Interpleader Suits (Section 88; Order XXXV)

Section 88 of the Code of Civil Procedure, 1908, read with Order XXXV, supplies one of the more elegant procedural devices in the Code — the interpleader suit. Where a person holds some debt, sum of money or other property, movable or immovable, claims no interest in it for himself except for charges and costs, but is faced with two or more rival claimants demanding it adversely to one another, he is permitted to file a single suit calling upon the rival claimants to interplead — that is, to fight out the title between themselves — so that he may safely deliver the thing to the rightful claimant and be discharged from all further liability. The substantive power lives in Section 88; the procedure in the six rules of Order XXXV. The institution is the Code's recognition that a stakeholder caught between two or more claims should not have to bear the burden of separate suits and the risk of inconsistent decrees.

The provision is short but heavily examined. Recurring questions test the four conditions for maintainability, the bar in Rule 5 against agents and tenants suing their principals or landlords, the directive (not mandatory) character of Rule 2 on payment into court, the alternative outcomes at the first hearing under Rule 4, and the exceptions for a Court of Wards, a railway company and a banker. The principal classical authorities — Mangal Bhikaji Nagpase v State of Maharashtra (the four conditions), Syed Shamsul v Sitaram AIR 1978 Pat 151 (Rule 2 directive), Khemchand v Khairuddin (non-appearance at first hearing), Sobhanadyi Rao v Jaggaya AIR 1966 AP 92 (partial discharge), Court of Wards v Tikka Chain AIR 1954 Punj 103, Chhaganlal v BB and CI Rly, and Duraiswamy v Dindigul Urban Co-operative Bank AIR 1957 Mad 745 — must all be at command.

Object of the interpleader suit

The object of an interpleader suit is to protect the innocent stakeholder. The plaintiff is not asserting any title of his own; he is, on the contrary, expressly disclaiming any interest beyond the recovery of his charges or costs. He has the thing in his hand — a parcel deposited with him as bailee, money standing to a depositor's credit, rent owed to a landlord whose title has been disputed by a stranger — and two or more persons stand in front of him each saying "give it to me, the others have no right". If he picks one and pays him, he risks a suit by the other; if he refuses both, he risks two suits and two decrees. The Code therefore allows him to bring a suit of a special kind — one in which he is plaintiff only nominally, the rival claimants are defendants, and the question for the court is which of the defendants is entitled to the thing. The plaintiff is a passive stakeholder; he asks only to be discharged on payment of his costs. The wider procedural context, including the rule against multiplicity of suits and the principle of res judicata, is treated in the chapter on history, object and scheme of CPC.

Section 88 — when interpleader suit may be instituted

Section 88 provides that 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. The proviso to Section 88 carves out the only general statutory disability — where any suit is pending in which the rights of all the parties can properly be decided, no such suit of interpleader shall be instituted. The substantive power is, in other words, available only where there is no other suit already on foot in which the same question can be determined.

The discretion to institute is statutory, not common-law. Before the 1908 Code, the English remedy of interpleader was administered through bills in equity; the Code converted the equitable remedy into a statutory civil suit, available in any civil court of competent pecuniary and territorial jurisdiction. The procedural route runs in parallel with — but is conceptually distinct from — the procedure under Order XXII for substitution of legal representatives, the procedure under Order I Rule 10 for addition or substitution of parties, and the procedure under Order II Rule 2 against splitting of claims, all of which are treated more fully in the chapter on parties to a suit.

Conditions for an interpleader suit

The four conditions, distilled from Section 88 and applied in Mangal Bhikaji Nagpase v State of Maharashtra and a long line of decisions, must each be satisfied. (a) There must be some debt, sum of money, or other property, movable or immovable, in dispute. The thing claimed must be capable of identification and capable of being delivered to the rightful claimant — a purely abstract claim of right, unconnected with any thing in the plaintiff's hand, will not do. (b) Two or more persons must be claiming the same thing adversely to one another. The claims must be inconsistent — claims that can stand together (one to part of the fund, the other to the rest) do not give rise to interpleader. (c) The plaintiff must claim no interest in the thing other than for charges or costs, and must be ready and willing to pay or deliver the thing to the rightful claimant. The plaintiff cannot use an interpleader suit to assert a title of his own; the moment he claims any beneficial interest, the suit ceases to be an interpleader and becomes an ordinary suit. (d) There must be no collusion between the plaintiff and any of the defendants. Where the suit is filed at the instance of, or in concert with, one of the rival claimants — to use the form of an interpleader to defeat the other claimant — the suit will not lie.

The four conditions correspond to the express averments which Order XXXV Rule 1 requires in the plaint. The court at the first hearing examines whether each averment is borne out by the materials; where any one of them fails, the suit is dismissed. The conditions also separate an interpleader suit from a suit by a stakeholder who has any beneficial interest of his own — for instance, a suit by a mortgagee who claims his own debt and asks the court to decide between rival claimants to the surplus. That kind of suit is not an interpleader; it is an ordinary suit between three or more parties.

Rule 1 — plaint in interpleader suits

Rule 1 directs that in every suit of interpleader the plaint shall, in addition to the other statements necessary for plaints under Order VII, state three things expressly — (a) that the plaintiff claims no interest in the subject-matter in dispute other than for charges or costs; (b) the claims made by the defendants severally; and (c) that there is no collusion between the plaintiff and any of the defendants. The averments are mandatory. The plaintiff must set out, with sufficient particularity, the nature and substance of each rival claim — vague references to a "dispute" or "rival claim" are not enough. He must, by his own pleading, demonstrate that the case falls within the four corners of Section 88. The court, on the materials in the plaint, decides at the threshold whether the suit is an interpleader at all; the question is then settled at the first hearing under Rule 4.

Rule 2 — payment of the thing into court

Rule 2 provides that where the thing claimed is capable of being paid into court or placed in its custody, the plaintiff may be required to pay or place it before he can be entitled to any order in the suit. The provision is directive and not mandatory. Syed Shamsul v Sitaram AIR 1978 Pat 151 settled that non-payment of the thing claimed, or a failure to place it in court's custody, does not nullify the entire proceedings — the court retains the discretion to call for payment as a condition for further orders, but the suit itself does not fail for want of payment. Where the thing is incapable of being paid into court — an immovable property or a chose in action — the rule is by its terms inapplicable and the question of payment does not arise. Where the thing is partly disputed and partly admitted, the court may direct payment into court of so much as is in dispute and order release of the rest, as Sobhanadyi Rao v Jaggaya AIR 1966 AP 92 indicates — partial discharge follows partial dispute.

Rule 3 — stay of pending suit by a defendant

Rule 3 deals with the situation where one of the rival claimants has already sued the stakeholder in respect of the same subject-matter before the institution of the interpleader suit. Where any defendant in the interpleader suit is actually suing the plaintiff in respect of the subject-matter, the court in which that earlier suit is pending shall, on being informed by the court in which the interpleader suit has been instituted, stay the proceedings in the earlier suit. The defendant's costs in the suit so stayed may be provided for in that suit; in so far as they are not, they may be added to his costs incurred in the interpleader suit. The rule prevents inconsistent decrees and gives effect to the proviso to Section 88 from the other direction — once the interpleader suit is on foot, the rival earlier suit must yield, so long as the rights of all parties can be decided in the interpleader.

Rule 4 — procedure at the first hearing

Rule 4 prescribes the alternatives open to the court at the first hearing of an interpleader suit. Sub-rule (1) provides that the court may, at the first hearing, either — (a) declare that the plaintiff is discharged from all liability to the defendants in respect of the thing claimed, award him his costs, and dismiss him from the suit; or (b) if it thinks that justice or convenience so requires, retain all parties until the final disposal of the suit. Sub-rule (2) provides that where the admissions of the parties or other evidence enable the court to do so, it may adjudicate the title to the thing claimed at the first hearing itself. Sub-rule (3) provides that where the admissions do not so enable the court, it may direct that an issue or issues between the parties be framed and tried, and that any claimant be made a plaintiff in lieu of or in addition to the original plaintiff; the suit shall then proceed to be tried in the ordinary manner.

The classical case on Rule 4(1)(a) is Khemchand v Khairuddin 53 IC 365. Where the rival claimants do not appear at the first hearing, the court may, if the suit is properly instituted, declare under Rule 4(1)(a) that the plaintiff is discharged from all liability to the defendants in respect of the money claimed, award him his costs, and dismiss him from the suit. Non-appearance of the rival claimants is, in substance, an abandonment of their claims as against the stakeholder; the stakeholder is not made to wait. Sobhanadyi Rao v Jaggaya AIR 1966 AP 92 supplies the rule on partial discharge — where the entire amount which is not in dispute is paid into court, the court may order the plaintiff to be discharged; if there is only a partial dispute, the discharge will be partial only. The plaintiff is, in either event, relieved of further responsibility once the thing in dispute is in the court's custody.

Rule 5 — agents and tenants disabled

Rule 5 prescribes a statutory disability. Nothing in Order XXXV 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. The rationale is the relationship of trust and confidence between principal and agent and between landlord and tenant — the agent or tenant who has received the thing on the footing of that relationship cannot turn round and ask the principal or landlord to fight a stranger for the thing. The bar applies only where the third party claims adversely to the principal or landlord; where the third party claims through the principal or landlord — for instance, as purchaser, assignee or mortgagee — the bar does not apply, and an interpleader suit lies.

The two illustrations to Rule 5 work the distinction precisely. Illustration (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 — because C does not claim through A but adversely to A. Illustration (b): A deposits a box of jewels with B as his agent. A 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; C alleges the contrary. Both claim the jewels from B. B may institute an interpleader suit against A and C — because in this case C claims through A as a pledgee. Nanji v Umatul (1979) 2 Cal LJ 7 applies the same logic to the agent's interpleader bar.

The position for tenants is parallel. A lets certain lands to B. C alleges that the lands never belonged to A, and claims the rent from B. B cannot institute an interpleader suit against A and C — C claims adversely to the landlord A. But if C claims the rent alleging that the lands were sold to him by A after they were let to B, B may institute an interpleader suit — C claims through A as purchaser. Shelly Bonnerjee v Raj Chandra Datt (1910) ILR 37 Cal 552 confirms the rule. Orr v Chidambaram (1910) ILR 33 Mad 220 illustrates a peculiar variation — A grants a perpetual lease of certain villages to his wife B; B sublets to C; A then alleges that the lease in favour of B was benami and gives notice to C claiming the rents; B denies the benami plea. C may maintain an interpleader suit against A and B — A is deemed to claim through B. Jugal Kishore v Bhagwandass AIR 1990 P&H 82 makes a further point: a tenant cannot maintain a suit compelling the landlords to interplead persons who claim independent rights of ownership, regard being had to Section 116 of the Evidence Act and the doctrine of estoppel.

Three categories of stakeholder fall outside the agent-tenant bar by reason of the underlying relationship being something other than principal-agent or landlord-tenant. Court of Wards v Tikka Chain AIR 1954 Punj 103 — a Court of Wards which has assumed the superintendence of an estate is entitled to file an interpleader suit for a decision as to which of the rival claimants was entitled to it, where all of them were its wards. Chhaganlal v BB and CI Rly (1915) 17 Bom LR 339 — a railway company is not an "agent" of the consignor within the meaning of Rule 5, so it may file an interpleader suit against the consignor and a third party claiming adversely to the consignor. Duraiswamy v Dindigul Urban Co-operative Bank AIR 1957 Mad 745 — the relationship between a banker and a customer is one of debtor and creditor, not principal and agent, and an interpleader suit is therefore maintainable by the bank where there is a dispute as to the title to monies deposited by a customer.

Rule 6 — charge for the plaintiff's costs

Rule 6 provides that 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. The rule recognises that the stakeholder, having been driven into court by no fault of his own, ought to be reimbursed his costs out of the very thing he has been holding. The charge attaches to the thing or its proceeds in court; the rival claimants take only what is left after the costs are paid. Where the thing is a sum of money in court, the costs are deducted from the corpus before the rightful claimant receives the balance. The rule is the procedural counterpart of Section 88's express reservation — the plaintiff's interest, though only for charges or costs, is given priority over the rival claimants' substantive claim.

Interpleader and ordinary suits — distinction

Five points of distinction between an interpleader suit and an ordinary suit are exam-favourites. First, the plaintiff. In an ordinary suit the plaintiff asserts a right of his own and seeks a relief in his own favour; in an interpleader suit the plaintiff disclaims any beneficial interest and seeks only to be discharged. Second, the parties. In an ordinary suit the rival claimants may not be on opposite sides — they may both sue the same defendant in successive suits — while in an interpleader the rival claimants are necessary defendants on the same side of the cause-title, brought together so that the question between them may be decided once and for all. Third, the relief. In an ordinary suit the court adjudicates the plaintiff's claim; in an interpleader the court adjudicates the rival defendants' claims inter se. Fourth, the conduct of the trial. After the first hearing under Rule 4(3), one of the claimant defendants is converted into the plaintiff, and the suit proceeds in the ordinary manner — the structural conversion is unique to the interpleader. Fifth, the proviso to Section 88 and Rule 3. An interpleader suit cannot be filed where another suit is pending in which the same question can be decided; conversely, where an interpleader is properly instituted, a pending suit by one claimant against the stakeholder is stayed under Rule 3.

Corporations, officers, court fee and forum

Where the plaintiff stakeholder is a corporation, a society, a partnership firm or a public officer, the special procedural rules in Order XXIX (suits by or against corporations), Order XXX (suits by or against firms), and Order XXVII (suits by or against the Government and public officers) apply mutatis mutandis to the institution of an interpleader suit. The interface is treated more fully in the chapter on suits by or against corporations and the chapter on suits by or against the Government and public officers. A bank as plaintiff (Order XXIX) and a railway company as plaintiff are both common in the case-law because the underlying disputes — over deposits, over consignments — typically generate interpleader claims.

Court fee on an interpleader suit is governed by the relevant State court-fees legislation. The general principle is that the suit is treated as a suit for a declaration with consequential relief; the value of the thing claimed is taken as the value of the suit for jurisdictional purposes, and ad valorem court fee is paid on it. Forum is determined by Sections 15 to 20 of the CPC, applied to the value of the thing claimed and the place where the cause of action arises — usually the place where the plaintiff stakeholder holds the thing. The general framework on jurisdiction is set out in the chapter on jurisdiction of civil courts under Sections 9, 11 and 15 to 20.

Key cases at a glance

Mangal Bhikaji Nagpase v State of Maharashtra — sets out the four conditions for the maintainability of an interpleader suit. Syed Shamsul v Sitaram AIR 1978 Pat 151 — Rule 2 is directive and not mandatory; non-payment of the thing into court does not nullify the proceedings. Khemchand v Khairuddin 53 IC 365 — non-appearance of the rival claimants at the first hearing entitles the court to discharge the plaintiff under Rule 4(1)(a). Sobhanadyi Rao v Jaggaya AIR 1966 AP 92 — partial dispute, partial discharge; the plaintiff is discharged to the extent of what is paid into court without dispute. Court of Wards v Tikka Chain AIR 1954 Punj 103 — a Court of Wards superintending the estate may file an interpleader suit between rival claimants who are all its wards.

Chhaganlal v BB and CI Rly (1915) 17 Bom LR 339 — a railway company is not an agent of the consignor within Rule 5, and may file an interpleader against the consignor and a third party claiming adversely. Duraiswamy v Dindigul Urban Co-operative Bank Ltd AIR 1957 Mad 745 — the bank-customer relationship is debtor-creditor, not principal-agent; an interpleader by the bank is maintainable. Nanji v Umatul (1979) 2 Cal LJ 7 — the Rule 5 bar on agents' interpleader operates only where the third party claims adversely to the principal; not where he claims through the principal. Shelly Bonnerjee v Raj Chandra Datt (1910) ILR 37 Cal 552 — the parallel rule for tenants. Orr v Chidambaram (1910) ILR 33 Mad 220 — the deemed-claim-through rule worked through a benami-lease fact-pattern. Jugal Kishore v Bhagwandass AIR 1990 P&H 82 — the tenant cannot compel landlords to interplead persons claiming independent ownership, regard being had to the estoppel under Section 116 of the Evidence Act.

Mastery of Order XXXV sets up the broader framework of special suits in the Code — the chapter on mortgage suits under Order XXXIV, the chapter on indigent persons under Order XXXIII, and the procedural baseline in institution of suits under Sections 26 and Orders IV and VI to VIII. The interpleader is the most stakeholder-friendly of the Code's special procedures; a clear grasp of Section 88 and the six rules is enough to dispose of any examination question, however framed.

Frequently asked questions

What is an interpleader suit under Section 88 of the Code of Civil Procedure?

An interpleader suit is a suit instituted by a person who holds some debt, sum of money, or other property, movable or immovable, in which he claims no interest other than charges or costs, and which is claimed adversely by two or more rival claimants. The plaintiff invites the rival claimants to fight out the question of title between themselves, so that he may safely deliver the thing to the rightful claimant and be discharged from all liability. Section 88 supplies the substantive grant; Order XXXV supplies the procedure. The object is to protect an innocent stakeholder against the risk of being sued separately by each of two or more persons claiming the same subject-matter from him.

What are the conditions precedent for instituting an interpleader suit?

Four conditions must be satisfied: (a) there must be some debt, sum of money or other property, movable or immovable, in dispute; (b) two or more persons must be claiming it adversely to one another; (c) the person from whom such debt, money or property is claimed must not himself claim any interest in it other than for charges and costs, and must be ready and willing to pay or deliver it to the rightful claimant; and (d) there must be no collusion between the plaintiff and any of the defendants. The plaint must, under Order XXXV Rule 1, contain express averments to this effect, in addition to the ordinary requirements of a plaint under Order VII.

Can an agent or a tenant institute an interpleader suit against the principal or the landlord?

As a general rule, no. Rule 5 of Order XXXV bars an agent from suing his principal, and a tenant from suing his landlord, for the purpose of compelling them to interplead with persons other than persons making claim through the principal or landlord. Where, however, the third party claims through the principal or landlord — for instance, as purchaser or assignee — the bar does not apply and an interpleader suit lies. Illustrations (a) and (b) to Rule 5 work the distinction; Shelly Bonnerjee v Raj Chandra Datt (1910) ILR 37 Cal 552 confirms it for tenants, and Nanji v Umatul applies it for agents. A Court of Wards superintending an estate may file an interpleader suit between rival claimants who are all its wards, as held in Court of Wards v Tikka Chain AIR 1954 Punj 103.

Is payment of the disputed thing into court a precondition for the maintainability of the interpleader suit?

No. Rule 2 of Order XXXV provides that where the thing claimed is capable of being paid into court or placed in its custody, the plaintiff may be required to pay or place it before he is entitled to any order in the suit. The provision is directive and not mandatory. Non-payment of the thing claimed, or failure to place it before the court, does not nullify the proceedings — Syed Shamsul v Sitaram AIR 1978 Pat 151 settled the rule. The court may in its discretion call for payment as a condition for further orders, but the suit itself does not fail for want of payment.

What is the procedure at the first hearing of an interpleader suit under Order XXXV Rule 4?

Under Rule 4(1)(a) the court may, at the first hearing, declare that the plaintiff is discharged from all liability to the defendants in respect of the thing claimed, award him his costs, and dismiss him from the suit. Under Rule 4(1)(b) the court may, if justice or convenience so requires, retain all parties until the final disposal of the suit. Under Rule 4(2), where the admissions of the parties or other evidence enable it to do so, the court may adjudicate the title to the thing claimed at the first hearing itself. Where the admissions do not so enable the court, Rule 4(3) directs the framing of issues and the trying of the suit in the ordinary manner, with any claimant being made plaintiff in lieu of or in addition to the original plaintiff.

Can a bank or a railway company file an interpleader suit?

Yes. The relationship between a banker and a customer is one of debtor and creditor, not of principal and agent — therefore the bar in Rule 5 does not apply, and a bank may institute an interpleader suit where there is a dispute as to the title to monies deposited by a customer, as held in Duraiswamy v Dindigul Urban Co-operative Bank Ltd AIR 1957 Mad 745. A railway company is also not an agent of the consignor within the meaning of Rule 5, so it may file an interpleader suit against the consignor and a third party claiming adversely to the consignor — Chhaganlal v BB and CI Rly (1915) 17 Bom LR 339.