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 the tribunal found no reasoned basis to fasten the default on the party. The appellate tribunal held that a party should not suffer for slackness or dereliction on the part of counsel unless the order records adequate reasons supporting such liability. It also noted that the quantum of costs lacked sufficient reasoning. The company petition was otherwise left to proceed expeditiously before the tribunal.

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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.

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