Definition
Adjustment of debts.
Defendant claims adjustment of ascertained sum.
Statutory Definition
Order VIII Rule 6 CPC.
Etymology & Origin
An accounting term absorbed into law, meaning to cancel or 'set off' one debt against another, leaving only the net balance to be paid.
Full Legal Analysis
A Set Off is a statutory defence available to a defendant in a civil suit for the recovery of money. If the plaintiff sues the defendant for ₹1 Lakh, but the plaintiff already owes the defendant ₹40,000 from a previous transaction, the defendant can plead a 'set off' for the ₹40,000, asking the court to adjust the mutual debts so they only pay the remaining ₹60,000.
Unlike a Counter Claim, which is an independent weapon, a legal set-off is primarily a shield used specifically in money suits to reduce or extinguish the plaintiff's claim.
For a 'Legal Set Off' to be allowed under the CPC, the sum must be 'ascertained' (a specific, known mathematical amount) and legally recoverable (not barred by limitation). However, courts also recognize an 'Equitable Set Off' for unascertained sums (like unquantified damages) if both claims arise from the exact same transaction.
The Supreme Court distinguished between legal and equitable set-off, noting that while legal set-off requires an ascertained sum, equitable set-off allows adjustment of unliquidated damages if the claims are so closely connected they should be tried together.
Drafting a written statement with a plea of set-off requires the defendant to pay court fees on the amount they are claiming, treating that portion of the defense almost like a mini-plaint.
This Term in Indian Statutes
Code of Civil Procedure, 1908, 1908
"Particulars of set-off to be given in written statement."
The procedural rule allowing the adjustment of mutual financial debts in court.
