Case: Union Of India Vs. Karam Ch.Thapar&amp;Brs.(Coal Sales)Ltd&amp;Ors

a suit for the recovery of money the defendant claims to set-off against the plaintiffs 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 plaintiffs 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." 18. What the rule deals with is legal set-off. The claim sought to be set-off must be for an ascertained sum of money and legally recoverable by the claimant. What is more significant is that both the parties must fill the same character in respect of the two claims sought to be set-off or adjusted. Apart from the rule enacted in Rule 6 abovesaid there exists a right to set-off, called equitable, independently of the provisions of the Code. Such mutual debts and credits or cross-demands, to be available for extinction by way of equitable set-off, must have arisen out of the same transaction or ought to be so connected in their nature and circumstances as to make it inequitable for the Court to allow the claim before it and leave the defendant high and dry for the present unless he files a cross-suit of his own. 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. 19. In Bhupendra Narain Singha Bahadur vs. Bahadur Singh and others - AIR 1952 SC 201 , this Court ruled 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. A wrong-doer who has wrongfully withheld monies belonging to another cannot invoke any principle of equity in his favour and seek to deduct therefrom the amounts which may have fallen due to him. There would be nothing improper or unjust in telling the wrong-doer to undo his wrong and not to take advantage of it. 20. In the present case, what the Coal Company has sought to enforce is a statutory obligation of the appellant-Union of India. The Coal Mines (Conservation and Development) Act, 1974 has a public purpose and a beneficial object to achieve. The stowing assistance is released to the Coal Company in the interest of securing safety at the coal mines and the development thereof. In the absence of stowing, there may be accidents, casualties and difficulties of operation. Non-payment of stowing allowance may discourage the coal mines from carrying out the stowing operations which would be detrimental to the interest of the workers. It would not be sound exercise of discretion on the part of the Court to permit set-off or recognize an adjustment made out-of-Court which would have the effect of withholding the release of stowing assistance and appropriating the amount thereof for the recovery of dues not arising out of the same transaction.21. Shri Jaideep Gupta, the learned senior counsel for the Coal Company, has rightly relied on the decision of Calcutta High Court in Coal Products Pvt. Ltd. and Anr. vs. Income-Tax Officer, "M" Ward, Companies District II, Calcutta, and others - (1972) 85 ITR 347 , wherein a garnishee order was quashed. It was held that the money which is payable by the Coal Board to a Coal Company as and by way of stowing assistance was not available to be paid by the Coal Board to Income-Tax Department for recovery of income-tax dues as that would result in breach of statutory obligation of the Board with regard to the utilization of its fund as laid down in Section 12 of the Act as also in breach of statutory obligation of the Coal Company attaching to the grant of assistance from the Coal Board. Rule 49 referred to hereinabove came up for the consideration of this Court in Industrial Supplies Pvt. Ltd. and Anr. vs. Union of India and others (1980) 4 SCC 341 , in some other context. Vide para 32, this Court observed that if the subsidy receivable from the Coal Board (succeeded by the Central Government) was by way of assistance, the granting being conditional, the recipient thereof would be bound to apply the same for the purposes for which it was granted viz. for the purpose of stowing or other safety operations and conservation of coal mines. In our opinion, in the facts and circumstances of the present case it would not make any difference whether the amount withheld by the Central Government is on account of assistance or reimbursement; in either case the Could would not hold in favour of adjustment being made by the Central Government by setting off the outstanding credit referable to stowing assistance as against the outstanding demand of arrears of royalty.22. In our opinion, the High Court has not erred in allowing the writ petition filed by the respondent-Coal Company.23. So far as the finding recorded in its appellate judgment by the Division Bench that the Central Government is not entitled to recover the royalty and it is the State of Bihar which only is entitled to demand and recover the royalty from the respondent-Coal Company is concerned, we set-aside that finding but without recording any opinion of ours on that aspect for the short reason that such issue is not required to be adjudicated upon in the present case in view of the finding arrived at hereinabove. We hasten to add that requisite pleadings and necessary material are also not available on record to arrive at a definite finding in that regard.24. Before parting we make it clear that the appellant or the State of Bihar, as the case may be, is free to recover arrears of royalty by adopting such other method as may be available under the law.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]n our opinion, in the facts and circumstances of the present case it would not make any difference whether the amount withheld by the Central Government is on account of assistance or reimbursement; in either case the Could would not hold in favour of adjustment being made by the Central Government by setting off the outstanding credit referable to stowing assistance as against the outstanding demand of arrears of royalty.22. In our opinion, the High Court has not erred in allowing the writ petition filed by the respondent-Coal Company.23. So far as the finding recorded in its appellate judgment by the Division Bench that the Central Government is not entitled to recover the royalty and it is the State of Bihar which only is entitled to demand and recover the royalty from the respondent-Coal Company is concerned, we set-aside that finding but without recording any opinion of ours on that aspect for the short reason that such issue is not required to be adjudicated upon in the present case in view of the finding arrived at hereinabove. We hasten to add that requisite pleadings and necessary material are also not available on record to arrive at a definite finding in that regard.24. Before parting we make it clear that the appellant or the State of Bihar, as the case may be, is free to recover arrears of royalty by adopting such other method as may be available under the law.