Introduction

Counterclaim can be defined as a claim made by the defendant in a suit against the plaintiff. It is claimed of, and separable from the plaintiff’s claim which can be enforced by a cross-action. Hence, it can be said that it is a cause of action, in the favour of defendant against the plaintiff.

A counter-claim may be set up only in respect of a claim for which the defendant can file a separate suit. Thus, a counterclaim is substantially a cross-action. Before the Amendment Act of 1976, there was no specific provision regarding counterclaim under the Code. However, in Laxmidas v. Nanabhai (AIR 1964 SC 11), the Supreme Court held the right to make a counterclaim statutory.

Order 8 Rules 6-A to 6-G contains specific provisions regarding counterclaim.

Object

In Ramesh Chand v. Anil Panjwani ((2003) 7 SCC 350) it was observed that the provisions relating to counterclaim seeks to save the time of the courts, exclude inconvenience to the parties to litigation, decide all disputes between the same parties avoiding multiplicity of proceedings and prolonged trials.

Who may file counterclaim?

It is the defendant who may file a counterclaim against the plaintiff. But incidentally and along with the plaintiff, the defendant may also claim relief against the co-defendants in a suit. Rule 6-B states that where any defendant seeks to rely upon any ground as supporting a right of counter-claim, he shall, in his written statement, state specifically that he does so by way of counter-claim.

When counterclaim may be set up?

In Mahendra Kumar v. State of M.P. ((1987) 3 SCC 265), a counterclaim may be set up by a defendant against a plaintiff in respect of cause of action accruing either before or after filing of the suit, provided such claim is not barred by limitation.

In Ashok Kumar Kalra vs wing cdr, Surender Agnihotri, it was stated that the court shall permit the filing of the counterclaim only after the written statement is filled but not after the issue are formulated in some exceptional case counter claim can be filled even after the issue are framed as so as to prevent the institution of multiple proceeding.

Modes of setting up counterclaim

There are three modes of pleading a counterclaim in a civil suit:

1. In written statement filed under Order 8 Rule 1;
2. By amending written statement with the leave of the court and setting up counterclaim; and
3. In a subsequent pleading under Order 8 Rule 9.

Limitation

A counterclaim is substantially a cross-suit inasmuch as the counterclaim is to be treated as a “plaint” for al purposes. Hence, it is governed by the law of limitation and it cannot get a different period of limitation.

Effects of counterclaim

In the case of Sarojini Amma v. Dakshyani Amma it was decided that “a counter claim has the same effect as a cross suit and has to be disposed of along with the main suit in which it is filed; the only limitation is that the Court should be competent to dispose of the counter claim and the main purpose of setting up a counter claim is to prevent multiplicity of proceedings between the parties.”.

Rule 6-D states that the effect of counterclaim is that even if the suit of the plaintiff is stayed, discontinued, dismissed or withdrawn, the counterclaim will be decided on its merits and the defendant will have a right to get a decree for counterclaim as claimed in the written statement.

According to Rule 6-E, if the plaintiff does not file any reply to the counterclaim made by the defendant, the court may pronounce the judgement against the plaintiff in relation to the counterclaim made against him or make such order in relation to the counterclaim as it thinks fit.

Rule 6-A (4) and Rule 6-G states that the counterclaim shall be treated as a plaint and will be governed by the rules applicable to the plaint, and a reply filed in answer to a counterclaim shall be treated as a written statement and shall be governed by the rules applicable to written statement.

Difference between Set-off and Counterclaim

In Munshi Ram v. Radha Kishan (AIR 1975 Punj 112), the following distinctions between a set-off and counterclaim were stated:

1. Set-off is a statutory defence to a plaintiff’s action, whereas counterclaim is substantially a cross action.
2. Set-off must be for an ascertained sum or it must arise out of the same transaction; a counterclaim need not arise out of the same transaction.
3. Set-off is a ground of defence to the plaintiff’s action. In other words, it is a shield, which if established, would afford an answer to plaintiff’s claim in toto (as a whole) or pro tanto (in proportion); on the other hand, counterclaim is a weapon of offence which enables the defendant to enforce the claim against the plaintiff effectually as an independent action.
4. In case of a legal set-off, the amount must be recoverable at the date of suit, while in case of counterclaim, the amount must be recoverable on the date of written statement.
5. In A.Z. Mohd Farooq v. State Govt. (AIR 1984 Ker 126), it was stated that when the defendant demands in a plaintiff’s suit an amount below or up to the suit claim, it is a set-off stricto sensu, but when it is for a larger amount, the claim for such excess amount is a counterclaim.