From Statute to Zero-Cost: Section 31A and the Bombay High Court's Zero-Cost Culture

by Prashant Narang and Vishnu Suresh.

Why this matters now

In 2015, Parliament rewrote Section 31A of the Arbitration and Conciliation Act to make loser-pays the default i.e., compensate the winner and deter abuse. A decade on, our mixed-methods study of the Bombay High Court’s arbitration docket(2023-24) shows a stark gap between that legislative design and courtroom reality. Out of 102 decisions under Sections 11 (appointment) and 34 (set-aside), costs were imposed in only four (3.9%). Even then, costs were framed as exceptional sanctions for egregious conduct – not as routine reimbursement that follows the event.

Parliament’s 2015 insertion of Section 31A followed the 246th Law Commission Report (2014), which condemned India’s token-costs culture under the Code of Civil Procedure and urged a structured, outcome-linked “costs-follow-the-event” rule for arbitration. Section 31A sought to import the English loser-pays norm to ensure both indemnity and deterrence. Yet, a decade later, the provision functions largely as a dead letter.

This reluctance is not harmless. When weak Section 11 or Section 34 petitions carry no real downside, the expected cost of delay collapses onto the opponent and the taxpayer. The result is a deterrence gap: fewer incentives to screen out speculative filings, more tactical adjournments, and a credibility problem for India’s “arbitration-friendly” promise.

In our new paper (publicly available), we build the first mixed-methods baseline for any Indian High Court on post-2015 costs in arbitration-related litigation. We combine a complete corpus of BHC decisions in 2023-24 with 22 confidential stakeholder interviews (judges, arbitrators, and counsel) to explain the pattern and to propose targeted reforms.

What we did

Prior commentary (and court exhortations in Salem and Uflex) diagnosed India’s token-cost culture but largely at the Supreme Court or in international arbitration. So, we chose to focus on a major High Court post-2015. We identified every Bombay High Court decision under Sections 11, 34 (and related Section 37 appeals where relevant) in calendar years 2023–24; after deduplication and exclusions, 102 reasoned decisions remained (54 in 2023; 48 in 2024). We coded each decision for whether costs were awarded, quantum, reasons, and whether judges engaged with Section 31A’s statutory factors. Interviews (22 conducted) supplied explanatory mechanisms behind judicial practice.

What we find

3.9% of decisions imposed costs; 96.1% did not. Where imposed, costs were justified as punishment for delay/illegality – not as routine indemnity. In 60 decisions, the court itself recorded conduct that maps onto Section 31A triggers. Costs were imposed in 4; in the remaining 56, no cost order followed. This selective enforcement blunts deterrence. With no articulated scale or factors applied, lawyers cannot advise clients on realistic exposure.

Why the default drifts to “zero-cost”

One, Section 31A(1) gives courts/tribunals discretion to determine costs. Section 31A(2) supplies a loser-pays presumption, but only if the decision-maker chooses to engage. Written reasons are required for departing from the presumption – not for declining to consider costs at all. This creates a one-way gate.

Two, interviewees repeatedly flagged a cultural aversion to “appearing punitive”. For judges approaching retirement, the post-retirement arbitration market sharpens this caution: visible toughness on costs can be perceived as party-unfriendly, potentially affecting future appointments. That behavioural preference often persists into arbitral roles.

Third, Section 31A lists factors but lacks practical scales. In our four cost-imposing cases, sums ranged from Rs. 1 lakh to Rs. 40 lakh – with thin links to documented outlay. Practitioners consequently cannot price risk ex ante; costs become a lottery, not a calculable exposure.

How reasons are (not) written

Most orders end with a formulaic “no order as to costs”, even when the judgment itself records behaviour that Section 31A treats as cost-triggering: obstruction, delay, frivolous claims, wasted hearings, or refusal of reasonable settlement.

Two of the four cost-imposing judgments offer only a one-line figure; two provide a brief narrative (e.g., “taking a chance”) and sometimes cite one cost figure from the record, but none works through Section 31A’s checklist or ties quantum to documented expense and deterrence. The resulting spread (Rs. 1-40 lakh) looks unanchored. For users, this reads like gesture, not governance.

What needs to be done

Our proposal aligns with the 246th Law Commission (2014) and the T.K.V. Committee (2024). One, create a rebuttable default: award reasonable, receipted costs to the successful party. Require brief reasons (even 1-2 sentences) when withholding costs. This small change collapses the one-way gate that currently rewards inaction. Two, keep indemnity as the baseline and add calibrated uplifts for documented delay tactics, non-disclosure, wasted hearings, or unreasonably rejected settlement offers – all already listed in Section 31A(3). Three, consider importing a narrow, high-threshold wasted-costs power (on the UK model) against improper or negligent conduct that needlessly increases expense. This targets the source of delay when it lies with representatives rather than clients.

Limitations

We included only one jurisdiction (Bombay), a two-year window, and interviews that exclude sitting judges and in-house counsel. Arbitral awards and proceedings were out of scope (confidentiality), though interviews illuminate arbitral practice.

Conclusion

Section 31A promised efficient, fair, and predictable cost allocation. In the Bombay High Court’s arbitration-related litigation, it has largely delivered neither indemnity nor deterrence – except at the margins of overt misconduct. A rebuttable default in favour of reasonable costs, brief reasons for exceptions, receipt-anchored scales, and conduct-linked uplifts would realign daily practice with Parliament’s indemnificatory intent and close the deterrence gap that now fuels speculative petitions.

Read the full working paper “From Statute to Zero-Cost: Section 31A and the High Court’s Zero-Cost Culture”, here.

The authors are researchers affiliated with TrustBridge Rule of Law Foundation.

Source: https://blog.theleapjournal.org/2025/11/from-statute-to-zero-cost-section-31a.html