What is difference between Garnishee Order and IT Attachment Order ?

Before we discuss difference between Garnishee Order and IT attachment order lets understand what Garnishee means. The term “Garnishee” has been derived from the French word ‘garnir’ which means to warn. Garnishee Order instruct a Garnishee (Bank) not to pay funds to the judgement debtor until directed by court. It may also be instructed to the bank to pay certain sum to judgement creditor (a person to whom a debt is owed by the judgement debtor) from the funds held by judgement debtor.

What is Garnishee Order ?

Garnishee Order is an order issued by court under Civil Procedure Code 1908  as per order XXI, rule 46, for recovery of amount due to judgement creditor. In other words, it is an order by court to attach money or goods belonging to the judgement debtor held with bank.

There are three parties involved in Garnishee Order :

Judgement Creditor – A person (creditor) who initiates the garnishment action or at whose request garnishee order is issued.

Judgement Debtor – A person who owes money to judgement creditor and whose funds are blocked.

Garnishee – Garnishee means a judgement debtor’s debtor.

Garnishee Order – What is Order NISI and Order Absolute ?

A Garnishee order is passed in two stages viz., Order NISI and Order Absolute.

Order Nisi : As per rule 46A, a notice is issued to a garnishee (a person sought to be warned) before a garnishee order is passed. It is known as Order NISI. Court order the bankers to stop operation, payment out of the funds of judgement debtor and for appearance in court on a given date.

Bank also inform the concerned customer about the receipt of the order so that dishonor of any Cheque issued by him may be avoided.

If such Order is not passed and an opportunity of hearing is not given by the court, the order shall be null and void.

Order Absolute : If banker has any objection to pay the funds held in account of the judgement debtor, he must appear in court and explain the reason why funds held in account cannot be paid. Court issue the final order called order absolulte after hearing the explanation from the bank if any and direct the bank to pay the amount to the judgement creditor or court.

Features of Garnishee Order

• Garnishee Order can attach either the entire amount or partial amount.
• Balance in excess of the amount mentioned in the order can be paid by the banker.
• Order is also applicable in case of amount drawn by a cheque but payment not yet affected.
• Garnishee Order is not applicable where a Cheque already has been marked Good for Payment.
• In case of Trust Account – A Trustee hold the fund for someone else. So trust account can not be attached and court should be informed about it.
• Garnishee Order not applicable in case of OD/CC account, if account is overdrawn as bankers owes no money to the customer.
• In case of partnership accounts, if the firm is judgement debtor both the firm as well as their personal accounts can be attached as they are jointly and severally liable.
• If a partner is judgement debtor, only his personal account can be attached and not that of firm or personal account of other partners.
• In case of joint accounts – if only one is judgement debtor, account can not be attached.
• Bank can set off any debt due to the bank at the time of receipt of order but bank can not exercise the right of set off for the installments which falling due for repayment at a future date.
• Order is not applicable to Cheque/DD/Bills sent under collection at time of order however they can be attached only after once they are collected and credited to the account.

Income Tax Department’s Attachment Order

Income Tax (IT) Attachment Order is an order issued under Sec.226(3) of Income Tax Act, 1961, by an Income Tax Department for recovery of statutory dues from a person under respective law. Unlike Garnishee Order that is issued in two stages (order NISI and Order Absolute), attachment order issued by Income Tax Department is direct.

The order is issued in case of income tax default. The Assessee’s credit balance in the bank can be attached. The attachment may be for debt due and payable, debts due but not payable on date, amount received subsequently.

In case of joint account – balance can be attached even if attachment order received in a single name.

In case, when bank fails to attach the amount it would make the bank deemed assessee and recover dues from the bank.

Difference between Garnishee Order and IT attachment Order

Features	Garnishee Order	Attachment Order
Who issue the order	Competent Court of Law	Any Income Tax Department – Sales Tax, Custom Department
Under which act	Sect 60 of CPC, 1908	Respective law governing the concerned department
Depositor	Judgement Debtor	Assessee
Bank	Garnishee or Judgement Debtor’s debtor	Assessee’s debtor
Stages	Two – Order NISI and Order Absolute	Directly Issued
Purpose	To recover private due	To recover statutory due
Amount	May be mentioned specifically	Specified clearly in the order
Applicable to account	All demand deposit and term deposit accounts	All demand deposit and term deposit accounts
Applicable to Amount	Clear amount available with garnishee at time of receipt of order	Amount in the account available at time of receipt of order as well as future credits
Right to set off	Available for lawful and due debts	Available for lawful and due debts
Joint Accounts, order single name	Not applicable	Applicable on pro rata basis
Joint Account, order joint names	Applicable	Applicable
Order in name of partner, trustee,executor, liquidator, director of a company etc.	Not applicable for accounts in name of firm, trust, company i.e, accounts in fiduciary capacity etc.	Not applicable for accounts in name of firm, trust, company i.e. accounts in fiduciary capacity etc.
FDR as collateral security	Not applicable	Not applicable
Undrawn CC/OD limits	Not applicable	Not applicable
Deceased	Applicable	Applicable
Failure to comply the order	Contempt of Court	Assessee in default