Written Statement, Set-off & Counter-claim — CPC & Limitation Act Notes

Written Statement, Set-off & Counter-claim

A defendant sued by a bank for an unpaid loan pointed out something obvious but powerful: the same bank was holding his matured fixed deposit. Why should he pay in full and then chase the bank separately for his own money? The Code agrees — through set-off, cross-debts can be adjusted in one suit, saving everyone a second round of litigation.

What is a written statement, and how do set-off and counter-claim work?

A written statement is the defendant’s pleading — the reply to the plaint (Order 8). Where the plaint is the plaintiff’s case, the written statement is the defendant’s case: what they admit, what they deny, and what new facts they rely on.

When (the When). Order 8 rule 1 requires the written statement within thirty days of service of summons, extendable by the court up to ninety days for recorded reasons. Importantly, this time-limit has been read as directory, not mandatory — the court can accept a late written statement in a fit case (Kailash v Nanhku, 2005).

Rules of defence. The defendant must (a) deny the plaint’s allegations specifically — a vague or evasive denial is treated as an admission (rule 3, rule 5); (b) raise all matters showing the suit is not maintainable or is barred, and any new facts (fraud, limitation, release) — new facts must be specially pleaded (rule 2); and (c) if a written statement is not filed, the court may pronounce judgment or make such order as it thinks fit (rule 10).

Now the two special weapons a defendant can add.

A. Set-off — Order 8 rule 6

Set-off is a defendant’s claim to adjust a money sum the plaintiff owes them against the plaintiff’s claim, in the same suit. Instead of paying in full and suing separately, the defendant says “net it off.”

There are two kinds.

Legal set-off (Order 8 rule 6). Available where the defendant’s claim is (i) for an ascertained sum of money, (ii) legally recoverable, (iii) within the court’s pecuniary jurisdiction, and (iv) both parties fill the same character as in the plaintiff’s suit. It need not arise from the same transaction, but it must be a definite, ascertained sum.
Equitable set-off (a judge-made extension, not in rule 6). Allowed where the cross-demand arises out of the same transaction, even if the amount is unascertained, because it would be inequitable to make the defendant pay and sue back. This is what saves the bank-loan-versus-fixed-deposit defendant when the FD amount is definite, and covers cases where the demands are intertwined.

B. Counter-claim — Order 8 rule 6A

A counter-claim is a cross-suit the defendant brings inside the plaintiff’s suit — an independent claim against the plaintiff, treated as if the defendant had filed a separate plaint. The court decides both the original claim and the counter-claim in one judgment.

Key features:

The counter-claim must be a claim the defendant has against the plaintiff, arising before the defendant delivers the defence (or before the time to do so expires).
It may be for any relief (money or otherwise), not just a set-off amount — this is what makes it wider than set-off.
It is treated as a plaint, and the plaintiff files a written statement in answer to it (rule 6A(3)–(4)).
Even if the plaintiff’s suit is stayed, discontinued or dismissed, the counter-claim may still proceed — because it stands on its own feet.

C. Set-off vs counter-claim — the distinction (guaranteed question)

Nature. Set-off is a ground of defence — it reduces or wipes out the plaintiff’s claim. Counter-claim is a cross-action — it seeks relief in the defendant’s own right.
Amount / relief. Legal set-off must be an ascertained sum; counter-claim may be for any relief, ascertained or not.
Excess. In pure set-off the defendant cannot recover a balance above the plaintiff’s claim; in a counter-claim the defendant can get a decree for the excess.
Transaction. Legal set-off need not, and equitable set-off must, arise from the same transaction; a counter-claim need not arise from the same transaction at all.

🧩 WORKED EXAMPLE — loan versus matured fixed deposit

Facts. A bank sues S to recover ₹5,00,000 due on a loan. S holds a matured fixed deposit of ₹4,00,000 with the same bank, now payable. S wants to set this off.

Rule. Order 8 rule 6 (legal set-off): a defendant may set off an ascertained, legally recoverable sum within the court’s pecuniary jurisdiction, both parties being in the same character. Equitable set-off also applies to intertwined demands.

Apply. The matured FD is an ascertained sum of ₹4,00,000, legally recoverable, and the parties (S and the bank) fill the same character. It qualifies as a legal set-off.

Conclusion. S may set off ₹4,00,000; the bank’s effective decree is for the ₹1,00,000 balance. Decoy. “Only an ascertained legal set-off is allowed” understates the law — equitable set-off would help even an unascertained same-transaction demand.

Order 8 rule 6 — Particulars of set-off to be given in written statement: “(1) Where in a suit for the recovery of money the defendant claims to set-off against the plaintiff’s demand any ascertained sum of money legally recoverable by him from the plaintiff, not exceeding the pecuniary limits of the jurisdiction of the Court, and both parties fill the same character as they fill in the plaintiff’s suit, the defendant may, at the first hearing of the suit… present a written statement containing the particulars of the debt sought to be set-off. (2) The written statement shall have the same effect as a plaint in a cross-suit…”

Order 8 rule 6A — Counter-claim by defendant: “(1) A defendant in a suit may, in addition to his right of pleading a set-off under rule 6, set up, by way of counter-claim against the claim of the plaintiff, any right or claim in respect of a cause of action accruing to the defendant against the plaintiff either before or after the filing of the suit but before the defendant has delivered his defence or before the time limited for delivering his defence has expired… (2) Such counter-claim shall have the effect of a cross-suit so as to enable the Court to pronounce a final judgment in the same suit, both on the original claim and on the counter-claim.”

In Simple Terms: The written statement is the defendant’s reply — deny clearly or you are taken to admit. If the plaintiff also owes the defendant a definite sum, the defendant can set it off against the claim (rule 6). If the defendant has a bigger, independent claim, they can file it as a counter-claim (rule 6A), which runs like a separate suit inside the same case and can win the defendant a decree of their own.

flowchart TD
    WS["Written statement O.8<br/>defendant's reply (30-90 days)"]:::root
    WS --> D["Specific denial r.3, r.5<br/>vague denial = admission"]:::leaf
    WS --> NF["New facts specially pleaded r.2"]:::leaf
    WS --> SO["Set-off r.6"]:::leaf
    SO --> L["Legal: ascertained sum,<br/>same character"]:::leaf
    SO --> E["Equitable: same transaction,<br/>may be unascertained"]:::leaf
    WS --> CC["Counter-claim r.6A<br/>cross-suit, any relief, excess recoverable"]:::outcome

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    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    classDef outcome fill:#E8F5E9,stroke:#1B5E20,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

⚠️ DON’T CONFUSE — set-off vs counter-claim

Set-off is a shield: it only reduces the plaintiff’s claim, and the defendant cannot recover any balance above it (legal set-off needs an ascertained sum).

Counter-claim is a sword: it is an independent cross-suit for any relief, it can win the defendant a decree for the excess, and it survives even if the plaintiff’s suit is dismissed or withdrawn.

Case Laws

Laxmidas Dayabhai Kabrawala v Nanabhai Chunilal Kabrawala (1964) — explained equitable set-off and the nature of a counter-claim as a cross-action that can be tried with the main suit.
Kailash v Nanhku (2005) — the ninety-day outer limit for filing a written statement under Order 8 rule 1 is directory, not mandatory; the court may permit a late filing in a deserving case.
Rohit Singh v State of Bihar (2006) — a counter-claim must relate to a cause of action accruing before the defence is delivered and cannot be raised after issues are framed.

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