In civil litigation, defendants are not limited to merely denying a plaintiff’s claim—they can also raise financial claims of their own against the plaintiff. These claims may take the form of a set-off or a counter-claim.
Though both serve as defensive tools, they are distinct legal concepts under the Code of Civil Procedure, 1908 (CPC) in Pakistan. In this article, we explain the difference between set-off and counter-claim, the legal basis, and when each can be applied.
What is Set-Off? (Order VIII Rule 6 CPC)
A set-off is a legal plea by the defendant asserting that the plaintiff owes him money, and therefore, the amount claimed by the plaintiff should be reduced accordingly.
Legal Definition:
Under Order VIII Rule 6 of the CPC, a defendant can claim set-off in respect of an ascertained sum legally recoverable from the plaintiff, provided:
- Both parties fill the same legal character,
- The sum is definite and legally recoverable,
- The claim is for money only,
- It arises out of a mutual debt before the filing of the suit.
Example:
If A sues B for Rs. 1,00,000, and B proves that A owes him Rs. 30,000 from a prior transaction, B can claim set-off and reduce liability to Rs. 70,000.strong text
What is Counter-Claim? (Order VIII Rule 6A–6G CPC)
A counter-claim is a claim made by the defendant in a suit against the plaintiff, similar to filing a cross-suit within the same proceeding.
Legal Definition:
Under Order VIII Rule 6-A to 6-G of the CPC, a counter-claim:
- Can be for any cause of action,
- May exceed the plaintiff’s claim in amount or type of relief,
- Can be filed even after the suit is instituted, but before the defendant submits his written statement,
- Has the same effect as a cross-suit.
Example:
If A sues B for defamation, B can file a counter-claim in the same suit seeking damages from A for breach of contract.
Key Differences Between Set-Off and Counter-Claim
| Aspect | Set-Off | Counter-Claim |
|---|---|---|
| Legal Basis | Order VIII Rule 6 CPC | Order VIII Rule 6A–6G CPC |
| Nature of Claim | Defensive & Monetary Only | Defensive & Offensive; can include damages, injunction |
| Scope | Limited to ascertained sum | Broader; any cause of action |
| Filing Time | With written statement | With or after written statement, but before issues |
| Separate Suit Needed? | No | No; it’s treated as a separate suit within the main one |
| Jurisdictional Limit | Must be within court’s pecuniary jurisdiction | Same requirement applies |
| Court Fee | No extra fee (generally) | May require court fee based on claim value |
Pakistani Law
The Civil Procedure Code (CPC) governs the procedures for set-off and counter-claims in Pakistan.
- Order VIII, Rule 6, CPC: This rule allows a defendant to claim a set-off against the plaintiff’s demands, provided the suit is for the recovery of money and the amount is ascertainable.
- Rule 162 Sindh Chief Court Rules (O.S.): Allows a defendant to set up a counter-claim against the plaintiff’s claims. *Section 30 of “THE CATTLE-TRESPASS ACT, 1871”: Any compensation paid to such person under this Act by order of the convicting Magistrate shall be set-off and deducted from any sum claimed by or awarded to him as compensation in such suit. *Section 46 of THE PROVINCIAL INSOLVENCY ACT, 1920: Where there have been mutual dealings between an insolvent and a creditor proving or claiming to prove a debt under this Act, an account shall be taken of what is due from the one party to the other in respect of such mutual dealings and the sum due from the one party shall be set -off against any sum due from the other party, and the balance of the account, and no more, shall be claimed or paid on either respectively. *Section 37 of “THE PARSI MARRIAGE AND DIVORCE ACT, 1936”: In any suit under this Act, the defendant may make a counterclaim for any relief he or she may be entitled to under this Act.
- HAAKAM KHAN Versus TOWN COMMITTEE, HAVELIAN (1985 CLC 808): This case clarifies the scope and applicability of set-off claims under the Civil Procedure Code, emphasizing the court’s discretion in allowing such claims to avoid multiplicity of suits and ensure equitable relief. It also highlights the court’s power to treat a set-off claim as a counter-claim, even in the absence of specific provisions in the code, to achieve justice.
- Civil Aviation Authority v. Japak International (Pvt.) Limited (2009 SCMR 666): This judgment reinforces the importance of adhering to procedural requirements under the Civil Procedure Code when claiming a set-off or counter-claim. It clarifies that parties cannot introduce new claims or defenses at a later stage without proper application and adherence to court fee requirements. The decision also underscores the distinction between legal and equitable set-offs and the conditions under which they can be claimed.
- MUHAMMAD IBRAHIM‑Plaintiff versus Messrs. EAST AND WEST STEAMSHIP CO‑Defendants (PLD 1952 Sind 41): This judgment clarifies that there is no distinction between legal and equitable set-offs concerning the applicability of court fees. It reinforces the principle that court fees are payable on the entire amount claimed in a set-off, ensuring revenue collection and discouraging the avoidance of fees through strategic claim structuring.
- Dewan Jairam Dass and Another v. Syed Niamat Ali and 4 Others (PLD 1982 Quetta 14): This judgment clarifies that a counter-claim for possession of land, arising from the same transaction as the original suit, is entertainable in the same proceedings to avoid multiplicity, even if the original suit is for declaration and injunction.
Relevant Judgments and Statutes.
- Order VIII, Rule 6, Civil Procedure Code (CPC): Governs the procedure for claiming a set-off in civil suits, requiring the suit to be for recovery of money and the amount to be ascertained.
- HAAKAM KHAN Versus TOWN COMMITTEE, HAVELIAN, 1985 CLC 808: Clarifies the scope and applicability of set-off claims, allowing courts discretion to permit them to avoid multiple suits.
- Civil Aviation Authority v. Japak International (Pvt.) Limited, 2009 SCMR 666: Reinforces adherence to procedural rules for claiming set-off or counter-claim, including timely application and court fee requirements.
- Section 30, THE CATTLE-TRESPASS ACT, 1871: Explains the utilization of compensation for set off purposes to any person being paid under this act
- Civil Aviation Authority v. Japak International (Pvt.) Limited (2009 SCMR 666): This judgment reinforces the importance of adhering to procedural requirements under the Civil Procedure Code when claiming a set-off or counter-claim. It clarifies that parties cannot introduce new claims or defenses at a later stage without proper application and adherence to court fee requirements. The decision also underscores the distinction between legal and equitable set-offs and the conditions under which they can be claimed.
- Dewan Jairam Dass and Another v. Syed Niamat Ali and 4 Others (PLD 1982 Quetta 14): This judgment clarifies that a counter-claim for possession of land, arising from the same transaction as the original suit, is entertainable in the same proceedings to avoid multiplicity, even if the original suit is for declaration and injunction.
Conclusion
Understanding the difference between set-off and counter-claim is vital for effective civil litigation in Pakistan. While both serve the purpose of balancing claims and saving judicial time, they are distinct in scope, nature, and legal requirements.
Legal practitioners must choose the correct remedy based on the type of claim, timing, and legal strategy. Using these tools wisely can make civil litigation more efficient and cost-effective.