Plea of Set-off and the Nature of a Counter Claim

A plea of set-off is “a plea whereby a defendant acknowledges the justice of the plaintiffs demand, but sets up another demand of his own, the counter balance that of the plaintiff; either in whole or in part”.

The doctrine of set-off is a “Reciprocal acquittal of debts between two persons”.

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Thus Order VIII, Rule 6 saves the time and money of defendant from filing fresh suit for recovery of money due from plaintiff.

Though Order 8, Rule 6 provides for illustrations from (a) to (h), the relevant illustration (d) and (e) are reproduced below.

(d) A sues B on bill of exchange for Rs. 500/- B holds a judgement against A for Rs. 1,000/-. The two claims being both definite, pecuniary demands may be set-off.

(e) A sues B for compensation on account of trespass. B holds a promissory note for Rs. 1,000/- from A and claims to set-off that amount against any sum that A may recover in the suit. B may do so, for, as soon as A recovers, both sums are definite pecuniary demands

Order VIII, Rule 6(1):

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, however, is not given to a set-off. Where the plaintiff does not appear and his suit is dismissed for default, or he withdraw 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 claim.

Counter Claim – Order VIII, Rule 6-A:

Rule 6-A deals with the scope of counter claim. The meaning of the counter claim is one of the pleas open to a defendant to defeat the relief sought by the plaintiff against him is a counter claim.

Therefore, a defendant in a suit may, in addition to his right to plead a set­off, set-up a counter claim.

In Munshi Rani vs. Radha Kishan, Punjab High Court held that the plea of counter claim can be set-up only in respect of claim which the defendant can file a separate suit.

Therefore, the plea of counter claim is substantial a cause of action. Before the Amendment Act of 1976, there was no specific provision for counter claim in the Code.

In Laxmi Das vs. Nan Bhai, the Supreme Court, however, held the right to make a counter-claim as statutory. It was also held that the Court has power to hear the original suit and counter-claim together if the counter-claim is properly stamped.

By the Amendment Act of 1976, a specific provision has been made for counter-claim by inserting Rules 6-A to 6-G in Order 8.

Rule 6-A, Sub-rule (1):

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 defendant has delivered his defence or before the time fixed for delivery of his defence has expired.

However, such, counter-claim should not exceed the pecuniary limits of the jurisdiction of the Court.

Rule 6-A, Sub-rule (2):

Such counter-claim shall have .the same effect as a cross suit so as to enable the Court to pronounce a final judgement in the same suit, both on the original claim and on the counter claim.

Rule 6-A, Sub-rule (3):

The plaintiff shall be at liberty to file a written statement in answer to the counter claim of the defendant within such period as may be fixed by the Court.

Rule 6-A, Sub-rule (4):

The counter claim of the defendant will be treated as a plaint.

Rule 6-B. Grounds of Counter-claim:

Grounds in Support of counter­claim shall be specifically mentioned in the written statement of the defendant.

Rule 6-C. Exclusion of Counter claim:

Where the plaintiff disputes the counter-claim and contends that counter-claim must be disposed off by way of independent suit in such cases the Court shall hear the plaintiff and pass appropriate orders.

Rule 6-D. Effect of Counter Claims:

The effect of the counter claim is that even if the suit of the plaintiff is stayed, discontinued, dismissed or withdraw the counter will be decided on merits.

Rule 6-E. Relief to Defendant where counter claim succeeds:

When the defendant proves his set-off or counter-claim, the Court shall pass decree in favour of the defendant.

Rule 6-F. Rules relating to written Statement to apply:

When the defendant takes the plea of set-off or counter claim, if the plaintiff so desires reply to the set-off or counter claim taken by defendant, the rules that are applicable to written statement shall apply to the reply given by the plaintiff in the plea of set­off or counter-claim taken by defendant as defence.