In this article, Anusha Chand discusses Interpleader Suit, section 88 read with Order XXXV of CPC.
INTRODUCTION
Not every suit which is civil in nature follows the same course of trial and proceeding. A few civil cases do not follow the regular course and are comparatively different in nature in terms of the parties and their involvement in the suit. One such kind of suit is the interpleader suit. Interpleader suits are very different from the ordinary suits that are filed before the Hon’ble Court between two parties, the plaintiff and the defendant. The dispute in such suits is instead between two defendants who fight for a claim over a particular good, debt, or chattel.[1] The plaintiffs in such suits usually do not have any real interest in the subject matter of the suit and institute the suit to only make sure that the property in dispute is put in the custody of the actual owner. In Halsbury’s Laws of England, interpleader suits have been defined as follows,
“Where a person is under liability in respect of a debt or in respect of money, goods, or chattel 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.”[2]
For an interpleader suit to be filed there must be a property or a sum of money that is in dispute over ownership and possession. The person currently in possession should not claim any right over the property in dispute and should rather be ready to deliver it to the respective owner once decided by the court.[3] Section 88 of the Code of Civil Procedure, 1908 governs suits of such nature and Order XXXV lays down the procedure to be followed in case of interpleader suits.
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LEGAL PROVISIONS FOR INTERPLEADER SUITS IN INDIA
According to Pomeroy in his book Equity Jurisprudence[4], for an interpleader suit to be filed there are certain essential conditions which should be fulfilled. He stated that
“i. The same thing, debt or duty must be claimed by both or all the parties against whom the relief is demanded;
- All their adverse titles or claims must be dependent, or be derived from a common source;
iii. The person asking the relief must not have or claim any interest in the subject-matter;
- He must have incurred no independent liability to either of the claimants; that is, he must stand perfectly indifferent between them, in the position merely of a stakeholder.” [5]
The general principle on which such suits are based is that the person in possession of the res having no interest in it should not be compelled to be involved in multiple suits filed by the prospective owners of the property in dispute.[6] He should be relieved of this burden by approaching the court and putting the res in the custody of the court. The burden then shifts on the court to ensure that the said property reaches the bonafide owner. Thus suits of such nature were made legit to protect the person in possession of the said res from ‘double vexation’ when there is only a ‘single liability’.[7]
The person is possession files the interpleader suit and becomes the plaintiff while the parties claiming rightful ownership become the defendants. The plaintiffs in such suits are referred to as applicants and defendants as claimants. If the applicant is sued by the claimant in a regular suit then he would have to bear all the cost of the suit. But in the case of interpleader suits, the applicant does not bear any cost to the suit and whatever cost is incurred by the plaintiff is reimbursed to him by the Court.[8]
According to Rule 4 of Order XXXV, the Plaintiff may either be discharged of all his liabilities or may be retained till the suit has been disposed.[9] For an interpleader suit to be maintainable before the Court of law, the plaintiff should not have any interest in the subject matter of the suit.[10] The Calcutta High Court, in Asaan Ali v Sarada Charan Kastagir[11] held that for a suit to be an interpleader suit, the applicant should be willing to handover the property to the claimant and should not have any interest in it. When suits with the applicant having an interest in the res are filed then such suits shall be dismissed on the discovery of the fact that the plaintiff has an interest in the subject matter of the suit.[12] With the passage of time, the courts in the United States now have a different approach when it comes to the Applicant’s interest in the subject matter. The approach adopted by the Courts of US has been discussed in the latter half of the paper.
If the subject matter of the suit or the res is suitable to be placed in the custody of the court, then the court may order the Applicant at its own discretion to deposit the same.[13] The applicant is bound by the Court’s order and cannot contest it as the key requirement in such suits is the absence of Applicant’s interest in the subject matter. In accordance to Rule 4 of Order XXXV, an applicant may be either dismissed from the suit at the first hearing or he may be retained till the suit is finally disposed at the discretion of the court depending on the facts and circumstances of the case.
Tenants and agents are barred from instituting an interpleader suit under Rule 5 of Order XXXV against their landlord and principal respectively.[14] This rule prohibits the tenants from questioning the ownership or title of their landlords during the period when the tenancy is in effect.[15] Regardless of that, there are certain circumstances when the tenant can file an interpleader suit during the subsistence of tenancy. In case of a fight between the legal heirs of the deceased owner or the landlord over the ownership of the property, the tenant gets the opportunity of filing an interpleader suit to determine the actual owner of the property and the rightful recipient of the rent to be paid.[16]
It was held in Neeraj Sharma v The District Sangpur Khadi Gram, by the Punjab and Haryana High Court that an interpleader suit by a tenant will be maintainable if the other person claiming a right over the disputed property is doing so through the original landlord and such suits will not be maintainable if the person independently claims ownership over the property and rent from the tenant.[17]
The Punjab and Haryana High Court held a suit instituted by a tenant to be maintainable where after the landlord’s death two parties were claiming ownership over the property.[18] In Om Prakash Kapoor v Nirmala Devi[19] the ownership over the rented property was claimed by the deceased’s nephew and a lady who had purchased the said property from the deceased’s wife. The court held that the tenant in this case was entitled to know to which of the two parties rent was to be paid and hence the suit filed by him should be maintainable.[20]
The situations under Rule 5 where the tenants are not allowed to file an interpleader suit against the landlord do not include circumstances where someone, other than the real owner by misrepresentation makes the tenant believe him or her to be the owner. There is no special provision permitting the tenant to institute a suit under such circumstances in a state of confusion about the identity of the true owner of the property.
INTERPLEADER SUITS IN THE US
The Supreme Court of United States has brought in a major change in case of interpleader suits by relaxing one of the essential conditions enlisted by Pomeroy in his book Equity Jurisprudence[21] on which the entire genre of such suits is based. The condition which required the plaintiff to not have any interest or claim in the subject matter or the res of the suit was relaxed and even abolished by many courts across the United States. Earlier, before such modification came into effect, plaintiffs were completely barred from instituting an interpleader suits if they had any interest in the subject matter in question. Such suits if filed would be dismissed by the Court. In existence of any kind of interest in the subject matter, the plaintiff was compelled to file a regular suit and was not benefitted with this option of interpleader suit. As the plaintiff did not have any claim, he could not also deny the transfer of ownership to any of the claimants or question the Court’s decision. [22] Such restriction on the plaintiff became problematic because not in every case the claimants had a bona fide interest.
In a case where a person has a life insurance policy and it does not cover for suicide, the insurance company can deny from paying the claimants any money if the cause of death is suicide. Here in the given case, the insurance company has an interest in the money which is being claimed by the legal representative of the deceased. The insurance company believes the death to be caused by suicide while the claimants believe it to have been caused by accident. If we go by the former rule, the insurance company’s interpleader suit will fail to be instituted but by the relaxation or the abolition of the said requirement, the applicant that is the insurance company can file an interpleader suit and deny the claims brought up by the claimants at the same time.[23]
In India, under the Code of Civil Procedure the requirement for the applicant to not have any interest in the subject matter of the interpleader suit in very uncompromising.[24] The Bombay High Court in the case of Mangal Bhikaji Nagpase v State of Maharashtra in 1997 held that it is mandatory for the plaintiff to affirm that he has no interest in the subject matter of dispute other than costs and charges.[25] Provisions which are so resolute in nature make it difficult for plaintiffs to institute an interpleader suit as the satisfaction of the essential conditions become non-viable. On failure to file an interpleader suit, the plaintiff is deprived of the various benefits he could have a enjoyed by filing a suit of such nature.
In the United States Federal Courts, interpleader actions are divided into two categories, the statutory interpleader and the rule interpleader. Minimum diversity between the claimants or the defendants is an essential requirement under 28 U.S.C (United States Code) § 1335 which governs statutory interpleader suits.[26] The provision of statutory is unavailable when the claimants to the res belong to the same state. This section also permits an individual to bring a ‘singular action’ against the claimants while the Federal Rules of Civil Procedure which establishes rule interpleader suits gives a remedy for people who are exposed to multiple litigations.[27] The Federal courts are also authorised to discharge the plaintiff from any kind of liability in such suits by 28 U.S.C § 2361.[28] Indian courts also have similar provisions under Rule 4 of Order XXXV of the Code of Civil Procedure. Further, the U.S.C also sets a minimum requirement for the value of the suit to be of $500 for an interpleader suit to be instituted before the court.[29] The Indian law on the other hand does not have any such requirement under any provision of the CPC. The second kind of interpleader action, the rule interpleader is governed by Federal Rule of Civil Procedure 22.[30] Rule interpleader actions are available in situations where there is absolute diversity and the pecuniary value of the said property in dispute is $75,000.[31] Rule interpleader actions are mostly brought up when the claimant and the applicants belong to different states.
CONCLUSION
The provisions for interpleader suits in India are rustic and do not take into consideration the changing needs and demands of the society. Comparison with the provisions of US on the same matter reflects the absence of the much needed revamp in the provisions under the Code of Civil Procedure.
[1] Takwani CK, Civil Procedure (6th edn, Eastern Book Company 2009) 425.
[2] Halsbury’s Laws (4th edn, 2001) vol 37, para 200.
[3] Takwani CK, Civil Procedure (6th edn, Eastern Book Company 2009) 425.
[4] Chafee Z, ‘Modernizing Interpleader’ (1921) 30 The Yale Law Journal 814.
[5] Ibid.
[6] Ibid.
[7] Chafee Z, ‘Modernizing Interpleader’ (1921) 30 The Yale Law Journal 814.
[8] Code of Civil Procedure 1908, Rule 6 order XXXV.
[9] Code of Civil Procedure 1908, Rule 4(1) Order XXXV.
[10] Code of Civil Procedure 1908, Rule 1 Order XXXV.
[11] AIR 1922 Cal 138.
[12] Takwani CK, Civil Procedure (6th edn, Eastern Book Company 2009) 426.
[13] Goel S, ‘Interpleader Suits – Section 88 Read with Order XXXV of the Code of Civil Procedure, 1908: Analysis’(2016) SSRN < https://ssrn.com/abstract=2880116> accessed 10 October 2018.
[14] Code of Civil Procedure 1908, Rule V order XXXV.
[15] Takwani CK, Civil Procedure (6th edn, Eastern Book Company 2009) 427.
[16] Bharat Bhushan Vij v Arti Techchandani, 2008 (153) DLT 247.
[17] (2006) 142 PLR 791.
[18] Om Prakash Kapoor v Nirmala Devi, CR No. 2770 of 1987.
[19] Ibid.
[20] Ibid.
[21] Chafee Z, ‘Modernizing Interpleader’ (1921) 30 The Yale Law Journal 822.
[22] Chafee Z, ‘The Federal Interpleader Act Of 1936: I’, (1936) 45 The Yale Law Journal 963.
[23] Jaiswal N, ‘Interpleader Suit – Section 88 and Order XXXV of CPC’, (2018) 2 Jus Imperator 1.
[24] Code of Civil Procedure 1908, Rule 1 Order XXXV.
[25] (1997) 99 BOMLR 91.
[26] Vincent J, ‘Protecting Financial Stakeholders: Using Rule and Statutory Interpleader’ (Lexology, 29 September 2014) <https://www.lexology.com/library/detail.aspx?g=9b5654fb-6265-49d1-b929-e022fd073438> accessed 13 October 2018
[27] 28 U.S.C § 1335
[28] 28 U.S.C § 2361
[29] 28 U.S.C § 1335
[30]Vincent J, ‘Protecting Financial Stakeholders: Using Rule and Statutory Interpleader’ (Lexology, 29 September 2014) <https://www.lexology.com/library/detail.aspx?g=9b5654fb-6265-49d1-b929-e022fd073438> accessed 13 October 2018
[31]Ibid.
