D.S. Mathur, J.This is an appeal by the New Victoria Mills Co. Ltd. defendant, against the order dated 3-2-1962 of the II Additional Civil Judge of Kanpur, holding that the adjustment of an amount of Rs. 22,375 pleaded in the written statement amounted to a claim of set off on which ad valorem court-fee was payable The defendant was thereupon called to make Rood the deficiency in court-fee.

2. Notice of the appeal has also been given to the Standing Counsel.

3. The material facts of the case are that the plaintiff, Shree Mahesh Company, is a partnership concern dealing in cotton etc., duly registered under the provisions of the Indian Companies Act. The defendant Company, the New Victoria Mills Co. Ltd., purchased cotton from the plaintiff Company. When disputes arose with regard to the amount due, the plaintiff instituted this suit for the recovery of Rs. 33,079-43 N.P. together with costs and interest pendente lite and future in regard to the cotton supplied to the defendant Company.

4. The defendant Company do not appear to have seriously challenged the claim of Rs. 32,632-63 N.P. as principal money but claim adjustment of two amounts. It was pleaded that after such adjustment was made a sum of Rs. 1257-63 N.P. was due to and was payable to the plaintiff which the defendant Company was always ready and willing to pay against proper receipt of discharge.

5. The two adjustments sought for were, one, towards the defective supply of cotton made by the plaintiff Company and the other, towards the non-supply of goods by Shree Vishnu Cotton Company a Company whose partners were the same as of the plaintiff Company.

6. The Civil Judge recorded the finding that the adjustment sought for towards defective supply of cotton resulted from the same transaction and could not be treated as a claim of set oft and no court-fee was payable on this amount. It was, however, held that ad valorem court-fee was payable on the other adjustment. In this appeal we are concerned with the adjustment of the sum of Rs. 22,375 on which ad valorem court-fee has been demanded and hence facts material to this point in issue alone shall be considered in this judgment.

7. The defendants case is that the family consisting of Lala Mussadi Lal, Lala Radhey Lal, Lala Sri Kishan Lal and Lala Moti Lal and their sons are the partners of two firms. Shree Vishnu Cotton Company and Shree Mahesh Company, and Lala Radhey Lal and Lala Jawahar Lal had an authority to act on behalf of both the firms In the name of Shree Vishnu Cotton Company several contracts were entered into with the defendant Company by Jawahar Lal himself Breach occurred on the part of Shree Vishnu Cotton Company and a sum of Rs. 22,375 became due to the defendant from the said Shree Vishnu Cotton Company on account of non-supply of 351 bales. It was on account of this liability that the defendant Company detained payment of the amount due to the plaintiff Company for the supply of cotton and insisted upon adjustment or payment of the loss due from Shree Vishnu Cotton Company and also for defective supplies made by the plaintiff Company.

It may here he noted that for the defective supply of goods the defendant were making a claim of Rs. 12,000 against the plaintiff Company. The defendant gave a similar reply to the notice served by the plaintiff Company, and at the same time asked the plaintiff Company to depute some representative to settle the outstanding matters. The defendants case further is that accordingly in or about the first week of January 1961. Lala Radhey Lal and Lala Jawahar Lal arrived and agreed on behalf of both the Companies, namely, Shree Vishnu Cotton Company and Shree Mahesh Company, that the sum of Rs. 22,376 as damages for non-supply against Shree Vishnu Cotton Company be adjusted against the claim of Shree Mahesh Company. It was also desired that "deductions may be made in the claim against Shree Mahesh Company for defective supplies", and it was eventually agreed that "the said claim be settled at Rs. 9,000".

When para 15 of the written statement containing these words is read along with para 12 thereof, it becomes clear that Lala Radhey Lal and Lala Jawahar Lal had claimed reduction of the amount claimed by the defendant for the defective supply of goods by the plaintiff company. They desired the reduction of the claim for defective supplies and the defendant Company reduced the claim from Rs. 12,000 to Rs. 9,000. Thus the defendant admitted by implication the liability of Rs. 1257-63 n.P. after adjustment of the aforementioned amounts of Rs. 22,375 and Rs. 9,000.

8. What is meant by a claim of set off was considered in Ratan Lal Vs. Madari and Another, and it was held:

A plea of satisfaction or extinguishment of a debt or a claim set up merely by way of defence is very different It may be noted that a plea of payment necessarily refers to a satisfaction or extinguishment of a debt effected prior to the stage of the defence, whereas a plea of set off is in the nature of a cross-claim and in effect it prays for a satisfaction, or extinguishment of a claim to be made in the future after the date when the plea has been set us. If it were held to be merely a plea regarding the adjustment of accounts and no more it would not come within the scope of Article 1, Schedule 1. Court-fees Act and no court-fee would be payable on the amount mentioned in such a plea.

9. There can be no dispute in that the defence plea of having made a payment towards debt or liability cannot amount to a claim of set off: for example, if the defendant alleges to have paid a sum of Rs. 1,000 in part satisfaction of a debt, the plea, irrespective of whether it is true or false, shall be plea of payment and cannot amount to a plea of set off. The same can be said of an adjustment which amounts to payment or satisfaction in part or whole of the liability. What is necessary is that, prior to the plea being raised by the defendant, the plea, if proved, would reduce the amount of the liability without any further point being adjudicated upon in the suit. Where the Court holds that the defence plea of having made a payment of Rs. 1,000 towads the debt is true, the plaintiff cannot be granted a decree for that amount.

Similarly, where under the agreement the liability stands reduced to the extent of the adjustment sought for in the written statement, the adjustment shall amount to payment or satisfaction and, in the eye of law, would not amount to a claim of set off. The Court shall have to consider the nature of the agreement and nothing else. Consequently, if the written statement suggests that payment or satisfaction, in part or whole, of the liability has been pleaded, that shall not be a plea of set-off and no court-fee can be demanded. But if the defendant claims an adjustment on grounds other than agreement, the plea shall be one of set off and can be taken into consideration only after the defendant pays the necessary court-fee. Naturally, if the defence plea of adjustment or set off is not found to be correct, the defendant would not succeed to that extent.

10. The alleged agreement arrived at between the parties has already been quoted above. It is contained in para 15 of the written statement. According to the defendant, the agreement arrived at on behalf of both the Companies, duly represented by Lala Radhey Lal and Lala Jawahar Lal, was that the sum of Rs. 22,375 as damages for non-supply against Shree Vishnu Cotton Company, shall be adjusted against the claim of Shree Mahesh Company. The claim of Shree Mahesh Company is the subject of litigation in the present suit. When the sum of Rs. 22,375 was to be adjusted against the present claim, it would mean that the claim of the plaintiff Company was to stand reduced, in other words, satisfied to this extent The plea as contained in para 15, therefore, amounts to payment or satisfaction in part of the liability, which in the eye of law, shall not amount to a plea of set off or counter claim and hence no court-fee is payable on the alleged adjustment of Rs. 22,375.

11. The learned Advocate for the respondent invited my attention to the cases of Raja Bhupendra Narain Singha Bahadur Vs. Maharaj Bahadur Singh and Others, , Durga Prasad Vs. Swami Avidya Nand Guru Swami Hamarata Nand, and the Shiromani Sugar Mills Ltd. Vs. Seth Sugni Chand Hashmat Rai and Co., but they can all be distinguished on facts. In none did the defendant allege that there was an agreement whereby the liability stood satisfied, that is, reduced to the extent of the adjustment sought for.

12. To sum up, a plea of adjustment does not amount to a plea of set off or counter claim, if as a result of the adjustment the liability stands satisfied in part or whole. In the instant case, the defendant had raised such a plea. What was pleaded in the written statement was that the amount due to the plaintiff Company stood satisfied to the extent of Rs. 22,375. It is immaterial that the amount sought to be adjusted was due to the defendant Company from another Company for non-supply of goods. The plea raised by the defendant thus amounted to part payment or part satisfaction of the plaintiffs claim and such a plea could not amount to a set off, of counter-claim, and hence no court fee was payable by the defendant

13. The F.A.F.O. is hereby allowed and the order under appeal is set aside. It is further ordered that no court-fee is payable on the alleged adjustment of Rs. 22,375. Costs on parties. Stay order is vacated.