Supreme Court Holds Counterclaim Cannot Be Filed Against Co-Defendant—Trial Court Wrongly Allowed Counterclaim by Impleaded Defendants

Case Name: Sanjay Tiwari v. Yugal Kishore Prasad Sao & Ors.
Citation: C.A. @ SLP (C) No. 11050 of 2025; 2025 INSC 1310
Date of Judgment/Order: 12 November 2025
Bench: Hon’ble Mr. Justice K. Vinod Chandran & Hon’ble Mr. Justice N.V. Anjaria

Held: The Supreme Court held that a counterclaim under Order VIII Rule 6A CPC cannot be directed against a co-defendant and can only be raised against the plaintiff. The impleaded defendants (defendants 2 and 3), who sought conveyance of the suit property from defendant No. 1, had no maintainable counterclaim because their claim was not directed against the plaintiff, was unsupported by any concluded agreement, and was barred by limitation. Relying on Rohit Singh v. State of Bihar and Rajul Mano Shah v. Kiranbhai Patel, the Court set aside the counterclaim while permitting the suit to proceed on merits.

Summary: The plaintiff filed a suit for specific performance based on an alleged oral agreement dated 02.12.2002 for purchase of 0.93 acres from defendant No. 1, asserting full payment and possession. Defendant No. 1, in his written statement, claimed that defendants 2 and 3 were in possession of a portion of the property and had an earlier agreement for purchase of 50 decimals. Defendants 2 and 3 thereafter sought impleadment, which was allowed, and filed a written statement asserting a right to the entire land for ₹5,55,000, allegedly based on partial payment of ₹2,95,000. They further raised a counterclaim seeking conveyance of the land from defendant No. 1. The Trial Court allowed the counterclaim; the High Court refused to interfere under Article 227, citing avoidance of multiplicity of litigation. Before the Supreme Court, it was shown that defendants 2 and 3 had no consistent pleadings, had conceded that 43 decimals had already been sold to the plaintiff’s father, and had raised the counterclaim after expiry of limitation. The Court held that their impleadment was proper only to avoid non-joinder, but that no counterclaim could be maintained against a co-defendant, especially when no subsisting agreement or readiness and willingness was pleaded.

Decision: The Supreme Court allowed the appeal, set aside the High Court’s order and the Trial Court’s acceptance of the counterclaim, and held that defendants 2 and 3 cannot maintain a counterclaim against a co-defendant or seek conveyance based on a time-barred and unproven agreement. The Court restored the suit to proceed before the Trial Court on all issues except the rejected counterclaim, clarified that the question of possession remains open for adjudication, and left the parties to contest the suit strictly on its merits.