Interpleader suit: Section 88; Order 35

Oxford Dictionary: "To interplead" means "to litigate with each other to settle a point
concerning a third party".

In Halsbury's Laws of England, it has been stated: "Where a person is under liability in
respect of a debt or in respect of any money, goods or chattels and he is, or expects to be,
sued for or in respect of that debt or money, or those goods or chattels, by two or more
persons making adverse claims thereto, he may apply to the court for relief by way of
interpleader."

Under this category of suits, the real dispute does not lie between plaintiff and defendant
rather multiple defendants interplead against each other.

E.g. - A finds a phone lying on the road, thereafter both B & C claim the phone from him. A
himself claims no interest in such phone, he can file a suit of interpleader.

Nature and Scope:

• An interpleader suit is one in which the real controversy/dispute is not between the
plaintiff and the defendant, but is rather between the defendants only, who inter-
plead against each other.
• The hallmark of an interpleader suit is the fact that, in an interpleader suit, the
plaintiff is not really interested in the subject-matter of the suit.
• The primary and the foremost object of an interpleader suit are to have the claims of
rival defendants adjudicated, for, in an interpleader suit, there must be some debt,
or, some money, or, other property in dispute between the defendants only.
• The plaintiff in an interpleader suit must be in a position of impartiality/non-
arbitrariness.

Section 88 of CPC:

Where two or more persons claim adversely to one another the same debts, 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.

Conditions on Which an Interpleader Suit can be Instituted:

• Two or more persons claim adversely to one another the same debts, sum of
money or other property from another.
• Property may be movable or immovable.
• The person from whom the property is claimed, claims no interest therein other
than for charges or costs.
• There must not be any pending suit under which the rights of all parties can
properly be decided.

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.

Who may File an Interpleader Suit:

• The person who claims no interest in the property other than for charges or costs
may institute the suit of interpleader. The plaint for the same should be in Form 40
of Appendix A of CPC.

Object:

• The decision of the court in an interpleader suit affords indemnity to the plaintiff on
payment of money or delivery of property to the person whose claim has been
upheld by the court.
• 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.

Partiality:
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.

Procedure for Institution of Interpleader Suit:

Order 35 (Interpleader) of CPC which is as follows:

Rule 1: It states that the plaintiff while filing a suit of interpleader must also state:
• That he claims no interest in the subject-matter in dispute other than for
charges or costs.
• The claims are made by the defendants severally.
• That there is no collusion between the plaintiff and any of the defendants.

Rule 2: It mentions that where the thing claimed is capable of being paid into
Court or placed in the custody of the Court, the plaintiff may be required to so pay
or place it before he can be entitled to any order in the suit.

Rule 3: It states that where defendant in an interpleader suit actually sues the
plaintiff in respect of the subject matter, any court in which suit against plaintiff is
pending shall on being informed by the Court in which suit of interpleader is
pending stay such suit.

Rule 4: At first hearing the court may declare that:

• Plaintiff is discharged from all liability towards defendant in respect of

things claimed.
• If the court thinks that for ends of justice to meet all parties need to be
retained, till the end, it may retain such party.

Rule 5: It mentions that agents and tenants may not institute interpleader suit
against their principal and landlord respectively.

Illustration - 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.
 Rule 6: Charge for Plaintiff’s 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.

Illustrations:

1. A, a railway company, is in possession of goods as a consignee. It does not claim

any interest in the goods except lien for wharfage, demurrage 444 and freight but
rival claims have been made by B and C adversely to each other. A can institute an
interpleader suit.
2. A is liable to pay Rs 40,000. The amount is claimed by B and C adversely to each
other. According to A, he has already paid Rs 10,000. An interpleader suit would be
competent for Rs 30,000.
3. A is liable to pay Rs 50,000. The said amount is claimed by B and C adversely. A
does not dispute his liability and is willing to pay the amount either to B or to C
declared to be the rightful claimant by the Court. A may file a suit under this section
by making B and C as defendants (Or. 35 R. 1). He can deposit Rs 50,000 in Court
(Or. 35 R. 2). On such deposit, the Court may discharge him from liability by
awarding costs to him and by removing his name from the suit. (Or. 35 R. 4).
4. A holds Rs 50,000 claimed by B and c adversely to each other. A institutes an
interpleader suit by joining B and C as defendants. It is revealed that A had a secret
agreement with B before the institution of the suit that if B succeeded in the suit, he
would accept Rs 40,000 in full and final satisfaction of his claim. In view of the
agreement, A has interest in the subject-matter of the suit and he cannot bring an
interpleader suit. The suit must be dismissed.

Test:

In order to decide whether a suit is in the nature of an interpleader suit, the court must
have regard to all the prayers in the plaint. A suit does not become an interpleader suit
merely because the plaintiff requires the defendants to interplead with each other as
regards one of the prayers in the plaint.

Appeal:

An order dismissing an interpleader suit is a decree and is therefore appealable as one

whereas a decision under Order 35 is an appealable order.

Case Laws:
https://blog.ipleaders.in/what-is-interpleader-suit/

• Chaturbhuj Vithaldas Jasani v. Moreshwar Parashram & Ors. (1987): This case dealt
with an interpleader suit filed by a bank, which held funds belonging to multiple parties.
The Supreme Court emphasized that interpleader suits serve the purpose of
preventing the stakeholders from being drawn into multiple, time-consuming, and
costly litigations and that they provide a convenient mechanism for resolving competing
claims.
• Mangal Bhikaji Nagpase v. State of Maharashtra (1997): Bombay High Court held that
the plaintiff must declare that he has no interest in the issue other than expenses and
charges.
• Puran Chand v. Ram Gopal (2000): In this case, the Delhi High Court reiterated the
principle that an interpleader suit is an appropriate remedy when multiple parties
assert competing claims to a specific property or fund held by a third party.
• 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 emphasizes that a separate action is not
necessary in such cases.