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Counterclaim in CPC

Updated: May 5


Counterclaim in CPC


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Counterclaim in CPC

A "counterclaim" could be defined as "a claim asserted by the defendant in response to a suit initiated by the plaintiff." It stands as a distinct assertion, detached from the plaintiff's claim, and is actionable through a cross-action.


Essentially, it represents a legal recourse available to the defendant against the plaintiff.


One of the avenues available to a defendant to contest the relief sought by the plaintiff is through a counterclaim.


Defined as "a claim made by the defendant in a suit against the plaintiff", a counterclaim grants the defendant the opportunity to assert an independent legal action in response to the plaintiff's claim.


Thus, in addition to the right to assert a set-off, a defendant in a suit may present a counterclaim, provided it pertains to a claim for which a separate suit could be filed.


Before the Amendment Act of 1976, the Code lacked specific provisions for counterclaims. Nonetheless, the Supreme Court established the statutory right to assert a counterclaim.


It ruled that the court possesses the authority to treat a counterclaim akin to a cross-suit and adjudicate the original suit and counterclaim concurrently, contingent upon proper stamping of the counterclaim.


In the landmark case of Laxmidas v. Nanabhai, the Supreme Court deliberated on the matter, stating, "The question has to be considered on principle as to whether there is anything in law—statutory or otherwise—which precludes a court from treating a counterclaim as a plaint in a cross-suit.


It is difficult to see any." The Court emphasised that mere non-conformity of a counterclaim to the requirements of a plaint under the Code of Civil Procedure does not deprive the court of the jurisdiction to interpret pleadings reasonably.


Consequently, if a counterclaim, essentially a plaint in a cross-suit, is annexed to or forms an integral part of the defendant's written statement, the court may treat it as such, thereby ensuring that justice is not thwarted by formal defects in pleading.

 
 

Object and Scope of Counterclaim


Prior to the Amendment Act of 1976, the option to claim a counterclaim or set-off was restricted solely to money suits.


Nevertheless, the Law Commission of India proposed a measure aimed at minimising the need for multiple legal actions by allowing defendants to assert both a plea of set-off and a counterclaim within the same suit.


These provisions concerning counterclaims were thus designed to streamline court proceedings, alleviate inconvenience for litigants, resolve all disputes between the involved parties, and curtail unnecessary proliferation of legal proceedings, thereby expediting trials.


Through the Amendment Act of 1976, specific provisions were introduced for counterclaims, notably through the insertion of Rules 6-A to 6-G.


According to sub-rule (7) of Rule 6-A, the defendant is empowered to assert, by means of a counterclaim against the plaintiff's claim, any right or claim accruing to the defendant against the plaintiff, whether preceding or subsequent to the filing of the suit, but prior to the delivery of the defendant's defence or the expiration of the stipulated time for such delivery.


However, such a counterclaim must not surpass the monetary limits of the court's jurisdiction.


In essence, by interposing a counterclaim, the court's pecuniary jurisdiction cannot be circumvented, and its authority to adjudicate upon the suit already instituted cannot be undermined by entertaining a counterclaim exceeding its pecuniary jurisdiction.


For instance, if A asserts a claim to any land against B and initiates legal proceedings to enforce that claim, and B possesses a counterclaim of any nature against A which he is entitled to raise and have resolved in the action initiated by A, then B is deemed to possess a right of counterclaim. Similarly, in a suit seeking injunction, a counterclaim for possession may be permissible.

 
 

Procedural Aspects

Mode of setting up Counterclaim

In civil suits, there exist three methods for pleading or asserting a counterclaim:


(i) Within the written statement submitted pursuant to Order 8 Rule 1;


(ii) Through the amendment of the written statement with the court's permission to introduce a counterclaim; and


(iii) Within a subsequent pleading as per Order 8 Rule 9.


Who may file counterclaim?

Typically, it is the defendant who is entitled to file a counterclaim against the plaintiff. However, in certain circumstances, the defendant may also seek relief against co-defendants in conjunction with the plaintiff.


Nonetheless, a counterclaim directed solely against co-defendants is not considered admissible.


When counterclaim may be set up?

A counterclaim may be asserted by a defendant against a plaintiff concerning a cause of action that arises either before or after the initiation of the lawsuit, as long as the claim is not barred by limitation.




Effect of Counterclaim


The effect of a counterclaim is akin to that of a cross-suit, empowering the court to issue a final judgement encompassing both the original claim and the counterclaim.


The defendant's counterclaim is regarded as a plaint, affording the plaintiff the opportunity to submit a written statement in response to the defendant's counterclaim.


Importantly, even if the plaintiff's suit is stayed, discontinued, dismissed, or withdrawn, the counterclaim remains viable for adjudication on its merits.


Consequently, the defendant retains the right to obtain a decree for the counterclaim as delineated in the written statement. Should the plaintiff fail to respond to the defendant's counterclaim, the court may render judgement against the plaintiff regarding the counterclaim or make such orders as deemed appropriate.


Furthermore, the counterclaim is treated as a plaint and governed by the corresponding rules applicable to plaints. Similarly, any reply submitted in response to a counterclaim is regarded as a written statement and is subject to the rules pertaining to written statements.


Difference between Set-off and Counterclaim

Basis

Set-Off

Counterclaim

Nature

Statutory defence

Substantially a cross-action

Requirement

Must be for an ascertained sum or arise out of the same transaction

Need not arise out of the same transaction

Purpose

Ground of defence to plaintiff's action

Weapon of offence to enforce claim

Timing

Amount must be recoverable at the date of the suit

Amount must be recoverable at the date of the written statement

Amount 

Demand is below or up to the suit claim

Demand may exceed the suit claim

 
 

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