What is Interpleader Suit?
An interpleader suit is a legal action initiated by a person or entity
holding property, funds, or assets that are claimed by two or more
conflicting parties. An interpleader suit is filed when the party
holding the property has no interest in it, except for potential
charges or costs and seeks to avoid liability or multiple lawsuits.
The primary dispute in an interpleader suit typically arises among
the defendants who interplead against each other, rather than
involving the plaintiff and the defendant of a case. An interpleader
suit is distinguished by the fact that the plaintiff is not directly
involved in the subject matter under contention. The fundamental
and most significant objective of an interpleader suit is to resolve
conflicting claims among rival defendants. This situation arises when
there is a disputed debt, capital, or other property solely between
the defendants. Essentially, an interpleader suit is initiated to
adjudicate a matter concerning a third party.
In an interpleader suit, it is essential for the plaintiff to maintain
impartiality and avoid arbitrariness. For instance, consider the
scenario where ‘A’ holds a total of Rs. 10,000, which ‘B’ and ‘C’ both
claim against each other. ‘B’ and ‘C’ are brought to court by ‘A’ in an
interpleader suit. During the proceedings, it is revealed that ‘A’ had
previously reached an agreement with ‘B’ before filing the suit,
stipulating that if ‘B’ were to win the case, he would accept only Rs.
9,000 from ‘A’ as full settlement of his claim. Since ‘A’ has an
interest in the subject matter of the suit due to this arrangement, he
is not eligible to initiate an interpleader suit. Consequently, the
complaint should be dismissed.
Section 88 and Order XXXV of CPC:
Interpleader Suits
Section 88 and Order XXXV of the Code of Civil Procedure, 1908
encompass the provisions governing Interpleader suits.
Section 88 delineates the criteria and conditions under which an
interpleader suit can be initiated. It specifies the essential elements
of an interpleader suit as follows:
Similar Property: There must be property involved that is of
a similar nature, which can include a mortgage, a sum of
money, or any movable or immovable property.
Multiple Claims: Two or more parties must assert competing
claims against each other regarding the said property.
Disinterested Claimant: The person initiating the suit
(plaintiff) claiming the property must not have any interest in
it, except for potential charges or expenses. This disinterest is
crucial, as the plaintiff must be in a position to deliver or
transfer the property to the rightful claimant.
Interpleader Action: A person claiming property may
commence an interpleader action against all the claimants
involved. The objective is to determine which claimant is
entitled to receive payment or possession of the property.
Additionally, the plaintiff seeks indemnity for themselves in
this process.
The Hon’ble Calcutta High Court, in the case of Asan v.
Saroda, established that a suit cannot be considered an
interpleader suit in CPC if the defendants do not assert conflicting
claims against each other. Furthermore, the plaintiff must either
acknowledge the title of one of the defendants or be willing to make
payment or deliver the property to that defendant.
The proviso to Section 88 further stipulates that no interpleader suit
shall be instituted when there is an ongoing lawsuit in which the
interests of both parties can be adequately determined.
Order XXXV Rule 1 – Plaint in an
Interpleader Suit
Order XXXV Rule 1 of the Code of Civil Procedure, 1908 pertains to
the Plaint in an interpleader suit. This rule mandates certain key
elements that must be included in the plaintiff’s complaint:
Lack of Interest: The plaintiff, in the interpleader suit, must
explicitly state that they have no interest in the subject matter
of the suit or in the individual claims made by the defendants.
Absence of Conspiracy: The plaintiff must unequivocally
assert that there is no collusion or conspiracy between the
claimants and any of the defendants throughout the course of
the case.
Listing Defendant’s Claims: The plaintiff is required to
include all the arguments and claims presented by the
defendants in the complaint.
Willingness to Present Property: If the property in dispute
is movable, the plaintiff must express their willingness to place
it before the court for resolution.
The Hon’ble Bombay High Court’s ruling in the case of Mangal
Bhikaji Nagpase vs. State of Maharashtra emphasised that the
plaintiff must affirm, in accordance with Rule 1, that they possess no
interest in the disputed subject matter apart from potential charges
or costs.
Order XXXV Rule 2 – Payment of the Thing
Claimed into Court
Order XXXV Rule 2 addresses the situation where the disputed
property can be paid into court or placed in the custody of the court.
In such cases, the plaintiff may be obligated to take this action
before being entitled to any order in the suit. The Hon’ble Patna
High Court, in the case of Syed Shamshul Haque v. Sitaram
Singh & Ors., clarified that the court has discretion to issue orders
concerning the disputed property and the concerned party must
adhere to these orders before seeking relief from the court.
Order XXXV Rule 3 – Procedure where
Defendant is Suing the Plaintiff in an
Interpleader Suit
Order XXXV Rule 3 outlines the procedure to be followed when a
defendant in an interpleader suit is also suing the plaintiff regarding
the subject matter of the suit. In such instances, the court in which
the suit against the plaintiff is pending must stay the proceedings
upon being informed by the court where the interpleader suit was
initiated. The costs incurred by the defendant in the stayed suit
should be provided for within that particular suit.
Order XXXV Rule 4 – Procedure at First
Hearing in Interpleader Suit
Order XXXV Rule 4 addresses the procedure at the first hearing of
an interpleader suit. This rule provides the court with certain powers
and options:
Plaintiff’s Release from Liabilities: The court has the authority
to release the plaintiff from all liabilities at the first hearing.
Consequently, the court may grant the plaintiff their costs and
dismiss the case. This means that if the court determines that the
plaintiff has no further role or responsibility in the matter, they can
be discharged from the suit.
Retention of Parties: However, if the court believes that it is
necessary for the sake of justice, propriety, or convenience to retain
all parties to the suit, the plaintiff may not be discharged until the
suit reaches its final resolution. This discretion allows the court to
determine whether it is appropriate to release the plaintiff or to keep
them involved in the proceedings.
Framing and Trying Other Issues: If the court deems it suitable,
it may also order that additional issues be framed and tried
concurrently with the suit. Furthermore, the court may allow any
complainant (i.e., the defendant in the interpleader suit) to be made
a plaintiff, either in place of or in addition to the original plaintiff, if
deemed necessary.
Order XXXV Rule 5 – Who cannot file
Interpleader suit?
Order XXXV Rule 5 outlines who is ineligible to file an interpleader
suit. In the case of Jugal Kishore & Anr. v. Bhagwan Das, the
court clarified that certain parties cannot initiate an interpleader suit
in CPC. Specifically, agents cannot sue their principals and tenants
cannot sue their landlords with the intention of compelling these
principals or landlords to interplead with individuals other than those
claiming through them.
Order XXXV Rule 6 – Charge of Plaintiff’s
Cost
Order XXXV Rule 6, the final rule in this order, deals with the charge
of the plaintiff’s costs. When an interpleader suit is appropriately
initiated, the court will determine how the original plaintiff’s costs
will be compensated. This compensation may be obtained by
charging the plaintiff a fee equivalent to the amount in dispute or by
utilising a similar method that proves to be equally effective and
successful.
Essentials of an Interpleader Suit
Before initiating an interpleader suit in CPC, the following conditions
must be met as per Section 88:
Disputed Debt or Property: There must be a disputed debt,
sum of money, or other property, whether movable or
immovable.
Multiple Claimants: Two or more persons must be making
adverse claims to this debt, money, or property.
Disinterested Claimant: The person from whom the debt,
money, or property is claimed should not have any interest in
it, except for charges and costs. They must be willing and
ready to pay or deliver it to the rightful claimant.
No Pending Suit: There should be no other pending suit
where the rights of the rival claimants can be properly
adjudicated.
Who may File an Interpleader Suit?
As per the case of Robinson v. Jenkins (1890), a person who has
no interest in the debt, money, or property except for the charges
and costs incurred by them and is prepared to pay or deliver it to
the rightful claimant, may file an interpleader suit in CPC.
The Reinstitution of Interpleader Suit
Where interpleader suit may be reinstituted and Power to state case
for the opinion of the Court is defined under Section 88 and 90 of
the Code of Civil Procedure 1908. An interpleader suit may be
reinstituted when multiple defendants blame each other for claiming
the same property, debt, or sum of money from the plaintiff, who is
not in direct possession of the property, does not claim any interest
and is willing to deliver the property. However, if a suit related to res
judicata (a matter already adjudicated upon) is pending in one court,
a similar suit cannot be instituted in another court.
The Object of Filing Interpleader Suit
An interpleader suit in CPC is typically filed with the following
objectives:
Adjudication of Claims: The suit aims to adjudicate the
competing claims made by the defendants, thereby
determining the rightful claimant.
Property Distribution: In cases where a person passes away
without transferring property to other family members, a
family member may need to claim the property or money from
a bank. The bank, in turn, may initiate an interpleader suit to
decide who should receive the property. This type of suit is
filed in the court where the doctrine of res judicata applies.
Procedure for Filing Interpleader Suit
The procedure for interpleader suits is governed by Order 35, Rules
1 to 4 of the Code of Civil Procedure, 1908. Here is a summary of
these rules and two landmark cases related to interpleader suits:
Rule 1: In every interpleader suit, the plaintiff must include the
following statements in the plaint:
The plaintiff claims no interest in the subject matter in dispute
except for the charges and costs.
The claims have been made by the defendants separately.
There is no collusion between the plaintiff and any of the
defendants.
The court may also order the plaintiff to deposit the disputed
amount or place the property in the custody of the court, providing
the plaintiff with a charge on the thing claimed to cover the costs
incurred.
Rule 4: According to this rule, the court has the authority to declare
that the plaintiff is discharged from all liability, award them costs
and dismiss them from the suit at the first hearing. Based on the
available evidence, the court may also adjudicate the title to the
property in dispute. If adjudication is not feasible, the court may
direct that issues be framed and tried between the parties and one
of the claimants may be made a plaintiff either instead of or in
addition to the original plaintiff. The suit then proceeds in an
ordinary manner.
Landmark Cases on Interpleader Suit
Neeraj Sharma v. The District Sangrur Khadi Gram
In this case, the Punjab and Haryana High Court clarified that agents
and tenants are not allowed to file interpleader suits against their
principals and landlords, as per Order XXXV Rule 5 of the Code of
Civil Procedure, 1908. A tenant cannot sue their landlord when the
dispute does not involve parties who have claimed through the
landlord. Interpleader suits are intended to resolve claims made
through the person initiating the suit. If someone is claiming a right
and interest in the property without reference to the landlord and
demanding rent, such claims are not maintainable.
Hanumanth Vajhula Jagannadha v. Vajhula Annapurna
Rajesswaramma
This case deals with excess execution questions, where property not
covered by the decree is delivered in execution of the decree. The
court clarified that in such situations, an appeal under Section 47 of
the Code of Civil Procedure is the appropriate recourse for the
judgment debtor to recover the property that was delivered in
excess of the decree. It emphasises that a separate action is not
necessary in such cases.
