Under Section 35A of the Code of Civil Procedure, 1908, where any party makes a false or vexatious claim or defence which it knows or has reasonable grounds to believe to be false or vexatious, the court may award compensatory costs in respect of such claim or defence not exceeding -

Section 35A(1) empowers a court, in any suit or other proceeding including an execution proceeding but excluding an appeal or a revision, to award compensatory costs in respect of a false or vexatious claim or defence, after recording its reasons for doing so, provided the party making it knew or had reasonable grounds to believe it to be false or vexatious. Section 35A(2) expressly caps such compensatory costs at three thousand rupees. The provision is intended to deter frivolous litigation and the abuse of the process of the court. Section 35B separately provides for costs for causing delay, and Section 95 deals with compensation for obtaining arrest, attachment or injunction on insufficient grounds.