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Set-off and counterclaim as given under Code of Civil Procedure 1908

Set off
Set off is reciprocal acquittal of debts. The meaning of Set-off is claim set up against another. It can be claimed by the defendant in the plea of defence. When in case of suit of recovery there is a cross claim which can further offset the original claim of the plaintiff and the defendant can claim some amount against the plaintiff then the defendant can claim a set off in respect of that amount. Via Set off the defendant can either wipe out or reduce the plaintiff's claim when in the matter of suit of recovery of money. There are two types of set off legal set off and equitable set off.

There are certain conditions that taken into consideration in the application of this rule:
  1. When the defendant claims the under this rule the suit must be for recovery of money
  2. There should be ascertained amount of money for the recovery.
  3. The sum which the defendant claims should be legally recoverable.
  4. The claim must not exceed the pecuniary jurisdiction of the court.
  5. Both parties fill the same character as they fill in the plaintiff's case at the first hearing of the suit, but not afterwards unless permitted by the Court, present a written statement containing the particulars of the debt sought to be set-off. The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Court to pronounce a final judgment in respect of both the original claim and of the set-off. (Order VIII, Rule 6).

Illustrations:
  1. W sues Z for Rs. 20000. Z cannot set off any amount for damages for breach of contract for specific performance
  2. K sues J on bill of exchange for Rs. 500. B holds a judgement against K for Rs. 1000. The two claim being both definite, pecuniary demands may be set off.
  3. X sues Z for Rs. 10000/- Z cannot set-off any amount due to him on a promissory note executed by A before five years
  4. J & K sues X for Rs. 1000/- K can not set off the a debt sue to him alone by J
  5. R sues T for Rs. 15000/- . T cannot claim set off amount of Rs. 400000 if the court in which the suit filed by T has pecuniary jurisdiction up to Rs. 2000 only.

In case of Jitendra Kumar Khan v. Peerless General Finance & Investment Co. Ltd, it was held that under Order VIII, Rule 6, CPC certain conditions precedent were satisfied for application the rule.

The two primary conditions are:
  1. that it must be a suit for recovery of money and
  2. the amount sought to be set-off must be a certain sum.

Legal Set Off
It is apparent that the conditions mentioned above are applicable in this type of set off as well. From the above provisions it can be further establish that the Court must treat the claim of the defendant in a way as, if the defendant had filed a complaint and the decree passed by the court is favour of the defendant if the defendant is able to establish the claim. It is only via a written statement the plea of set off can be raised. The rule further confines only to set-off and does not provide for a counter-claim, which is allowed by way of equitable set-off, and is not expressly provided in Rule 6-A of Order VIII, by C.P.C. (Amendment) Act, 1976.

Example: X suit is brought by a Hindu son as the heir and representative of his father to recover from Y certain debt due to the father. Y claims to set-off a debt due to him by X's father. Y may do so, for both the parties fill the same character. But the amount due as manager cannot be set-off against a personal liability, for both parties do not fill the same character.

Equitable set off:
  1. This right exists when the plaintiff as well as defendant claim's arise out of the same transaction.
  2. The law of equitable set-off applies where the cross-claims, though not arising out of the same transaction, were closely connected together.
  3. In order that a claim for equitable set-off may arise, it is not sufficient that there are cross-demands; it is further necessary that there should be a connection between them which makes it inequitable to drive the defendant to a separate suit—as when the demands arise out of the same transaction or when there is on each side knowledge of and confidence in one debt discharging the other.
In the code of civil procedure order 8, rule 6A to 6G deals with counter-claim.
  • A counter-claim is a claim independent of the plaintiff's claim., and
  • It is in a form of a cross-claim,
  • There might may or may not be the same cause of action for a claim to arise.
  • In scope of recovering the money the Counter-claim may also be accompanied by a set-off in case there is also the scope of recovering money.
  • Also, unlike set-off, a counter-claim is not related exclusively to matters relating to money-suits. It could, therefore, concern itself with any civil suit.

There are a few essentials to a counter-claim, which are as follows:
  1. A counter-claim must be accompanied with a written statement, When not filed along with a written statement, the court does not allow the defendant to file a counter-claim in the later stages of the suit, if the court feels such is happening to prolong the proceedings. However, under Rule 9 of order 8, a counter-claim may always be filed as a subsequent pleading.
  2. The counter-claim shall be brought forward to avoid multiple instances of the same occurrence, and shall save the court's time
  3. The plaintiff shall file a written statement as a response to the counter claim, for a counter-claim is treated on par with a plaint. The court can give a final judgment of matters in both the plaint and counter-claim.
  4. For the defendant, the counter-claim can be filed by the defendant against the plaintiff. In some instances, he can claim from co-defendants along with the plaintiffs. But a counter-claim solely to claim from the co-defendants is not entertained by the courts.
  5. It can only be filed when the subject matter is not restricted by the Limitation Act.

Comparison of set off and counter claim
  • Both of them can be seen as a 'response' to a suit of Civil Nature,
  • A set-off is a Defence, while a counter-claim is a cross-action, and while a set-off has to concern the same transaction, a counter-claim does not necessarily have to.
  • A set-off is a defensive action, while a counter-claim is the counter-attack.
  • Neither can exceed the pecuniary limits of Jurisdiction of the court, and both are supposed to be accompanied with written statements.
  • Dismissal of suit or its withdrawal would not debar a set off or counter claim being tried may be followed by a decree against the plaintiff.
  • Both are not compelling on the defendant, and the defendant may always take independent action.
  • Both are liable to pay court-fees.

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