LEGAL ASPECTS OF BANKING

OPERATIONS
INDIAN INSTITUTE OF
BANKING & FINANCE
MODULE C & D
11.10.07

**SARFAESI Act 2002, extends to whole of

India including the State of Jammu &
Kashmir. Also applicable to housing
finance companies.
.. The act is effective from 21.06.2002. It also
covers the earlier loans which are
outstanding.

.. Based on the observation of the Supreme

Court in the Mardia Chemicals vs Union of
India case, the Government of India issued
notification amending the provisions of the
SARFAESI Act. The amendment stipulates
payment of 50% amount instead of 75% as
originally enacted. (When appealed)

. Take over of loans or advances from the

Bank or Financial Institution for the
purpose of recovery is known as Asset
reconstruction.
. The word Board is used in the Act refers to
the Securities and Exchange Board of India
(SEBI)

01.. The SARFAESI Act is not applicable to

a.. Regional Rural Banks
b.. Nationalized Banks
c.. Co-operative Banks
d.. State Bank of India and their Associate
banks

. Default should have been committed by the

debtor.
. The borrowers account should have been
classified as NPA as per the guidelines of
RBI.
. The Act is applicable only to a Secured
creditor and not to an unsecured creditor

02..Which one is not pertaining to

Hypothecation.
a.. A charge in or upon any movable property
b.. Right in favour of the creditor
c.. Possession also with the lender
d.. Retaining the ownership with the owner of
the property

03..Bank G has lent to N a sum of Rs.2 lacs

on the hypothecation of a car. Identify the
Originator as per the provisions of the
SARFAESI Act.
a.. Borrower N
b.. Bank G
c.. Both are not Originators
d.. SEBI

**Obligor is a person liable to pay to the

lender (originator).
As per the contract terms and conditions or
otherwise.
He has to discharge any obligation in
respect of a financial asset whether existing,
future, conditional or contingent or and
includes a borrower.

04.. Identify the odd item (Qualified

Institutional Buyer)
a.. Bank
b.. Insurance company
c.. Individual Investor
d.. An Asset Management Company

The securitization company or reconstruction

Company to raise funds from qualified
institutional buyers by formulating schemes.
.Separate scheme wise accounts to be
Maintained.
.The Scheme invites subscription to security
receipts proposed to be issued by such company
under the scheme.

05.. Acquisition of financial asset from the

originator, by Securitisation or
reconstruction company is known as
a.. Reconstruction
b.. Securitisation
c.. Transfer of Assets
d.. None of these

..On acquisition of financial asset the

securitisation or reconstruction company
becomes the owner of financial asset and
steps into the shoes of the lender bank or
financial institution.
.. RBI is the regulatory authority for
securitisation or reconstruction company.

06..The minimum capital requirement for

securitisation or reconstruction company, at
the time of registration is
a.. Rs. 30 Crore
b.. Rs. 50 Crore
c.. Rs.100 Crore
d.. Rs.200 Crore

.. Securitisation company is a company registered

under the Companies Act,1956 for the purpose of
securitisation. It also needs registration from RBI
under the provisions of SARFAESI Act.
.. Security agreement includes an agreement,
instrument or any other document or arrangement
under which security interest is created in favor of
secured creditor

07..The securitisation company can set up separate

trusts scheme wise and act trustees for such
schemes as provided in the Securitisation
Companies and Reconstruction Companies
(Reserve Bank) Guidelines and Directions,2003.
The beneficiaries of such trusts are
a.. Investors b.. Debtors c.. Creditors d.. Lending
Bankers

08..The creation of mortgage by deposit of

title deeds with the secured creditor is
considered as
a.. Security Receipt
b.. Security Agreement
c.. Secured Asset
d.. Secured Debt

..Secured debt means a debt which is secured

by any security interest.
..Secured Asset means the property on which
security interest is created.
.. The powers given by SARFAESI Act for
enforcement of securities are against
secured assets only

09..Security Receipt is issued

a.. To Borrower by the Bank
b.. To Qualified Institutional buyer by the
Reconstruction Company
c.. To Creditor by the Securitisation Company
d...To Reconstruction company by the
Securitisation Company

..The security receipt evidences the

purchasers undivided right, title and
interest in the security.
..These receipts are transferable in the market.
.. Sponsor is a person holding not less than
10% of the paid up capital of securitisation
or reconstruction company.

10.. The Securitisation or reconstruction company to

commence business or carry on business subject to
1. It obtains certificate of registration from the Registrar of
Companies
2. It has the owned funds not less than Rs3 crore or such
other amount not to exceed 10% of the financial assets
acquired to be acquired
a. Correct
b.. Incorrect
c. From SEBI and not Registrar of Companies; Not less
than Rs 2 crore and not to cross 12%
d. None of these

..Depending on the nature of security asset RBI has

the powers to specify different amounts of owned
funds for different companies.
..The company can formulate separate schemes for
acquisition of financial asset.
..The securitisation or reconstruction company can
act as trustees for such trusts and manage the assets
held in trust.

..The Securitisation or reconstruction company can

acquire financial asset without execution of any
deed of assignment or transfer in its favor by the
concerned bank or the financial institution.
..Assignment is complete on the acquiring company
issuing debenture or bond and incorporating
therein the terms and conditions of acquisition.

.. The securitisation involves two stages.

In the first stage it is acquisition of financial
assets and undivided interest therein.
Second stage is issue of security receipts in
favor of investors for the purpose of raising
money from investors

11..As per the provisions of SARFAESI Act

the document to be executed requires
(identify which one is not correct)
a.. Payment of stamp duty
b.. As per the provisions of the Indian Stamp
Act
c.. State Stamp duty laws
d.. Central Stamp duty laws

..As per RBI guidelines,

a...an acquisition of funded assets should not include
take over of outstanding commitments, if any, of
any bank or financial institution to lend further.
bterms of acquisition of security interest in nonfund based transactions should provide for the
relative commitments to continue with bank or
financial institute till demand for further funding
arises

12..Which one is correct (Securitisation

matter)
a. Security receipt is in favor of investor
b. Security receipt is issued with RBIs
permission
c. Security receipt can not be transferred
d. Security receipt is issued to the borrower
who has failed to repay

13..When the bank decides that the financial asset

now be acquired by the securitisation company, a
notice of such development to be given to
a.. The Obligor b.. Such notice is not optional
c.. The Obligor, which is compulsory
d.. The Obligor which is not compulsory under the
Act.

.. If the obligor is a company there is no need

for modification of charge, when the notice
regarding acquisition of financial asset by a
securitisation company, is not given to the
debtor company.
However, if such notice is given to the
obligor company, then notice to the
Registrar of companies becomes essential.

14.. A bank had advanced to a person who had defaulted

leading to a securitisation company acquiring the financial
asset. In fact no notice has been issued to the obligor. Later
on the debtor remits some amount towards his dues to the
bank from where he had availed the financial facility.
a.. The bank can utilise the funds
b.. The bank has an obligation to remit to the securitisation
company
c.. The bank first of all should not accept such payment
d.. The bank has to enquire why the debtor had not paid
earlier when the liability was outstanding with them.

..The securitisation or reconstruction company raises

funds for acquisition of asset by issue of security
receipts. Public/individual investors are barred
from investing in a securitisation or reconstruction
company by the Act.
..Realisation of the asset is held and applied towards
redemption. i.e., repayment of investments as
assured while issuing the security receipt.

15..In case there is no realization and repayment by the securitisation or

reconstruction company, then the qualified institutional buyers are
entitled to call a meeting of all qualified institutional buyers making
investments in that scheme and the resolution passed in the meeting.
a.. The first institutional buyer has the right to call for such meeting
b.. The qualified institutional buyers holding not less than 75%
of the total value of security receipts has the right
c.. Any one of the Institutional investor who takes the lead gets the
priority
d.. None of the above

.. When the securitisation or reconstruction

company issues security receipts the holder
of the security receipts is entitled to an
undivided interest in the financial asset.
.. In such an event the security receipt does
not require registration which is other wise
compulsory under the Registration Act,1908

16..XYZ bank has got a security receipt from a

securitisation company. They wish to transfer the
same. Then
a.. Such security receipt need not be registered
b.. Such security receipt has to be registered
c.. Such security receipt cannot be transferred
d.. Such security receipt has to be retained by the
bank who is the original institutional investor and
hence there is no question of registration / non
registration.

..Asset reconstruction means acquisition of

any right or interest of any bank or financial
institution in any financial asset for the
purpose of realisation. Powers to take
measures for asset reconstruction are given
without any prejudice to the provisions
contained in any other law.

..If the cause of default in an unit is

mismanagement or lack of expertise on the
part of the existing management the
securitisation or reconstruction company
has the powers to take over the management
or change the management. This power can
be exercised even when there is no default.

..The SARFAESI Act is silent about the

grounds or reasons on the basis of which
action of acquisition can be taken.
Therefore, loan agreements between
bank/financial institution and the borrower
are required to be taken into account as
provisions of this do not have overriding
effect on existing contracts and laws.

17..A securitisation or recosnstruction

company can raise funds by way of
deposits.
a.. Under special circumstances only
b.. Cannot raise funds by way of deposits
c.. If need arises with the permission of RBI
d.. As and when required with the permission
of RBI,SEBI and Company Law Board

18.. When the asset is acquired for

reconstruction there is limit of six years for
such reconstruction.
a.. True
b.. False
c.. Not 6 years but 5 years
d.. No such restriction on number of years

19..Which one is not correct

a At the time of enforcing securities as per the provisions
of SARFAESI Act, the securitisation company may itself
acquire secured assets for use or resale if such resale is
through a public auction.
b.. The Securitisation company is permitted to set up trusts
who can issue security receipts.
c.. While issuing security receipts detailed disclosures are
required to be made by the securitisation company
d.. While issuing security receipts detailed disclosures are not
required to be made by the reconstruction company.

20..While a securitisation company is taking

over the financial asset from the creditor
bank, they will issue
a.. Debenture
b.. Security Receipt
c.. Undertaking
d.. None of these

..Under the SARFAESI act a secured creditor

can enforce the security interest created in
his favor without the INTERVENTION
of the Court or Tribunal.
..The act deals with how the notice to be given
by the secured creditor asking for
repayment of the out standings.

..The secured creditor bank to give a notice

asking the debtor to clear the liability in full
within 60 days from the date of notice.
.. The above is applicable to such debtors who
have defaulted and classified as NPA.
.. There is no bar for the creditor to seek the
other legal remedies such as resorting to
filing of suit in a competent court

21..Identify which one is not incorrect. (SARFAESI Act)

a.. Notice as per the provisions of the act is a routine one
b.. Notice as per the provisions of the act is a statutory notice.
c.. The Act does contemplate a reply form the borrower to
the notice.
d.. When the offer of sale of property is accepted by the
purchaser and the secured creditor accepting the offer
confirms the sale, the purchaser has to deposit 50% of the
offer price.

22..The authorized officer is authorized to

issue sale certificate. Such certificate is
conveyance of immovable property and
requires stamping as per the provisions of
Stamp Act.
a.. True
b.. False
c.. Relevant State Laws
d.. Central Laws

..As the powers of enforcing securities need to be

exercised prudently, fairly and with due care and
caution the Rules framed under SARFAESI Act
provide that Authorized Officer should be of the
level equivalent to Chief Manager of a public
sector bank or equivalent or any other authorised
person exercising powers of superintendence,
direction and control of the business or affairs of
the creditors, as the case may be.

..For taking possession and then sale of immovable

property, the secured creditor is required to serve a
possession notice on the borrower and by affixing
the possession notice on the outer door or at the
conspicuous place at the property.
..The authorised officer is required to publish the
possession notice in two leading newspapers, one
of which should be in vernacular language.

23..Before sale of immovable property by the

secured creditor, the borrower has to be
given a notice about the sale.
a.. 30 days of sale b. 15 days of sale
c.. 45 days of sale d. 60 days of sale

24.. If the price for secured asset is coming

less than the reserve price, the authorized
officer can sell the asset at a lower price
a.. Then his decision will be final
b.. With the consent of the secured creditor
c.. With the consent of the borrower and the
secured creditor
d.. Without consulting any one

..When the secured creditor is required to take

possession or control of the secured asset or to sell
such secured asset, he can take the help of the
Chief Metropolitan Magistrate or District
Magistrate.
..For seeking their help a request in writing is
required.
..To approach the authority within whose jurisdiction
the secured asset or documents related to it are
situated.

..When the secured creditor takes over the management of

business of a borrower, he may publish a notice in a
newspaper published in English language and in a
newspaper published in Indian language in circulation in
the place where the principal office of the borrower is
situated, for appointment of
a.. If the borrower is a company as defined in the Companies
Act, 1956 to be the directors of such company, or
b.. In any other case, to be the administrator of the business of
borrower.

**Any person, including borrower, aggrieved

by any of the measures taken by the secured
creditor or his authorised officer for taking
possession of the security may make an
application along with the prescribed fees to
the Debt Recovery Tribunal having
jurisdiction within 45 days from the date on
which such measures are taken.

25..The DRT has to dispose off the

application preferred seeking justice, within
a period of
a.. 30 days
b.. 45 days
c.. 60 days
d.. 90 days

26.. If an appeal has to be preferred based on the decision of

Debt Recovery Tribunal with the Appellate Tribunal the
time limit is
a.. 30 days form the date of receipt of the order of Debt
Recovery Tribunal
b.. 15 days form the date of receipt of the order of Debt
Recovery Tribunal
c.. 60 days form the date of receipt of the order of Debt
Recovery Tribunal
d.. 45 days form the date of receipt of the order of Debt
Recovery Tribunal

27..The amendment to the SARFAESI act, stipulate that no

appeal can lie unless the borrower deposits 75% of the debt
claimed by the secured creditor. The Tribunal has powers
for reasons to be recorded to reduce this amount to 50% of
the claim amount.
a.. True
b. From 75% to 50% and tribunal cannot reduce further
c.. From 75% to 50% in the first stage and Tribunal can
reduce the same to 25%
d.. False

..The Central Government has to appoint by

notification a person as Central Registrar for the
purpose of registration contemplated under the
Act.
..The record of Central Registrar can be kept fully or
partially in computer, floppies, diskettes, or any
other electronic form. The Central Registrar shall
have the control and management of the Central
Registrar.

28..Under the SARFAESI Act now filing of details of

transactions of securitisation, reconstruction and creation
of security interest is required to be filed with the Central
Registrar. The period of filing such details in form as may
be prescribed is 21 days after the days of transaction or
creation of security.
a.. Correct
b.. Not 21 days and no such limit
c.. Not 21 days but 30 days
d.. Incorrect

..Whenever any security interest is registered

with the Central Registrar is modified, the
modification is required to be filed before
Central Registrar. It is the duty of the
securitisation company or reconstruction
company or the secured creditor to file the
modification.

..The security interest registered with the

Central Registrar is required to be satisfied
on payment of full amount by the borrower.
The duty to report satisfaction is on the
Securitisation company or Reconstruction
company or the secured creditor. The
reporting to be done within 30 days of
payment in full or satisfaction of the charge.

29..On receipt of the satisfaction of the charge the

Central Registrar to cause a notice to be issued to
the concerned calling upon to show cause as to
why the payment of satisfaction should not be
recorded as intimated. Such notice to be issued
a.. Within 7 days
b.. Within 14 days
c.. Within 21 days
d.. Within 30 days

30.. If a Securitization company of Reconstruction company

fails to comply with any of the directions issued by RBI,
then such a company is punishable by RBI with fine not
exceeding Rupees Two lacs for the default. For further
continuation of the offence an additional fine is up to
Rs.5000/= per day of default can be imposed.
a.. Not in correct
b.. Incorrect
c.. Rs.5 lacs and Rs.10000/- per day respectively
d.. Rs.7 lacs and Rs 5000/- per day respectively

31..The provisions of SARFAESI Act not applicable

in respect of
a.. A pledge of movable within the meaning of the
Indian Contract Act,1872(sec172)
b.. Any right of an unpaid seller as per Sale of Goods
Act,1930 (sec 47)
c.. Any security interest created in an agricultural
land
d.. All the above

32.. A bank had lent Rs.9 lacs to a borrower and obtained

security in the possession of the debtor by way of
hypothecation. Later on by using the provisions of the
SARFAESI Act, bank could recover only Rs.5 lacs. The
outstanding dues works out to rs.6.35 lacs. Then the bank
a.. Can proceed against the borrower under Civil Law
b.. Since the bank had availed the support of SARFAESI Act
has to forego the balance outstanding
c.. The bank should have applied their mind before invoking
Securitisation Act
d.. The bank can proceed against the borrower under Civil
Law subject to the provisions of Limitation Act as well.

33..A bank has used the Securitisation Act provisions and

could recover only Rs. 18 lacs . Still they will have to
recover Rs.11 lacs plus interest. Fortunately for the bank
the limitation period on the loan documents is intact.
a.. Bank has to seek legal remedy through the Civil Court.
b.. Bank has to seek legal remedy through DRT
c.. Bank has to forego since they have already availed the
legal avenue
d.. Bank may have to approach the borrower straight away
and request him to settle the balance amount.

34.. A complaint alleging deficiency in

banking service may be filed with the
Banking Ombudsman having the
jurisdiction
a.. Non-issue of drafts to customers and others
b.. Inordinate delay in collection of cheques
c.. Both a & b
d.. None of the two

..No complaint to the Banking Ombudsman shall lie

unless the complainant had before making a
complaint to the Banking Ombudsman made a
written representation to the bank and either the
bank had rejected the complaint or the
complainant had not received any reply within a
period of one month after the bank concerned
received his representation or the complainant is
not satisfied with the reply given to him by the
bank.

..The complaint is made not later than one

year after the cause of action has arisen.
..The complaint is not in respect of the subject
matter, which was settled through the office
of the Banking Ombudsman in any previous
proceedings

.. If a complaint is not settled by agreement within a

period of one month from the date of receipt of the
complaint or such further period as considered by
Banking Ombudsman, he can pass an award.
.. He shall be guided by the evidence placed before
him, the principles of law and practice, directions,
instructions and guidelines issued by RBI from
time to time to pass the necessary award.

35..The Banking Ombudsman while passing an

Award in respect of a complaint may direct the
complainant to furnish a surety for refund of
amount received under the Award along with
interest if any.
a.. There is no such requirement
b.. It is not Surety but Indemnity
c.. It is not only Indemnity but also suitable Surety
d.. None of the above

..A bank not agreeing to accept the Award

passed under the Banking Ombudsman
scheme may file a review application before
the Review Authority within one month
from the date of receiving copy of the
Award. Banks application to be approved
by the banks Chairman or in his absence by
the Managing Director or any other officer
of equal rank.

36.. The Banking Ombudsman assuming the

charge of an arbitrator shall follow the
procedure as laid down under the scheme
read wit the provisions of
a.. The Arbitration Act, 1996
b.. The Banking Regulation Act,1949
c.. The Reserve Bank of India Act,1934
d.. None of these

37. For a Debt Recovery Tribunal, the Presiding

Officer holds office for a term of 5 years from the
date on which he enters upon his office or until he
attains the age of 62 years, which ever is less.
a.. Correct
b.. In correct
c.. Not 5 years and 62 years but 3 years and 63 years
respectively
d.. Not 5 years but 7 years whereas 62 years of age is
correct .

..As per the observation of the High Court, the DRT

has power to entertain the application for
execution of the decree of foreign court.
.. Every application to be filed before the DRT shall
be accompanied by appropriate fees.
.. The Tribunal may , on giving opportunity to both
the sides of being heard, pass interim or final order
for payment of amount including interest thereon.

38..A Civil suit which is pending stands

transferred to the DRT. Then the fees
payable
a.. Will be decided by the DRT
b.. Standard fees to be paid as applicable to a
new case referred to the DRT
c.. No fees required to be paid
d.. None of the above

39.. A bank has moved the DRT for justice. Before the final
order is passed another Bank who have also advanced to
the same borrower has approached the DRT for inclusion
in the same proceedings.
a.. Permissible
b.. Not permissible
c.. Not permissible since both the contracts are different
d.. DRT would not entertain and advise the bank to file a
separate case.

40..Any person aggrieved by the order passed by the Tribunal

or deemed to have been passed by the Tribunal under DRT
Act, may prefer an appeal to the concerned Appellate
Tribunal.
a.. Within 45 days form the date on which copy of the order is
received.
b.. If the order was made by the Tribunal with the consent of
the parties no appeal possible
c.. Both a & b
d.. Within 60 days from the date on which copy of the order is
received.

.. The DRT issues Recovery Certificate to the

applicant. Recovery Officer has to proceed to
recover the amount specified in the Recovery
Certificate, by adopting any one of the following
a.. Attachment and sale of movable and immovable
property of the defendants
b. Arrest of the defendant and his detention in prison
c.. Appointment of a receiver for the management of
the movable and immovable properties of the
defendant.

..The Bankers Book Evidence Act extends to

whole of India except the Sate of Jammu &
Kashmir,.
..Bankers books include ledgers, daybooks,
cashbooks, account books and all other
records used in the ordinary course of
business of a bank.

41..Under the Bankers Book Evidence Act,

the term Judge refers to
a.. Judge of a special Court
b.. Judge of a High Court
c.. Judge of a DRT
d.. Judge of Supreme Court

42.. For making the order that bank officer should either
produce the books of account or appear as witness (as per
the Bankers Book Evidence act) can be made by the Court
or Judge with out summoning the bank. Such order shall
be served on the bank at least 5 days before the same is to
be obeyed.
a.. True
b.. False
c.. Not 5 days but 3 days
d.. At least 3 clear working days

..The Consumer Protection Act is not applicable in

the State of Jammu and Kashmir.
..The Act is for better protection of the interests of
the consumers and for that purpose to make
provision for the establishment of consumer
councils and other authorities for the settlement of
consumers dispute.
..The Act is social welfare benefit oriented
legislation for the consumer providing selfcontained quasi-judicial machinery to provide
speedy and simple redressal to consumer disputes.

43..A dispute where the person against whom

complaint has been made, denies or disputes
the allegations contained in the complaint.
a.. Complaint
b.. Consumer Dispute
c.. Dispute
d.. Allegation

44..District Consumer Protection Council to

meet as an when necessary. There has to be
at least two meetings every year.
a.. Correct
b.. Incorrect
c.. At least One meeting
d.. At least Three meetings

45..Which one is not correct (Consumer Protection matters).

a.
Once the complaint is admitted by the District Forum it cannot be
transferred to any other Court or Tribunal or any authority set up
under any law.
b.
Any person aggrieved by the order passed by the District Forum
may prefer an appeal to the State Commission within a period of 30
days from the date of the order.
c.
A person who is a Judge of the Supreme Court, to be nominated by
the Law Ministry, who shall be the Chairman of Selection
Committee to the National Commission
d.
For filing any complaint before a District Forums, State
Commission or the National Commission the limitation period is 2
years from the date of cause of action.

46.. Borrower K has executed a Demand

Promissory Note and a Hypothecation
agreement to Bank B. Then the bank has
made available the finance.
a.. Valid contract
b.. In valid contract
c.. Quasi contract
d.. No contract

47.. A & B has taken a loan from the bank by

executing a demand promissory note and
other documents jointly.
a.. A is the promisor
b.. B is the promisee
c.. Bank is the promiser
d.. Bank is the promisee and both A& B
promisors

48. Identify which is not essential of a valid

contract.
a.. Proposal and acceptance
b.. Consideration
c.. Free consent
d.. Agreement under force

..A contract of indemnity is entered into when

a party apprehends a loss in a particular
contract and it wants itself to be covered
from the losses it may incur.
.. A contract guarantee is a contract to perform
the promise, or discharge the liability, of a
3rd person in case of default.

49..Bank has lent money to R on the personal guarantee of L.

The bank obtained a demand promissory note from R and a
guarantee agreement from both L & R. Among other
contents, the guarantee agreement protected the bank with
special clauses for which Guarantor L has given his
consent. When R failed to repay, Bank asked L to repay
the loan. He promptly refused and advised the bank to
approach R who only has taken the money. After trying
only they can approach him and not before that, that is
what L told the bank.
a.. The stand of L is incorrect
b.. The stand of Bank is incorrect
c.. What L says has relevant substance
d.. Bank will succeed if they proceed against L even without
proceeding against R based on the guarantee agreement

..Where there are co-sureties, a release by the

creditor of one of them does not discharge the
others. Also, the surety released does not become
free from his responsibility to the other sureties.
..A surety has the right of Subrogation.
..Any guarantee obtained by means of
misrepresentation made by the creditor is invalid.
..Any guarantee which the creditor has obtained by
means of keeping silence as to material circumstance is also
invalid.

50..N has given his personal guarantee for a loan to

P by bank W. When the repayments are regular,
N has decided to discontinue his guarantee for
certain personal reasons.
a.. He has the right to discontinue
b.. Bank will uphold his decision to discontinue
c.. Bank need not concur with the decision of the
surety
d.. Borrower will have to permit the surety to leave

51.. A bank has taken gold ornaments as security by way of

pledge and lent. When the borrower defaulted, the bank
sold the gold ornaments without intimating the Pledgor in
writing. The bank depended on the contents of the pledge
agreement in which the Pledgor has given it in writing and
authorised the bank to dispose off without referring the
matter to him in writing.
a.. The banks stand is correct
b.. The bank will succeed if contested by the pledgor
c.. The bank will fail if contested by the pledgor
d.. As the creditor the bank has the right to dispose off

.. No consideration is necessary to create an agency.

.. In an emergency, an agent has authority to do all
acts to protect his principal form loss as would be
done by a person in his own case.
.. An agent can detain money received by him on
account of goods sold, even if all the goods
consigned to him for sale are not sold.

52.. A bank as a collecting banker has

misplaced the cheque accepted for collection.
The customer when he approached to know
about the realisation of the cheque, then only
the bank could realise it has misplaced the
Cheque.
a.. The bank is responsible
b.. Till the cheque is realized or returned, the bank is not responsible.
c.. If the cheque had been purchased then the bank would have been
responsible and not for collection item.
d.. The bank is not responsible

.. A Sale and an Agreement Sell are different.

.. A sale is a contract in which the parties have
already performed their part.
.. The ownership of goods stands transferred
under a sale
.. If the seller fails to deliver, the buyer can
sue the seller

.. In an agreement to sell, the parties are yet to

perform their mutual promises.
..The ownership of the goods yet to pass on to
the seller
.. In case the seller fails to deliver the goods,
the buyer can claim only damages.
.. The seller can only sue for damages.

53..Under Sale the risk in goods is with the

a.. Seller
b.. Buyer
c.. Both of them
d.. None of them

..Whether a stipulation in a contract of sale is

condition or warranty depends on the types of
contract. Even if the parties have agreed that a
stipulation is a warranty, in fact, it may be a
condition if it is the basis of the contract.
.. If the sale of goods is by description, there is an
implied condition that the goods shall correspond
with the description.

54..There is an implied condition that the buyer shall

have and enjoy quiet possession of the goods.
a.. True
b.. False
c.. It is not implied condition but implied
warranty
d.. It is not only implied condition but also implied
warranty

55.. An Unpaid Seller may exercise his right

of stoppage in transit by
a.. Taking actual possession of the goods
b.. Giving notice of his claim to the carrier
c.. Both of them
dAny one of them

56.. A B C & co a partnership firm has a current account with

bank J. The account is operated by any one of the partners.
A cheque (open cheque) received signed by one of the
partners B, representing the firm and in favour of B.
Another cheque signed by C representing the firm
favouring Self.
a.. The bank is in order in paying both the cheques
b.. The bank is not in order in paying both the cheques
c.. The bank is in order in paying the cheque signed by B and
not by C
d.. The bank is in order in paying the cheque signed by C and
not by B

..If a minor who is admitted to receive the

benefits of the partnership firm chooses to
become a partner after he attains majority is
responsible for all the acts of the firm with
effect from the date on which he has been
admitted to receive the benefits.

.. A firm can be dissolved with the consent of

all the partners or in accordance with a
contract between the partners.
.. A firm can also be dissolved by agreement
between the partners or by the court

57..A bank has got the documents executed by a Limited

Company. However they have overlooked to get the
Common Seal affixed on these documents. A reference to
the Articles of Association has revealed that affixing the
Common Seal for the documents has not been mentioned.
In other words, the Articles of Association is silent with
regard to the same.
a. Bank will get protection
b. Bank cannot recover the dues based on the documents
c. Affixing of Common Seal is compulsory in such cases.
d. Affixing of Common Seal is not compulsory unless it is
specifically stated in the Articles of Association

58..Which one is incorrect

a.. A private company is prohibited from acceptance
of any deposit from public
b.. A private company should have a minimum paid
up capital of Rs.2 lcs
c.. A foreign company is incorporated in India but
has a place of business in foreign countries
d.. A public company should have minimum 5
members

59.. Identify the correct one.

a.. Any terms of the Articles of Association can be altered by an ordinary
resolution
b.. Change of Registered Office in another State or the object clause can
be altered only by a special resolution and passed by the company and
with the sanction of the Company Law Board
c.. The borrowings in excess of the paid up capital plus free reserves in
respect of a public limited company can be done based on resolution
by way of circulation among the board of directors.
d.. Both Memorandum and Articles of Associations are not considered as
Public documents.

..When a company exercise its powers to promote

and/or realise any of its objects stated in the
Memorandum of Association, it is known as Intra
vires ( i.e., within the powers of ) the company.
.. Any other act of the company which is outside the
scope of the objects clause of the Memorandum of
Association is called Ultra vires(i.e., beyond the
powers of ) the company

.. Doctrine of Constructive notice states that

every outsider is assumed to have read the
Memorandum of Association and Articles
of Association.
Doctrine of Indoor Management lays down
that the outsiders are not required to see the
compliance of internal regulations of the
company.

60.. A person is deemed to become a member of a

company if he allows his name to be put on the
register of the members of otherwise holds himself
out as a member even if there is no agreement to
become a member.
a.. Ordinary Member
b.. Acquiescence Member
c.. Special Member
d.. Non member

61.. On the death of a member, if the member has

not made a nomination for the shares then the
surviving joint holder (if any) or his legal
representatives have the right to register
themselves as members.
a.. Transmission of Shares
b.. Transfer of Shares
c.. Assignment of Shares
d.. Negotiation of Shares

62.. Identify which is not a Statutory Right

a.. To receive notice of meetings, attend and
vote at meetings
b. To receive dividends
c. To receive copies of annual accounts of
the company
d. To transfer shares

63.. To be registered as a member in the

companys register of members (subject to a
valid membership obtained by transfer,
allotment, etc.,)
a.. Proprietary Right
b.. Statutory Right
c.. General Right
d.. Documentary Right

..A prospectus must be signed by every person

mentioned therein as a director or proposed
to be a director.
.. Every application form for shares must be
accompanied by a copy of the prospectus
except application forms issued to
underwriters and existing shareholders and
debenture holders.

64.. A prospectus has to be registered with

a.. The Registrar of Companies
b.. SEBI
c.. Stock Exchange
d.. No one

..The provisions of FEMA extend to all over

India and also apply to all branches, offices
and agencies outside India owned or
controlled by a person resident in India and
also to any contravention committed outside
India by any such person to whom this Act
applies.

65..A transaction by which there may be a change

(either an increase or decrease) in the assets or
liabilities outside India of persons resident in India
or assets or liabilities in India of persons resident
outside India.
a.. Capital account Transaction
b.. Current account Transaction
c.. Both a & b
d.. Neither a nor b

66.. The mortgagor agrees that in the event of his

failing to pay according to his contract, the
mortgagee shall have a right to get the
mortgaged property sold and recover his dues.
a. Mortgage by Conditional Sale
b. Equitable Mortgage
c. English Mortgage
d. None of these

67..A came with his brother, to take a loan on the

security of his Term deposit which will mature
after 7 years. He has changed his decision and
wants the same to be transferred in the name of his
brother.
a.. Possible
b.. Impossible
c.. Possible by way of assignment
d.. Not possible since the FDR is not transferable

Thanks
Best wishes to one and all
T.M.C.Vasudevan
09819500380
022-27606208
vasu1611@yahoo.co.in
vasu1611@rediffmail.com