SET OFF

When a claim is made against another claim, it is called set-off. A set-off therefore is a cross
claim which has the effect of partly offsetting the original claim. Set off has been described in
the Rule 6 Order 8 of the Code of Civil Procedure of India.
Set-off is a form of settling the reciprocal debts. When there are mutual debs between the
plaintiff and the defendant then, one debt is set-off against another debt.1 Set-off is one of the
defense pleas which is available to the plaintiff as it reduces the plaintiffs claim in a suit for
recovery of money.2
HISTORY
Under the old English law set-off had no existence even though it was already recognised
under equity. Insolvent Debtors Relief Act 1729 and the Debts Relief Amendment Act 1735
together brought about the set-off concept under the legal statutes for the first time.
The concept of allowing the defendant in a civil lawsuit to claim a set off originated back
when defendants were still sent to debtors prisons for owing money. Courts began to realize
that the doctrine of equity called for a solution to situations where a defendant was sent to
debtors prison despite the fact that the plaintiff in the lawsuit actually owed money to the
defendant as well. At the time, civil procedure required for the first lawsuit to be settled
before another claim could be addressed. As a result, any claim that the defendant had against
the plaintiff was not before the court until after the original lawsuit terminated3.
DOCTRINE OF SET OFF
In a particular when this type of situation happens when the plaintiff finds out that the
plaintiff has some debt to settle against the defendant and the defendant in turn also finds out
that he has similar debts against the plaintiff, then he could claim a set off for the particular
amount4.

1 Chambers 21st century Dictionary , p. 1283

2 Strouds Judicial Dictionary (1986) Vol. 5 , p.2387
3 http://www.wisegeek.com/what-is-a-set-off.htm
4 B. Seshaiah v B Veerabhadrayya , AIR 1972 AP 134 (FB)

The doctrine of set-off could be defined 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.5
CONDITIONS FOR CLAIMING A SET-OFF
A defendant could only claim a suit of set off if the following conditions have been specified.
1.
2.
3.
4.
5.

When the particular suit has been about the recovery of money
The sum of money must be ascertained
The sum of money must be legally recoverable
The sum of money must be recoverable by the defendants from the plaintiffs
The sum of the money to be recovered must not exceed the pecuniary jurisdiction in

which the court has been instituted.

6. Both the parties must fulfil each others claims criteria for debt settlement.6
EFFECT OF SET OFF
The defendant is considered to be in the same position as that of the plaintiff as regards of the
amount when he claims for set off. As regards to numbering of cases the set off filed doesnt
have a new case number , rather it is tagged with the original claim. Even though they are
separate suits they are tried together7.
In cases where the defendant is not able to appear in person and is not able to substantiate his
claim as a result of which his suit is dismissed. This however have no bearing on the set off
claimed by the defendant. If the defendant could prove that the plaintiff owes him money
then the suit could be instituted against him.8

TYPES OF SET-OFF
Set off has been classified into two types as
1. Legal set-off
2. Equitable set-off
5 Jayanti Lal v Abdul Aziz , AIR 1956 Pat 199 p 200
6 Civil Procedure with Limitation Act 1963, C. K Takwani , Seventh Edition , p 267 para 3
7 Dayaram vs Jokhuram , AIR 1960 MP 393
8 Jamnadas V Behari , AIR 1941 Nag 258