JAIIB legal Minors

 MINORS :

• Under sec 3 of Majority act 1875 a person is a minor as per law if he has not attained 18 years of age.

• Also applicable in case of court appointed guardian.

• A minor cannot ratify the debt incurred by him during his minority after he attains majority.

• A contract with a minor is void ab-initio (Sec.11 of IC Act)

• The legal heirs of a minor are his natural guardians. 

Guardian appointed by Court : Legal Guardian

By will of father – Testamentary Guardian (only after death of Father and Mother)

• Supreme court judgement allows the Bank to open and operate account solely in the name of mother when father is alive. Father & Mother are natural guardians. 

• A minor cannot be a partner in the firm. He can be admitted only for the benefits (Sec.30 of partnership Act)Cannot be a director Sec 164 of Companies Act

• A minor can ratify the transactions of the firm only if he decides to become a partner of the firm.  In that case the bank has to obtain a ratification letter confirmation letter) from him to make him liable for all the activities of the firm during his minority.

• A minor cannot appoint an agent but he can be an agent (Sec.183 of IC Act) but he will not be personal liable, only the prinicpal will be liable for all the acts of the minor agent.

• Any necessaries supplied to the minor, it can be recovered out of his estate (S.68 of Indian Contract Act.

• Even if any loan is taken by the minor by misrepresenting his age, it cannot be recovered after he attains majority 

Rationale: If any loan is granted to the minor by taking a guarantee, it cannot be recovered either from the minor or from the guarantor since the guarantor’s liability exists only along with the borrower’s  liability. If the borrower is not liable, than the guarantor is also not liable.

Minor cannot nominate, however, personally authorized to act (guardian) on behalf of the minor can nominate.

• In the case of a Muslim minor, mother will not be a natural guardian. It is only the father, or executor of father’s will or father’s father or executor of father’s father’s will or court appointed guardian.

• Two minor can open a Joint SB account but to be operated jointly. No E or S account will be opened as it would amount to entering into a contract which is void.

• A minor cannot be declared insolvent. Since an insolvent is a person who cannot repay the liability as he has no assets to repay. But a minor cannot incur any liability as he is incapable of entering into contract. Hence he cannot be declared insolvent.

• Minor 10 years and above – SB / TDR account max Rs.2 lacs TDR period max 10 years – uniform signature. Banks risk. 14 years ATM classic card

• By guardian no age restriction. Consolidated balance Rs.20 lacs max. 

Pehli Udan – 10 years & above Uniform signature. Cheque leaf 10, ATM photo id card, ATM withdrawal 5,000; INB Rs.5000; MBS Rs.2000 A/c Rs.5 lacs; CIF Rs.10 lacs

Pehla Kadam – Jt. Operation or single operation by parent

Sole Name of Minor: on attaining majority formalities: a) confirm balance b) submit fresh SS/Photo; c) Declaration and Proof of majority; d) Form 60/61 or PAN card.

• Acc to Sec 26 of NI act, minor can draw, endorse or negotiate a cheque or Bill of Exchange but he cannot be held liable.  He cannot be sued. Bill is valid, other parties are liable.

Rationale : Minor cannot be declared insolvent – Insolvent is a person who is not capable of repaying his liabilities because he has no assets to repay whereas a minor cannot incur any liabilities during his minority since he is incapable of entering into contract as per sec 11 of contract act.  Hence a minor cannot be declared as an insolvent.

Rationale: Bank has to obtain rectification letter from the minor who has attained majority and has become a partner in a firm – This letter is obtained from him in order to make him liable for all the debts and liabilities incurred by the firm during his minority otherwise he may try to escape the liability of the firm incurred in the past.