Interpleader Suits

By Mohd. Sahil Khan 10 Minutes Read

Introduction

Consider a scenario where you are holding a piece of jewellery that is being claimed by multiple parties. Each claimant is adamant about their right to possession, and you are caught in the middle, fearing legal repercussions. This is the essence of an interpleader suit. Order XXXV and Section 88 of the Code of Civil Procedure, 1908 (hereinafter referred to as C.P.C.) deals with the interpleader suit.

An interpleader action is a legal proceeding initiated by a party who is subject to conflicting claims regarding the same property or funds. The purpose of such a suit is to shield the innocent party from the burden of multiple lawsuits and to allow a court to determine the rightful claimant.

Parties to the suit

1. Person having the possession

• In the case of interpleader suits, the person who has possession of the suit is willing to give it to the rightful claimant.
• The person having the possession will institute a suit against multiple claimants in order to determine the rightful claimant.
• The question emerges as to why he will institute a suit and how he will benefit from it. Filing an interpleader suit can save the person having possession from multiple lawsuits. Furthermore, he will be entitled to receive the cost of the suit. After the court’s decree, the rightful claimant will return the cost.
• For instance, A finds a lost laptop and tries to locate the owner. B and C both claim ownership. A file an interpleader suit to avoid legal liability and have the court determine the rightful owner. The court will hear evidence from B and C to decide who gets the laptop.

2. Claimants

• As per Section 88 of C.P.C., the matters concerning interpleader suits involve two or more claimants who claim adversely to each other either a sum of money, movable or immovable property, etc.
• The claimants are made defendants in the suit, who contest for the property in dispute. Once their claim is proved by way of a piece of evidence, the court confers the same upon them. The rightful claimant has the duty to pay for the cost of the suit to the plaintiff.

Procedure involved in interpleader suit

• Order XXXV of the C.P.C. enumerates the procedural aspects related to interpleader suits. Whereas Section 88 deals with the substantive aspects concerning interpleader suits.
• The plaintiff in the interpleader suit has to declare in his plaint that he does not claim any interest in the subject matter except his lawful charges and cost of the suits as per Order XXXV Rule 1.
• The plaintiff will have to declare the respective claims of the defendant and that he is not in collusion with either defendant.
• When an interpleader suit is filed, the court can adjust the parties involved. It can either dismiss the original plaintiff after they pay their costs and fees or appoint one of the defendants as the new plaintiff.
• In alternative, the court can retain the original plaintiff in the case while simultaneously appointing one of the defendants as an additional plaintiff. This allows the court to adapt the proceedings to best suit the specific circumstances of the case.
• After hearing from the parties, the court may choose to resolve the interpleader suit without a full trial if the parties agree on the facts and the applicable law. This is known as a summary judgment. However, if there are disputed facts or legal issues, the court will schedule a trial to hear evidence and determine the outcome.
• If an interpleader suit is filed while a less comprehensive suit involving only two parties is already pending, the court hearing the interpleader suit will inform the other court about the interpleader action. The court handling the less comprehensive suit will then stay its proceedings. The party who initiated the interpleader suit is entitled to recover the costs associated with the stayed suit. If these costs are not paid, they will be added to the costs of the plaintiff in the interpleader suit.

Proviso to Section 88 C.P.C.

• As per Section 88 proviso, if a comprehensive suit is already pending between all the parties concerned, then an interpleader suit shall not be instituted. It means that if an interpleader suit is instituted, the interpleader suit shall be dismissed.
• The significance of the proviso to Section 88 lies in its ability to prevent the application of Section 10 of the Civil Procedure Code (CPC). Without this proviso, a subsequent interpleader suit would be barred by Section 10, which prevents multiple lawsuits involving the same subject matter.
• However, the proviso explicitly excludes interpleader suits from the scope of Section 10, allowing them to proceed even if a related suit is already pending. Section 88 is a specific provision designed for interpleader suits, while Section 10 is a general provision applicable to all types of lawsuits. As a result, Section 88 takes precedence over Section 10 in cases involving interpleaders.

Can agents and tenants institute interpleader suits?

• Agents and tenants cannot institute interpleader suits against their principals or landlords. Order XXXV Rule 5 of C.P.C. explicitly states that agents cannot sue their principals, nor can tenants sue their landlords, to force them into an interpleader action with third parties. This limitation is designed to maintain the hierarchical relationship between principals, agents, landlords, and tenants.
• While agents and tenants may find themselves in situations where they are caught between conflicting claims, their ability to seek legal recourse is restricted. They cannot directly compel their principals or landlords to enter into an interpleader action with third parties.
• While the general rule is that agents and tenants cannot initiate interpleader suits against their principals or landlords, there is an exception. In cases where a third party’s claim to property or money is derived from the landlord or principal, the agent or tenant may be able to interplead them. This means the agent or tenant can bring the landlord or principal into a lawsuit to resolve the conflicting claims.
• For instance, A tenant is renting an apartment from a landlord. A third party claims ownership of the apartment. The tenant can interplead the landlord and the third party to resolve the conflicting claims and determine who is the rightful owner.

Conclusion

Interpleader suits serve as an essential legal remedy for stakeholders caught between conflicting claims over the same property, protecting them from the risk of multiple liabilities and ensuring the rightful claimant is determined by the court. Section 88 of the Civil Procedure Code, 1908, alongside Order XXXV, lays down the substantive and procedural framework for interpleader suits. The law not only helps stakeholders resolve disputes but also safeguards their financial interests by allowing them to recover costs associated with the litigation. Although the provision primarily applies to stakeholders with no interest in the property, it also imposes limitations, particularly on agents and tenants, who cannot initiate such suits against their principals or landlords. Overall, interpleader suits strike a balance between safeguarding the stakeholder’s rights and providing a judicial forum for claimants to assert their claims in a structured and equitable manner.

Mohd. Sahil Khan