Interpleader Suits

Four, he must be ready to pay or deliver it to the rightful claimant. He is not resisting; he simply does not know whom to pay.

Five, no suit must be pending in which the rights of all parties can properly be decided. That is the proviso, and its logic is that an interpleader suit is unnecessary where an existing suit can already settle the matter.

The purpose stated in the section is twofold and both halves should be given: to obtain a decision as to whom payment or delivery should be made, and to obtain indemnity for himself.

What the plaint must say: Rule 1

Order XXXV Rule 1: in every suit of interpleader the plaint shall, in addition to the other statements necessary for plaints, state:

(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 (c) that there is no collusion between the plaintiff and any of the defendants

Clause (c) is the safeguard against abuse. Without it, a debtor and one claimant could arrange an interpleader suit between them to embarrass a genuine creditor, and the collusive plaintiff would enjoy the protection of the Order while doing it.

Read this alongside the ordinary requirements of Order VII Rule 1: an interpleader plaint needs everything a plaint needs, plus these three statements. See [The Plaint].

Bringing the property into court: Rule 2

Rule 2: 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.

That is the practical price of the relief. A stakeholder who wants to be discharged must first put the stake where the court can deal with it.

Where a defendant is already suing the plaintiff: Rule 3

Rule 3: where any of the defendants in an interpleader suit is actually suing the plaintiff in respect of the subject matter of that suit, the Court in which that suit against the plaintiff is pending shall, on being informed by the Court in which the interpleader suit has been instituted, stay the proceedings as against him. His costs in the suit so stayed may be provided for in that suit, and so far as they are not, they may be added to his costs incurred in the interpleader suit.

So the two proceedings are not allowed to run in parallel. The claimant's own suit is stayed and the whole contest moves into the interpleader suit.

What happens at the first hearing: Rule 4

This is the rule that shows how the plaintiff gets out.

Rule 4(1): at the first hearing the Court may:

(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 require, retain all parties until the final disposal of the suit.

Rule 4(2): where the Court finds that the admissions of the parties or other evidence enable it to do so, it may adjudicate the title to the thing claimed.

Rule 4(3): where the admissions do not enable it to adjudicate, it may direct that 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, and shall proceed to try the suit in the ordinary manner.

Sub-rule (3) is the moment the suit changes character. The stakeholder steps out, a claimant steps into his place as plaintiff, and what began as an interpleader becomes an ordinary contest between rival claimants.

Rule 6: 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.

Who may not bring one: Rule 5, with the Code's own illustrations

Rule 5: 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.

The reason is that an agent and a tenant are not neutral stakeholders at all. Each holds under a person whose title he has accepted, and he is not permitted to turn round and put that person to proof against a stranger. What he may do is interplead where the rival claim comes through his principal or landlord, because then he is not disputing the title he accepted.

The two illustrations to the rule make the line exact.

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. C's claim is adverse to A and does not come through him, so B, as A's agent, cannot compel his own principal to interplead.

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 owed by A 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. Here C claims through A, so B is not disputing his principal's title; he is only asking which of two persons standing in A's shoes is entitled.

Learn both illustrations together. The difference between them is the whole of Rule 5.

A worked example

Nikhil runs a warehouse. Om deposits fifty crates with him. Priya then claims the crates from Nikhil, saying she bought them from Om last month, and Om denies the sale and demands them back. Nikhil claims nothing except his storage charges.

Can he interplead? Work through section 88. There is property. Two persons claim it adversely to one another. Nikhil claims no interest except charges, which the section expressly permits. He is ready to deliver to whoever is entitled. And no suit is pending in which the rights of both can be decided. All five conditions are met.

What must his plaint say? Everything Order VII Rule 1 requires, plus the three statements in Order XXXV Rule 1: that he claims no interest beyond charges or costs, the claims of Om and Priya severally, and that there is no collusion between him and either of them.

Must he hand over the crates? Under Rule 2, where the thing claimed is capable of being placed in the custody of the Court, he may be required to place it there before he is entitled to any order.

Priya has already sued Nikhil for the crates. Rule 3: the court in which her suit is pending shall, on being informed, stay it as against her, and her costs there may be provided for or added to her costs in the interpleader suit.

At the first hearing. The Court may discharge Nikhil, award him his costs and dismiss him from the suit, under Rule 4(1)(a); or keep everyone in if justice or convenience requires. If the admissions allow, it may decide the title there and then under Rule 4(2). Otherwise it frames issues and may make Priya the plaintiff in place of Nikhil, under Rule 4(3).

Nikhil's storage charges. Rule 6: where the suit is properly instituted, the Court may secure his costs by giving him a charge on the crates.

Change one fact. Suppose Nikhil is not a warehouse keeper but Om's agent, and Priya's claim is that Om stole the crates from her. That is illustration (a): the claim does not come through Om, and Rule 5 bars Nikhil from making his own principal interplead.

Change it again. Suppose Priya claims as Om's pledgee, under a security Om himself created. That is illustration (b), the claim comes through Om, and Nikhil may interplead.

Change the plaintiff. Suppose Nikhil also says half the crates are his own. He then has an interest in the subject matter beyond charges or costs, so section 88 is not available to him at all.

What it does not mean

It is not a suit in which the plaintiff claims anything. He claims only charges or costs, and asks to be discharged.

Two people being interested is not enough. Their claims must be adverse to one another.

It is not available where an existing suit can decide everything. The proviso to section 88 says so.

An agent or tenant cannot use it against his own principal or landlord, unless the rival claim comes through that principal or landlord.

Discharge is not automatic. Under Rule 4(1)(b) the Court may retain all parties where justice or convenience requires, and under Rule 2 it may first require the property to be brought in.

Quick revision

Section 88: where two or more persons claim adversely to one another the same debt, sum of money or property from another person who claims no interest other than for charges or costs and is ready to pay or deliver it to the rightful claimant, that person may sue all the claimants to obtain a decision as to whom to pay, and indemnity for himself. Proviso: not where a suit is pending in which the rights of all parties can properly be decided.

Order XXXV Rule 1, the plaint must state: no interest beyond charges or costs; the claims of the defendants severally; and no collusion. Rule 2: the thing claimed may be required to be paid into or placed in the custody of the Court first. Rule 3: a defendant's own pending suit against the plaintiff is stayed. Rule 4: at the first hearing the Court may discharge the plaintiff with costs, or retain all parties; may adjudicate the title on the admissions; or may frame issues and make a claimant the plaintiff in his place. Rule 5: agents may not sue principals, nor tenants their landlords, to compel interpleader, except where the rival claims through the principal or landlord. Two illustrations, jewels deposited with an agent. Rule 6: the Court may secure the plaintiff's costs by a charge on the thing claimed.

Test yourself

1. What is meant by an interpleader suit? A suit instituted under section 88 by a person from whom two or more persons claim adversely to one another the same debt, sum of money or other property, where he claims no interest in it other than for charges or costs and is ready to pay or deliver it to the rightful claimant. Its purpose is to obtain a decision as to the person to whom payment or delivery should be made, and to obtain indemnity for himself.

2. State the conditions for an interpleader suit. There must be a debt, sum of money or other property in dispute; two or more persons must claim it adversely to one another; the person holding it 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.

3. What must the plaint in an interpleader suit state? In addition to the statements necessary for any plaint, 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: Order XXXV Rule 1.

4. Can an agent bring an interpleader suit against his principal? Not for the purpose of compelling the principal to interplead with a person claiming otherwise than through him. Order XXXV Rule 5 so provides, and the Code's illustrations show the line: an agent cannot interplead where a stranger claims the goods as wrongfully obtained by the principal, but may where the rival claimant claims through the principal, as a pledgee under a security the principal created.

5. What may the Court do at the first hearing? Under Order XXXV Rule 4 it may declare the plaintiff discharged from all liability in respect of the thing claimed, award him costs and dismiss him from the suit; or retain all parties if justice or convenience so requires. Where the admissions or other evidence permit, it may adjudicate the title; otherwise it may frame issues and direct that a claimant be made plaintiff in lieu of or in addition to the original plaintiff, and try the suit in the ordinary manner.

6. When is an interpleader suit not maintainable? Where the plaintiff claims an interest in the subject matter beyond charges or costs; where the claims are not adverse to one another; where a suit is already pending in which the rights of all parties can properly be decided; and where an agent or tenant seeks to compel his principal or landlord to interplead with a person not claiming through them.