Banking · Garnishee Order, Right of Set-Off and Power of Attorney
Mr. Kapoor and his son, Arjun, maintain a joint savings account with an 'Either or Survivor' mandate. Mr. Kapoor also has an overdue personal loan with the same bank. He granted a Power of Attorney (PoA) to his daughter, Sneha, to operate his accounts. On March 1 at 10:00 AM, the bank receives a court Garnishee Order attaching all sums due to Mr. Kapoor in his individual capacity for Rs 5,00,000. At the time of the order: - Joint Account balance: Rs 8,00,000. - Mr. Kapoor's individual Fixed Deposit (FD): Rs 3,00,000. - Overdue Personal Loan amount: Rs 2,00,000. - A cheque for Rs 1,00,000 issued by PoA holder Sneha on the joint account on Feb 28 is presented on March 1 at 3:00 PM. What is the legal obligation of the bank?
- 1The bank should freeze both accounts completely until the court determines ownership of the joint account funds.
- 2The bank must honor the cheque presented at 3:00 PM because it was issued before the order was received.
- 3The bank should first set off the Rs 2 lakh overdue loan from the Rs 3 lakh individual FD, attach the remaining Rs 1 lakh of the FD, and cannot attach the joint account as it is held in a different rights/capacity.✓
- 4The bank should attach the entire Rs 8 lakh in the joint account and Rs 3 lakh in the FD to satisfy the order.
Correct answer
The bank should first set off the Rs 2 lakh overdue loan from the Rs 3 lakh individual FD, attach the remaining Rs 1 lakh of the FD, and cannot attach the joint account as it is held in a different rights/capacity.
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