“SET OFF”

FINAL DRAFT SUBMITTED IN THE PARTIAL FULFILLMENT OF THE COURSE

TITLED

“CODE OF CIVIL PROCEDURE”

SEPTEMBER 2022

PROJECT PROPOSED BY:

NAME: HANI DIPTI

COURSE: B.B.A. LL.B (Hons.)

ROLL NO: 2412

SEMESTER: 5th

SUBMITTED TO:

DR.B.RAVI NARAYAN SARMA

(ASSISTANT PROFESSOR OF LAW)

CHANAKYA NATIONAL LAW UNIVERSITY,

NYAYA NAGAR, MITHAPUR, PATNA - 800001

DECLARATION BY THE CANDIDATE

I, HANI DIPTI, student of Chanakya National Law University hereby dec1are that the work
reported in the B.B.A.,LL.B. (HONS.) project report entit1ed: “SET OFF” submitted at
Chanakya National 1aw University, Patna is an authentic record of my work carried out under
the supervision of Dr. B.R.N SARMA I have not submitted this work e1sewhere for any other
degree or diploma. I am responsib1e for the contents of my Project Report.

(Signature of the Candidate)

HANI DIPTI

NAME: HANI DIPTI

ROLL NO: 2412

COURSE: B.B.A., LL.B. (Hons.)

SEMESTER: 5th
ACKNOWLEDGEMENT

I wou1d 1ike to thank my facu1ty Dr. B.R.N SARMA whose guidance he1ped me a lot with
structuring of my project. I take this opportunity to express my deep sense of gratitude for his
guidance and encouragement which sustained my efforts on all stages of this project. I owe the
present accomp1ishment of my project to my friends, who he1ped me immensely with materia1s
throughout the project and without whom I cou1dn’t have comp1eted it in the present way. I
wou1d a1so 1ike to extend my gratitude to my parents and all those unseen hands that helped me
out at every stage of my project.

THANK YOU

NAME- HANI DIPTI

COURSE- B.B.A., LL.B (Hons.)

ROLL NO – 2412

SEMESTER- 5TH
CONTENTS
Contents...........................................................................................................................................4

CHAPTER1- INTRODUCTION.....................................................................................................5

AIMS AND OBJECTIVES.............................................................................................................6

RESEARCH QUESTIONS.............................................................................................................6

HYPOTHESIS.................................................................................................................................6

RESEARCH METHODOLOGY....................................................................................................6

SOURCES OF DATA.....................................................................................................................6

CHAPTER 2-. MEANING OF SET OFF.......................................................................................7

CHAPTER 3 - RULE FOR PLEA OF SET OFF IN WRITTEN STATEMENTS........................7

CHAPTER 4- TYPES OF SET OFF...............................................................................................8

CHAPTER-5 Effect of set off.......................................................................................................10

chapter-6 et off and counterclaim.................................................................................................10

CONCLUSION..............................................................................................................................11

BIBLOGRAPHY...........................................................................................................................12
CHAPTER1- INTRODUCTION

The Code of Civil Procedure, 1908 (hereinafter, as CPC) under Order VIII provides for rules
which a defendant files a written statement in reply of the plaint of the plaintiff, in this if any
situation arises where the plaintiff files a suit of recovery of money from the defendant, but at
same time defendant also has some debt on the plaintiff, in this case, the defendant may claim for
the set off the amount against the plaintiff recoverable by him. For the setting off the amount, the
defendant has to state the fact in the written statement filed by him. Provisions regarding the set-
off have defined under Order 8 Rule 6 of CPC. Regarding a Written Statement, set off and a
counterclaim, although interestingly neither of the terms are defined in the CPC.

However, all the above referred terms under Order VIII concern themselves with the pleadings
of the defendant. A Written Statement can be further simplified to mean the reply to the plaint of
the plaintiff. A set off on the other hand can be defined as the reduction or discharge of a party’s
debt or claim by an assertion of another claim arising out of another transaction or cause of
action against the other party. Similarly, a counterclaim is an independent claim raised by the
defendant against the plaintiff in his pleading, which is based on a separate and independent
cause of action.

The concept of set off, as stated hereinbefore, is a claim set up against the plaintiff which has the
effect of reduction or discharge of a party’s debt or claim. In other words, it is a cross-claim
which partly offsets the original claim. Where there are mutual debts between the plaintiff and
the defendant, one debt maybe settled against the other. It is a plea which is available to the
defendant for his defence in a suit instituted by the plaintiff.

In B. Seshaiah v. B. Veerabhadrayya, the Andhra High Court expressed the concept as “the
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”. The same doctrine as provided under Order
VIII Rule 6 of CPC allows the defendant to settle the reciprocal claims against the plaintiff
without the need for filing a different suit. This helps in settling the reciprocal claims of the
plaintiff and defendant in the same suit.

AIMS AND OBJECTIVES

The researcher tends to analyse the defence which is available to defendant in a situation when
there is mutual debts between the plaintiff and the defendant.

RESEARCH QUESTIONS
1. What are the essential conditions for set off to arise?

2. What is the effect of set off?

3. What are the difference between set off and counter claim?

HYPOTHESIS
The research believes that set-off is a defence in reciprocal acquittal of debts set up against,
which are available to the defendant.

RESEARCH METHODOLOGY
The researcher will be relying on Doctrinal method of research to complete the project.

SOURCES OF DATA
The researcher will be relying on both primary and secondary sources to complete the project.

1. Primary Sources: Acts & Articles

2. Secondary Sources: Books, newspapers, journals, cases and websites.

CHAPTER 2-. MEANING OF SET OFF

The concept of set off, as stated hereinbefore, is a claim set up against the plaintiff which has the
effect of reduction or discharge of a party’s debt or claim. In other words, it is a cross-claim
which partly offsets the original claim. Where there are mutual debts between the plaintiff and
the defendant, one debt maybe settled against the other. It is a plea which is available to the
defendant for his defence in a suit instituted by the plaintiff.

In B. Seshaiah v. B. Veerabhadrayya1, the Andhra High Court expressed the concept as “the
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”. The same doctrine as provided under Order
VIII Rule 6 of CPC allows the defendant to settle the reciprocal claims against the plaintiff
without the need for filing a different suit. This helps in settling the reciprocal claims of the
plaintiff and defendant in the same suit.

CHAPTER 3 - RULE FOR PLEA OF SET OFF IN WRITTEN STATEMENTS

Under Order VIII Rule 6, the provision of set off has been reproduced hereinafter;

6. 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 characters they fill 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.

Therefore, in order for a defendant to take the plea of set off against the plaintiff, a number of
conditions are to be satisfied which are as follows: 

 The suit filed by the plaintiff must be for the purposes of recovery of money. 

 The money to be recovered must of a sum which is ascertainable. 

 The same sum must be legally recoverable by the defendant from the plaintiff. 

1
B. Seshaiah v. B. Veerabhadrayya, AIR 1972 AP 134 (FB)
  The sum legally recoverable must not exceed the pecuniary jurisdiction of the court in
which the suit by the plaintiff against the defendant is filed. 

 Both the parties, i.e., the defendant and the plaintiff must fill the same character as they
fill in the plaintiff’s suit.

CHAPTER 4- TYPES OF SET OFF

The law recognizes two types of set off, among which only one is expressly provided under
Order VIII Rule 6 CPC, which is generally termed as a legal set off. The legal requirements as to
a set off has been discussed and elaborated upon hereinbefore. Apart from that a set off cannot
travel beyond the scope and the limit of the suit under which it is filed. It cannot bring out
something which is entirely new and not present in the original petition. It is an independent
cause of action for the defendant and, both the petitioner’s and the defendant’s claims are
adjusted in favour of the person whose amount is greater.

The set off under CPC is not exhaustive in its application and the rules of equity provides for
another type of set off available to the courts which is commonly known as equitable set off. The
concept of equitable set off is used by the courts in cases where the legal set off is not available,
as the case doesn’t fall or fulfills the legal requirements as per order VIII Rule 6. Alternatively,
in addition to legal set off, equitable set off, as allowed by the courts of equity in England, may
be claimed by the defendant in respect of even an unascertained sum of money, provided that
both the cross demands arise out of one and the same transaction or are so connected, in the
nature and circumstances, that they can be looked upon as parts of one transaction. Therefore, in
order to avoid filing of a different suit in that scenario, the equitable set off can be granted.
However, it is important to note that unlike a legal set off which is available to the defendant
under the provisions of CPC, the application of equitable set off lies solely at the discretion of
the court and is not available to the defendant as a matter of right. In case of Jitendra Kumar
Khan v. Peerless General Finance & Investment Co. Ltd 2, it was held that under Order VIII, Rule
6, CPC certain conditions precedent were satisfied for application the rule.

The two primary conditions are:

1. that it must be a suit for recovery of money and

2. the amount sought to be set-off must be a certain sum

Understand both the types of set off with the illustrations given below:

Legal set off—

A sues B for compensation on account of trespass. B holds a promissory note for Rs. 1000

from A and claims to set off that amount against any sum that A may recover in the suit. B may
do so. As soon as A recovers, both sums are definite pecuniary demands.

In this scenario, a set off can be claimed since all the requirements under Order VIII Rule 6 (as
stated hereinbefore) for a set off are fulfilled.  

Equitable set off—

A sues B to recover Rs. 50,000 under a contract, B can claim set off towards damages sustained
by him due to breach of the same contract by A. 

In this case, the damages claimed by way of set off are not fully covered by Rule 6 Order VIII
since the set off claimed is not an ascertained sum of money. Therefore, the court has the
discretion to allow the same depending upon the facts of the matter.

CHAPTER-5 EFFECT OF SET OFF

In a case where set off is claimed by the defendant in a suit instituted by the plaintiff, the written
statement filed by the defendant works as and has the same effect as that of a plaint in a different
suit. This written statement effectively acts as a cross suit against the plaintiff although the
requirement for filing a separate suit is not there. In other words, the court has two suits in a case
2
In case of Jitendra Kumar Khan v. Peerless General Finance & Investment Co. 2004 (4) CHN 255
where set off is claimed, but the same are tried together as a single suit and no separate suit
number lies for the same. The same is also stated under clause (2) of Rule 6 Order VIII, CPC.

Where the plaintiff does not appear and his suit is dismissed for default, or he withdraws his suit,
or he fails to substantiate his claim at the trial and his suit is dismissed, it does not affect the
claim for a set off by the defendant and a decree may be passed in favour of the defendant if he is
able to prove his claim.

CHAPTER-6 ET OFF AND COUNTERCLAIM

The counterclaim is provided under Rule 6-A of Order VIII, wherein the defendant has the right
in a suit instituted by the plaintiff to set-up any right or claim against the plaintiff, in the same
suit in respect of any cause of action accruing to the defendant against the plaintiff either before
or after the filing of the suit but before the time limited for delivering his defence has expired.

There are a few essentials to a counter-claim, which are as follows:

 A counter-claim must be accompanied with a written statement, When not filed along with a
written statement, the court does not allow the defendant to file a counter-claim in the later
stages of the suit, if the court feels such is happening to prolong the proceedings. However,
under Rule 9 of order 8, a counter-claim may always be filed as a subsequent pleading.
 The counter-claim shall be brought forward to avoid multiple instances of the same
occurrence, and shall save the court's time
 The plaintiff shall file a written statement as a response to the counter claim, for a counter-
claim is treated on par with a plaint. The court can give a final judgment of matters in both
the plaint and counter-claim.
 For the defendant, the counter-claim can be filed by the defendant against the plaintiff. In
some instances, he can claim from co-defendants along with the plaintiffs. But a counter-
claim solely to claim from the co-defendants is not entertained by the courts.
 It can only be filed when the subject matter is not restricted by the Limitation Act.
Keeping in view both the provision under Order VIII, the major differences between the two can
be summarized as follows:

1. Set off is available as a form of statutory defence in a case, whereas counter claim in
essence is similar to a cross suit founded upon a cause of action accruing based on the
same facts or otherwise. The counterclaim can also be said to be weapon of offence 

2. The legal requirement for a claim of set off is strict and includes only claim for an
ascertained amount of money which must arise from the same transaction in a money
suit; whereas the same is not the case in a counterclaim and it doesn’t necessarily have to
be based on the same transaction.

3. The claim of set off must be an ascertained sum which must be recoverable legally at the
date of the filing of the suit, whereas in a counterclaim the same should be recoverable at
the date of the written statement.

CONCLUSION

The provision of Rule 6 Order VIII provides for a plea of defence in the form of a set off which
can be claimed by the defendant as a matter of right upon fulfillment of the legal requirements as
provided thereunder. The courts have also elaborated upon the concept and clarified certain
aspects in relation to the application of set off. An example of the same will be of the
applicability of court-fee on a set off claim. In M/S. Anand Enterprises v Syndicate Bank 3, the
question was pertaining to the applicability of court fee on a set off. The Karnataka High Court
stated the position in respect to the issue by observing that a written statement should be treated
as a plaint in so far as the set off claim is concerned, and the same portion will attract court fee.
The courts have applied the principle of set off as it effectively helps the parties and the judicial
system in disposing of matters arising between the same parties in a single suit, thereby saving
the time and efforts of the courts as well as of the parties by eliminating multiplicity of
proceedings. Thus, hypothesis that set-off is a defence in reciprocal acquittal of debts set up
against, which are available to the defendant stands true.

3
M/S. Anand Enterprises v Syndicate Bank, AIR 1990 Kant 175
BIBLOGRAPHY
The researcher has consulted following sources to complete the research paper:

BOOKS:

 C. K. Takwani, Civil Procedure with Limitation Act, 1963 (8th ed. Eastern Book
Company, 2019).
 CODE OF CIVIL PROCEDURE,1908
 Thakker, C., & Thakker, M. (2003). Civil procedure. Eastern Book Co

ARTICLES

o India Law Journal

o Manupatra

o https://www.indiafilings.com/learn/code-of-civil-procedure-set-off-and-counter-claim/