Allowed

Shri. Ajaykumar Vishnu Dasture v. Gracious Herbals Pvt. Ltd.

Bombay HC23 Jun 2023WP/3378/2014

Case brief

AI extract

What is this about?

In this civil appeal, the Bombay High Court allowed a writ petition to quash an order dismissing the petitioner's application for amendment to claim an equitable set-off. The court held that the cross-demands arose from the same transaction and allowed the application for equitable set-off, directing the trial court to decide the case within one year.

What did the court decide?

Impugned order quashed; application for amendment of written statement to claim equitable set-off allowed; trial to be concluded within one year.

Shri. Ajaykumar Vishnu Dasture Vs Gracious… — Contract and Commercial Disputes | Bombay HC (2023)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION

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WRIT PETITION NO. 3378 OF 2014

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Ajaykumar Vishnu Dasture....Petitioner.
 Versus
Gracious Herbals Pvt. Ltd...Respondent.

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Mr. R. S. Apte, Senior Advocate with Mr. S. S. Bedekar for the
petitioner.

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Mr. Vishwajit P. Sawant, Senior Advocate for the respondent.

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——————

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 Coram : Sharmila U. Deshmukh, J.
 Date : June 23, 2023.

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P. C. :

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1. By the impugned order dated 11th December 2013, the

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petitioner’s application for amendment of written statement to claim

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equitable set-off under the provisions of Order-VIII Rule-6 of the Code of
Civil Procedure, 1908 [for short “CPC”] came to be dismissed.

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2.Heard Mr. Apte, learned senior counsel appearing for the
petitioner and Mr. Sawant, learned senior counsel appearing for the
respondent. For the sake of convenience, the parties are hereinafter
referred to by their status before the trial Court.

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3.Mr. Apte, learned senior counsel appearing for the defendant
submits both the parties fill the same character as they fill in the
plaintiff’s suit and the amount which is claimed as an equitable set-off is
a sum of money which is legally recoverable by him from the plaintiff.
He would urge that finding of the trial Court that there are two distinct
causes of action is erroneous inasmuch as the pleadings in the plaint
itself substantiate the position that the transactions in question are
intrinsically linked. He has invited the attention of this Court to the
relevant pleadings to urge that there was no separate transaction apart
from the agreement which was entered into between the parties to
develop 15 herbal products. He submits that pursuant to the agreement
between the parties, 50% of the amount had been paid and the balance
50% amount is required to be paid and the claim in the suit is
intrinsically linked with the payment which is due and payable and, as
such, the defendant is entitled to claim set-off. He has invited the
attention of this Court to the document which is annexed at page-112
which acknowledges the receipt by defendant of a sum of Rs.75,50,000/-
as advance payment for development work carried out by him and
would urge that upon development work being carried out, the balance
50% was due and payable. He would further submit that the plaintiff’s

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demand for a sum of Rs.79.90,703/- along with interest is pursuant to the
oral agreement which was entered into between the parties. He urged
that there was no say which was filed by the plaintiff objecting to the
application.

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4.Per contra, Mr. Sawant, learned senior counsel appearing for the
plaintiff submits that the agreement between the parties was for
development of herbal products along with the transfer of know-how,
and, there was responsibility upon the defendant to market the same in
Indonesia. He submits that upon a representation by the defendant that
the directors of Indonesian company were coming to India and required
accommodation, a loan was advanced by the plaintiff to the defendant
and out of the said loan amount, a flat had been purchased. He submits
that the plaint proceeds on the basis of fraud and deception and the
transaction for recovery is distinct from the case set up by the defendant
for equitable set-off. He distinguishes between an equitable and a legal
set-off provided under the provisions of Order-VIII Rule-6 CPC by
placing reliance on the decision of the Apex Court in the case of
Jitendra Kumar Khan v. Peerless General Finance & Investments Co.,
Ltd [(2013) 8 SCC 769], on which decision reliance is also placed by
learned senior counsel appearing for the defendant. He would further

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urge that in event the defendant has any claim against the plaintiff, it is
open for the defendant to file a counter-claim or institute a separate suit,
however, in the present case, the equitable set-off cannot be claimed.

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5.Considered the submissions of the parties and perused the
documents with the assistance of learned senior counsel appearing for
the respective parties.

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6.As the issue in question is regarding the claim of set-off by the
defendant, it would be relevant to reproduce sub-rule (1) of rule 6 of
Order-VIII of CPC, which deals with the particulars of set-off to be given
in written statement, which reads thus :

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“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.”’

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7.Upon a plain reading of above provision, it is clear that in a suit

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for recovery of money, the defendant can claim a set-off against the

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plaintiff’s demand in respect of an ascertained sum legally recoverable
by him subject to the condition that both parties fill the same character
as they fill in plaintiff’s suit.

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8.For that purpose, it will be necessary to refer to the pleadings in
the plaint inasmuch as the contention of learned senior counsel for the
plaintiff is that the suit was for recovery of an amount which was given
as loan to the defendant and had no connection with the oral agreement
for exchange of know-how. It is averred in the plaint that the plaintiff had
offered 25% share of the profits to the defendant after deducting
advance / loan given to the defendant for the purchase of furnished flat
and Honda City car subject to the reimbursement received from
Indonesian company – Sanbe Farma, as assured by the defendant. It is
further averred that relying upon the assurances and representations
given by the defendant and said Indonesian company that they will
reimburse the expenses incurred for the defendant by the plaintiff, a
duplex flat in a project which was developed by one of the partners of
plaintiff was transferred to the defendant. Pertinently, it is the case of
plaintiff that consideration for the said flat was given to the defendant by
the plaintiff and the director of plaintiff in person and his family
members, as advance from the plaintiff company and a brand new

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Honda City car was also purchased in the defendant’s name in a
through similar transaction mode. It is further averred that the plaintiff
was keeping a follow up about the payments against the product
formulae transferred to Indonesian company and also informed them
about the transfer of flat and providing other facilities to the defendant
and relying upon the representations and assurances from the company
through their emails, the plaintiff spent an amount of Rs.79,90,903/- over
the defendant including the transactions of said flat and car. The
particulars of the said amount is given in paragraph 11 of plaint. The
case of plaintiff is that motive of the defendant was to rob and dupe the
plaintiff without fulfilling any of his representations and assurances for
assistance or technical improvements or marketing of the herbal
products by developing 15 products and the cause of action arose when
the defendant used money paid by the plaintiff for purchasing the flat
and the Honda City car and started claiming its possession and
ownership. Armed with this case, the plaintiff has approached the trial
Court and sought recovery of the amount of Rs.79,90,703/-.

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9.The submission of Mr. Sawant is that the amount of which
recovery is sought before the trial Court is a loan amount unconnected
with the business transactions between plaintiff and defendant. To my

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mind, a reading of the averments in plaint indicates that both these
transactions are intrinsically linked inasmuch as a specific statement is
made in paragraph 11 of the plaint that based on the representations and
assurances as well as the false email communications received from
Sanbe Farma, the plaintiff has spent and paid the amount for the benefit
of defendant. If the suit, as contended, was simplicitor for recovery of
amount which was advanced as loan, there was no necessity for the
plaintiff to plead and aver as regards the business transactions between
the parties as well as the communications, claimed to be forged, from
the Indonesian company. The specific case in the plaint is that defendant
was entitled to a share in the profits after deducting the advance / loan
given to the defendant for purchase of the flat and Honda City Car. By
these very averments in plaint, the plaintiff has pleaded that payment of
the amount of Rs.79,90,703/- was required to be adjusted against the
amount due and recoverable, if any, to the defendant.

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10.Mr. Apte, learned senior counsel has rightly pointed out the
document at page 112 of the petition which is an acknowledgment by the
defendant as having received a total sum of Rs.75,50,000/- as advance
payment for the development work carried out for 15 herbal products.

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The Apex Court in Jitendra Kumar (supra) has analysed the provisions of Order-VIII Rule-6 of CPC as regards legal set-off and an equitable set-off. The Apex Court in the said decision has referred to its earlier decision in Union of India v. Karan Chand Thapar and Bros. (Coal Sales) Ltd [(2004) 3 SCC 504] it had opined as under :

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“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.”

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.The Apex Court having considered various decisions on the

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subject, has held in paragraph 16 as under :

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“From the aforesaid enunciation of law it is quite clear that equitable set-off is different than the legal set-off; that it is independent of the provisions of the Code of Civil Procedure; that the mutual debts and credits or cross-demands must have arisen out of the same transaction or to be connected in the nature and circumstances; that such a plea is raised not as a matter of right; and that it is the discretion of the court to entertain and allow such a plea or not. The concept of equitable set-off is founded on the fundamental

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principles of equity, justice and good conscience. The discretion rests with the court to adjudicate upon it and the said discretion has to be exercised in an equitable manner. An equitable set-off is not to be allowed where protracted enquiry is needed for the determination of the sum due.”

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12.The law laid down by the Apex Court is that the cross- demands
to be available for extinction by way of equitable set-off, they must have
arisen out of the same transaction or ought to be so connected in their
nature and circumstances as to make inequitable for the Court of law to
allow the claim before it and leave the defendant high and dry unless he
files a cross suit. The concept of equitable set-off having founded on the
fundamental principles of equity, justice and good conscience has to be
exercised in an equitable manner whether the claim would be allowed or
not would of course depend upon the evidence before the Court.
However, considering the pleadings itself, in my opinion, the cross-
demands arise from the same transaction and are connected. As held
by the Apex Court, it is the discretion of the Court to entertain and allow
such plea or not. However, the settled position in law is that the
discretion has to be exercised judicially.

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13.In the present case, the trial Court has rightly held that the
parties filled the same character in respect of two claims. Having held

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so, the claim of the defendant for equitable set-off was required to be
allowed. In that view of the matter, the writ petition stands allowed. The
impugned order dated 11th December 2013 passed in Special Civil Suit
No.3 of 2022 pending before the 8th Joint Civil Judge, Senior Division,
Pune is hereby quashed and set aside and the defendant’s application
for amendment at Exhibit-20 is allowed.

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14.Considering that the proceedings before the trial Court are of
the year 2012 and could not proceed further due to the pendency of
present petition, it will be in the interest of justice that the trial Court
decides the same expeditiously and in any event within a period of one
year from today. The parties are directed to co-operate with the trial
Court so as to ensure that the proceedings are disposed of expeditiously.
Needless to mention that the trial Court to decide the matter on its own
merits, uninfluenced by the observations made herein.

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[Sharmila U. Deshmukh, J.]

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[Pursuant to speaking to the minutes order dated 3rd July 2023, this order is
corrected. The correction is in the appearance of advocates which is shown in bold.]

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Shri. Ajaykumar Vishnu Dasture v. Gracious Herbals Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Shri. Ajaykumar Vishnu Dasture v. Gracious Herbals Pvt. Ltd.

Case brief

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What the court decided

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