Whether Order XII Rule 6 of the CPC would be attracted in a case where equitable set off has been claimed is the question which arises for consideration in this application.
The basic fact of the matter is not in dispute.
The parties hereto entered into an agreement titled Deal Memo on or about 1.4.2008 pursuant whereto and in furtherance whereof subscription fees were to be paid for carrying of channels on cable as stipulated therein on both non addressable cable system and addressable cable system.
The petitioner was to draw invoices on the basis of the monthly records to be submitted by the respondent herein as a matter of practice for the analogue and DTH mode from February 2010 onwards and in respect of CAS for the period of April, 2010 onwards.
In relation to Non-CAS areas from February, 2010 onwards and in respect of Non-CAS and DTH areas from April, 2010 onwards, invoices were raised on or about 7.4.2010 on the projections given to the petitioner by the respondent.
The petitioner, however, terminated the agreement by reason of a notice dated 13.7.2010. On or about 20.7.2010 the respondent sent the records for raising the invoices upto January, 2010. Invoices were raised on or about 18.8.2010 upto June, 2010 for a sum of Rs. 21,40, 40,936/-.
A revised report was filed during pendency of the Miscellaneous Application 316 of 2010 for the analogue operation (April, 2010 to August 2010), for Nepal/Bhutan from April, 2010 to August 2010, for CAS operation from April, 2010 to August, 2010 and for DTH IPTV Operation for the period April, 2010 to August, 2010 for a sum of Rs.18,70,35,941/-.
So far as the analogue services are concerned, out of the total dues of Rs.9.5 crores a sum of Rs.1.22 crores was deducted towards bad debts as a result whereof an amount of Rs.1,36,21,012 became payable.
The respondents in their reply inter alia contended:
1. The reports were provisional in nature as the bad debts had not been finalized and the same is subject to collection.
2. As a counter claim for a sum of Rs.259.54 crores has been made the said amount should be set off against the amount of claim.
Mr. Kathpalia, the learned counsel appearing on behalf of the applicant would contend :-
1. The respondent having admitted the agreement as also non-payment of the stipulated fees for the period 1.4.2010 till 12.8.2010 there is absolute no reason as to why a decree on admission as contemplated under Order XII Rule 6 of the Code of Civil Procedure shall not be passed.
2. So far as the question of bad debt is concerned the same being not applicable in respect of Nepal/Bhutan, CAS areas and DTH operations, the question of collection of any further amount from the subscriber would not arise. The sum of Rs.1,22,59,877 deducted by the respondent towards bad and doubtful debts was the highest amount which could be deducted and in fact such amount may be much less.
3. As the amount of counter claim is yet to be determined, the question of the same being taken into consideration at this stage does not arise.
Mr. Amit Chadha, the learned senior counsel appearing on behalf of respondent, on the other hand, urged:-
1. An admission of fact on the part of a defendant for the purpose of passing a decree under Order XII Rule 6 of CPC must be clear and unambiguous and the same must relate to the liability to pay.
2. Having regard to the stand taken by the respondent in its written statement that it was entitled to set off, the question of admission of any liability for payment of any sum, in respect whereof a decree may not be passed, does not and cannot arise.
3. A decree on admission can only be passed if a crystalized liability has come into being and as damages claimed by the respondent are in the nature of `equitable set off? and the same being a defence, no admission can be culled out therefrom.
Order VI of the CPC refers to pleadings generally.
Order VIII of the CPC provides for written statement, set off and counter claim.
Order VIII Rule 6 of CPC reads as under:
?6. Particulars of set-off to be given in written statement? (1) Where in a suit for the recovery of money the defendant claims to set-off against the plaintiff's demand any ascertained sum of money legally recoverable by him from the plaintiff, not exceeding the pecuniary limits of the jurisdiction of the Court, and both parties fill the same character as they fill in the plaintiff's suit, the defendant may, at the first hearing of the suit, but not afterwards unless permitted by the Court, present a written statement containing the particulars of the debt sought to be set-off.
(2) Effect of set-off?The written statement shall have the same effect as a plaint in a cross-suit so as to enable the Court to pronounce a final judgment in respect both of the original claim and of the set-off : but this shall not affect the lien, upon the amount decreed, of any pleader in respect of the costs payable to him under the decree.
(3) The rules relating to a written statement by a defendant apply to a written statement in answer to a claim of set-off.
Order XII of the CPC provides for admissions made in a case, Rule 6 whereof empowers the court to pass a decree on admission in the following terms:
?[6. Judgment on admissions? (1) Where admissions of fact have been made either in the pleading or otherwise, whether orally or in writing, the Court may at any stage of the suit, either on the application of any party or of its own motion and without waiting for the determination of any other question between the parties, make such order or give such judgment as it may think fit, having regard to such admissions.
(2) Whenever a judgment is pronounced under sub-rule (1) a decree shall be drawn upon in accordance with the judgment and the decree shall bear the date on which the judgment was pronounced.]?
It is not in controversy that the words ?or otherwise? occurring in Order XII Rule 6 of the CPC are of wide import.
Indisputably Order VIII Rule 6 deals with legal set off. However, the common law countries developed the principle of `equitable set off?. A claim of equitable set off, however, must arise out of the same transaction which is the basis of the plaintiff?s claim and when it would be inequitable to drive the defendant to initiate a separate proceedings for the said purpose.
In the case of claim of `equitable set off? by way of damages even the said claim may not be confined to the date of filing thereof. It is considered to be an equitable defence.
Venkatraman J. in Maheswari Metals and Metal Refinery, Bangalore-2 v. The Madras State Small Industries Corporation Ltd. reported in AIR 1974 Madras 39 upon considering a large number of decisions where equitable set off had been allowed, opined:
?49. In view of the numerous authorities which have recognized the right of set off, I feel that I cannot interfere with the discretion exercised by the learned appellate Judge in allowing the defendant to raise the plea of equitable set-off to the extent of the plaintiff?s claim, but subject to three matters which I shall presently mention.?
However, the plea of equitable set off was allowed subject to terms specified therein, keeping in view the delay in raising the said plea at the result of which the matter was pending for a long time.
Recently in M/s CRB Capital Markets Ltd. vs. Smt. Bimbla Devi Sahney (Deceased Thru LRs) & Anr. IV (2005) BC 53 the Delhi High Court opined as under:
?16. Almost in identical circumstances Punjab High Court had allowed the set-off in the case of Mehr Chand v. Amritsar Bank 28 IC 975. That was a case where in a suit by a liquidator against a debtor of the company, debtor demanded set-off of a fixed deposit made by him with the company. It was also held that even if the fixed deposit has not matured at the date of the order for winding-up of the company but had matured at the date of the suit field by the O.L, such set-off would be admissible. In the present case it feels the same character, as out of the security amount given by the company to the respondents, respondents kept the amount in fixed deposit. Even on equitable grounds set-off may be allowed. Principles of equitable set-off is recognized in Rule 6 of Order VIII CPC. The essence of such a claim is that there must be some connection between the plaintiff?s claim for a debt and the defendant's claim to set-off, which will make it equitable to dry up the defendant to a separate suit. In these cases where cross demands arise out of the same transaction or are so connected in their nature and circumstances that can be looked upon as part of one transaction, equitable set-off is permissible. This principle is made applicable even in those cases where the claim of the defendant is for an unascertained sum like that of damages but arising out of same transaction.?
The question came up for consideration before the Supreme Court of India in UOI vs. Karam Chand Thapar & Bros. (Coal Sales) Ltd. & Ors. (2004) 3 SCC 504 wherein the plea of equitable set up was held to be applicable even in a writ petition.
?18??When a plea in the nature of equitable set-off is raised it is not done as of right and the discretion lies with the court to entertain and allow such plea or not to do so.?
This Tribunal recently passed a decree on admission in Petition No.166 of 2010 Zee Turner Ltd vs. Asianet Satellite Communications Ltd. upon considering the decisions of Supreme Court of India in Uttam Singh Duggal & Co. Ltd. vs. United Bank of India & Anr. reported in 2000(7) SCC 120, Charanjit Lal Mehra & Ors vs. Kamal Saroj Mahajan & Anr. reported in 2005(11) SCC 279, Malwastrips Pvt. Ltd. vs. Jyoti Ltd. 2009(2) SCC 426, , Jeevan Diesels and Electricals Ltd. vs. Jasbir Singh Chadha & Anr. reported in 2010(6) SCC 601 and Karam Kapahi v. Lal Chand Public Charitable Trust, 2010(4) SC 753.
We may, however, also notice that a division bench of Madhya Pradesh High in Shikharchand & Ors. Vs. Mst Bari Bai & Ors. AIR 1974 MP 75 opined that an admission may be made either expressly or constructively for the purpose of passing a decree under Order XII Rule 6 of the Code of Civil Procedure, stating:
?15. We would like to point out that while trying the suit or other actions at law the Court is not to function helplessly in the routine manner. The primary object of a Court must be to do justice between the parties according to law and where at any stage of the suit it appears that the plaintiff is entitled to the relief asked for by him on the basis of defendant's own admissions there would be no point in delaying the judgment unnecessarily with a view to decide all controversial points in the routine manner. We must say that the learned Judge of the lower Court rightly exercised his discretion in granting a decree to the plaintiff in this case and there is no justification for interference with it.
Singh, J. has in his concurring judgment referred to Ellis vs. Alien (1914) Ch. 904 to hold that Rule applies wherever there is clear admission of facts. It was opined that Rule 6 of Order XII must bear the same construction as was made on the corresponding English Rule by Sargant, J.
The said judgment was approved by the Supreme Court of India in Karam Kapahi & Ors. Vs. Lal Chand Public Charitable Trust & Anr. Reported in (2010) 4 SCC 753.
In that case, however, the respondent trust was the lessor of the appellant club. The ownership of the respondent in respect of the tenanted premises was clearly admitted. It furthermore admitted the quantum of rent as also non-payment thereof apart from the receipt of the notice of termination. The Supreme Court while applying the provisions of Section 116 of the Indian Evidence Act and distinguishing its earlier decision in the case of D. Satyanaryana vs. P. Jagdish 1987(4) SCC 424, stated the law thus:-
?62. Here the fact situation is totally different. Here the Club was not facing threat of eviction from anybody excepting the Trust and there is no question of a superior landlord. In the instant case Section 116 prima facie applies and the Club is prima facie estopped from challenging the title of the Trust.?
The Supreme Court furthermore refused to exercise its discretionary jurisdiction under Article 136 of the Constitution of India.
The Apex Court, however, observed:
?48. However, the provision 'under Order 12 Rule 6 of the Code is enabling, discretionary and permissive and is neither mandatory nor it is peremptory since the word "may" has been used. But in the given situation, as in the instant case, the said provision can be applied in rendering the judgment.?
Admission, it is trite, must be unequivocal, positive, clear and specific. However, where the question of limitation or maintainability of the suit is to be determined, a decree on admission should not be passed.
It may also not be passed, if the contract is found to be against public policy.
In Razia Begum vs. Sahebzadi Anwar Begum 1959 (1) SCR 1111, it was held that Order XII Rule 6 of the CPC is required to be read along with the proviso to Rule 5 of Order VII thereof. [See also Shri Jiten Bhalla vs. Ms. Gayatri Bajaj 2008 (DL2) GJX 1046-DEL ]
The Rule conferrs a discretionary jurisdiction upon the court; the object being to arrive at a speedy judgment.
However, in this case, the respondent clearly questioned the termination of the contract. According to it the breach of performance of the contract, if any, was on the part of the petitioner and not on its part. The respondent had filed a separate petition for passing of a decree for damages for a sum of Rs.259.54 crores.
We may notice the relevant statements made by the respondent in this behalf:
?75. The respondent states that because of wrongful termination of the Deal Memo, the total loss caused to the respondent is Rs.259.54 Crores, the details of which have been set out above and also in respondent?s application for amendment of its petition bearing No.248(C) of 2010 pending adjudication before this Hon?ble Tribunal. The Respondent states that as per fresh provisional report the amount of Rs.16,95,70,210/- may be payable to the petitioner (subject to further adjustments on account of bad debts.) This is set off from Rs.259.94 crores receivable as damages from the petitioner. Therefore, a sum of Rs.242,58,29.790/- is due from the petitioners jointly and/or severally. Thus, the question of payment to the petitioners does not arise and on the contrary the petitioners are liable to make a payment of Rs.242,58,29,790/- to the respondent.?
Even in its reply the respondent stated:
?6. The respondent states that because of wrongful termination of the Deal Memo, the loss caused to the Respondent is Rs.259,54,00,000/- the details of which have been set out in Respondent?s petition bearing No.248(C) of 2010. For the sake of brevity the contents of the same are not being repeated and they may be read as forming part of the present reply. The Respondent states that as per fresh provisional report the amount of Rs.16,95,70,210/- may be payable to the Petitioner (subject to further adjustments on account of bad debts). This is set-off from Rs.259,54,00,000/- receivable as damages from the petitioner. Therefore, a sum of Rs.242,58,29,790/- is due from the Petitioners jointly and/or severally. Thus, the question of payment to the petitioners does not arise and on the contrary the petitioners are liable to make a payment of Rs.242,58,29,790/- to the Respondent.
8. The respondent categorically states that there is neither any admission of liability on its part nor money is due and payable by the respondent to the petitioners. The respondent states that the disputes between the parties are yet to be adjudicated after conducting the proper trial. Thus, the question of passing a decree on purported admission as prayed for does not arise.?
Mr. Kathpalia, however, has relied upon a judgment of the Division
Bench of the Delhi High Court in Numero Uno International Ltd. vs. Prasar Bharti 2008(1) Arb. LR 446 Delhi, wherein upon noticing the principles of set off and counter claim, it was held
?7. In the light of the above, there is no gain saying that the making of a counter claim is tantamounting to institution of an independent suit for adjudication of the claim of the defendant. Not only court fee is payable on the counter claim but the counter claim remains unaffected by the withdrawal of the original suit evidently on the principle that the counter claim is a suit in itself. So also the court has always
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the power to direct a set off or counter claim being tried separately from the original suit. Such being the legal nature and character of a counter claim, its pendency does not denude the arbitrator of the power to make an interim award in the original suit/claim if such an interim award is otherwise justified. What is significant is that the legality of an interim award may be tested by reference to the material on which it is based rather than the areas of dispute that may still call for adjudication between the parties. If an interim award on the basis of material available on record is not justified, the Court may set aside the same under Section 34 of the Act. No interference with an interim award would, however, be permissible only because the defendant has made a counter claim or because some areas of dispute independent of the area covered by the interim award remains to be resolved.? In Numero Uno International (supra) there were categorical admissions. In this case both the parties, however, claimed damages against each other; the validity of termination being the core issue. Moreover, the said decision was rendered in an arbitration proceeding. The application of the provision of Order VIII Rule 5 or Order XII Rule 6 of the CPC did not fall for the consideration of the Court. Keeping in view the fact that according to the respondent it has suffered huge losses and in the event of a decree is passed and put to execution by the petitioner, the respondent in a case of this nature shall suffer prejudice and, thus, we are of the opinion that this Tribunal should not exercise its discretionary jurisdiction to pass a decree on admission. We are of the opinion that interest of justice would be subserved if the hearing of the petition is expedited. It is directed accordingly. This application is dismissed. No costs.