The Delhi High Court has held that a court cannot direct a third party to deposit money in court in the absence of an admitted or crystallised liability, reiterating that garnishee orders can ordinarily be passed only after a decree is obtained and the debt sought to be attached is established as due and payable.

Justice Tejas Karia relied on Value Advisory Services v. ZTE Corporation (2009) where there was no decree in favour of the petitioner therein and the alleged debt was disputed by the garnishee. The High Court did not consider it appropriate to direct the garnishee to deposit the amount therein.

The Court was dealing with a challenge to a trial court order directing NBCC (India) Limited to deposit ₹1.48 crore in a fixed deposit receipt (FDR) in a commercial suit arising out of a payment dispute between a contractor and a subcontractor.

The dispute stemmed from a project awarded by NBCC to GNC Infra LLP for construction works relating to a National Investigation Agency (NIA) facility in Hyderabad.

GNC Infra subsequently subcontracted part of the work to another entity. Following disputes over payments, the subcontractor instituted a recovery suit against GNC Infra and impleaded NBCC as a defendant, seeking protection of amounts allegedly payable by NBCC to GNC Infra.

During the pendency of the suit, the trial court modified an earlier status quo order and directed NBCC to deposit an amount equivalent to the suit claim before the court.

Aggrieved, NBCC approached the High Court contending that there was no privity of contract between it and the plaintiff and that no liability had been determined either against GNC Infra or against NBCC.

Allowing the petition, the High Court observed that a garnishee is essentially a debtor of a judgment-debtor and that a garnishee order can be issued only where there exists a presently enforceable debt.

“A garnishee order can be passed only once the Suit is decreed and once the Court is satisfied that a garnishee has a crystallised liability towards the judgment-debtor,” the Court held.

In the present case, the Court noted, the suit was yet to be adjudicated and that there had been no determination of liability of GNC Infra towards the plaintiff. Further, there was no finding that any amount was due and payable by NBCC to GNC Infra.

“In absence of both the conditions having been satisfied, the Impugned Order directing the Petitioner to deposit the Suit Amount with the learned Trial Court could not have been passed,” the Court observed.

Rejecting the argument that NBCC's willingness to preserve the amount pending adjudication amounted to an admission of liability, the Court clarified,

“A willingness to preserve an amount pending adjudication cannot be equated with an acknowledgment that the amount is due and payable.”

Accordingly, the Court allowed the petition and set aside the trial court's order directing NBCC to deposit ₹1.48 crore before the court.

Appearance: For the Petitioner : Mr. Mohit Arora, Advocate For the Respondents : Mr. Alok Bhachawat, Mr. Ishan Jain & Mr. Vishnu Dhangal, Advocates.

Case Title: NBCC India Limited v. GNC Infra LLP & Anr.

Case no.: CM(M) 1181/202

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