Page 82 - DCOM208_BANKING_THEORY_AND_PRACTICE

Unit 5: Banker Customer Relationship

The aforesaid right to combine accounts is available to bank only. The customer cannot combine Notes
his two or more accounts and hence cannot except bank to honour cheque, drawn on one account,
if balances are not sufficient in that account, but is so in the other one.

5.4.3 Garnishee Order and Attachment Order

When the debtor failed to pay the debt to his creditor, the latter may approach court for issuance
of garnishee order on the banker of the debtor. A garnishee order is an order issue by court
under provision of order 21 rules 46 of the code of civil procedure 1908. The order is in two parts
– order nisi and order absolute. Order nisi is issued fit, directing the bank to stop payment in the
account of the judgement debtor to explain as to why not the deposit of the particular peon is
attached. This is because of the fact that the banker’s right of set off takes precedence over
garnishee order and therefore bank may require to avail the same. Order absolute is issued
later, whereby entire balance in the account is attached, if the court is not satisfied with bank’s
explanation to order nisi. An order served on Head Office of a bank applies to all of its branches
after reasonable period.

Garnishee order Attachment order of revenue Authorities
1. May be issue for the entire balance or a 1. Amount specifically mentioned.
specified amount.
2. Applies to outstanding on the date of receipt 2. Applies to subsequent credits also
of the order not to subsequent credits in the
account.
3. In case of joint account, if only one (or more 3. Balance in joint accounts may be attached.
but not all) is the judgment debtor, the joint The share of each of the account holder shall
a/c cannot be attached but reverse is true. In be, unless contrary is proved, presumed to be
partnership a/c If judgment debtor is firm, equal.
partner (s) individual accounts may also be
attached but reverse is not true.
It is important to note that:
1. In case of clearing, when customer account credited, but he is the amount not allowed to
withdrawn and therefore proceeds are not deemed to have been credited till realised. But
if the customer is permitted to withdraw before the cheque is realize, it is deemed to have
been purchased by the bank and garnishee order applies to such cases.
2. Both applies to debts due or accruing due or repayable at a fixed future date (viz. term
deposit)
3. Unauthorized/undrawn balance in overdraft limits cannot be attached in both the cases.

Self Assessment

Fill in the blanks:
9. The peon to whom the power of attorney is given is known as a ……………….

10. The agent has a legal ………………. to make legal decisions about the principal’s property
and finance.
11. The primary relationship, which flows from the essential function of a bank, is of
……………….
12. Lien is the right to ……………….
13. A garnishee order is issued by the ……………….

14. The right of set off can be exercised only when ……………….

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