1 in each of these cases has claimed in its application Rs.15 million i.e. equivalent to the partial claim for damages in the suit, without providing any particulars of the total costs incurred and likely to be incurred by it in defending proceedings in the suit. Likewise, no determination of the costs incurred and likely to be incurred by respondent No.1 has been made by the learned trial court while passing the orders impugned in the instant petitions whereby the petitioner has been directed to furnish or deposit Bank guarantee with the Nazir of the trial court in the sum of rupees equivalent to the amount claimed by the plaintiff on or before 5.10.2013. What rule 1 of Order XXV of the Code envisages is to provide security for the payment of all costs incurred and likely to be incurred by any defendant which cannot, by any stretch of imagination, cover the amount claimed by the plaintiff in a suit. Accordingly, the impugned order in both cases, to that extent, has been passed in excess of jurisdiction vested in the court below.
15. In these cases the respondents surely have a right to defend themselves in the suits filed by the petitioner since the relief sought poses serious risks to their business, which entails incurring of costs that cannot be left unsecured following the general rule. No peculiar facts and circumstances have been pointed out by the learned counsel for the petitioner to treat the case of the petitioner as an exception to the general rule to avoid an order of security for costs. Therefore, application of respondent No.1 in these cases cannot be outrightly dismissed in entirety. The amount of security for costs claimed by respondent No.1 in each of the suits instituted by the petitioner has been found to be illusory and arbitrary, however, the same does not preclude the learned subordinate court from securing them under Order XXV of the Code for such part of the claimed amount as would justly and reasonably cover the total costs of defending these claims in the facts and circumstances of each case[5].
16. For the foregoing reasons, these civil revisions are partially allowed, the impugned orders dated 28.09.2013 are hereby set aside, applications under Order XXV and Section 151 of the Code filed in the suits instituted by the petitioner shall be deemed to be pending in the court of first instance which shall be decided afresh by determining the proper amount of security for costs in each case in accordance with law.
1. Muhammad Akram v. Mst. Farman Bi (PLD 1990 SC 28)
2. Khursheed Ahmed Niaz Fareedi v. Bashir Ahmed etc. (1993 SCMR 639);
3. Ikram Hassan Khan v. Sajjad Aziz Bhatti and another (1997 MLD 3025); Naraindas v.
Muhammad Ali Chand (1992 MLD 515); and Mst. Sakina and others v. Muhammad Akram and others (1991 MLD 1891)
4. Mary Lilian Hira Devi v.Kunwer Digbijai Singh (AIR 1917 PC 80)
5. (Danilina v.Chernukhin [2019] 1 WLR 758)