GARNISHEE & INCOME TAX ATTACHMENT ORDERS

Garnishee Order: The order is issued by the Court to Bank to attach the account of a customer, who is adjudged as a judgement debtor in a case to make payment to a third party who is a judgement Creditor. The Bank on whom the order is issued and which is the Banker of judgement debtor is called Garnishee. The order is issued in two parts: First, Court directs Banker to stop payment out of the account of judgement debtor. This order is called Order Nisi. On receiving order, Banker should immediately suspend operations in account and advise the customer. Any cheque drawn by customer on a/c should be dishonoured by the bank.

 In case if a particular amount is specified in the order Nisi, then any surplus amount available in the account can be paid to the customer or on his order. Order Nisi also seeks explanation of the Banker as to why the funds in the account should not be utilised for meeting the judgement creditors claim. After the Banker files any explanation in the Court, if any, the Court may issue final order, called Order Absolute whereby entire balance in the account or specified amount is attached to be handed over to the judgement creditor through the Court. After making the payment, Bankers liability towards its customer is discharged to that extent. Garnishee order does not apply to the amount of

 Cheque marked by the Bank as good for the payment. Garnishee order attaches the deposits of the customer which are due and accruing due e.g. Fixed Deposits etc.(accruing due). Garnishee Order does not apply to(a) the amounts of cheques, drafts, bills etc. sent for collection by the customer and the amount of which has not been credited to customer a/c (b) Stocks & Shares which are in the process of sale, and the sale amount has not been received. (c) Garnishee order can not attach the funds deposited in the a/c after receipt of Garnishee order. As such garnishee order is not applicable to future credits in the a/c.

 Garnishee order is not applicable to money held by the judgement debtor abroad. Garnishee order is also not applicable to securities held in the Safe Custody of the Bank. Garnishee order issued for one of the joint account holders , declaring him judgement debtor ,can not attach funds of the joint account. But reverse is possible i.e. Garnishee order issued in joint names of two or more individuals, declaring all of them as judgement debtors, can attach the funds of the individual account holder. Garnishee order issued declaring partnership firm as judgement debtor can attach the funds of the individual partners.

 Trust Accounts: If Garnishee order is issued declaring one of the Trustees as judgement debtor, Trust account can not be attached. The Banker should accordingly advise the Court. Before making payment to the Court for the Garnishee amount, Banker can exercise its right of set-off, and also advise the Court. INCOME TAX ATTACHMENT ORDER: The credit balance in the account of a customer of a Banker may be attached by the Income-Tax Authorities, if the former defaults in making payment of the tax due from him. The order should be signed by a authorised officer of

 The Income Tax Deptt. not below the rank of Income Tax officer. The order will attach the funds of the customer which are: (a) due or accruing due (b) any future credits in the account e.g. cheques/ drafts/bills collected or cash proceeds deposited in the account (c) amount of credit in the joint account, pro-rata (d) If the order specifies any amount, funds are attached to that extent Banker can exercise its right of set-off before making payment to Tax Authorities.