1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.315 OF 2006 IN SUMMONS FOR JUDGMENT NO.616 OF 2005 IN SUMMARY SUIT NO.2139 OF 2005 ... Glaxo Smithkline Pharmaceuticals Ltd. ...Appellant v/s. Equipar Srl., ...Respondent ... Dr.V.V.Tulzapurkar, Sr.Counsel i/b Deven Darkadas & Partners for the Appellant. Ms.Rajani Iyer, Sr.Counsel with Mr.Chetan Kapadia and Mr.Rajesh Talekar i/b K.Ashar & Co. for the Respondent. ... CORAM: D.K.DESHMUKH & V.R.KINGAONKAR,JJ DATED: 8 th April, 2010 P.C.: 1. By this Appeal, the Appellant challenges the order passed by the learned single Judge dated 27 th February, 2006 in Summons for Judgment No.616 of 2005. By that 2 order the learned single Judge has granted leave to defend the suit on depositing the amount of Rs.10,00,000/-. Summary Suit is filed by the Plaintiff/Respondent for recovery of the costs of the material supplied by the Plaintiff to the Defendant. The suit claim is in excess of an amount of Rs.15,00,000/-. The defence of the Defendant was that the material supplied by the Plaintiff was defective. The material was required to be returned. The Defendant also claimed that the Plaintiff has acknowledged that some of the material was defective. Perusal of the order, however, shows that the learned single Judge has referred to this aspect of the matter and has held that the Defendant has no defence to offer because the Defendant has not instituted a suit for recovery of the amount which according to the Defendant is recoverable by it from the 3 Plaintiff for supply of defective material. 2. Perusal of the judgment of the learned single Judge of the Calcutta High Court in the case of United Bank of India v/s. P.K.Mukherjee (Coal and Agency) P.Ltd. & ors., 83 C.W.N. 496 and other judgment of the Full Bench of Andhra Pradesh High Court in the case of Bhogandham Seshalah, v/s. Budhi Veerabhadrayya and ors, AIR 1972 Andhra Pradesh 134, shows that apart from legal set off, equitable set off also can be claimed in written statement by the Defendant and that equitable set off is the matter of defence and no law of limitation applies to it. The observations found in paragraphs 8 to 10 of the judgment of the Calcutta High Court and the observations found in paragraphs 21 to 28 of the Judgment of the Full Bench of the Andhra Pradesh High Court, in our opinion, 4 are relevant. They read as under: (U.B.I. v/s. P.K.Mukherjee) 8. Mr.Sen also relied on 19 CWN 1183 (Ramdhari Singh vs. Permanand) in support of his contention that time barred debt can be claimed by way of equitable set off. The question of limitation would not stand in the way. At page 1186 of this report, the Division Bench of this Court held: It is contended, however, that as the government revenue was paid on the 28, 3, 1905 and this suit was not filed until the 6 th February, 1909, the claim on this head was barred by limitation and could not be claimed by way of set off, as it was not legally recoverable. We are of opinion, however, that the amount paid can be claimed. A time barred debt may be claimed by way of equitable set off. 9. The Division Bench in that case had relied on 2 M.H.C.R. 296 (Clerke vs. Ruthnavalee) as will appear from page 1187 of the report:- 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 could recover and the defendant be driven to a cross suit, and which have been 5 followed in numerous cases, should be followed in the present case. 10. Mr.Ghose submitted that 17 C.W.N. 1060, Kalanand vs. gir, is not a good law after the amendment of the Civil Procedure Code. In support he relied on Order VIII Rule 6 A of the amended Code. I have carefully compared the old and the amended Act. No change has been effected regarding set off. Amended sub-rule 6A relates to a counter claim and not to a claim for set off which is Order VIII rule 6 sub-rule (2) and has not been amended at all. In view of this, I am unable to accept the submissions of Mr.Ghose on this point. I accept the submissions made on behalf of the petitioners that it would be inequitable to allow the Plaintiff to recover and drive the petitioners to a regular suit for recovery of their claims alleged in the original written statement and in the present petition. The plea of limitation is not a bar where the time barred debt is claimed by way of set off and as such this amendment should be allowed in the interest of justice. But the petitioners will not be entitled to make any counter claim in the present suit in respect of the alleged damages suffered by them. (B.Seshaiah v/s. B.Veerabhadrayya) 6 AIR 1972 Andhra Pradesh 134 21. On general principles and in exercise of its inherent power an executing court can entertain and give effect to a claim of set off even in cases which do not fall strictly within the provisions of Rule 18 or 19 of Order 21, Civil P. C. It must be remembered that while Rule 18 is applicable to cases passed in two different suits, Rule 19 relates to cases where there is a decree under which two parties are to recover sums of money from each other. These provisions are not however exhaustive. De hors these Rules, there is general and inherent power in the executing court to grant what is called equitable set off. 22. The principle of set of may be defined as the extinction of debts of which two persons are reciprocal debtors to one another, by the credits of which they are reciprocally creditors to one another. 23. While Order VIII, Rule 6, Order XXII, Rules 18 and 19, Civil P. C. are instances of legal set off, the equitable set off is mainly based on the principle of equity, justice and good con-science. The provisions for legal set off do not take away from the parties any right to set off which they had independently of the Code. For example in cases of natural debits the credits, that is in mutual open and current account cases and in cases where cross decrees arise out 7 of the same transaction or cases where cross demands arise from different sets of transactions but are so connected in their nature and circumstances as to make it inequitable that the plaintiff or the decree-holder should recover form the defendant and the judgment-debtor driven to a cross suit or execution petition. This set off is known as equitable set off, if one may like to call then so and such a right is well recognised in India apart from the provisions of the Civil P. C. 24. The distinction between the two has, however, to be borne in mind. The difference between the legal set off and an equitable set off is that while in the former case the Court is bound to entertain and adjudicate upon the plea when raised, the defence of equitable set of cannot be claimed as a matter of right, but the Court has a discretion to adjudicate upon it in the same suit or execution proceedings or to order it to be dealt with in a separate suit or execution proceedings. 25. From what is discussed above, it would be plain that equitable set off can be claimed in a case where cross- demands, arise out of the same transaction as well as in cases where the cross-demands may not arise out of the same transaction but they are so connected in the nature or circumstances that it would be inequitable to allow one party to execute his decree driving the other party to separate proceedings of 8 execution. No hard and fast rules can be laid down, nor it is desirable to do so as to in what circumstances in such cases equitable set off can be permitted. The granting of equitable set off rests in the discretion of the Court. This discretion is a judicial discretion and we conceive that the dominant feature of judicial discretion is that it has to be exercised accordingly to settled rules rather than individual fluctuating and unsettled opinion. Thus where a Court thinks that investigation into the claim of equitable set off will cause great delay it may refuse to allow it or may order the enquiry to proceed on such terms as it thinks fit. 26. The equitable set of, however, cannot be treated as a strait-jacket formula. It cannot be bound down to the procedural limitations. Since the matter is in the discretion of the Court, it may grant equitable set off in a proper case in spite of the fact that no execution petition is independently filed for that purposes. It can grant such a set off if an execution petition is pending albeit seeking a different mode of executing the decree such as arrest of the judgment-debtor. 27. It is also not relevant that execution petition of a decree which is sought to be set off is or is not filed by the other decree-holder. And even in a case where an independent execution petition if necessary and if filed for the purpose of claiming 9 set off is time barred, that would not deter the Court from granting an equitable set off like legal set off would not be permitted if the claim separately enforced would be time barred. But the jurisdiction of the Court exists to grant equitable set off if special circumstances permit even in a case where claim for set off is time barred. 28. That the Court has general and inherent power to grant equitable set off de hors the provisions of Order XXI, Rule 18 or 19, Civil P. c. is well supported by the following decisions. We are first referring to the decisions in which the cross demands had arisen out of a single transaction or were so connected with each other as to attract equitable considerations. See Mt. Nonibai v. Jethanand, AIR 1938 Sind 31; Badri Nath v. Moti Ram, AIR 1939 Lal 85, Adwaita Chandra Saha v. Chittagong Co., AIR 1925 Cal 102: Rama Rao v. Venkatramanachar, AIR 1951 Mys 20; Cinnammal v. Chidambara, AIR 1936 Mad 626; Bank of Dacca Ltd, v. Gour Gopa Saha, AIR 1936 Cal 409 and Ramu Sahu v. Thakur Rai, AIR 1917 Pat 259. 3. Therefore, it does appear that the Defendant has not instituted his own proceedings for claiming the amount. He can claim the amount as equitable set off as a 10 matter of defence. It is obvious that this aspect of the matter has not been considered by the learned single Judge. From the material which is presently on record, we are not in a position to find out what is the approximate amount of equitable set off if at all to be allowed, as the basic material necessary for arriving at that amount is not available on record. In our opinion, in the present case an inquiry would be necessary that even assuming that the Defendant can claim equitable set off, what will be the approximate amount of equitable set off, which the Defendant can calim. 4. Taking over all view of the matter, therefore, in our opinion, following order would meet the ends of justice. O R D E R 11 (i)The order impugned in the Appeal is set aside. The Summons for judgment No.616 of 2005 is remitted back to the learned single Judge for denovo consideration and decision in accordance with law, in the light of the observations made above. (ii)The learned single Judge shall permit the parties to produce before him additional affidavit and documents and thereafter dispose of the summons for judgment in accordance with law. (iii)Appeal disposed of. (D.K.DESHMUKH, J.) (V.R.KINGAONKAR, J.)