Legal Provision: Section 88 & Order 35 CPC
Section 88 of the CPC
This section lays down the substantive right to file an interpleader suit. It states that where a person is under liability regarding any debt or property and claims are made by two or more persons, he may sue them to let the court decide the rightful claimant.
Order 35 of the CPC
Order 35 provides the procedural framework for filing and conducting an interpleader suit. It outlines the contents of the plaint, responsibilities of the plaintiff, and the steps to follow.
Meaning of Interpleader Suit
An interpleader suit is a civil suit filed by a neutral party who holds property or money over which two or more parties claim ownership. The plaintiff does not claim any interest in the subject matter except for charges or costs.
The purpose of the suit is to:
- Protect the stakeholder from double liability
- Prevent multiple litigations
- Let rival claimants fight the legal battle
- Allow the court to determine the rightful owner
Essentials of a Valid Interpleader Suit
To maintain an interpleader suit, the following conditions must be met:
1. Existence of Rival Claims
At least two persons must claim the same subject matter. Their claims must be adverse to each other.
2. Stakeholder Has No Interest
The plaintiff must be a neutral party. He must not claim any personal interest in the disputed property or debt.
3. Plaintiff Holds the Property or Money
The stakeholder must actually hold the goods, money, or property that is under dispute.
4. Willingness to Deliver
The plaintiff must be ready to deliver the property to the rightful claimant as decided by the court.
5. No Collusion
There should be no collusion between the plaintiff and any of the claimants.
Who Can File an Interpleader Suit?
Any person—whether an individual, business, trustee, bank, or warehouse owner—can file an interpleader suit if they face competing claims over goods or funds in their possession.
Example:
A courier service receives a parcel. Two parties claim it. The courier does not know who the actual owner is. Instead of delivering to the wrong person, the courier files an interpleader suit and lets the court decide.
Who Cannot File an Interpleader Suit?
A person claiming any personal interest in the property cannot file an interpleader suit. Also, someone who owes separate debts to separate people cannot file such a suit because there’s no common subject matter.
Procedure for Filing an Interpleader Suit
1. Filing the Plaint
The plaint must:
- Mention that the plaintiff holds the disputed item
- Declare that rival claims exist
- State that the plaintiff has no interest
- Ask the court to decide the rightful owner
2. Deposit or Delivery
The plaintiff may deposit the goods or money in the court.
3. Hearing and Claim Determination
The court hears both defendants (claimants) and decides who holds the stronger legal right.
4. Discharge of Plaintiff
Once the court accepts the interpleader suit and takes control of the disputed property, the plaintiff is discharged from further liability.
Important Case Laws
1. Rashtriya Ispat Nigam Ltd. v. Verma Transport Co. (2006)
The Supreme Court ruled that an interpleader suit is maintainable when the stakeholder has no interest and is under risk due to multiple claims.
2. State Bank of India v. Rajesh Agarwal (2005)
The Court held that banks can file interpleader suits when two clients demand the same fixed deposit.
3. Cotton Corporation of India Ltd. v. United Industrial Bank Ltd. (1983)
The Court clarified that if the stakeholder has any right, title, or interest in the subject, an interpleader suit is not maintainable.
Relief Provided by the Court
The court can:
- Injunct the claimants from proceeding against the stakeholder
- Direct the deposit of the property
- Order that the plaintiff be discharged
- Proceed to adjudicate the dispute between claimants
Difference Between Interpleader Suit and Stakeholder’s Suit
| Aspect | Interpleader Suit | Stakeholder’s Suit |
|---|---|---|
| Interest | No personal interest | May have limited interest |
| Type of Claim | Adverse claims over same subject | May be similar or different |
| Plaintiff Role | Neutral party | May involve minor interest |
| Example | Trader caught between two claimants | Bank with a lien over the disputed amount |
Benefits of Interpleader Suits
- Reduces multiple legal proceedings
- Saves court time
- Protects innocent stakeholders
- Ensures justice among true claimants
Limitations of Interpleader Suits
- Cannot be filed if the plaintiff has an interest
- Not applicable for criminal or personal matters
- Requires actual possession of disputed property
Use of Geographical Indications in Interpleader Context
In trade-related interpleader suits, geographical indications may appear where two parties claim rights over products with regional identity. For instance, if two traders from different regions claim rights over “Kashmiri Saffron” stored in a warehouse, the warehouse may file an interpleader suit and cite the Geographical Indications of Goods Act to help resolve the ownership.
Mnemonic Code to Remember Essentials of an Interpleader Suit
Use the memory code “CHIPS” to recall five essentials.
| Mnemonic | Element | Explanation |
|---|---|---|
| C | Competing Claims | Two or more persons claiming the same property |
| H | Held by Plaintiff | Plaintiff holds the disputed subject matter |
| I | Interest Absent | Plaintiff has no interest in the property |
| P | Plaintiff Ready to Deliver | Willing to give up the property to rightful owner |
| S | Suit Filed Without Collusion | Plaintiff is neutral and acts in good faith |
