BANKERS OBLIGATIONS AND RIGHTS WHEN A CUSTOMERS ACCOUNT IS ATTACHED BY A GARNISHEE ORDER

It is said that the word garnishee is derived from the Latin term garnire which means to warn. The obligation of a banker to honour his customers cheque is extinguished on receipts of an order of the court known as garnishee order issued under order 21 Rule 46 of civil procedure code. Such an order attaches the debts not secured by a negotiable instrument by prohibiting from recovering the debt and the debtor from making payment thereof. The creditor at whose request the order is issued is called the judgement creditor the debtor whose money is frozen is called the judgement debtor. And the banker who is the debtor of the judgement debtor is called the garnishee. This order is issued in two parts. First the court directs the banker to stop payment out of the account of the called as ORDER NISI. On receipt of the confirmation of the banker court issued another order known as ORDER ABSOLUTE whereby the entire balance in the account or a specified amount is attached. GARNISHEE ORDER IS APPLICABLE a. Where there is a credit balance b. Attaches the amount drawn by a cheque but payment not yet effected. c. All bank branches of a bank are treated as one entity. d. Attaches future maturing term deposits also. e. attaches joint account if issued so f. Attaches personal account of partners if an order is served on a partnership account. WHERE THE ORDER IS NOT APPLICABLE? a. Where a cheque has been marked for good payment. b. Attaches the amount specified only c. Not applicable to sanctioned limit. d. Where any assignment of balance has been made and acknowledged e. Not applicable to deceased and insolvents f. Salary is not attached. g. Bank can exercise the right of set off before complying with Garnishee Order. DEBTS ATTACHED BY A GARNISHEE ORDER: A garnishee order attaches only debts which are actually due and debts which are accruing due. It does not attach contingent or future debts. AMOUNTS ATTACHED BY A GARNISHEE ORDER: The amount garnished by a garnishee order depends upon the terms of the garnishee order. The order may attach either the entire amount of the judgement debtor lying with the garnishee or part of it. In case the terms of the garnishee order do not specify the amount garnished, the presumption is that the entire amount lying with the garnishee is attached.

BANK DEPOSITS OR FUNDS ATTACHABLE BY A GARNISHEE ORDER: 1. Current deposits or savings bank deposits, standing to the credit of the judgement debtor at the time the order is served on the bank. 2. Fixed deposits in the name of the judgement debtor at the time the garnishee order is served. 3. Time deposits in the name of the judgement debtor at the time the garnishee order is served, provided the required notice of withdrawal has been given by the customer to the banker before the garnishee order is served on the banker. BANKERS RIGHTS ON THE RECEIPT OF A GARNISHEE ORDER: 1. After receiving the preliminary garnishee order, i.e., the order nisi, the banker can raise his obligations to the handing over of the funds attached to the judgement creditor on the appointed date and time. 2. Before paying the amount in the garnished account to the judgement creditor, the banker is entitled to deduct from the customers funds all the amounts due to him from the customer on the date of receipt of the garnishee order.

APPLICABILITY OF THE LAW OF LIMITATION TO BANK DEPOSITS AND ADVANCES

INTRODUCTION Under the Indian Limitation Act of 1963, a debt becomes time-barred, if it is not repaid within three years after it is contracted. As such, no legal action can be taken by a creditor against a debtor for the recovery of the amount due from the debtor after the expiry of three years from the date of debt. Applicability of the law of limitation to bank deposits: Bank deposit also is a debt due from the banker to a customer. So, the law of limitation applies even to a bank deposit. There is some difference between a bank deposit and an ordinary commercial debt in respect of the commencement of the period of limitation. In the case of an ordinary commercial debt, the period of limitation begins from the date of the debt. In case of bank deposits it is as follows In the case of current deposits, the limitation period begins to run from the date on which the demand for repayment is made by the customer. Therefore, in the absence of demand made by the customer, there is no fear of sums deposited with a banker on a current account becoming time barred. In the case of fixed deposits also, the period of limitation begins to run from the date on which the demand for repayment is made by the customer. But there are others who opine that the period of limitation begins to run from the date of expiry of the fixed period.

 In the case of time deposits, the period of limitation begins to run only from the date of expiry of the specified notice of withdrawal given by the customer. Applicability of the law of limitation to bank advances: A bank advance, i.e., a debt due from a customer to a banker is like an ordinary commercial debt. Therefore, there is no difference between an ordinary commercial debt and a bank advance in respect of the commencement of the period of limitation. In the case of a bank loan, the period of limitation begins to run from the date of the loan. However, in the case of a bank overdraft or a cash credit, the period of limitation begins to run from the date on which the overdraft or the cash credit is availed of by the customer and not from the date on which the overdraft or the cash credit is sanctioned.

CONCLUSION: