BANKING LAW AND PRACTICE PDF

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This book contains the course content for Banking Law and Practice. . State Bank of India and its Associate (Subsidiaries) Banks-A New Channel of Rural. Download and look at thousands of study documents in Banking Law and Practice on Docsity. Find notes, summaries, exercises for studying Banking Law and. treatises on the subject of banking law. volumes of colonial law reports, some cases that ought Now, according to colonial practice, bankers Bankers.

It is an important one, however, because depending on whether a person or body is classed as a bank it will have a range of additional rights and obligations.

Butterworths, Chapter 2. But banking as an activity is much older. In ancient times the temple was likely to be the location of much of what we would recognise as banking business. In Mesopotamia, money could be borrowed at interest from the temple; in Greece, sanctuaries and temples were often the store house or place of safe custody for bullion and valuables; and in Jerusalem money-changers located in the temple precinct would exchange currency and allow interest on deposits with them.

This is not because banks have been abolished as a legal concept, but they have been re-named and other institutions brought under the new name.

A noticeable omission from the definition of banking business was the involvement of banks in the Australian payments system15 under which payments are made or funds transferred by such mechanisms as the collection and payment of cheques, direct credits and debits, debit and credit card payments and high value payments. Future definitions? One of the difficulties of a definition based on the functions of the institution — a check-list approach - is that the activities of and services offered by institutions most of us would recognise as banks is changing and the last decade in particular has been a period of accelerated change.

The Regulatory Framework Regulatory agencies There are three main regulatory agencies for the financial system in Australia and their responsibilities are: It has responsibility for monitoring and reviewing financial industry codes of practice such as the Electronic Funds Transfer Code of Conduct.

ASIC also has responsibility for enforcing company law and the licensing and conduct of corporations. The responsibility for consumer protection in the financial services sector, however, lies with ASIC. Membership of an approved scheme is a licence requirement. They include the power to regulate unconscionable conduct and consumer protection in the financial services industry, contained in Part 2 Division 2. Regulation of Financial Services and Markets Chapter 7 of the Corporations Act was a new chapter of the Corporations Act, replacing the previous chapters 7 and 8, and was introduced via what is 20 See below for more about the dispute resolution framework under the Corporations Act and the Code of Banking Practice.

The UCCC was introduced in to replace previous state-based credit legislation. This means that when you download a copy of the Consumer Credit Code, you download the Queensland legislation, which has been adopted in Victoria via the Consumer Credit Victoria Act The UCCC applies to credit: See www. It covers credit contracts and by section 10, a hiring agreement where the hirer has a right or obligation to download the goods.

It also, in a separate Part 10, covers consumer leases where the hirer does not have a right or obligation to download the goods. So some of the questions to ask when determining whether the UCCC applies will go to: Once those questions are answered, the exceptions set out in section 7 and in the Regulations will need to be considered. The banker-customer relationship is essentially a contractual one. It is more than that, however, and contains other contractual incidents implied by the courts.

In addition, the contract is overlaid by equity, tort to a lesser extent and statute including consumer protection legislation. Although described in those terms, the banker-customer relationship is not a normal debtor-creditor relationship where the debtor is required to seek out his or her creditor and repay the debt when it is due.

A bank is entitled to and should wait for a demand for repayment — a withdrawal slip or equivalent — and the timing of the demand may be prescribed by the express terms of the contract, such as with term deposits. The monetary threshold is now linked to an ABS index of the cost of new houses in Sydney so it changes regularly. For the up-to-date threshold see the government site www. Also the Lawyers Practice Manual, Victoria chapter on consumer credit disputes..

And as banking practice changes, the way in which they are expressed may also change. The normal incidents of the relationship The basic incidents of the banker-customer relationship30 have been identified as: Under common law, the customer has only two duties: Attempts have been made at various times to extend the duties owed at common law by a customer to such things as discovering forgeries by reading statements;33 taking care of a cheque book;34 and running an organized business.

The absence of a common law duty does not, of course, prevent an obligation being imposed under the express terms of the contract, although it is necessary to ensure that important obligations are sufficiently brought to the attention of the customer.

For example, leaving spaces in the figures or words for the amount. The duty includes notification of known unauthorised transactions: See section 5 of the EFT Code, available at www. Such a duty may, in limited circumstances, include a duty to question an otherwise valid mandate, e. The banker-customer relationship is not one of the accepted fiduciary relationships41 and the contractual duty of a banker to a customer is not a fiduciary duty, except in special circumstances.

The case of Commonwealth Bank of Australia v Smith45 is an example. His advice included discouraging other sources of advice. And the geographical context was a small town. The facts will therefore be crucial. Duty to Disclose? Misleading or deceptive conduct by silence.

Claims of misleading conduct by silence are sometimes brought in the alternative to a claim of breach of fiduciary duty. But it can be unhelpful to frame the claim as arising from a duty to disclose.

That context may or may not include facts giving rise to a reasonable expectation, in the 44 Timms v Commonwealth Bank of Australia, at para One question that arises in a claim of misleading conduct by silence is whether the omission to speak must be deliberate or advertent: Conduct may be misleading or deceptive at law, even though it was not intentionally so.

When the customer fails to cover bills domiciled at the bank for payment. When the banker wants to close an account of his customer it is advisable for the banker not to accept deposits. When the customer frequently countermands payment of cheques. When the customer repeatedly issues cheques without having adequate funds in the account b.

Wherever possible. When the customer closes his account. In the meanwhile. The order issued by the Court of Law to the banker. Liabilities be withdrawn as and when desired. The case laws quoted will enable the reader to understand the circumstances of various instances. The dual benefit of Term-Deposits advances against deposits also understood.

The impact of entries made in the pass book also explained. Longer the duration. A fixed deposit maturing on a Sunday will be paid on the proceeding Saturday. Say true or false a. Savings account is more suitable for business people. No interest will be offered to Current Account. A wrong entry in the pass book favourable to a customer constitute a settlement of account.

Savings Deposit b.

The best suited deposit for a trading community is: Fixed Deposit. Varies from bank to bank.

The minimum balance to be maintained in a savings bank account with a cheque facility is: The maximum period for which a fixed deposit can be obtained is: Recurring Deposit 4. Current Account d.

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Banker can close his customer's account: According to IBA. No limit. All the three cases. What are the salient features of recurring deposit accounts? Differentiate savings bank account from current account.

What is FDR? Explain it's features. What is Donatio Mortis Causa Clause? Explain time liabilities and demand liabilities with examples. What is the proper function of a pass book according to Sir John Paget? Explain the salient features of various types of deposit accounts.

Narrate the circumstances under which a wrong entry in a pass book in favour of a banker bind the customer.

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Anti- Dating and Post-Dating 3. Course 3. The present unit makes an attempt to identify the various negotiable instruments. The customer can make use of these cheque leaves either to withdraw money from the bank or to make payments to others.

Tannan's Banking Law and Practice in India

These cheques. Orders drawn against these goldsmiths or letters. The law relating to cheque is mainly embodied in the Negotiable Instruments Act. Specially crossed. The cheque system carreis many advantages over other forms of money. It is very convenient to make and receive payment by means of cheques. Payment through cheque system is not only easy but also costs less. Persons making payments need not take the trouble of maintaining and preserve record of payments.

When a cheque is lost or stolen. If necessary the payment can be proved through the record kept in the bank. Section 6 of the Negotiable Instruments Act. These advantages are not available in the case of payments in other forms of money.

Before explaining them. The cheque system is very popular in European and other rich countries of the world.

In order to understand this definition thoroughly. The person who draws a cheque is the drawer. It runs as follows: But it is obvious that alterations can be effected with comparative ease in all the above cases except handwriting. In that case he becomes the drawer as well as the payee.

Sometimes the drawer may draw a cheque payable to himself. Writing may be done by a typing. Instrument In Writing: A cheque should be an instrument in writing. If the banker is asked to do. Unconditional Order: It is evident from Section 6 of the Negotiable Instruments Act that a cheque is a bill of exchange and it is also clear from Section 5 of the Act that a bill of exchange is an unconditional order.

After giving an indemnity to their bankers. Signed by the Person Issuing it: A cheque should be signed by the person issuing it. The person's arrival through ship becomes a condition attached to the instrument and as such it ceases to be a cheque. By One Person to Another: To be a valid cheque. Joint stock companies. It should be noted that persons in law are not necessarily human beings.

A Certain Sum of Money Only: The order must be for the payment of a certain sum of money only. If the amount stated in words differs from the amount stated in figures. On a Particular Branch of a Bank Only: The instrument must be drawn on a specified banker and not on any other person. This uniform practice has come into effect from May1. Banks have been advised to pay the amount written in words in conformity with Section 18 of the Negotiable Instruments Act. According to Section 19 of Negotiable Instruments Act.

Payable on Demand: The order must not be expressed to be payable otherwise than on demand. But the. If it is dated earlier it is known. This authority must be exercised by the holder within a reasonable time Griffthst Vs Dalton. Ante-Dating and Post-Dating: The drawer can date a cheque earlier or later than the ostensible date of issue. The drawee banker also may insert the date. If the drawer has not dated the cheque. X issues a cheque in September The Payee Sir.

But he may date it as September 2. This is ante dating. When a post-dated cheque is presented on or after the date written on it the paying banker should have no objection to honour it merely on the ground of his knowledge of the cheque being originally post-dated.

In such cases they are treated as bearer cheques. A cheque may be made payable to the order of a specified person or to the bearer thereof. Cheques are sometimes made payable to fictitious person [imaginary persons].. The National Provincial Bank Ltd that a cheque drawn in favour of. Cheque in favour of impersonal payee such as wages. If it is desired that the payment of a cheque should reach only a particular payee. The rights which it embodies are capable of being transferred by mere delivery or endorsement and delivery.

A Negotiable Instrument possesses the following characteristics: It is a contract for the payment of money. A holder. Consideration is presumed to have passed between the parties.. Consideration is used in the sense of quid pro quo i. The Negotiable Instruments Act primarily applies to promissory note. It can be transferred any number of times within the period of limitation.

The holder. Dividend warrants. Although instruments like bill of lading railway receipt. But posta orders.. But there are certain other instruments which are held to be negotiable. Delivery refers to the transfer of possession. Holder refers to the bearer or the payee or the endorsee of a cheque who is in possessio of it. W have to understand the meaning of two terms namely.

Constructive delivery does not require physic handing over of the instrument and it can be effected by the mere intention of the transferred. But constructive delivery is not so. Actual delivery involves the physical handing over of a cheque by one person to another.

Delivery ma be either actual or constructive.

Banking Law And Practice Books

Order Instrument: An instrument payable to the order of a certain person is said to be negotiated when it is endorsed by the payee and delivered to the party. Bearer Instrument: A bearer Instrument is said to be negotiated when it is transferred from one person to another by mere delivery. The clerk then endorses. He prepares a cheque and makes it payable to a purely imaginary person.

Ultimately the drawer has to suffer the loss. Even if it were so. In these circumstances. The absence of a genuine endorsement does not prevent the third party from obtaining a good title because the cheque is payable to a fictitious or non-existing person.

He the drawer could not have avoid that loss by ordering the bank not to pay the cheque. Bills of exchange. By an assignment under the Transfer of Property Act. By negotiation under the Negotiable Instruments Act. On the contrary. A finder of a lost instrument may be in possession of it It does not mean that he is the holder. Position of the Holder: While occupying any of these three positions. Where the note. The holder may be the payee or endorsee or bearer of a cheque.

Thus mere possession of an instrument will not make a person. The title of the person who is claiming to be holder must be acquired lawfully. In his own name. He not only protects himself against all defects of persons. In short he holds the instrument free from any defect Section 9 of the Negotiable Instruments Act.

He is in a paramount position. The first requirement to be satisfied before a person can be holder in due course of a cheque is that he must be a holder. To be a holder-in-due course. As to regularity. Complete and Regular: As to completeness. A post dated cheque is not deemed to be irregular. Before Becoming Overdue: A cheque is ordinarily payable on demand.

In the case of order cheques endorsement in favour of the holder is essential. It will be deemed to be overdue when it appears on the face of it to have been in circulation for an unreasonable length of time. Even if an endorsement does not appear to be regular. In India if a cheque is in circulation for more. In good faith: The cheque must have been received in good faith.

When it is over due the transferee. If such a cheque with banker's note of dishonour is further negotiated. No Notice of Dishonour: A cheque might have been previously presented to the banker who might have dishonoured it for the reason written upon the same.

Value must be apparent. It may relate to any antecedent debt or liability. A thing is deemed to be done in good faith when it is done honestly whether it is done negligently or not. For Value: Transfer of a negotiable instrument must be for valuable consideration. There is no obligation of payment. But an order instrument is put in a deliverable state when it is endorsed by the payee. Deliverable State: The instrument should have been in a deliverable state.

Payable to a specified person only e. Pay Kavitha only c. There cannot be a holder in due course under the following circumstances: When it bears the forgery of essential signature.

A bearer instrument is always in a deliverable state. When an instrument is marked Not Transferable or b. The person who gives the order to pay or who makes the bill is called the drawer. The person to whom the payment is to be made is called the payee.

The person who is directed to pay is called the drawee. In some cases. There are three parties to a bill of exchange. When the drawee accepts the bill. The holder must present the bill to the drawee for his acceptance. It must contain an order to pay.

The drawer or the payee who is in possession of the bill is called the holder. It must be in writing. Essential Elements: The essential elements of a bill are more or less the same as of a promissory note and are subject to some formalities as regards date.

These essential elements are as follows: A bill as originally drawn cannot be made payable to bearer on demand. The order must be unconditional. It requires three parties. It must contain an order to pay money. It must be signed by the drawer. The formalities relating to number. The sum payable must be certain. B downloads goods from C on similar terms. Now B may order A to pay the sum of Rs. A downloads goods on credit from B for Rs. This order will be a bill of exchange.

A bill contains an unconditional order to pay. In a note there are two parties- the maker and the payee. The maker of a note corresponds in general to the acceptor of a. In a bill there are three parties -the drawer.

The maker of a note is the debtor and he himself undertakes to pay. A note contains an unconditional promise to pay. The drawer of a bill is the creditor who directs the drawee his debtor to pay. A note requires no acceptance as it is signed by the person who is.

A note cannot be made payable to the maker himself whereas in a bill. The liability of the maker of a note is primary and absolute. But the maker of the note cannot undertake to pay conditionally whereas the acceptor may accept the bill conditionally because he is not the originator of the bill. The maker of a note stands in immediate relation with the payee. A note cannot be drawn payable to bearer. Certain provisions like a presentment for acceptance Sec.

A bill can be so drawn. A bill payable after sight or a certain period must be accepted by the drawee before it is presented for payment.

But in the case at dishonour of a note. Foreign bills must be protested for dishonour when such protest is required by the law of the place where they are drawn Sec. This includes the drawer and the prior endorsers. No such protest is required in the case of a note. In case of dishonour of a bill either by non-acceptance or by non-payment. A bill may be drawn on any person.

A cheque is not entitled to any days of grace. A cheque requires no acceptance. A bill which is not expressed to be payable on demand is entitled to three days of grace. A bill must be accepted before the drawee can be called upon to make payment upon it.

Description

The drawer of a cheque is not necessarily discharged from his liability by the delay of the holder in presenting it for payment. A cheque may be crossed but not a bill. A bill must be duly presented for payment to the acceptor or else the drawer of the bill will be discharged from liability. A bill may be payable on demand or after the expiry of a certain period after date or sight.

A cheque is always payable on demand. He is discharged only to the extent of the damage. The payment of a cheque may be countermanded by the drawer but the payment of a bill cannot be countermanded.

A bill may be noted or protested for dishonour. Instrument note. A cheque does not require any stamp where as a bill. A cheque is not required to be noted or protested for dishonour. Exchange in writing containing an unconditional.

Banker can return the cheque on the ground of amount in words and figures differs. The holder-in-due course can sue in his own name only with the information of the transferor or previous holders. Banker can honour a cheque which does not bear drawer's signature. Negotiable instrument means: A bearer instrument is always in deliverable state.

There are two parties to a bill of exchange i. Define cheque and State its advantages. Explain the terms holder and holder-in-due course. Assume you as a banker and narrate how will you treat an un dated cheque? Discuss 4. Explain the requisites of a cheque. What are the characteristics of Negotiable Instrument? Write a note on anti-dated. How can an illiterate person sign a cheque? This unit explains the meaning of term endorsement.

A clear understanding of the term endorsement and its legal impact will enable the reader to handle the negotiable instrument with care and caution. If these is no sufficient space for making endorsements on the cheque. Endorsement means writing of a person's name on the back of a negotiable with a view to negotiating the same.

That piece of paper is known as an allonge. In general. But if anyone has become the holder in his own right. The payee of an instrument is the rightful person to make the first endorsement There after. There is difference between transfer by endorsement and transfer by assignment e. But in the latter case. In the former case. Blank Endorsement: This instrument can be negotiated by mere delivery subsequently. When a cheque drawn in Mr.

X's name is signed on its back by Mr. Such an endorsement makes it payable to the bearer. X himself. If Y wants to endorse it. Full Endorsement: In addition to his signature. This instrument becomes payable only to Y or his order.

For example if Mr. The holder of a negotiable instrument endorsed. A blank endorsement may be converted into a full endorsement.

If he does so the endorsement is termed as a conditional endorsement. Conditional Endorsement: If the endorser of a negotiable instrument likes. The conditions thus added may be. Uma arrives within three months from the date of endorsement on the instrument. If she does not arrive from Canada within the stipulated period.

Conditional endorsement does not make the instrument-non. But the endorsee's right of negotiating the instrument may be restricted or excluded by express words. Pay the contents to Surya only. Chandra endorses an instrument payable to bearer as follows: Restrictive Endorsement: Pay Surya for my use.

Pay to Sundari without recourse to me. Pay Surya or order for the account of Chandran. The amount must be credited to Surya. Pay to Sundari or order at her own risk.

The following are the instances of such endorsement. Suppose Radha endorses a cheque to Sundari thus: But the endorsees. In these cases. But if the amount due has already been partly paid a note to that effect may be endorsed on the instrument and it may be negotiated for the balance. Partial Endorsement: An instrument cannot be endorsed for a part of its amount.

Radha will not be liable to Sundari or subsequent endorses. In this connection attention is invited to the famous ruling of the Privy Council in the case of Bank of Baroda.

When such marking by usage amounts to an undertaking by the banker to honour it. This implies that the cheque was drawn in good faith and on funds sufficient to meet it.

In such a context. The conclusive legal observations in this respect were 1. Instead of marking the customer's cheque. Here the representation related to the future and 4.

Such a practice except for clearing purposes. In view of the above decision. Leading cases in the Law of banking. Banking law and Practice in India M. Tannan 4. Lord Chorley and P. The banker on whom the cheque is drawn. Assignment means the transfer of legal title to a properly without. The persons who can make a valid endorsements are the payee of an instrument at the first instance and the holder subsequently.

An order cheque can be negotiated only by delivery. Endorsement means writing of a person's name on the back of a negotiable. An order cheque can be converted into a bearer cheque by means of: The payee of an instrument or the holder of the instrument is the rightful person to make the endorsement.

The person who makes the endorsement is called the Endorsee. The maker of a note and the drawer of a bill can endorse. Sans fra is Endorsement 3. Blank Endorsement d. Special Endorsement c. This abstract will appear on the contents page of the issue containing your submission. Note that subscribers come from a wide variety of jurisdictions so please provide explanations of terms where necessary.

Plain English should be used where appropriate. Style Guidelines Please submit material under one of the following headings. All material must discuss subjects of international interest. Opinions In the style of an editorial, these are topical, opinionated pieces that often express a fairly radical or controversial view. Word length: approximately 1, Articles Articles should focus on a major, current theme of interest to the banking and financial community.Business Taxation and Tax Management But the money is not set apart in strong rooms.

Savings Deposit b. What constitutes the business of banking is the vexed question. These essential elements are as follows: Though he can retain them until his debt is paid.

By an assignment under the Transfer of Property Act.

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