CPC – Lecture -6

Set off (Order VIII, Rule 6)

• Meaning of Set Off

• Set off is reciprocal acquittal of debts. “Set-off” means a claim set up
against another. It is a cross-claim which partly offsets the original claim.
It is an 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 a suit for recovery of money, a defendant can stake his claim to any ascertained
sum of money-legally recoverable by him from the plaintiff as a set-off against the
plaintiff’s demand if :
• (a) the ascertained sum does not exceed the pecuniary jurisdiction of the court;
and

b) both parties fill the same character as they fill in the plaintiff’s case at the first
hearing of the suit, but not afterwards unless permitted by the Court, present a
written statement containing the particulars of the debt sought to be set-off.
• The written statement shall have the same effect as a plaint in a cross-suit so as to
enable the Court to pronounce a final judgment in respect of both the original
claim and of the set-off. (Order VIII, Rule 6).
• In a suit for injunction, the counter claim for possession by defendant can be
 Condition-

• However, the defendant is entitled to raise the plea of set-off only when following
conditions exist :—
• 1. The suit is for recovery of money.—The plea of set-off shall be available to the
defendant only in a suit instituted against him for recovery of money. If the suit is not a
money-suit, the defendant cannot raise this plea. For instance, in a suit tor dissolution of
partnership, the defendant cannot claim set-off because it not a money-suit. But, in a suit
for ejectment of tenant on the ground of non-payment of rent, in which arrears of rent
have also been claimed, the defendant-tenant may plead set-off. However, in case where
ejectment of tenant has been prayed for but amount of unpaid rent is not demanded, the
defendant-tenant cannot raise the plea of set-off since it is no more a money-suit. Thus,
what is necessary is that one of the reliefs sought in the suit against the defendant must be
for recovery of money. In such a suit, the defendant is entitled to raise the plea of set-off.
• The defendant’s claim must be for an ascertained sum of
money-‘It means that the amount which the defendant claims against
the plaintiff tiff to be set-off must be fixed, definite and known. Such
amount may not by the plaintiff but if it is ascertained, then the
defendant may plead set-off. For unascertained sums, the plea of set-
off is not available to the defendant under Rule 6. However, such
unascertained sums may be effectually set-off by consent of parties if
the suit is compromised.
• The money must be legally recoverable.—The term ‘legally
recoverable” means that the debtor is liable to pay the sum under any
law. The defendant shall be entitled to claim set-off in respect of such
dues only which the plaintiff is bound to pay under any law. A time-
barred debt is not legally recoverable and hence set-off cannot be
pleaded for such amount.
4. Both plaintiff and defendant must fill the same character as they
fill in the plaintiffs claim.—The defendant may plead for set-off only
when both the parties i.e., plaintiff and defendant fill may same
character as they fill in the suit. It means that the amount in respect of
which the defendant pleads set-off must be claimable from plaintiff in
the same capacity as in the suit. If the amount payable by the plaintiff to
the defendant is in the capacity of a “manager’, but the plaintiff has filed
the present suit in his personal capacity, then the defendant cannot raise
the plea of set-off in respect of such amount.
• 5. The sum claimed by way of set-off must not exceed the
pecuniary limits of the court.—It is necessary that the amount
claimed to be set-off by the defendant is within the pecuniary limits of
the court in which the suit has been instituted.
• In Jitendra Kumar v Peerless General Finance & Investment Co.
Ltd.,’ it was held that under Order VIII, Rule 6, CPC certain
conditions precedent are to be satisfied for application of the said
Rule. Two primary conditions are that it must be a suit for recovery of
money and the amount sought to be set-off must be a certain sum.
Apart from the aforesaid parameters there are other parameters to
sustain a plea of set-off under this Rule
Types of Set Off

• Set-off is of two kinds viz., legal set-off and equitable set-off. Rule 6
speaks of legal set-off only.
• Legal Set Off
• It is apparent from a reading of the above provisions that in order to
constitute legal set-off, the following conditions must be fulfilled, viz.,
• (a) The suit must be for recovery of money.
• (b) The defendant must claim an ascertained sum of money. A sum of
money due in respect of a disputed transaction cannot constitute an
ascertained sum.
• (c) That ascertained sum must be legally recoverable from the plaintiff, i.e., it is
not barred by the law of limitation.
• (d) The plaintiff’s claim and the set-off must be claimed in the same character.
The amount must be recoverable by the defendant and if there are more than one
defendant, then by all the defendants. Again, the amount must be recoverable by
the defendant from the plaintiff and if there are more than one plaintiff, then from
all the plaintiffs.
• (e) The set-off should be within the pecuniary jurisdiction of the
Court.
• The above provisions further establish that the Court must treat the
claim of the defendant exactly as if the defendant had filed a plaint and
the Court must pass a decree in favour of the defendant, if his claim is
established.’ It is only in a written statement that a plea of set-off can
be raised. The rule further confines only to set-off and does not
provide for a counter-claim, which is allowed by way of equitable set-
off, and is not expressly provided in Rule 6-A of Order VIII, by C.P.C.
(Amendment) Act, 1976.
• Illustrations
• (a) A suit is brought by a Hindu son as the heir and representative of his father to
recover from B certain debt due to the father. B claims to set-off a debt due to him
by A’s father. B may do so, for both the parties fill the same character. But the
amount due as manager cannot be set-off against a personal liability, for both
parties do not fill the same character.
• Equitable set-off
• Court of Equity in England allowed set-off when cross-demands arose out of the
same transaction, even if the money claimed by way of set-off was an
unascertained sum of money. The Common Law Courts refused to take notice of
equitable claims for they were not ascertained sums. The Courts of Equity,
however, held that it would be inequitable to drive the defendant to a separate
cross-suit and that he might be allowed to plead a set-off though the amount might
be unascertained. Such a set-off is called an equitable set-off.
• In India, the distinction between legal and equitable set-off remains.
The provisions as to legal set-off are contained in Order VIII, Rule 6,
C.P.C. The same has now been enlarged by insertion of Rule 6-A with
regard to counter-claim by the defendant. So far as equitable set-off is
concerned it is provided in Order XX, Rule 19(3), C.P.C., which states
that “the provisions of this rule (relating to a decree for set-off or
counter-claim and an appeal therefrom) shall apply whether the set-off
is admissible under Rule 6 of Order VIII or otherwise.” The provisions
of Order VIII, Rule 6, and Rule 6-A are, therefore, not exhaustive
because apart from a legal set-off an equitable set-off can be pleaded
independently of the specific provision of the Code.
• Counter claim Order VIII, Rules 6-A to 6-G]
• “Counterclaim” may be defined as “a claim made by the defendant in a
against the plaintiff”. It is a claim independent of, and separable from, suit
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.
• In addition to pleading a set-off in a suit, the defendant may also set-up a counter-
claim. The term “counter-claim” means a claim raised by the defendant against
the claim of plaintiff in a suit. It is essentially and substantially a cross-action of
the defendant. It may be described as a cause of action accruing to defendant
against the plaintiff. However, such cause of action must accrue before filing of
written statement by the defendant.
• As such, the defendant may set-up a counter-claim only in respect of a claim for
which the defendant can file an independent suit. However, the defendant must
specifically state in his written statement that he is setting-up a counter-claim.
Such counter-claim shall not exceed the pecuniary jurisdiction of the court.
• The defendant must set-up his counter-claim as early as possible because the no
counter-claim can be raised after framing of issues and closure evidence.
• One of the pleas open to a defendant to defeat the relief sought by the plaintiff
against him is a counterclaim. Counterclaim may be defined as “a claim made by
the defendant in a suit against the plaintiff”. Therefore, defendant in a suit may, in
addition to his right to plead a set-off , a counterclaim. It may be set up only in
respect of a claim for which the defendant can file a separate suit.”.” Thus, a
counterclaim is substantially a cross-action.
• Rule 6-A contemplates counter-claim in any suit. The scheme of the new
rule is to permit the defendants to set up counter-claims, which arise
between the parties and which are cognizable by the Court where the suit
is pending. A defendant in a suit may, in addition to his right of pleading a
set-off under Rule 6, also set up—by way of counter-claim against the
claim of the plaintiff, any right or claim in respect of a cause of action
accruing to the defendant against the plaintiff either before or after the
filing of the suit but before the defendant has delivered his defence or
before the time limited for his defence has expired, whether such counter-
claim is in the nature of f a claim for damages or not : provided that such
counter-claim shall not exceed the pecuniary limits of the jurisdiction of
the Court. (Order V111, Rule 6-A).
• Such counter-claim shall have the same effect as a cross-suit so as
to enable the Court to pronounce a final judgment in the same
suit, both on the original claim and on the counter-claim. 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. The counter-claim shall be treated as a plaint and governed
by the rules applicable to plaints. Order VIII, Rule 6-A (2-4).
• Rule 6-B of Order VIII provides that where any defendant seeks
to rely upon any ground as supporting a right of counter-claim, he
shall, in his written statement, state specifically that he does so by
way of counter-claim. That rule does not apply where specifically a
counter-claim is raised, but confines itself to a ground mentioned in
the written statement as supporting a right to counter-claim.
• In Rohit Singh v State of Bihar,’
• The supreme court held that a counter-claim, could be filed even after
the written statement is filed, but that does not mean that a counter-
claim can be raised after the issues are framed and the evidence is
closed. The counter-claim cannot be raised after framing of issues and
closure of evidence.
• Mode of setting up counter-claim
• There are three modes of pleading or setting up a counter-claim in a civil suit :
• (1) First, the written statement filed under Rule 1 may itself contain a counter-
claim which in the light of Rule 1 read with Rule 6-A would be a counter-claim
against the claim of the plaintiff preferred in exercise of legal right conferred
by Rule 6-A.
• (2) Secondly, a counter-claim may be preferred by way of amendment
incorporated subject to the leave of the Court in a written statement already
filed.
• (3) Thirdly, a counter-claim may be filed by way of a subsequent pleading
under Rule 9.
 Suit by Indigent person
• India being a welfare State provides the necessary Legal Aid and assistance to
the poor and the downtrodden. Order XXXIII of the Code of Civil Procedure,
1908, is one such example of Legal Aid rendered to the Indigent Persons
which inter-alia provides for the institution of Civil Suits by Indigent Persons.
Initially, the expression “Pauper” was being used but later it was replaced
with the expression “Indigent Person”.
• At the time of institution of a Civil Suit, the Plaintiff(s) i.e. the person(s) instituting
the Civil Suit, is/ are required to pay the requisite Court Fees as prescribed under
the Court Fees Act, 1870. However, the poor people do not possess sufficient
means to pay the Court Fees. Therefore, Order XXXIII comes to their rescue, by
exempting them from the payment of the Court Fees at the first instance and allows
them to prosecute the suit in forma pauperis subject to certain conditions as
stipulated under the Order.
• Definition
• The definition of an Indigent Person is provided in the Explanation I to Rule
1 of the Order XXXIII, which states that a person is an indigent person–
1.if he is not possessed of sufficient means (other than property exempt from
attachment in execution of a decree and the subject matter of the suit) to enable
him to pay the fee prescribed by law for the plaint in such suit, or
2.where no such fee is prescribed, if he is not entitled to property worth one
thousand rupees other than the property exempt from attachment in execution of a
decree, and the subject matter of the suit.
• Explanation II to Rule 1 provides that any property which is acquired by a
person after the presentation of his application for permission to sue as an indigent
person, and before the decision of the application, shall be taken into account in
considering the question whether or not the applicant is an indigent person.
• The Hon’ble Supreme Court in the case of, Sushil Thomas Abraham
v. Skyline Builders, (2019) 3 SCC 415 observed as under:
• “19. The question as to whether the plaintiff is possessed of sufficient
means to pay the requisite Court fees for the plaint in the suit as per
the provisions of the Court Fees Act, 1870 is required to be decided by
holding an inquiry as prescribed under Rules 4 to 7 of Order 33 of the
Code by the trial Court.
The Court will prima facie reject such applications in the following
cases:

1.where it is not framed and presented in the prescribed manner; or

2.where the applicant is not an indigent person; or
3.where the applicant has, within two months next before the presentation of the
application, has disposed of any property fraudulently or in order to be able to
apply for permission to sue as an indigent person; or
4.where there is no cause of action;or
5.where the applicant has entered into an agreement with reference to the subject-
matter of the suit under which another person has obtained interest; or
6.where the allegations show that the suit would be barred by any law; or
7.where any other person has entered into an agreement within him to finance the
litigation.
• The Court Fees can be recovered in the following manner:
1.Where an indigent person succeeds in a suit, the State government can recover
Court fees from the party as per the direction in the decree and it will be the first
• charge on the subject-matter of the suit.
2.Where an indigent person fails in the suit, the Court fees shall be paid by him.
Where the suit abates on account of the death of a plaintiff, such Court fees would
be recovered from the estate of the deceased plaintiff.
• Rule 9A provides that the Court may assign a pleader to an unrepresented indigent
person. The Central Government or the State Government may make provisions
for rendering free legal aid and services to indigent person to prosecute their cases.
The State shall be deemed as a necessary party as per Rule 13.