"Attach his accounts!"

The worst situation one can find himself in, it is said, is to owe money to the mafia. And the biggest mafia in any country is the government of the day. Government is mafia with legitimacy and government's henchmen are called TAX MEN.

It so happens that whenever a taxpayer defaults in payment of taxes, tax recovery mechanisms of the government are activated and all types of properties are attached. "Attach his accounts" is the favourite tagline of an income tax commissioner whenever the finance ministry comes knocking for budget targets.

Few days back, during a recovery procedure, it was found that to escape the taxman the defaulter has put all his funds in floating demand drafts. The drafts are drawn by the same person in his own name. Now this is novel.

As such demand drafts are negotiable instruments encashable at a discount at any branch of any bank in India. The physical money is in the possession of parent bank. But can this physical money be attached and retrieved by revenue? This issue has come earlier too, but that was an era when drafts were physically transferred to clearing branches in respective cities. At that time a simple attachment at the issuing bank would do the trick. Post-Information Tech reforms banks no longer transfer drafts physically. Rather a system generated confirmation of genuineness is uploaded into a central server and any bank branch can cross-check it.

Hence the only alternative remaining in such a case is to cancel the draft at the issuing branch. Now the problem is that draft numbers are available but drafts are not in IT department's possession. Can the draft still be encashed? If so, what is the procedure? The IT Act gives all round authorisation to its taxmen to retrieve tax demand from banks. But in this case a new challenge arises; as to the procedure to be adopted to cancel drafts so as to retrieve tax for revenue.