TABLE OF CONTENTS

1) Certificate of Declaration……………………………………………………………...ii

2) Acknowledgement……………………………………………………………...........iii

3) Introduction……………………………………………………….…………..............iv

4) Research Methodology………………………………………………………….........vi

5) Objective………………………………………………………………………...........vi

6) Sources of data ………………………………………………………………….……vi

7) Set-off: Rule 6 .............................................................................................................01

a. Meaning ...........................................................................................................01

b. Doctrine explained ..........................................................................................01

c. Types ...............................................................................................................02

d. Conditions ......................................................................................................02

e. Effect of set-off .............................................................................................03

f. Equitable set-off ............................................................................................03

g. Legal and equitable set-off: Distinction ........................................................04

8. Counter-claim rule 6(A) to 6(G) ..................................................................................05

a. Meaning ...............................................................................................................05

b. Doctrine explained ..............................................................................................05

c. Object ..................................................................................................................06

d. Nature and Scope ................................................................................................07

e. Modes of setting up counterclaim .......................................................................07

f. Who may file counterclaim .................................................................................07

g. When counterclaim may be set up ......................................................................08

h. Effect of counterclaim ........................................................................................08

i. Set-off and counterclaim: Distinction .................................................................09

9. Conclusion ..................................................................................................................10

10. Bibliography .............................................................................................................12

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CERTIFICATE OF DECLARATION

  I Vinay Kumar Sahu hereby declare that the project work entitled submitted in HNLU, Raipur, is record of an original work done by me under the able guidance of Ms. Neha Sinha (Assistant Lecturer) HNLU, Raipur.

  

VINAY KUMAR SAHU

ROLL NO.- 169 SEMESTER – 9

BATCH – XI

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ACKNOWLEDGEMENT

I feel myself highly exhilarated to work on this project involving “Set-off and Counter-

Claim”.

I take this opportunity to thank Ms. Neha Sinha who had played the role of a central

character and always given me the courage and wisdom to shape my ideas in right direction.

Special thanks to the I.T. staff and library staff who have devoted their valuable time to give

me all sorts of suggestions, ideas and facilities regarding this topic.

Last but not the least I thank all the members of the H.N.L.U. and all others who have

helped me in the completion of this work.

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INTRODUCTION

The doctrine of set-off is provided by the Order-8, Rule-6, of  Civil Procedure Code. In law, a

set-off is an equitable defence to the whole or to a portion of a plaintiff's claim. A setoff is the

right of a creditor to balance mutual debts with a debtor. In bookkeeping terms, setoffs are

also known as reconciliations. To determine a setoff, simply subtract the smaller debt from

the larger. Any balance remaining due either of the parties is still owed, but the remainder of

the mutual debts has been set off.

In England, set-off at law was created by the Insolvent Debtors Relief Act 1729 and the

Debts Relief Amendment Act 1735, known together as the "Statutes of Set Off". Such a

defense could be pleaded only in respect of mutual debts of a definite character, and did not

apply to cases in which damages were claimed, nor to equitable claims or demands. By the

rules of the Supreme Court (O. XIX. r. 3) a defendant in an action may set off or set up any

right or claim by way of counterclaim against the claims of a plaintiff, and such set-off or

counterclaim has the same effect as a statement of claim in a cross-action.

The legal defense of set-off (above) was originally introduced to prevent the unfair

situation whereby a person ("Party A") who owed money to another ("Party B") could

be sent to debtors' prison, despite the fact that Party B also owed money to Party A.

The law thus allows both parties to defer payment until their respective claims have

been heard in court. Upon judgment, both claims are extinguished and replaced by a

single net sum owing (e.g. If Party A owes Party B 100 and Party B owes Party A

105, the two sums are set off and replaced with a single obligation of 5 from Party B

to Party A).

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Set-off can also be incorporated by contractual agreement so that, where a party

defaults, the mutual amounts owing are automatically set off and extinguished.

In certain jurisdictions (including the UK), set-off takes place automatically upon the

insolvency of a company. This means that, for each party which is both a creditor and

debtor of the insolvent company, mutual debts are set-off against each other, and then

either the bankrupt's creditor can claim the balance in the bankruptcy or the trustee in

bankruptcy can ask for the balance remaining to be paid, depending on which side

owed the most. This has been criticized as an undeclared security interest that violates

the principle of pari passu. The alternative, where a creditor has to pay all its debts,

but receive only a limited portion of the leftover moneys that other unsecured

creditors get, poses the danger of 'knock-on' insolvencies.

The right to set off is particularly important when reporting a bank's exposures to

regulatory authorities. The situation where a bank has to report that it has lent a large sum to

a borrower (and is therefore exposed, because there is a risk that the borrower might default

thereby leading to the loss of the bank's or its depositors' money) is thus replaced (where the

bank has taken security over shares or securities of the borrower) with an exposure of the

money lent minus the value of the security taken.

Order 8 , Rules 6A to 6G , of the Civil Procedure Code deal with the principle of

Counter claims by the defendants. In civil procedure, a party's claim is a counterclaim if the

defending party has previously (in the present action) made a claim against the claiming

party.

Examples of counterclaims include:

After a bank has sued a customer for an unpaid debt, the customer counterclaims

(sues back) against the bank for fraud in procuring the debt. The court will sort out the

different claims in one lawsuit (unless the claims are severed).

Two cars collide. After one person sues for damage to her car and personal injuries,

the defendant counterclaims for similar property damage and personal injury claims.

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RESEARCH METHODOLOGY

This project is based upon doctrinal method of research. This project has been done after a

thorough research based upon intrinsic and extrinsic aspects of the project.

OBJECTIVES

The objective of this project is to -

To discuss the concept of set-off and counter-claim under CPC,1908.

To discuss its provisions under CPC,1908.

SOURCES OF DATA

The following secondary sources of data have been used in the project-

1. Articles.

2. Books

3. Websites

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1A PROJECT ON ADR