Code of Civil Procedure, 1908 (CPC)
Interpleader Suits: Section 88 and Order XXXV CPC
A banker holds money, a warehouseman holds goods, an insurer holds a policy amount, and two people claim it. He wants nothing for himself; he simply wants to know whom to pay without being sued twice. The interpleader suit is the Code's answer. Under Section 88 of the Code of Civil Procedure, 1908, a person holding property to which he claims no interest may sue the rival claimants, ask the court to decide between them, and be discharged. Order XXXV supplies the procedure. These notes cover the meaning and object, the five conditions, who may not file such a suit, and how it differs from an ordinary suit.
The interpleader suit: its conditions, its exclusions and its procedure
1. Meaning and Object
An interpleader suit is a suit in which the plaintiff, who is in possession of money or property but claims no interest in it, calls upon the defendants, who make adverse claims to it, to interplead, that is, to litigate the question of entitlement between themselves. The word describes the position exactly: the plaintiff steps aside and the defendants plead against each other.
§ Why the remedy exists A stakeholder faces three risks, and the suit removes all three: • The risk of paying the wrong claimant. If he pays A and B turns out to be entitled, he pays twice, since payment to a person not entitled is no discharge. • The risk of being sued by both. Without this remedy he would have to wait to be sued, defend against each claimant separately, and might face inconsistent decrees. • The risk of holding indefinitely. He cannot keep the property forever; charges accrue, goods deteriorate, and he remains exposed. • The suit lets him deposit the property in court, obtain a discharge with his costs, and step out, leaving the claimants to fight. It is a remedy for the innocent holder, not a device for one who has a stake of his own. |
2. Section 88: The Five Conditions
§ Section 88, CPC 1908 Where two or more persons claim adversely to one another the same debt, sum of money or other property, movable or immovable, from another person, who claims no interest therein other than for charges or costs and who is ready to pay or deliver it to the rightful claimant, such other person may institute a suit of interpleader against all the claimants for the purpose of obtaining a decision as to the person to whom the payment or delivery shall be made, and of obtaining indemnity for himself: Provided that where any suit is pending in which the rights of all parties can properly be decided, no such suit of interpleader shall be instituted. |
§ The five conditions, all of which must be satisfied Taken from the section itself: • There must be a debt, sum of money or other property, movable or immovable, in the plaintiff's hands. • Two or more persons must claim it adversely to one another. The claims must be to the same thing and mutually exclusive; two claimants each asserting a different part of a fund do not claim adversely. • The plaintiff must claim no interest in the subject matter, other than for charges or costs. This is the heart of the remedy: a warehouseman may claim his storage charges and still interplead, but a person asserting a share of the fund itself cannot. • He must be ready to pay or deliver it to the rightful claimant. Readiness is shown by the willingness to place the property in the court's custody under Order XXXV Rule 2. • No suit must be pending in which the rights of all parties can properly be decided. Where such a suit exists, the proviso bars the interpleader suit, because the question can be settled in the existing proceeding. |
3. Who Cannot File an Interpleader Suit
§ Order XXXV Rule 5, CPC 1908 Nothing in this Order shall be deemed to enable agents to sue their principals, or tenants to sue their landlords, for the purpose of compelling them to interplead with any persons other than persons making claim through such principals or landlords. Illustrations. (a) A deposits a box of jewels with B as his agent. C alleges that the jewels were wrongfully obtained from him by A, and claims them from B. B cannot institute an interpleader suit against A and C. (b) A deposits a box of jewels with B as his agent. He then writes to C for the purpose of making the jewels a security for a debt due from himself to C. A afterwards alleges that C's debt is satisfied, and C alleges the contrary. Both claim the jewels from B. B may institute an interpleader suit against A and C. |
§ The persons excluded Four categories in practice: • An agent against his principal, and a tenant against his landlord, where the rival claimant does not claim through that principal or landlord. The reason is estoppel: a bailee, agent or tenant cannot dispute the title of the person under whom he holds. Illustration (b) shows the limit of the bar: where both claimants derive their claims from the principal, the agent may interplead. • A person who claims an interest in the subject matter himself. He is not a stakeholder but a claimant, and must litigate his own claim. • A person already sued in a proceeding in which the rights of all parties can properly be decided, by force of the proviso to Section 88. • A person acting in collusion with one of the claimants. Order XXXV Rule 1 requires the plaint to state that there is no collusion, and a plaintiff found to be colluding is not entitled to the protection the suit gives. |
4. Procedure: Order XXXV
Rule | What it provides |
|---|---|
Rule 1: the plaint | In addition to the ordinary requirements, the plaint must state that the plaintiff claims no interest in the subject matter other than for charges or costs; the claims made by the defendants severally; and that there is no collusion between the plaintiff and any of the defendants |
Rule 2: payment into court | Where the thing claimed is capable of being paid into court or placed in its custody, the plaintiff may be required to so pay or place it before he can be entitled to any order in the suit |
Rule 3: suit already pending | Where any of the defendants in an interpleader suit is actually suing the plaintiff in respect of the subject matter, the court in which that suit is pending shall, on being informed by the court in which the interpleader suit is instituted, stay the proceedings as against him, and his costs shall be provided for as the court may direct |
Rule 4: the first hearing | At the first hearing the court may declare that the plaintiff is discharged from all liability, award him his costs, and dismiss him from the suit; but where the justice of the case requires, it may retain all parties until the final disposal of the suit |
Rule 5: exclusions | Agents may not sue their principals, and tenants their landlords, to compel them to interplead with persons other than those claiming through them |
Rule 6: costs | Where the suit is properly instituted, the court may provide for the costs of the original plaintiff by giving him a charge on the thing claimed, or in some other effectual way |
§ Rule 4: the plaintiff steps out The provision that gives the remedy its character. At the first hearing, where the court is satisfied that the plaintiff is a genuine stakeholder, it may declare him discharged from all liability, award him his costs, and dismiss him from the suit. Thereafter the suit continues between the defendants alone, and the court proceeds to determine which of them is entitled. The claimants are, in substance, made to litigate a dispute that was always theirs. Where the case requires, the court may instead retain all the parties until the final disposal, as where the plaintiff's own conduct is in question, or where his charges must be quantified against the fund. |
5. Interpleader Suit Compared with an Ordinary Suit
Basis | Interpleader suit | Ordinary suit |
|---|---|---|
The plaintiff's interest | He claims no interest in the subject matter, other than charges or costs | He asserts a right of his own and claims relief for himself |
The real contest | Between the defendants, who claim adversely to one another | Between the plaintiff and the defendant |
The relief sought | A decision as to whom payment or delivery should be made, and indemnity for the plaintiff | The substantive relief claimed in the plaint |
Who leaves the suit | The plaintiff, who may be discharged with his costs at the first hearing under Rule 4 | No one; the plaintiff prosecutes the suit to judgment |
Special pleading requirements | Rule 1: no interest, the defendants' claims, and no collusion | The ordinary requirements of Order VII Rule 1 |
Subject matter in court | Rule 2: the plaintiff may be required to pay the money or place the property in the court's custody | No such requirement |
Bar on institution | The proviso to Section 88: no interpleader suit where a pending suit can decide the rights of all parties | No comparable bar; Section 10 may require a stay |
6. Landmark Points
- Section 88. Five conditions: property in the plaintiff's hands; two or more adverse claimants; no interest in the plaintiff other than charges or costs; readiness to pay or deliver; and no pending suit in which the rights of all parties can properly be decided.
- Order XXXV Rule 1. The plaint must state the absence of interest, the claims of the defendants, and the absence of collusion.
- Order XXXV Rule 2. The plaintiff may be required to pay the money into court or place the property in its custody before obtaining any order.
- Order XXXV Rule 4. At the first hearing the court may declare the plaintiff discharged, award him his costs and dismiss him from the suit, leaving the claimants to litigate.
- Order XXXV Rule 5. An agent may not sue his principal, nor a tenant his landlord, to compel an interpleader with persons not claiming through them.
- Order XXXV Rule 6. The court may secure the original plaintiff's costs by giving him a charge on the thing claimed.
7. Frequently Asked Questions
What is an interpleader suit?
A suit in which a person holding money or property, who claims no interest in it other than for charges or costs, sues two or more persons claiming it adversely to one another, so that the court may decide to whom payment or delivery should be made and grant him an indemnity.
What are the conditions for an interpleader suit?
There must be a debt, sum of money or other property; two or more persons must claim it adversely to one another; the plaintiff must claim no interest in it other than for charges or costs; he must be ready to pay or deliver it to the rightful claimant; and there must be no pending suit in which the rights of all parties can properly be decided.
Who cannot file an interpleader suit?
An agent against his principal, and a tenant against his landlord, to compel them to interplead with persons not claiming through them, under Order XXXV Rule 5; a person who claims an interest in the subject matter himself; a person already sued in a proceeding that can decide all the rights; and a person acting in collusion with a claimant.
Why can a tenant not interplead against his landlord?
Because he is estopped from disputing the title of the person under whom he holds. The same reasoning bars an agent against his principal. The bar falls away where the rival claimant claims through the landlord or principal, as illustration (b) to Rule 5 shows.
What must an interpleader plaint state?
In addition to the ordinary requirements, that the plaintiff claims no interest in the subject matter other than for charges or costs; the claims made by the defendants severally; and that there is no collusion between the plaintiff and any of the defendants.
When is the plaintiff discharged from an interpleader suit?
At the first hearing, under Order XXXV Rule 4, where the court is satisfied he is a genuine stakeholder. It may declare him discharged from all liability, award him his costs and dismiss him from the suit, which then continues between the defendants alone.
How does an interpleader suit differ from an ordinary suit?
In an ordinary suit the plaintiff asserts a right of his own against the defendant. In an interpleader suit he asserts no right at all: the contest is between the defendants, the plaintiff merely holds the property, may be required to deposit it in court, and seeks only a discharge and his costs.
8. Related Topics in This CPC Series
- Order XXIV: Payment into Court by the Defendant
- Parties to Suits under Order I: Joinder and Necessary Parties
- Res Sub Judice: Stay of Suit under Section 10
- Order XXV: Security for Costs