CPC Case Brief – Jitendra Kumar  v. Peerless General Finance

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Equitable right to set off is a right developed from the principle of equity. Equitable right to set off is a debtor’s right to reduce the amount of a debt by any sum a creditor owes the debtor.

Facts : The appellant Nos. 1 and 3 along with appellant No. 2 instituted suit in the High Court of Calcutta principally for a declaration that they are entitled to be paid all the commissions and other incentives payable to the agents/field officers by the defendants in respect of the transactions or business which was done in accordance with the terms and conditions of appointment of all agents of the defendant company.

After issuance of notice of the plaint which was presented on 11.8.1993, the defendants filed their written statement on 12.8.1994. Thereafter, on 7.4.1998, the defendants filed an application for amendment of the written statement.  The amendment that was sought for by the defendants was to the effect of a grant of a decree for a sum of Rs.4,19,509.43 in favour of the defendant No. 1 and a decree to enquire into the sum which is payable by the plaintiff to the defendant company. The said application was seriously opposed by the plaintiffs on the ground that such an amendment was totally impermissible and the defendants were actually introducing a counterclaim or set-off. Dissatisfied with the order of rejection an appeal was preferred and the Division Bench came to hold that the claim put forth by the defendants by way of written statement could no longer be legally recoverable at that distance of time; and that the claim could not be treated as a counterclaim and set-off as envisaged under the Civil Procedure Code.

Principle: Claim put forth in the written statement cannot be regarded as a counterclaim or a legal set-off as both are not permissible at the stage when the application to amend the written statement was filed.

Also, the provisions of the Limitation Act do not necessarily bar an equitable set-off and the provisions of Order VIII Rule 6 do not do away with the principles of equitable set-off.

It has been opined that a plea in the nature of equitable set-off is not available when the cross-demands do not arise out of the same transaction and not connected in its nature and circumstances.

When a plea in the nature of equitable set-off is raised it is not done as of right and the discretion lies with the court to entertain and allow such plea or not to do so.

SC : Tested on the aforesaid principles we are disposed to think that the Division Bench has rightly allowed the amendment on the base that the claim put forth could be treated equitable set-off, for the stand taken in the amendment can be looked upon as a part of one transaction.

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