Garnishee Order in Banking – Complete Detailed Guide for IIBF Bank Promotion Exams

1. Meaning and Concept of Garnishee Order

A Garnishee Order is a legal directive issued by a court instructing a bank to attach and transfer funds from a customer’s account to a creditor to satisfy a debt.

• Judgment Creditor: Person entitled to receive money
• Judgment Debtor: Person who owes money
• Garnishee (Bank): Institution holding debtor’s funds

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2. Legal Provisions Governing Garnishee Order

Garnishee Orders are governed under the Civil Procedure Code (CPC), 1908 specifically Order XXI Rule 46.

The bank is treated as a debtor of the customer, and hence the court can attach the amount deposited.

3. Stages of Garnishee Order

3.1 Order Nisi

• Temporary order issued by court
• Bank must freeze the account
• No withdrawals allowed
• Bank must confirm balance

3.2 Order Absolute

• Final order passed after hearing
• Bank must transfer funds to creditor
• Non-compliance leads to legal liability

4. Key Features of Garnishee Order

5. Scope of Garnishee Order

Accounts Covered

• Savings Account
• Current Account
• Fixed Deposit
• Recurring Deposit

Accounts Not Covered

6. Impact on Different Accounts

Individual Account

Fully attachable. Entire balance can be frozen.

Joint Account

Only debtor’s share can be attached. If unclear, court clarification required.

Partnership Account

• Firm debtor → Account attachable
• Partner debtor → Firm account not attachable

Trust Account

Not attachable as funds belong to beneficiaries.

7. Timing Rule (Most Important)

Garnishee Order applies only to balance available at the time of order.

Future deposits are NOT attachable.

Example

• Balance at order: ₹50,000
• Later deposit: ₹1,00,000

Attachable amount = ₹50,000 only

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8. Banker’s Duties

1. Verify court order
2. Identify account
3. Freeze funds immediately
4. Stop withdrawals
5. Inform customer
6. Respond to court
7. Transfer funds after Order Absolute

9. Consequences of Non-Compliance

• Bank becomes liable
• Penalty by court
• Contempt proceedings possible

10. Garnishee Order vs Lien vs Set-Off

11. Case-Based Examples

Case 1

Debt: ₹2,00,000 | Balance: ₹80,000 → Bank will transfer ₹80,000

Case 2

Multiple accounts → Total balance considered

Case 3

Joint account → Only debtor’s share attachable

12. Important Exam Points

• Applies only to credit balance
• Future deposits not applicable
• Loan accounts cannot be attached
• Order Nisi before Order Absolute
• Immediate action required

13. Common Exam Traps

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