Bank Mandate
A bank mandate is a written order to the bank, asking it to open an account, name the peon/s authorized to sign the cheques on behalf of the account holder, and provide the specimen signature.
It is also a written request passed by one bank to another. This is to request the second bank to allow a customer to open an account and carry out transactions in a way an existing account holder would.
Power of Attorney
The Power of Attorney is a legal document giving one person (“agent” or “attorney-in-fact”) the power to act on behalf of another person, who is also known as the principal.
The agent can have widespread legal authority or a limited one depends on the power provided to him/her.
Power of Attorney is usually given if the Principal is invalid or medically unable to discharge a set of activities or if he/she is absent to sign legal documents
There are two types of Power of Attorneys:
General Power of attorney: This provides the peon to act on behalf of the principal on general matters like management of the estate, litigations, Sale of property, etc.
Special power of attorney: A special power of attorney is meant for specific tasks. In such cases, the attorney holder has to report to the principal.
Banker’s Lien
A lien is defined as the right to retain goods in possession until the debt is paid.
A banker’s lien is defined as the right of the bank, in the absence of a contract to the contrary, to hold in its possession, the goods, as security. This right is automatic and no agreement is required. Hence, it is called a general lien. A general lien is also called the “implied pledge”. That would mean the bank also has the right to sell.
However, there is a limitation to such a right. The bank can only hold goods and securities which have been got through the normal course of business and not as a trustee or as an agent.
There, however, may be lien over particular goods as per specific contract or even a negative lien. A negative lien is an undertaking of not alienating security without the consent of the bank.
Right of Set-Off
Bank has the right to combine two or more accounts:
However, if one of the accounts is in debit of the customer, with the same name and rights, then the following needs to be taken care of:
- An account in the individual capacity of the customer showing debits balance cannot be combined with one in a fiduciary capacity (i.e. trustee etc.) showing credit balance.
- Accounts really belonging to identical persons, but dissimilar names can be combined. Thus an account of a sole proprietorship concern may be combined with that in his/her name.
- Two accounts, of a solicitor, one in his name and other marked as client account will not be combined.
- Two accounts one belonging to an individual and other jointly with someone, will not be combined.
- The right can be implemented only when the debt is due.
- The right should be implemented after giving due notice unless a contract to the contrary exists.
- The right may be exercised before the garnishee order is made effective
Garnishee Order and Attachment order
When the debtor fails to pay the debt, the creditor has the right to approach the court to issue a garnishee order on the bank of the debtor.
A garnishee order is an order issued under by the court under the provision of order 21 rules 46 of the civil procedure 1908.
The order is divided into two parts:
Order nisi
Order nisi directs the bank to stop payment in the account of the judgment debtor to explain is to why not the deposit of the particular person is attached.
The reason for the same is because the banker’s right to set off takes precedence over the garnishee order and hence the bank too requires to avail the same.
Order Absolute
This is issued later. Through this order the entire balance in the account is attached, but only after the court is dissatisfied with the explanation provided by the bank regarding Order nisi. Also to remember, that an order served to the Head Office of a bank is applicable to all its branches, after a reasonable period in time.
Let us look at the difference between the garnishee order and the Attachment order:
| Garnishee Order | Attachment Order |
| Can be issued for the entire balance | The amount is specifically mentioned |
| Is only applied to the outstanding as on the date of receipt of the order and not to the subsequent credits | Does apply to the subsequent credit too |
| In the case of joint account, a joint account cannot be attached if only one of the holders is a judgment debtor but the reverse is true. In a partnership firm, if the judgment debtor is a firm, the partner’s individual account may also be attached. | A balance in a joint account may be attached. In that case, the share of each of the account holders shall be equal, unless there is a contract to the contrary. |
Pertinent to note that:
- Unauthorized or undrawn balance in overdraft cannot be attached in both cases.
- Both the instances apply to debts due or accruing due or repayable at a fixed future date