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LAWS BANKING

Various Laws Affecting Bankers 1. RBI Act 1934 2. Banking Regulation Act 1949 3. Negotiable Instrument Act 1881 4. Indian Contract Act 1872 . Indian !artners"i# Act 1932 $. %"e Com#anies Act 19 $ 7. Consumer !rotection Act 198$ 8. Banking &mbudsman Act 2''$ 9. %rans(er o( #ro#ert) Act 1882 1'. *oreign +,c"ange -anagement Act 1999 11. Indian .tam# Act 1899 12. Code o( Ci/il !rocedure 19'8 13. Banker0s book +/idence Act 1891 14. In(ormation %ec"nolog) Act 2''' 1 . Rig"t to In(ormation Act 2'' 1$. Reco/er) o( 1ebt 1ue to Banks And *inancial Institutions Act 1993 21R% Act3 17. .ecuritisation 4 Reconstruction o( *inancial Assets and +n(orcement o( .ecurit) interest Act 2''2 2.AR*A+.I Act 2''23

Indian Contract Act 1872 Who is competent to contract 5 .ec 11 +/er) #erson is com#etent to contract 6"o is o( t"e age o( ma7orit) according to t"e la6 to 6"ic" "e is sub7ect and 6"o is o( sound mind and is not dis8uali(ied (rom contracting b) an) la6 to 6"ic" "e is a .ub7ect A minor is a #erson 6"o "as not attained ma7orit). According to .ec 3 o( Indian -a7orit) Act 187 9 a minor is a #erson 6"o "as not com#leted 18 )ears o( age. :"ere a guardian "as been a##ointed b) court 2(or minor0s #erson or #ro#ert) or bot"3 9 t"e minor attains ma7orit) on com#letion o( 21 )ears. A contract 6it" a minor is /oid ab;initio 2Rig"t (rom ince#tion3 Contract 6it" a minor is /oid but minor0s disc"arge on c"e8ue "a/ing recei/ed mone) b) "im is /alid. <ence9 Banks o#en de#osit accounts in t"e name o( t"e minor in "is= "er single name #ro/ided "e can read 4 6rite and is ca#able o( understanding as to 6"at "e=s"e is doing. According to .ec 2$ o( N.I. Act9 a minor can dra69 endorse or negotiate a c"e8ue or bill o( e,c"ange binding all #arties e,ce#t "imsel(. Bill 6ill be /alid and ot"er #arties 6ill be liable in t"eir res#ecti/e ca#acities. -inor 4 Agenc)> ; A minor ma) be a##ointed as an agent to act on be"al( o( "is #rinci#al but legall) "e cannot be "eld res#onsible. A minor ma) a##oint an agent.

-inor 4 !artners"i# A minor cannot be a #artner as #er .ec 4 o( Indian !artners"i# Act but can be admitted to t"e bene(its o( #artners"i# as #er .ec 3' o( t"e Act. -inor is not liable (or losses but onl) (or s"aring #ro(its. :it"in si, mont"s o( minor attaining ma7orit) or "is kno6ledge about admittance to t"e bene(it o( #artners"i# 6"ic"e/er is later9 "e=s"e "as to decide 6"et"er "e=s"e 6is"es to be a #artner. -inor "as o#tion to re#udiate (deny/refuse/reject) "is liabilit) as a #artner. I( "e=s"e c"ooses to be a #artner or (ails to re#udiate 6it"in si, mont"s o( "is="er attaining ma7orit) or kno6ledge9 "e=s"e is deemed to be a #artner and "is="er liabilities 6ill be (rom t"e date "e=s"e 6as admitted to t"e bene(its o( #artners"i#. %"e banker s"ould t"ere(ore "a/e #artners"i# deed on record 6"ile granting an ad/ance to a #artners"i# (irm 6"erein minor is admitted to t"e bene(its o( #artners"i# 4 a banker s"ould address a letter to minor on "is attaining ma7orit) as to t"at "e mentioning "is "a/ing been admitted to t"e bene(its o(( #artners"i# 4 6"et"er "e 6ould like to be a #artner. %"is 6ill enable banker to reco/er ad/ance gi/en to #artners"i# (irm (rom #erson or #ro#ert) o( t"e t"en minor. Ad/ance gi/en to minor 6it" a guarantee b) a ma7or cannot be reco/ered legall) eit"er (rom t"e minor or (rom ma7or guarantor as t"e contract 6it" minor is /oid ab;initio. :"en a minor (alsel) re#resenting "imsel( to be a ma7or gets an ad/ance (rom bank9 t"e said ad/ance cannot be reco/ered b) bank. ?ien> ; .ec 17' 4 .ec 171 o( Indian Contract Act. Rig"t o( creditor to retain t"e #ossession o( goods 4 securities o6ned b) t"e debtor until t"e debt "as been re#aid. No rig"t o( sale o( goods 4 securities. !articular ?ien> ; 2.ec 17'3 Creditor0s rig"t to retain goods= securities (or 6"ic" dues "a/e arisen 4 not (or ot"er dues. @eneral ?ien> .ec 171>; Rig"t o( creditor to retain #ossession o( an) goods=securities (or general balance o( #a)ment. Bankers9 *actors9 :"ar(ingers9 Attorne)s o( <ig" Court 4 !olic) Brokers "a/e rig"t o( general lien.

!ro#ert) must be obtained la6(ull) in t"e ca#acit) o( banker. Im#lied !ledge> ; 2Banker0s ?ien3 Rig"t to sell a(ter gi/ing reasonable notice. Banker "as rig"t to lien against time;barred debts also a3 In ca#acit) o( Banker b3 @oods 4 ser/ices standing in t"e names o( borro6er c3 .ecurities remaining in t"e #ossession o( banker e/en a(ter anot"er loan "as been re#aid. :"ere Banker0s Rig"t o( general ?ien cannot be e,ercisedA a3 Contract to contrar) b3 :"en borro6er is %rustee or Agent c3 @oods=.er/ices entrusted (or s#eci(ic #ur#ose e.g. ."ares (or selling. d3 @i/en (or sa(e custod) e3 ?e(t in bank0s #ossession b) mistake (3 @i/en to bank to secure a loan but "as not been granted loan. @uarantee> 1e(ined in .ec 12$ o( Indian Contract Act 1872. BA contract to #er(orm t"e #romise or disc"arge t"e liabilit) o( a t"ird #erson in case o( "is de(ault.C @uarantee can be s#eci(ic or continuing. It s"ould be (or la6(ul consideration 4 s"ould not be obtained b) misre#resentation9 (raud or concealment o( material circumstances. !ersons ot"er t"an minors insane or insol/ent can gi/e a /alid guarantee. @uarantor0s liabilit) is co;e,tensi/e 6it" t"at o( t"e borro6er. In case o( #artners"i# (irm guarantee signed b) a single #artner cannot bind t"e (irm or ot"er #artners9 i( t"e business o( t"e #artners"i# (irm is not to gi/e guarantee. Bailment> ; .ec 148 o( Indian Contract Act

A bailment is t"e deli/er) o( goods b) one #erson to anot"er (or some #ur#ose9 u#on a contract t"at t"e) s"all 6"en t"e #ur#ose is accom#lis"ed be returned or ot"er6ise dis#osed o(( according to t"e directions o( #erson deli/ering it. 1uties o( Bailor> 213 %o disclose kno6n (aults in goods. 223 ?iable (or de(ects in goods. 233 %o bear e,#enses in res#ect o( bailment.

1uties o( Bailee> 213 %o take care o( goods bailed 2A man o( ordinar) #rudence3 223 Not to make unaut"oriDed use o( goods 233 Not to mi, bailors goods 6it" "is o6n 243 %o return goods to bailor 2 3 %o return accretion to goods.

!ledge> ; .ec 172 o( Indian Contract Act !ledge is bailment o( goods as securit) (or #a)ment o( a debt or #er(ormance o( #romise (or some #ur#ose under contract9 t"e #ur#ose 6"en accom#lis"ed goods "a/e to be returned b) #ledgee to #ledgor. Ender #ledge9 t"e o6ners"i# continues to remain 6it" #ledger 6"ereas t"e #ossession is 6it" #ledgee. %"ere s"ould be deli/er) o( goods b) #ledger to #ledgee 6it" intention o( creating securit). %"e deli/er) can be actual or constructi/e e.g. "anding o/er ke) o( godo6n or documents o( title to goods A##ro#riation o( !a)ment 2Cla)ton0s Rule3 .ec 9 to $1 o( Indian Contract Act

:"en a debtor "as more t"an one debt 6it" a creditor .ec 9>; %"e debtor "as t"e (irst rig"t (or deciding about #a)ment b) "im to be a##lied to 6"ic" debt b) creditor. -ust be a##lied b) creditor accordingl). .ec $'>; I( debtor does not make t"e c"oice9 creditor can a##l) t"e #a)ment b) debtor at "is discretion to an) la6(ul debt 6"et"er barred b) la6 o( limitation or not. .ec $1>; :"en neit"er t"e debtor or t"e creditor is making c"oice about a##ro#riation o( #a)ment made b) debtor9 debt is to be disc"arged in Forder o( time0. I( debts are o( e8ual standing9 to be a##lied in disc"arge o( eac" debt #ro#ortionatel).

Indian Partnership Act 19 2 .ec 4>; !artners"i# is relations"i# bet6een t6o or more #ersons 6"o agree to s"are #ro(its o( business carried on b) all or an) o( t"em. .ec 11 o( Com#anies Act 5 No. o( #artners Banking Business 5 1' 2-a,imum3 &t"er t"an Banking 5 2' 2-a,imum3 Registration o( *irm> ; 2.ec $93 Not mandator) 5 Regd. *irm can sue ot"ers. Non registered (irm cannot sue 4 also cannot sue intense. Registration o( #artners"i# (irm is not com#ulsor). Im#lied !o6ers o( !artners .ec 19213 Act o( t"e #artner binds t"e (irm and ot"er #artners. !artner is an agent o( t"e (irm (or t"e #ur#ose o( business o( t"e (irm. !artner must sign (or and on be"al( o( t"e (irm to bind t"e (irm and ot"er #artners. *or gi/ing guarantee9 all #artners s"ould sign unless gi/ing guarantee is t"e business o( t"e (irm.

:"en Im#lied Aut"orit) cannot be e,ercisedA .ec 19223 a3 .ubmission o( dis#ute to arbitration. b3 &#ening bank a=c in "is o6n name (or business o( (irm. c3 Com#romise or relin8uis" an) claim or #ortion o( claim b) t"e (irm. d3 :it"dra6al o( suit (iled b) (irm e3 Admit liabilit) in a suit against (irm. (3 Ac8uire immo/able #ro#ert) on be"al( o( t"e (irm. g3 %rans(er immo/able #ro#ert) belonging to (irm. "3 +nter into #artners"i# on be"al( o( t"e (irm. 1issolution o( !artners"i# *irm>; a3 B) mutual consent b3 1eat"9 insol/enc) or retirement o( a #artner c3 B) o#eration o( la6 5 business becoming unla6(ul or b) com#etent court d3 Automatic dissolution 5 !artners"i# (or s#eci(ic time.

!he Sa"e o# Goods Act 19 $ 1ocuments o( %itle to @oods 1ocuments o( title to goods include a bill o( lading9 dock 6arrant9 6are"ouse 5 kee#er0s certi(icate9 :"ar(inger certi(icate9 rail6a) recei#t9 6arrant or order (or t"e deli/er) o( goods 4 an) ot"er document used in t"e ordinar) course o( business as #roo( o( t"e #ossession or control o( goods or aut"oriDing t"e #ossessor o( t"e document to trans(er or recei/e goods t"ereb) re#resented.

%"e de(inition uses t"e 6ord Fincludes0 <ence9 is merel) illustrati/e or inclusi/e but not e,"austi/e. Rail6a) Recei#t> ; 1ocument issued b) t"e Rail6a) Com#an) 6"ic" is to be "anded o/er at t"e destination o( goods9 in return (or t"e deli/er) o( goods named in t"e document. Bill o( ?ading>; A recei#t (or goods s"i##ed on board a s"i#9 signed b) t"e #erson 6"o contracts to carr) t"em stating t"e terms on 6"ic" t"e goods 6ere deli/ered to and recei/ed b) t"e s"i#. 1ock;:arrant>; 1ocument issued b) a dock or :"ar( o6ner setting out t"e detailed

measurements 2or 6eig"t3 o( a s#eci(ic #arcel o( goods 4 declaring or certi()ing t"at goods are "eld to t"e order o( t"e #erson named t"erein. A :"ar(inger0s Certi(icate or a 6are"ouse kee#er0s Certi(icate>; 1ocument 2in nature o( 6arrant3 stating t"at certain goods s#eci(ied in certi(icate are in "is 6are"ouse.

!he Companies Act 19%& .ec 12 >; Registration o( C"arges 6it" Registrar o( Com#anies 13 -o/able #ro#ert) 5 Not being #ledge 23 Immo/able #ro#ert) 33 C"arge on Book;debts 43 Encalled s"are ca#ital 3 .ecuring an) issue o( debenture $3 Calls made but not #aid 73 &n a s"i# or s"are in a s"i# 83 *loating c"arge including stock;in trade

93 &n good6ill9 #atent9 trademark9 co#)rig"t etc.

%"e c"arge is re8uired to be registered 6it"in ;3'; da)s o( its creation. %"e modi(ication or satis(action o( c"arge is also re8uired to be registered 6it"in ;3'; da)s Borro6ing !o6ers o( t"e Com#an) .ec 292>; Resolution is re8uired to be #assed (or borro6ing .ec 2932132d3>; No #ublic limited CoG or #ri/ate limited Co. 6"ic" is a subsidiar) o( a #ublic limited Co. can borro6 in aggregate 2mone) borro6ed 4 #ro#osed to be borro6ed3 in e,cess o( its o6n #aid;u# ca#ital H Ca#ital Reser/es 2Reser/es not set a#art (or an) s#eci(ic reser/es3 e,ce#t under aut"orit) o( a resolution #assed b) s"are"olders in a general meeting. Aggregate o( borro6ings e,cludes tem#orar) ad/ances 2Re#a)able 6it"in ;$; mont"s9 s"ort term credits9 discounting o( bills. No suc" restrictions (or #ri/ate ?td. co. unless it is subsidiar) o( #ublic ?td. co.