Q. Define legal set-off and counter claim? Differentiate between legal setoff and counter claim. Also, discuss the concept of equitable setoff with relevant case laws? [10 Marks]
Answer:
Legal Set-off: In a money suit, the defendant can claim an amount due to him by the plaintiff, in the same legal capacity or relations by virtue of Rule 6 of Order VIII of the Code of Civil Procedure, 1908 (hereinafter referred to as the “CPC”). Such a claim is called a setoff.
Counter Claim: On the other hand, Rules 6A to 6G of Order VIII of CPC enable the defendant to claim a sum of money or any other right from plaintiff and the same is called a counterclaim. Both assume the nature of cross-suit, and the original plaintive must file a written statement in answer to these. Both must not exceed the pecuniary limits of the courts where they are filed.
Some points of distinction between the two are:
Set-Off | Counter Claim |
1. Only an ascertained sum of money can be pleaded. 2. It is filed at the first hearing. 3. Both parties must set off in the same capacity as the original suit, though capacities may be reversed. 4. As per Section 3, Limitation Act, 1963 it is deemed to have been filed on the date of institution of the suit. | 1. Money or any other right or title can be pleaded. 2. It can be filed till the defendant files his written statement. 3. Treated as a plaint and rules under Order VII, CPC apply upon it. 4. As per the same provision, it is deemed to have been filed on the day it is filed. |
Equitable Setoff
Equitable Setoff is a common law concept. There is no provision relating to it in the CPC though courts have recognized it under Order 20, Rule 19(3), CPC. Unlike legal setoff, as per the decision in Union of India v/s Karamchand, equitable set-off can also be for an unascertained sum of money, in a money suit. The claim should be legally recoverable & both claims should arise from the same transactions. The major advantage of an equitable setoff is that the party can also claim an amount which is otherwise barred by limitation. Also, no court fee needs to be filed for a claim that is equitably deductible. But unlike legal setoff, an equitable setoff cannot be claimed as a matter of right and allowing the claim is at the discretion of the Court.
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