MAHARASHTRA NATIONAL LAW UNIVERSITY, NAGPUR

B.A.LL.B.(Hons.) Year-V Semester-IX: Academic Year: 2021-2022

Second Open Book Assessment, November-2021
9.1 BANKING AND FINANCIAL LAWS
Total Marks: Forty (40)
Instructions:
1. Read the questions carefully and answer.
2. No clarification shall be sought on the question paper.
3. Use the Answer File Template sent by Examination Section and fill the necessary
information.
4. Answer File Nomenclature : UID and Course Name (For Example-UID: UG2017-01 &
Course: 9.1 Banking and Financial Laws, Answer File Nomenclature: 2017-01
BankingandFinancialLaws).
5. Use of open resource(s) to answer the question(s) is permitted.
6. Answer file in MS Word shall be submitted on or before 11:59 pm, on Sunday, November
28, 2021 on a link provided by the respective subject teacher.
7. Students are advised not to consult any faculty member/outsider or any other person
regarding the questions and must strictly adhere to professional values.
8. The contents of question paper are strictly for private circulation only.

Note: Total No. of questions are FIVE (5). Attempt any FOUR (4) questions.
1. Mr. Suresh is an accountant working with Mehta Textiles Ltd. at Mumbai. He was residing in
a rented house at Vashi owned by Mr. Gosavi. In the year 2016, Mr. Gosavi was in need of
fund to start a hotel business in Navi Mumbai. Therefore, he approached the State Bank of
India for financial assistance and applied for a loan against several properties owned by him
including the property in which Mr. Suresh was a tenant. The bank granted the loan which was
to be repaid within two (2) years. However, Mr. Gosavi failed to pay the dues within the
stipulated time according to the terms and conditions of loan agreement. As a result, his account
became a Non-Performing Asset. Therefore, the State Bank of India filed an application before
the Chief Metropolitan Magistrate, Mumbai under Securitisation and Reconstruction of
Financial Assets and Enforcement of Securities (SARFAESI) Act 2002 for seeking the
possession of mortgaged properties which were in actual possession of Mr. Suresh.
Accordingly, the Chief Metropolitan Magistrate, Mumbai ordered for transferring the
possession of the concerned property to the bank. Consequently , Mr. Suresh filed an
application as an intervenor to stay the execution of the order passed by the Chief Metropolitan
Magistrate on the ground of overriding applicability of Maharashtra Rent Control Act 1999
over SARFAESI. However, the Chief Metropolitan Magistrate dismissed the application and
upheld the overriding applicability of SARFAESI Act 2002. Hence, Mr. Suresh preferred an
appeal against the order of Chief Metropolitan Magistrate.
Examine the above facts with reference to relevant legal provisions and judicial
pronouncements to assist the High Court in determining the overriding applicability of
SARFAESI 2002 over Maharashtra Rent Control Act 1999. 10 Marks

2. Verma Auto Ltd. is an automobile company registered in India located at Chennai (the
appellant). It entered a contract with a Volkswagen Ltd., an automobile company registered in
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 Germany, (the respondent) for supply of automobile machineries. In pursuance to the contract,
the Verma Auto Ltd. opened a confirmed, irrevocable and divisible letter of credit with Bank
of India for the entire value of the equipment. Accordingly, Volkswagen Ltd. supplied all the
required machineries and received twenty-five (25) percent of the money payable under the
letter of credit from Bank of India. However, within three (3) months from the date of delivery
of goods, Verma Auto Ltd. complained that the performance of the machinery was not efficient
and filed a suit seeking an injunction restraining Volkswagen Ltd. from realising the balance
of amount payable under the letter of credit. Subsequently, the parties entered into an
agreement to amicably settle the dispute, by which it was agreed that the Verma Auto Ltd.
would withdraw the suit and Volkswagen Ltd. would not demand any payment under the letter
of credit for further six (6) months. However, due to the failure of parties to amicably reach
any settlement within the expiry of agreed time, Verma Auto Ltd. filed a suit for restraining
Bank of India and Volkswagen Ltd. from making any payment and taking any steps in
pursuance of the letter of credit. Consequently, Volkswagen Ltd. challenged the petition and
demanded the payment of the remaining amount payable under the letter of credit.
Examine the above facts with reference to relevant legal provisions and judicial
pronouncements to assist the court to decide the matter. 10 Marks

3. Biere Cafe is a partnership firm located at Nagpur. In January 2018, it applied for a loan from
Bank of India for Rs.30/- Lakhs. Subsequently, the loan was sanctioned and the bank
immediately disbursed a sum of Rs.23/- Lakh to Biere Cafe. Later, in July 2018, Biere Cafe
applied for an additional advance of Rs.40/- Lakh, but the application was not accepted by the
bank. Further, the bank recalled the originally sanctioned loan and withdrew Rs.7,00,000/- out
of the original loan sanctioned to Biere Cafe. Subsequently, Biere Cafe filed a complaint before
the Banking Ombudsman at Nagpur and contended that the withdrawal of Rs.7,00,000/- from
its account was unauthorised and it had suffered a considerable loss because of the denial from
bank in advancing the additional loan. However, the bank opposed the complaint and
contended that, the claims of Biere Cafe were not within the purview of the power of Banking
Ombudsman. Meanwhile, in January 2019, the bank approached the Debts Recovery Tribunal
(DRT) for recovery of amounts due from Biere Cafe. Later, before the Banking Ombudsman,
the bank contended that, the complaint of Biere Cafe had ceased to be maintainable in view of
the pendency of the proceedings before the DRT. However, the Banking Ombudsman rejected
the contentions of the bank and passed an award for disbursement of the sum of Rs.7,00,000/-
and directed the bank to provide further advances as requested by Biere Cafe. Later, with the
permission of Reserve Bank of India, the bank challenged the award passed by Banking
Ombudsman. Consequently, Biere Cafe filed a writ petition before High Court of Bombay with
the prayer to implement the award of the Banking Ombudsman.
Examine the above facts with reference to relevant legal provisions and judicial
pronouncements to suggest the High Court to determine the validity of the award passed by
Banking Ombudsman. 10 Marks

4. The money market performs a crucial role of providing an equilibrating mechanism to even
out short run liquidity imbalances in the economy. It is also a pivotal mechanism through
which the RBI intervenes into the monetary economy by influencing liquidity and rate of
interest thereby actuating the Money Market to function like a signaling device for the other
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 segments of Indian Financial System. In the given context, critically analyse and discuss the
significance of money market in India. 10 Marks

5. The uniformity of financial regulation across multiple jurisdictions and the consistency of the
requirements imposed on internationally active entities may provide powerful incentives for
cross-border financial activities and operations. By the same token, heterogeneous rules or any
type of regulatory discrimination against foreign players in domestic markets tend to inhibit
the internationalization of financial activity. In the given context, critically examine the role
of regulations in facilitating financial market integration. 10 Marks

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