Garnishee Order - An overview

 The word ‘Garnish’ is derived from an old French word ‘garnir’ which means to warn or to prepare . It is to serve an heir with notice i.e. to warn of certain debts that must be paid before the person is entitled to receive property as an heir.

Garnishee means a judgment-debtor’s debtor . He is a person or institution that is indebted to another whose property has been subject to garnishment. He is a person who is liable to pay a debt to a judgment debtor or to deliver any movable property to him. A third person or party in whose hands money is attached by process of court; so called, because he had garnishment or warning, not to pay the money to the defendant, but to appear and answer to the plaintiff creditor’s suit .

Garnisher is a judgment-creditor (decree-holder) who initiates a garnishment action to reach the debtor’s property that is thought to be held or owed by a third party.

A garnishee order is an order passed by an executing court directing or ordering a garnishee not to pay money to judgment debtor since the latter is indebted to the Garnisher (decree-holder) . It is an order of court to attach money or goods belonging to the judgment debtor in the hands of a third person. It is a remedy available to any judgment creditor; this order may be made by the court to holders of funds (3rd party) that no payments are to make until the court authorizes them. The third party is known as garnishee and the court order is known as garnishee order. The purpose of the order is to protect the interest of the creditors. An order served upon a garnishee requiring him not to pay or deliver the money or property of the debtor (defendant) to him and / or requiring him to appear in the court and answer to the suit of the plaintiff to the extent of the liability to the defendant

Suppose A owes Rs. 1000 to B and B owes Rs. 1000 to C. by a garnishee order the court may require A not pay money owed to him to B, but instead to Pay C, since B owes the said amount to C, who has obtained the order.

Suppose A owes B Rs 2,000/. A refuses to repay the amount to B and B sues A. He obtains a decree in his favor. Here B is a judgment-creditor and A is the judgment-debtor. B comes to know that A has some money in a bank account and would like to have his decree satisfied by attaching the funds in the hands of A's bank. For this purpose he approaches a court and obtains a Garnishee order attaching funds at the bank standing to the credit of A. In this e.g., A, is the garnishee and B is the Garnisher (Person who initiates action).

Order 21 Rule 46 A to 46 I have been newly inserted in the Code of Civil Procedure by the Amendment Act, 1976. They lay down the procedure in garnishee cases. Prior to amendment, opinion expressed by various Courts was that the Court had no power to compel a garnishee to pay debt in Court and in case a garnishee on appearance denied the debt, it was duty of the Court to enquire that if debt was due and when garnishee was held liable to pay, except on certain contingencies, it was not permissible to call upon him to pay the amount into Court . The object of newly inserted Rule 46A is to render the debt due by the debtor of the judgment debtor available in execution to the decree holder and not to drive him to a suit. The primary object of a garnishee order is to make the debt due by the debtor of the judgment debtor available to the decree holder in execution without driving him to the suit. The court may, in the case of debt (other than a debt secured by a mortgage or charge) which has been attached under Rule 46, upon the application of the attaching creditor, issue a notice to garnishee liable to pay such debt, calling upon him either to pay into court the debt due from him to the judgment debtor or so much thereof as may be sufficient to satisfy the decree and costs of execution, or to appear and show cause why he should not do so.

The order contemplated by Rule 46 A is discretionary and the court may refuse to pass such order if it is inequitable. The discretion, however, must be exercised judicially. Where the court finds that there is bona fide dispute against the claim and the dispute is not false or frivolous, it should not take action under this rule.

If money is payable to the judgment debtor on certain contingencies, the garnishee cannot be asked to make payment unless those contingencies have taken place. Similarly, garnishee proceedings cannot be taken in respect of a debt which cannot be attached under the code. Where the garnishee disputes his liability, the court must raise an issue, and determine the liability of the garnishee.

Some property is exempt from garnishment. Exemptions are created by statutes to avoid leaving a debtor with no means of support. For example, only a certain amount of work income may be garnished. Under 15 U.S.C.A. § 1673, a garnishment sought in federal court may not exceed 25 percent of the debtor's disposable earnings each week, or the amount by which the debtor's disposable earnings for the week exceed thirty times the federal minimum hourly wage in effect at the time the earnings are payable. In Alaska, exemptions include a burial plot; health aids necessary for work or health; benefits paid or payable for medical, surgical, or hospital care; awards to victims of violent crime; and assets received from a retirement plan (Alaska Stat. § 09.38.015, .017). Because garnishment involves the taking of property, the procedure is subject to DUE PROCESS requirements. In Sniadatch v. Family Finance Corp. of Bay View , the U.S. Supreme Court struck down a Wisconsin statute that allowed pretrial garnishment of wages without an opportunity to be heard or to submit a defense. According to the Court, garnishment without prior notice and a prior hearing violated fundamental principles of due process.

The payment made by the garnishee into the court pursuant to 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.

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.

Garnishee Proceedings

Garnishment is a judicial proceeding in which a creditor asks the court to order a third party who is indebted to the debtor to turn over to the creditor any of the debtor’s property held by that third party . It is an inquisitorial proceeding, affording a harsh and extraordinary remedy. It is an anomaly, a statutory invention sui generic, with no affinity to any action known to common law. It is a method of seizure but it is not a levy in the usual acceptation of that term. It is proceeding by which a diligent creditor may legally obtain preference over other creditors; and it is in the nature of the creditor’s bill, or a sequestration of the effects of a debtor in the hands of his debtor . It is a proceeding in which plaintiff in action seeks to reach the rights & effects of defendant by calling into court some third party, who has such effects in his possession or who is indebted to defendant. While a garnishment proceeding accomplishes the same purposes as an attachment or execution, it is in no sense a levy on property, but it is a judicial proceeding by which a new judgment is to be obtained.

Garnishee proceedings are the proceedings are in rem as well as in personam. It operates on the person of the garnishee as on the debt. Therefore, it is classified as a proceeding quasi in rem

In Kuchimanchi Nagamani vs. Mantri Prasada Agnihotrudu and others , the petitioner filed suit for recovery. During the pendency of suit the Order of garnishee attachment of amount lying with Government department was passed but no objections were raised by the government authorities at that time and therefore, the Order became final. Later, when the petitioner applied for withdrawal of amount, the Government Authorities objected. The Hon’ble Court while setting aside the objections held that the authorities did not raise the objections at relevant time and therefore, the objections are not to be entertained.

In Fargo Freight Ltd v. Commodities Exchange Corporation , the enforcement petition was for enforcing the English award. The Hon’ble Court held that it was under S 46 to 49 of the Arbitration and Conciliation Act, 1996. In these proceedings, the enforcement has necessarily to be between the parties to the award. In these proceedings, serious disputes regarding the liability of third party to pay could not be decided. Here the dispute arose as to whether or not the documents were discrepant. The Hon’ble Supreme Court held that the division court should have directed the appellants to have that dispute decided by the competent court in an appropriate proceeding. Provisions contained in Part II of the arbitration and conciliation Act, 1996 do not permit courts to decide such disputes with the third party in such proceedings. To that extent, here, the division Court is right. Such a dispute could not have been decided in the proceedings. In Hon’ble Supreme Court’s view, however, the division court was wrong in remitting the matter back for the following procedure under Order 21 Rule 46 CPC. The Hon’ble Supreme Court held that Order 21 Rule 46 deals with the garnishee proceedings. These apply when monies of judgment debtor are in the hands of the third parties. In cases of Letter of Credit the liability of the issuing bank is an entirely independent liability. It cannot be said that the monies payable by the issuing bank are monies belonging to the judgment-debtor. Thus, the claim, if any, can only be decided in independent proceedings which should have been adopted by the Appellants.

Prohibitory order on garnishee

A Notice was issued to call upon the defendant to show cause against the prayer of the plaintiff in his application. However, notice was not issued in form No 5. The Kerala High Court, in Greater Cochin development Authority, Kadavanthara v, harrisons Malayam Ltd. & Anr , held that since the purpose of form 5 was achieved in substance, the order will not be liable to be set aside on that ground. A comparison of form No 5 was made with the prohibitory order which actually served on the garnishee. It revealed certain differences such as in the prescribed form the direction was “to the above named garnishee and to affix at the court house” the mention of the direction to the defendant to furnish security was not available in the impugned order and direction in the impugned order was to the garnishee prohibiting or restraining him from making the payment of specified debt or any part thereof to any person whomsoever or otherwise than the court and form no 5 envisages direction to the Amin to call upon the defendant to furnish security. However, in the absence of any particular form prescribed by the law, whereby the amin, to whom the warrant in form No 5 is addressed, should call upon the defendant to furnish security, the court resorted to issuance of separate notice calling upon the defendant to show cause against the prayer in the application which mentions of security as well, there was no illegality. By issuance of separate notice the court achieved the purpose of the former portion of the form No 5 in substance.

Execution of money decree

The executing court has been given power to recover any of the amounts of the judgment debtor, which is in the hands of other. However, the court has no power to issue an order or direction to anybody, may it be usual financier of the judgment-debtor to pay to satisfy the debt or decretal amount for the judgment debtor, may it under assumption that the guarantee is able and can recover the amount from judgment debtor or the judgment debtor will pay to garnishee. In the just out case, the executing court has not held that any of the amounts of the judgment debtor who is not holding any money of the judgment debtor is lying with the petitioner bank. The executing court did not held that the petitioner under any provisions of law can be directed to create liability upon himself to pay the amount to decree holder even under the assumption that petitioner may recover the amount either from the judgment debtor or from state.

The order of the executing court, which is virtually a direction to create a liability for the bank, rather than to pay any debt amount or deposit amount of the judgment debtor to decree holder is therefore, in violation of the Rule 46 B of order 21 of CPC and is liable to be set aside

Scope & Nature

Scope of Order 21 Rule 46 A

Rule 46-A requires a notice to be issued to a garnishee before a garnishee order is passed against him. If such notice is not issued and opportunity of hearing is not afforded before passing an order, the order would be null and void. In the eyes of the law, there is no existence of such an order and any step taken pursuant to or an in enforcement of such an order would also be void.

The object of this rule is to render debt due by the debtor of the judgment debtor available in execution to the decree holder and not to drive him to a suit. It applies to a debt, other than a debt secured by a mortgage or a charge, which has been attached under R 46. Unlike the Calcutta rule, this rule applies to a debt under a negotiable instrument by virtue of the new R 46-A. The word ‘may’ in the rule means that the rule is discretionary and the court may refuse to act under this rule if it inequitable. If a debt attachable under R 46 has not in fact been attached under this rule or the debt is one which cannot be attached under this rule garnishee proceedings cannot be taken in respect thereof. Thus, the garnishee proceedings cannot be taken in respect of a debt due to a firm in execution decree against the partners in their individual capacity.

The foundation of garnishee proceedings is an attachment under R 46. Further a decree holder can proceed against a garnishee only where the judgment debtor has a present right to recover the debt from his Judgment debtor (the garnishee). If money is payable to the judgment debtor only on a certain contingencies, the decree holder would be subject to the same disability as his judgment debtor & decree holder would be subject to the same disability as his judgment debtor and has to wait till the happening of that contingency. This so because the debt that is attachable is one which the judgment debtor can enforce payment of, if he desires to do so. There is, however, a distinction between the case where there is existing debt, payment whereof is deferred and the case where the debt and its payment rests in future. In the former case, the debt is attachable and in the latter it is not . The fact that the amount of the debt due or accruing is not ascertained does not prevent a garnishee order nisi being made

In Syndicate Bank v. Vijay Kumar, while furnishing bank guarantee in favor of high Court customer furnished two fixed deposit receipts duly discharged to the bank and authorized the bank the custody of the receipts and renewals thereof. The Hon’ble Supreme Court held that it becomes a general lien. Bank can set off liability of the party against the receipts. If the fixed deposits are attached to bank garnishee has to go to the court. The balance after adjustments of bank’s claim shall be available to satisfy the decree.

In Executive Engineer, KSE Board v. J H Sharma , the garnishee appeared in court in response to the letter and filed a counter-affidavit, raising certain objections. It was held that since he had raised his contentions in counter-affidavit, the same could be treated as objections contemplated under O 21 R 46 C even in the absence of formal notice under O 21 R 46 C to order that the disputed question be tried as an issue and to decide the issue. In the impugned orders, the court below did not consider the merits of the dispute raised by the appellant.

Form of Notice

The notice submitted shall call upon the garnishee to show cause. In a particular case, a money decree was obtained on the basis of Compromise. At the instance of the decree holder, an attachment before judgment was effected, of a certain sum of money, said to belonging to the judgment debtor which was in the hands of the appellant garnishee, by way of prohibitory order. The executing court, at no stage, issued any notice under O 21 R 46 to the garnishee. Only, a letter was directed by the court to be written, requesting the garnishee to remit to be stated in the summons or notice. It would not attract O 58 R 5 .

Bank Account

In the case of a bank account which is in the joint names of two persons their shares are taken as equal in the absence of evidence to the contrary . Banker has the right to set off one account against another account of the same person

Cheque

A cheque cannot be attached under O 21 R 46. It is attached under O21 R 51 relating to negotiable instrument.

Contingent Debt

A contingent debt cannot be attached . For Example, where, under a building contract, the building contractor is supposed to be paid only on the architect’s certificate then, unless and until the certificate is issued the money at the owner’s hand cannot be attached for a debt due from contactor.

Scope of Order 21 Rule 46 B:

It empowers the court, in case the garnishee does not appear and show cause against the notice under R 46 A, to order him to comply with the terms of the notice and on such an order, execution may be issued. Such an order is to be deemed to be a decree against the garnishee and in favor of the judgment creditor. The further proceedings are in execution of that decree and against the garnishee . The power to make the order is discretionary and may be refused on sufficient grounds such as where the judgment debtor’s interest in the debt is not personal but is in the capacity as a trustee

Scope of Order 21 Rule 46 C:

The legislature intended to treat some of the orders passed by the execution court to be decree for the purpose of appeals or otherwise. It was further intended to treat certain orders passes to be in the exercise of the original jurisdiction of the court so as to have a final adjudication of those matters and accordingly jurisdiction had been specifically conferred under O 21 R 46 C & R 101 of CPC. Thus, orders passed under r 46 C & R 101 stand on different footing.

If the garnishee disputes indebt ness to the judgment debtor or alleges that the debt is not attachable debt the court must order an issue to be raised and tried. Even if there is reasonable doubt, the matter must be tried .

1. Adjudication of the dispute

Where the letter of credit opened by the bank and the court issued interim order in view thereof but the bank disputed its liability under the said letter of credit held, without adjudicating liability of the bank, decree passed in terms of arbitral award was not proper. For all intents and purposes the appellant is a third party to the decree. The first question for consideration which arise is that whether decree could be enforced in the same execution proceedings against a third party, not being party to the decree. Before that question is taken up for consideration, it is to see the nature of credit. Letter of credit as commonly understood confers authority on the person to whom it is addressed to advance money or furnish good on the credit of the writer. It is in the nature of negotiable instrument, and is a letter whereby a person requests another to advance money or given credit to the third party and promised to repay person making advancement. A letter of credit has been defined as an offer by a bank or any other financial institutions to be bound to person to whom it is directed, when accepted and acted on him by according to its stipulation and is in substance an authority to him to draw on the bank in accordance with the terms stated and a promise by the bank to accept and pay bills or drafts so drawn.

2. Trial of disputed Question

Where the ban disputed its liabilities under the letter of credit, it was observed that letter of credit commonly understood confers authority upon the person to whom it is addressed to advance money or furnish goods on credit of the writer. It is in the nature of negotiable instrument, and is a letter whereby a person requests another to advance money or give credit to third person and promised to repay person making advancement. A letter of credit has been defined as an offer by a bank or other financial institutions to be found to person to whom it is directed, when accepted and acted on by him according to its stipulations and is an substance an authority to him to draw on the bank in accordance with the terms stated and a promise by the bank to accept and pay bills or draft so drawn.

Moreover, Rule 46 A of order 21 applies not only to a debit other than a debit secured by a mortgage or a charge, which has been attached under Rule 46 of Order 2 1of CPC but also to a debt under a negotiable instrument. Rule 46 lays down the procedure when the garnishee dispute indebt ness to the judgment debtor or alleges that the debt is not an attachable debt. The court must order an issue to be raised and tried. Even if there is a reasonable doubt the matter should be tried. The garnishee is required to make out a garnishee is required to make out a prima facie case before an issue as to liability may be ordered to be raised. In the words he would disclose facts from which a reasonable inference may be drawn that there is a valid dispute as to his alleged liability. On the same analogy, as contained in rule 46 C of order 21, there must be adjudication by the court, once the bank had disputed its liability to pay.

3. Attachment before judgment

In the instant case, the order passed by the court being interim in nature, there was no urgent need for physical confiscation of the money from the garnishee, especially because the opportunity for furnishing security was still there and it was in those circumstances that a prohibitory order was issued as seen quoted above from pg 27 of the paper book. By service of the order in the particular form the garnishee or the defendant is not prejudiced in any manner because no direction is contained therein, which is not authorized by the provisions of law. The fact that the court has restrained payment is clearly communicated in the order served on the garnishee and the ambiguity, if any; available in the form prescribed is cleared in the specific order actually served on the garnishee. It may also be mentioned here that this being attachment of debt, it is o 21r 46 that applies regarding the manner of effectuating the attachment order and that o 21 r 46(2) provides for service of the prohibitory order on the garnishee besides affixture in the court’s notice board. Both these requirements have been fulfilled here. There is no mandate in O 21 R 46(2) that copy of the prohibitory order should be served on the defendants also.

Attachment before judgment was effected under O 38 R 5, CPC since the attachment was of a sum of money allegedly belonging to the judgment debtor and lying in the hands of the appellant, it would have been affected byway of prohibitory order. R 11 A O 38 states that the provisions of the code are applicable to an attachment made in execution of the decree shall, so far as may be, apply to an attachment made before judgment which continues after the judgment by virtue of provisions of R 11. According to R 11, where property is under attachment by virtue of the provisions of O 38 and a decree is subsequently passed in favor of the plaintiff, it shall not be necessary upon an application for execution of such decree to apply for attachment of the property.

4. Liability of Bank

Where the bank disputed its liability under the letter of credit and the court did not adjudicate upon the liability of the bank rather decree passed in terms of Arbitration award making the bank liable. But since bank was not party to arbitration, the orders liable to satisfied. Letter of credit as commonly understood confers authority upon the person to whom it is addressed to advance money or furnished goods on the credit of the writer. It is in the nature of negotiable instrument, and is a letter whereby a person requests another to advance money or given credit to a third person and promised to repay person making advancement. A letter of credit has been defined as an offer by a bank, or other financial institutions to be bound to person to whom it is directed, when accepted and acted on by him according to its stipulations and is in substance an authority to him to draw on bank in accordance with the terms stated and a promise by the bank to accept and pay bills or drafts so drawn.

The court must order an issue to be raised and tried. Even if there is a reasonable doubt the matter should be tried. The garnishee is required to make out a prima facie case before an issue as to his liability may be ordered to be raised. In other words, he would disclose facts from which a reasonable inference may be drawn that there is a valid dispute as to his alleged liability. On the same analogy, as contained in R 46 C, there must be adjudication by the court, once the bank had disputed its liability to pay. 



5. Admission of Appeal 

Order passed under R 46 C & R 101 stand on different footing that the orders passed under the provisions of O 21, even though the provisions were made to treat all such orders as decrees. As original jurisdiction has not conferred to the executing court in deciding claims under R 58 CPC an appeal shall not lie to the division bench from an order passed under R 46 C & R 101 are orders passed in exercise of the original jurisdiction of subordinate court and those orders shall come within the purview of Clause (ii) of S 5 of Kerala HC Act.

6. Undertaking to pay compensation

Where garnishee obtained possession from the lessee giving undertaking to pay agreed compensation, in the suit filed by the creditor, direction was given to the garnishee to deposit the amount in the court. In the instant case, TIDCO has acquired the lands belonging to the salt department of government of India and has agreed to pay compensation due to the salt department and its lessees. Transfer of entire land has also been made by the salt department to TIDCO in pursuance of the order dated 6-1-1999 by the government of India. Conditions under which transfer has been affected in favor of TIDCO by the government of India are to the effect that TIDCO shall pay compensation agreed by it to the lessees who have been made to prematurely surrender their leasehold rights. Further it was a condition that the salt commissioner shall not be dragged to any proceedings in court in respect of the amount payable to the lessees and it is responsibility of the TIDCO to meet all Claims.

Order 21 Rule 46 D

The words ‘where it is suggested or appears to be probable’ would mean that either the garnishee points it out or that it appears to the court from the record before it. On a rule similar to this rule, it has been held in England that the garnishee must inform the court of any claim to or lien upon the debt and that if having knowledge thereof, he still pays to the garnisher then he would have to pay the person entitled to such claim or lien . Under this rule, the court has to make an order directing such a third person to appear and state his claim to such a debt and prove the same.

Order 21 Rule 46 E

In R Viswanatha Pandaram & Co v. Surajmal Ganeshmal Bansali, P Filed a suit for recovery of Rs 13,300/- against B on the same day, applied for an attachment before judgment, of a sum of Rs 10,000/- in the hands of C Bank. The garnishee, C Bank, filed a counter affidavit stating that the money did not belong to the debtor but to L, Bank of Bombay. A notice was thereupon issued to L Bank under the provisions of R 46 D made by the high Court of Madras belonged to it. The High Court held that it was incumbent on the court to have investigated as to whom the money belonged or if it found that the matter was complicated, it would have referred the parties to a suit after ordering the amount to be deposited in court .

Order 21 Rule 46 F

The object of this rule is to discharge the garnishee from his liability to his own creditor, judgment debtor and any other person ordered to appear under R 4 D for the amount paid or levied. The words under rule 46 A or under any such order as aforesaid mean that the garnishee gets discharge of his liability only if payment by him is made under R 46 A or under an order made under R 46 B, 46 C, 46 E. Accordingly if the garnishee makes payment, not under the garnishee proceedings, but by way of private arrangement, he would not get a valid discharge under this rule. The garnishee gets a valid discharge although the decree in execution of which the application is made under R 46 A or the order passed in the proceedings under such an application, is set aside or reversed. This is so also where the judgment creditor may have to return the money to the receiver in insolvency, where the judgment debtor has been adjudicated insolvent.

II. Legal Provisions

Order 21 Rule 46 A to Rule 46 I of Code of Civil Procedure, 1908 deals with Garnishee orders. It was inserted in the code by the Amendment Act, 1976.

Rule 46-A: Notice to garnishee, “ (1) The Court may in the case of a debt (other than a debt secured by a mortgage or a charge) which has been attached under rule 46, upon the application of the attaching creditor, issue notice to the garnishee liable to pay such debt, calling upon him either to pay into Court the debt due from him to the judgment-debtor or so much thereof as may be sufficient to satisfy the decree and costs of execution, or to appear and show cause why he should not do so.

(2) An application under sub-rule (1) shall be made on affidavit verifying the facts alleged and stating that in the belief of the deponent, the garnishee is indebted to the judgment-debtor.

(3) Where the garnishee pays in the Court the amount due from him to the judgment-debtor or so much thereof as is sufficient to satisfy the decree and the costs of the execution, the Court may direct that the amount may be paid to the decree-holder towards satisfaction of the decree and costs of the execution. ”

Rule 46-B: Order against garnishee, “Where the garnishee does not forthwith pay into Court the amount due from him to the judgment-debtor or so much thereof as is sufficient to satisfy the decree and the costs of execution, and does not appear and show cause in answer to the notice, the Court may order the garnishee to comply with the terms of such notice, and on such order, execution may issue as though such order were a decree against him.”

Rule 46-C: Trial of disputed questions, “Where the garnishee disputes liability, the Court may order that any issue or question necessary for the determination of liability shall be tried as if it were an issue in a suit and upon the determination of such issue shall make such order or orders as it deems fit.

Provided that if the debt in respect of which the application under rule 46A is made is in respect of a sum of money beyond the pecuniary jurisdiction of the Court, the Court shall send the execution case to the Court of the District Judge to which the said Court is subordinate, and thereupon the Court of the District Judge or any other competent Court to which it may be transferred by the District Judge shall deal with it in the same manner as if the case had been originally instituted in that Court.”

Rule 46-D: Procedure where debt belongs to third person, “Where it is suggested or appears to be probable that the debt belongs to some third person, or that any third person has a lien or charge on, or other interest in such debt, the Court may order such third person to appear and state the nature and particulars of his claim, if any, to such debt and prove the same”

Rule 46-E: Order as regards third person, “After hearing such third person and any person or persons who any subsequently be ordered to appear, or where such third or other person or persons do not appear when so ordered, the Court may make such order as is hereinbefore provided, or such other order or orders upon such terms, if any, with respect to the lien, charge or interest, as the case may be, of such third or other person or persons as it may deem fit and proper.”

Rule 46-F: Payment by garnishee to be valid discharge, “Payment made by the garnishee on notice under rule 46A or under any such order as aforesaid shall be a valid discharge to him as against the judgment-debtor and any other person ordered to appear as aforesaid for the amount paid or levied, although the decree in execution of which the application under rule 46A was made, or the order passed in the proceedings on such application may be set aside or reversed.”

Rule 46-G: Costs, “The costs of any application made under rule 46 A and any of the proceeding arising therefrom or incidental thereto shall be in the discretion of the court.”

Rule 46-H: Appeals, “An Order made under rule 46 B, 46 C or 56 E shall be appealable as a decree.”

Rule 46-I: Application to negotiable Instruments, “The provisions of Rules 46 A to 46 H shall, so far as may be, apply in relation to negotiable instruments attached under rule 51 as they apply in relation to debts.”

III. Judicial Trend

In Kazim Jawaz Jung v. Mir Mohamad Ali Jaferi and Anr, the Appellant is the debtor of judgment debtor. He was directed to deposit in Court amount payable to judgment debtor as required by decree holder. The appellant disputed his liability with regard to amount due to judgment debtor. He contended that the final decree with regard to liability amount has not been passed yet and therefore the impugned amount becomes payable only when judgment debtor allots land to appellant. Thus, the appellant is not liable to pay any amount before allotment of land by judgment debtor. The Hon’ble Andhra Pradesh High Court held that where the judgment debtor himself is not entitled to recover amount from appellant then decree holder has no right to recover amount from appellant.

In Mackinnon Mackenzie and Company Pvt. Ltd. v. Anil Kumar Sen and Anr, the question which came up for consideration is that if the garnishee denies that any sum of money is due to the judgment-debtor whether it is open to the court to hold the garnishee liable for the claim made by the judgment-debtor without raising and trying an issue on the question of such liability. The Hon’ble Calcutta High Court held that the Judge has a discretion under the Rule to, make an order summarily or to settle an issue and try the same on evidence. No doubt the order contemplated by the Rule is a discretionary one, but such discretion must be judicially exercised. Where a Judge finds that a claim is bona fide disputed and the dispute is not frivolous, he should not rush to a conclusion on the affidavit evidence having regard to the requirement of the Rule. A garnishee order which enables a judgment-creditor to obtain satisfaction of his claim in a summary proceeding is a matter of procedure, similar in scope as in the case of a judgment on admission under Order 12 Rule 6 of the Civil Procedure Code or the summary procedure in suits to recover debts or liquidated demands as prescribed in Chapter XIII-A of the Original Side Rules. This procedure can be availed of by a decree-holder where either the debt is not disputed or the dispute appears to the Court to be frivolous and without any substance. It is of no avail in a case where there is a substantial bona fide dispute with regard to the debts sought to be attached.

In Executive Engineer, KSE Board v. J H Sharma, the garnishee appeared in court in response to the letter and filed a counter-affidavit, raising certain objections. It was held that since he had raised his contentions in counter-affidavit, the same could be treated as objections contemplated under O 21 R 46 C even in the absence of formal notice under O 21 R 46 C to order that the disputed question be tried as an issue and to decide the issue. In the impugned orders, the court below did not consider the merits of the dispute raised by the appellant.

In Surinder Nath v Union of India, The garnishee order was for a fictitious sum of Rs. 8, 56,377.55 which was not mentioned in the show cause notice issued under Section 226(3) of the Income Tax Act, 1961. The Hon’ble Supreme Court held that there can be no doubt that when an order is made for the payment of a fictitious sum without giving any opportunity to a person, against whom the order is made, to show cause against the passing of such an order for the said sum, the order is a nullity. The garnishee order that was passed was a nullity and any sale held pursuant to such an order is also a nullity irrespective of its confirmation. In view of the conduct of the firm and/or its said partner, they should share along with the Revenue a part of the compensation that may be allowed to the auction-purchaser. The Revenue shall see that the said amount is refunded back to the auction-purchaser. Further, the auction-purchaser will be entitled to get interest on the said amount at rate of fifteen per cent for a period of two years and a half, during which the amount remained blocked, by way of compensation.

In Syndicate Bank v. Vijay Kumar, while furnishing bank guarantee in favor of high Court customer furnished two fixed deposit receipts duly discharged to the bank and authorized the bank the custody of the receipts and renewals thereof. The Hon’ble Supreme Court held that it becomes a general lien. Bank can set off liability of the party against the receipts. If the fixed deposits are attached to bank garnishee has to go to the court. The balance after adjustments of bank’s claim shall be available to satisfy the decree.

In K Jayaraman & etc. v. TS Ravi & Ors, garnishee obtained possession from the lessee giving undertaking to pay agreed compensation, in the suit filed by the creditor; direction was given to the garnishee to deposit the amount in the court. In the instant case, TIDCO has acquired the lands belonging to the salt department of government of India and has agreed to pay compensation due to the salt department and its lessees. Transfer of entire land has also been made by the salt department to TIDCO in pursuance of the order dated 6-1-1999 by the government of India. Conditions under which transfer has been affected in favor of TIDCO by the government of India are to the effect that TIDCO shall pay compensation agreed by it to the lessees who have been made to prematurely surrender their leasehold rights. Further it was a condition that the salt commissioner shall not be dragged to any proceedings in court in respect of the amount payable to the lessees and it is responsibility of the TIDCO to meet all Claims.

In Global trust bank Ltd. v. Fargo Frieght ltd. & ors, the Hon’ble court held that it applies not only to a debt other than a debt secured by a mortgage or a charge, which has been attached under Rule 46 of Order 21 but also to a debt under a negotiable instrument. The foundation of a garnishee proceeding is an attachment under rule 46(1) of Order 21 of the Code. At the most it can be said that orders, which were passed, are akin to attachment proceedings under which by operation of various interim orders the appellant had been directed to keep the letter of credit alive. But the question in this instant case is that whether mere attachment would entitle and enable the Court to otherwise make a direction for the payment of the amount, without adjudicating upon the case set up by appellant that for various reasons it is not liable to pay the amount. It has also been noticed above that the appellant is seriously disputing its liability under the letter of credit to pay. Rule 46B of Order 21 of the Code says that when the garnishee does not forthwith pay into Court the amount due form him and fails to appear and show cause in answer to the notice, the Court may order the garnishee to comply with the terms of such notice. Rule 46C of Order 21 lays down the procedure when the garnishee disputes indebtedness to the judgment debtor or alleges that the debt is not an attachable debt. The Court must order an issue to be raised and tried. Even if there is a reasonable doubt the matter should be tried. The garnishee is required to make out a prima facie case before an issue as to his liability may be ordered to be raised; In other words he would disclose facts from which a reasonable inference may be drawn that there is a valid dispute as to his alleged liability.

In Greater Cochin development Authority, Kadavanthara v, harrisons Malayam Ltd. & Anr , A Notice was issued to call upon the defendant to show cause against the prayer of the plaintiff in his application. However, notice was not issued in form No 5. The Kerala High Court held that since the purpose of form 5 was achieved in substance, the order will not be liable to be set aside on that ground. A comparison of form No 5 was made with the prohibitory order which actually served on the garnishee. It revealed certain differences such as in the prescribed form the direction was “to the above named garnishee and to affix at the court house” the mention of the direction to the defendant to furnish security was not available in the impugned order and direction in the impugned order was to the garnishee prohibiting or restraining him from making the payment of specified debt or any part thereof to any person whomsoever or otherwise than the court and form no 5 envisages direction to the Amin to call upon the defendant to furnish security. However, in the absence of any particular form prescribed by the law, whereby the amin, to whom the warrant in form No 5 is addressed, should call upon the defendant to furnish security, the court resorted to issuance of separate notice calling upon the defendant to show cause against the prayer in the application which mentions of security as well, there was no illegality. By issuance of separate notice the court achieved the purpose of the former portion of the form No 5 in substance.

In Bombay Stock Exchange v. Jaya I. Shah and Anr, the Hon’ble Court held that the assets belonging to the defaulted member cannot be attached in Garnishee proceedings since it is not a debt due by the Exchange to the defaulted member.

In State of Bikaner and Jaipur v. Additional Dist. & Sessions Judge, Jodhpur , the Hon’ble Court held that it is clear from Sub-rule (1) of Rule 46 of Order 21 itself that an attachment can be issued against the debt, share and other movable property not in the possession of the judgment-debtor. The court may pass appropriate order restraining the person holding the debt or share in the capital of any corporation to not to pay or disburse the amount. The Rule 46B also provides that what type of order can be passed against the garnishee. It only says that the executing court can pass the order against the garnishee to pay into Court, "the amount due from him to the judgment-debtor". The Rule 46D provides the what procedure should be adopted when it is claimed that the debts belongs to some third person, or that any third person had a lien or charge on, or other interest in, such debt, the Court may order such third person to appear and state the nature and particulars of his claim, if any, to such debt and prove the same. All the provisions referred above clearly reveals that the executing court has been given power to recover any of the amounts of the judgment-debtor, which is in the hands of other. The court has no power to issue order or direction to anybody, may it be usual financier of the judgment-debtor, who is not holding any money of the judgment-debtor to pay to satisfy the debt or decretal amount for the judgment-debtor, may it under assumption the garnishee is able and can recover the amount from the judgment-debtor or the judgment-debtor will pay to the garnishee. The court further held that the executing court appears to have not looked into the relevant provision of law to find out for what type of order can be issued against the garnishee. The court held that the order of the executing court violates the Rule 46B of Order 21 CPC, which authorizes the executing court to direct the garnishee to pay the "amount due from him (garnishee) to the judgment-debtor".

In Uttar Gujarat S.R.V. Sangh Ltd. V. Mehsana District Central Co-op. Bank Ltd. and Ors , Ex-parte garnishee orders were issued against the appellant by the Ahmedabad Board of Nominees. Pursuant to the order of restraint passed by the Board of Nominees, Ahmedabad Division, the present appellant was restrained from giving or making payment to defendant No. 1. Though appellant was a party in the Special Civil Application, the matter was disposed of without hearing the appellant. In the Review Application the learned Single Judge of the High Court proceeded on entirely erroneous premises. The ultimate result is that the appellant, without getting an opportunity of being heard and/or presenting its case has been saddled with the liability. Therefore, the Hon’ble Supreme Court set aside the impugned order and remits the matter to the High Court for fresh disposal in accordance with law.

In Food Corporation of India v. Sukh Deo Prasad , the Hon’ble Supreme Court held that the Garnishee proceedings are governed by Rules 46 and 46A to 46F of order 21 of the Code. Sub-para (1) of Rule 46 A provides that in the case of a debt (other than a debt secured by a mortgage or a charge) which has been attached under Rule 46, upon the application of the attaching creditor, the court may issue notice to the garnishee liable to pay such debt, calling upon him either to pay into court the debt due from debtor or to appear and show cause why he should not do so. Rule 46B provides that where the garnishee does not forthwith pay into court the amount due from him to the debtor and does not appear and show cause in answer to the notice, the court may order garnishee to comply with the terms of such notice, and on such order, execution may issue as though such order were a decree against him. Rule 46C provides that where the garnishee disputes liability, the court may order that any issue or question necessary for the determination of liability shall be tried as if it were an issue in a suit and upon the determination of such issue shall make such order or orders as it deems fit. It would thus be seen that the amount due by a garnishee, if disputed has to be determined as if it was an issue in the suit and the court can appropriate order determine the extent of liability of the garnishee. In this case, there was no adjudication of the amount payable by FCI. Whatever amount that was due in pursuance of the order dated 27.5.1996 in regard to one go down taken on lease in June 1994, was deposited by FCI and the plaintiff bank at whose instance the order was made has no complaint or grievance.

IV. Conclusion 

The Code of Civil Procedure empowers the court to issue the garnishee order. Prior to the amendment in 1976, there was no provision relating to garnishee order in the code of civil procedure, 1908. After the insertion of Amendment by the way of Code of civil procedure Amendment Act, 1976, a direct provision was added to the Code of Civil Procedure, 1908. It empowers the court to issue such an order on the application duly filed. But it is not mandatory on the courts to issue the order every time as and when the application for its issuance is filed. It is the discretionary power of the court to issue a garnishee order and not the mandatory provision. The word ‘may’ in the rule means that the rule is discretionary and the court may refuse to act under this rule if it inequitable or if it is likely to cause prejudice to garnishee.

The garnishee is required to make out a prima facie case before an issue as to his liability may be ordered to be raised. Even if the garnishee disputes the indebtedness to the judgment debtor, the court shall carry on the proceedings. If there is even little doubt about the indebtedness of the judgment-debtor, the court shall continue with the proceedings. The Court must order an issue to be raised and tried. Even if there is a reasonable doubt the matter should be tried.

The court has no power to issue order or direction to anybody, may it be usual financier of the judgment-debtor, who is not holding any money of the judgment-debtor to pay to satisfy the debt or decretal amount for the judgment-debtor, may it under assumption the garnishee is able and can recover the amount from the judgment-debtor or the judgment-debtor will pay to the garnishee

The court may reject the application or refuse to issue such order if suitable grounds are not found i.e. if the affidavit filed by the decree holder is vague, insufficient and ambiguous; the proceedings would not sustain and would come at stake. The court may, in exercise of sound discretion, control the use of writs of garnishment to the extent of preventing it from being abused or becoming oppressive. If the assets are belonging to the defaulted member it cannot be attached in Garnishee proceedings since it is not a debt due to the defaulted member.

Thus, it is concluded that it is very good piece of legislation by our parliamentarians. But it has to be used with caution. While issuing such order, it is the duty of the court to check whether the case is prima facie. It is also the duty of the court that while exercising the discretionary power, the power is not misused and the innocent is not harassed.