The main legal point established in the judgment is the distinction between set off and adjustment, and the requirement to pay court fee on the estimated amount due to the defendants in a claim for set off.

J.B. Koshy, J.

1. The revision petitioner was the plaintiff-bank. The suit was filed for recovery of an amount of Rs. 32,38,041.20 arising out of several loans on the basis of overdraft agreements secured by hypothecation of stock-in-trade, vehicles and machinery, etc. The defendants were set ex parte and the suit was restored after one year and eight months of the institution of the suit. The defendants contended that on the oral assurance of sufficient working capital being made available to them by the previous manager and some of the employees, they had spent large amounts for canvassing orders, etc. The defendants claimed that they are entitled to claim from the bank as damages Rs. 57.47 lakhs out of which Rs. 25 lakhs is stated to be profits which were lost on account of their inability to conduct the business due to lack of funds. Therefore, in the written statement it was claimed that it may be set off against the amounts due to the bank and a decree may be passed in favour of the defendants for the balance amount due to them.

2. The learned sub-judge found that even though an amount was estimated tentatively for the loss and damages sustained due to the breach of agreement and inaction in disbursement of further loans, the amount was not quantified. The amount can be quantified only after adjudication and the amount, according to paragraphs 10 and 22 of the written statement, has to be adjusted from the amount due. So it is a case of adjustment and no court fee need be paid on the same until the matter is finally adjudicated and preliminary decree is passed, The learned judge also relied on the decision in Anand Enterprises v. Syndicate Bank, AIR 1990 Kar 175.

3. The revision petitioner urges that in paragraph 4 of the written statement it is clear that what is raised is a claim for set off and counterclaim and their plea for set off and counter-claim is based on the allegations which they could have filed as a separate suit also and in effect it will amount to a counter-claim or claim set off for which court fee has to be paid. If it is a claim for set off court fee has to be paid in view of Section 6(2) of the Code of Civil Procedure, 1908. Section 6(2) of the Code of Civil Procedure states that a written statement claiming a set off shall have the same effect as a plaint in a cross-suit. Section 8 of the Kerala Court Fees and Suits Valuation Act, 1959, was also referred to. Under Section 8 of the Kerala Court Fees and Suits Valuation Act, 1959, a written statement pleading a set off or counter-claim shall be chargeable with fees in the same manner as a plaint. The rates are mentioned under Schedule I, Article 1 of the Kerala Court Fees and Suits Valuation Act, 1959. The claim raised in the written statement is a claim for set off or counter-claim and court fee has to be paid as per Schedule I, Article 1, but such court fee need not be paid if it is a question of adjustment. Therefore, the question to be decided is whether the claim raised by the defendants in the written statement is a question of set off or counterclaim or it is only an adjustment.

4. A Division Bench of this court in Cheria Elias v. Surendra Chit Fund [1989] 1 KLT 449, explained what is set off and what is adjustment (head note) :

"Set off is a plea open to a defendant by which he could claim wiping off or reducing the plaint claim by adjustment of the amount due to him from the plaintiff. A plea of set off is distinguishable from a plea of payment of adjustment. Set off extinguishes the debt or reduces the same. Payment of adjustment refers to a satisfaction or extinguishment of a debt effected prior to the raising of defence in the written statement. The question of set off can arise only in respect of dues which are outstanding and which have not already been adjusted. Thus, a plea of payment or adjustment is definitely and essentially a different plea and can be pressed into service only if the same was raised before the institution of the su