This article is related to the set-off and Counter-claim doctrines provided
under the Code of Civil Procedure (hereinafter referred to as CPC). Order VIII,
Rule 6 of CPC provides for the set-off and Rule 6A provides for the
counterclaim. These two rules were inserted in the CPC, to provide the defendant
with a mechanism to present his side of the claim in the same suit brought up by
In a civil suit, the plaintiff is considered as the main aggrieved and he is
provided many opportunities to plead his grievances before the court, but the
defendants were not available of this sort of remedy in earlier periods and the
defendants had to bring a different suit for his claim. But with the coming of
the concept of 'equity' and due to change in the judicial system over the period
of time, the defendants were allowed to plead their claim in the plaintiff's
suit as set-off and counterclaim.
History of Set-off
In the development of English and Roman Procedure, both the systems developed a
common-sense view that a man should not be compelled to pay one moment what he
will be entitled to recover back to next. 'Compensatio' was the name given by
Roman law to the cancelling of cross demand. Similarly, in English common
law, Set-off, in the sense of cancelling mutual independent cross-demands was
apparently regarded as out of question at law, when in 1677, it was said in Sir
William Darcy's Case.
It was through bankruptcy proceedings that set-off first obtained a
foothold in English law. The temporary bankruptcy act of 4 Anne, c. 17, sec. 11,
provided that where there had been "mutual credit" given between the bankrupt
and any person who was his debtor, the latter should not be compelled to pay
more than the balance that appeared due on an adjustment of the account. This
statute was followed by others making various improvements in the law which are
now embodied in the English bankruptcy act of I898. But equitable jurisdiction
over set-offs in cases of bankruptcy was exercised by the Court of Chancery long
prior to the introduction of the provision into the statute. In India, the
concept was introduced in the Code of Civil Procedure.
Set-off [Rule 6 of Order 8]Meaning and definition of set-off
In simple, set-off is a reciprocal acquittal of debts. The meaning and
definition set-off is not provided under the Code and can be deciphered from the
The claim of set-off is a claim set up against another. It is a cross-claim that
partly offsets the original claim. It is the extinction of debts of which two
persons are reciprocally debtors to one another by the credits of which they are
reciprocally creditors to one another. Where there are mutual debts between the
plaintiff and the defendant, one debt may be settled against the other. It is a
plea in defence, available to the defendant. By adjustment, set-off either wipes
out or reduces the plaintiff's claim in a suit for recovery of money.
In B. Seshaiah v. B. Veerabhadrayya
, the Andhra High Court
expressed the concept as:
The extinction of debts of which two persons are reciprocally debtors to one
another by the credits of which they are reciprocally creditors to one another.
The doctrine provides that where in a suit for recovery of money by the
plaintiff, the defendant finds that he has also a claim of some amount against
the plaintiff; he can claim a set-off in respect of the said amount. A plea of
set-off is "a plea whereby a defendant acknowledges the justice of the
plaintiff's demand, but sets up another demand of his own to counterbalance that
of the plaintiff; either in whole or in part". Thus, it is a reciprocal
acquittal of debts between two persons. The right of a defendant to claim
set-off has been recognized under Rule 6. It obviates the necessity of filing a
fresh suit by the defendant.
The term "set-off' denotes mutual discharge of debt. It is reciprocal
satisfaction of the claim of the plaintiff and the defendant against each other.
In simple words, "set-off' means that the amount claimed by the plaintiff from
the defendant is to be satisfied against the amount that the plaintiff owes to
For instance, where 'X' files a suit against 'Y' for recovery of Rs. 15,000/-
but 'Y' already holds a decree of Rs. 20,000/- against 'X', the defendant 'Y'
may plead for the set-off of the claim of plaintiff 'X'.
Effect of Set-off
When a defendant pleads set-off, he is put in the position of a plaintiff as
regards the amount claimed by him. There are two suits, one by the plaintiff
against the defendant and the other by the defendant against the plaintiff; and
they are tried together. A separate suit number is not given to a set-off. Where
the plaintiff does not appear and his suit is dismissed for default, or he
withdraws his suit, or he fails to substantiate his claim at the trial and his
suit is dismissed, it does not affect the claim for set-off by the defendant and
a decree may be passed in favour of the defendant if he is able to prove his
Legal requirements of Rule 6 of Order VIIIA defendant may claim a set-off if the following conditions are satisfied:
- The suit must be for the recovery of money;
- The sum of money must be ascertained;
- The sum of money must be legally recoverable;
- It must be recoverable by the defendant or by all the defendants if more
- It must be recoverable from the plaintiff or from the plaintiffs if more
- It must not exceed the pecuniary jurisdiction of the court in which the
suit is brought;
- Both the parties must fill, in the defendant's claim to set-off, the
same character as they fill in the plaintiff's suit.
E.g.: A bequeaths Rs. 2000 to B and appoints C his executor and residuary
legatee. B dies and D takes out administration to B's effects. C pays Rs 1000 as
surety for D; then D sues C for the legacy. C cannot set-off the debt of Rs 1000
against the legacy, for neither C nor D fills the same character with respect to
the legacy as they fill with respect to the payment of Rs 1000.
Types of Set-offThe law recognizes two types of set-off, namely:
- Legal set-off, and
- Equitable set-off.
Order 8 Rule 6 deals with legal set-off, but the said provision is not
exhaustive and does not take away the power of the court to allow such
adjustment independent of Rule 6 of Order 8. The other adjustment may be called
an "equitable set-off".
Rule 6 deals with legal set-off only. An equitable set-off was allowed by the
courts of Common law in England. Legal set-off can only be entertained in
respect of only ascertained money. The rule 6 is not exhaustive and there can a
set-off be granted in respect of an unascertained sum of money.
The concept of
equitable set-off comes from "equity, justice, good conscience". The equitable
set-off is not provided in the Code of Civil Procedure, 1908. The equitable
set-off is given at the discretion of the court. The plea raised by the
defendant is not a matter of the right of the defendant but is a matter of
discretion of the court.
While differentiated between the two, the Supreme Court in the case
of Jitendra Kumar Khan & Ors v. The Peerless General Finance & Investment
Company Limited and ors, held that the legal set-off and equitable set-off is
that legal set-off is a legal right whereas the equitable set-off is granted on
the discretion of the court.
Counterclaim (Rules 6-A-6-G)Background
Before the Amendment Act of 1976, there was no specific provision for
counterclaim in the code. By the Amendment Act of 1976, a specific provision has
been made for counterclaim by inserting Rules 6-A to 6-G. But before this
amendment, in the year 1964, the Supreme Court in the case of Laxmidas v.
,held the right to make the counterclaim a statutory. It was held
that the court has the power to treat the counterclaim as a cross-suit and hear
the original suit and counterclaim together if the counterclaim is properly
Under sub-rule (i) of Rule 6-A, the defendant may set up by way of counterclaim
against the claim of the plaintiff any right or claim in respect of action
accruing to the defendant against the plaintiff either before or after filing of
the suit but before the time fixed for the delivery of his defence has expired.
A Counterclaim is one of the pleas open to a defendant to defeat the relief
sought by the plaintiff against him. According to the Black's Judicial
Dictionary, "Counterclaim" may be defined as "a claim made by the defendant
in a suit against the plaintiff." Therefore, a defendant in a suit may, in
addition to his right to plead a set-off, set up a counterclaim. It is a
claim independent of and separable from the plaintiff's claim which can be
enforced by a cross-action. It is a cause of action in favour of the defendant
against the plaintiff. Thus, a counterclaim is properly a cross-action and the
court can pronounce a final judgment both on the original claim and
In the case of Ramesh Chand v. Anil Panjwani
, the Supreme Court set out the
modes of pleading for the counterclaim. There are three modes of pleading or
setting up a counterclaim in a civil suit:
- In the written statement filed under Order 8 Rule 1;
- By amending written statement with the leave of the court and setting up
- In a subsequent pleading under Order 8 Rule 9.
A defendant can file a counter-claim in respect of a cause of action which is
independent of the cause of action averred by the plaintiff. It need not confine
to money claim or to cause of action of the same nature as of the plaintiff or
be related to or be connected with the original cause of action or matter
pleaded by the plaintiff.
For instance, in a suit for injunction, a counterclaim
for an injunction in respect of the same or different property can be made under
Order VIII, Rule 6-C. The plaintiff may object to disposal of the claim by way
of counter-claim by pleading for its disposal by an independent suit and he may,
at any time before issues are settled in relation to the counter-claim apply to
the Court for an order that such counter-claim may be excluded. And the Court
may, on the hearing of such application, make such order as it thinks fit.
Purpose of the Doctrine
The purpose of the provision enabling filing of a counter-claim is to avoid
multiplicity of judicial proceedings and save upon the Court's time and as also
to exclude the inconvenience to the parties by enabling claims and
counter-claims, that is, all disputes between the same parties being decided in
the course of the same proceedings.
If the consequence of permitting a
counter-claim either by way of amendment or by way of subsequent pleading would
be prolonging of the trial, complicating the otherwise smooth flow of
proceedings or causing a delay in the progress of the suit by forcing a retreat
on the steps already taken by the Court, the Court would be justified in
exercising its discretion not in favour of permitting a belated counter-claim.
Starting time of the right to file Counter-claim
A pleading by way of counter-claim runs with the right of filing a written
statement and that such right to set up a counter-claim is in addition to the
right of pleading a set-off conferred by Rule 6. A set-off has to be pleaded in
the written statement The counter-claim must necessarily find its place in the
Once the right of the defendant to file a written statement
has been lost or the time-limited for delivery of the defence has expired, then
neither the written statement can be filed as of right nor a counter-claim can
be allowed to be raised, for the counter-claim under Rule 6-A must find its
place in the written statement.
Effect of Counter-claim
The effect of the counterclaim is that even if the suit of the plaintiff is
stayed, discontinued, dismissed or withdrawn, the counterclaim will be decided
on merits and the defendant will have a right to get a decree for a counterclaim
as claimed in the written statement. If the plaintiff does not file any reply to
the counterclaim made by the defendant, the court may pronounce the ex parte
judgment against the plaintiff in relation to the counterclaim made against him
or make such order in relation to the counterclaim as it thinks
fit. According to Rule 6-A(4), the counterclaim shall be treated as a plaint
and will be governed by the rules applicable to the plaints. Similarly,
according to Rule 6-G, a reply filed in answer to a counterclaim shall be
treated as a written statement and governed by rules applicable to written
In the leading case of Laxmidas v. Nanabhai,
 the Supreme Court observed,
"The question has to be considered on principle as to whether there is anything
in law—statutory or otherwise—which precludes a court from treating a
counterclaim as a plaint in a cross-suit. It is difficult to see any. No doubt,
the Code of Civil Procedure prescribes the contents of a plaint and it might
very well be that a counterclaim which is to be treated as a cross-suit might
not conform to all these requirements but this by itself is not sufficient to
deny to the court the power and the jurisdiction to read and construe the
pleadings in a reasonable manner.
If, for instance, what is really a plaint in a
cross-suit is made part of a written statement either by being made an annexure
to it or as part and parcel thereof, though described as a counterclaim, there
could be no legal objection to the counter treating the same as a plaint and
granting such relief to the defendant as would have been open if the pleading
had taken relief of a plaint. To hold otherwise would be to erect what in
substance is a mere defect in a form of pleading into an instrument for denying
what justice manifestly demands."
Set-off and Counter-claim: Distinction
The distinction between the two is very important as they look similar in
nature, but it is not so and the difference between the two is very important
and must be carefully considered:
- Set-off is a statutory defence to a plaintiff's action, whereas a
counterclaim is substantially a cross-action.
Set-off must be for an ascertained sum or must arise out of the same transaction
as the plaintiff's claim. A counter-claim need not arise out of the same
Set-off is a statutory ground of defence and has to be pleaded in the written
statement. It can be sued as a shield and not as a sword. Counter-claim, on the
other hand, does not afford any defence to the plaintiff's claim. It is a weapon
of offence that enables the defendant to enforce his claim against the plaintiff
as effectually as in an independent action. It is a sort of cross-action. 
An equitable set-off is a claim by the defendant in defence, which generally
cannot exceed the plaintiff's claim. A counter-claim the defendant may, however,
exceed the plaintiff's claim, being in nature of the cross action. Under the
provision rule 6-F of Order 6, if in any suit a set-off or counterclaim is
established as a defence against the plaintiffs claim and any balance is found
due to the defendant as the case may be the court may give judgment to the party
entitled to such balance.
However, in both the cases of set-off and counter-claim, the defendant's claims
must not exceed the pecuniary limits of the jurisdiction of the Court.
- The Development of set-off, by William H. Loyd, available
- 2 Freeman 28 (1677)
- Supra at 1
- AIR 1972 AP 134
- Taken from Civil Procedure by C.K. Takwani Eighth Edition, 2019.
- Civil Appeal Nos.6784 OF 2013
- AIR 1964 SC 11.
- Ed. 1999 at p. 348.
- Rule 6-A (1) of Order VIII of the Code of Civil Procedure
- (2003) 7 SCC 350 at p. 367
- Order VIII, Rule 6-C
- Rule 6-E of Order 8.
- AIR 1964 SC 11
- Ibid; see also, A.Z. Mohd. Farroq v. State Govt., AIR 1984 Ker 126 (FB).
Set-off and counterclaim as given under Code of Civil Procedure 1908
Plaint, Written Statement, Set Off And Counter Claim Under Civil Procedure
Producing Additional Document At The Stage Of Cross-Examination