Document Fragment View

Matching Fragments

25. On the other hand, the submission of Thiru A. N. Rajagopalan, the learned counsel for the respondent (defendant), is that there was continuing breach on the part of the plaintiff and that the defendant had a period of three years from 1-5-1968 when the accumulated zinc dross was removed by fresh contractors and the total damages payable by the plaintiff were ascertained. But the learned counsel submits that I need not go into the question of limitation, because that will have to be decided in another suit, O.S. No. 7279 of 1971, which the present defendant has filed in the City Civil Court for the recovery of a sum of Rupees 34,291.55. A copy of the plaint in that suit has been furnished to me. It is claimed therein that the present defendant sustained damages to the extent of Rs. 39,281.55, that it gave credit to the sum of Rs. 5,000/- paid by the present plaintiff as earnest money and that the suit was filed for the recovery of the balance. The plaint mentions three days as the days when cause of action arose namely 11-5-1967 when the counter offer of the present defendant was accepted by the present plaintiff, 21-6-1967 when the present plaintiff went back on the contract and 1-5-1968 when the accumulated zinc dross and ash were removed by fresh contractors and the total damages payable by the present plaintiff became ascertained and subsequently. On that basis the suit would have to be filed on 1-5-1971, but it was vacation time and the suit was filed on 10-6-1971, the reopening day. It may also be mentioned in passing that the additional written statement permitted by the appellate Judge was filed in December, 1970, in the trial Court in O.S. No. 3216 of 1968. Thiru A. N. Rajagopalan prays that I need not go into the question of limitation with reference to the legal right of the defendant to claim damages to the tune of Rs. 39,291.55--whether the starting point was 21-6-1967 or 1-5-1968, but submits that, apart from the legal right of set-off, the defendant herein had an equitable right of set-off to the extent of Rs. 5,000/-, that they could plead it virtually as a defence in O.S. No. 3216 of 1968, that for the purpose of limitation the claim of equitable set off should be considered as having been made on the date of the suit, O.S. No. 3216 of 1968, namely, 21-6-1968, and that on 21-6-1968 the claim of equitable set off was in time.

26. The short question for decision therefore is whether in law the defendant had such an equitable right of set-off to the extent of Rs. 5,000/- and whether for the purpose of limitation it was enough if it was not time-barred on 21-6-1968, the date of the plaintiff's suit. There are a number of cases which have recognized such a right of equitable set off to the extent of the plaintiff's claim and they have also pointed out that such a right could be urged so long as it was not time-barred on the date of the plaintiff's suit (21-6-1968 in this case). The two conditions for allowing a claim of equitable set off are that it must arise out of the same transaction which is the basis of the plaintiff's claim and that it would be inequitable to rive the defendant to a separate suit for the purpose. It may also be mentioned straightway that this right of equitable set off is different from what has been provided under Order VIII, Rule 6 of the Code of Civil Procedure, which says:

42. It will be seen that it has been held in the above case that a plea of equitable set off could be allowed to the extent of the plaintiff's claim, if it is not time-barred on the date of the plaintiff's suit. It would be appropriate to explain the juristic principle further, particularly with reference to the present case. Equitable set-off is allowed where it arises out of the same transaction which is the basis of the plaintiff's claim and where it would be inequitable to drive the defendant to a separate suit. For instance, if in this particular case, the defendant, if it merely wanted to retain the sum of Rupees 5,000/- as equitable set off to a possible claim of the plaintiff for Rs. 5,000/-, the Court cannot say that it should have filed a suit merely to be able to retain the sum of Rupees 5,000/-. The defendant might well hope that the plaintiff might not file a suit for the recovery of the sum of Rs. 5,000/-, because of the knowledge that the defendant might plead equitable set-off to the extent of Rs. 5,000/- ; nay, might even file a further suit for damages exceeding the sum of Rs. 5,000/-, of course, subject to the law of limitation. It is true that the defendant, in order to retain the sum of Rs. 5,000/-, must prove that it has suffered damages at least to the extent of Rs. 5,000/-, if the matter comes to the Court. But it does not follow from this that even to retain the sum of Rs. 5,000/- it should have taken the initiative in filing a suit to get a declaration of its right to retain the same. It could well wait. This being the nature of equitable set off, it follows that the date for judge whether the claim for equitable set off was in time would be the date of the plaintiff's suit and not a later date. If we were to hold that the plea of equitable set-off must be held to have been raised only on the date of the written statement, it might prejudice the defendant, because, the plaintiff might have brought the suit on the last date of limitation (as was the case in ILR 42 Mad 873 = (AIR 1920 Mad 819)) and in another case might delay service of summons on the defendant. The claim of the defendant to recover damages in excess of the plaintiff's claim stands on a different footing and normally the claim must be held to have been filed only on the date when it was filed. But the principle is different in the case of an equitable set-off, which is limited to the plaintiff's claim, and is virtually an equitable defence to it. This is virtually what was argued by counsel in ((1850) 15 QB 1046) to which reference has been made in the decision.

"A written statement pleading a set-off or counter claim shall be chargeable with fee in the same manner as a plaint."

50. Secondly the defendant must be put on some terms. It will be remembered that even in the notices which passed between the parties before the suit, the plaintiff's counsel had drawn the attention of the defendant to the position in law and, in particular, to the decision in (ILR (1943) 2 Cal 213) = (AIR 1943 PC 34) that even on the footing that the plaintiff had committed breach, and was liable to pay damages, the defendant must return the sum of Rs. 5,000/- and file its own claim to recover damages. Still the defendant filed its written statement claiming that the sum of Rs. 5,000/- was earnest money and that it was entitled to forfeit it without proof of damage. If the defendant had filed a correct written statement earlier, claiming equitable set-off, the plaintiff's suit would not have been delayed so much. It may be mentioned that even in the additional written statement which the defendant filed in December, 1970, as a result of the direction of the learned appellate Judge, it did not refer to any equitable set off, but stated that it was entitled to forfeit the deposit of Rs. 5,000/-, "as the said amount was reasonably estimated as damages suffered by the defendants." I therefore told Thiru A. N. Rajagopalan, the learned counsel for the defendant, that unless the defendant filed a proper written statement mentioning that it was claiming only an equitable set-off, it was not possible to take note of the additional written statement. Accordingly the defendant had filed a draft additional written statement stating that it is entitled to equitable set-off the damages suffered by it to the extent of Rs. 5,000/- against the amount paid by the plaintiff as earnest money. Both because the defendant did not file a correct written statement initially and even the additional written statement filed in December, 1970, is not correct and a correct written statement is going to be filed only hereafter, I think that in the interest of justice the defendant should pay a sum of Rs. 300/- to the plaintiff as a condition precedent to the filing of the written statement. The defendant is given three weeks from now to pay the amount to the plaintiff's counsel. This amount cannot be recovered from the plaintiff, even if the defendant ultimately succeeds in proving its claim for damages.