What is Equitable set-off?
As a result of series of decisions of the Courts in India there emerge the following propositions of law with regard to equitable set-off:
1. An equitable right of set-off exists in this country when the claims of the plaintiff and that of the defendant arise out the same transaction.
2. The law of equitable set-off applies where the cross-claims though not arising out of the same transaction, were closely connected together.
3. In order that a claim for equitable set-off may arise it is not sufficient that there are cross-demands; it is further necessary that there should be a connection between them which makes it inequitable to drive the defendant to a separate suit—as when the demands arise out of the same transaction or when there is, on each side, knowledge of and confidence in one debt discharging the other.