2013 (8) TMI 1057 - SC - Indian Laws

Summary

Issues involved: Delay in filing application for substitution, amendment of written statement, application for equitable set-off, interpretation of Order VIII Rule 6.

Delay in filing application for substitution: The Supreme Court allowed the prayer for substitution of appellant No. 2 after condoning the delay in filing the application. The suit was originally instituted by appellant Nos. 1 and 3 along with the predecessor-in-interest of appellant No. 2 for a declaration regarding commissions and incentives payable by the defendants. The defendants filed an application for amendment of the written statement seeking a decree for a specific sum, which was opposed by the plaintiffs.

Amendment of written statement: The learned single Judge rejected the application for amendment, stating that there was no scope for entertaining a counter claim at that stage. The Division Bench upheld this decision, emphasizing that the claim put forth by the defendants could not be legally recoverable at that point in time. The Division Bench clarified that if the set-off claims were found to be barred by limitation at trial, the defendants would only be entitled to a pro-tanto reduction of the plaintiff's claim.

Application for equitable set-off: The main contention revolved around whether the claim of equitable set-off, as put forth by the defendants, was permissible. The court analyzed the requirements of set-off under Order VIII Rule 6, noting that equitable set-off is distinct from legal set-off and is not governed by the Code. The court referred to various legal precedents to establish the principles governing equitable set-off, emphasizing that such a plea is not raised as a matter of right and is subject to the court's discretion.

Interpretation of Order VIII Rule 6: The court clarified that equitable set-off is based on principles of equity, justice, and good conscience. The discretion to allow equitable set-off lies with the court, and it should be exercised in an equitable manner. The Division Bench's decision to treat the claim as a plea in the nature of equitable set-off was upheld, with the understanding that the final determination of the claim's validity would depend on the evidence presented during the trial. The High Court was urged to expedite the disposal of the suit, which had been pending since 1993.