Interpleader Suit CPC

Where conflicting claims and uncertainties often reign supreme, the interpleader suit stands as a beacon of clarity and fairness. This legal mechanism, often overlooked in the broader spectrum of civil procedures, serves as a vital instrument for resolving disputes over property, debts and assets.

An interpleader suit is not merely a legal safeguard; it is a powerful tool designed to protect the rights of individuals and entities who find themselves caught in the crossfire of conflicting interests.

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.

Conclusion

Section 88 and Order XXXV of the Code of Civil Procedure, 1908 deals with interpleader suit. These provisions serve to safeguard individuals who act in good faith from facing condemnation due to their non-fulfillment of certain duties, particularly in cases where they have no vested interest in property or where they are the complainants seeking resolution of disputes over property or debt.

By providing protection for a person’s right to legal costs in such scenarios and by facilitating the determination of rightful claims, interpleader suit help ensure fairness and justice in civil proceedings. However, in cases where these rights are not adequately protected or are ignored by the courts, individuals can resort to an appeal process as outlined under Order XLIII Rule 1 of the Code of Civil Procedure, 1908.