Filing Counterclaims Against Co-Defendants: Supreme Court Judgment in Rajul Manoj Shah v. Kiranbhai Shakrabhai Patel

In a recent decision, the Supreme Court in Rajul Manoj Shah alias Rajeshwari Rasiklal Sheth v. Kiranbhai Shakrabhai Patel & Anr.¹ (“Rajul Manoj Shah”) provided clarity on two points on the filing of counterclaims: first, a counterclaim cannot be directed solely against a co-defendant; and second, a counterclaim cannot be permitted after issues are framed.

In Rajul Manoj Shah, the appellant-plaintiff filed a suit in 2012 for declaration and injunction concerning a property asserting joint ownership with defendant no.1. The Appellant-Plaintiff had also sought to invalidate an agreement to sell in favour of Defendant No. 2. Defendant No. 1 died during the proceedings in 2013. However, in 2020, Hon’ble Gujarat High Court directed that the Nazir of the City Civil Court be substituted as Defendant No.1 under Order XXII Rule 4A CPC.

Subsequently, Defendant No. 2 applied to amend his written statement and set up a counterclaim seeking: (a) specific performance of the 2011 agreement by directing the Nazir to execute a sale deed for defendant no.1’s undivided share; and (b) partition under the Partition Act, 1893. The Trial Court rejected the application as late, barred by limitation, and not permissible against a co-defendant; the High Court reversed the judgment of the Trial Court.

In Rajul Manoj Shah, the Supreme Court was called upon to decide whether a counter-claim can be entertained after issues have been framed and the suit has substantially progressed, whether a counter-claim seeking relief solely against a co-defendant (in this case, the Nazir representing the estate of the deceased defendant no.1) is maintainable under Order VIII Rule 6A CPC, and whether the High Court properly exercised its supervisory jurisdiction under Article 227 in interfering with the Trial Court’s order.

In Rajul Manoj Shah, the Supreme Court restored the Trial Court’s order and reversed. The ruling and the key observations of the Hon’ble Supreme Court in

A. Non-tenability of Counterclaim Against Co-Defendant

Order VIII Rule 6A of the CPC enables a defendant to set up a counterclaim against the claim of the plaintiff in respect of any cause of action accruing to the defendant against the plaintiff before the filing of the defense or the expiry of the time to file it. Such a counterclaim has the effect of a cross-suit and is governed by the rules applicable to plaints.

The Court held that a counterclaim must be directed against the plaintiff. A counterclaim aimed solely at a co-defendant is not maintainable. However, incidental or ancillary relief against co-defendants may be permissible if the main counterclaim is directed against the plaintiff.

The Court stated that under Order VIII Rule 6A, a counterclaim must be made against the claim of the plaintiff and must relate to a cause of action accruing against the plaintiff. The Court relied on the precedent set in Rohit Singh & Ors. v. State of Bihar², which held that a counterclaim must be directed against the plaintiff and that a counterclaim solely against co-defendants is not permissible. This position was reaffirmed by the Court, which also cited its reiteration in Damodhar Narayan Sawale v. Tejrao Bajirao Mhaske³ and Satyender vs. Saroj.⁴

In applying these principles to the present case, the Court found that defendant no.2’s relief for specific performance was directed against the estate of defendant no.1, represented by the Nazir, and not against the plaintiff. As a result, such a counterclaim could not be entertained. Furthermore, the relief of partition was contingent upon first establishing a right through specific performance against defendant no.1’s estate. Without first establishing such a right in appropriate proceedings, a partition counterclaim could not be maintained against the plaintiff.

B. Time-Bar for Counterclaims After Issues Are Framed

The Court determined that allowing a counterclaim after issues have been framed is not permissible. In reaching this conclusion, the Court relied on the decision in Ashok Kumar Kalra v. Wing Cdr. Surendra Agnihotri, which clarified that although Order VIII Rule 6A does not explicitly set a time limit for filing counter-claims, the accrual of the cause of action is limited to the period before the filing of the defense or the expiry of the time for defense. Counter-claims, being similar to plaints, are also subject to the Limitation Act. The Court stated that as a general rule, a counterclaim cannot be permitted after issues have been framed and the suit has substantially progressed. The outer limit for filing a counterclaim is therefore before issues are framed.

In the present case, issues were framed on 12 February 2019, while the counter-claim application was filed on 26 July 2021, which was after the outer limit recognized in Ashok Kumar Kalra⁵. The Court agreed with the Trial Court’s finding that permitting such a delayed counterclaim would undermine the objective of speedy justice and would change the scope of the original suit.

The Court also relied on Ashok Kumar Kalra v. Wing Cdr. Surendra Agnihotri, which clarified that a counterclaim cannot be entertained after issues are framed and that courts must balance the bar of limitation and procedural efficiency, with the outer limit for counterclaims before the framing of issues.

The purpose of counterclaims to avoid multiplicity and enable disposal in a single trial was discussed in Jag Mohan Chawla v. Dera Radha Swami Satsang.

Conclusion

The Supreme Court’s ratio decidendi was that a counterclaim under Order VIII Rule 6A CPC must be directed against the plaintiff, and a counterclaim directed solely against a co-defendant is not maintainable. However, incidental relief against co-defendants may be claimed if the primary counterclaim is against the plaintiff. The Court also held that the outer limit for entertaining a counterclaim is before the framing of issues. A counterclaim filed after issues are framed cannot be permitted, even if it is within the general limitation period, because it undermines the objective of speedy justice and changes the scope of the trial.

Thus, it is important to draft counterclaims so that they assert causes of action against the plaintiff. If the relief sought lies primarily against a co-defendant, such as specific performance against a vendor co-defendant, the appropriate recourse may be to file an independent suit or seek proper joinder, rather than attempt a counterclaim.