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TMI Blog2014 (3) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... ies any remedy to the defendant, by way of an appeal on merits. The valuable right of a defendant to contest the claim should not be denied unless the admission is clear, unambiguous and unconditional. Seeking setoff of the amount of Rs. 15,00,000/- as the setoff has not been lawfully claimed in the written statement - HELD THAT:- As per the Jitendra Kumar Khan case [[ 2013 (8) TMI 1057 - SUPREME COURT] ] equitable set-off is distinct from the legal set-off as envisaged by Order VIII rule 6 of the Code. Equitable set-off is different than the legal set-off and it is independent of the provisions of the Code of Civil Procedure. However for claiming equitable set-off it must be established that the mutual debts and credits or cross-demands must have arisen out of the same transaction or are connected in the nature and circumstances. The Plea of equitable set-off is raised not as a matter of right but it is within the discretion of the court to entertain and allow such a plea or not. As per the CRB Capital case [[ 2005 (5) TMI 346 - HIGH COURT OF DELHI] ] equitable set-off can be claimed even for an unascertained sum of money provided the same arises out of the same transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ern and the Plaintiff decided to continue with the MOU as a sole proprietor of M/s. Swastik Enterprises. The MOU was modified by letter dated the 06.09.2007. The Plaintiff paid the amount of the Security Deposit, deposited with M/s. Ikon industries by the erstwhile partners of M/s. Ozone enterprises to them and accordingly the Security Deposit was acknowledged by Defendant No. 1 and 2 solely in favour of the Plaintiff. 5. The Plaintiff claims to have placed a purchase order on Defendant No. 2 and collected the material from the said Defendant for distribution. The Plaintiff thereafter requested for more material however the said Defendant never supplied the same. Somewhere in the month of September 2007 the Plaintiff became aware that the said Defendant was supplying material to M/s. Raju agency in contravention to the terms of the MOU. As per the information of the Plaintiff the Defendant was supplying material to other parties other than the Defendant No. 3 as well. The Plaintiff contends that there was a breach of the terms of the MOU by the Defendants and accordingly the Plaintiff sought for a refund of the Security Deposit along with damages for the sum of Rs. 5,00,000/-. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to give any cheque to the Plaintiff. As per the Defendant on account of the breach by the Plaintiff the Defendant's manufacturing unit had to be closed down and he had to pay huge loan liability amount to the bank for which the factory had to be sold. The Defendant had obtained a franchisee for the product Director's Special. The Defendant claims to have forfeited the Security Deposit due to the default of the Plaintiff. 9. The Defendant No. 4 in his written statement with respect to the cheque of Rs. 5,00,000/- has contended that the Defendant No. 4 did not know the Plaintiff but knew the father of the Plaintiff as he had friendly relations with him for last 20 years. The Defendant No. 4 along with a common friend had gone to inquire about the health of the father of the Plaintiff and on the request of the father of the Plaintiff he had agreed to invest in the business of the Plaintiff and had issued him a cheque for the same. Subsequently however the father of the Plaintiff was not happy with the conduct of the Plaintiff and he did not want the Defendant No. 4 to be involved with the Plaintiff in any manner whatsoever and the Plaintiff had refused to return the cheque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Duggal Co. Ltd. V. Union Bank of India Ors. 2000 (7) SCC 120 the Supreme Court has laid down as under:- 12. As to the object of Order 12 Rule 6, we need not say anything more than what the legislature itself has said when the said provision came to be amended. In the Objects and Reasons set out while amending the said Rule, it is stated that where a claim is admitted, the court has jurisdiction to enter a judgment for the Plaintiff and to pass a decree on admitted claim. The object of the Rule is to enable the party to obtain a speedy judgment at least to the extent of the relief to which according to the admission of the Defendant, the Plaintiff is entitled . We should not unduly narrow down the meaning of this Rule as the object is to enable a party to obtain speedy judgment. Where the other party has made a plain admission entitling the former to succeed, it should apply and also wherever there is a clear admission of facts in the face of which it is impossible for the party making such admission to succeed. 15. The Supreme Court has further in the case of Himani Alloys Ltd. V. Tata Steel Ltd. 2011 (11) JT 222 laid down as under: 10. It is true that a judgment can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a substantial loss to the Defendants. On account of the loss suffered by the Defendants due to breach of the Plaintiff the Defendants forfeited the Security Deposits. There is thus no clear admission that is unequivocal, unambiguous or unconditional. As the admission of receipt of Security Deposit is coupled with the plea that the Security Deposit has been forfeited on account of breach by the Plaintiff, there is no clear admission in favour of the Plaintiff that can be acted upon. The Plaintiff is thus not entitled to a decree on admission. 18. Learned counsel for the Plaintiff has further contended that there is no clause for forfeiture of Security Deposits and as per the agreement the Security Deposit was either to be refunded or to be adjusted in accordance with mutual consent. I find no merit in this contention. The amount of Rs. 15,00,000/- deposited by the Plaintiff with the Defendants was not an advance. The said amount has been described as Security Deposit . The very fact that the party has described the deposit as Security Deposit prima facie lends credit to the submission of the counsel for the Defendant that the Security Deposit was a deposit made by the Plaintiff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts not only in cases of mutual debits and credits, but also where cross-demands arise out of the same transaction. The said principle has been reiterated by the Calcutta High Court in Chisholm v. Gopal Chander [ILR 16 Cal 711 (1889)]. 13. In Raja Bhupendra Narain Singha Bahadur v. Maharaj Bahadur Singh and others[AIR 1952 SC 782] it has been opined that a plea in the nature of equitable set-off is not available when the cross-demands do not arise out of the same transaction and not connected in its nature and circumstances. It has been further stated therein that a wrongdoer who has wrongfully withheld moneys belonging to another cannot invoke any principles of equity in his favour and seek to deduct therefrom the amounts that have fallen due to him. There is nothing improper or unjust in telling the wrongdoer to undo his wrong, and not to take advantage of it. 14. In M/s. Lakshmichand and Balchand v. State of Andhra Pradesh [(1987) 1 SCC 19], this Court has ruled that when a claim is founded on the doctrine of equitable set-off all cross-demands are to arise out of the same transaction or the demands are so connected in the nature and circumstances that they can be looked u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a plea is raised not as a matter of right; and that it is the discretion of the court to entertain and allow such a plea or not. The concept of equitable set-off is founded on the fundamental principles of equity, justice and good conscience. The discretion rests with the court to adjudicate upon it and the said discretion has to be exercised in an equitable manner. An equitable set-off is not to be allowed where protracted enquiry is needed for the determination of the sum due, as has been stated in Dobson Barlow v. Bengal Spinning Weaving Co. [(1897) 21 Bom 126] and Girdharilal Chaturbhuj v. Surajmal Chauthmal Agarwal [AIR 1940 Nag 177]. 21. As per the Jitendra Kumar Khan case (Supra) equitable set-off is distinct from the legal set-off as envisaged by Order VIII rule 6 of the Code. Equitable set-off is different than the legal set-off and it is independent of the provisions of the Code of Civil Procedure. However for claiming equitable set-off it must be established that the mutual debts and credits or cross-demands must have arisen out of the same transaction or are connected in the nature and circumstances. The Plea of equitable set-off is raised not as a matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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