by Ashutosh Vinay
Published on: December 24, 2023 at 11:41 IST
There are two parties in a suit, ‘Plaintiff’ and ‘Defendant’. Where plaintiff is the aggrieved party who files suit to claim stating as what relief he wants from the Court and the defendant is the party against who the claims have been filed. But does the defendant only have a right to defend his suit? What if the defendant themselves are the aggrieved party? For this purpose, the ‘Code of Civil Procedure 1908′ has a dedicated rule, Rule 6 of Order VIII. which deals with counter-claim in a suit. In this article we’ll get to know about counter claims as whether counter claim can continue despite the primary suit being dismissed.
What is Counter Claim?
As per Order VIII Rule 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 pecuniary 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.
Interpretation
A defendant can set up a counterclaim against the claim of the plaintiff, with respect to the cause of action arising to the defendant against the plaintiff either before or after the filing of the suit, but before the defendant has delivered his defence, Also the claim shall not exceed the pecuniary limits of jurisdiction of the court it has been filed in.
The counter claim shall have the same effect as a cross suit and it enables the court to provide judgement of both the claims in the same suit.
The plaintiff will be liable to file their written statement in answer to the counter claim of the defendant under the time period mention/fixed by the court.
The counter claim will be treated as a plaint not as a defence and will be governed by the rules of plaints too.
A Counter Claim is defendant’s claim against the claim of the party.
For example, if a plaintiff initiates a lawsuit and a defendant responds to the lawsuit with claims of their own against the plaintiff. Let’s understand this with a practical example:
A is a Loan lending bank which sues B for not repaying the loan. In the suit filed by A it claims the unpaid debt by B. After which B counterclaims against A for fraud in procuring the debt. Now the court will sort out two clams in the same lawsuit.
Why is Counter Claim Necessary?
A counter-claim holds significance for both individuals and judicial entities. From the perspective of individuals, it alleviates the burden of filing numerous lawsuits and the associated stress of managing hearings and documentation for each case. For judicial bodies, it serves to avoid the accumulation of multiple cases involving the same parties, allowing them to concentrate on a single suit that includes the counter-claim. This, in turn, prevents the need to revisit identical facts repeatedly, streamlining the legal process.
The Delhi High Court in Gastech Process Engineering (India) Pvt. Ltd. v. Saipem, observed that counter claim is a better option to settle multiple issues/disputes in a single suit rather than filing multiple suits
Essential Elements of Counter Claim
1. It must be against the same parties involved in the proceeding.
2. It should be a permitted claim.
3. It should be related with the same facts and issues.
Can counter claim continue even after the primary suit has been dismissed?
The dismissal of counter claim depends upon various factors such as jurisdiction, reason for dismissal of the primary suit etc.
If the primary suit has been dismissed without prejudice, the defendant has the option to institute a separate suit for the counter claim later on. If the claim was related to the issue(s) raised in the suit then the claim will be dismissed by the court.
If in future the plaintiff decides to reopen the case, then the defendant can assert the counter claims again. But if the primary suit is dismissed with prejudice, the plaintiff cannot bring the same issue to the court again. So, if the counter claim is capable of being instituted into an independent suit, then it can be continued regardless of the primary suit.
Even after the independent suit being instituted from the counter claim, the jurisdiction of the court is also a crucial consideration. Whether the Court is having competent jurisdiction for the independent suit made out of that claim or not. If the Court doesn’t have the jurisdiction the suit cannot continue in that court and will be dismissed.
The concept of “prejudice” is often associated with the dismissal of a case. When a court dismisses a case “with prejudice,” it means that the dismissal is final, and the plaintiff is barred from bringing the same case or claims again. This type of dismissal indicates that the court has made a final decision on the merits of the case, and the plaintiff cannot refile the lawsuit based on the same facts or legal grounds.
On the other hand, if a case is dismissed “without prejudice,” it means that the dismissal is not final, and the plaintiff has the option to refile the case in the future. The dismissal without prejudice may be due to procedural issues, such as the improper filing of documents, lack of jurisdiction, or other non-substantive reasons. In such a scenario, the plaintiff is typically allowed to correct the issues and bring the case back to court.
Now, in the context of a counterclaim continuing after the dismissal of the primary suit, the crucial factor is whether the dismissal of the primary suit is “with prejudice” or “without prejudice.” If the primary suit is dismissed with prejudice, it generally implies that the entire case, including any counterclaims, is concluded, and the parties cannot pursue those claims further. However, if the primary suit is dismissed without prejudice, it means that there is an opportunity for the counterclaim to persist, and the party asserting the counterclaim may have the option to pursue it independently or as part of a new lawsuit.
Benefits of Counter Claim
- Efficiency: It is more efficient to bring up all the disputes involving the same issue are resolved at the same time
- Cost: We all know how expensive it can be to file an independent suit for every dispute that arises from or is related to the suit, bringing a counter claim can be cost effective to the defendant regarding the suit.
- No opt out: The plaintiff would not have an option to opt out of the counter claim resulting in all of the issues/disputes being solved at the same time.
Grounds under which a counter claim can be excluded
Under Order VIII Rule 6C it is mentioned that a counter-claim filed by the defendant can be excluded from the suit if the plaintiff can prove with sufficient reasons that an independent suit is needed to be filed for that claim. The plaintiff then, can request the court for dismissal of the counter-claim.
In the case of Malaga Realtors Private Limited v. Vilas Pundalik Malik and Ors (2019) defendants filed a counterclaim, but the Senior Judge at Mapusa excluded the claim and on the basis of ‘Order 8 Rule 6C’. stating that no prejudice had been caused to the petitioners or the original defendants by the exclusion of the counter claim in this regard, that no cause of action could be made out in that regard, and hence the petition was dismissed accordingly.
In the case of Subaida Ebrahim v. Moosa C. and ors, (2022) The appeal was filed under section 104 and Order XLIII of CPC, in order to challenge the order preferred in the favour of decree-holder in the dispute related to distribution of property.
The respondent could appropriate the balance sale price which was Rs. 2,85,433 that was deposited by the appellant, so the appellant contended there is no alleged fraud or irregularity, therefore order of sale should not be set aside. The High Court of Kerala ruled that in case of separate decree-holders, claim cannot be set-off by one of them.
In the case of M/S. A.G. Enviro Infra Projects v. M/S. J.S. Enviro Services Pvt. Ltd., (2023) the petitioner under Section 34 of Arbitration and Conciliation Act, 1996 filed a petition for setting aside the final award and to allow the counter claim raised against respondent for charging an excess amount of Rs. 4,14,42,192 with 18% rate of interest whereas the respondent company contended for passing of an award of Rs. 2,00,00,00 for the loss of goodwill.
Since the matter has been decided by the Arbitrator first, the prominent question there was- does the Arbitrator fail to decide the counter claim and can the court decide the same. Hon’ble Delhi High Court held that the Court could modify the award but the extent should be limited.’
Conclusion
It can be concluded that counterclaim can be used as both shield and sword in a lawsuit. In which the defendant will also have an opportunity to seek the claims they want to without the need of filing an independent suit. The chances of counterclaim continuing after the dismissal of primary suit depends on whether the primary suit has been dismissed with or without prejudice.
The terms “with prejudice” and “without prejudice” in the context of dismissals indicate whether the decision is final or allows for the possibility of the case or claims being revisited in the future.
If the primary suit is dismissed without prejudice, leaving room for potential re-filing, the counterclaim may be subject to reassertion if the plaintiff decides to pursue the case again. However, if the dismissal is with prejudice, barring the plaintiff from bringing the same claim again the counterclaim cannot continue unless it can be instituted into an independent suit.
Edited by Bharti Verma, Associate Editor at Law Insider
