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Question: What is set-off? Discuss the provisions regarding set-off as provided under the Civil Procedure Code and distinguish between legal and equitable set-off. [DJS 1976, BIHAR J 1975, 1976, 1977, WB J 1997, 1995 , 1992, Raj J. 1969, 1975, 1979] Find the answer to the mains question only on Legal Bites. [What is set-off? Discuss the provisions regarding set-off as provided under the Civil Procedure Code and distinguish between legal and equitable set-off.]AnswerSet-off is a legal...

Question: What is set-off? Discuss the provisions regarding set-off as provided under the Civil Procedure Code and distinguish between legal and equitable set-off. [DJS 1976, BIHAR J 1975, 1976, 1977, WB J 1997, 1995 , 1992, Raj J. 1969, 1975, 1979]

Find the answer to the mains question only on Legal Bites. [What is set-off? Discuss the provisions regarding set-off as provided under the Civil Procedure Code and distinguish between legal and equitable set-off.]

Answer

Set-off is a legal principle that allows for the adjustment or cancellation of mutual debts or claims between parties involved in a legal dispute. It is a mechanism that promotes efficiency and fairness by avoiding multiple lawsuits for separate claims and enabling the resolution of related matters in a single proceeding.

The provisions regarding set-off are governed by the Civil Procedure Code (CPC) in many jurisdictions, including India. In India, set-off is covered under Order VIII, Rule 6 to Rule 10 of the CPC.

Here is a detailed explanation of the provisions regarding set-off under the CPC:

• Order VIII, Rule 6: Under this rule, a defendant in a suit is entitled to plead a set-off against the plaintiff's claim if it arises out of the same transaction or is connected with the subject matter of the plaintiff's claim. The defendant must file a written statement along with the set-off counterclaim, specifying the amount sought to be set off.

Order VIII, Rule 7: This rule outlines the conditions for a valid set-off. It states that the defendant must have a right to set off, and the set-off must be for a liquidated sum of money, either presently payable or payable at a certain future date.

• Order VIII, Rule 8: According to this rule, the set-off claimed by the defendant must be pleaded specifically in the written statement or a subsequent pleading. If the defendant fails to do so, the court may refuse to allow the set-off.

• Order VIII, Rule 9: This rule provides the procedure for dealing with a claim for set-off. Once the defendant pleads a set-off, the court has the authority to try both the plaintiff's claim and the defendant's claim simultaneously, or it may direct separate trials if it deems necessary.

• Order VIII, Rule 10: Under this rule, the court has the power to determine the amount of the set-off claim and adjust it against the plaintiff's claim. If the court finds that the defendant's claim is well-founded, it may pass a decree in favour of the defendant for the balance amount, if any.

Distinction between Legal and Equitable Set-off:

1. Legal Set-off: Legal set-off arises when the defendant has a legal right to adjust or cancel a debt or claim against the plaintiff's claim. It is governed by specific statutory provisions, such as those found in the CPC. The requirements for a legal set-off include a direct connection between the debts or claims and the existence of a mutual relationship between the parties involved.

2. Equitable Set-off: Equitable set-off, also known as non-legal set-off or set-off in equity, is based on principles of fairness and justice rather than specific statutory provisions. It arises when the defendant has a cross-claim that is not directly connected to the plaintiff's claim but has an equitable justification for cancellation or adjustment. Equitable set-off allows for a broader scope of claims to be set off against each other, even if they do not arise out of the same transaction or have a direct relationship.

Set-off is a mechanism provided under the Civil Procedure Code that allows for the adjustment or cancellation of mutual debts or claims between parties involved in a legal dispute. It promotes efficiency by resolving related matters in a single proceeding. Legal set-off is governed by specific statutory provisions, while equitable set-off is based on principles of fairness and justice, allowing for a broader scope of claims to be set off against each other.

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Mayank Shekhar

Mayank is an alumnus of the prestigious Faculty of Law, Delhi University. Under his leadership, Legal Bites has been researching and developing resources through blogging, educational resources, competitions, and seminars.

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