[Advocate's Diary] Essentials of a Civil Suit: Counter-claims, set-offs, rejoinders and additional pleadings

Advocate's Diary is a project aimed at addressing the dearth of literature on court practice and litigation advocacy. To this end, we aim to create a repository of columns on the essentials of court practice – ranging from civil suits to criminal trials, from ADR procedures to enforcement of decrees and judgments, and more.

The guest columns in the series aim to develop a conversation channel with seasoned practitioners, senior advocates, arbitrators and judges.

In our last column for the Advocate’s Diary series, we covered the law on substantive pleadings under the CPC and the importance of filing comprehensive pleadings which exhaustively lay down a party’s case for the civil court to provide the appropriate reliefs as sought for. Ideally, in a civil suit, the stage for filing of substantive pleadings comes to a close when the written statement (filed by the defendant under Order VIII Rule I of the CPC) comes on record before the court.

However, in cases where the defendant has claimed a set-off against the plaintiff’s reliefs, owing to related transactions in which they have claims against the plaintiff, or have raised a separate counter-claim along with the written statement, the CPC allows for parties to file additional pleadings – usually in the form of a replication and a rejoinder.

This column will explore the law governing additional pleadings in civil suits, focusing specifically on set-offs, counter-claims, replications and rejoinders. It will also summarise the principles which govern the amendment of pleadings under Order VI Rule 17 of the CPC – which emphasise the importance of balancing the interests of allowing a party to fully present its case, with the civil court’s mandate of ensuring expeditious disposal of cases.

Set-offs and counterclaims

A set-off is a device made available to the defendant in a civil suit, by which any debts or monies which are allegedly due from the defendant (as claimed by the plaintiff in the suit) can be adjusted and settled against debts owed to the defendant by the plaintiff. Under Order VIII Rule 6 of the CPC, a set-off can only be availed by the defendant in suits for recovery of money, where (a) the sum due from the plaintiff to the defendant is definite, (b) the sum is legally recoverable (and is not a contested amount), and (c) does not exceed the pecuniary jurisdiction of the court before which the suit is filed.

The reason why a set-off has been provided for under the CPC is to avoid multiplicity of proceedings, and to enable the civil court to make a final determination on the lis between the parties. In effect, when the sum which the defendant seeks a set-off against can be considered by the civil court in the plaintiff’s suit, it is saving the parties the hassle of instituting (and defending) the same claim in parallel proceedings, thus saving significant legal costs and time.

However, the test laid down under Order VIII Rule 6 also contains another important element – that both parties fill the same character as they fill in the plaintiff’s suit. Essentially, this precludes the defendant from raising any and all possible claims against the plaintiff which it may have (including those arising from unrelated and separate transactions). For instance, a defendant cannot set-off a sum due from the plaintiff if the suit has been instituted against the defendant jointly and severally with a co-defendant in respect of a different transaction – since the claim is not of the same character as the one made in the suit by the plaintiff.

While the powers of Order VIII Rule 6 CPC can be availed of by the defendant along with the written statement at the first hearing of the suit, the civil court also has the authority to consider a set-off as a court of equity. An equitable set-off is thus one where the court considers a competing debt, liability or other sum due to the defendant against the reliefs claimed by the plaintiff to ensure an equitable final outcome in the suit. However, even in such circumstances, the potential equitable set-off must flow out of the same transaction, or must be of the same character, for the civil court to consider it and set it off against the plaintiff’s claims in the suit.

The Supreme Court, in Bhupendra Narain Bahadur v Bahadur Singh, and in Union of India v Karam Chand Thappar, emphasised the discretionary nature of a plea of set-off, which is not considered a vested right of the defendant per se, but as a discretionary relief of the civil court as a court of equity – especially in the context of equitable set-offs. In the latter case, the Supreme Court clarified that the mutual debts or cross-demands which the defendant wishes to have set-off against the plaintiff’s claims must arise out of the same transaction, or be related to the nature and circumstances of the suit filed for the court to be able to grant equitable relief to both parties.

Rule 6(2) of Order VIII provides that a claim for a set-off in a written statement shall have the same effect as if the claim was made by way of a plaint in a cross-suit against the plaintiff – to enable the civil court to provide an effective and equitable final judgment. However, a set-off still remains a shield for the defendant to adjust and bring down its overall liability against the plaintiff in the suit before the civil court. It was through the amendment to the CPC in 1976 that the legislature provided the defendant with a sword to add to its shield – in the form of a counter-claim under Rule 6A of Order VIII.

A counter-claim, unlike a set-off, is a positive claim made by the defendant against the plaintiff in respect of a cause of action which should have arisen either before or after the filing of the suit by the plaintiff, but not after the time set for the defendant to file the written statement under Order VIII Rule 1. The plaintiff is provided with the right to move an application to contend that any counter-claim raised by the defendant should be decided through a separate cross-suit, and not in the same suit, under Rule 6C of Order VIII.

But perhaps the most telling aspect that makes a counter-claim a sword in the defendant’s armoury against the plaintiff, is the fact that as per Rule 6D, the court shall continue to determine the defendant’s counter-claim (and pass its judgment on the same) even if the plaint in the original suit is stayed, discontinued or dismissed. Rule 6D has therefore provided teeth to the defendant’s right to a defence in a civil suit, with the Delhi High Court referring to it as a weapon of defence in its decision in Gastech Process Engineering v Saipam.

However, it is vital that the defendant raises the counter-claim along with its defence at the first hearing of the suit, since the Court will exercise limited discretion (and generally refuse to exercise it altogether) when the defendant sleeps over their right to raise a counter-claim expeditiously, as was laid down by the Supreme Court in Ramesh Chand Ardwatiya v Anil Panjwani.

Replications and rejoinders

Order VIII Rule 9 of the CPC provides that no additional pleading after the plaint and the written Statement shall be filed except by leave of the court and upon such terms as the court deems fit. In effect, any additional pleading after the filing of the defendant’s written statement is at the sole discretion of the court, which is only allowed to come on record if the party can prove that the pleading needs to address new facts, circumstances or grounds that have been raised, which were not covered in the initial pleading.

The plaintiff usually seeks the leave of the court to file a ‘replication’ in response to the new facts and grounds alleged by the defendant in its written statement, to which the Defendant has the right to respond by way of a ‘rejoinder’. However, as the Delhi High Court laid down in its decision in Anant Construction v Ram Niwas, a court will not allow the plaintiff to file a replication if it intends to put forth inconsistent pleas in its case through the replication, alter the foundation of its case or a part of the cause of action under which it arises, or raise new claims altogether. The court will also dismiss any application for subsequent pleading where the plaintiff seeks to file a replication merely to deny the averments made by the defendant in the written statement. This is because the plaintiff’s interest would be protected by the doctrine of implied traversal and joinder of issues, which prevents the plaintiff from having to specifically deny each ground and defence taken by the defendant.

Amendment of pleadings

Much like additional pleadings, any amendment to pleadings already filed by the parties is only allowed at the discretion of the court. Section 153 of the CPC contains the general power of the civil court to amend defects and errors in a civil proceeding – including allowing the parties the right to amend their pleadings through an application filed under Order VI Rule 17 of the CPC.

The powers under Order VI Rule 17 of the CPC allows the party to make any such amendment to its pleading which it believes will be necessary for the determination of the real questions in controversy between the parties. Ideally, such an application must be made by either party before the commencement of trial in the suit, which has been interpreted by the Supreme Court in Baldev Singh v Manohar Singh and Kailash v Nankhu to mean the stage when issues have been framed and the parties are called upon to file documentary evidence. However, the proviso to Order VI Rule 17 grants the court the power to allow a party to amend its pleading even after the commencement of trial, if it is convinced that the party has provided credible reasons for its failure to have preferred its application before the commencement of trial.

The Supreme Court has time and again reaffirmed the position that under the garb of an amendment to a pleading, a party cannot be allowed to introduce fresh claims, introduce a fresh cause of action or to change the very nature of the suit filed. In Asian Hotels (North) Ltd. v Alok Kumar Lodha and others, the Supreme Court observed that a civil court would not be justified in allowing an amendment application through which the plaintiff was trying to introduce new prayers and reliefs – which would change the very nature of the Suit. The conclusions in Asian Hotels resonated with the Supreme Court’s earlier landmark decisions in Pirgonda Patil and Ganesh Trading Co. v Moji Ram, where the Court also held that allowing an amendment application where the plaintiff tried to surreptitiously include a fresh claim which would otherwise be time-barred would cause irreparable harm to the defendant, is impermissible under the Court’s scope of powers under Order VI Rule 17.

Conclusion

The law on additional pleadings emphasises the need for parties to support any such request with cogent and genuine reasons, since any such subsequent pleading (or amendment) is only taken on record at the discretion of the court. The court will balance the interests of both parties before deciding to take on such additional or amended pleading into consideration in a civil suit.

Tanvi Dubey is an independent practitioner at the Supreme Court of India, with a diverse practice ranging from civil, commercial and constitutional disputes to service matters before the Supreme Court and other fora in Delhi.

Sumit Chatterjee is a civil and commercial dispute resolution lawyer at Arista Chambers, practicing before the Karnataka High Court, trial courts and a wide array of tribunals in Bangalore.

The authors would like to acknowledge the efforts of Harshit Jindal (fourth year student at NLSIU) and Archit Sinha (third year student at NLSIU) for their research assistance on this column.