DICTATED ORDER

1. The Court: This is an appeal from an order refusing leave to the appellant defendants to amend their written statement. The order is dated the 28th of July, 1998. The suit was filed by the plaintiffs alleging that the respondent Peerless and its high officers had acted, conspired and colluded with the defendant Nos. 8, 9 and 10, who were the agents of Peerless. By reason of such wrongful actions the plaintiffs had lost large sums of money. The principal claim in the plaint is for Rs. 25 lac.

2. The suit was filed in 1993. The written statement was first delivered in 1994. In 1998 the amendment application was taken out. The substance of the application is that a sum of Rs. 5 lac was lent and advanced by Peerless to the first plaintiff in or about the year 1977. It is further alleged that interest accrued thereon and part payments were made from time to time by the debtor right from July, 1978 until 1996.

3. On examination of the records we find that none of the acknowledgements is accompanied by any writing by or on behalf of the first plaintiff; no such existence of writing is pleaded by the appellants either. A separate suit in 1998 as such would apparently be barred and the principal loan of 1977 or any outstanding interest thereof would not be recoverable thereby.

4. This is the principal ground on merits that has been taken up in opposition by the respondents.

5. No doubt an amendment of a pleading can be allowed at any stage of the suit and the plea of limitation is not an absolute bar against the Court allowing such as amendment. But since limitation is necessarily and inescapably relevant in the present matter, we would not interfere with the discretionary order of the First Court in refusing leave to amend so as to include a debt which is more than two decades old.

6. According to the present laws written statement can contain, apart from denials and refutations of the plaintiffs case three items namely, a set-off as mentioned under Order 8 Rule 6 of the Code of Civil Procedure, a counterclaim as mentioned in Rule 6A of that order, and an equitable set-off.

7. Order 8 Rule 6 and Order 8 Rule 6A are set below:

“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.

6A. Counter-claim by defendant.—(1) A defendant in a suit may, in addition to his right of pleading a set-off under Rule 6, set up, by way of counter-claim against the claim of the plaintiff, any right or claim in respect of a cause of action accruing to the defendant against the plaintiff either before or after the filing of the suit but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of a claim for damages or not:

Provided that such counter-claim shall not exceed the pecuinary limits of the jurisdiction of the Court.

(2) Such counter-claim shall have the same effect as a cross-suit so as to enable the Court to pronounce a final judgment in the same suit, both on the original claim and on the counter-claim.

(3) The plaintiff shall be at liberty to file a written statement in answer to the counter-claim of the defendant within such period as may be fixed by the Court.

(4) The counter-claim shall be treated as a plaint and governed by the rules applicable to plaints.”

8. In our opinion Mr. Ghose for the respondents rightly argues that the appellants' written statement cannot at this distance of time be permitted to include a claim which is no longer “legally recoverable” by him. The Limitation Act would prevent legal recovery of the debt of 1977. The underlining in the quotation of Rule 6(1) is ours.

9. In regard to section 3 of the Limitation Act, 1963, Mr. Ghose pointed out that the section bars a delayed set-off and a delayed counter-claim inasmuch as it bars a delayed suit. According to him this provision would be a bar in the appellant's way of getting an amendment of the written statement now.

10. He also gave us the old corresponding section in the Limitation Act of 1908 which was section 3 of the Limitation Act of 1908 and that section runs as follows:

“3. Dismissal of suits, etc., instituted, etc. after period of limitation.— Subject to the provisions contained in sections 4 to 25 (inclusive), every suit instituted, appeal preferred, and application made, after the period of limitation prescribed therefor by the First Schedule shall be dismissed, although limitation has not been set up as a defence.

Explanation.—A suit is instituted, in ordinary cases, when the plain is presented to the proper officer; in the case of a pauper, when his application for leave to sue as a pauper is made; and, in the case a claim against a company which is being wound up by the Court, when the claimant first sends in his claim to the official liquidator”.

11. According to Mr. Ghose the inclusion of set-off and counter-claim in the Limitation Act has occurred for the first time in 1963 and by such inclusion the Act bars not only a set-off mentioned in Order 8 Rule 6 but it bars any and every set-off including an equitable set-off. If an equitable set-off is also barred, then there is no way the appellants can get their amendments in.

12. The point which falls for consideration by us is, therefore, related to the examination of the nature of an equitable set-off. That a right to claim a set-off exists even apart from the provisions of the Code of Civil Procedure is, by judicial authorities, sufficiently well-established today.

13. In the case of M. Mackenzie, reported at AIR 1975 Calcutta page 150, the Division Bench stated in paragraph 26 that “parties to a proceeding have a right to set-off their claims against each other …………………… independently of the provisions of Order 8, Rule 6……………………”.

14. In the case of Ramdhari Singh, reported at 19 CWN 1183, also a Division Bench judgment, it was opined that the right of set-off exists not only in cases of mutual debits and credits but also where cross-demands arise out of the same transaction or are so connected in their nature and circumstances as to make it inequitable that the plaintiff should recover and the defendant be driven to a cross-suit. It was also said there that, an equitable set-off is to be permitted in the defendants' pleadings “more specially when a fresh suit, may be barred by limitation”.

15. Equitable set-off is also considered in the case of Kalanund Singh, reported at 17 CWN page 1060. The Division Bench said as follows at page 1061 of the reports:

“Insofar as the second ground is concerned, it has been argued that as the sums claimed by way of set-off were not ascertained amounts, it was not competent to the defendants to plead a set-off. This contention is clearly unfounded. It was pointed out by this Court in the case of Bhagbat Panda v. Bamdeb Panda (8), that the provisions of the Civil Procedure Code (section III of Act XIX of 1881) do not take away from parties any right to set-off, whether legal or equitable, which they would have independently of that Code; and that such right exists, not only in cases of mutual debits and credits, but also where cross-demands arise out of the same transaction or are so connected in their nature and circumstances as to make it inequitable that the plaintiffs should recover and the defendants should be driven to a cross-suit. The same principle had been previously recognized in the case of Clark v. Ratnavaloo Chetti, 2 MHCR 296 (1864) and was subsequently adopted in the case of Chisholm v. Gopal Chander, ILR 16 Cal (711) 1889”.

16. Mr. Chatterjee for the appellants also relied upon a comparatively recent Single Bench judgment of our High Court, reported at 83 CWN page 496. There it was also held that the provisions of the Limitation Act do not necessarily bar an equitable set-off and further that the provisions of Order 8 Rule 6 do not do away with the principles of equitable set-off laid down in so many earlier judicial authorities.

17. We are of the respectful opinion that the judgment delivered by Pratibha Banerjea, J. in the said case of United Bank of India is correct in law.

18. In the facts of the present case, in our opinion, it would be inequitable to permit the plaintiffs to recover its unliquidated damages, provided he is able to prove the case at trial, without allowing the defendants to set-off the amounts outstanding on an old debt, provided the existence of the loan and the existence of still outstanding amounts can be sufficiently proved by the defendants at trial apart from the question of limitation.

19. We are of the opinion that section 3 of the Limitation Act of 1963 does not relate to equitable set-offs at all. The most important distinction between a legal set-off as mentioned in the Code, and an equitable set-off as formulated by Judge made law, is that at the end of a suit, a legal set-off might result in a sum of money being paid to the defendants alone without the plaintiffs being held to be entitled to any recovery at all; but in the case of an equitable set-off, which is time-barred, this can never happen. Such an equitable set-off can only wipe off pro tanto the plaintiffs' claim. If the plaintiffs' claim is not proved at all and if the defendants' barred equitable set-off is proved to the full extent, even then the defendants cannot claim a decree because the whole purpose why he was allowed to plead a barred equitable set-off was that it was inequitable to allow the plaintiff to recover, leaving the defendants' equitable claims out of consideration altogether. If the plaintiff is recovering nothing, then nothing inequitable is done if the defendants' equitable set-off is completely brushed off.

20. To an extent, the circumstances allowing an equitable set-off and a legal set-off overlap. Where an equitable set-off is claimed on the basis of mutual debits and credits, it might be that the same said claim could also be founded as a legal set-off. It is not the practice, nor the law that defendants indicate in their written statement whether their set-off is of a legal or an equitable nature. That has to be gathered from the surrounding circumstances and materials which are brought before the Court by the parties litigating before it. In case it is found that the said set-off can be either equitable or legal, then and in that event it would be permissible for the Court to allow recovery to the defendants alone, even in cases where the plaintiffs' claim is outweighed by the defendants' set-off, provided of course, the set-off is not a time-barred one. In cases of time bar, the principles stated earlier apply.

21. We find that even if the set-off of the appellants is assumed to be barred by limitation, yet that is not a ground upon which the amendments can be disallowed at this stage. The principal reason is that it is inequitable to allow the plaintiffs to recover, without paying any attention to a loan taken by the first plaintiff from the defendant No. 1, provided the said allegation is proved to be true at trial.

22. Another point raised by Mr. Ghose was the point of appealability. He submitted that no matter is being finally adjudicated in disposing of this amendment application and, therefore, the order under appeal is not maintainable.

23. The appellant submitted that there is at least one case on record where a refusal to the plaintiff to amend the plaint was opined by the Division Bench as an appealable order. In that case the landlord/plaintiff had sought for permission to add a new ground of eviction which was refused by the First Court hearing the interlocutory matter. The Court of Appeal opined that the refusal to permit the new ground to be added had finally disposed of the right of the plaintiff to get the matter adjudicated upon that additional ground also. Thus, the appeal was maintainable. The case is of Tara Properties, reported at AIR 1989 Cal 192.

24. The case of Khimji, the Supreme Court pronouncement is, with respect, of extremely helpful and wise vintage; it was also relied upon. The case is reported at AIR 1981 SC 1786.

25. One of the important tests of appealability is the test of finality. In the present case if the set-off is not allowed, a fresh suit being very probably barred by limitation, the defendant/appellant would be finally precluded from its right to knock off the alleged amount of loan from the plaintiffs dues, assuming that both the dues of the parties would be proved at trial. Thus, we opine that the order in the instant case is an appealable one.

26. We have not spent a very large amount of time on this issue of appealability. There is a purpose behind it. It is important for the Courts somewhat more to decide the appeals themselves that to spend an equal, and sometimes a larger amount of time, on deciding whether the order under appeal is appealable. As such, in our opinion, the correct procedure and the correct law is that an order on the Original Side of our High Court is to be held as appealable unless it can be demonstrated that it is not so. In other words, in cases of doubtful orders, those are to be held as appealable than otherwise. On this principle also the order under appeal is appealable.

27. The appeal is, therefore, allowed. The order under appeal is set aside. There will be an order in terms of prayer (a) of the Notice of Motion taken out in the Court below, and this prayer would be found at page 111 of the Paper Book. The amendments are to be incorporated within three weeks hereof; leave to reverify the written statement immediately after the incorporation, but at the latest within a fortnight thereafter. The plaintiffs would be entitled to file an additional written statement, if any, within eight weeks from date hereof.

28. It is clarified that though the amendments are allowed, if the appellant's set-offs are found to be barred by limitation at trial, then and in that event, they would never be entitled to a decree on their own but only to a wiping off pro tanto of the plaintiffs' claim. The amendment by way of paragraph 20G of the written statement is particularly to be read in this light at trial.

29. There will be no order as to costs.

30. All parties and all others concerned to act on an authenticated copy of this Dictated Order on the usual undertakings.

Ajoy Nath Ray, A.C.J and Arun Kumar Mitra, J.:

Appeal allowed.

S.K.P