SET-OFF AND COUNTER-CLAIM

DIFFERENCE BETWEEN SET-OFF AND COUNTER-CLAIM

Civil Procedure Code LAW EXPLAINED
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INTRODUCTION TO SET-OFF AND COUNTER-CLAIM- 

The law along with substantive law also provides for procedural law to define the procedure which will lead towards the track of getting rights of the people so in pursuance of that, there is a law under the Civil procedure Code (CPC) under which Order 8 rule 6 and rule 6-A provides for the procedure of set-off and counter-claim which makes it easy for the court to deal with the same cases in a single suit and provide adequate justice according to it.

PROVISIONS-

Rule 6 Order 8 Of Civil Procedure Code defines the term “Set off” whereas Rule 6A-6G of Order 8 defines the term Counterclaim.

There was no provision in the Code (Before Amended Act, 104 of 1976) about counter-claim. The provision for filing counter-claim by a defendant was introduced, for the first time, by the 1976 Amendment to the Code of Civil Procedure, 1908 and consequently, Order 8, Rule 6-A to Order 8, Rule 6-G came to be inserted by which now the counter-claims can be set up by the defendant. What the law contemplates is treating the counter-claim as a cross-suit. Recognizing that a counter-claim is a cross-suit and not a separate suit, there is first, no registration of a counter-claim as a separate suit.[1]

Rule 6B Counterclaim should be in a written form

Rule 6C Court on the hearing of plaintiff’s application can exclude such counter-claim

Rule 6D If the suit of the plaintiff is stayed, discontinued or dismissed will not affect the counter-claim

Rule 6E Court can make a judgment against the plaintiff if didn’t reply for the counter-claim

Rule 6F Relief to the defendant where counter-claim succeeds.

Rule 6G Rules of written statement applies to the reply of counter-claim.[2]

MEANING OF SET-OFF- 

The term set off can be interpreted as setting of the claim or a counter-claim which must arise out of the same transaction as the plaintiffs claim, so when a defendant has any claim which he wants to set along with the present claim then he files the set off as a written statement within 30 days of the period.

For instance, A has filed the suit against B for claiming 15000 Rs. For which court has asked B to send his reply within 30 days, then within 30 days B came up with another claim of 20,000 Rs. and asked the court to set the same with the present suit, so here the court will consider this claim from B as another plain, instead of a written statement, within the same suit, and will give their judgment conjointly.

MEANING OF COUNTERCLAIM- 

The term counterclaim can be understood as cross-action which can arise before the suit gets filed, after the suit files or before the defended has presented his written statement, and is considered as a weapon in law.

For instance, A has filed the suit against B asking for an injunction so that B is not able to enter into his property for which court has asked the B to send his reply within 30 days, B came up with another claim that the property against which A had filed complaint is actually under belongs to A and in under him so here this claim which is given in the form of the written statement will consider as a plaint and instead of filing a separate suit court will deal with that in the same suit.

WHAT MAKES THE SET OFF DIFFERENT FROM COUNTER-CLAIM-

 The distinction between a setoff and a counter-claim must be borne in mind. In one sense both are cross-actions, but a setoff is also a ground of defence. If established, it affords an answer to the plaintiffs’ claim either wholly or pro tanto, for setoff is a debt claimed by a defendant against the plaintiff balancing a debt claimed by the plaintiff against the defendant. A counter-claim, on the other hand, is a weapon of offence and enables a defendant to enforce a claim against the plaintiff as effectually as in an independent action.[3] In the same way there many more things which makes the identity of set-off different from counter-claim, as-

NATURE- 

Both the set-off and counter-claim follow procedural nature where they provide the way to short out the two claims in a single suit, they are enabling provision which gives a right to the defendant that instead of filing an independent action, he can seek that relief in a suit filed by the plaintiff against him.[4]

OBLIGATIONS IMPOSED BY THE PROVISIONS-

Under Order 8, Rule 6-A (2) of the C.P.C. 1908, it is provided that a counter-claim shall have the same effect as a cross-suit to enable the Court to pronounce a final judgment in the same suit, both on the original claim and the counter-claim and Order 8 Rule 6-A (3) entitles the plaintiff to file a written statement in answer to the counter-claim while Order 8 Rule 6-A (4) provides that the counter-claim shall be treated as a plaint and governed by the rules applicable to plaints.

The Kerala High Court in Pampara Philip Vs. Koorithottiyil Kinhimohammed; observed that in a suit where the counterclaim is made, there may be cases where plaint is dismissed and the counterclaim is allowed, the plaintiff needs to challenge only the counterclaim.

It is substantially a cross-action by the defendant against the plaintiff and secures to the defendant the full relief which a separate action at law, a bill in chancery or a cross bill would have secured him on the same state of facts.[5]

Whereas Sub-rule (1) of Rule 6 of Order VIII of CPC imposes two restrictions upon the defendant’s right to claim setoff. These two restrictions are (i) that the claim should relate to any ascertained sum of money; and (ii) that it must be legally recoverable by the defendant from the plaintiff. [6]

So, set off also get followed on the same principles as counter-claim but the difference is that the claim under it needs to be arising from the same action as filed by the plaintiff.

MUTUALITY BETWEEN CLAIMS AND PARTIES-

Order 8, Rule 6-A, C.P.C. does not say as to who shall be parties to the counterclaim. It does not enable the participation of persons who are not already parties to the suit is difficult to accept.

The counterclaim need not necessarily be confined to the claim made against the plaintiff, and if for its effective adjudication- besides the plaintiff, other interested persons should be made parties, they should be impleaded, if the Court is satisfied that without them the adjudication will be incomplete[7]

Whereas in set off the law does not permit counter-parties to use third party debt to set off against an un-related liability.[8]All forms of set-off require mutuality between claim and cross-claim.

TYPES-

The term set off is divided into two types- Legal set off and Equitable set off, whereas there is no such division of counter-claim exists.

The set off as per order 8 Rule 6 CPC may be claimed for an ascertained sum of money which is legally recoverable from the plaintiff. This is known as a legal set-off. And for an unascertained sum of money, and equitable set-off may be claimed, but not as of right. It is the only legal set off for which the procedure is laid down in Civil ProcedureCode, but none of the rules bar the defendant to claim equitable set-off.[9] In Jeetendra Kumar Khan v. the Peerless General Finance & Investment Co. Ltd.7, it gets that the principle of equitable set-off is founded on the fundamental principles of equity, justice, and good conscience.

Also, in Bhagwati Prasad V. Hukamchand Mills Ltd 1961 Mplj 272).In Bhagwati Prasad’s case, the High Court of Madhya Pradesh has held: “In case of an equitable setoff the principle contained in Order 8 rule 6 applies not strictly but only by analogy. Therefore, the Court’s discretion in this regard is wider than in a case falling within the terms of that rule. That does not mean that the? The court can do what it likes. If for example, the claim of the defendant’s inequitable setoff relates to transactions that can be suitably investigated in the suit itself, and then even if it is a claim for the unliquidated sum it should be taken up. If on the other hand, the defendant’s version would involve an elaborate and complicated inquiry unconnected with and over a period different from the version of the plaintiff, the matter should be left to a fresh suit by the defendant. The question is not one of the party’s rights or the court’s jurisdiction. It is ultimately one regarding the convenience and of the mechanics of the litigation.[10]

CONCLUSION-

 The provisions of Set-off and counter-claim get introduced in the CPC to make things convenient for the judiciary as well as general people so that they need not waste their precious time and resources with the burden of a variety of separate suits as it provides an opportunity to file another plaint in the form of a written statement with the already existing suit. It could be concluded that this weapon and defence is providing the judiciary with an opportunistic way to give speed to their actions toward providing justice.

Sources:
[1]Ashok Kumar Singh Sengar vs Om Prakash Chaturvedi And 4 Others on 16 March 2016

[2] http://legislative.gov.in/sites/default/files/A1908-05.pdf

[3]Aminchand Pyarelal vs Union Of India on 2 April 1976

[4]Vediammal And Ors. vs M. Kandasamy And Ors. on 7 February 1997

[5]Cofex Exports Ltd. vs Canara Bank on 29 May 1997

[6]M.V. Ramana Rao vs N Subash on 10 April 2019

[7]Teofilo Barreto vs Sadashiva G. Nasnodkar And Ors. on 5 March 2007

[8] P Wood Title Finance, Derivatives, Securitisation, Set-off and Netting, (London: Sweet & Maxwell, 1995), 189

[9] M/s. Pritha Offsets Pvt. Ltd. Vs. Egmont Imagination (I)P. Ltd. 13

[10]Vediammal And Ors. vs M. Kandasamy And Ors. on 7 February 1997

This blog is written by Anjali Tripathi, Nirma University

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