Garnishee Order: What it is?

A garnishee order is a significant legal mechanism used in debt recovery, enabling creditors to collect debts owed by a judgment debtor through a third party, known as the garnishee. This process, widely utilised in civil litigation, is governed by Order 21, Rules 46 to 46I of the Code of Civil Procedure, 1908 (CPC) in India, and has been introduced through amendments to the CPC in 1976.

In this article, we will provide an in-depth exploration of the concept of garnishee orders, their legal framework, the procedures involved, and the rights and obligations of the parties involved. This comprehensive guide will also review relevant case law and explore the implications of garnishee orders in practice, particularly in India.

The Concept of a Garnishee Order

A garnishee order allows a creditor (the judgment creditor) to recover a debt from a third party who owes money to the debtor (the judgment debtor). The third party, referred to as the garnishee, is usually a bank, employer, or any institution holding the debtor’s assets. By issuing a garnishee order, the court directs the garnishee to pay the judgment creditor directly, bypassing the judgment debtor.

The purpose of this legal tool is to ensure that a creditor can enforce a court’s judgment in their favour without having to rely solely on the judgment debtor, who may either refuse or be unable to pay. Garnishee orders are frequently used in both civil and commercial litigation to ensure the collection of debts.

Etymology of the Term ‘Garnishee’

The term “garnishee” originates from the Old French word ‘garnir,’ which means to warn or prepare. Historically, it was used in the context of warning a debtor’s heir of certain liabilities or debts before inheritance. Over time, the term evolved in legal contexts to refer to the third party in a garnishment process, warning them not to release funds or property to the debtor, but to settle the judgment creditor’s claim instead.

Laws Governing of Garnishee Orders in India

The legal provisions for garnishee orders in India are outlined under Order 21, Rule 46 to Rule 46I of the Code of Civil Procedure, 1908 (CPC), as amended by the CPC Amendment Act of 1976. These rules provide the procedural framework and legal guidelines for the issuance and execution of garnishee orders.

Order 21, Rule 46: General Provision for Garnishee Orders

Rule 46 of Order 21 provides the general basis for garnishee orders. It allows the court to issue an order attaching a debt in the hands of a third party, preventing the garnishee from paying the judgment debtor and instead directing them to pay the judgment creditor.

The rule applies to debts that are due to the judgment debtor, except debts secured by a mortgage or charge. The attachment under this rule is a preliminary step before issuing a garnishee order, ensuring that the debt is preserved for satisfaction of the judgment.

Order 21, Rule 46A: Notice to the Garnishee

Rule 46A mandates that the court issue a notice to the garnishee once a creditor applies for a garnishee order. This notice directs the garnishee to either pay the debt into court or show cause as to why they should not do so.

The application for this notice must be made on an affidavit, where the creditor affirms that the garnishee is indebted to the judgment debtor. This rule ensures that the garnishee has an opportunity to respond before the court orders the payment.

Order 21, Rule 46B: Compliance by the Garnishee

If the garnishee fails to comply with the notice issued under Rule 46A—by either paying the debt or appearing before the court to contest the claim—the court may pass an order compelling the garnishee to make the payment. The order is treated as a decree against the garnishee, which means that the court can initiate execution proceedings to recover the amount if the garnishee does not voluntarily comply.

Order 21, Rule 46C: Disputed Liability of the Garnishee

In cases where the garnishee disputes their liability to the judgment debtor, Rule 46C provides that the court must conduct a trial to determine the issue. The court will treat the dispute as an issue in a suit and decide the garnishee’s liability based on the evidence presented.

The garnishee can contest the garnishment on several grounds, such as claiming that they owe nothing to the judgment debtor, or that the debt is contingent and not immediately due.

Order 21, Rule 46D: Third-Party Claims

If a third party claims to have a lien or other interest in the debt, Rule 46D requires the court to allow the third party to appear and prove their claim. The court may then decide how to deal with the third party’s interest before issuing the garnishee order.

Order 21, Rule 46F: Payment by Garnishee as Discharge

Once a garnishee makes a payment in compliance with the garnishee order, it acts as a valid discharge of their liability to the judgment debtor. Even if the judgment is later reversed or set aside, the garnishee will not be held responsible for the amount paid.

Scope of Order 21, Rules 46A to 46I

The provisions of Order 21, Rules 46A to 46I apply not only to debts but also to negotiable instruments such as cheques and bills of exchange. However, the rules do not apply to debts secured by a mortgage or a charge.

The Procedure for Obtaining a Garnishee Order

The procedure for obtaining a garnishee order is relatively straightforward but requires adherence to strict legal steps to ensure its validity. Below is the general process followed in India:

Application for Garnishee Order

The process begins when a judgment creditor applies to the court for a garnishee order. This application must be supported by an affidavit stating that the garnishee (third party) is indebted to the judgment debtor. The affidavit should provide all the relevant details, including the amount of debt and the relationship between the garnishee and the judgment debtor.

Issuance of Notice

Upon receiving the application, the court issues a notice to the garnishee under Rule 46A. This notice requires the garnishee to either:

• Pay the debt into court, or
• Appear in court and show cause as to why they should not make the payment.

Hearing

If the garnishee appears in court and disputes their liability, the court will hold a hearing to determine whether the debt is indeed due. The garnishee can provide evidence to show that:

• They do not owe any debt to the judgment debtor, or
• The debt is contingent and has not yet matured.

If the court is satisfied that the debt exists, it will order the garnishee to make the payment.

Order of Payment

If the garnishee does not dispute the debt or fails to appear in court, the court can issue an order of payment under Rule 46B. This order compels the garnishee to pay the debt either directly to the judgment creditor or into the court.

If the garnishee still does not comply with the order, the court can treat it as a decree and initiate execution proceedings against the garnishee, just as it would against any other debtor.

Execution of the Garnishee Order

Once the court passes a garnishee order, the payment made by the garnishee is treated as a valid discharge of their liability to the judgment debtor under Rule 46F. The court may then direct that the amount be paid to the judgment creditor towards satisfying the decree.

Legal Safeguards for Garnishees

While garnishee orders are an effective tool for creditors, there are several safeguards in place to ensure fairness and protect the rights of the garnishee:

Notice and Opportunity to Respond

Under Rule 46A, the garnishee is given notice of the proceedings and has the right to contest their liability. This ensures that the garnishee is not deprived of their property without due process.

Dispute of Liability

If the garnishee disputes their liability, Rule 46C provides that the court must conduct a trial to determine the validity of the debt. This protects the garnishee from being unfairly compelled to pay a debt they do not owe.

Third-Party Interests

Rule 46D allows third parties to assert their interest in the debt before the court issues a garnishee order. This provision ensures that the court does not wrongfully distribute funds that belong to another party.

Exemption from Garnishment

Certain debts are exempt from garnishment under the CPC. For example, wages up to a certain amount or funds necessary for the debtor’s basic living expenses are generally protected from garnishment. This ensures that the debtor is not left destitute by the garnishee order.

Case Law on Garnishee Orders

Several significant cases have shaped the legal interpretation and application of garnishee orders in India. Below are some landmark judgments:

Krishna Singh v. Mathura Ahir (1980)

In this case, the Supreme Court emphasised the importance of garnishee orders in the execution of a decree. The court held that garnishee orders provide an effective mechanism for creditors to recover debts without having to rely on the judgment debtor’s compliance.

Food Corporation of India v. Sukh Deo Prasad (2009)

In this case, the Supreme Court clarified that a garnishee can set off any amount due to them by the judgment debtor before making the payment. This ruling provided clarity on the garnishee’s right to adjust their claims against the judgment debtor before complying with the garnishee order.

Bombay Stock Exchange v. Jaya I. Shah and Anr

The Bombay High Court held that assets belonging to a defaulting member of the Bombay Stock Exchange could not be attached under garnishee proceedings, as these were not debts owed by the Exchange to the member.

International Perspectives on Garnishee Orders

While the legal framework for garnishee orders is similar across jurisdictions, each country has specific provisions governing their application. For example:

• In the United States, garnishee orders are subject to federal and state laws, including protections for wages and certain assets.
• In England, garnishee orders (known as third-party debt orders) are governed by the Civil Procedure Rules and are frequently used to recover debts from bank accounts.

In all jurisdictions, the common principle is that a creditor can collect debts owed to the debtor by a third party, provided that due process is followed.

Conclusion

A garnishee order is a powerful legal remedy for creditors seeking to enforce a judgment. By allowing creditors to recover debts from a third party, garnishee orders provide an efficient and effective means of debt collection. However, the procedure must be carefully followed, with safeguards in place to protect the rights of garnishees and third parties.

The legal framework in India, governed by Order 21, Rules 46 to 46I of the CPC, provides a robust mechanism for garnishee orders while ensuring fairness and due process. Courts have the discretion to determine whether a garnishee order is appropriate in each case, and both garnishees and third parties are afforded the opportunity to contest their liability.

Overall, garnishee orders play a critical role in the execution of decrees, offering a legal avenue for creditors to recover debts without being dependent on the debtor’s willingness to pay. However, they must be applied judiciously to balance the interests of creditors, debtors, and garnishees.