Banking law

Sec 4 to 17........def...................28 marks ni act

Short note copra ,rti, ombudsman,sica,ni act

Sec.22 to sec.25............sums 14 marks

True or false 12marks

Sec.31,sec.9,sec.85& A ni act

Sec.99 to 101 niact

Sec.118 niact

Sec 138 to sec 147 niact

NI act

st
• Came into Force on 1 March 1882;
Total Sections: 147.
• Total Amendments: 23- last one in 2002.
• Imp. Sec. Related to Banking: 56
3 to 18,20,22 to 25,26,31,45(A),63,83,85,85(A),87,91,92,99 to
101,118,119,123 to 131, 131(A),138 to 147
WISH YOU ALL A VERY HAPPY LEARNING…
From: B.J.VED
 Negotiable Instruments act

Sec.3: Banker – Not Defined

Banker includes any person acting as a banker and any post office
savings bank.
Sec. 5 (b) of BRA 1949 defines Banking &
Sec .5 (c ) defines Banking Company
5(b) Banking :- Accepting for the purpose of lending or investment,
of deposits of money from public, repayable on demand or
otherwise and withdrawable by cheque , draft, order or
otherwise.
5 (c ) Banking Company:- Means any Company which transacts
the business of Banking in India.

Sec.13(1): Negotiable Instrument : means Promissory Notes, Bill of

Exchange and Cheque payable either to order or to bearer .
Sec.13(2): N.I. may be made payable to two or more payees ‘jointly', or
‘one of two’ or one or some of several payees.
Sec.14: Negotiation : When P/N,B/E or cheque is transferred to any
person, so as to constitute that person the holder thereof, the instrument
is said to be ‘negotiated’.

ESSENTIAL FEATURES OF NEGOTIABILITY

1. OWNERSHIP PASSES – BEARER – BY DELIVERY ONLY

& ORDER – BY ENDORSEMENT AND DELIVERY.
2. TRANSFEREE OF N.I., FULFILLING CONDITIONS OF BEING
‘HOLDER IN DUE COURSE’(SEC.8 OF N.I. ACT) GETS
BETTER TITLE THAN TRANSFEROR.
3. HOLDER IN DUE COURSE CAN SUE UPON N.I. IN HIS
OWN NAME.

Sec.4: Promissory Note: (a) In writing (b) signed by maker ( c) not

being bank note or currency note (d) containing unconditional
undertaking
(e) to pay a certain sum of money only
(i) to a certain person (ii) to the order of certain person (iii) to
the bearer of the instrument
 (RBI Act Sec.31 – Restricts any person except RBI or Central Govt.)
(A) Two Parties – Promisor & Promisee
(B) Does not require acceptance.
( C) Demand P/N or usance P/N.
(D) Cannot be Crossed.
(E) Usance P/N – Entitled for Days of Grace.

Sec.5: Bill of Exchange

(a) In writing (b) signed by maker (c ) unconditional
order (d) directing a certain person
(e) To pay a certain sum of money only
(i) to a certain person or his order
(ii) to the bearer (refer Sec.31 of RBI Act)
(A) Three Parties – Drawer, Drawee and Payee
(B) Usance Bill requires acceptance and entitled
for days of grace.
(C) Cannot be crossed
(D)Can be drawn in sets

Three Explanations (Sec.4 –P/N & Sec.5 –B/E)

(A) Promise not conditional – on occurrence of
specified event which is certain to happen
though the time may not be certain e.g. death.
(B) Sum is certain – which includes interest and
when on default of installment, balance unpaid
shall become due.
( C) Certain Person – Although he is mis-named
or designated by description only.

Sec.6: Cheque
If a B/E drawn on a specified banker and not expressed
to be payable otherwise than on demand and it includes
(i) The electronic image of a truncated cheque and
(ii) A cheque in the electronic form
(A) Three Parties – drawer, specified banker and payee
(B) Unconditional order to a specified banker
(C) Cannot be drawn in sets
(D) Can be crossed
(E)Does not require acceptance
(F)Not entitled to the days of grace
 (G) No stamp duty required

Sec.7 : Six Definitions: Drawer, Drawee, Payee,

Acceptor, Drawee In Case of Need & Acceptor For
Honour
Drawee in case of Need
When n the bill or in any endorsement there on,
the name of any person is given in addition to the
drawee to be resorted in case of need.
Acceptor for Honour
When a B/E has been noted or protested for
non-acceptance or for better security and
any person accepts it supra protest for honour of
drawer or any endorser

Sec.8: Holder (P/N,B/E or Cheque)

Any person entitled in his own name to the
possession there of and to receive and
recover amount due there in from the parties
thereto.
When the note, bill or cheque is lost or
destroyed,its holder is the person so entitled.
Sec.9: Holder In Due Course
Holder+ for consideration+ before maturity
+ without having doubt about defect in title
of the person from whom the title is received.

Sec.10 : Payment in Due course

1. Payment in accordance with
apparent tenor of the instrument.
2.In good faith.
3.Without negligence.
4.Without doubt in the title of the
presenter to receive payment.

Sec.11: Inland Instrument

A Promissory Note, Bill of Exchange or Cheque
Drawn or made in India
And
Made payable in or drawn upon any person resident
in India,
Shall be deemed to be an inland instrument.
Sec.12: Foreign Instrument
Not so drawn made or made payable shall be deemed to
be an inland instrument.

Sec.15: Indorsement (P/N, B /E & Cheque)

Maker or Holder-signs-purpose of negotiation –on
back or face or slip of paper annexed
Thereto (allonge) or a stamped document – said to
indorse & called “indorser”
Sec.16: Indorsement in Blank & Indorsement in Full.
Indorsee
Other Types of Indorsements
(a) Restrictive Indorsement
(b) Sans Recourse (Without Recourse) Indorsement
(c) Conditional Indorsement
(d) Facultative Indorsement

Sec.17: Ambiguous Instrument:

Instrument construed either as a P/N or B/E,
the holder may at his election treat it as either & the
instrument shall be thence forward treated
accordingly.
Sec.18: Amount in Words & Figure Differ:
Amount in words –undertaken or ordered to be paid.
Sec.20: Inchoate Stamped Instrument: One person
signs & delivers-N.I. duly stamped –wholly blank or
incomplete-gives prima facie authority to holder to
complete – drawer liable to any holder in due course.

Sec.22 to 25: Calculation of Maturity Period of P/N & B/E.

Sec.22: Maturity - Falls due for payment – uance P/N or B/E
– 3days of grace unless expressly prohibited.
Sec.23: Period in Months - Corresponding day in
corresponding month.
If no corresponding date then last day of the month.
Sec.24: Period in Days – Day of date or presentation for
acceptance or sight shall be excluded.
Sec.25: When day of maturity is holiday (State Govt.) –
Next preceding business day.

Sec.26: A minor may draw, indorse, deliver

and negotiate such instrument so
as to bind all parties except
himself.
A minor can be a drawer or indorser of the
negotiable instrument.
The instrument is valid and can be
negotiated binding all the parties under
the instrument except the minor.

Sec.31: Liability of Drawee of Cheque (Bank)

Drawee having sufficient funds of drawer- properly applicable
–must pay – In default – compensate the drawer.
Sec.45(A): Holder’s Right to duplicate of lost bill
Lost before overdue – on security or indemnity by holder
– entitled to duplicate bill.
Sec.63: Drawee’s time for deliberation before acceptance
-48-hours excluding public holidays
Sec.83:Allowing Drawee more than -48-hours
Holder allowing - previous parties not consenting get
discharged.

Sec.85 & Sec.85(A): Protection To Paying Banker

In Respect of Cheques
(Open or Crossed) & Demand Draft
85(1): Where a cheque payable to order purports to
be indorsed by or on behalf of the payee, the drawee
is discharged by payment in due course.
85(2): Where a cheque is originally expressed to
payable to bearer, the drawee is discharged by
payment in due course to the bearer thereof
irrespective of Indorsements.
(For payment in due course for 85(1) &(2) refer Sec.10 N.I.Act)
Regular indorsement – correct indorsement.
85(A): Protection in respect of Demand Draft (Always Order)
Sec.99, 100 & 101: Noting, Protest & Protest
for better security.
When P/N or B/E is dishonoured by
non-acceptance or non-payment - holder –notary
public –upon instrument (Noting) or certificate by
notary public (Protest).
When acceptor of B/E has become insolvent or
his credit is publicly impeached before maturity of bill
– notary to issue certificate called protest for better
security.
Bills dishonoured by non-acceptance & payable at
some other place than the residence of drawee, be
protested for non-payment – further presentment not
necessary.
Inland Bills (Sec.11) may be got noted.
Foreign Bills (Sec.12) require protest.

Sec.118: Presumption as to Negotiable

Instruments: Until contrary is proved
(a) Of consideration – made or drawn for
consideration.
(b)As of date – made or drawn on such date.
(c)As to time of acceptance – accepted within a
reasonable time after its date & before maturity.
(d) As to time of transfer– made before maturity.
(e) As to order of indorsement – order in which they
appear thereon.
(f) As to stamp (lost instrument) – duly stamped.
(g) That holder is a holder in due course.

Sec.123 to Sec127: Of Crossed Cheques

(A) General Crossing: Cheque bearing two parallel
transverse lines across its face with or without
words “and company” and “not negotiable”.
(B) Special Crossing: Cheque bears across the
face name of a banker with or without words
“not negotiable” - crossed to that banker.
Banker on whom cheque drawn crossed generally shall not
pay it otherwise than to a banker and specially to that
banker or his agent for collection.
Holder may cross uncrossed cheque generally or specially.
Banker to refuse payment of cheque crossed specially to
more than one banker.

Sec.138 to 147: Liability of drawee of cheque

returned for “insufficiency of funds” or
“exceeding arrangement”
Conditions: (1) For consideration or payment of
debt or liability.
(2) Presented within validity period.
(3) Notice of dishonour to drawer within 30 days.
(4) Payment not received within 15 days after
receipt of notice.
(5) Written complaint in Metropolitan Magistrate
Court or Judicial Magistrate
Court of first class within one month of cause of
action arising.

Sec. 138 to 147: Penalties & other provisions

(1) Two years of imprisonment or twice the amt. of chq. or
both.
(2)Partner & responsible person in Co. liable for offence.
(3)Central Govt./ State Govt./F.I. nominee not liable for
prosecution.
(4)Summons by speed post or approved courier by court.
(5)Refusal to accept summons – presumed having been
served.
(6)Banker’s slip or memo – presumed fact of dishonour
unless disproved.
(7)Every offence punishable under this act shall be
compoundable.

Rights of Holder In Due Course ( Sec.9) under N. I. Act:

(Sec.20,42,53,58,121 & 122 + Sec.118,36 & 46)
1. Inchoate stamped instruments (Sec.20).
2. Acceptance of Bill drawn in fictious name (Sec.42) : Acceptor
fictious – not relieved from liability to any holder in due course.
3. Holder deriving title from holder in due course (Sec.53).
4. Prior defects (Sec.58) : Party liable to pay – cannot raise
objection against holder in due course that he had lost or
obtained through fraud or unlawful consideration.
 5. Estoppels for denying original validity of instrument (Sec.120):
Maker of note, drawer of B/E or chq. & acceptor for honour –
suit filed by holder in due course - cannot deny – validity of
original instrument.
6. Estoppels against denying capacity of payee to indorse
(Sec.121).
7. Sec.118: Presumption that the holder of N.I. is a holder in due
course.
8. Sec.36: Defense of accommodation acceptance cannot be set
up against holder in due course.
9. Sec.46: Other parties to the bill cannot avoid liability to holder
in due course on the ground that instrument was conditional or
for special purpose.

When holder is not holder in due course.

1. Chq. Crossed “Not Negotiable” (Sec.30).
2. Forgery of drawer’s signature.
3. When instrument after noted for non – payment negotiated –
holder cannot claim to be holder in course.
When Banker can refuse payment even though having sufficient
money in the account
a. Post dated or stale chq.
b. Payment counter manded.
c. Signature defers
d. Customer has died / notice regarding insolvency/ unsound
mind received.
e. Garnishee order is served.

Who can cross a cheque ?

1.Drawer before issue.
2.Holder, Holder may convert general crossing into special
crossing.
3. Cheque crossed specially, the banker to whom crossed can to
other bank as his agent for collection.
When bill may be treated as dishonoured for non –
acceptance?
1. Drawee is fictious
2. Drawee cannot be formed
3. Acceptance refused
4. Drawee dead / insolvent / insane.
5. Drawee does not accept bill within 48 hrs.
RIGHTS TO INFORMATION ACT – 2005
th
Came Into Force w.e.f.12 October 2005
Total Sections: 30
What is RTI ?: Sec.24
Right to information to Indian citizen to access information (including
Inspection)
under control of public authorities.
Who can get this right?
Indian Citizens

Why Enacted:-
(1)To promote transparency & accountability
of public authorities.
(2)To contain corruption.
Information
Sec.2(f): Material in any form i.e. records,
documents, memos, e-mails, opinion, advises,
circulars etc. as also data held in electronic form
etc. & information relating to any private body
which can be accessed by a public authority under
any law.

Rights:
 Right to inspect records/ documents.
 Take notes.
 Take extracts.
 Take certified copies.
Records:
 Any document, manuscript or file.
 Any microfilm, facsimile copy of document etc.
 Image, images in microfilm.
 Any document produced by computer or any other
device.

Exemptions From Disclosure: Sec.8 & 9

1) Affecting sovereignty or integrity of India.
 2) Forbidden by court / law / tribunal etc.
3) Breach of privilege of Parliament or State Legislature.
4) Commercial confidence, Trade secrets, intellectual property
etc.
5) Information received in confidence from foreign Govt.
6) Endangering life or physical safety of any person.
7) Information impeding process of investigation / prosecution of
offender.
8)Available to a person in fiduciary capacity (involving trust) –
unless in public interest.
9) Cabinet papers / of Council of Ministers.
10) Personal information – no relation to public activity or interest
unless in larger public interest.

Who Provides Information?

Each organization will have Public Information
Officer (PIO) to rate requests to relevant
departments.

Penalties:-
By Central or State Information Commission
– Penalty of Rs. 250/- per day of delay tile
submission of information – Max. Rs.25000/-
Penalties if
1) PIO refuses to receive application.
2) Not furnished information within
stipulated time.
3)Giving incorrect / incomplete / misleading
information.

The Consumer Protection Act,1986(known also as COPRA)

th
The consumer Protection (Amendment) Act 2002 implemented w.e.f.15
March 2003 – the world’s Consumer Rights Day.
Total Sections: 29

Who is a Consumer?
(i) A person who buys goods or hires services for consideration
(i.e. for a price).
(ii) For his /her use (and not for sales).
 (iii) Any user of such goods and services, with permission of
buyer, is also a consumer.

Coverage:-All goods & services including banking, insurance, transport,

processing, electricity,physians etc. in private, public and co-operative
sector.
All banking services are covered due to their being essential services.

Who can file a complaint?

A consumer individually or jointly, any voluntary consumer
organization,Central or State Govt.
Limitation Period
Within two years from the date of cause of action.

Pecuniary (Financial) Jurisdiction

Three Authorities
(1)Dist.Forum (Powers of Dist. Judge) – Upto 20 lacs – President
& 2 members.
(2)State Commission (Power of High Court Judge) – Upto 100
lacs –
President & 2 other members.
(3) National Commission (Powers of Supreme Court Judge)
Above Rs.100 lacs
President & 4 other member.

Time Limit For Disposal

A. Admissibility of Complaint
Within -21- days of the date of receipt.
B. Decision on Complaint
- Within -3- months.
Requirements to File A Complaint
(1)Written complaint in duplicate with name & address of
complainant & opposite party.
(2) Facts of Complaint.
(3) Supporting Document/s & relief sought.
Other Provisions
 No court fee charged.
 Consumer or anyone can represent his case.
 Engaging a lawyer is not compulsory.
 Consumer to obtain proper receipts / cash memo & guarantee
/warrantY card
 Duly stamped & signed.
Reliefs: Includes
(1)Removal of defects from goods.
(2)Replacement of new goods.
(3)Refund of price / charges.
(4)Award of compensation for loss or injury suffered.

(5)Providing for adequate costs.

(6)Prohibition of sale of goods of

hazardous nature.

Penalties For Frivolous

complaint or for
non-compliance of orders
Imprisonment for not less than one month & upto three years OR fine
not less than
Rs.2000 and upto Rs.10000/- OR Both.

Appeals :- Period:- Within -30-days from date of order

(1)With State Commission
To deposit 50% of amount awarded or Rs. 25000 whichever is less.
(2) With National Commission
50% of award or Rs.35000/- whichever is less.
(3) With Supreme Court
(Order of National Commission )50% of award or Rs. 50000/-
whichever is less.

Banking Ombudsman Scheme – 2006

Came into effect from 01.01.2006
(Enlarged Scheme of 2002)
Sec.35(A) of BRA 1949.
Covers:- All commercial banks,RRB’s,
scheduled Banks (as defined in RBA
Act1934) & co-operative Banks including in Jammu & Kashmir.

Objective: Resolutions of Banking services complaints through

conciliations & mediation between the bank & aggrieved partier or by
passing an Award.
Who can be Ombudsman ?
CGM / GM – RBI (For period not exceeding – 3- years at a time &
extension
of – 2- years).
Cost shared by Banks as determined by RBI.

Who can file complaint ?

A person or his authorized representative on paper or e-mail OR
forwarded by RBI / Central Govt.
Credit card complaints –Ombudsman having jurisdiction over the billing
address of and holder.

When Complaints can be made ?

(a) Complaint was made to bank but rejected or
no reply to complaint received from bank
within one month or complaint was not
satisfied with reply.
(b) Period of more than one year has not elapsed after receipt of bank
reply.
(c ) Complaint is within limitation period under Indian Limitation Act –
1963.
(d) Not for issuer already settled / dealt with by Ombudsman OR
proceedings before court, Tribunal or arbitrator is pending or a
decree or order or award has been passed.

Process:- Complaint sent to Bank by Ombudsman – Endeavour to

promote
settlement through conciliation or mediation. If complaint is not settled
within
one month, Ombudsman passes an award or rejects application.
Amount of Award:- Amount of loss or Rs.10/- lacs whichever is less –
complaint to give an indemnity to refund the amount with interest in the
event.

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