Code of Civil Procedure, 1908 (CPC)
Set-Off and Counterclaim Distinguished
A defendant is not confined to denying the claim. Under Order VIII of the Code of Civil Procedure, 1908 he may attack back, and the Code gives him two instruments. A set-off under Rule 6 is a defensive shield: it cancels the plaintiff's money claim to the extent of what the plaintiff owes him. A counterclaim under Rule 6A is a sword: it is a cross-claim of its own, which may exceed the plaintiff's claim and survive its dismissal. These notes cover the conditions for each and the differences.
How far each reaches against the plaintiff's claim
1. Set-Off: Order VIII Rule 6
§ Order VIII Rule 6(1), CPC 1908 (in substance) Where in a suit for the recovery of money the defendant claims to set off against the plaintiff's demand any ascertained sum of money legally recoverable by him from the plaintiff, not exceeding the pecuniary limits of the jurisdiction of the Court, and both parties fill the same character as they fill in the plaintiff's suit, the defendant may, 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. (2) 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 both of the original claim and of the set-off. (3) The rules relating to a written statement by a defendant apply to a written statement in answer to a claim of set-off. |
§ The five conditions All must be satisfied for a legal set-off: • The suit must be for the recovery of money. A set-off cannot be claimed in a suit for possession, injunction or declaration. • The sum must be ascertained, that is, a definite figure, not unliquidated damages. • It must be legally recoverable by the defendant from the plaintiff, so a time-barred claim cannot be set off. • It must not exceed the pecuniary limits of the court's jurisdiction, since the court must be able to decide it as though it were a suit. • Both parties must fill the same character as in the plaintiff's suit. A debt owed to the defendant personally cannot be set off against a claim he faces as an executor. |
2. Counterclaim: Order VIII Rules 6A to 6G
§ Order VIII Rule 6A, CPC 1908 (in substance) (1) A defendant in a suit may, in addition to his right of pleading a set-off under Rule 6, set up by way of counterclaim 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 delivering his defence has expired, whether such counterclaim is in the nature of a claim for damages or not: Provided that such counterclaim shall not exceed the pecuniary limits of the jurisdiction of the Court. (2) Such counterclaim shall have the effect of 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 counterclaim. (3) The plaintiff shall be at liberty to file a written statement in answer to the counterclaim. (4) The counterclaim shall be treated as a plaint and governed by the rules applicable to plaints. |
Rule | What it provides |
|---|---|
Rule 6B | Where a defendant sets up a counterclaim and the plaintiff contends that it ought not to be disposed of by way of counterclaim but in an independent suit, the plaintiff may apply for an order that it be excluded, and the court may make such order as it thinks fit |
Rule 6C | Where the defendant sets up a counterclaim and the plaintiff does not file a written statement in answer, the court may pronounce judgment against the plaintiff in relation to the counterclaim or make such order as it thinks fit |
Rule 6D | If in any case in which the defendant sets up a counterclaim the suit of the plaintiff is STAYED, DISCONTINUED OR DISMISSED, the counterclaim may nevertheless be PROCEEDED WITH |
Rule 6E | If the plaintiff makes default in putting in a reply to the counterclaim, the court may pronounce judgment against him in relation to the counterclaim |
Rule 6F | Where in a suit a set-off or counterclaim is established as a defence against the plaintiff's claim and any balance is found due to the defendant, the court may give judgment to the defendant for such balance |
Rule 6G | The rules relating to a written statement by a defendant shall apply to a written statement filed in answer to a counterclaim |
3. The Two Compared
Basis | Set-off, Rule 6 | Counterclaim, Rule 6A |
|---|---|---|
Nature | Essentially defensive: it cancels the plaintiff's claim to its extent | An independent cross-claim, with the effect of a cross-suit |
Type of suit | Only in a suit for the RECOVERY OF MONEY | In any suit |
What may be claimed | An ASCERTAINED sum of money | Any right or claim, whether for damages or not, liquidated or unliquidated |
Amount | Cannot exceed the plaintiff's claim in its operation as a defence | May EXCEED the plaintiff's claim, subject to the court's pecuniary limits |
Cause of action | Must be legally recoverable and not time-barred | May arise from a wholly different cause of action |
When it must have accrued | It must exist at the date of the suit | Before or after the filing of the suit, but before the defence is delivered or the time for it expires |
Character of the parties | Both must fill the same character as in the plaintiff's suit | No such requirement |
If the suit fails | The set-off falls with the claim it was pleaded against, subject to Rule 6F | Rule 6D: it may be proceeded with even if the suit is stayed, discontinued or dismissed |
Court fee | Payable on the amount claimed by way of set-off | Payable as on a plaint, the counterclaim being treated as one |
4. Two Points Regularly Tested
i. Rule 6F is the bridge. Where either a set-off or a counterclaim is established and a balance is found due to the defendant, the court may give judgment for that balance. So a defendant may leave the suit with a decree in his favour.
ii. Rule 6D is the real difference. A set-off is pleaded against the plaintiff's claim; a counterclaim stands independently, and survives the stay, discontinuance or dismissal of the suit. A defendant with a substantial cross-claim is therefore better protected by a counterclaim.
iii. Both are raised in the written statement, and both are treated as cross-proceedings for the purpose of pronouncing a final judgment on the whole matter.
iv. A counterclaim may be excluded. Under Rule 6B the plaintiff may apply for an order that the counterclaim be disposed of in an independent suit, and the court may so order where the two disputes are unrelated and joining them would embarrass the trial.
5. Landmark Points
- Order VIII Rule 6. Five conditions: a money suit, an ascertained sum, legally recoverable, within the pecuniary limits, and the same character in both parties.
- Order VIII Rule 6(2). The written statement pleading a set-off has the effect of a plaint in a cross-suit.
- Order VIII Rule 6A. A counterclaim may be any right or claim, liquidated or not, accruing before or after the suit but before the defence is delivered.
- Order VIII Rule 6A(4). A counterclaim is treated as a plaint and governed by the rules applicable to plaints, including court fee.
- Order VIII Rule 6D. A counterclaim may be proceeded with even if the plaintiff's suit is stayed, discontinued or dismissed.
- Order VIII Rule 6F. Where a balance is found due to the defendant on a set-off or counterclaim, the court may give judgment to him for that balance.
6. Frequently Asked Questions
What is a set-off?
A claim by the defendant, in a suit for the recovery of money, to set against the plaintiff's demand an ascertained sum of money legally recoverable by him from the plaintiff, within the pecuniary limits of the court, both parties filling the same character as in the plaintiff's suit.
What is a counterclaim?
A cross-claim set up by the defendant against the plaintiff in respect of a cause of action accruing to him, whether or not it is a claim for damages, arising before or after the filing of the suit but before the defence is delivered. It has the effect of a cross-suit.
Can a counterclaim exceed the plaintiff's claim?
Yes, subject only to the pecuniary limits of the court's jurisdiction. That is one of the chief differences from a set-off, which operates as a defence and can only extinguish the plaintiff's claim to its own extent.
What happens to a counterclaim if the suit is dismissed?
Under Order VIII Rule 6D the counterclaim may nevertheless be proceeded with, even where the plaintiff's suit is stayed, discontinued or dismissed. A set-off, being pleaded as a defence, does not have that independence.
Can the defendant obtain a decree in his own favour?
Yes. Under Order VIII Rule 6F, where a set-off or counterclaim is established and a balance is found due to the defendant, the court may give judgment to him for that balance, and a decree is drawn up accordingly.
Is court fee payable on a counterclaim?
Yes. Under Order VIII Rule 6A(4) the counterclaim is treated as a plaint and governed by the rules applicable to plaints, which includes the payment of court fee on the amount or value claimed.
Can the plaintiff object to a counterclaim being tried in the suit?
Yes. Under Order VIII Rule 6B he may apply for an order that the counterclaim be excluded and disposed of in an independent suit, and the court may make such order as it thinks fit, particularly where the disputes are unrelated.
7. Related Topics in This CPC Series
- Order VIII: The Written Statement, Set-off and Counterclaim
- Legal Set-Off and Equitable Set-Off Distinguished
- Plaint and Written Statement Distinguished
- Order II: Frame of Suit and the Bar under Order II Rule 2