Equitable set-off in execution denied for unrelated facility dues; requires same transaction or inequitable circumstances.

ORDER :

Senthilkumar Ramamoorthy, J.

The decree holder filed the civil suit against the 1^st judgment debtor/applicant and three others for the following remedies: recovery of a sum of Rs.45,00,000/- with interest thereon at 18% p.a.; a sum of Rs.15,00,000/- as damages and expenses; and for a permanent injunction to restrain payments under letter of credit dated 27.05.1999.

2. The suit claim arose out of a purchase order issued by the plaintiff/decree holder to a foreign supplier/third defendant. In relation to such supply, the decree holder was directed to open a letter of credit. Such letter of credit was opened by the 1^st judgment debtor/applicant. On the ground that the foreign supplier failed to dispatch the machinery within the prescribed time limit, the decree holder cancelled the purchase order and, thereafter, filed the suit. Shortly after the suit was filed, payment was made under the letter of credit by the 1^st judgment debtor to the foreign supplier/3rd defendant.

3. The 1^st judgment debtor did not plead a set-off, make a counter claim or file a separate suit. The suit filed by the decree holder was decided in its favour under judgment and decree dated 12.12.2008 directing the 1^st and 3^rd defendants to jointly and severally pay the plaintiff/decree holder a sum of Rs.15,03,373/- towards principal and a sum of Rs.37,21,792/- towards interest along with further interest thereon from 01.04.2007 until realization at 18% p.a. In addition, the 1^st and 3^rd defendants were directed to pay a sum of Rs.1,00,000/- towards damages and expenses with interest at the rate of 6% p.a. from the date of judgment till realization.

4. The matter was carried in appeal by the 1^st judgment debtor in O.S.A.No.156 of 2009. The appeal was rejected under judgment dated 01.09.2016. The 1^st judgment debtor endeavoured to file a special leave petition along with an application to condone the delay. By order dated 26.05.2020, the proposed special leave petition was rejected at the pre-numbering stage. Meanwhile, the decree holder filed E.P.No.57 of 2019. In such E.P., the Asset Asset Reconstruction Company (India) Limited (ARCIL), which is said to be an assignee of the 1^st judgment debtor/applicant, filed application Nos.2749 & 2570 of 2022 to implead itself in E.P.No.57 of 2019 and requested that a sum of Rs.85,65,519/- be set-off from the sum of Rs.5,19,94,061/-, which was stated to be the liability of the decree holder as on 28.06.2022. Such applications were rejected under order dated 03.12.2024. Thereafter, order dated 22.08.2025 was issued in the execution petition for a warrant for the attachment and sale of movable properties of the 1^st judgment debtor. Said order is challenged in these applications.

5. The contentions of learned senior counsel for the 1^st judgment debtor/applicant are as under:

(i) At paragraph-93 of judgment dated 12.12.2008, a finding was entered that contra/reverse entry may be made in respect of the principal amount paid. Because payment was made by the 1^st judgment debtor against the letter of credit, the 1^st judgment debtor was entitled to debit the account of the decree holder with regard thereto.

(ii) The decree holder was provided facilities under an overdraft cash credit account with the credit limit of Rs.90,00,000/-. The 1^st judgment debtor marked Exs.R1 and R2 before the learned Master. As per the memo of calculation forming part of Ex.R1, the net amount payable by the decree holder to the 1^st judgment debtor is a sum of Rs.46,33,170.38. This amount has been arrived at after deducting a sum of Rs.16,43,708/- towards the