Supreme Court Clarifies Law on Counter-Claims: Holds They Cannot Be Directed Solely Against a Co-Defendant

On November 12, 2025 the Supreme Court issued a landmark ruling in Sanjay Tiwari v. Yugal Kishore Prasad Sao & Ors. [2025 INSC 1310], resolving a dispute over the maintainability of counterclaims. The Division Bench, which was made up of Justices K. Vinod Chandran and N.V. Anjaria, overturned a High Court ruling and reaffirmed that a counterclaim must be made against the plaintiff rather than just a co-defendant.

FACTUAL CIRCUMSTANCES

The appellant (plaintiff) filed a suit for specific performance, which gave rise to the dispute. According to the plaintiff, the first defendant had verbally agreed to sell 0.93 acres of land and had been paid in full.

Two more parties (Defendant Nos. 2 and 3) were impleaded during the trial. They asserted that they and the first defendant had a different contract in which they agreed to buy some of the same land. It’s interesting to note that Defendant Nos. 2 and 3 filed a “counter-claim” against the first defendant (their co-defendant) in order to obtain specific performance of their own purported agreement, rather than merely defending the suit.

This counterclaim was accepted by the Trial Court and later upheld by the High Court. The High Court reasoned that resolving all of the issues in a single suit would “avoid multiplicity of litigation.” Before the Supreme Court, the plaintiff contested this strategy.

THE LEGAL POSITION: COUNTER-CLAIMS AGAINST CO-DEFENDANTS

Whether a defendant can use a counterclaim to resolve a disagreement with another defendant in the same suit was the main legal question.

The precedent established in Rohit Singh & Ors. v. State of Bihar [(2006) 12 SCC 734] was a major source of support for the Supreme Court. The Court noted that a counterclaim must always be made against the plaintiff, even though it may be founded on a different cause of action. It cannot be a private dispute between co-defendants only, but it may be related to the cause of action against the plaintiff.

The Bench noted:

“A counter claim though can be based on different cause of action… it has necessarily to be directed against the plaintiff and cannot be directed against the co-defendant.”

In order to enforce the rule that a defendant must first establish a right against the plaintiff before any incidental claims against co-defendants can be entertained, the Court also cited Rajul Mano Shah v. Rajeshwari Rasiklal Sheth [(2025) 10 SCR 152].

DECISION

According to the Apex Court, Defendants Nos. 2 and 3 lacked a specific claim against the plaintiff. Their complaint concerned a different purported agreement and was directed solely at the first defendant. The Court also pointed out that since they tried to file their claim years after their purported cause of action arose in 2002, it was probably barred by limitation.
The Supreme Court granted the appeal as a result. It concluded that the High Court made a mistake by allowing the counterclaim only to stop more lawsuits. The High Court’s and Trial Court’s rulings on the counterclaim were overturned. The counterclaim is still pending, and the Trial Court has been ordered to move forward with the initial lawsuit.

The lower courts need to be reminded by this ruling of the stringent limitations of Order VIII, Rule 6A of the Code of Civil Procedure. This decision makes it clear that procedural expediencies cannot supersede statutory limitations, even though the judiciary frequently tries to combine cases in order to save time. A counterclaim is not a means of avoiding bringing a separate lawsuit against a co-defendant; rather, it is a weapon of defense against the plaintiff.