GARNISHEE ORDER & ATTACHMENT ORDER

GARNISHEE ORDER

A Garnishee Order is an order issued by a court under provisions of Order 21, Rule 46 of the Code of Civil Procedure, 1908. The concept of ‘Garnishment’ has been introduced in civil procedure code by the Amendment Act, 1976, and is a remarkable piece of legislation. This term has been derived from the French word ‘garnir‘ which means to warn or to prepare.

In simple words, the garnishee is the person who is liable to pay a debt to a debt to the judgment debtor or to deliver any movable property to him. Besides the Judgment Debtor and decree Holder, Garnishee is a third person in whose hands the debt of the judgment debtor is kept.

The Garnishee Order is an order passed by an executing court directing or ordering a garnishee not to pay money to the judgment debtor since the latter is indebted to the garnisher (decree holder). It is an Order of the court to attach money or Goods belonging to the judgment debtor in the hands of a third person.

How a garnishee order works?

A default judgment is usually obtained by a creditor either when a debt has gone unpaid, you haven’t been able to come to any agreement with the creditor about repaying the debt, or other alternative debt collection avenues have been exhausted. If a garnishee order is made against you, then your bank, financial institution, or employer will likely be notified rather than you.

The payment made by the garnishee into the court under the notice shall be treated as a valid discharge to him as against the judgment debtor. The court may direct that such amount may be paid to the decree-holder towards the satisfaction of the decree and costs of the execution.

Features of the Garnishee Order

The bank upon whom the order is served is called Garnishee. The depositor who owes money to another person is called judgment debtor. Features of the Garnishee Order are as under;

• Garnishee Order applies to existing debts as also debts accruing due i.e. SB/CD, RD/FD Accounts.
• Garnishee Order applies only to those accounts of Judgement Debtor which have credit balance.
• The relationship between the bank and judgment debtor is of debtor and creditor. Bank is the debtor of the judgment debtor who is a creditor of the bank.
• Garnishee Order does not apply to money deposited after receipt of Garnishee Order. It also does not apply to cheques sent for collection but yet to be realized. But if credit was allowed in the account before realization with the power to withdraw to the customer, Garnishee’s order will be applicable on this amount.
• Garnishee Order does not apply to an unutilized portion of the overdraft or cash credit account of the borrower as no debt is due to the judgment debtor. For example, if the limit is Rs 4 crore and the outstanding is debited Rs 3 crore, the garnishee order is not applicable on the balance Rs 1 crore.
• A bank can exercise the right of set-off before applying for the Garnishee Order.
• Garnishee Order is applicable only if both debts are in the same right and same capacity.
• Garnishee Order issued in a single name does not apply to accounts in the joint names of judgment debtor with another person(s). But if the Garnishee Order is issued in joint names, it will apply to individual accounts also of the same debtors. When Garnishee Order is in the name of a partner it will not apply to a partnership account but when Garnishee Order is in the name of firm, accounts of individual partners are covered.
• If an amount is not specified in the order, then it will be applicable to the entire balance in the account. However, if it is for a specific amount, the cheques can be paid from the balance available after setting aside the amount as mentioned in the Garnishee Order.
• Not applicable on fixed deposits taken as security for some loans.
• If the loan is given against fixed deposits, applicable on the amount after adjusting the loan.

Where neither the garnishee makes the payment into the court, as ordered, nor appears and shows any cause in answer to the notice, the court may order the garnishee to comply with such notice as if such order were a decree against him. The costs of the garnishee proceedings are at the discretion of the court. Orders passed in garnishee proceedings are appealable as Decrees.

ATTACHMENT ORDERS

Income Tax Authorities Issue Attachment Orders in terms of Section 226(3) of the Income Tax Act, 1961. On receipt of this order, a banker is required to remit the desired amount to income tax authorities. An Attachment Order without mentioning the amount is not a valid order.

Attachment Order is different from Garnishee order in the following respects:

• The attachment order applies to money deposited in the account after receipt of the order also till it is fully satisfied whereas the Garnishee order does not apply to subsequent deposits.
• Attachment Order in single name applies to joint accounts also proportionately unless the contrary is proved whereas Garnishee order in single name does not apply to joint accounts. However, the right to set-off is available to the bank before applying for the order.

In case the banker fails to comply with the Attachment Order, it will be liable for the amount of the order and deemed as an assesses in default.

When both the Garnishee Order and Attachment Order are received simultaneously, priority should be given to the Attachment Order.