Court fees are payable on written statements pleading a set-off, whether legal or equitable, as per Article 1 of Schedule I of the Court Fees Act, 1955.

1. The question that arises in this case is whether the learned Subordinate Judge of Hazaribagh was right in asking the petitioners to pay court-fee on the amount of Rs. 70,000 which the petitioners claim as a set-off in the written statement.

2. The opposite party instituted Money Suit No. 13 of 1950 in the Court of the Subordinate Judge claiming a sum of Rs. 1,00,000 as principal and a sum of RS. 15,000.00 as interest from the petitioners, alleging that there was a breach of contract and they were, therefore, entitled to the amount claimed by way of damages for the breach of the contract. The case of the opposite party was that they had advanced a sum of Rs. 6,50,000 to the petitioners for the purpose of floating a company on certain terms and conditions. The contract was not performed as the company was not floated and no action was taken to implement the terms and conditions on which the company was to be floated. The opposite party admitted that a sum of Rs. 5,50,000 was returned by the petitioners. The suit was, therefore, instituted for the balance of Rs. 1,00,000 which was still in deposit with the petitioners and for the interest due thereon.

3. The defence of the petitioners was that the opposite party was not entitled to refund of any money. The petitioners said that they had committed no breach of contract but there was a breach of contract on the part of the opposite party and, on account of this breach, the petitioners had suffered damages to the extent of Rs. 70,000. The petitioners also claimed that the opposite party had maliciously lodged a false criminal case against the petitioners and, on account of these criminal proceedings, the petitioners claim damages to the extent of Rs. 1,00,000.

4. The learned Subordinate Judge held that the claim for damages on account of malicious prosecution cannot be legally entertained by way of set-off. The petitioners claim on this point was, therefore, disallowed. As regards the claim for set off to the extent of Rs. 70,000 on account of damages for breach of contract, the Subordinate Judge was of the opinion that the defendants must pay court-fee on this amount, failing which the claim for set off would be rejected.

5. Against this order, the petitioners have obtained a rule from this Court.

6. The first submission of Mr. Kameshwar Dayal is that the amount of Rs. 70,000 which the petitioners claim was a claim by way of an equitable set-off and the Subordinate Judge was not justified in requiring the petitioners to pay court-fee on this amount. Counsel pointed to the fact that the Subordinate Judge said that the claim "cannot be treated as equitable set off and the defendants cannot claim exemption in the matter of court-fee." Mr. Kameshwar Dayal was right in contending that the claim which the petitioners set up was not in the nature of a legal set-off but in the nature of an equitable set-off. The reason is that the claim which the petitioners made was a claim in respect of an unascertained sum by way of damages for a breach of contract. It is true that the petitioners roughly estimated the damages to be a sum of Rs. 70,000. But the nature of the claim made is by way of damages for a breach of contract and, therefore, it is wrong to say that the set off which the petitioners claimed is in the nature of a legal set-off.

The question, however, in the present case is not whether the claim set up by the petitioners is a claim in the nature of a legal set-off or whether it is a claim in the nature of an equitable set-off. The question on the other hand is whether the petitioners are liable to pay court-fee on the amount which they claim as set oil. On this point, Mr. Kameshwar Dayal argued that court-fee is payable only on a claim made by the defendant which is in the nature of a legal set-oft coming within the ambit of Order 8, Rule 6, Civil P. C. The argument of learned counsel is that the matter is not governed by the Court-lees Act and the defendant in such a case