2026 (4) TMI 232 - AT - Companies Law

Costs for counsel's lapse cannot be imposed on the party without a reasoned basis, appellate tribunal says.

Costs imposed on a litigant for alleged dereliction by counsel in proceedings under Sections 241 and 242 of the Companies Act, 2013 were set aside because ... Imposition of costs - Lack of diligence - dereliction of counsel in conducting the proceedings . Imposition of costs - Litigant not to suffer for counsel's default - HELD THAT: - The Appellate Tribunal held that the lapse noted in the impugned order was attributable to the conduct of the counsel and not to any want of diligence on the part of the appellant himself. It reiterated the settled principle that a litigant should not be made to suffer for slackness or dereliction of the advocate representing him. It further found that mere failure of counsel to properly press the pending application or chronologically argue the documents could not justify saddling the appellant with costs, particularly when the order did not disclose any basis for quantifying the costs imposed. [Paras 4, 5, 6] The impugned order was quashed to the extent it imposed costs on the appellant, while the appellant was required to diligently participate in the further proceedings. Final Conclusion: The appeal was allowed in part by setting aside the direction imposing costs on the appellant, since the default was that of counsel and not of the litigant. The main company petition was directed to be taken up and disposed of expeditiously, and the pending interlocutory applications were closed. Issues: Whether the cost of Rs. 2 lakhs imposed on the appellant for the alleged dereliction of counsel in conducting the proceedings was sustainable.Analysis: The impugned order arose in proceedings under Sections 241 and 242 of the Companies Act, 2013. The cost was imposed because an application for placing additional documents had been permitted but was later not pressed, and the tribunal treated the conduct as a lack of diligence. The appellate tribunal found no basis to attribute such default to the litigant, and held that a party should not be made to suffer for slackness or dereliction on the part of counsel. It also found that the quantum of cost had not been supported by any adequate reasoning.Conclusion: The imposition of cost was set aside in favour of the appellant.Final Conclusion: The appeal succeeded to the limited extent of removing the cost burden, while the company petition was left to proceed expeditiously before the tribunal.Ratio Decidendi: A litigant should not be penalised with costs for the lapse of counsel unless the order records a reasoned basis for fastening such liability on the party.