In Indian civil litigation, the concepts of set-off and counter-claim, as delineated under Order VIII Rules 6 and 6A of the Code of Civil Procedure, 1908 (CPC), empower defendants to assert claims against plaintiffs within the same legal proceedings. This mechanism promotes judicial efficiency by resolving interconnected disputes concurrently.
MEANING AND DEFINITION
-
Set-Off: A set-off allows the defendant to counterbalance the plaintiff’s claim by asserting a debt owed by the plaintiff to the defendant. Essentially, it is a defense mechanism enabling mutual debt extinguishment to the extent of the lesser amount. For instance, if a plaintiff sues for ₹10,000, and the defendant is owed ₹4,000 by the plaintiff, the defendant can claim a set-off of ₹4,000, reducing potential liability to ₹6,000.
-
Counter-Claim: A counter-claim is a claim made by the defendant against the plaintiff, not merely limited to the plaintiff’s claim but can exceed or differ from it. It is akin to a cross-suit lodged within the original suit, allowing the court to adjudicate both claims simultaneously. For example, if a plaintiff sues for breach of contract, the defendant may file a counter-claim for damages arising from the same contract.
HISTORICAL BACKGROUND
The doctrine of set-off was first implemented by English Courts in 1729 with the advent of equity, aiming to provide defendants with a means of obtaining compensation. This principle was incorporated into Indian law to ensure fairness and reduce multiplicity of litigation.
TYPES OF SET-OFF
-
Legal Set-Off:
Recognized under Order VIII Rule 6 of the CPC, a legal set-off pertains to ascertained sums of money, which are legally recoverable and within the pecuniary jurisdiction of the court. The amount must be definite, and both parties should hold the same character as they do in the plaintiff’s suit. -
Equitable Set-Off:
Though not explicitly provided in the CPC, equitable set-off is recognized under principles of equity, justice, and good conscience. It allows setting off unascertained sums arising from the same transaction. The courts exercise discretion in allowing equitable set-off, considering the connection between the claims.
ESSENTIALS OF LEGAL SET-OFF
- The suit must be for the recovery of money.
- The amount claimed to be set-off must be ascertained and legally recoverable.
- The claim should not exceed the pecuniary jurisdiction of the court.
- Both parties must fill the same character as they do in the plaintiff’s suit.
- The set-off must be specifically pleaded in the written statement.
LEGAL PROVISIONS AND PROCEDURE
-
Order VIII Rule 6 CPC:
This rule permits the defendant to claim a set-off against the plaintiff’s demand by presenting a written statement containing particulars of the debt sought to be set-off. The claim should be made at the first hearing of the suit, and it holds the same effect as a plaint in a cross-suit. -
Order VIII Rule 6A CPC:
Introduced by the 1976 amendment, this rule allows the defendant to set up a counter-claim against the plaintiff’s claim, which may accrue before or after the filing of the suit but before the defendant has delivered his defense. The counter-claim has the same effect as a cross-suit, enabling the court to pronounce a final judgment on both the original claim and the counter-claim.
CASE LAWS AND JUDICIAL INTERPRETATIONS
-
Jitendra Kumar Khan v. Peerless General Finance & Investment Co. Ltd. [(2013) 8 SCC 769]:
The Supreme Court elucidated that for a legal set-off under Order VIII Rule 6, the claim must be for an ascertained sum, legally recoverable, and both parties should hold the same character as in the plaintiff’s suit. -
Rohit Singh v. State of Bihar [(2006) 12 SCC 734]:
The Court held that a counter-claim can be filed even after the written statement, provided it is before the framing of issues, and it should relate to the cause of action accruing to the defendant against the plaintiff.
DIFFERENCES BETWEEN SET-OFF AND COUNTER-CLAIM
| Aspect | Set-Off | Counter-Claim |
|---|---|---|
| Nature | Defensive; extinguishes the plaintiff’s claim to the extent of the set-off amount. | Offensive; enables the defendant to seek affirmative relief against the plaintiff. |
| Scope | Limited to ascertained sums of money. | Can encompass various claims, including damages, specific performance, or injunctions. |
| Jurisdictional Limits | Must be within the pecuniary jurisdiction of the court. | Counter-claim should not exceed the pecuniary limits of the court’s jurisdiction. |
| Filing Time | Must be pleaded in the written statement at the first hearing. | Can be filed after the written statement but before the defendant has delivered his defense or before the time limited for delivering his defense has expired. |
| Legal Provision | Order VIII Rule 6 CPC. | Order VIII Rule 6A CPC. |
CONCLUSION
Understanding the nuances of set-off and counter-claim under Order VIII Rules 6 and 6A of the CPC is crucial for legal practitioners and law students. These provisions not only empower defendants to seek just remedies but also reduce the burden on courts by facilitating the resolution of interconnected claims in a single proceeding. Such mechanisms ensure fairness, judicial economy, and comprehensive adjudication.
