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LL.B.(Hons.)IVthSemesterBankingLaw
Unit–ISyllabus:-
Unit-I BankingLawinIndia (Lectures10)i. BankingRegulationAct,1949:ConceptofBankandBanker,Functionsof
Banks,ClassificationofBanks,RelationshipbetweenBankandCustomerii. Control by government and its agencies, Management of Banking
companies,On accountand audit,Reconstruction and reorganization ofbankingcompanies,socialcontroloverbanking
iii. Suspensionandwindingupofbusinessofbankingofbankingcompaniesiv. BankingOmbudsman,v. RecentTrendsinBanking:AutomaticTellerMachineandInternetBanking,
SmartCreditCards,BankingFrauds.
UnitWisePreviousYearQuestionPaperofLucknowUniversity2013
LongQuestionQ.1- GivelegaldefinitionofBank.DescribevariousfunctionsofmodernCommercialBanksinIndia.
cSaddhfof/kdifjHkk’kknhft,AHkkjro’kZesavk/kqfudokf.kfT;dcSadksadsfofHkUudk;ksZadko.kZudhft,AQ.2- DiscussthesuccessandfailuresoftheBankingOmbudsman.
cSafdaxvksEcM~leSu¼cSafdaxyksdiky½dhlQyrkvksa,oavlQyrkvksadhfoospukdhft,AShortQuestions.Q.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i) Originoftheword‘Bank’cSad“kCndhmRifÙkA(ii) CustomeroftheBank.cSaddkxzkgdA(iii) SavingBankAccount.cprcSad[kkrkA(iv) FixedDeposit.Lkkof/ktekA(v) ScheduledCommercialBanksandNon-scheduledCommercialBanks.
vuqlwfprokf.kfT;dcSadrFkkxSj&vuqlwfprokf.kfT;dcSadA(vi) Licensedandnon-licensedCommercialBanks.
Ykkblasl/kkjhrFkkxSj&ykblsal/kkjhokf.kfT;dcSadA
2014LongQuestionQ.1- DiscusstherecentdevelopmentofBankingbusinessinIndia.
HkkjresarkRdkfydcSafdaxO;kikjesafodkldhO;k[;kdhft,AQ.2- Describedifferentmodesofwindingupofbankingcompanies.
cSafdaxdEifu;ksadsifjlekiudsfofHkUurjhdksadko.kZudhft,AShortQuestions.Q.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i) CommercialBank. Okkf.kfT;dcSadA(ii) BankingOmbudsman. cSafdaxvksEcM~leSuA(iii) InstitutionalBank. laLFkkxrcSadA
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(iv) Account. ys[kkA(v) Courtliquidator. U;k;ky;hifjlekidA
LL.B.Hons.(SemesterVI)2015LongQuestionQ.1- Definereconstructionandamalgamation.Discusstheprocedureforamalgamationofbanking
companies.iqufuZekZ.k,oalekesyudksifjHkkf’krdhft,AcSfdaxdaiuhdslekesyudhizfØ;kdhO;k[;kdhft,A
Q.2- WhocanbeAuditorofbankingcompany?Whatisthepurposeofauditandaccountofbankingcompanies?WhataretheguidelinesfortheappointmentofstatutoryauditorsinPublicSectorbanks.cSafdaxdEiuhdkvkWfMVjdkSugksldrkgS\cSafdaxdsvkWfMVvkSjvdkmaVdkD;kmn~ns”;gS\ifCydlsDVjcSadesavkWfMVjdhfu;qfDrijfdufunsZ”kdkikyudjukgS\
ShortQuestions.Q.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i) BankingCompany
cSafdaxdEiuh(ii) Socialcontroloverbankingcompany
cSadksaijlkekftdfu;a=.k(iii) BankingOmbudsman
cSafdaxvksEcM~leSu(iv) Recenttrendsinbanking
cSfdaxdsu,vk;ke(v) Customer
xzkgd
LL.B.Hons.(SemesterVI)2016LongQuestionQ.1- WriteindetailtheprovisionsoftheBankingRegulationActregardingreconstructionand
reorganizationofbankingcompanies.cSafdaxdEiuhdsiqufuekZ.k*,oaiquxZBu*lslEcfU/krcSafdaxfofue;uvf/kfu;e*dsizko/kkuksadksfy[ksaA
Q.2- Discusstheprovisonsrelatingtothewindingupabankingcompany.cSafdaxdEiuhdsifjlekiulslEcfU/krizko/kkuksadhfoospukdhft,A
ShortQuestions.Q.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i) NationalizedBank
jk’Vªh;drcSadLL.B.Hons.(SemesterVI)2017
LongQuestionQ.1- Describe the suspension and winding up ofBanking companies with the help oflegal
provisionsofBankingRegulationAct,1949.cSafdaxfofu;euvf/kfu;e]1949dsfof/kdizko/kkuksadhlgk;rklscSadksadsLFkxu,oaifjlekiudko.kZudhft,A
Q.2- Howgovernmentanditsagenciescontrolthemanagementofbankingcompanies?Discuss.Lkjdkj,oabldsvfHkdrkZcSadksadsizcU/kudksdSlsfu;af=rdjrsgSa\foospukdhft;sA
ShortQuestions.Q.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i) BankingFrauds
cSafdaxesadiV(ii) ATM
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,-Vh-,e-(iii) InstitutionalBanking
laLFkkxrcSafdax(iv) ScheduledBank
vuqlwfprcSadLL.B.Hons.(SemesterVI)2018
LongQuestionQ.1- GivelegaldefinitionofBank.DescribevariousfunctionsofmoderncommercialBanksinIndia.
cSaddhfof/kdifjHkk’kknhft,AHkkjro’kZesvk/kqfudokf.kfT;dcSadksadsfofHkédk;ksZadko.kZudhft,AQ.2- WhatdoyouknowabouttheBankingOmbudsman?Discussalsoitssuccessandfailures.
cSafdaxvksEcM~leSu¼cSafdaxyksdiky½dsckjsesavkiD;ktkursgSa\bldhlQyrkvksarFkkvlQyrkvksadhHkhppkZdhft,AShortQuestion
1.Originoftheword‘Bank’cSad“kCndkmn~xe
2.CustomeroftheBankcSaddkxzkgd
3.FixedDepositLkkof/ktek
4.OverdraftvksojMªk¶V
LL.B.Hons.(SemesterVI)2019LongQuestionQ.1- Describethesuspensionandwindingupofbankingcompanieswiththehelpoflegal
provisionsofBankingRegulationAct,1949.cSafdaxvf/kfu;e]1949dsfof/kdizko/kkuksadhlgk;rklsCkSadksadsLFkxu,oaifjlekiudko.kZudhft,A
Q.2- Whatarethegeneralprincipleswhichshouldguideabankerinmakingloanandadvancestoacustomer?fdlhxzkgddks_.krFkkvfxze/kuiznkudjrsle;cSadjdksekxZn'kZuiznkudjusokyslkekU;fl)kUrD;kgSa\
ShortQuestionQ.1- ATM
,Vh,eAssignment/ModelPaper
Unit-ILongQuestionQ.1- Whatdoyoumeanby“Bank”?DefineandExplainitsImportance.
cSadlsvkiD;kle>rsgSa\bldksifjHkkf’krdhft,rFkkbldsegRodkscrykb;sAQ.2- HowisBankingombudsmanappointed?Explainthepowersanddutiesofombudsman.
cSafdaxyksdikydhfu;qfDrdSlsgksrhgS\cSafdxyksdikydh“kfDr;ksavkSjdÙkZO;;ksadhfoospukdhft,AQ.3- Discusstherelationshipbetweenbankerandcustomer.
cSaddkjhvkSjxzkgddslEcU/kksadhfoospukdhft,A
AnswersQ.1- Whatdoyoumeanby“Bank”?Defineandexplainitsimportance.Ans.-
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Theterm "Bank"inthepresentcontextmeansaninstitutionwhichcarriesonthebusinessof"banking".ItisregisteredunderBankingRegulationAct,1949.AccordingtothisAct"A BankingCompanymeansanycompanywhichtransactsthebusinessofbankinginIndia.
AccordingtoSec.3ofNegotiableInstrumentAct,1881,theword"Banker"includesanypersonactingasabankeraswellasanypost-officesavingbank."
Originofword"Bank":Sofarasthepresentsystem isconcernedtheword"Bank"issaidtobeGermanicorigin
cognatewiththeFrenchword"Banque"andtheItalianWord"Benca"bothmeaningbench.InancientItalyandFrancewhenamoneylenderfailedhisbenchwasbrokenasaresultofhisfailures.ThewordBankasstatedbyauthoritiesisoriginallyderivedfrom "back"whichmeansa"joint-staff-fund".IntheItaly,bankerstransactedtheirbusinessonthebenchesinthemarketplace.Whenabankerfailed,his"bankco"i.e.,benchwasbrokendownbythepeople,anditwasindicativeoffactthathehasbecomebankrupt.Legaldefinitionofbank:
AccordingtoBankingRegulationAct,1949bankingcompanymeansanycompanywhichtransactsthebusinessofbankinginIndia.[Sec.5(c)].
AccordingtoSec.5(b)bankingmeans"theacceptingofdepositsofmoneyfrom thepublic,forthe purpose oflending orinvestment,which are repayable on demand orotherwise and arewithdrawalbycheque,draft,orderorotherwise"
AccordingtoSec.3oftheNegotiableInstrumentAct,1881,thewordBanking"includesanypersonactingasabankeraswellasanypostofficesavingbank.
AccordingtoProf.Hart"Abankerisapersonorcompanycarryingonbusiness,ofreceivingmoneysandcollectingdrafts,forcustomerssubjecttotheobligationofhonoringcheque,drawnuponthem from timetotimebythecustomerstotheextentoftheamountsavailableontheiraccounts."
ImportanceofBanksBanksare beneficialto everyone.Banking playsa veryimportantrole in the economic
developmentofallnationsoftheworld.Themainadvantagesofbanksareasfollows:1.ToProvideCreditInformationandLetterofCredit.–Wheneveranybodywantstoknowthe
financialpositionofabusiness,heisreferredtoitsbanker,whosupplieshim thedetailedinformation.BanksalsoissueLetterofCredittotheircustomerstohelpandenablethem togoabroad.
2.FacilityinMakingpayments-ThePaymentsaregreatlyfacilitatedthroughchequeswhichisalwaysconvenientandsafeandavoidsdispute.Thereisnoneedofcountingmoneywhenpaymentismadebymeansofcheques.
3.Safety–Thereisalwaysariskinkeepingcashwithone’sownself.Themoneywiththebanks
1.Bank:Definition(Sec.3ofNegotiableInstrumentAct,1881)2.Originofword“Bank”.3.LegalDefinitionofBank.
Prof.Hart4.ImportanceofBank
a.Toprovidecreditinformationandletterofcreditb.Facilityinmakingpaymentsc.Safetyd.Toencouragehabitofsavinge.Saleandpurchaseofsecuritiesf. Collectionofchequesetc.
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remainsinsafecustody.Everybodylikestokeepmoneywiththebankstoavoidtherisk.4.Toencouragehabitofsaving-Banksencouragethehabitofsavingsinthepublic.Savingsin
thebanksontheonehandaresafeandontheotherhandearninterestforitsdepositors.Thisisthemainadvantageofthebanks.
5.SaleandPurchaseofSecurities-Banksalsosellandpurchaseshares,stocks,debenturesandbondsetc.onbehalfoftheircustomers.
6.Collectionofchequesetc-Banksalsocollecttheamountofcheques,drafts,billsofexchange,etc.onbehalfoftheircustomers.
7.OtherServices-Inadditiontotheabovementionedservicesbanksalsoprovidevariousotherservicestotheircustomers,suchasremittanceoffunds,paymentofinsurancepremium,issuanceoftravelercheques,loanfacilityetc.
&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&Q.2- Howisbankingombudsmanappointed?Explainthepowersanddutiesofombudsman.Ans.-
TheReserveBankofIndiahasappointedOmbudsmenundertheBankingOmbudsmanScheme,1995forredressalofgrievancesoftheMembersofthepublicagainstbanksrelatingtodeficiencyinbankingservices,loansandadvancesandotherrelatedmatters.Recently,theschemehasbeenamendedandnow,itisknownasBankingOmbudsmanScheme,2006whichcameintoforcefrom IstJanuary,2006.Thenew shcemeisapplicabletoallCommercialbanks,RegionalRuralBanksandScheduledPrimaryCo-operativeBanks.
AppointmentofOmbudsmanTheOmbudsmanisappointedbytheReserveBanksatsuchplacesasmaybespecifiedbyit.
TheReserveBankhasappointed Banking OmbudsmanatMumbai,New Delhi,Patna,Gauhati,Chandigarh,Jaipur,Ahmedabad,Bangalore,Bhopal,Bhubaneshwar,Chennai,Hyderabad,Kanpur,KolkataandTiruvananturam.TheOmbudsmenarelikelytobeappointedshortlyatalltheplaceswheretheofficesoftheReserveBankaresituated.TheremunerationandotherperquisitespayabletotheBankingOmbudsmanaredeterminedbytheReserveBankfrom timetotimeandisbornebythebanksinsuchproportionandinsuchmannerasmaybedeterminedbytheReserveBank.
Jurisdiction,PowerandDutiesofOmbudsmanTheOmbudsmanwillbeempoweredtoreceivecomplaintsagainsttheCommercialBanksand
ScheduledCo-operativeBanksrelatingtodeficiencyinbankingservicesandloansandadvances.TheschemehasspecifiedthenatureofcomplaintswhichcanbeentertainedbytheBankingOmbudsman.TheOmbudsmanwillentertainallcomplaintsconcerningdeficiencyinbankingservicessuchas:
(i) Non-payment/inordinatedelayinthepaymentorcollectionofcheques,drafts/billsetc.,(ii) Non-acceptance,withoutsufficientcause,orsmalldenominationnotestenderedforany
purpose,andforchargingofcommissioninrespectthereof;(iii) Non-issueofdraftstocustomersandothers;(iv) Non-adherenceofprescribedworkinghoursbybranches;(v) Failuretohonourguarantee/letterofcreditcommitmentsbybanks;(vi) Claimsinrespectofunauthorizedorfraudulentwithdrawalsfrom depositaccountsetc.;(vii) Complaintspertainingtotheoperationsinanyaccountsmaintainedwithabankssuchas
delays,non-creditofproceeds to party’s accounts,non-paymentofdepositornon-observanceoftheReserveBanksdirections,ifany,applicableto rateofintereston
Theanswershallconsistoffollowingimportantpoints:1.BankingOmbudsman
a.BankingOmbudsmanScheme,1995b.BankingOmbudsmanScheme,1996
2.AppointmentofOmbudsman3.Jurisdiction,poweranddutiesofOmbudsman
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deposits;(viii) Complaintsfrom exportersinIndiasuchasdelaysinreceiptofexportproceeds,handling
ofexportbills,collectionofbillsetc.providedthesaidcomplaintspertaintothebank’soperationsinIndia.
(ix) Complaints from non-residentIndians having accounts in India in relation to theirremittancesfroabroad,depositsandotherrelatedmatters;
(x) Complaintspertainingtorefusaltoopendepositaccountswithoutanyvalidreason;and(xi) AnyothermatterrelatingtoviolationofthedirectivesissuedbytheReserveBankofIndia
inrelationtobankingservices.Thecomplaintsrelatingtoloansandadvancesofthefollowingnaturewillbeentertained;
(i) Non-observanceofReserveBankdirectionsoninterest-rates;(ii) Delay in sanction/non-observance ofprescribed time schedule fordisposalofloan
application;(iii) Non-acceptanceofapplicationforloanswithoutfurnishingvalidreasonstotheapplicant;
and(iv) Non-observanceofanyotherdirectionorinstructionoftheReserveBankasmaybe
specifiedforthispurpose.TheOmbudsmanmayalsoentertainsuchothercomplaints,asmaybespecifiedbytheReserve
Bankfrom timetotimeinthisbehalf.
&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&Q.3- DiscusstheRelationshipbetweenbankerandcustomer.Ans.-
Meaningofacustomer-Acustomerisonewhoisaccomplishedtofrequentacertainplaceofbusiness.
Acustomerisapersonwhoregularlyorrepeatedlymakespurchasesof,orhasbusinessdealingwith,atradesmanorbusiness.
AccordingtoDr.Hart,“Acustomerisonewhohasanaccountwithabankerorforwhom abankerhabituallyundertakestoactassuch.
Neitherthenumberoftransactionsnortheperiodduringwhichbusinesshasbeenconductedbetweenthepartiesismaterialindeterminingwhetherornotaper
GeneralRelationship between Bankerand Customer-The relationship between a bankerandcustomerisbasicallycontractual.Itisregulatedby(a)thegeneralprovisionsoflawofcontract(b)therulesofagency,whereapplicable,and(c0bankingpractice.Theremaybefollowingrelationshipsbetweenbankerandcustomer:
1.DebtorandCreditorRelationship
1.Meaningofacustomer2.Generalrelationshipbetweenbankerandcustomer
a.Debtorandcreditorrelationshipi.Demandforpayment
ii.Properplaceandtimeiii.Demandinpropermanneriv.Notimebar
b.Trusteeandbeneficiaryrelationshipc.Principal-agentrelationshipd.Baileeandbailerrelationship
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2.Bankerasatrustee
3.BankerasAgent
4.BaileeandBailor
1.DebtorandCreditorRelationship-Therelationofbankerandcustomerisprimarilythatofdebtorandcreditor.ButwhoiswhatataparticularmomentdependsontheStateofcustomer’saccount.Iftheaccountshowsacreditbalance,thebankerwillbeadebtorandthecustomeracreditor.Butinthecaseofdebitbalanceoroverdraft,thebankerwillbethecreditorandthecustomerthedebtor.
The debtor-creditorrelationship between a bankerand a customeris governed bythefollowingconditions:-
(a)Demandforpayment-A bankisnotanordinarydebtorinthesensethatitisundernoobligationtorefundthecustomer’sdepositsunlessdemandismade.Evenincaseoffixeddeposits,thebankisnotrequiredtoreturnthemoneyonitsownaccord.Thecustomersmustmakeademandforrepaymentoffundsdepositedexceptwhenthebankisbeingwoundup.
(b)Properplaceandtime-Theobligationtorepaytheamountdepositedislimitedtothebranchwheretheaccountiskept.Thecustomercanissuechequesonlyonthebranchonthebankswheretheaccountiskept.Thedemandforpaymentmustbemadeduringtheworkinghoursandonworkingdaysofthebranchconcerned.
(c)Demandinpropermanner-Thedemandforpaymentshouldbemadeinpropermannerinaccordancewithlaw orcustom.Thedemandshouldnotbemadeverballyorthroughatelephonicmessage.Thepropermannermaybeacheque,draftoranythingwhichmayprovethe genuineness ofdemand by the customerwhose identity mustbe disclosed andauthenticatedtothesatisfactionofthebank.
(d)Notimebar-Thedepositswithabankdonotbecometimebarredontheexpiryofaspecificperiodasnotbecomedueforpaymentunlessitisdemanded.
2.TrusteeandBeneficiaryrelationship-Thebankerassumesthepositionofatrusteewhenheacceptssecuritiesorvaluablesfrom thecustomerfavorsafecustody.Thearticlesdepositedwiththebankforsafecustodycontinuetobeownedbythecustomer.Thebankeristodealwiththearticlesaspertheinstructionsofthecustomer.Thebankerisatrusteeofthecustomerinrespectofchequesandbillsdepositedbythecustomerforcollection,tilltheyarecollected.Hebecomesthedebtoronceitiscollectedandcreditedtotheaccountofthecustomer.Thebankeractsalsoforthebenefitofthecustomer,andthus,thecustomerisabeneficiaryinthisway.
3.Principal-agentrelationship-Abankeractsasanagentofhiscustomerandperformsanumberofagencyfunctionse.g.,thebankercollectschequesonhisbehalfandmakespaymentofvariousduesofhiscustomerviz.,insurance,premium etc.
4.BaileleandBailorrelationship-Thebankfunctionsasabaileewhenitkeepsvaluablearticles,ornaments,titledeedsetc.ofitscustomer.Thebankworksasthecustodianofthesethings,anditisimpliedresponsibilityofthebanktoreturnthesethingssafely.Thus,thebankisabaileeandthecustomerisabailor.Whendemanded,thebankreturnsallthesethingstoitscustomers.Thebankkeepsonekeyofthecustomer’slockerwithitandanotherkeyiskeptbythecustomer.Thelockercannotbeopenedwithoutusingboththekeys.Thecustomerhastopaytherentofthelocker.
&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&
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Unit–IISyllabus:-
Unit-II RegulationofBanks (Lectures10)i. ReserveBankofIndiaAct,1934ii. Incorporation,Capital,ManagementandBusinessofBankingCompany,iii. CentralBankingfunctionofReserveBankofIndia,iv. CollectionandfurnishingofCreditInformation,ControlofReserveBankof
IndiaoverNon-bankingInstitutionsandFinancialInstitutions,v. CreditcontrolbyReserveBankofIndia,Generalprovisionsandpenalties.
UnitWisePreviousYearQuestionPaperofLucknowUniversity2013
LongQuestionQ.1- WhatdoyouknowaboutthemanagementboardoftheReserveBankofIndia?Discuss.
Hkkjrh;fjtoZcSaddsizcU/ke.MydslEcU/kesavkiD;ktkursgSa\foospukdhft,AQ.2- DiscussmainfunctionsoftheReserveBankofIndia.
Hkkjrh;fjtoZcSaddsizeq[kdk;ksZadhfoospukdhft,AShortQuestions.Q.1- GovernorandDeputyGovernoroftheReserve. Hkkjrh;fjtoZcSaddkxouZjrFkkfMIVhxouZjA
2014LongQuestionQ.1- DiscussthecharacteristicsandpowersoftheR.B.I.
Hkkjrh;fjtoZcSaddhfo”ks’krkvksa,oa“kfDr;ksadhO;k[;kdhft,AQ.2- CommentonSocialControlofR.B.I.
Hkkjrh;fjtoZcSaddslkekftdfu;a=.kijfVIi.khdhft,AShortQuestions.Q.1- CentralBank.dsUnzh;cSadA
LL.B.Hons.(SemesterIV)2015LongQuestionQ.1- Describegeneralprovisionsofpenaltiesandpunishmentforbankingcompanies,itsofficers
andauditorsfornon-complianceorcontraventionoflaws.cSfdaxdaiuh,oabldsvf/kdkfj;ksa]vkWfMVj}kjkfu;eksadsvuqikyuudjusdhn”kkesanaM,oaltklslacaf/krlkekU;izko/kkuksadho.kZudhft,A
Q.2- DescribeCentralBankingfunctionofReservebankofIndia,specialfocusoncreditcontrolmechanism,IsRBIarmedwithDraconianpowerdiscuss?
ShortQuestions.Q.1- INFINETbfUQusV
LL.B.Hons.(SemesterIV)2016LongQuestionQ.1- DescribethecentralbankingfunctionsofReserveBankofIndia.
Hkkjrh;fjtoZcSaddsdsUnzh;cSadlEcfU/krdk;ksZadko.kZudhft,AQ.2- DiscusstheconstitutionofCentralBoardofReserveBankofIndiaanditsorganizational
structure.Hkkjrh;fjtoZcSaddsdsfUnz;cksMZdsxBu,oabldsfoHkkxh;lajpukdhfoospukdhft,A
ShortQuestions.Q.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i) CashReserveRatio
udnlajf{krvuqikr(ii) PowersofAuditor
9
vads{kddh“kfDr(iii) CreditControlbyRBI
Hkkjrh;fjtoZcSad}kjk_.kfu;a=.kLL.B.Hons.(SemesterIV)2017
LongQuestionQ.1- Discussthecreditcontrolmechanism ofRBI.
fjtoZcSadds_.kfu;a=.kiz.kkyhdhO;k[;kdhft,AQ.2- DescribethecentralbankingfunctionoftheRBI.
fjtoZcSadvkWQbf.M;kdsdsUnzh;dk;ksZadko.kZudhft,AShortQuestionsQ.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i) Non-BankingFinancialInstitution
xSj&cSafdaxfoÙkh;laLFkku(ii) Reverse-Repo
fjolZ&jsiksLL.B.Hons.(SemesterIV)2018
LongQuestionQ.1- WhatdoyouknowaboutthemanagementboardoftheReserveBankofIndia?Discuss.
Hkkjrh;fjtoZcSaddsizca/keaMydslEcU/kesavkiD;ktkursgSa\ppkZdhft,AQ.2- DiscussbrieflymainfunctionsoftheReserveBankofIndia.
Hkkjrh;fjtoZCkSaddseq[;dk;ksZadhla{ksiesappkZdhft,AShortQuestionQ.1- GovernorandDeputyGovernoroftheReserveBankofIndia.
Hkkjrh;fjtoZcSaddkxouZjrFkkfMIVhxouZjLL.B.Hons.(SemesterIV)2019
LongQuestionQ.1- Discussthecontrolmechanism ofRBI.
fjtoZcSaddhfu;a=.kiz.kkyhdhO;k[;kdhft,AQ.2- Describecreditcontrolmechanism ofRBI.
fjtoZcSaddh_.kfu;U=.kiz.kkyhdko.kZudhft,AShortQuestionQ.1- BankingOmbudsman
cSafdaxvksEcM~eSuQ.2- GovernorandDeputyGovernorofRBI
fjtoZcSaddsxouZj,oafMIVhxouZjQ.3- Reverse-Repo
fjolZ&jsiksAssignment/ModelPaper
Unit-IILongQuestionQ.1- Discusstheobjectives,organizationalstructureandfunctionsoftheReserveBankofIndia.
fjtoZcSadvkWQbf.M;kdsmn~ns”;ksa]laxBukRed<kapsrFkkdk;ksZadhfoospukdhft,AQ.2- Explain thecontrolofReserveBankofIndiaovernon-banking institutionsand financial
institutions.xSj&cSafadaxlaLFkkvksa,oafoÙkh;laLFkkvksaijHkkjrh;fjtoZcSaddsfu;U=.kdko.kZudhft,A
Q.3- DiscussthecontrollingpowersofIndianReserveBankOver.Banks.Hkkjrh;fjtoZcSaddhcSdksadslEcU/kesafu;a=.k“kfDrdhO;k[;kdhft,A
Answers
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Q.1- Discusstheobjectives,organizationalstructureandfunctionsoftheReserveBankofIndia.
Ans.-
ReserveBankofIndia-ReservebankofIndiawasestablishedintheyear1935asacentralBankofthecountryundertheprovisionsofReserveBankofIndiaAct1934.Itwasnationalizedintheyear1949andthuscameunderabsolutecontrolofGovernment.Offices,BranchesandAgencies-ItsofficesareatBombay,Kolkata,Delhi,andMadras.ItsagenciesmaybeestablishedatotherplacesinthecountrywiththepermissionofthecentralGovernment.GovernororManagement-ACentralBoardofDirectorswouldlookafterthemanagementoftheR.B.I.suchBoardwillhave20members.TherewillbeaGovernorandmaximum offourDeputyGovernorappointedbytheCentralgovernment.Therewillbefourdirectorsonefrom eachcircle/Zone nominated bythe CentralGovernment.The centralGovernmentwillnominate ten moreDirectorsforaperiodofFouryears.CentralGovernmentwillnominateagovernmentservantmoreasaDirector.
GovernorandDeputyGovernorswillbefulltimerappointedforamaximum periodof5yearstheymaybereappointedaftertheexpiryof5years.TheywillbeentitledtosalaryandallowanceprescribedbycentralboardofDirectorsandapprovedbytheCentralGovernment.
GovernorwillpresideoverthemeetingsoftheBoardofDirectors.InhisabsencetheDeputyGovernornominatedbytheGovernorwillpresideoverthemeeting. TheGovernmentnominatedemployee (Director)and DeputyGovernors willhave the rightto participate and take partindeliberationsinthemeetingoftheCentralBoardofDirectorsbutwillhavenorighttovote/Franchise(Section8ofRBIAct.1934).
FunctionsofReserveBank-FunctionofReserveBank
TraditionalFunctions PromotedandDevelopmentalFunction
1.ReserveBankofIndia2.Offices,Branchesandagencies3.GovernororManagement4.FunctionsofReserveBank
a.TraditionalFunctionsb.PromotedFunctions
i.NoteIssue(Sec.22)ii.BankertotheGovernment(Sec.20)
iii.ControlofBanks1.BankingRegulationAct,1949(Sec.22,23,35,36,36AA,36AB)
iv.Banker’sDeath(Sec.17oftheReserveBankofIndiaAct,1934)v.ControlofCredit
vi.Custodianofexchangereservevii.CollectionofDatapublication
5.Promotionalanddevelopmentalfunctions
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Note CollectionofData Controlof Bankerto Custodianof Control BankersIssueandPublication Credit TheGovernmentExchangeReserve ofbank Bank
ItscapitalisRs.5Crore.ReserveBankofIndiahasrighttoissuethecurrency.ItactsasabankeroftheCentralGovernmentandStateGovernments.ITactsasabankeroftheGovernmentbycollectionsofthebillofexchangeofthegovernment,acceptthem andmakespayment.ItmanagesloanfortheGovernment.ItgivesadvicetothecentralgovernmentsstateGovernmentinvariousfinancialmatters.ItactsasabankeroftheBankalso.Itacceptsdepositsofthebanks,givethemload,andactsasacleaninghouseforthem.priorpermissionoftheReserveBankofIndiaisrequiredtoopennewbranchofabank.Ithasrighttomakeaninspectionofthebank.Itcontrolsthecreditinthecountry.
ThusfunctionsoftheReserveBankofIndiaareasfollowing-1- NoteIssue-Undersection22oftheReserveBankofIndiaAct1934,theReservebankshallhavethesolerighttoissuebanknotesinIndia.Accordingtosection38oftheReserveBankofIndiaAct,theCentralGovernmentshallputintocirculationrupee,coinsandonerupeecurrencynotesthroughReserveBankonly.ItistonotethatonerupeecurrencybearthesignatureoftheFinanceSecretary.Ministryoffinance,GovernmentofIndiawhiletheotherbanknotesareissuedunderthesignatureoftheGovernoroftheReserveBankofIndia.NotesissuedbytheReserveBankofIndiaareknownasBankNoteswhiletheonerupeesnotesofthecentralGovernmentareknownascurrencynotes.Accordingtosection27oftheRBIAct1934theReservebankshallnotreissuebanknoteswhichonetorn,defaced,orexcessivelysoiled.2- BankertotheGovernment-TheReserveBankistheBankertotheCentralGovernmentStatutorilyandtotheStategovernmentsbyvirtueofagreementsenteredintowiththem undersection20ofAct,theCentralGovernmentconductsallitstransactionthroughtheReservebanksection21oftheReserveBankofIndia1934requirestheGovernmentofIndiatoentrusttheReserveBankallitsmoney,remittances,exchangesandbankingtransactionsinIndiaandinparticulardepositfreeofinterestallincashbalancewiththeReserveBank.3- ControlofBanks-ThereserveBankActsassupervisorandcontrollerofbanks.UndertheprovisionsofthebankingRegulationAct1949.a. EachbankinIndiaisrequiredtoobtainLicensefrom theReserveBankbeforeconductingbanking business(Section22).b. Eachbankdesirousofopeningnewbranchorchangeinthelocationofanyexistingbranchisrequiredtoobtainpriorpermissionfrom theReserveBank(section23).c. RBIhaspowertoinspectbooksandaccountsofcommercialbank(Section35).d. ReserveBankofIndiamayissuedirectionstocommercialbankandmayprohibitbanktoenterinto particulartransactions(section36).e. ReserveBankmayremoveanytopexecutiveofabanksection(36AA)f. ReserveBankmayappointadditionaldirectorsofthebankingcompanysectionAB.4- Banker'sBank-TheReservebankofIndiaisabankertothescheduledcommercialBankinIndia. AlltheScheduledcommercialBankkeeptheiraccountswiththeReserveBankKeeptheiraccountwiththeReserveBank.
Undersection17oftheReserveBankofIndiaAct1934ScheduledbanksmayhaverecoursetoReserveBankforFinancialassistanceundertheprovisionsoftheAct,theReservebankisempoweredtomakeloanandadvancestoscheduledBanksagainstthesecurityofstocksandfundetc.refundableondemandorontheexpiryofafixedperiodsnotexceeding180daysincaseifacommercialbankisnotinapositiontoraiseFinancesfrom othersources,thenitmayapproachReserveBankfornecessaryFinancialaccommodation.TheReserveBank,inthecapacityofthelenderofthelastresort,assumes,theresponsibilityofmeetingdirectlyorindirectlyallreasonabledemandsforCo-operativesocietyregisteredwithintheareainwhichthestateco-operativeBankoperates.
Anyotherpersonsuchloansoradvancesshouldberefundableondemandorontheexpiryoffixedperiodsnotexceeding90days,onsuchtermsandconditionsastheReserveBankmayconsider
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tobesufficient.5- ControlofCredit-TheReserveBankexercisesitscontroloverthecreditcreatedbythecommercialbanks.6. CustodianofExchangeReserve-TheReserveBankistheCustodianofthecountryisforeignexchangerevenue.TheallIndiaremittancestoforeigncountriesandforeignremittancestoIndiaaremadethroughtheReserveBank.7. CollectionofDataPublication-TheReserveBankistheprincipalsourceofcertainFinancialStatisticsandbankingdata.TheReserveBankpublishesamonthlybulletin,withweeklystatisticalsupplementsandannualreportwhichpresentagooddealofperiodicalreviewsandcommentscreditfacilitiesfrom commercialbanksandothercreditinstitutionsonterm andconditionsasmaybespecifiedundersection42oftheReserveBankofIndiaAct.TheReservebankholdsthecashreservesofcommercialandotherbanksandthusactsascustodian.TheReserveBankAct.asaclearinghouseformemberbanksforsettlingtheirmutualtransactionsbybookentries.
Accordingtosection18oftheActwhenintheopinionoftheReserveBankaspecialoccasionhasarisenmakingitnecessaryorexpedientthatactionshouldbetakenforregulatingcreditintheinterestsofIndiatrade,industry,commerceandagriculture.TheBankmaynotwithstandinganylimitationcontainedinsection-17-1. Purchasesellordiscountanybillofexchangeorpromissorynote,thoughthesamemaynotbeeligibleforpurchaseordiscountundersection-17.2. Makeloansoradvancesto-
a. StateCo-operativebankb. Ontherecommendationofastateco-operativebank,topertainingtogeneraleconomic
Financialandbankingdevelopments,includingtheBank'smonitorypoliciesandmeasures,adoptedforthequalitativeandquantitativemonetarymanagement.8. PromotionalandDevelopmentalFunctions-Itperformsmanypromotionanddevelopmentfunction,viz.i. ThroughtheinstitutionslikeUnitTrustofIndia,whichhelpstomobilizesavinginthecountry.ii. BysettingupBanker'sTrainingCollegetoextendtrainingfacilitiestosupervisorystaffofcommercialbank.
____________________________________________________________________________Q.2- ExplainthecontrolofReserveBankofIndiaovernon-banking institutionand financial
institutions.Ans.-
TheReserveBankofIndiahastakeninitiativeinsettingupstatutorycorporationsattheall-Indiaandregionallevelstofunctionasspecializedinstitutionsforterm lending.ThefirstoftheseinstitutionswastheIndustrialFinanceCorporationofIndiasetupin1947.FollowedbytheStateFinancecorporationsineachofthestatefrom 1953onwards.TheRBIhasalsohelpedinthe
Theanswershallcontainfollowingimportantpoints:1.ControlofReserveBankofIndia–
a.IndustrialFinanceCorporationofIndia,1947b.IndustrialDevelopmentBankofIndiac.UnitTrustofIndiad.SmallIndustriesDevelopmentBankofIndiae.StateFinanceCorporationsf. NationalHousingBanksg.DepositInsuranceandCreditGuaranteeCorporation(DUCGC)
2.Non-BankingFinancialCompanies(NBFCs)3.GrowthofNBFCs4.RecentPolicyDevelopments
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establishmentofotherfinancialinstitutionssuchastheIndustrialDevelopmentBankofIndia,theIndustrialReconstructionBankofIndia,SmallIndustriesDevelopmentBankofIndia,UnitTrustofIndia,etc.ForthepromotionofforeigntradetheReserveBankhasestablishedtheexportandImportBankofIndia,Similarly,forthedevelopmentofthehousingindustrytheRBIhasestablishedtheNationalHousingBank.
Furthermore,theDepositInsuranceandCreditGuaranteeCorporation(DUCGC),awhollyownedsubsidiaryoftheReserveBank,operatescreditguaranteeschemeswithobjectiveofprovidingcoveragainstdefaults in repaymentofloans made to smallborrowers,including small-scaleindustrialborrowers,inorderthatcreditflowtothem isenlarged.Non-BankingFinancialCompanies(NBFCs)
Financialsystem impliesasetofcomplexandcloselyconnectedorinterconnectedinstitutions,agents,practices,markets,transactions,claimsandliabilitiesintheeconomy.Financialinstitutionscanbeclassifiedasbankingandnon-bankinginstitutionsorasintermediariesandnon-intermediaries.Non-BankingFinancialCompanies(NBFCs)constituteanintegralpartofIndianFinancialSystem andsupplementthebankingandindustrialsector.
Theterm NBFCcanbecoinedtoincludeallcompaniescarryingonthebankingfunctionsbutwhichcannotbeformallycalledasbanks.Itprovidesawidespectrum offinancialservices—bothfundbasedandnon-fundbasedorfeebasedactivitiesrangingfrom hirepurchaseandleasingtoloanandpureinvestmentandcounseling.Forthesepurposes,theNBFCsapartfrom theircapitalgetresourcesfrom thepublicthroughfixeddepositsandcreditfacilitiesfrom banks.GrowthofNBFCs
NBFCshaveinrecentyearsgrownsizeablebothintermsoftheirnumbersaswellasinvolumeofbusinesstransactions.Thenumberofsuchfinancialcompaniesgrew moreandmoremanifold.Thefactorstothisgrowthwerelowertransactionscostoftheiroperations,theirquickdecisionmakingability,customerorientationandpromptprovisionofservice.Thereareotherfactors,whichcontributedtothisenormousgrowth.NBFCswerehistoricallysubjectedtoarelativelylowerdegreeofregulationwhencomparedtobanks.HigherrateofreturnondepositsofferedbyNBFCshaveenabletoattractalargebaseofsmallsavers.Lastly,severaldistinctivefeaturesofNBFCslikenoentrybarrier,limitedfixedassetsandholingofinventoryallofwhichledtoaproliferationofNBFCs.NBFCs—Itscategories
NBFCsarenotahomogenousset;theyconsistof8categorieswithdifferingimplicationsforsupervisionandfinancialintermediation.Theprincipalbusinessofthesecategoriesisgivenbelow:
a Equipmentleasingcompanies
Equipmentleasingorthefinancingofsuchactivity.
b Hirepurchasecompanies Hirepurchasetransactionorthefinancingofsuchactivity.c Loancompanies Providingfinancebymakingloansoradvancesorotherwise
foranyactivityotherthanequipmentleasing,hirepurchaseandhousingfinancecompanies.
d Investmentcompanies Acquisitionofandtradinginsecuritiestoearnprofits.e Mutualbenefitcompanies NotifiedbytheCentralGovernmentunderSection620Aofthe
CompaniesAct,1956.f Miscellaneousnon-banking
companies,i.e.chitfundsAgreementwithaspecifiednumberofsubscribersthateveryoneofthem shallsubscribecertainsum oninstallmentsoveradefiniteperiodandeveryoneisentitledtothepriceamountasdetermined.
g Housing financecompanies
Thefinancingofacquisitionorconstructionsofhousesincludingtheacquisitionsordevelopmentofplotsofland.
h Residuary non-bankingcompanes
Companywhichreceivesdepositsunderanyschemeorarrangementinonelumpsum orininstallmentsorbysaleofunitsorcertificatesorotherinstrumentsorinanyother
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manner.Theaboveclassificationisforthepurposeofsupervisionandcontrol.RegistrationofNBFC’swiththeRBI
TheReserveBankofIndiaAct,provides forthecompulsoryregistrationofNBFCs.ItalsoprovidesthattheReserveBankofIndiahasgotpowertoincreasetheminimum NOFforentryintothebusinessfrom Rs.25lakhstoRs.2crores.Accordingly,inthemonetaryandcreditpolicystatementfortheyear1999-2000,itwasproposedthattheNBFCswhichareincorporatedonorafterApril20,1999,therequirementforminimum NOFwillbeRs.2crore.RecentPolicyDevelopments
In January,2000,the Reserve Bank ofIndia effected severalamendments to NBFCregulations.Theyare:
1.NBFCswhichare:(a)Engagnedinmicro-financingactivities;(b)LicensedunderSection25oftheCompaniesAct,1956;and(c)Notacceptingpublicdepositeswereexemptedfrom thepurview oftheregulationsof
registration,maintenanceofliquidassentsandtransferofprofitstoReserveFund.2.MutualbenefitcompaniesinexistenceonJanuary9,1997andhavingNOFofRs.10lakhs
exemptedfrom therequirementofregistration,maintenanceofliquidassets,creationofReserveFundandalsofrom otherprovisions.
3.Certainregulationsinrespectofopeningandclosingofbrancheswithanobligationofauditorstoreportonnon-complianceofthesedirections.NBFCshavetoconstituteauditcommitteeconsistingofnotlessthan3directorsiftheyhaveassetsofmorethan50croresasperthelastauditedbalancesheet.
TheregulationforNBFCsandResidenceyNBFCswerefurtherrationalizedinJune2000withthefollowingamendments:
(a)Rationalizationofprovisiongnormsinrespectofleaseandhirepurchaeassets.(b)Obtainingandkeepingontheirrecordacopyofpasspoart,rationcard,electionidentitycareof
thenewdepositholdersasanevidenceforidentification.(c)PermitsResiduarynon-bankingcompaniestomakeinvestmentintheschemeofmutualfunds
approvedbySEBIandloweringoftheceilingoninterestratespayablbythesecompaniesby2percent.
(d)Permissionto NBFCsto acceptdepositsfrom therelativesoftheirdirectorssubjecttoadequatedisclosure.
(e)RationalizationoftheformatsofallstatutoryreturnssubmittedbytheNBFCs,Nidhis,RBNCsandchitfundswithaviewtofacilitatingelectronicprocessingandtousethem toeffectiveoff-sitemonitoringtools.TheReserveBankofIndiahasalreadystartedprocessingtheinitiativestobetakenbyit,whilethegovernmentislookingatlegislativechanges.ItishopedthattheReserveBankofIndiawillimplementtherecommendationsoftheVasudevCommitteeoveraperiodoftimeinaphasedmannerforasoundandhealthygrowthanddevelopmentsoftheNBFCsector.
_________________________________________________________________________________________
Q.3- DiscussthecontrollingpowersofIndianReserveBankoverBanks.Ans.-
1.ControllingpowersofIndianReserveBankoverBanks–2.ControloverManagement(Sec.36AAand36AB)3.AccountsandAudit
a.Section–30ofBankingRegulationsAct,19494.Displayofauditedbalancesheet(sec.29)5.Inspection(sec.35)
a.Sec.45QofBankingRegulationsAct,1949b.Thebankinglaws(Amendment)Act,1983
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TheReserveBankofIndiaisreasonableforthedevelopmentofanadequateandsoundbankingstructureinthecountryforcateringtotheneedsofagriculture,industry,tradeandcommerce.TheReserveBankofIndiahasbeenvestedwithadequatepowersofsupervisionandcontrolovertheoperationsofcommercialbanks—publicsectorbanksincludingregionalruralbanksandprivatesectorbanksincludingforeignbanks—publicsectorbanksincludingregionalruralbanksandprivatesectorbanksincludingforeignbanks—andthecooperativebanksoperatinginthecountry.Someofthepowersandfunctions arederivedfrom theReserveBankofIndiaAct,1934,andsomeothersfrom theBankingRegulationsAct,1949.TheFormeraCtconstitutesthecentralbankinglegislationandthelatterActcontainslegislationforregulatingtheactivitiesofcommercialandcooperativebanks.Thecontroloverthebankingcompaniesindifferentfieldsarediscussedbelow.ControloverManagement(Section36AAand36AB)
UnderSection36AAofBankingRegulationAct,ReserveBankofIndiaalsoenjoysvastpowersofdaytodaysupervisionandcontrolofbankingcompanies.WhentheReserveBankissatisfiedthatinthepublicinterestorforpreventingtheaffairsofabankingcompanybeingconductedinamannerdetermenttotheinterestsofthedepositorsorforthepropermanagementofanybankingcompany,itisnecessarytoremoveanydirector,chiefexecutiveofficerorotherofficeroremployeeofthebankingcompany,itmaydosobyanorderinwriting.Theordershallcontainreasonsforhisremovalandthedatefrom whichitshallbeeffective.TheReserveBankshallalso giveareasonableopportunitytosuchapersonforexplaininghispositionbeforesuchorderisactuallypassedagainsthim.However,ifintheopinionoftheReserveBank,anydelaywouldbedetrimentaltotheinterestsofthebankingcompanyoritsdepositors,thepersonremovedmaybeorderedtoceaseactingwhetherdirectlyorindirectly,pendingconsiderationoftherepresentation.AccountsandAudit.
Attheexpirationofeachcalendaryearorattheexpirationofaperiodof12monthsendingwithsuchdateastheCentralGovernmentmay,bynotificationinofficialGazettespecifyinthisbehalf,everybankingcompanyincorporatedinIndia,inrespectofallbusinesstransactedbyitandeverybanking companyincorporated outsideIndia,in respectofallbusinesstransacted through itsbranchesinIndia,shallprepareswithreferencetothatyearortheperiod,asthecasemaybe,abalancesheetandaprofitandlossaccountasonthelastworkingdayoftheyearortheperiodintheformssetoutinthethirdscheduleorasneartheretoascircumstancesadmit.Thegovernmenthasnotifiedthattheaccountsofbankingcompaniesshallbeclosedason31stMarcheveryyearasagainst31stDecemberearlier.
Section30ofBankingRegulationAct,1949,laysdownthatthebalancesheetandprofitandlossaccountofbankingcompanywillbepreparedaspertheprovisionsofSection29ofBankingRegulationAct,andshallbeauditedbyapersondulyqualifiedunderanylaw.Theappointments/re-appointmentorremovalofanAuditorofabankingcompanyhastobemadewiththepreviousapprovalofReserveBankofIndia.DisplayofauditedBalanceSheet-
TheBankingRegulationsActmakesprovisionsrequiringabankingcompanyincorporatedoutsideIndia,todisplayatitsprincipalplaceofbusinessandbranchofficesinIndiaonorbeforethefirstMondayinAugusteveryyear,copiesofbalancesheetandprofitandlossaccountpreparedinaccordingwiththeprovisionsofSection29oftheAct,sofarasitsbusinesstransactedthroughitsbranchesinIndiaisconnected.Italsorequiressuchaforeignbankingcompanytodisplayitsconsolidatedbalancesheetandaccounts,relatingtoitsentirebankingbusiness,assoonastheyareavailable,andthesamearetokeptdisplayedtillreplacedbythoserelatingtothesucceedingperiod.Inspection
Section35oftheBankingRegulationsActwasincorporatedwithaviewtosafeguardtheinterestsofshareholdersanddepositorsofbankingcompanies,asaresultofwhichbankdirectorsandmanagersarelikelytobecautiousinemployingthefundsoftheirinstitutions.
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Section45QoftheBankingRegulationAct,1949andSection237oftheCompaniesAct,1956dealswithinspectionincertaincasesbytheReserveBankofIndiaandtheCentralGovernmentrespectively.TheseSectionshavebeenincorporatedintheirrespectiveActswithaview tocheckmalpracticesincompaniesgenerallyandparticularlyintheBankingCompanies.Privatesectorbanks(withdepositsinexcessofRs.50crores)includingforeignbanks,financialinspectioniscarriedoutonceinthreeyears,Forallotherbanks,includingRRBstheinspectionisundertakenonceintwoyears.IncaseofAnnualAppraisalSystem ofinspection,greaterstressislaidonanobjectiveassessmentofsystemsanddevelopmentalaspects,suchas,organizationalsetup,resourcesmobilization;creditappraisalanddevelopmentofcredit,profitability,internalcontrolsystem,etc.TheBankingLaws(Amendment)Act,1983hasempoweredReserveBanktoalsoconductedscrutinyoftheaffairsofthebankingcompaniesinadditiontoconductingregularinspectionasstatedabove.
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Unit–IIISyllabus:-
Unit-III NegotiableInstruments (Lectures10)i. NegotiableInstrumentsAct,1881ii. DefinitionandcharacteristicofNegotiableInstruments,TypesofNegotiable
Instruments,iii. DefinitionandEssentialsofPromissoryNote,BillofExchangeandCheque,
Liabilitiesandiv. CapacityofPartiesofNegotiableInstrument,Holderand Holderindue
course,Transferandv. NegotiationofNegotiableInstrument.
UnitWisePreviousYearQuestionPaperofLucknowUniversity2013
LongQuestionsQ.1- WhatdoyoumeanbyNegotiableInstrument?Discusstheircharacteristics.
ijØkE;fy[krlsvkiD;kle>rsgSa\budhfo”ks’krkvksdhfoospukdhft,AQ.2- whatdoyoumeanbypromissorynote?Discussitsessentialelementsanddifferentiate
betweenpromissorynoteandbillofexchange.opui=lsvkiD;kle>rsgSa\bldsvko”;drRoksadko.kZudhft,rFkkopui=,oafofue;i=esavUrjcrkb;sA
ShortQuestions.Q.1- Overdraft.vf/kfod’kZaAQ.2- Cheque.pSdA
2014LongQuestionsQ.1- whatisnegotiation?Whenadocumentisa‘promissorynote’?
ijØkE;D;kgS\dcdksbZnLrkostopui=gSAQ.2- ‘’Thegreatelementofnegotiabilityistheacquisitionofpropertybyyourownconductnotby
anothers.Discusswiththehelpofdecidedcase.ikjØE;.kh;rkdkegRoiw.kZrRogSfdlEifÙkdhizkfIrmldsviusvkpj.klsgksufdvU;fdlhdsAfu.khZrokndhlgk;rklsO;k[;kdhft,A
ShortQuestions.Q.1- NegotiableInstruments.ijØkE;fy[krAQ.2- BillofExchange. fofue;i=
LL.B.Hons.(SemesterIV)2015LongQuestionQ.1- Defineterm Negotiation.Discussdoctrineofnegotiabilitywiththehelpofrelevantcasesand
illustrations.ijkØE;dksifjHkkf’krdhft,AijØE;rkdsfl)kUrdhlqlaxroknksa,oan’VkUrksadhlgk;rklsO;k[;kdhft,A
Q.2- PrepareusualformatofBillofExchangeandPromissoryNote.WhatarethepresumptionsregardingNegotiableInstruments?lkekU;iz;ksxdhtkusokyhfcyvkWQ,Dlpast]opui=dkizk:Ikcuk;sAijkØE;fy[krlslacaf/krmi/kkj.kkD;kgSA
ShortQuestions.Q.1- StaleCheque LVsypsdQ.2- VSAT oh,lv,Vh
LL.B.Hons.(SemesterIV)2016LongQuestionQ.1- Define‘Holder’and‘Holderinduecourse’,itsrightsandliabilities.
/kkjd*,oalkekU;vuqØeds/kkjd*]budsdk;ksZa,oankf;RoksadksifjHkkf’krdhft,A
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Q.2- Prepareususalformatof‘PromissoryNote’forloanoradvanceofRs.500/-#-500@&ds_.k;kvfxzedsfy,opui=dklkekU;izk:Ikcuk;saA
ShortQuestions.Q.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i) Instrumentnegotiablebycustom orusage.
:f<+,oaiz;ksx}kjkekU;ijkØE;fy[kr(ii) NoticeofProtest
fojks/kdhlwpuk(iii) Instrumentalobtainedbyunlawfulmeans
vfof/kdrjhdslsizkIrfy[krLL.B.Hons.(SemesterIV)2017
LongQuestionQ.1- PrepareusualformatofBillofExchange(B/E)alsodiscusstheprocessofdischargeofparties
withthehelpofillustration.fofue;i=dsvkSipkfjdizk#irS;kjdhft,rFkki{kdkjksadhmUeqfälsmUeqfälEcfU/krizfØ;kdkn’VkUrdhlgk;rklsfoospukdhft;sA
Q.2- WhatisNegotiation?Discussthedoctrineofnegotiability.ijØkE;D;kgS\ijØkE;rkdsfl)kUrdhppkZdhft;sA
ShortQuestionsQ.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i) CapacityofpartiesofNegotiableinstrument
ijØkE;fy[krdsi{kdkjksadh{kerk(ii) NotingandProtest
fy[kr,oafojks/kLL.B.Hons.(SemesterIV)2018
LongQuestionQ.1- WhatdoyoumeanbyNegotiableInstruments?Discusstheircharacteristics.
ijØkE;fy[krlsvkiD;kle>rsgSa\mudsy{k.kksadhppkZdhft,AQ.2- DefinePromissoryNote.Discussitsessentialelementsanddifferentiatealsobetween
PromissoryNoteandBillofExchange.Okpui=dksifjHkkf’krdhft,Abldsvko”;drRoksadhppkZdhft,,oaopui=rFkkfofue;i=esavarjHkhcrkb;sA
ShortQuestionQ.1- PartiesofCheque
Pksddsi{kdkjQ.2- BankDraft
cSadMªk¶VQ.3- DaysofGrace
vuqxzgfnolQ.4- HolderandHolderinduecourse
/kkjdrFkklE;d~vuqØe&/kkjdLL.B.Hons.(SemesterIV)2019
LongQuestionQ.1- Whatisnegotiableinstrument?Explainitsessentialfeatures.
ijkØE;fy[krD;kgS\ijkØE;fy[krdsvko';drRoksadhO;k[;kdhft,AQ.2- PrepareusualformatofBillofExchange,Promissorynoteandcheque.
lkekU;fofue;foys[k]opui=vkSjpsddkizk#icukb;sAShortQuestionQ.1- Drawee,DrawerandPayee
vknsf'kr]ys[kdkj,oaikodQ.2- InstitutionalBank
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laLFkkxrcSadQ.3- Dishonour
vuknj.kQ.4- Maturity
ifjiDorkQ.5- StaleCheque
LVsypsdAssignment/ModelPaper
Unit-IIILongQuestionQ.1- WhatdoyouunderstandbyNegotiableInstruments.Whataretheessentialelementsand
characteristicsofNegotiableInstruments.Explain.ijØkE;fy[krlsvkiD;klle>rsgSa\ijØkE;fy[krdsvko”;drRo,oafo”ks’krk,¡D;kgSa\Li’Vdhft,A
Q.2- DefinePromissoryNotes,Discussinbriefitsessentialelementsanddistinguishbetweenbillofexchangeandpromissorynotes.opui=dko.kZudjsa]la{ksiesaopui=dsvko”;drRoksadkscrkrsgq,fofue;lsvUrjcrkb,A
Q.3- WhatdoyoumeanbyHolderanddifferencebetweenHolderandHolderinduecourse/kkjddsvkiD;kle>rsgSrFkk/kkjdvkSjlE;d~vuqdze/kkjdesavUrjLi’Vdhft,A
AnswersQ.1- DefineNegotiableInstruments.Whatarethegeneralpresumptionsrelatingtonegotiable
instruments?
Ans.-
Negotiableinstrumentisa written and signed unconditionalpromiseororderto payaspecifiedsum ofmoneyonthedemandoratadefinitetimepayabletoorderorbearer.
TheNegotiableInstrumentAct1881doesnotdefineanegotiableInstrumentandmerelystatesthatanegotiableinstrumentmeansapromissorynote,billofexchangeorchequepayableeithertoorderorbearer.
1.NegotiableInstrument:Definitiona.NegotiableInstrumentAct,1881b.Sec.13oftheAct,1881
2.Presumptionsrelatedtonegotiableinstrumentsa.Considerationb.Datec.TimeofAcceptanced.Timeoftransfere.Orderofendorsementf.Stampg.Holderinduecourseh.Dishonour
3.Non-NegotiableInstruments–a.BilloflodingandRailwayReceiptb.L.I.C.Policyc.Sharecertificated.PostalOrdere.Debenturesf.AirwaysBill
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Section13oftheNegotiableInstrumentsActdoesnotindicatethecharacteristicsofaNegotiableinstrumentbutonlystatesthatthreeinstrumentchequebillofexchangeandpromissorynotearenegotiableinstrument.Thusthesearenegotiableinstrumentbystatutesection13oftheActdoesnotprohibitanyotherinstrument,whichbearstheessentialfeaturesofnegotiabilitytobetreatedasnegotiableinstrument.AccordingtoEnglishLaw...withregardtothemostimportanttypesofnegotiableinstrumentstatutehasrecognizedthanassuchforexampleblanknotes,billofexchange,includingcheques,promissorynotes,bankersdraftsanddividendwarrants".
Presumptionsrelatedtonegotiableinstruments:-
UnderSection118oftheNegotiableInstrumentsact,1881anegotiableinstrumentissubjecttocertainpresumptionsasgivenbelow.
(a)Consideration-Everynegotiableinstrumentshallbepresumedtohavebeenmadeordrawnforconsideration.
InA.V.Murthyv.B.S.Nagabasavanna,itwasobservedthatanegotiableinstrumentispresumedtobedrawnforconsiderationanddismissalofcomplaintofdishonorofchequeatthresholdonthegroundthatanamountwasadvancedfouryearsback,andthusthedebtisnotenforceable,suchcourseisnotproper.
(b)Date-Everynegotiableinstrumentbearingadateispresumedtohavebeenmadeordrawnonsuchdate.
(c)TimeofAcceptance-Everyacceptedbillofexchangeispresumedtohavebeenacceptedwithinareasonabletimeafteritsdateandbeforeitsmaturity.
(d)TimeofTransfer–Thetransferofanegotiableinstrumentistakentohavebeenmadebeforeitsmaturity.
(e)OrderofEndorsement-The endorsements appearing upon a negotiable instrumentarepresumedtohavebeenmadeintheorderinwhichtheyappearthereon.
(f)Stamp-Itispresumedthatalostpromissorynote,billofexchangeorchequewasdulystamped.
(g)Holderinduecourse-Itispresumedthataholderofanegotiableinstrumentisaholderinduecourse.However,wheretheinstrumenthasbeenreceivedfrom itslawfulownerorfrom anypersoninlawfulcustodythereof,bymeansofanoffenceorfraud,orhasbeenreceivedfromthemakeroracceptorthereofbymeansofanoffenceorfraud,orforunlawfulconsideration,theburdenofprovingthattheholderisaholderinduecourseliesuponhim.
AccordingtoSection119oftheNegotiableInstrumentsAct,1881.
(h)Dishonour-Inasuituponaninstrumentwhichhasbeendishonoured,thecourtshall,onproofoftheprotest,presumethefactofdishonor,unlessanduntilsuchfactisdisproved.
Thus,itmaybeconcludedthatthefollowingarenotnegotiableinstruments:
1.BillofLadingandRailwayReceipt–Thesearetransferablebutdonotpassbettertitle.Theseareonlyquasi-negotiableinstruments.
2.L.I.C.Policy-Itisnotfreelytransferablebyendorsementanddelivery.Itcanonlybeassigned.Itisnotanegotiableinstrument.
3.ShareCertificate-Itcanbetransferredonlythroughseparatetransferdeedsandalsothedefectintitlegetsconveyedontransfer.Itisnotanegotiableinstrument.
4.PostalOrder–Itisnotanegotiableinstrumentasdefectintitlegetspassedonthetransfer.
5.Debentures-Thesearelongcertificatesandtransferablegenerallylikeshares.Therefore,
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thesearenotnegotiableinstruments.
6.AirwaysBill–Itisareceiptanddoesnotfulfilthecharacteristicsofanegotiableinstrument.
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Q.2- DefinePromissoryNotes,Discussinbriefitsessentialelementsanddistinguishbetweenbillofexchangeandpromissorynotes.
Ans.-
PromissoryNote(Section-4)-Promissorynoteisanunconditionalpromiseinwritingmadebyonepersontoanother,signedbythemakerengagingtopayondemandoratafixedordeterminablefuturetimeasum certaininmoneytoortotheorderofaspecifiedperson,orthebearer.SpecimensofPromissoryNote-
EssentialCharacteristics-i. WrittenStatement-Apromissorynotemustbeinwriting.Itmayeitherbeprintedortypedor
Rs.6000 Lucknow
19.03.2008OndemandIpromisetopayMr.Ram ororderaSum ofRs.SixThousandonly.
Sd-B.N.Mishra
Stamp
Theanswershallconsistoffollowingimportantpoints:1.PromissoryNote–Sectiony2.EssentialCharacteristics
a.Writtenstatementb.Notabanknoteorcurrencynotec.Promisetopayd.Unconditionalpromisee.Signaturef. Makeroftheinstrumentmustbecertaing.Promisetopaycertainamounth.Payeemustbecertain
3.Billofexchange–Section54.Essentialcharacteristics–
a.Writteninstrumenta.Unconditionalordertopayb.Signatureofdrawerc.Drawermustbecertaind.Thedraweemustbecertaine.Thepayeemustbecertainf. Certainamount
5.Distinctionbetweenpromissorynoteandbillofexchange6.Cheque–Sec.67.Essentialcharacteristics8.Distinctionbetweenchequeandbillofexchange9.Distinctionbetweenchequeandpromissorynote
22
writtenbyapenorpencil.Apromissorynotewrittenbyapencilisvalidintheeyesoflaw.Butmanipulationiseasilypossibleinapromissorynotewrittenbythepencil,andtherefore,itappearsnotpropertorecognizesuchpromissorynote.ii. NotaBankNoteorCurrencyNote-ThepromissorynotedoesnotincludeaBankNoteorcurrency note.iii. Promisetopay-Inthepromissorynotetheremustbepromisetopay.iv. Unconditionalpromise-Thepromisetopaythemoneymustbeeitherunconditionalorbasedonthe happeningofsuchacondition,happeningofwhichiscertain.v. Signature-Thepromissorynotemustbesignedbythemakeroftheinstrument,otherwise,itwillbe irregular.theterm signatureincludesalsoamarkorthumbimpressionmadebytheperson concerned.vi. MakeroftheInstrumentmustbecertain-Themakerofthepromissorynotemustbeacertainperson.vii Promisetopaycertainamount-Theamountpromisedtopaymustbecertain.viii Payeemustbecertain-Thepayeemustalsobeacertainperson.Apromissorynotemaybepayable tobearerororder.c. BillofExchange(Section-5)-AbillofExchangeisaninstrumentinwritingcontaininganunconditionalorder, signedbythemakerdirectingacertainpersontopayacertainsum ofmoneyonlyto,ortotheorder toacertainpersonortothebeareroftheinstrument.
Essential-1. WrittenInstrument-Thebillofexchangemustbeinwritinglikepromissorynoteitmayeitherbe printedortypedorwrittenbyapenorpencil.
2. UnConditionalordertopay-Theinstrumentmustcertainanordertopay.
3. SignatureoftheDrawer-Thebillofexchangemustbesignedbythedrawer,otherwiseitwouldbe irregular.
4. Drawermustbecertain-Thedrawerofthebillofexchangemustbeacertainperson.
5. Thedraweemustbecertain-Thedraweeofthebillofexchangemustbeacertainpersonbecause thedraweeistobetracedfortheacceptanceorpaymentoftheinstrument.
6. Thepayeemustbecertain-Thepayeeofthebillofexchangemustbecertain.
7. Certainamount-Thesum payablemustbecertain.
d. DistinctionbetweenpromissaryNoteandBillofExchange-
PromissoryNote BillofExchangeThereareonlytwoparties,namely,themaker(debtor)andthepayee(creditor)
There are three parties,namely thedrawerthedraweeandthepayee.
Drawerandpayeemaynotbesame DrawerpayeemaybesameItcontainsanunconditionalpromisebythe Itcontainsanunconditionalordertothe
Rs.10,000 Lucknow13/12/2008
StampsOndemandpaytoM/sX,ororderasum ofRupeesTenthousandonlyforvaluerecieved.To,
M/SZ Sd/-MryMum fordganj,NewDelhi
23
makertopaythepayee draweetopayaccordingtothedrawer'sdirection.
Noprioracceptanceisneeded. A bill payable after sight must beaccepted by the drawee orhis agentbeforeitispresentedforpayment.
e. Cheque(Section-6)-Chequeisabillofexchangedrawnonabankerpayableondemand.Achequeisabillofexchangedrawnonaspecifiedbankerandnotexpressedtobepayableotherwisethanondemand.
Essential-1. Achequemustbeinwriting.Itmaynotbeoral.2. theremustbeanordertopaytheamount3. Draweemustbeacertainbank.4. Payeemustbecertain.5. Achequeispayableondemandonlyf. DistinctionbetweenChequeandBillofExchange-
Cheque BillofExchangeItmaybedrawnonlyonabanker. Itcanbedrawnonanypersonincludinga
banker.Achequecanbecrossed. Crossingofthebillofexchangeisnot
possible.Theamountisalwayspayableondemand. Theamountmaybepayableondemand
orafteraspecifiedtime.Acceptanceisnotneeded. A bill payable after sight must be
accepted.
g. DistinctionbetweenChequeandPromissorynote-
Cheque PromissoryNoteA chequecanbedrawnonlybytheaccountholderofthebank.
Itcanbemadebyanyperson.
Itcanbecrossed. CrossingofthepromissoryNoteisnotrequired.
Chequeispayablealwaysondemand. Itmaybepayableondemandorafteraspecifiedtime.
CentralBankofIndiaCantonmentRoad,Lucknow.No.H/SB24016Date-23.03.2008
PaytoMr._____________X ________________orbearerRupeesFiveThousandonly.
LF Rs.5000/=Accounts20153 Sd/-B.KSingh
24
-------------------------------------------------------------------------------------------------------------------------------------Q.3- WhatdoyoumeanbyHolderandDifferencebetweenHolderandHolderinduecourse.
Ans.-
MeaningofHolder-Accordingtosection8oftheNegotiableInstrumentsAct,1881,Holderofapromissorynote,billofExchangeofchequemeansanypersonentitledinhisownnamestothepossessionthereofandtoreceiveorrecovertheamountduethereonfrom thepartiesthereto.
A personbecomestheholderofanegotiableinstrument,ifthefollowingconditionsaresatisfied.i. Theholdermustbeentitledtothepossessionoftheinstrumentinhisownnameandunderalegal title.ii. Theholdermustbeentitledtoreceiveorrecovertheamountfrom thepartiesconcernedinhisown name.b. HolderinDueCourse-Accordingtosection9oftheNegotiableInstrumentsAct,1881,Holderinduecoursemeansanypersonwhoforconsiderationbecomesthepossessorofapromissorynotebillofexchangeorcheque,ifpayabletobearer,orthepayeeorendorseethereofitpayabletoorder,beforetheamountmentionedinitbecamepayable,andwithouthavingsufficientcausestobelievethatdefectexistedinthetitleofthepersonfrom whom hederivedhistitle.apersonbecomestheholderinduecourseofanegotiableinstrumentifthefollowingconditionsaresatisfied.i. TheNegotiableInstrumentshouldbeinthepossessionoftheholderinduecourse.ii. ThenegotiableInstrumentshouldberegularandcompleteinallrespects.iii. TheNegotiableInstrumentshouldhavebeenobtainedforvaluableconsideration,i.e.bypayingits fullvalue.iv. TheNegotiableInstrumentshouldhavebeenobtainedbeforetheamountmentionedthereinbecomespayable.
Ifabillornoteorchequebetakenafteritisdue,thepersontakingittakesitathisperil.Hecanhave nobettertitletoitthanthepartyfrom whom hetakesitandtherefore,cannotrecoveruponit.Itit Turnsoutthatithasbeenpreviouslylostorstolen.v. TheholderinduecourseshouldobtaintheNegotiableInstrumentwithouthavingsufficientcauseto believethatanydefectexistedinthetitleoftransferor.c. RightsofaHolder-i. Heisentitledtoconvertanendorsementinblankintoanendorsementinfull.ii. HeisentitledtocrossaCheque.iii. Hecannegotiateachequetothethirdperson.itnotprohibitedbythedirectionprescribedinthe cheque.
Theanswershallconsistoffollowingimportantpoints:1.MeaningofHolder-2.Holderinduecourse–3.Rightsofaholder–4.Privilegesofaholderinduecourse–
i) Sec.53ofnegotiableinstrumentAct,1881ii) Sec.36 “iii) Sec.20 “iv) Sec.42 “5.Case–Englandv.VaglianoBros6.DifferencebetweenHolderandHolderinduecourse
25
iv. Hecanclaim thepaymentoftheinstrument
v. HecanobtainaduplicatecopyoflostCheque.
d. PrivilegesofaHolderinduecourse-Theholderinduecourseenjoysthefollowingprivileges:-
i. Holderinduecorusealwayspossessesbettertitlethanthatofhistransferororanyoftheprecious parties.
AccordingtoSection53ofthenegotiableInstrumentsAct"Aholderofanegotiableinstrumentwhoderivestitlefrom aholderinduecoursehastherightsthereonofthatholderinduecourse.
ii. AccordingtoSection36oftheAct,"EveryPriorpartytoanegotiableinstrument,i.e.itsmakeor drawer,acceptationorendorserisliablethereontoaholderinduecourseuntiltheinstrumentis dulysatisfied.
iii. AccordingtoSection20oftheAct,"Ifnegotiableinstrumentwasoriginallyaninchoate(incomplete)instrumentandasubsequenttransfercompletedtheinstrumentforasum greaterthanwhatwastheintentionofthemaker,therightoftheholderinduecoursetorecoverthemoneyoftheinstrumentisnotaffected.
iv. AccordingtoSection42,"Ifabillofexchangeisdrawnonbehalfofafictitiouspersonandispayabletohisorder,theacceptorisnotrelievedofhisliabilitytoholderinduecoursebecauseofsuchfictitiousname.Butitisessentialthattheholderinduecourseprovesthatthedocumentbearstheendorsementwithsignatureinthesamehandasthatofthedrawerandpurportingtobemadebythedrawer.
InBankofEnglandvs.VaglianoBros,itwasheldthattheacceptorofabillofexchangecannotagainsttheholderinduecourse,saythattheotherpartiestothebillwerefictitious.
Thewordsfictitiouspayeemeansapersonwhoisnotinexistenceorbeinginexistence,isneverintendedbythedrawertohavethepayment.
e. DifferencebetweenHolderandHolderinDueCourse-
Holder HolderinDueCourseHolderisnotrequired to be Holderin duecourse.
HolderinduecoursemustbeHolderorthenegotiableinstrument.
Holdermayobtainthenegotiableinstrumentwithout consideration also viz.instrumentreceivedforagift.
Holderinduecoursemustreceivetheinstrumentforconsideraction.
A person maybe holderofthe negotiableinstrumentevenafteritsdateofmaturity.
apersonmaybeholderinduecoursebefore the date of maturity of theinstrumentHolderin due course mustobtaintheinstrumentpriortothedateofmaturityoftheNegotiableinstrument.
26
Unit–IVSyllabus:-
Unit-IV Cheques (Lectures10)i. CrossingofChequesandpayment,DishonorofCheques,Presentmentand
Payment,ii. Dishonor,NotingandProtestofNegotiableInstrument,iii. Endorsement:Definition,Essentialofavalidendorsementanditskinds,iv. RulesofEvidenceandcompensation.
UnitWisePreviousYearQuestionPaperofLucknowUniversity2013
LongQuestionsQ.1- WhatdoyoumeanbyEndorsement?Discussitscharacteristics.
i’BkadulsvkiD;kle>rsgSa\bldhfo”ks’krkvksadko.kZudhft,AQ.2- Whatdoyoumeanbycrossingofcheque?Discussthecircumstancesunderwhichbankmay
refusethepaymentofcheque.pSddsjs[kkadulsvkile>rsgSa\muifjfLFkfr;ksadko.kZudhft,tccSadpSddkHkqxrkudjuslseukdjlrrkgSA
ShortQuestions.Q.1- NotingandProtest. fVIi.kh,oaizlk{;A
2014LongQuestionsQ.1- Definedishonorofchequesandwhatareitsconsequences.
pSddsvuknj.kdksifjHkkf’krdhft,rFkkbldsD;kifj.kkegksaxsAQ.2- Discussthe‘holder’and‘holder-in-duecourse’withthehelpofillustrations.
/kkjd*,oalEod~/kkjd*dhn’Vkardhlgk;rklsO;k[;kdhft,AShortQuestions.Q.1- Endorsement. i’BkaduAQ.2- Crossingofcheque pSddkjs[kkaduA
LL.B.Hons.(SemesterIV)2015LongQuestionQ.1- AandBenteredintoanagreementtocarryonabusinessofpharmaceuticalsandsigned
partnershipdeedfor60%40shareinthefirm.AfterfewyearsAleftbusinessandreceivedtwopostdatedchequesof60,000and1,20,000onthetermsoftransferofownershipofshoptoB,whichneverhappened.A presentedboththechequeswhichwasdishonoredduetostoppayment.Discusstheprocedureandremediesinthelightofabovefacts.d,oa[knokdsO;kikjgsrq60%40dsvuqikresaHkkxhnkjhfoys[kgLrk{kjdsHkkxhnkjhesaizos”kdjrsgSAdqNo’kksZackndviusfgLlsdksnks60]000,oa1]20]000dsckndhfrfFkesans;pdksadscnysnqdkudkLokfeRo[kdksnsusdkoknkdjrkgSijUrqmlsiwjkughadjrkgSAdizkIrpsdksadksHkqxrkugsrqcSadesaizLrqrdjrkgStks[kdsHkqxrkujksdusdsfunsZ”kdsdkj.ke;kZfnrughagksrkgSmijksDrrF;dsizdk”kesafof/kizfØ;k,oamipkjdhO;k[;kdhft,A
Q.2- OneA,bymeansofafraud,obtainedachequefrom B,ThechequewasmadepayabletoAororder.AgavethechequetoCinpaymentofhisowndebt,butforgettoendorseit.ChadnonoticeofthefraudthenbutbeforehecouldobtainA’sendorsement,hewasgivennoticeoffraud.Discuss the consequences in the lightofabove facts and procedure ofvalidendorsement.ddiVls[kdk,dpsdizkIrdjysrkgStksfdd;kmldsvkns”kijHkqxrkufd;ktkldsxkAdusmlpsddksxdksvius_.kksadsHkqxrkuds,otesansrkgSijUrqmldki’BkadudjukHkwytkrkgSxdksdiVdkKkuughagksrkgSijUrqtcrdogdlsi’BkadudjkrkgSmlsdiVdhlwpukizkIrgkstkrhgSAmijksDrrF;dsizdk”kesaifj.kkeksa,oamfpri’BkadudhizfØ;kdhO;k[;kdhft,A
ShortQuestions.Q.1- Essentialofvalidendorsement oS/ki’Bkadudsvko”;drRoQ.2- SPNS ,lih,u,l
27
LL.B.Hons.(SemesterIV)2016LongQuestionQ.1- Whatis‘endorsement’?Whataretheessentialofa‘validendorsement’anditskind?Explain.
i’BkaduD;kgS\oS/ki’Bkadu,oabldsizdkjD;kgSa\foospudhft,AQ.2- Writethelegalprovisionsofdishonorofchequesanditsconsequences.Whatistheprocedure
tofixtheliabilityfordishonorofcheques?psdksadsvuknjlslEcfU?krfof/kdizko/kkuksa,oabldsifj.kkeksadksfy[ksaApsdksadsvuknjesankf;Rolqfuf”prdjusdhD;kizfØ;kgS\
ShortQuestions.Q.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i) NotingfordishnourofNI
ijkØefy[krdsvUkknjdkfooj.k(ii) ‘SansRecourse’dendorsement
lSUljhdkslZ*i’BkaduLL.B.Hons.(SemesterIV)2017
LongQuestionQ.1- DiscusstheLawofpresumption/evidenceofNegotiableinstruments.
ijØkE;fy[krdsmi/kkj.kk@lk{;dsfu;eksadhO;k[;kdhft;sAQ.2- Describecrossingofchequesanditseffect.
Pksdksadsjs[kkadu,oamldsizHkkodko.kZudhft,AShortQuestions.Q.1- Writeshortnotesonthefollowing:
fuEufyf[krijlaf{kIrfVIif.k;kafyf[k,%(i)Partialendorsement
vkaf”kdi’Bkadu(ii) SpecialCrossing
fo”ks’kjs[kkaduLL.B.Hons.(SemesterIV)2018
LongQuestionQ.1- WhatdoyoumeanbydishonorofCheque?Discussthecircumstancesunderwhichbankmay
refusethepaymentofCheque.PksddsvuknjlsvkiD;kle>rsgSa\muifjfLFkfr;ksadhppkZdhft,tccSadpsddkHkqxrkudjuslseukdjldrkgSA
Q.2- WhatdoyoumeanbyEndorsement?DescribevarioustypesofEndorsements.Ik’BkadulsvkiD;kle>rsgSa\fofHkéizdkjdsi’Bkaduksadko.kZudhft,A
ShortQuestionQ.1- Post-datedCheque
mÙkj&rkjh[kpsdLL.B.Hons.(SemesterIV)2019
LongQuestionQ.1- Describecrossingofchequeanditseffect.
Pksddsjs[kkadu,oamldsizHkkodko.kZudhft,AQ.2- Whatdoyouunderstandbyendorsement?Discussvariouskindsofendorsement.
Ik"BkadulsvkiD;kle>rsgSa\fofHkéizdkjdsi"Bkadudko.kZudhft,AShortQuestionQ.1- SpecialCrossing
fo'ks"kjs[kkaduAssignment/ModelPaper
Unit-IVLongQuestionsQ.1- WhatdoyoumeanbyEndorsement?Discussthecharacteristicsofendorsement.
i’BkadulsvkiD;kle>rsgSa\i’Bkadudhfo”ks’krkvksadko.kZudhft,A
28
Q.2- whatisthemeaninganddefinitionofcrossingofcheque?Discussthecircumstancesunderwhichbankmayrefusetopayacheque.pSdjs[kkadudkvFkZ,oaifjHkk’kkD;kgS\cSad}kjkpSddkHkqxrkueukdjusdhijhfLFkfr;ksadhfoospukdhft,A
Q.3- Definedishonorofchequeandwhatareitsconsequences.psddsvuknjdksifjHkkf’krdhft,rFkkbldsD;kifj.kkegksxsaA
LongAnswersQ.1- WhatdoyoumeanbyEndorsement?Discussthecharacteristicsofendorsement.
Ans.-
Theterm ‘Endorsement’meanssigningatthebackofinstrumentforthepurposeofnegotiation.Theactofsigningacheque,forthepurposeoftransferringittosomeoneelse,iscalledtheendorsementofcheque.
UndertheNegotiableInstrumentsAct,1881theterm ‘endorsement’meanswritingthenameofapersononthebackoftheinstrumentwiththeintentionoftransferringtherightstherein.Thepersonwhoendorsesthechequeiscalledendorser.Thepersontowhom thechequeisendorsediscalledendorsee.
Theendorsementisusuallymadeonthebackofthecheque.Ifnospaceisleftonthecheque,theendorsementmaybemadeonaseparatesliptobeattachedwiththecheque.
DefinitionofEndorsement-AccordingtoSection15oftheNegotiableInstrumentsAct,1881“Whenthemakerorholderofanegotiableinstrumentsignsthesame,otherwisethanassuchmaker,forthepurposeofnegotiation,onthebackoffacethereoforonaslipofpaperannexedthereto,orsosingsforthesamepurposeastampedpaperintendedtobecompletedasanegotiableinstrument,heissaidtohaveendorsedthesameandiscalledendorser.”
KindsofEndorsement-Endorsementessentiallyisoftwokinds-endorsementinblank,andinfull.Therearesomeotherkindsaswellwhichareconstitutionalnodoubt,butnotverypopular.
1.EndorsementinBlankorGeneral–Anendorsementissaidtobeinblankor‘general’whentheendorserputshissignatureonlyontheinstrument,anddoesnotwritethenameofanyonetowhom ortowhoseorderthepaymentistobemade.
Meresignatureconvertsanorderinstrumentintobearerandsolongasitremainsso,itcanbetransferredbydeliveryalone.However,tomaketherecordclearandmakethepersonsassumetheendorser’sliabilityontheinstrument,itshallbedesirableforthebearerorholdertoplacehisendorsement,uponitatthetimeofmakingitfurthernegotiable.Hardlynecessarytomentionthatwhenactualpaymentisclaimedevenonanendorsementinblank,thetransfereehastosignovertheendorsement.Theholdercanconvertablankendorsementintoaspecialendorsementbywritingabovethesignatureadirectiontopayhimselforsomeotherperson.
Theanswershallconsistoffollowingimportantpoints:1.Endorsement:Meaning
a.NegotiableInstrumentAct,18812.Endorsement:Definition
a.Section–15ofthenegotiableinstrumentAct,18813.KindsofEndorsement
a.EndorsementinBlankorGeneralb.EndorsementinFullorspecialc.Conditionalendorsementd.Restrictiveendorsemente.Endorsementsansrecoursef. Facultativeendorsement
29
2.Endorsementinfullorspecial-Anendorsementis‘special’orin‘full’iftheendorser,inadditiontohissignature,alsomentionsthenameofthepersontowhom ortowhoseorderthepaymentistobemade.Thereisadirectionaddedbytheendorsertothepersonsospecified,calledthe‘endorsee’oftheinstrument,whonowbecomesitspayeeentitledtosueforthemoneydueontheinstrument.Theeffectobviouslyofthefullendorsementisthatfurtherendorsementcanbemadeonlybytheendorsee,anditisonlythespecialendorseeorhislegalrepresentativewhocansueonit.Itnotonlygivesthefullchainofpersonswhomayhavehadaninterestinthebill,butalsogivestheholderfullrecourseagainstallendorsersprecedinghim.Thusifachequepayableto‘X’ororderissignedby‘X’withthewords“Payto‘Y’ororder”,itisendorsementinfull.Itisonlynow‘Y’whocanclaim payment.Butif‘Y’transfersittosomeothercreditor,hewillhavetomakehisownendorsement.Mostendorsementsareofthistype,asthecasualfinderofalostbillcannotnegotiateitwithoutthemissingendorsementoftheholder.Examplesofspecialendorsementsetc:
1
2
3.ConditionalEndorsement-Conditionalendorsementisnegotiationwhichtakeseffectonthehappeningofastatedevent,nototherwise.Section52oftheActprovides,“Iftheendorserofanegotiableinstrument,byexpresswordsintheendorsement,makeshisliabilityortherightoftheendorseetoreceivetheamountduethereofdependinguponthehappeningofaspecifiedevent,althoughsucheventmayneverhappen,suchendorsementiscalledaconditionalendorsement.”Ifontheaforementionedcheque,Mr.Xwrites,“PaytoMr.YifhisfathervisitstheUnitedKingdomwithintwomonths.”HeretherighttoreceivepaymentinthechequearisesonlyonthefulfillmentoftheconditionthatMr.Y’sfathergoestotheUnitedKingdom.
4.Restrictive Endorsement-Restrictive endorsementseeks to putto an end the principalcharacteristicofanegotiableinstrument,andsealsitsfurthernegotiability.Thismaysoundalittleunusual,buttheendorseeisverymuchwithinhisrightsifhesosingnsthatitssubsequenttransferenceisrestricted.Thispreventstheriskofunauthorizedpersonsobtainingpaymentthroughfraudorforgeryandthedrawerlosinghismoney.IfXsignsinanyofthefollowingwaysonanegotiableinstrumentandmakesitpayabletoY,therightofYtofurthertransferitforvalueisimmediatelyterminated.
(a)PaytoYonly.
(b)PaythecontentstoYonly.
(c)PayYformyuse,oronmyaccount,orforcollection.
(d)PayYfortheaccountofZ.
Inthefirsttwocases,theendorsementpreventsfurthernegotiationandisvalidonlybetweentheparties,Inthethirdcase,theendorseecanneithertransfertoathirdpersonnorholdtheendorserliabletohim becauseitconstitutestheendorseeasanagentoftheendorserforaspecialpurpose.Inthefourthcase,thetitleisvestedintheendorseeintrustforsomeotherperson,henceitrestrictsnegotiation.Therestrictiveendorsementismainlyemployedwhereabankoranagenthastoendorseabillorchequecollection.Hecannotbesueduponit,asanyotherendorsercanbe,ifthebillisdishonoured.
“PayMr.Y(Sd.)X”
“PayMr.Yororder
30
5.EndorsementSansRecourse-Theterm ‘Sansrecourse’meanswithoutrecourseorreference.Assuchwhenthepropertyinanegotiableinstrumentistransferredsansrecourse,theendorsernegativeshisliabilityandexcludeshimselffrom responsibilitytoallsubsequentendorsees.Itisoneofthecommonestform ofqualifiedendorsementsandvirtuallyprohibitsnegotiationsincetheendorsersaysineffect.“Hereisaninstrument,Iwillgiveyoutitletoitbutdonotlooktomeintheeventitisdishonoured.”Thus,itisaspecieofqualifiedendorsementswhichreleasetheendorserfrom suchoftheliabilitiesasareimposeduponhim bylaw asapartof“endorser’scontract.”Butheisleftwithcertainotherliabilitiesasavendororselleroftheinstrument.Thisendorsementhasitselfnoeffectupontheliabilityofotherendorsers,andnoeffectuponthenegotiabilityoftheinstrument.
6.FacultativeEndorsement-Facultativeendorsementisanendorsementwheretheendorserwaivessomerighttowhichheisentitled.Forexample,theendorseeisliabletogivenoticeofdishonortotheendorserandnormallyfailuretogivethisnoticewillabsolvetheendorserfrom hisliability.Buttheendorsermayexpresslywrite,“PaytoY,ororder,Noticeofdishonorwaived.”Bysuchanendorsement,Xremainsliablefornon-payment,evenifnonoticeisservedbecauseofhisownexpresssurrenderingoftherighttoreceivenotice.
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Q.2- Whatisthemeaninganddefinitionofcrossingofcheque?Discussthecircumstancesunderwhichbankmayrefusetopayacheque.
Ans.-
Acrossedchequeisoneonthefaceofwhichtwotransverseparallellineshavebeendrawnwithorwithoutcertainwordsinthem.Theeffectisthatthepaymentofsuchchequecanbemadebythedraweebankertosomeotherbankerasagentoftheholder,andthepayeeortheholderthereofcannotobtainpaymentfrom thepayingtellerofthedraweebank.Whenachequeiscrossed,noonecancashitatthecounterofthebank,anditmustbepaidtoabank.Theamountcanbeeitherdepositedwiththedraweebankerforthecreditofhisaccount,orhavethedraweebankerpayitsproceedstoanotherbankforthecreditoftheaccountwhichtheholderhaswithsuchotherbankthroughthelocalclearinghouse.Naturally,acrossedchequebecomesmuchsaferthananopenoruncrossedcheque.Itcaneasilybetracedintowhosehandsthemoneyhasbeenpaid.
Circumstancesinwhichbankmustdishonorcustomer’scheques
Abankmustrefusepaymentofthecustomer’schequesinthefollowingcircumstances:
1.WhentheDrawerCountermandsPayment-Whenthecustomerissuesstoppaymentordertothebanker,hemustrefusethepaymentofthecheque.Achequeisanunconditionedorderofthedrawertothebankerandtheformeriscompetenttocancelsuchorderatanytimebeforeitspaymentismade.Thefollowingrulesshouldbeobservedinrelationtocountermandingofpaymentbythedrawer.
Theanswershallconsistoffollowingimportantpoints:1.Meaninganddefinitionofcrossingofcheque–2.Circumstancesinwhichbankmustdishonorcustomer’scheques
a.Whenthedrawercountermandspaymentb.Deathofthecustomerc.Insanityofthecustomerd.Insolvencyofthecustomere.Receiptofgarnishaorderf. Defectivetitleoftheholderg.Receiptofnoticeofassignment–Sec.130ofT.P.A.,1882h.Breachoftrust
31
(j)Onlythedrawerofachequecanissuethestoppaymentorder.Thepayeeortheendorseehasnosuchright.Butifthepayeeortheholderofachequereportstothebankaboutthelossofcheqquethebankshouldholdanenquiryaboutthetitleofpersonpresentingthechequeafterthat.However,thepayeeortheholdermaygetthepaymentofthelostchequestoppedthroughthedrawer.
(ii)Thestoppaymentordermaybegivenbythedrawereitherorallyorinwriting.Thebankmustidentifythecustomerwhenhereceivessuchanorder.Stoppaymentorderontelephoneisvalidifthebankrecognizesthevoiceofthedrawer.Similarly,paymentmaybestoppedthroughatelegraphicorder.Thedrawermustlateronsubmitthefullparticularsofthechequewhosepaymentistobestopped.
(iii)Thecountermandordermustbedulyservedonthebankbeforethepaymentismade.Anysuchordergivenafterpaymentwillhavenoeffect.Ifduetooversightpaymentismadeafterthereceiptofthecountermandorder,thebankershallbeliabletothedrawerevenifsuchachequeisdishonoured,afterthereceiptofthestoppaymentorder,forwantofsufficientfunds,thebankwillbeheldliable.
(iv)Ifthepaymenthasbeenstoppedthebankshouldremaincautiousforsixmonthsfrom thedateofissueofcheque.Aftersixmonths,thechequewillbecomestateofwhichnopaymentwouldbepossible.
2.DeathoftheCustomer-Whenthedrawerdiesandthebankhasreceivedthenoticeofhisdeath,thebankermuststoppaymentofchequesignedbyhim becausetheorderofthedrawerbecomesinoperativeontheoccurrenceofhisdeath.Paymentsshouldbestoppedimmediatelyafterthereceiptofthenoticeofthedeathofthecustomer.Thebankshouldmakesurethatthenewsaboutcustomer’sdeathisreliable.
3.InsanityoftheCustomer-Whenacustomerbecomesinsaneandthebankhasgotthenoticeofhisinsanity,hemuststoppaymentofthechequesissuedbytheinsanecustomer.Thebankcaninsistonformalinformationandcertificationtotheeffectthathiscustomerhasgoneinsane.Butsolongasthecustomeractsrationallyandunderstandshisinterestproperly,hischequesshouldnotbedishonoured.
4.InsolvencyoftheCustomer-Whenthebankerreceivestheinformationthataninsolvencypetitionhasbeenfiledbyoragainstthecustomer,thebankmuststoppaymentfrom thecustomer’saccounttosafeguardhisinterest.Ifthebankmakespaymentevenafterthereceiptofsuchinformation,hewilldosoathisownrisk.Afteranorderofadjudicationhasbeenpassedbythecourt,thebankmustclosetheaccountoftheinsolventcustomerandcommunicatetohisofficialreceiverthebalancetothecreditofthecustomer.
5.ReceiptofGarnisheeOrder-WhenthebankhasreceivedaGarnisheeOrderfrom thecourtoflawattachingcustomer’sbalancewiththebank,itmuststoppaymentofthechequesissuedbythecustomer,However,ifthecourt’sorderattachesapartofthecreditbalanceofthecustomer,thebankcanutilizetheremainingbalancetohonourthechequesissuedbythecustomer.
6.DefectiveTitleoftheHolder-Whenthebankcomestoknow orevenhasadoubtaboutthedefectivetitleofthepartypresentingthecheque,thebankercanrefusepayment.
7.ReceiptofNoticeofAssignment-WhenthecustomerhasgivennoticeofassignmentofthecreditbalanceofhisaccountunderSection130oftheTransferofPropertyAct,1882,Thebankmustnotmakepaymentofanychequedrawnbytheassignorafterthereceiptofnoticeofassignme nt.
8.BreachofTrust-Ifthebankhasadoubtaboutthemisuseoftrustmoneybyapersonwhoisoperatingatrustaccount,thebankhasarighttorefusepaymentofthechequesdrawnonthe
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trustaccount.
---------------------------------------------------------------------------------------------------------------------------------------Q.3- DefinedishonorofchequeandwhatareitsConsequences.
Ans.-
Whenanegotiableinstrumentisdishonoured,thenoticeofdishonorshouldbegivenbytheholderoftheinstrumentoranypersonliableforthepaymentviz.,endorseroftheinstrumentbutsuchnoticeisnotrequiredtobegiventodrawerofpromissorynoteoracceptorofthebillofe4xchangeordraweeofthedishonouredcheque.
NotingandProtesting-
Noting-Whenapromissorynoteorbillofexchangehasbeendishonoured,theholdermaycausesuchdishonortobenotedbyaNotaryPublicupontheinstrumentoruponapaperattachedtheretoorpartlyuponeach.Howeversuchnotemustbemadewithinareasonabletimeafterdishonorandmustspecifythedateofdishonor,thereason,ifany,assignedforsuchdishonor,or,iftheinstrumenthasnotbeenexpresslydishonouredendtheNotarycharges.
Protesting-Whenapromissorynoteorbillofexchangehasbeendishonouredbynon-acceptanceornon-payment,theholdermay,withinareasonabletime,causesuchdishonortobenotedandcertifiedbyanotarypublic.Suchcertificateiscalledaprotest.
PenaltiesinCaseofDishonourofchequesforinsufficiencyoffundsinaccount-Ifaperson,knowing thefactthatthechequewillbedishonoured,issuesacheque,thensuchoffenceispunishableunderSection420I.P.C.otherwiseonlyissuingachequedoesnotmeanthatthereissufficientfundintheaccount.
Now,relevantprovisionshavebeenmadeunderSection138oftheNegotiableInstrumentsAct,1881videBanking,PublicFinancialInstitutions&N.I.(Amendment)Act,1988(66of1988).Accordingtothissection,ifachequeisdishonouredbythedraweebankduetoinsufficiencyoffundsinaccount,thedrawershallbepunishedwithimprisonmentuptooneyearorfineuptodoubletheamountofthechequeorwithbothprovided.
(i)Thechequewasproducedbeforethedraweebankwithinsixmonthsfrom thedateofissueorwithintheperiodofitsvalidity,whicheverisearlier.
(ii)Noticeforpaymentwasgiventodrawerbythepayeeorholderinduecoursewithin15day
Theanswershallconsistoffollowingimportantpoints:1.Dishonorofcheque:-
a.Notingandprotestingb.Protestingc.Penaltiesincaseofdishonorofchequesforinsufficiencyoffundsinaccount
i.Sec.420ofI.P.C.ii.Sec.138ofNegotiableInstrumentAct,1881
iii.Bank,PublicFinancialInstitutions&N.I.(Amendment)Act,1988.iv.Proviso(b)ofSection-138oftheNegotiableInstrumentsAct,1881v.Sec.219ofCr.P.C.
d.Cases:i.Kusum IngotsandAlloysLtdv.PennarPetersonSecurities,
ii.SILimports,U.S.A.v.Exim AidsSilkExportsiii.K.R.Indirav.Dr.G.Adinarayanaiv.GoaplastPvt.Ltd.v.ShriChicoUrsuleD’Souzaandanotherv.AnilkumarHaritwalv.AlkaGupta
Sec.,147&148oftheAct,1881
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from thenoticeofdishonorgivenbythedraweebank.
(iii)Thedrawerfailedtopaytheamountwithin15daysfrom thedateofreceiptofsuchnotice.
InacaseRajendraB.Chaudhariv.StateofMaharashtra*anotherithasbeenobservedthatacauseofactionfortheprosecutioninrespectsofdishonorofachequearisesonlyifthedrawercommitsdefaultinmakingpaymentwithinstipulatedperiod,afterreceiptofthenoticerequiredtobegiveninconformitywithproviso(b)ofSection138oftheNegotiableInstrumentsAct,1881,inrespectofeachtenderandthenon-paymentbythedraweebankonthegroundthatthebalanceamountintheaccountofdrawerisinsufficienttohonourhiscommitmentoritexceedstheamountarrangedtobepaidfrom thataccountbyanagreementwiththedraweebank.Eachtenderofachequeanditsdishonorgivesrisetoseparatecauseofactionsubjecttoaconditionthatseparatenoticesareissuedinrespectofeachofthesecheques.Thepayeeisnotpreventedfrom combiningthecausesofactionbycoveringalltheinstancesinasinglenotice.Insuchacaseallthetransactionscoveredbythenoticewouldberegardedasasingletransaction,permittingasingletrial.However,inacasewherechequeswereissuedondifferentdates,presentedondifferentdatesandseparatenoticeareissuedinrespectofeachdefault,thetransactionscannotbeheldtobeasingletransactionattractingprovisionofSection219oftheCriminalProcedureCodeandthusseparatetrialsarepermissible.
InKusum IngotsandAlloysLtd.V.PennarPetersonSecurities,theHon’bleSupremeCourtobservedthattheobjectofbringingSection138oftheActonstatuteistoinculcatefaithintheefficiencyofbankingoperationsandcredibilityintransactingbusinessonnegotiableinstruments.
InSILImports,U.S.A.v.Exim AidesSilkExports,itwasheldthatinthecaseofdishonorofcheque,wherenoticeunderSection138oftheActhasbeenservedmorethanonce,theperiodoflimitationforfilingcomplaintunderSection142commencesfrom thedateofreceiptofthefirstnoticebythedrawerandnotfrom thedateofreceiptofthelaternotice.Itispermissibleforthedrawertosendnoticebyfax.
InK.R.Indirav.Dr.G.Adinarayana,itwasobservdthatincaseofdishonoroffourcheques,aconsolidateddemandnoticewouldnotinvalidateit.However,therewasnospecificdemandmadeforpaymentoftheamountcoveredbythecheque&thusnoticeisinvalid.Inthisway,acquittalofaccusedinproper.
InGoaplastPvt.Ltd.V.ShriChicoUrsuleD’Souzaandanother,itwasobservedthatincaseofstoppageofthepaymentofpostdatedchequebeforeduedateofpayment,thecomplaintunderSection138oftheNegotiableInstrumentsAct,1881allegingdishonorofchequeismaintainablebecauseonfaithofpaymentbywayofpostdatedchequethepayeealtershispositionbyacceptingthecheque.Thelegislativepurposeoftheprovisionistopermitefficacyofbankingandtoensurecredibilityinbusinesstransactionsthroughbank.
InAnilKumarHaritwalv.AlkaGupta,theHon’bleSupremeCourthasobservedthattheoffenceofdishonorofchequeiscompoundableinviewofSection147,and,convictionandsentenceforoffenceunderSection138oftheNegotiableInstrumentsAct,1881wassetasideinviewoffactthatdisputehasbeensettledandtheamountduetocomplainanthasbeenpaid.