Introduction to Counterclaim
Rule 6-A to Rule 6-G of Order VIII of the Code of Civil Procedure, of 1908 deals with the provision related to the counterclaim. It basically refers to a claim made by the defendant against the plaintiff by a cross-action, independent and separate from the claim of the plaintiff. It is a plea in the favour of the defendant if there is a cause of action in the favour of the defendant. A counterclaim can be brought along with a set-off claim. A defendant can set up a counterclaim only for those causes of action that could have been claimed in a separate suit as well. There was no provision for counterclaim in the CPC before the 1976 Amendment Act, only a cross-action could be filed. The Supreme Court in Laxmidas v. Nanabhai, (1964) 2 SCR 567, held the right to make a counterclaim, a statutory right. The Apex Court also held that the court has the power to treat a counterclaim as a cross-action suit, and the court can try and hear the counterclaim and original suit together if the counterclaim is properly stamped.
Ram has a claim against Shyam for the possession of the land, and he files a suit to claim the possession. On the other hand, Shyam also has a cross-claim of some kind against Ram, which by law can be claimed in a separate suit. Thus, in this case, Shyam has the right to set up a counterclaim against Ram in the same suit.
Object of Counterclaim
The Law Commission of India recommended adding the counterclaim provision in the CPC to avoid a multiplicity of proceedings. Only after this, the Amendment Act of 1976 was brought. The main objective of a counterclaim is to save the time of courts and save the parties to the suit from inconvenience, as multiple proceedings on the same subject matter may increase the litigation cost and also waste the time of the parties. It was also brought into the CPC to avoid prolonged trials.
When a Counterclaim May be Set up?
A defendant can set up a counterclaim before or after the suit has been filed by the defendant. But the defendant has to set up the counterclaim before he has filed his Written Statement or before he has filed his defence. This also means that a defendant can file a counterclaim only before the time for filing a defence has expired. It is pertinent to note here that the counterclaim must not exceed the pecuniary limit of the court to try the case.
Who may Set-up Counterclaim?
A defendant may set up a counterclaim against the plaintiff. He may also set up a counterclaim against other defendants along with the plaintiff. However, he may not set up a counterclaim only against the other defendants. Such a counterclaim is not maintainable in a court of law.
Modes of Setting-up Counterclaims
There are three ways in which a defendant can set up a counterclaim against the plaintiff. They are:
- A defendant can set up a counterclaim in the written statement filed under Rule 1 of Order VIII.
- A defendant can set up a counterclaim by amending the written statement after obtaining the leave of the court. However, such an amendment should not change the whole nature and cause of action of the suit.
- A defendant can set up a counterclaim through a subsequent pleading under Rule 9 of Order VIII. The same was held in Ramesh Chand v. Anil Panjwani, (2003) 7 SCC 350.
Effect of Counterclaim
- According to Rule 6-A (2) of Order VIII, the effect of a counterclaim is identical to a cross-suit. A court may pronounce a final judgment on the original claim and counterclaim together.
- Rule 6-A (4) states that a counterclaim set up by the defendant shall be treated as a plaint.
- According to Rule 6-A (3), the plaintiff has the right to file a written statement in reply to the counterclaim set up by the defendant.
- According to Rule 6-D and Rule 6-F, a defendant will still have the right to a decree for the counterclaim on merits even if the original claim of the plaintiff is discontinued, stayed, dismissed, or withdrawn. The same provision was upheld in Daga Films v. Lotus Production, AIR 1977 Cal 312 (317).
- According to Rule 6-E, the court has the power to pronounce a judgment against the plaintiff, or in the favour of the defendant in the counterclaim if the plaintiff fails to file a reply to the counterclaim made by the defendant.
- According to Rule 6-G, a reply to a counterclaim shall be treated as a written statement. This means that it shall be governed by the provisions applicable to written statements.
Difference Between Set-off and Counterclaim
- Set-off is a defence whereas a counterclaim is a cross-action, or in other words, a plaint.
- The defence of set-off is only available if the sum of money involved is ascertained. On the other hand, a counterclaim need not be certain or arise out of the same cause of action.
- In a set-off claim, the defendant can set-off the recovery amount that the plaintiff and defendant owe to each other. However, if there is an excess amount that is still left to be recovered, then that excess amount can be recovered through a counterclaim.
A counterclaim is a claim made by the defendant against the plaintiff in a cross-action. Such a claim need not arise out of the same cause of action. The main object of a counterclaim is to avoid multiplicity of proceedings and save the time of the court and save the parties to the suit from inconvenience. Sometimes, set-off and counterclaim are assumed to be similar, but they are significantly different. In other words, we can say that set-off and counterclaim have the same objects but they function differently. The statutory recognition of counterclaims by the Amendment Act of 1976 was much needed as there is a huge pendency of cases in the courts.