The Recovery Officer can issue a garnishee order without conducting an inquiry or issuing a show cause notice under the Recovery of Debts and Bankruptcy Act, 1993.

ORDER

Heard learned Senior counsel Sri. M.S. Shyamsundar with learned counsel Smt. P.L. Vandana for the petitioner, learned counsel Smt. Anupama Hegde for respondent No.1, learned counsel Sri. V.J. Achalanand for respondent No.2 and learned counsel Sri K.S. Mahadevan for Official Liquidator. Respondent Nos.3, 4 and 6 are served and notice to respondent No.5 dispensed with.

2. This petition impugning the order of garnishee issued by respondent No.1 in TRC No.910/2018 in O.A.No.113/2002 dated 10.03.2020.

3. It is stated that respondent No.2 lent money to respondent No.3. Respondent Nos.4 and 5 were corporate guarantors to the said loan. Respondent No.4 has been ordered for winding-up. Respondent No.6 was Director of respondent No.4-Company at the relevant time. It is stated that respondent No.6 submitted his resignation as Director in respondent No.4-Company.

4. It is stated that respondent No.6 filed applications before the Debts Recovery Tribunal [DRT] under Order XXI Rule 101 of CPC read with Rules 9 and 11 of Schedule-II to the Income Tax Act, 1961 seeking declaration that he has no obligation or liability in his capacity as Director after the date of his resignation as Director. The said applications are pending consideration.

5. Respondent No.1 at the instance of respondent No.2- Certificate holder has issued order of garnishee to the petitioner directing the petitioner to pay forthwith in favour of respondent No.1 such sum as is payable to the respondent No.6 herein. The said order of garnishee is under challenge.

6. Learned Senior counsel Sri M.S. Shyamsundar with learned counsel Smt. P.L. Vandana appearing for the petitioner submits that respondent No.1 has not conducted any enquiry before issuing direction to pay the amount forthwith. There is no material to demonstrate that the petitioner is due in a sum in favour of respondent No.6. It is further contended that respondent No.1 before issuing the order of garnishee under Section 28 of the Recovery of Debts and Bankruptcy Act, 1993 [hereinafter referred to as 'Act of 1993'] is required to issue show-cause notice, after consideration of the reply, has to determine whether the petitioner is in due of sum payable to respondent No.6. In the absence of said exercise, the order of garnishee cannot be issued.

7. On the other hand, learned counsel Smt. Anupama Hegde for respondent No.1 and learned counsel Sri.V.J.Achalanand for respondent No.2 in vehemence contend that the contention of the petitioner is beyond the scope of Section 28 of the Act of 1993. The Act does not contemplate issuing of show cause notice, determination of the liability and the quantum of amount/sum due by the petitioner in favour of respondent No.6.

8. Heard learned counsel for the parties.

9. Section 28 of the Act of 1993 provides modes of recovery. Section 28 of the Act of 1993 reads as under;

"28. Other modes of recovery.—

(1) Where a certificate has been issued to the Recovery Officer under sub-section (7) of Section 19, the Recovery Officer may, without prejudice to the modes of recovery specified in Section 25, recover the amount of debt by any one or more of the modes provided under this section.

(2) If any amount is due from any person to the defendant, the Recovery Officer may require such person to deduct from the said amount, the amount of debt due from the defendant under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Recovery Officer:

Provided that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a civil court under Section 60 of the Code