Set off (Order VIII, Rule 6]
Set off is reciprocal acquittal of debts. “Setoff” means a claim set up against another. It is a crossclaim which partly offsets the original claim. It is an extinction of debts of which two persons are reciprocally debtors to one another by the credits of which they are reciprocally creditors to one another. Where there are mutual debts between the plaintiff and the defendant, one debt may be settled against the other. It is a plea in defence, available to the defendant. By adjustment, setoff either wipes out or reduces the plaintiff’s claim in a suit for recovery of money.

Counter claim [Order VIII, Rules 6A to 6G]
“Counterclaim” may be defined as “a claim made by the defendant in a against the plaintiff”. It is a claim independent of, and separable from, suit plaintiff’s claim which can be enforced by a crossaction. It is a cause of action in favour of the defendant against the plaintiff.
In addition to pleading a setoff in a suit, the defendant may also setup a counterclaim. The term “counterclaim” means a claim raised by the defendant against the claim of plaintiff in a suit. It is essentially and substantially a crossaction of the defendant. It may be described as a cause of action accruing to defendant against the plaintiff. However, such cause of action must accrue before filing of written statement by the defendant. As such, the defendant may setup a counterclaim only in respect of a claim for which the defendant can file an independent suit. However, the defendant must specifically state in his written statement that he is settingup a counterclaim. Such counterclaim shall not exceed the pecuniary jurisdiction of the court.

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