Law · Banking Law
A limited company, 'Tech Innovators Pvt Ltd,' has a board resolution authorizing its MD and CFO to operate the bank account jointly. The MD is declared mentally unsound. A creditor serves a Garnishment Order for 50,00,000 rupees. The company's account balance is 45,00,000 rupees, and there is an unutilized Cash Credit (CC) limit of 20,00,000 rupees. Determine the correct course of action for the bank regarding the account operation and the Garnishment Order.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank can release funds for the MD's treatment from this account, and the Garnishment Order attaches the full 65,00,000 rupees (Balance + CC limit).
- 2The bank cannot release funds for treatment from the company account as it is a separate legal entity, joint operation is suspended, and the Garnishment Order only attaches the credit balance of 45,00,000 rupees, not the unutilized CC limit.✓
- 3The bank must allow the CFO to operate the account alone in an emergency, and the Garnishment Order attaches only the CC limit as it is money at call.
- 4The bank can honor the MD's family request from the CC limit, and the Garnishment Order is void because the account balance is less than the debt amount.
Correct answer
The bank cannot release funds for treatment from the company account as it is a separate legal entity, joint operation is suspended, and the Garnishment Order only attaches the credit balance of 45,00,000 rupees, not the unutilized CC limit.
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