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civil_laws:garnishee

Garnishee Proceeding

Enumerate the significance of Garnishee Proceeding under Order 21 Rule 46 CPC.

The word Garnish is derived from an old French word 'garnir'. It 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 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 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 as the judgment debtor 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. The court order is called garnishee order. The purpose is to protect the interest of the creditors.

Example: Suppose A owes Rs. 1000 to B. B owes Rs. 1000 to C. By a garnishee order, the court may require A not to pay money owed to him to B, but instead to Pay C, since B owes the said amount to C. 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. B is a judgment-creditor and A is the judgment-debtor. B comes to know that A has some money in a bank account. B can satisfy his decree by attaching the funds in the hands of A's bank. For this purpose he approaches a court and obtains a garnishee order.

The court may in the case of debt (other than a debt secured by a mortgage or charge) can attach under Order 21 Rule 46, upon the application of the attaching creditor. Order 21 Rule 46 does not contain any provision enabling the garnishee to raise any objection though it gives opportunity to the garnishee to subject himself to the order by making payment into Court. Order 21 Rule 46 A to 46 I have been inserted in the Code of Civil Procedure by the Amendment Act, 1976. They lay down the procedure in garnishee cases. The object of 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 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. Passing of such an order is discretionary. The discretion must be exercised judicially.

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. Such proceedings cannot be taken in respect of a debt which cannot be attached. Where the garnishee disputes his liability, the court must raise an issue, and determine the liability.

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 he neither makes the payment into the court, as ordered, nor appears and shows any cause in answer to the notice, the court may order him 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 proceedings are appealable as Decrees.

Garnishment is a judicial proceeding in which a creditor asks the court directing 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 a harsh and extraordinary remedy. It is a method of seizure. It is not a levy in the usual acceptation of that term. It is a proceeding by which a diligent creditor may legally obtain preference over other creditors. Such proceedings are quasi in rem. Under the provisions of Order XXI, Rule 46 of the Code of Civil Procedure, any amount lying with any third party can always be attached as garnishee. But it is open to the garnishes to show that nothing was due and payable by him to the judgment-debtor. The very purpose of depositing the money being to enable him to recoup any loss to be sustained by him out of it he can appropriate the deposit towards it even after receipt of notice of attachment. The decree-holder cannot by means of attachment stand in a better position as regards the garnishee than the judgment-debtor and obtain from him a relief which the judgment debtor himself could not. Under the Amendment Act of 104 of 1976, the said rule has undergone substantial change. Rules 46-A to 46-I contemplate a detailed procedure by enquiry in respect of such garnishee proceedings. Order XXI, Rule 46-A contemplates a notice to garnishee.

Rule 46-A provides the following procedures:

  1. The Court may, in the case of any debt due to the judgment-debtor (other than debt secured by a mortgage or a charge or by negotiable instrument), or any movable property in which he has an interest, but not in his possession, which has been attached under Rule 46 of this Order, upon the application of the attaching creditor, issue notice to any person liable to pay such debt; or
  2. The Court may deliver an account for such movable property (such person to be hereinafter called the 'garnishee' calling upon him either to pay or deliver into court the debt due from or the property deliverable by him to such judgment-debtor, or so much thereof as may be sufficient to satisfy the decree and costs of execution;
  3. The Court may order to appear and show cause why he should not do so. Such application shall be supported by an affidavit verifying the fact alleging and stating that in the belief of the deponent the garnishee is indebted to the judgment-debtor.

Rule 46-B provides the following procedure when garnishee does not forthwith pay the amount:

  1. The Court may allow, pay or deliver into Court, the amount due from him or the property deliverable by him to the judgment-debtor or so much thereof as is sufficient to satisfy the decree and the costs of execution, or does not appear and show cause in answer to the notice;
  2. The court may order the garnishee to comply with the terms of such notice, and on such order being made, execution may issue as though such order were a decree against him.

Rule 46-C provides procedure where garnishee disputes his liability:

  1. The Court may order that any issue or question necessary for the determination of the liability shall be tried as if it were an issue in a suit and upon determination of such issue shall make such order as may seem just:
  2. Where the garnishee admits his liability but disputes its extent and the decree-holder does not seek to recover from the garnishee any sum in excess of what he admits is due from him the Court shall not be bound to decide the dispute and may direct the garnishee to pay such sum or so much thereof as is sufficient to satisfy the decree and the costs of the execution proceedings.

Rule 46-A requires a notice to be issued. If such notice is not issued and opportunity of hearing is not afforded before passing an order, it would be null and void. In the eyes of the law, there is no existence of such order. Rule 46-B an order is to be passed against garnishee for complying with the terms of the notice. Rule 46-C contemplates specifically of trial of disputed questions whenever the garnishee comes out with such dispute and it further contemplates that the said dispute shall be tried as if it were an issue in a suit.

As against the order under Rule 46-C, a regular appeal is provided under Rule 46-H as a decree.

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: 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 made by the garnishee on notice under rule 46A 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: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.

In Kuchimanchi Nagamani vs Mantri Prasada Agnihotrudu1) it was held that, attachment of the amount lying with Government department was passed. No objections were raised by the government authorities at that time. The authority having not taken any such steps of objecting to or raising any dispute at proper time cannot be permitted to raise any objection and no such objection can be entertained by the Court.

In Fargo Freight Ltd vs Commodities Exchange2) it is held that Order 21 Rule 46, CPC deals with garnishee proceedings. It applies when monies of the judgment-debtor are in the hands of 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. The claim, if any, can only be decided in independent proceedings which should have been adopted by the Appellants. 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 a 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 under the assumption that the guarantee is able and can recover the amount from judgment debtor or the judgment debtor will pay to garnishee.

In Executive Engineer, T.C. … vs J.H. Sharma And Anr. on 15 February, 19883) the scheme of the rules contemplates a specific opportunity being given to the garnishee to show cause why he should not pay the amount into Court. If he raises an objection the court has a duty to consider the objection and pass appropriate orders. The rules do not require him to raise an objection suo motu before receiving a show cause notice under Rule 46A. The fact that he did not suo motu file an objection when the attachment was effected before judgment does not take away his right under the above rules to raise an objection. The executing Court, in that case, at no stage had taken care to issue notice to the garnishee under Rule 46A calling upon him either to pay the money into court or to show cause why he should not do so. In such impugned order the Court below did not consider the merits of the dispute raised by the appellant and so direction was issued that it is open to garnishee to contend that he does not have any money belonging to the judgment-debtor or due to the judgment-debtor. If such a contention is raised at the appropriate stage in response to notice under Rule 46A the Court has a duty to consider the same. A cheque or a contingent debt cannot be attached under O 21 R 46. 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.

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1)
2001 (1) ALD 105, 2001 (1) ALT 385
2)
2004 Supp(3) SCR 309
3)
AIR 1988 Ker 285

Created on 2021/02/27 00:21 by LawPage • Last modified on 2021/04/09 22:10 (external edit)