1.A notice has been sent to an NPA borrower under
SARFAESI Act giving him 60 days
notice for payment of the dues and stating that the Bank
would take over the assets of the
firm in case of default. The dues have not been paid.
What action you will take to recover the
dues?
Answer
In case the Borrower fails to discharge his liability in full within
60 days, the Secured Creditor
may take recourse to one or more of the following measures to recover
his secured debt,
namely
i) Take possession of the secured assets of the Borrower
ii) Take over the management of the business of the BorrowerProblem Power SBLC Deoghar
iii) Appoint any person, to manage the secured assets the possession
of which has been taken
over
Bank also has the right to transfer the secured assets by way of
lease, assignment or sale for
recovering the dues
A notice of 30 days is required to be given to the Borrower before
effecting sale of the secured
assets
taken over.
2. A cheque drawn in favour of Sri Ram Kumar marked with ‘Not
Negotiable crossing’ is paid
to the credit of Sri Mohan Kumar’s Account, an endorsee.
Discuss the position of Paying
Banker.
Answer
As per Sec 130 of NI Act, Not negotiable crossing does not restrict
the transferability of the
cheque. It can be further transferred by endorsement and delivery.
However, the transferee of
the cheque does not get better title than the transferor. Thus, the
words ‘Not Negotiable’ are
only a caution for the transferee to accept such cheques from well
known parties or after being
satisfied with his/her title to the cheque.
Thus paying banker is justified in making payment of the cheque and
crediting Sri Mohan’s
Kumar
account if otherwise in order
3. A PPF account in the name of a HUF
entity matured on Mar 2010. Sri Dinesh K Patel,
Karta of the HUF request you to extend the deposit for
another 5 years? What actions you will
take?
Answer
In this context, it will be relevant to refer GOI notification dated
13th May 2005 in terms of
which
i) HUFs were no more eligible for opening PPF Accounts since May 2005
ii) All existing HUF PPF accounts were allowed to continue till
original maturity
iii) No extension should be allowed after original maturity
iv) No interest should be allowed for the period after maturity
It is, therefore, obvious from the above instruction that the PPF
account in the name of HUF
entities
cannot be extended after maturity.
4. A’ & ‘B’ are having a jointly
operated locker. ‘A’ has nominated ‘X’ and ‘B’ has nominated
‘Y’. Both of them die in a accident.
Answer
In such eventuality, access of the locker will be given jointly to the
nominees X and Y. However,
certain precautions will be exercised before handing over the contents
to them. These are:
i) Genuineness of the death certificate will be ensured.
ii) Due care and caution will be exercised in establishing the
identity of the nominees.
iii) Effort will be made to find out if there is any order from a
competent court restraining
the branch from giving access to the locker of the deceased
iv) Nominees will be clearly explained that the access to the contents
of locker has been
given to them as trustee of the legal heirs of the deceased and such
access to them will
not affect
the claim/rights of the legal heirs of the deceased.
5. Mr. & Mrs. Sharma are having a
locker to be operated by either of them or survivor. Mr.
Sharma requests you in writing that Mrs. Sharma should
not be permitted to operate the
locker. Discuss the situation.
Answer
If the locker is in joint names, access to the hirers is allowed only
after verification of mandate
for operation recorded with the bank.
In the present case, mandate is available for operation of the locker
by either of them.
However, the mandate can be revoked by any one of the joint hirers.
Here, Mr. Sharma (one of
the hirer) has given the notice to revoke the earlier mandate of
operation (E or S). In such
situation, only joint operation of the locker can be permitted.
Bank should also make effort to persuade them to surrender this locker
and get separate
lockers
allotted in their sole name to prevent any further complication or litigation.
6. M/s Venus Dresses has a cash
credit account with you. They have taken insurance cover
for the full value of the stock of raw materials and
finished goods. Due to congestion in the
factory premises a portion of the stocks are shifted to
a separate godown. A fire accident
takes place thereat and the stocks are fully destroyed.
But the insurance Company rejects the
claim. Indicate the reasons.
Answer
An insurance policy contains the value of insured stock and also the
place where the stocks are
kept. In case the stocks are shifted to another godown, the insurance
cover will be available if
the change of place is notified to the insurance company and endorsed
to this effect is made in
the policy.
In this case, this has not been followed by the borrowal unit and
therefore the insurance
company is
justified in rejecting the claim
7. A, B and C are partners in a firm.
A retires from the firm. B and C are willing to accept the
liability
of the firm. What precautions will you take if you accept the offer of B and C?
Answer
When a partner retires from a partnership firm, the firm is
reconstituted. In such case the
following precautions should be taken to avoid the applicability of
Clayton’s Rule:
i) A letter of continuing guarantee should be obtained from all the
continuing and
outgoing partners as an interim measure
ii) In case the advance is guaranteed by any third party guarantor, a
stamped letter of
confirmation should be obtained from them
iii) In respect of Term Loans, there is no need to obtain a fresh set
of documents. Instead a
stamped letter should be executed by the continuing partners and
Guarantor(s), if any
iv) In case mortgage is created over the partnership property, it will
not be affected
Meanwhile, the reconstituted firm should be accorded a new sanction of
limit and fresh
documents
should be obtained. Outstanding balance should be transferred to a new account
8. Mr. Raja has taken a gold loan
from your branch. His whereabouts are not known and
five years have passed. One day Mrs. Raja comes to your
branch with cash to close the loan
taken by her husband under the condition that the gold
ornaments are delivered to her. What
will you do?
Answer
As per sec 108 of Indian evidence Act, a person reported missing can
be presumed to be dead
only after a lapse of 7 years by a competent court.
In the present case, therefore, gold ornaments pledged to the Bank can
be handed over to Mr.
Raja only on closure of the loan account.
Meanwhile, Mrs. Raja should be advised to repay the loan to reduce the
interest liability. This is
also in
interest of the bank from asset quality angle
9. X, Y and Z are the partners of a
firm. The firm is availing an overdraft limit of Rs 5 lakh
from your branch. You come to know from reliable source
that Mr X died on 27th
Jan 2011.
Two cheques signed by Mr X are presented for payment on
28th Jan 2011. Cheques are dated
prior to the date of death of Mr X and within 6 months
from the date of issue. What actions
you will take?
Answer
On receipt of information of death of a partner X in the firm,
operation in the overdraft account
with us should be stopped immediately in order to determine the
liability of the deceased
partner. Estate of deceased partner X will only be liable for payment
of debt raised by the firm
before his death. Moreover, if we fail to do so, clayton’s rule will
come into play. Any further
credit in the account will reduce the liability of the deceased
partner Mr. X.
We should, therefore open a new current account in the name of reconstituted
firm to facilitate
the continuance of business pending sanction of suitable credit
limits. Fresh mandate for
operating the account by the surviving partners should also be
obtained.
Cheques drawn by deceased partner may be paid after obtaining confirmation
of the surviving
partners
and not otherwise.
10. Sri Krishna Ballabh Sinha is a
visually impaired/blind person. He can sign consistently. He
wants to open a self operated cheque facility Savings
Bank A/c. What procedure you will
adopt to accede to his request? If, he would not have
been able to sign uniformly do you
envisage any change in the procedure?
Answer
i) In terms of revised RBI/IBA guidelines in this respect Sri Sinha
will be permitted to open self
operated cheque facility SB A/c.
ii) Firstly, Sri Sinha needs to be informed/explained about his ‘rights
& liabilities’ as account
holder
iii) Third party cash payment of self drawn cheques by visually
impaired persons is now
permitted
iv) He is also not required to submit any undertaking
v) Since he is able to sign the cheques consistently, affixing his
thumb impression at the time of
issuing cheque is not required
In case, he feels that his signature may not exhibit consistency does
not mind branding “CARE –
Depositor Visually Impaired” stamp, in order to avoid the ‘cheque
being returned unpaid’ on
account of ‘difference in the signature’, in such cases a written
request for branding the
cheques may be obtained, cheques shall be branded and thumb impression
shall also be
obtained and witnessed by the Bank Official under his signature and
specimen signature
number,
along with the Bank stamp
11. Jai Hind Trust is maintaining a
current account in your branch with a substantial balance
in the account. Mr. Atma Ram the Managing Trustee is the
authorized signatory of the
account. Recently you come to know that Mr. Atma Ram has
been declared as insolvent.
Today your branch has received a cheque for Rs.5 lacs
signed by him in clearing. The account
has sufficient balance to honour the cheque. The Manager
(branch operations) approaches
you with a dilemma whether to honour the cheque or not,
as the signatory has become
insolvent. Please guide him.
Answer
Manager Branch operation will be advised as under
i) Mr Atma Ram has been declared insolvent and therefore operation in
his personal
account will be stopped as the amount held in it becomes payable to
official receiver.
ii) However, Mr Ram’s insolvency will not affect his functions as
Trustee because he is
functioning in fiduciary capacity and official receiver cannot claim
the amount held in
Trust Account. Therefore, cheques drawn by Mr Ram as Trustee on the
Trust account
are payable
if otherwise in order.
12. Garnishee order for Rs 1.20 lakh
is received in case of a Partnership Firm M/s XYZ.
Credit balance available in the account of the firm is
Rs 90000/- only. Bills for Rs 20000/- are
sent for collection to their account. Credit Balance in
the personal account of Partner X, Y & Z
are Rs 15000/-, Rs 6000/- and Rs 18000/- respectively.
What actions you will take?
Answer
Garnishee order is not applicable to bills/cheques sent for collection
but the proceeds not yet
realized.
In case of partnership firm, however, it is applicable to credit
balances held in personal
accounts of the partners.
Since, there is a shortfall of Rs 30000/- in the partnership account,
it can be met
proportionately from the personal accounts of the partners i.e. Rs
10000/- each. Again, only Rs
6000/- is available in the personal account of Y and therefore,
shortfall of Rs 4000/- will be
equally met from the personal accounts of X and Z.
Thus, in compliance of the garnishee order, the amounts in various
accounts would be attached
as under:
i) Account of M/s XYZ firm - Rs 90000/-
ii) Personal A/c of X -Rs 12000/-
iii) Personal A/c of Y -Rs 6000/-
iv)
Personal A/c of Z -Rs 12000/-
13. Mr. Dinesh is a software engineer.
He is having SB account in your branch. Mrs.
Meenakshi, his mother one day approaches your branch and
informs the sudden death of his
son. She also informs that nomination in the SB account
is available in her favour. On scrutiny
you find the following details with respect to Mr.
Dinesh:
Account Balance (Rs.)
Savings Plus 57,695.00
MOD-STDR 45,000.00
Personal Loan 23,507.00
(Outstanding)
How will you deal with the situation?
Answer
Nomination given by Mr. Dinesh for his Savings Plus account will also
hold good for the MODs
created through auto sweep in the account. However, outstanding in the
personal loan account
should be first appropriated before settling the claim in favor of the
nominee Mrs. Meenakshi.
Thus, a sum of Rs 79188/- (Rs 57695 + Rs 45000 – Rs 23507) may be paid
to the nominee after
exercising due diligence in ascertaining the fact of death of the
depositor and in establishing the
identity of
the nominee.
14. Mr. Ashok Paul maintains a STDR
for Rs 275000/- with your branch. He died due to a road
accident. His son, Suman Paul approaches you to claim
the amount as nominee. Meanwhile,
you receive an advocate’s notice on behalf of the
daughter of the deceased Mrs. Radha Paul
to stop payment of the deposit to Suman Paul. How will
you handle the situation?
Answer
Payment to nominee after death of the depositor constitutes a full
& valid discharge of bank’
liability. However, we should take cognizance of any order, decree,
certificate or other
authority from a Court of competent jurisdiction restraining the bank
from making the payment
from the account of the deceased.
In the present case, advocate of Mrs Radha Paul should be advised to
obtain an injunction
order from any competent court and mere serving of a legal notice
cannot be construed as an
injunction from competent court.
In absence of any such order, payment to nominee after exercising due
diligence will provide a
valid discharge to bank’s liability. Moreover, such payment to him
shall not affect the right or
claim of
remaining legal heirs of the deceased
15. What actions you will take in the following
cases?
a) Smt. Lal approaches you for payment of a sum of Rs
56000/- lying in her husband’s account
& he is reported missing for than one year.
b) Will the situation be different if amount is more
than Rs 1 lakh?
Answer
a) Under section 108 of the Indian Evidence Act, a person reported
missing can be presumed to
be dead only after a lapse of 7 years by a competent court. Claim in
respect of amount held in
accounts of such person can be settled only after a certificate to
that effect is issued by the
court.
To alleviate the hardship of nominee/legal heirs of persons reported
missing for a minimum
period of one year, it has been decided to settle Claim upto Rs 1 lakh on production of the
following documents:
o FIR
o Non-traceable report issued by the police authorities.
o Indemnity from the claimant
AGM (Admin) of the respective region has been authorized to settle
such claims
In view of the above, Smt. Lal’s claim can be settled.
b) If the amount is more than Rs 1 lakh, Smt. Lal’s claim can be
settled only after a lapse of 7
years when she produces a certificate issued by a competent court
regarding presumption of
her husband’s death under sec 108 of evidence Act.
16. Y reports death of her husband X maintaining a SB
A/c. She claims the money lying in X’s
account (Rs 43000/-) as nominee. She submits an
acknowledgement issued by bank
mentioning therein her name as nominee to the account.
On scrutiny, however, it is observed
that nomination form was not signed by X. Smt. Y is
mother of a 15 year old daughter only.
How will you help Y in such situation?
Answer
Nomination in favour of Y by X cannot be considered valid as the
Nomination form has not been
signed by the depositor. The bank should apologize for the mistake.
They should also assure
Smt. Y of all cooperation in smooth settlement of a sum of Rs 43000/-
held in her husband’s
account. She will be advised to submit the following documents:
a)
Death Certificate of Mr. X
b)
b) Claim
format signed by the Smt. X together with declaration from one independent
c)
person, in
respect of legal heirs of deceased Mr. X, known to the family of the deceased
d)
and
acceptable to bank
e)
c) A
stamped Letter of Disclaimer to be signed by Smt. Y on behalf of her minor
daughter
f)
Ms Rekha
g)
d) A
stamped Letter of Indemnity to be signed by Smt. Y (Claimant)
h)
In this
case, No sureties are required as the claim amount is below Rs 50,000/-
17.Mr. Ram Lal & Mr. Raushan Mehra are maintaining
an ‘E or S’ SB A/c with your Branch.
They have nominated jointly Mr Ram
Lal’s minor daughter Ms Rekha. Mrs Shyama Devi, wife
of Mr. Ram Lal was appointed to
receive the money on behalf of Minor Nominee. Mr Ram Lal
died in an accident. Raushan Mehra
approaches the Branch and requests you to change
nomination in favour of his son
Suraj Mehra and this is opposed by Mrs Shyama Devi. How
will you deal with the situation?
Answer
In the present case, mandate is in favour of Mr Ram Lal & Mr Rajiv
Prakash with survivorship
clause. Amount held in the account is
payable to either of them or survivor. Nomination is valid
only after the
death of both of them. Since Ram Lal has died in an accident, Mr Rajiv Praksh
(Survivor) is entitled
to operate the account singly.
Further, Mr Rajiv
Praksh is also entitled to change nomination in the account. Therefore, claim
of Mrs Shayma Devi is not justified.
18. M/s ABC Pvt Ltd co is maintaining
a current account with your branch. Cheques are to be
drawn jointly by two directors and one Accounts officer
of the company. Can we stop
payment
of a cheque on the strength of a letter signed by the Accounts officer?
Answer
In case of a Joint Account, firm, Joint Stock Company or a Trust, any
person authorize to sign
may stop payment. It is not necessary that the countermand order must
be signed by all those
persons who had signed the concerned cheque.
But if the countermand order is to be cancelled, all the persons
authorised to operate the
account must sign such letter
19. A cheque for Rs 500/- is issued by
the drawer leaving space before the amount in words &
figures. Payee of the cheque changed the amount to Rs
5500/- . Cheque is presented for
payment and honoured by you. Please justify your action.
Answer
In this case, the amount of the cheque has been changed which is a
material alteration.
Therefore, it requires drawer authentication. It also appears from the
case that the payee had
been to able to make such change due to negligence of the drawer in
writing the cheque and
that the material alteration may not be apparently clear.
Under Sec 89 of NI act statutory protection is available to the paying
banker in case of payment
of cheques which have been materially altered provided the alteration
is not apparently clear
and payment is made in due course.
In the present case, both the conditions appear to be fulfilled as
there is no ground to believe
that payment has notbeen made in due course. Therefore, paying banker
can seek protection
under the said act.
20. Credit balance in the account of
Mr P maintained with your branch is Rs 11000/- as at 31st
Jan 2011. A cheque dated 3rd Feb
2011 for Rs 7000/- drawn by Mr P is presented for payment
on 1st
Feb 2011 and honoured. On 2nd Feb
2011, another cheque for Rs 5000/- dated 31st Jan
2011 is presented for payment which is returned and
marked insufficient balance. Discuss.
Answer
Payment of a post dated cheque will not be considered as payment in
good faith and without
negligence and therefore it will not be deemed as payment in due
course (Sec 10 of NI Act).
Bank has no authority to debit Mr P’s account for cheque dated 3rd Feb 2011.
In this situation, dishonour of cheque dated 31st Jan 2011 is not proper and the paying bank is
liable for damages caused to the drawer due to its wrongful dishonour.
