Distinction between set-off and counter-claim: The distinction between set-off and counter-claim may now be noted: (1) Set-off must be for an ascertained sum or must arise out of the same transaction as the plaintiffs claims; a counter-claim, however, need not arise out of the same transaction. (2) Set-off is a statutory ground of defence and is to be pleaded in the written statement. Counter-claim, on the other hand, is a weapon of offence enabling a defendant to enforce his claim against the plaintiff as effectively as in an independent action. It is a sort of cross-action.

A set-off, on the other hand, can be used as a shield and not as a sword. (3) In the case of set-off the plaintiff in order to establish his plea or limitation has to prove that the set-off was barred when the plaintiff commenced his action. In a counter-claim the plaintiff has to prove that it was barred when it was pleaded. (4) An equitable set-off is a claim by the defendant in defence which generally cannot exceed the plaintiffs claim.

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A counter-claim by the defendant may, however, exceed the plaintiffs claim being in the nature of a cross-action. Under the provisions of R. 6-E of O. VIII, if in any suit a set-off or counter-claim is established as a defence against the plaintiffs claim and any balance is found due to the defendant, as the case may be, the court may give judgment to the party entitled to such balance.