The Civil Procedure Code (CPC), 1908 does not provide any meaning or definition of the term Set-off thus it can be construed from Judicial Interpretation. We can understand set-off as a cross-claim of the defendant against the claim of the plaintiff. Order 8 Rule 6 of the CPC recognizes the defendant’s right to claim set-off.
When the plaintiff has a debt against the defendant and the defendant also has a debt against the plaintiff, then such mutual debt of the plaintiff and the defendant can be settled against each other. Thus, Set-Off is a reciprocal extinction or acquittal of debts. Here, the plaintiff and the defendant are reciprocal debtors as well as reciprocal creditors to one another.
Order 8, Rule 6 of CPC provides that in a suit for recovery of money filed against the defendant, the defendant claims that he has the right to recover a definite sum of money from the plaintiff. In the written statement the defendant provides the particulars of the debt which he sought to set off against the plaintiff. The defendant can claim set off at the first hearing of the suit. The set-off can be claimed later on by the defendant if so permitted by the court.
In a claim of set-off filed by the defendant, the written statement filed by him acts as a plaint. Thus, the court pronounces final judgment in both the plaintiff’s claim and the defendant’s set-off claim. If the suit of the plaintiff is dismissed by the court then also the court can pass a decree in favor of the defendant if he proves his claim.
ESSENTIAL ELEMENTS OF SET-OFF
The following are the essential elements or conditions required for a claim of Set-Off:
1. Set-off is only for recovery of money– Order 8, Rule 6 of CPC clearly states that in a suit for recovery of money the defendant claims set-off against the plaintiff. Thus, set-off is done only in cases of recovery of money and not in any other cases like title, possession, injunction.
2. Definite sum of money– A set-off can be claimed by the defendant only when the amount claimed by the defendant is definite, ascertained, or fixed by the parties.
3. Suit is within the pecuniary limits of the court’s jurisdiction- The suit by the defendant shall not exceed the pecuniary jurisdiction of the court otherwise the court has no authority to adjudicate such suit.
4. Both the plaintiff and the defendant file the same character as they file in the plaintiff’s suit-A person who is not the party to the suit shall not claim for set-off in a suit instituted by the plaintiff without the permission of the court or unless so provided by the plaintiff in his suit. Thus, parties in the suit fill the same character as in the original suit.
TYPES OF SET OFF:
Set-off is of following two types-
a. Legal set off- The provisions regarding legal set-off are given in Order 8, Rule 6 of the Civil Procedure Code. It is provided in cases where the sum of money is ascertained. The defendant by paying the court fees can plead legal set off within the limitation period.
b. Equitable set off– It is provided in cases of the unascertained sum of money by way of damages. It should arise for some transaction. The court fees for equitable set-off may or may not be paid. An Equitable set-off is given at the discretion of the court.
Counter-claim means a claim by the defendant against the plaintiff in a suit filed by the plaintiff against the defendant. In such a case the defendant has a right to file a counter-claim along with a set-off claim. Such a counter-claim can be made by the defendant only for a claim for which he can file a separate suit.
The counter-claim can be made by the defendant either before or after filing the suit. Counter-claim cannot be made after filing issues. Counter-claim is a cause of action accruing to the defendant against the plaintiff. It should be made before the defendant has delivered his defence or before the expiry of the time limit permitted to him for delivering his defence.
As the counter-claim acts as a cross suit the Court can pronounce its judgment on both the original claim as well as the counter-claim. The counter-claim shall act as a plaint and the plaintiff can file a written statement to answer the defendant’s counter-claim. The counter-claim should be within the pecuniary limits of the jurisdiction of the court. The grounds on which the defendant has made the counter-claim should be specifically stated in the defendant’s written statement. In such a suit if the plaintiff’s suit is stayed or dismissed, the court can still proceed with the counter-claim of the defendant. If the defendant succeeds in his counter-claim then the court passes a decree for the counter-claim against the plaintiff
On the defendant’s counter-claim if the plaintiff requests the court to dispose of the defendant’s counter-claim as an independent suit then the court may make such order as it deems fit. However, such application of exclusion of counter-claim must be made by the plaintiff before the issues of counter-claim are settled. If the plaintiff fails to reply to the defendant’s counter-claim then the court can make a judgment against the plaintiff for the defendant’s counter-claim or make any other appropriate order.
The object of counter-claim is to save the court’s time by avoiding multiplicity of judicial proceedings and inconvenience to the parties to the suit by providing a decision on all the issues or disputes between them in the same suit.
DISTINCTION BETWEEN SET OFF AND COUNTER-CLAIM
|1.||Set-off is a statutory defence against the plaintiff.||Counter-claim is a cross-action against the plaintiff.|
|2.||In Set-off the defendant cannot succeed if the plaintiff proves that the claim of set-off was barred by limitation when he commenced his action.||In counter-claim, it is enough if the plaintiff proves that the counter-claim was barred when it was pleaded.|
|3.||Set-off is for an ascertained or definite sum and it must arise out in the same transaction as the plaintiff’s claim.||Counter-claim need not necessarily arise out of the same transaction.|
|4.||Set-off claim cannot exceed the plaintiff’s claim.||Counter-claim can exceed the plaintiff’s claim.|
|5.||Set-off can be pleaded in the written statement as it is a statutory defence.||Counter-claim is not a defence to the claim of the plaintiff as it is independent cross-action.|
|6.||The object of set-off is to allow the defendant to make a claim for recovery of money from the claim of the plaintiff.||The object of counter-claim is to save the court’s time by avoiding the multiplicity of a judicial proceeding.|
|7.||Set off is claimed only in suits for the recovery of money.||Counter-claim can be claimed in other suits like title, possession.|