Brave Bank in Related

PART A
BANKING RELATED ACTS
BRAVE - Banking Related Acts and Various Enactments
CHAPTER - 1
STATE BANK OF INDIA (SBI) ACT-1955
The State Bank of India is the largest Bank in India, in terms of number of branches, deposits & advances, assets & liabilities, net profit, number of employees etc.,
History
The roots of the State Bank of India rest in the first decade of 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2nd June 1806. The Bank of Bengal and two other Presidency banks, namely, the Bank of Bombay (incorporated on 15th April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated as joint stock companies, and were the result of the royal charters. These three banks received the exclusive right to issue paper currency in 1861 with the Paper Currency Act, a right they retained until the formation of the Reserve Bank of India. The Presidency banks amalgamated on 27th January 1921, and the reorganized banking entity took as its name Imperial Bank of India. The Imperial Bank of India continued to remain a joint stock company. Pursuant to the provisions of the State Bank of India Act (1955), the Reserve Bank of India, which is Indias central bank, acquired a controlling interest in the Imperial Bank of India. On 30th April 1955 the Imperial Bank of India became the State Bank of India. The Govt. of India recently acquired the Reserve Bank of Indias stake in SBI so as to remove any conflict of interest because the RBI is the countrys banking regulatory authority. In 1959 the Government passed the State Bank of India (Subsidiary Banks) Act, enabling the State Bank of India to take over eight former State-associated banks as its subsidiaries. On Sept. 13, 2008, State Bank of Saurashtra, one of its Associate Banks, merged with State Bank of India. SBI has acquired local banks in rescues. For instance, in 1985, it acquired Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, State Bank of Travancore, already had an extensive network in Kerala. The bank traces its history back through the Imperial Bank of India in 1920, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The Government of India nationalised the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 59.73% stake, and renamed it as State Bank of India. On 31st March 2008, the Government of India took over the stake held by the Reserve Bank of India. SBI provides a range of banking products and Insurance (SBI Life) through its vast network in India and overseas, including products/services aimed at NRIs. It is slated to start General Insurance (Non-Life) very shortly. It is Super Financial Market in India aiming to play big role in the years to come globally. The State Bank Group, with over 16000 branches, has the largest branch network in India. With an asset base of $250 billion and $195 billion in deposits, it is a regional banking behemoth. It has a market share among Indian commercial banks of about 20% in deposits and advances, and SBI Accounts for almost one-fifth of the nations loans. The State bank of India is 29th most reputable company in the world according to Forbes.
PART A - Banking Related Acts 3
State Bank of India (SBI), Mumbai Main Branch is Indias largest branch. The government of India is the largest shareholder in SBI.
International presence
The bank has 141 overseas offices spread over 32 countries as on 31st Dec 2009. It has branches of the parent in Colombo, Dhaka, Frankfurt, Hong Kong, Johannesburg, London and environs, Los Angeles, Male in the Maldives, Muscat, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape Town. SBI operates several foreign subsidiaries or affiliates. In 1990 it established an offshore bank, State Bank of India (Mauritius). It has two subsidiaries in North America, State Bank of India (California), and State Bank of India (Canada). In 1982, the bank established its California subsidiary, named State Bank of India (California), which now has eight branches - seven branches in the state of California and one in Washington DC which was recently opened on 23rd November, 2009. The seven branches in the state of California are located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego and Bakersfield. The Canadian subsidiary too dates to 1982 and has seven branches, four in the greater Toronto area, and three in British Columbia. In Nigeria, SBI operates as INMB Bank. This bank began in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It now has five branches in Nigeria. In Nepal SBI owns 50% of Nepal SBI Bank, which has branches throughout the country. In Moscow SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest. In Indonesia it owns 76% of PT Bank Indo Monex. State Bank of India already has a branch in Shanghai and plans to open one up in Tianjin.
Associate banks
There are six associate banks that fall under SBI, and together these six banks constitute the State Bank Group. All use the same logo of a blue keyhole and all the associates use the State Bank of name followed by the regional headquarters name. Originally, the then seven banks that became the associate banks belonged to princely states until the government nationalized them between October, 1959 and May, 1960. In tune with the first Five Year Plan, emphasizing the development of rural India, the government integrated these banks into State Bank of India to expand its rural outreach. There has been a proposal to merge all the associate banks into SBI to create a mega bank and streamline operations. The first step along these lines occurred on 13th August 2008 when State Bank of Saurashtra merged with State Bank of India, which reduced the number of state banks from seven to six. Furthermore on 19th June 2009 the SBI board approved the merger of its subsidiary, State Bank of Indore, with itself. SBI holds 98.3% in the bank, and the balance 1.77% is owned by individuals, who held the shares prior to its takeover by the government. The acquisition of State Bank of Indore is in the process and which will help SBI add 470 branches to its existing network of 12000+. Also, following the acquisition, SBIs total assets will inch very close to Rs 10,00,000 lakh crore mark. Total assets of SBI and the State Bank of Indore stood at Rs 998,119 crore as on March 2009. The Subsidiaries of SBI till date State Bank of Indore State Bank of Bikaner & Jaipur
4 BRAVE - Banking Related Acts and Various Enactments
State State State State
Bank Bank Bank Bank
of Hyderabad of Mysore of Patiala of Travancore
The Bank handles almost the entire gamut of financial services. It is a financial supermarket. The Bank extends services to the following sections: Corporate Sector SMEs Mid-Corporates Rural Sector, especially Agriculture and allied activities Retail Sector i.e., Personal Segment The Bank has designed 200+ Products under Deposits & Advances portfolio including SBI Life & SBI Mutual Fund, for specific segments or tailor made schemes suitable to the needs of the customers. The quantum of loan ranges from Rs.100 to Rs.10000 crores, which is the amount advanced while Tata Group acquired Corus Steel Company. The State Bank has following Non-Banking Subsidiaries/Joint Ventures. SBI Capital Markets Ltd., (SBI CAP)-an Investment Banking arm SBICAP Securities Ltd., (SSL)-a Stock Market Trading wing SBICAPS Ventures Ltd., (SVL)-a Venture Capital wing SBICAP (UK) Ltd., SBI Funds Management Pvt Ltd., (SBIFMPL)-a Mutual Fund management arm SBI Factors & Commercial Services Pvt Ltd., (SBI FACTORS)-for factoring services SBI Cards & Payment Services Pvt. Ltd., (SBICSPL)-a Credit/Debit Cards venture SBI DFHI Ltd.,-a Discount Finance co., for Govt Securities SBI Life-a Life Insurance Company Global Trade Finance Ltd., (GTFL)-a factoring services for overseas business SBI Mutual Funds Trustee Company Pvt Ltd.,-a MF Trust activities Additional Subsidiaries/Jointly Controlled Entities: SBI Commercial and International Bank Ltd., in Russia SBICAP (UK) Ltd. SBI Funds Management (International) Ltd. GE Capital Business Process Management Services Pvt Ltd. C-Edge Technologies Ltd. SBIs Foreign Banking Subsidiaries are: State Bank of India (Canada) SBI International (Mauritius) Ltd. State Bank of India (California) Indian Ocean International Bank Ltd. (Mauritius) PT Bank Indo Monex (Indonesia)
PART A - Banking Related Acts
TOGETHER A MAMMOITH ORGANISATION CALLED STATE BANK STATE BANK OF INDIA AS ON 31-03-2009 Rs. In Crores Authorised Capital Paid-Up Capital & Reserves & Surplus Aggregate Deposits 1000 57948 742073 Market Share 17.72% 542503 Market Share 16.03% 20873 Registered Office Corporate Office No. of employees Kolkatta Mumbai 205896
Aggregate Advances
No. of pensioners including family pension No. of Branches
103556
Net Interest Income
11448 100% Core 8581 92 in 32 countries 6 14 29 61 46 04 Gurgaon
Other Income Operating Profit Net Profit Gross NPA Net NPA Earnings Per Share Capital Adequacy Ratio - CAR Dividend paid Government of India Share holding No. of individual shareholders Staff Recruited during 08-09
12691 17915 9121 2.84% 1.76% Rs.143.77 14.25% 290% 37,72,07,200 share 59.41% 781263 33703
No. of ATMs No. of Foreign Offices Associate Banks Local Head Offices Total Networks No. of Admn offices No. of SBLCs No. of LCPCs Apex Training Institutes:Staff Academy
Staff College State Bank Institute for Information and Communication Management-SBIICM State Bank Institute for Rural Development S-BIRD
Hyderabad Hyderabad
Hyderabad
CHAPTER 2
RESERVE BANK OF INDIA ACT-1934
RBI was established on the recommendations of Royal Commission on Indian currency & Finance (1926). The Act was passed in the year 1934 and the RBI was established on 1.4.1935 as a Private Sector Bank. It was nationalised on 1.1.1949. With nationalisation, the Central Govt. owns hundred percent of the capital of the bank. The Share Capital of the bank (paid-up) is Rs.5 Crores, with face value of a share of Rs.100. The RBI is managed by a Governor, 4 Deputy Governors and 15 Directors.
RBI Functions:
RBI performs mainly 5 types of functions: 1. 2. 3. 4. 5. It functions as currency issuing Bank. It functions as a Banker to Central & State Govt. It acts as Banker to the scheduled Banks. It works for the promotion & development of Agriculture, commerce, Trade and Industry. It communicates important information to the public, on behalf of Central/State Govt. and collects various industrial/economic data.
Currency Issue:
The Central Govt. is issuing one Rupee Note, which are signed by the Finance Secretary The Reserve Bank issues all currency notes also called as bank notes for denominations of Rs. 2, 5, 10, 20, 50, 100, 500, 1000, 5000 and 10,000 under the signature of Governor. The RBI issues currency notes against the 100 percent backing of Gold, Bullion, Foreign Securities, Rupee Securities, Mint, Promissory Notes or Bills of Exchange. It withdraws from the circulation, the defaced, mutilated or soiled currency notes. RBI can avail the services of other commercial banks for distribution of currency through chests. Such banks provide currency chest service to the RBI in the capacity of agents of RBI.
Banker to Central/State Governments:

Sec. 20 of RBI Act, the RBI manages Public Debt of Central Govt. Sec. 21 of RBI Act, the RBI manages Public Debt of State Govt. Such Public Debts can be Long Term Bonds and Short Term Treasury Bills, Ad-hoc Treasury Bills etc. RBI gives Ways & Means advance to the Central and State Governments.
Bankers Bank:
It frames and implements monetary policy with an objective to provide necessary/suitable credit for development of Agriculture, Commerce, Trade and Industry, to ensure price stability. It controls and regulates money supply and liquidity through different quantitative and
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qualitative tools such as CRR, SLR, Bank Rate, Open Market Operations, Selective Credit Control, etc. It frames and implements Credit Control and Credit Policy by way of Bank Rate, Interest Rates, Open Market Operations and Reserve Requirements. It exercises selective credit control and by way of fixing ceiling on loan amounts, margins to be maintained, minimum interest rates to be changed on certain notified commodities. It prescribes stipulations for paid up capital and reserves for the banks. It provides finance/re-finance, export refinance (to the extent of 15% of outstanding export credit eligible for refinance) and bills rediscounting facilities to the banks. It provides Liquidity Adjustment Facility (LAF). It also manages market stabilization scheme from time to time
Promotion of Agriculture, Industry, Commerce & Trade:

RBI formulates and implements policies for the promotion of Agriculture. Industry, Commerce and Trades of the economy. It maintains National Industrial Credit Fund. It makes its contributions to NABARD for promotion of Agriculture. It maintains National Housing Credit Fund and allows long-term credit to National Housing Bank for creating dwelling units. It allows advance to Development/Promotional Institutions like SIDBI, EXIM Bank, etc. for the promotion of industry and foreign trade.
Furnishing of Information:
It collects necessary information regarding Deposits, Loans and Advance, various Govt. Schemes for the poor and downtrodden from banks through returns such as Basic Statistical Returns (BSR-I and BSR-II). It can seek the banks to submit any specific information as required for policy making or control purpose from time to time. It monitors the position of big borrowal Accounts, NPAs, Suit filed Accounts, etc. It provides necessary information to the banks from time to time.
(For Various Sections of RBI Act refer other part of the Book) n
CHAPTER-3
BANKING REGULATION ACT-1949
The Banking activity was governed by the Companies Act and subsequently Banking Companies Act 1949 was passed on 10th March, 1949, with a view to consolidate the law relating to banking companies to safe guard the interest of the depositors and economic interest of the country. The nomenclature of the Act was changed w.e.f. 1st March, 1966: it now stands as Banking Regulation Act 1949. The Act is applicable to all commercial, co-operative and foreign banks operating in India including J & K.
Important Features:
a) A comprehensive definition of banking so as to bring within the scope of the legislation all institution which receives deposits, repayable on demand or otherwise, for lending or investment. Prohibiting non-banking companies from accepting deposits repayable on demand. Separate set of guidelines are there for NBFCs accepting deposits from the public. Prohibition on trading with a view to eliminate non-banking. Exceptions to recent changes to Life/Non-Life Insurance and MFs. Prescription of minimum capital standards. Read in conjunction with Basel II. Limiting the pay out of dividends by the Banks. Inclusion in the scope of the legislation of banks incorporated or registered outside the Provinces of India. Introduction of a comprehensive system of licensing of banks and their branches. Now liberalised branch licensing policy is in vogue. Special format of balance-sheet and conferring of powers on the RBI to call for periodical returns. Inspection of the books and Accounts of banks by the RBI. Empowering the Central Government to take action against banks conducting the affairs detrimental to the interests of the depositors. Provision for bringing the RBI into closer touch with banking companies. Provision of an expeditious procedure for liquidation in case of need.
b) c) d) e) f) g) h) i) j) k) l)
Demand Liabilities: Demand Liabilities include all liabilities which are payable on demand and they include current deposits, demand liabilities portion of savings bank deposits, margins held against letters of credit/guarantees, balances in overdue fixed deposits, cash certificates and cumulative / recurring deposits, outstanding Telegraphic Transfers (TTs), Mail Transfer (MTs), Demand Drafts (DDs), unclaimed deposits, credit balances in the Cash Credit Account and deposits held as Security for advances which are payable on demand. Time Liabilities: Time Liabilities are those which are payable at the end of the term which includes fixed deposits, cash certificates, cumulative and recurring deposits, time liabilities portion of saving bank deposits, staff Security deposits, margin held against letters of credit if not payable on demand, deposits held as securities for advances which are not payable on demand, India Millennium Deposits and Gold Deposits. However, pre mature closure of FD allowed with some conditions. Other Demand & Time Liabiities (ODTL): Other Demand and Time Liabilities (ODTL) include
interest accrued on deposits, bills payable, unpaid dividends, suspense Account balances representing amount due to other banks or public, net credit balances in branch adjustment Account, any amount due to the Banking System which are not in the nature of deposits or borrowing. Liabilities not included for DTL/NDTL calculations: The under-noted liabilities will not form part of liabilities for the purpose of CRR: a) Paid up capital, reserves, any credit balance in the Profit & Loss Account of the bank, amount availed of as refinance from the RBI and apex financial institutions like Exim Bank, IDBI, NABARD, NHB, SIDBI etc. b) Amount of provision for IT in excess of the actual estimated liabilities. c) Amount received from DICGC towards claim and held by banks pending adjustments thereof. SBI is not a member with DICGC for the purposes of advances. d) Amount received from ECGC by invoking the guarantee. e) Amount received from insurance companies on ad-hoc settlement of claims pending judgement of the Court. f) Amount received from the Court Receiver. g) The liabilities arising on Account of utilisation of limits under Banks Acceptance Facility (BAF). h) Interbank term deposits/term borrowing liabilities of original maturity of 15 days and above and up to one year with effect from fortnight beginning August 11, 2001.
Classification & Valuation of Security for the purpose of SLR: classification):
(Methods of
The entire investment of the portfolio of the banks (including SLR Securities and non-SLR Securities) should be classified in three categories viz. Held to Maturity, Available for Sale, and Held for Trading.
Valuation:
Held to Maturity (HTM): These Securities need not marked to market and will be carried at acquisition cost unless it is more than the face value, in which case the premium should be amortized over the period remaining to maturity. Available for Sale (AFS): The individual scripts in the Available for Sale category will be marked to market at the quarterly or at more frequent intervals, while the net depreciation under each classification should be recognised and fully provided for, the net appreciation under each classification should be ignored. The book value of the Security would not under-go any change. Held for Trading (HFT): The individual scripts in this category will be marked to the market at monthly or at more frequent intervals as in the case of those in the available for sale category. The book value of the individual Security in this category would not undergo any change after marking to market. n
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CHAPTER-4
NEGOTIABLE INSTRUMENTS ACT
The Negotiable Instruments Act, 1881 is applicable to the whole in the India including J & K and now having 147 Secs and 17 chapters. The Act was amended from time to time and the last amendment was made in February 2003. The important features of these amendments are that return of cheques due to insufficient funds has been made a criminal offence and Information Technology Act has also been made applicable to the Negotiable Instruments Act. Due to the applicability of IT Act, Electronic Cheques and Digital Signatures have been given statutory recognition. NEGOTIABLE INSTRUMENTS: Sec 13 gives the meaning of Negotiable Instruments and states Negotiable Instruments means a promissory note, bill of exchange or cheque payable either to order or to bearer. Even though separate definitions of all these instruments are given in Sec 4,5 and 6 of the Act respectively but there is no direct definition of Negotiable Instrument as such in the Act. Definition of Demand Draft is given in Sec 85 A, which states it is an order to pay money, drawn by one office of a bank upon another office of the same bank for a sum of money payable to order on demand. Demand Promissory Note, Bill of Exchange and Cheques are specifically mentioned as Negotiable Instruments in Negotiable Instrument Act but Sec 137 of the Transfer of Property Act states that there can be additional Negotiable Instruments as per customs and usages of the trade. As of the day the following instruments have been legally recognised as negotiable instruments as per Customs and Usages of the trade. 1) 2) 3) 4) 5) 6) 7) 8) 9) Pay order or Bankers cheque Govt. Promissory Note Certificate of Deposit Commercial Paper Treasury Bills Hundi Bill of Lading* Railway Receipts* Dock warrant*
10) Warehouse Receipt (Wharfinger certificate)* 11) Delivery Order 12) GRs issued by transport operations approved by IBA. * The instruments mentioned above from serial no. 7 to 11 are also documents of title to goods under Sale of Goods Act. Lorry receipt is not mentioned in the document of title to goods in the Sale of Goods Act. However, as in banks most of the transactions take place through lorry receipt, therefore, to assist the banks, IBA has the system of approving the transport operators. Therefore, only those lorry receipts are negotiable instruments which are issued by approved transport operators by IBA. However airway bill is neither a document to title to goods and nor recognised as negotiable instrument.
BASIC FEATURES OF NEGOTIABLE INSTRUMENTS: Negotiable instruments possess a unique characteristic called Negotiability. Term negotiation has been defined in Sec 14 of the Act, which states when a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute the person the holder thereof, the instrument is said to be negotiated. The Negotiation contains following features: a) Free Transferability: the instrument should be freely transferable. may be by: Delivery, if its is payable to bearer (Sec 47), and By endorsement and delivery if it is payable to order (Sec 48) Transferability
b)
Holders Title Free from Defects: The person (transferee) taking the instrument bonafide for value known as previous holder. A holder in due course in one who receives the instrument for value, before maturity, in good faith and without negligence and suspicion as to the defect in the title of the transferor.
The above two conditions are necessary for an instrument to be called a negotiable instrument. If the above two conditions are satisfied, the holder can sue on the instrument in the own name.
PRESUMPTIONS AS TO NEGOTIABLE INSTRUMENTS

(I) Sec 118 provides certain presumptions as to Negotiable Instruments, in favour of holder until the contrary is proved: a) b) c) d) e) f) g) Negotiable Instrument was made, drawn, accepted, endorsed and negotiated or transferred for consideration. It bears the date on which it was made or drawn. It was accepted within a reasonable time after its date and before maturity. Every transfer of negotiable instrument was made before maturity. Endorsements appearing on negotiable instrument were made in the order in which they appear thereon. That a lost instrument was duly stamped. Holder is a holder in due course.
The burden of proof that the instrument is contrary to all/any of the above presumptions is with the person, who challenges such presumption. (II) Sec 119-In a suit upon an instrument, which has been dishonoured, the court shall, on proof of the protest, presume the fact of dishonour, unless and until such fact is disproved.
RULE OF ESTOPPEL (SEC 120-122)

1) 2) 3) No maker of Negotiable Instrument or acceptor of bill of exchange has the right to deny the original validity of instrument in any suit. Capacity of the payee to endorse cannot be denied by the maker in a suit by the holder in due course. No endorser of a Negotiable Instrument shall be permitted to deny the signature or capacity to contract of any prior party to the instrument.
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KINDS OF NEGOTIABLE INSTRUMENTS:

PROMISSORY NOTE: As per Sec 4 of NI Act, Promissory Note is an instrument: (a) In writing (not being a bank note or a currency note), (b) Containing an unconditional undertaking (or promise), (c) Signed by the maker, (d) To pay a certain sum of money, (e) To or to the order of a certain person or to the bearer of the instrument. Parties to a Promissory Note: There are basically two parties i.e. maker (who promises to pay in case of bank loan, it is borrower) and payee (to whom it is payable in case of a bank loan, the bank). In case of sale and purchase transactions, the buyer i.e., debtor is the maker when he promises to pay for the goods and the seller is the creditor and becomes payee. Types of Promissory Note: There are two types of Promissory Notes, i.e. Demand Promissory Note, which is payable immediately on demand and Usance Promissory Note, payable after a predefinite period. Stamping of Promissory Note: The Promissory Notes require to be stamped as per Indian Stamp Act and stamp duty is same for entire India except J & K. Promissory Notes payable in Instalments: Promissory Notes can be drawn payable in instalments also and a provision can be made that on default in payment in one instalment, entire amount becomes payable. This is also known as usance promissory note because payment cannot be demanded before due date. In the category of usance promissory notes, two additional instruments as per custom and usages Certificates of Deposit and Commercial Papers have also been recognised a usance promissory notes. Promissory Note Payable to Bearer: Although, under Sec 4 there is no bar to the issue of a promissory note payable to bearer on demand or payable to bearer, Sec 31 of the RBI Act prohibits such a promissory note to be issued by any person other than the RBI or by the Central Government. Currency Notes and Promissory Notes: Currency notes being money, though fulfil a number of conditions of promissory notes, are not promissory notes and have been excluded from promissory notes as per Sec 4 of NI Act and are governed by Indian Currency Act (Sec 21). BILL OF EXCHANGE: As per Sec 5 of NI Act, a Bill Exchange (B/E) may be a demand or usance. In case of cash sale in the commercial transactions, normally demand bills of exchange are drawn and in case of credit sales, usance bills of exchange are drawn by the seller on the purchaser. Bill of Exchange has following characteristics: a) b) c) d) e) f) In Writing, Containing an unconditional order, Signed by the marker, Directing a certain person to pay, A certain sum of money and money only, To or to the order of a certain person or to the bearer of the Instrument.
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Parties to a Bill of Exchange:

Drawer: The person who orders to pay i.e. creditor or seller of goods. Drawee: The person who is directed to pay i.e. debtor or buyer of goods. Since a minor cannot incur any liability, he cannot be the drawee. Payee: The person who is authorised to obtain the payment. Acceptor: The drawee becomes acceptor on acceptance of B/E for payment. Drawee in case of need: When the bill mentions the name of additional person in addition to the drawee, it is known as the drawee in case of need. Acceptor for honour: When a bill of exchange has been noted or protested for non-acceptance for better Security and any person accepts it for honour of the drawer or anyone of the endorsers, such person is called as on accepter for honour. DUE DATE CALCULATION (Sec 22 OF NI ACT): Due date is required to be calculated for payment in case of usance promissory note and usance bill of exchange. While calculating the due date three days of grace are required to be added. However if the drawer has either already mentioned the due date is already calculated by the drawer then grace period is not to be given. Drawer has every right to contract out the provisions related to grace period within the parameters of law. In case of usance promissory note on each instalment three days of grace are to be added. However, in case of commercial paper and certificate of deposit even though they are usance promissory notes no days of grace are to be given because due date is already calculated by the drawer.
PRINCIPLES FOR CALCULATING THE DUE DATE:

(1) If a usance period is mentioned in complete months while calculating the due date corresponding date of the concerned month is to be taken and there after three days will be added e.g. if due date is to be calculated from 15th June for one month, the due date will be 15+3 days of grace i.e. 18th July. (2) If that concerned date is not available, then last date of the month is to be taken, e.g., if due date is to be calculated for one month from 31st Jan, corresponding day works out to 31st Feb and as that day is not available we will have to take last day of the month i.e. 28th/29th Feb and after adding three day of grace, due date will be 3rd March (Sec 23). (3) If the bill is drawn in days, then while calculating the due date 1st day is excluded and last day be included. Suppose the due date is to be calculated for 45 days from 10th March, the procedure will be as under. (Sec 24) Days of March after 10th Days of April Total = 21 days = 9 days = 30 days
After adding 3 days of grace in April 9th, the due date will be 12th of the April. If the maturity date, falls on Public Holiday/Sundays, the bill will become payable on next preceding business day. Public holidays are declared under Sec 25 of NI Act by Central Govt. only after making the notification in the Official Gazette. CHEQUE: As per Sec 6 of NI Act, a cheque is: (a) A bill of exchange (b) Drawn on a specified bank and (c) Not expressed to be payable otherwise than on demand.
Parties to a Cheque:
Drawer: The person who draws the cheque or the Account holder. Drawee: The bank on whom the cheque is drawn or where the Account is maintained. Payee: The person named in the cheque for receiving the payment. ELECTRONIC CHEQUE: It means a cheque which contains the exact mirror image of a paper cheque, with the use of digital signatures. HOLDER (Sec 8): The holder of a negotiable instruments, is a person who is entitled in his own name to the possession of the instrument and to receive the amount due their on from the parties thereto. Where the promissory note, bill of exchange is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction. Example: A thief in possession of an instrument, a finder of any instrument, persons who takes instrument under forged endorsement and payee or endorsee who is prohibited by Court (an insolvent) from receiving the payment, cannot become holders.
Rights of a Holder
a) b) c) d) e) Holder can obtain a duplicate of the lost instrument (Sec 45-A). Holder can cross the cheque if not already crossed, convert a general crossing to a special crossing, endorse and can negotiate, if the negotiation is not restricted. Holder can sue in his own name in relation to the instrument. Holder can complete an inchoate instrument. Holder can give proper discharge to the person making the payment.
Holders in Different Situations

a) b) c) d) e) f) Legal heirs in case of a deceased holder. There cannot be any holder of a forged instrument. Drawee/acceptor continues to be liable to the true owner till the owner gets the payment (in case of payment to a wrong person). Payee or last endorse of an order cheque. The person to whom a cheque is validly negotiated, in case of bearer cheques. Person entitled to payment at the time of loss of an instrument in case of a lost instrument, the finder cannot become holder. In such situation, if a transferee becomes holder in due course, he gets good title. But in case of order cheque when endorsement of the holder is forged, the transferee does not get any title because forgery conveys no title (Sec 58). The person is entitled to receive the payment in case of a damaged/ mutilated/ truncated instrument.
g)
HOLDER IN DUE COURSE (Sec 9): It means any person who for consideration became the possessor of the negotiable instrument if payable to the bearer or payee or endorsee if payable to the order before the amount mentioned in it became payable and without having sufficient cause to believe that any defect existed in the title of the person from whom he derives his title. Thus to become a holder in due course, the holder must have received the negotiable instrument (a) for consideration; (b) in good faith i.e. without knowledge of any defect in the transferors title; and (c) before maturity.
Privileges of a Holder in due Course:

Inchoate Stamped Instrument: Where one person signs and delivers to another, a paper stamped in accordance with the law relating to negotiable instruments, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamped. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, by any holder in due course for such amount, provided that no person than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid there under. (Sec. 20). An Inchoate instrument means an incomplete instrument, which is not legally invalid (say date or amount or place not stated i.e. anything other than signatures of the drawer). The drawer or holder can complete such instruments. Where amount is not filled by the drawer, holder has the right to complete it for an amount not more than the one, intended. Even though inchoate instrument is valid, banks do not pay such instruments as it will not be the payment in due course and bank will not get the valid discharge. Subsequently, if the same instrument if presented after completion by the holder, the banks will make payment of such instruments if otherwise in order. Liability of Prior Parties: Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied (Sec 36). Example: A draws and B accepts a bill of exchange payable to C or order. C endorses the bill to D and D to E, who is a holder in due course. E can recover the amount from A,B,C and D. Fictitious Bill: If a bill is drawn payable to the drawers order in a fictitious name, the acceptor is not relieved from liability to any holder in due course, provided endorsement and the drawers signatures are in the same handwriting (Sec.42). No Effect of Conditional Delivery: If a BOE or PN is negotiated to a holder in due course, the other parties to the instrument cannot escape liability on the ground that the delivery of the instrument was conditional or for a special purpose only (Sec 6). Example: A gives a promissory note to B. It is agreed that B will demand payment of the note only on delivery of goods to A. Before the delivery of goods is effected, B endorses it to C, a holder in due course, C can recover the amount from A (condition is applicable between A and B). Instrument obtained by unlawful means or for unlawful consideration When a negotiable instrument has been lost, or has been obtained from any marker, acceptor or holder thereof by means of an offence or fraud, or for an unlawful consideration, no possessor or endorse who claims through the person who found or so obtained the instrument is entitled to receive the amount due thereon from such marker, acceptor or holder, or from any party prior to such holder, unless such possessor or endorsee is, or some person through whom he claims was a holder thereof in due course. (Sec. 58).
Where holder in due course cannot be there?

There cannot be holder in due course in case of not-negotiable crossing because defective title is not converted into better title (Sec 130) and for an instrument the title to which has been obtained through forged endorsement (forgery does not convey any title as per Sec 58). Even if the only word is written on the endorsement, this is a situation of restrictive endorsement and person receiving there after cannot become the holder in due course.
Conditions to become Holder in due course:

a) b) Person who claims to be holder in due course must have the negotiable instruments in his possession. He must be payee or endorsee and a bearer. He must obtain possession of it for real, valuable and lawful consideration (and not as a gift) before its maturity, as after maturity, subsequent holders cannot be holders in due course, even though they acquire in good faith and for due consideration. He must obtain it in good faith without any sufficient reason to believe that any defect existed in the title of the person from whom he obtained it.
c)
DISTINCTION BETWEEN HOLDER AND HOLDER IN DUE COURSE:

a) b) c) Holder in due course obtains the instrument for lawful consideration while the condition of consideration does not apply to holder. A person must acquire the possession of negotiable instrument before maturity to become a holder in due course, while the holder may obtain the possession, even after maturity. Negotiable Instruments must have been acquired in good faith and without sufficient reason to believe the existence of defect in title of a person from whom it had been acquired, to be a holder in due course. On the other hand, this qualification is not needed to be a holder. A holder gets defective title while the holder in due course gets better title.
d)
AMBIGUOUS INSTRUMENT: As per Sec 17, where the instrument is drawn in such a manner that it can be construed both as a promissory note or bill of exchange, it is called ambiguous and may be treated by the holder as anyone of these and instrument shall be treated and dealt with accordingly. ESCROW: When a negotiable instrument is delivered (to a third party to be handed over to the payee) subject to fulfilment of some condition or for a special purpose as collateral Security or not for the purpose of transferring absolutely, the property there in, it is called Escrow. For instance, a cheque delivered to a person, with the condition that it should be encashed only if the payee, complies with a condition. NEGOTIATION AND ASSIGNMENT: Negotiable Instruments can be either negotiated under NI Act or can be assigned under Transfer of Property Act by following the procedure for assignment. Since the procedure of negotiable is easier and convenient and that of assignment is difficult, the parties dealing with negotiable instruments adopt the procedure of negotiation. Negotiation: It implies a transfer of negotiable instrument so as to constitute the transferee a holder thereof who would be entitled in his own name to sue on the instrument and recover the amount due thereon. A negotiation involves the transfer of ownership of the instrument from its holder to the other person. Assignment: It means transfer of ownership in the instrument by means of a written and registered document under the provisions of the Transfer of Property Act, 1882.
DISTINCTION BETWEEN NEGOTIATION & ASSIGNMENT

The two differ on the following grounds: 1) Consideration: Consideration is always presumed in case of transfer by negotiation. There is no such presumption as to consideration in case of transfer by assignment; the transferee must prove consideration for the transferor.
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2)
Mode of Transfer: Negotiation is effected by mere delivery in case of an instrument payable to bearer and by endorsement and delivery in case of instrument payable to order. Assignment, on the other hand, requires a discharge on instrument and also a written document signed by the transfer in favour of transferee / assignee, irrespective of whether the instrument is bearer or order one. Title: In case of Negotiation, if the transferee is a holder in due course, he takes the negotiable instrument free from all defects in the title of the previous transferor. But in case of Assignment, the assignees claim shall he subject to all defects and equities that may exist in the title of the assignor, even though he took the instrument for value and in good faith. Notice of Transfer: Assignment does not bind the debtor unless a notice of the assignment has been given to him and he has, expressly or impliedly, assented to it. But no information of the transfer of a negotiable instrument has to be given to the debtor.
3)
4)
INSTRUMENTS MADE PAYABLE TO BEARER: RBI Act 1934 (Sec 31) vests all powers in RBI and Central Govt. and states that no person other than RBI or Central Govt. can draw, accept, make or issue any bill of exchange or promissory note payable to bearer on demand. This Sec also puts a restriction on making a promissory note payable to bearer by a person other than RBI/Central Govt. Although Sec 4 of NI Act, while defining a Promissory Note provides for issue of bearer promissory note, but Sec 31 of RBI Act has over-riding effect. Therefore, currency note is not a promissory note even though it contains the promise by the Government of India/Governor of RBI because it has been specifically excluded from the definition of promissory note. In India currency notes are governed by separate act i.e. Indian Currency Act. MINOR IN RELATION TO NEGOTIABLE INSTRUMENT: As per Sec 26 of NI Act, a minor may draw, endorse, deliver and negotiable the instruments so as to bind all parties except himself. AGENCY (SEC 27 OF NI ACT): Every person capable of contact may bind himself or be bound by a duly authorised agent acting in his name. A general authority to transact business and to receive and discharge debts does not confer upon an agent the power of accepting or endorsing bills of exchange so as to bind his principal. An authority to draw bills of exchange does not in itself impart an authority to endorse.
DISTINCTION BETWEEN NEGOTIATION AND ENDORSEMENTS

NEGOTIATION: Negotiation means transferring an instrument from one person to another in such a manner as to convey title and to constitute the transferee the holder thereof. As per Sec 46 delivery is important to complete negotiation, which may be actual or constructive. Without delivery, the property will not be considered to have been transferred. For instance, if a person endorses an instrument and expires without delivery to the endorses and his legal heirs deliver him, the negotiation has not been completed. Bearer Instruments (Sec 47) In case of bearer instruments, the negotiation is complete with delivery only. Order Instruments (Sec 48) The negotiation by endorsement and delivery would be required in case of negotiable instruments payable to order. Sec 58 is the exception to the rule mentioned is Sec 47 and Sec 48 because if the instrument is obtained through unlawful means or unlawful
consideration negotiation will not take place. In case of order instruments, if after making the endorsement holder dies legal heirs cannot deliver the instrument. However, if they are delivered, the person who has received the instrument will not become holder in due course. The legal representatives however can re-endorse and deliver. ENDORSEMENTS: As per Sec 15 of NI Act, endorsement is made for the purpose of negotiable instrument, by the maker or holder of a negotiable instrument, by signing on the face or backside of an instrument or on a slip of paper called allonge or so signs for the same purpose on a stamp paper intended to be completed as a negotiable instrument. A person who signs and transfers the property is called endorser and in whose favour it is transferred is called endorse. IMPORTANT ASPECTS OF ENDORSEMENT: Types of Instruments Endorsed: Cheque, bill of exchange and promissory note can be endorsed. Who can Endorse: An endorsement is made by maker or holder of an instrument. Endorsement on face or back: As per Sec 15, the endorsement can be done on the back or on the face of the instrument or on a slip of paper attached to it. But as per common usage, it is usually done on the back of the instrument. Number of Endorsements: There can be any number of endorsements on a NI as there is no limit for negotiation. Endorsement by Minor: A minor can endorse u/s 26 of NI Act, but he will not be liable as an endorser. Types of Endorsements: The endorsements may be blank or general, special, full, restrictive, partial, conditional or qualified. Blank Endorsements Sec 16(1): If the endorser signs his name only, without adding any words or directions, the endorsement is said to be blank. Sec 54: In case of blank endorsement can be converted to an endorsement in full by writing name of a person above the endorsers signatures. By doing so, such holder does not incur the liability of an endorser because his name will not appear in the instrument.
Endorsement in Full: Where the endorser signs his name and adds the name of endorsee specifically, the endorsement is called full. Blank endorsements can be converted into full. Restrictive Endorsement: To restrictive further endorsement, when the endorser adds words like Pay the contents to X only or Pay X or order for the Account of Y or Pay X for my use, or must be credit to Z the endorsement is said to be restrictive endorsements. (Sec 50). Partial Endorsement: When an endorser transfers only a part of the amount of the negotiable instrument to the endorsee, it is called partial endorsement. It is not a valid endorsement for purpose of negotiation. Further if the cheque is partly paid and the fact is mentioned on the cheque, it can be negotiated for the balance amount (Sec. 56). Conditional Endorsement: An endorsement which stipulates some conditions is called conditional endorsement. For example Pay to Mr. A when he marries. In case of conditional endorsement
the fulfilment of condition is binding between endorser and endorsee only. The paying bank is not bound to verify the fulfilment of such conditions. It is applicable between endorser and endorsee i.e., between immediate parties only. If the instrument is endorsed further without fulfilling the conditions, the other person will become the holder in due course because he has no concern with the fulfilment of the condition. Sans Recourse Endorsement: By adding the words like Pay Venkatesh or order without recourse to me the holder excludes his liability as an endorser. This type of endorsement is called Sans Recourse. Facultative Endorsement: Where an endorser give up his rights or increases his liability by express words by writing Pay Venkatesh or order, notice of dishonour waived, it becomes a facultative endorsement. Forged Endorsement: Endorsement made by person other than the holder, by signing the name of holder, is called forged endorsement. All endorsees including a Holder or Holder in due course or Holder for values subsequent to the forged endorsement do not derive any title to the instrument. The paying banker gets protection as per Sec 85(1) provided the endorsement is regular. Effect of Endorsement: An unconditional endorsement of negotiable instrument followed by its unconditional delivery, transfers to the endorsee the property therein, vesting in him the title to the instrument. The endorsee acquires a right to negotiate the instrument to anyone he likes and sue all parties whose names appear on it. The endorser on the other hand, assumes the liability of a principal debtor till the instrument is paid. Liability of Endorser U/s 25, by endorsing an instrument, the endorser impliedly promises that On due presentment, the instrument will be accepted and paid, In case of dishonour of bill, he will compensate the holder, provided the notice of dishonour is given. He will not deny to a holder in due course, the genuineness or regularity of the drawers signature and endorsement and; He will not deny the validly of endorsement and his title to the instrument to any subsequent endorsee. Every endorser after dishonour is liable as upon on instrument payable on demand.
Impairing Endorsers Remedy: Where the holder of a negotiable instrument without the consent of the endorser destroys or impairs the endorsers remedy against any prior party, the endorser is discharged from liability to the holder to the same extent as if the instrument has been paid on maturity (Sec. 40). For instance, if an instrument is endorsed by holder B in favour of C and C endorses it in favour of D, D to E and B strikes the endorsement of C without the consent of E; B is not entitled to recover anything from E and is absolved of his liability. Negotiation back in favour of Endorser: When one of the prior endorsers again becomes holder of the NI before maturity, it is called negotiation back. In such circumstances, all parties subsequent to the said holder do not remain liable and cannot be sued by him on the bill. For instance, where a cheque is endorsed by B in favour of C and C to D and by D to E and E endorsers it in favour of C, C reaches at the previous position when he had endorsed in favour of D. C can demand payment from B only and not D & E.
Negotiation back in favour of Drawer: If the negotiation back is in favour of a drawer of the cheque, then no party remains liable and the cheque is treated as satisfied. No further endorsement can be done in case of negotiation back either in favour of drawer or in favour of previous endorser. Regularity of Endorsements: Sec 85(1) protects a paying banker in case of payment of an order cheque and Sec 85-A in case of a bank draft, provided the endorsement is regular (which may be or may not be genuine) Bankers paying a cheque with irregular endorsement may be held liable for negligence and shall lose the statutory protection. To consider an endorsement as regular and valid, the following conditions should be fulfilled: Payee or endorsee of a bill himself or his duly authorised agent must sign the endorsement. If a cheque is payable to two persons, both of them must endorse it in their own hand writing. Endorser should not sign in capital letters, otherwise, it will be treated as endorsement by illiterate person and will require witness and will be considered as irregular endorsement. Spelling of the name of the endorsee must be the same as appearing in the instrument. If his name is wrongly spelt, he must sign in the manner shown on the instrument and again with correct spelling. Initials of the name of payee or holder should not be changed in the endorsement.
Endorsement on bearer cheques: A paying bank gets protection u/s 85(2) in respect of a bearer cheque and he need not verify the endorsement, as once a bearer is considered always a bearer. For such endorsements the paying bank is not to take any cognizance. All types of endorsement on bearer cheque are meaningless and paying banker is discharged from liability after making the payment. It means, on bearer cheque even in case of irregular or restrictive endorsement paying banker will get the protection.
When cheque cannot be endorsed?

Account payee crossing Special crossing Restrictive endorsement Negotiation back
CROSSING: Crossing is a unique feature associated with a cheque affecting to a certain extent the obligation of the paying banker and also its negotiable character. Crossing of a cheque implies two parallel transverse lines on the face with or without words, such as & Co, notnegotiable etc.
Types of Crossing
a) b) General Crossing (Sec. 123) Special Crossing (Sec. 124)
General Crossing: A general crossing, as per Sec.126, is a direction to the paying bank not to pay a cheque across the counter i.e. banker on whom it is drawn shall not pay it otherwise than to a banker only. Sec 123 of the NI Act defines General Crossing as Where a cheque bears across its face addition of the words and company or any abbreviation thereof between two parallel transverse
lines or of two parallel transverse lines simply, either with or without the words not negotiable, that addition shall be deemed a crossing and the cheque shall be deemed to be crossed generally. Special Crossing: A Special Crossing implies the specification of the name of the banker on the face of the cheque. Sec 124 of the NI Act reads, Where a cheque bears across its face, an addition of the name of a bank either with or without the words not-negotiable that addition shall be deemed a crossing and the cheque shall be deemed to be crossed specially, and to be crossed to that banker. In simple words, a special crossing is a direction to the paying bank for paying to that bank whose name is there on the face of the cheque. Cancellation/Opening of Crossing: Crossing can be cancelled by the drawer only by adding the words crossing cancelled and with proper authentication. The payment of such cheques should preferably be given to drawer only as the chances of forgery in such cases could be high. Protection to paying Bank for crossed cheque: Protection is available to a paying bank, as per Sec. 128 of NI Act, if the same is a payment in due course as per Sec 10 of NI Act. NOT NEGOTIABLE CROSSING (Sec 130) The notation not-negotiable by itself does not constitute a crossing. When it is added to a general or special crossing, the crossing becomes a Not-negotiable Crossing. The inclusion of the words not-negotiable takes away one of the important characteristics of negotiability though the instrument continues to be transferable. The normal characteristic of cheque is that the transferee of a cheque if he fulfils the requirements of holder in due course can get absolute title to the cheque notwithstanding the defective title of the transferor. However, in case of a cheque bearing not-negotiable crossing, the transferee of a cheque cannot have a better title than that of the transferor inspite of fulfilling all the requirements of Holder in due course as mentioned in Sec 9 of NI Act. Further Transfers not restricted: Not-negotiable crossing does not restrict further transfers but the endorsee do not get a better title than the endorsers. Benefit of not negotiable crossing: This crossing protects the interest of drawer because if the cheque goes into wrong hands the person will not get the better title, which means he will not become the holder in due course and will not be able to demand the money from the drawer, because drawer is answerable only to the holder in due course. Not Negotiable Crossing warning to the endorse/holder: Not negotiable crossing is a warning to the endorsee / holder to thoroughly ascertain that the endorser has right title over the instrument in case he fails to do so, his title may become defective and he would be liable to the true owner of the cheque. Crossed cheque a direction to the Banker: All types of crossings are direction to the paying banker that payment of the cheque must be made to a banker or through a banker only. However, Account payee crossing even though not defined in N.I. Act but legally recognised is a direction to the collecting banker that cheque must be collected in the Account of payee only. The resultant effect of the same is that all types of crossed cheques can be endorsed but Account payee cheque cannot be endorsed because it is to be collected in the Account of payee only. If the collecting bankers sends the Account payee crossed cheque bearing endorsement for collection, paying banker cannot make the payment of that cheque because the apparent tenor states that Account payee cheque cannot be endorsed and if paying banker makes the payment
of that cheque, if will not be a payment in due course. Therefore, the paying banker will return the cheque with the reason that Account payee cheque cannot be endorsed. At the same time, collecting the cheque for other than the Account of the payee will be liable for conversion. Responsibility of the paying banker in case of Cross Cheques (Sec 129): Any banker paying a cheque crossed generally otherwise, than to a banker, or a cheque crossed specially otherwise, than to a banker, to whom, the same is crossed or his agent for collection, being a banker, shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid. PAYMENT OF CHEQUES Liability of Drawee (payment banker): It is statutory Obligation of the banker of the banker to honour the cheques of a customer provided there is sufficient balance and the cheque is otherwise in order. Sec 31 of NI Act provides that The drawee of a cheque a) b) c) d) Having sufficient funds of the drawer in his hands, Property applicable to the payment of such cheque, Must pay the cheque when duly required to do so and In default of such payment, must compensate the drawer for any loss or damage caused by such default.
As per the above Sec, following conditions must be satisfied: a) b) The bank must have sufficient funds of the drawer in his hands. The funds should be properly application to the payment of the cheque i.e. there should not be any legal bar in payment of this cheque. Cheque should not be countermanded. There is no garnished order or attaching the amount of cheque. No notice is received regarding insolvency, death or insanity of customer. There is no defect in the title of the customer and the cheque is otherwise in order.
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SPECIMEN OF CROSSING
Sec-123 GENERAL CROSSING Sec -124 SPECIAL CROSSING
IMPORTANT ASPECTS OF CROSSING Two transverse lines essential for General Crossing: Two transactions lines across the face of the cheque are essential for general crossing. A cheque generally crossed can be collected through a banker-any banker i.e. the bank of the holder. Two transverse lines not essential for Special Crossing: Drawing two parallel transverse lines either with or bill of exchange or promissory note. Who can cross: As per Sec 125, where a cheque is uncrossed, the holder may cross it generally or specially. Crossing can also be done by: A drawer, at the time of issue, A holder (general to special or not negotiable crossing) and A banker who receives the cheque for collection (special crossing) can cross the instruments again to another banker who is agent for collection.
Alteration of General Crossing to Special Crossing and vice versa: A general crossing can be converted to a special crossing by the drawer or by any holder. However a special crossing can
be changed to a general crossing only under the signatures of the drawer since it amounts to material alteration. Cheque crossed specially to more than one bank: As per Sec 127, if a cheque is crossed specially to more than one bank (unless one bank is acting as collecting agent to another), the payment shall be refused. Cheque crossed to two or more branches of the same bank: A cheque crossed to two or more branches of the same bank, is considered to be crossed to one bank only, because the whole bank has indivisible corporate entity. Cheque can be collected by any branch of the bank whether the name of the branch is mentioned or not. Then duly required to do so means: Cheque should be in proper form, and issued from a particular cheque book which is issued in that Account only and further properly filled & signed. The Cheque should not be mutilated. Any alteration should be duly authenticated. Should not be stale or post-dated. It must be properly endorsed if necessary. Cheque must be presented at the branch where Account is kept. Presentment should be during business hours.
Liability of Wrongful Dishonour: If the banker wrongfully dishonours a customer cheque, the bank is liable for damages to the customer. The damaged can be as under: a) b) Nominal damages i.e. equal to actual loss. Substantial damages i.e. direct and indirect loss e.g., if the bank has returned Rs. 5,000 cheque and customer alleges that cheque was for an advance amount paid for tender and if the cheque would have been honoured by the bank he would have get a tender of Rs. 5 lac and in that tender he could have earned Rs. 3 lac, the bank will have to compensate for this indirect loss to the customer. Exemplary damages i.e. compensation for defamation or mental agony suffered by the customer due to the wrongful dishonour of the cheque.
c)
Golden rule of Damages: In case of wrongly dishonour of cheque the smaller the amount bigger the compensation. Protection for Paying Banker in case of Cheque: Important Sections dealing with protection for Paying Banker are: a) Regularity of endorsement Sec. 85(1): Paying bankers liability is to ensure the regularity of endorsement and is not concerned with genuineness of endorsement. The genuineness of endorsement is the liability of collecting banker. Therefore, protection is available to the paying banker in case of forged endorsements. All endorsements on a bearer cheque are meaningless Sec. 85(2): It means once a bearer, always a bearer. Protection in case of demand draft 85(A): Protection as per 85(1) and (2) available for a bank draft also. Cheque with material alteration which is not apparently visible (Sec. 89): Where a promissory note, bill of exchange or cheque has been materially altered but does not appear to have been so altered, or where a cheque is presented for payment which does not at the time of presentation appear to be crossed, the paying banker will get the protection.
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b) c) d)
e)
Where the cheque is an electronic image of a truncated cheque, any difference in apparent tenor of such electronic image of the truncated cheque shall be a material alteration and it shall be the duty of the bank or the clearing house, as the case may be, to ensure the exactness of the apparent tenor of electronic image of the truncated cheque while truncating and transmitting the image. Any bank or a clearing house which receives a transmitted electronic image of a truncated cheque, shall verify from the party who transmitted the image to it, that the image so transmitted to it and received by it, is exactly the same. If a cheque payable to order, purports to be endorsed by or behalf of the payee and the banker on whom it is drawn pay if in due course, the banker is discharged and he can debit his customers Account with the amount so paid even if the endorsement of payee might turn out to be forgery and might have been endorsed by payees agent without his authority. To claim the protection the payment must be a payment in due course (Sec 10).
f)
g)
h)
PAYMENT IN DUE COURSE: As per Sec. 10, a payment would be consideration in due course if it is made: In accordance with the apparent tenor of the instrument. In good faith and without negligence. To the person in possession of the instrument. Under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount mentioned therein. It must be made in money only.
Apparent tenor: Apparent tenor implies that the bank should ascertain the actual intention of the parties, as it appears or seen in the instrument. Payment of a crossed cheque in cash is not a payment in accordance with the apparent tenor. Similarly, a payment made after stop payment instructions, after banking hours, of a forged cheque etc., are not the payments in due course. (P.M. Das v. Central Bank of India, AIR 1978 Cal). WHEN BANK SHOULD NOT PAY Death of the drawer - The death of a drawer in case of individuals Account (such as Individual/ Proprietorship, Joint Accounts, HUF, Partnership Firm) terminates the contractual relationship. Company in liquidation - The balance lying with the bank in case of company in liquidation, vests with the official liquidator. Insane customers - The insanity terminates the contractual capacity and payment after that cannot be made. Insolvent drawers - Where a customer is adjudged insolvent, the balance in the Account is vested with official receive/assignee. Hence bank should stop the operations in the Account. If the Account is having the credit balance, bank will remit the proceeds to official receiver/assignee whenever demanded and in case of debit balance, bank should file the recovery before official receiver/assignee because after insolvency bank cannot initiate the legal proceedings against insolvent persons. Insolvency means commercial death of a person. Countermanding - On receipt of valid stop payment instruction from the drawer bank must not pay. Stop payment instructions from others cannot be accepted but due precaution should be
taken when information relating to loss of an instrument is received from others e.g., if the payee informs the loss of cheque, he has no right to stop the payment but at the same time this has become the suspicious instrument for the bank and payment of such instrument will never be a payment in due course. The cheque will be returned with the reason cheque reported lost by the payee, drawers instructions awaited. OthersWhen cheque is post dated or bank has insufficient funds or cheques is of doubtful legality, or the funds in the hands of the bank are not properly applicable to the payment, or cheque or it is irregular, ambiguous or otherwise materially altered or has become stale etc.
PAYEE OF CHEQUESAFE GUARDS:

The bank should take abundant precaution while dealing with special type of payees such as minors, insolvent, company representatives etc. Minors Sec 26 states that a minor can draw, endorse, deliver and negotiable any negotiable instrument, but he binds all parties except, himself. Hence a minor payee can be paid but it should be ensured that he appears to be capable of obtaining payment because to get the valid discharge it is the duty of the paying banker to make the payment in good faith and without negligence. Company/Corporation/Govt. Department - Cheques drawn in favour of a company should not be paid in cash and should be credited to its Account, from where they can obtain cash payments. The cheques drawn in favour of a company should be paid through a bank Account only (even if bearer). Such cheques endorsed in favour of 3rd parties, directors and employees should also not be paid. Similar treatment is given to the cheques relating to Govt. departments or corporations. Impersonal payees - Where the payee is impersonal, such as Bhagwan Ram or order, the payment should be made to drawer or after getting an endorsement from a drawer. Insolvent - The property of an un-discharged insolvent is vested in Official receiver and he is not entitled to obtain payment, where he is payee of a cheque. Hence he should not be paid. AMOUNT OF CHEQUE: If the amount ordered to be paid is stated differently in figures and in words, the amount stated in words is paid irrespective of the fact, which amount is more or less. (Sec 18).
BEARER OR ORDER CHEQUES

If the cheque is issued without mentioning the words order or bearer, it should be treated to be payable to order. Its conversion from order to bearer should be with full signatures. However, if the cheque is drawn payable to a person only i.e.. Mr. Amir Khan only, then it can be paid only to Mr.Amir Khan and not his order. This cheque cannot be further endorsed also. If both the words bearer as well as order is written and none of them is deleted, the cheque would be considered as bearer.
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DRAWERS SIGNATURES: FORGED CHEQUE

Bank liable in case of payment of forged cheque: In case of payment of forged cheque, the paying banker does not get valid discharge as the payment does not carry the mandate of the drawer. Even in cases, where forgery of signature has been done very cleverly and it cannot be detected by any methodology, even then the bank cannot debit the Account of the drawer. The burden to disprove forgery lies with the banker. Customer not liable for not keeping the cheque under lock and key: In case of payment of forged instrument, the bank cannot take the plea that the drawer was negligent in not keeping the cheque book under lock and key as mentioned in the Account opening rules. Joint Accounts: In case of joint Accounts, all the signatures of the drawers must be genuine. Subsequent Confirmation by Drawer: In situation where the drawer subsequently confirms that the signatures on the cheque was done by him, the drawer is stopped from denying the signatures later on. Protection to Collection banker: The Collecting Bank gets protection, in respect of a forged cheque, because it is not the duty of the collecting banker to verify the signatures of the drawer.
DRAWERS SIGNATURE DIFFERS: The paying banker should return the cheque unpaid and will be liable, if the signature of the drawers does not tally with that of the specimen signature. FORM OF CHEQUE: NI Act does not prescribe any specific form of a cheque but banks have designed their own forms of cheques as well as withdrawal slips, which contain all the necessary ingredients of the definition of cheque in NI Act. Withdrawals by the customer by writing an application on a plain paper even though not unlawful but bank will not make the payment of the same. As per RBI guidelines, in Accounts where cheque book has been issued even the payment cannot be made on withdrawal slips. DATE OF CHEQUE: The different situations which can emerge regarding date of cheque is that it may be undated, having an impossible date, stale cheque or post dated cheque. UNDATED CHEQUE: A cheque presented on the counter for payment without date should be returned unpaid. However, if the drawer of the cheque has not filled the date, the same can be filled by the holder, but it should filled before presentation to the banker. As such a cheque bearing different hand writing and in different ink can be paid.
Cheque with impossible Date:

A cheque with impossible date, say 30th Feb, 2004 can be paid on or after 29th Feb 2004 (preceding date). A cheque dated on Sunday or holiday can be paid on subsequent date. A cheque bearing a date prior to the opening of the Account can be paid as there is a contractual relationship on the data of payment of the cheque. Suppose the Account is opened on 1st Jan 2004 but the cheque is received dated 25th Nov, the same can be paid. Similarly a cheque signed by the agent bearing a date a date prior to the date of issue of power of attorney can be paid. A cheque bearing dates as per National Saks Calendar is in order and can be paid. However, a cheque on which the date is mentioned as July 2005 will not be paid as it is

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incomplete date and this instrument is an inchoate instrument and payment of such instrument will not be a payment in due course. Stale Cheque: Validity period of the cheque is defined in Sec 138 of NI Act, which states that cheque, must be presented to the drawee banker within a period of six months from the date written on it or within its validity period whichever is earlier. Therefore, the maximum validity period of a cheque is six months as per law. This cannot be increased but can be reduced by the drawer. For example a cheque dated 1st Jan 2005. If not presented for payment, becomes stale on 1st July 2005. Payment of stale cheque without revalidation by the drawer is not payment in due course. The drawer of the cheque can reduce the validity period of the cheque by writing on the face of the cheque such words as, cheque is valid for three months but it cannot be increased beyond 6 months even with express words. However, the date can be revalidated by the drawer.
Post dated cheque:

Post dated cheques are those which bear a date prior to the date on which it is drawn and the date has not fallen due till presentment. These cheques are valid instruments and are in the form of usance bill of exchange. Post dated cheque become effective on the date mentioned on the cheque and the drawer of such cheque can be used by the holder after the mentioned date only if dishonoured. The payment of post-dated cheques is not payment in due course. Further paying bank is exposed to following risk on payment of post-dated cheques: 1. 2 3. 4. The drawer can stop the payment before the given date. A garnishee order may be served on the bank in the concerned Account. There may be situation of death, insolvency or insanity of the drawer Another cheque of the customer may bounce due to insufficiency of the funds during the period and bank may be held liable for that.
MATERIAL ALTERATION (SEC 87) Material alteration is an alteration in a cheque or a negotiable instrument, which brings basic change in the mandate given by the drawer. Material alterations include alteration in the date, amount of the cheque, name of payee, rate of interest (D.P. Note); converting order cheque to bearer cheque or crossed to open cheques etc. Alterations permitted under Act : Alterations such as filling blanks of inchoate instruments (Sec 20), conversion of blank endorsements into endorsement in full (Sec 49), crossing of an open cheques (Sec 125), conversion of general crossing into special crossing. Further, alterations which do not change the mandate of the drawer or position of the party materially are also non-material alterations. For example, converting a bearer cheque to order cheque, completing the date etc. Rectification of material alteration : Material alteration can be corrected or rectified by the drawer of a cheque only. Liability of paying banker in case of payment of cheque which is materially altered: In case of payment of materially altered cheque, the paying bank cannot debit the Account of the drawer as the payment has not been done as per the mandate of the drawer. Payment of a materially altered cheque is not considered a payment in due course as per Sec 10 of NI Act.
Protection to paying banker in case of cheques which do not appear to have been materially altered: As per Sec 89, where a promissory note, bill of exchange or cheque has been materially altered but does not appear to have been so altered i.e. material alteration is not apparent, the paying banker is protected, if the paying banker had exercised reasonable care, prudence and scrutiny.
COLLECTION OF CHEQUES
A Bank collecting a cheque acts either as an agent or as a holder for value if the cheque is purchased by the bank before sending it for collection. It acts as an agent when he collects and no receiving the amount, credits his customers Account. On the other hand it acts as a holder for value or holder in due course when the bank purchases the cheque from the customer and credits the Account before realization of the cheque. While collecting a cheque for a customer, the banker acts as an agent and the relationship is that of principal and agent. As an agent, bank has certain duties to his customers. They are: Duty to present cheque for payment without delay: If there is any delay on the part of the collecting banker and in the meanwhile drawer changes his position and the cheque is dishonoured, the collecting bank will be held negligent. Duty to give notice of dishonour: If notice of dishonour has not been given within a reasonable time and the customer suffers any loss because of this, then the bank will be held liable for the same. Duty to credit the proceeds after realization to the customer: There should not be any delay on the part of the collecting banker in crediting the proceeds to the Account of the customer or remitting the proceeds if the sender of the cheque happens to be at the place other than one where collecting banker is situated and wants the proceeds to be remitted by Demand Draft. In this case the draft should be strictly in accordance with customer instructions. Duty to third parties: While collecting the cheque for the customer, the banker is only his customers agent. The bank has no direct title nor he can have better title than his customer. Thus, if the bank collects the cheque to which his customer has no title, the banker can be held liable to the true owner for conversion.
Risk of Conversion: The collecting banker is exposed to risk of conversion when it collects a cheque paid by his customer who has no title of defective title. The bank can be held guilty of conversion & can be made liable for the amount to the true owner of the cheque. Sec 131 of NI Act, provides protection to a collecting banker against conversion in certain circumstances. Statutory Protection in case of Conversion: The statutory protection to a collecting banker is available as per Sec 131 for cheque and Sec 131(A) for bank drafts. This protection is available when bank acts as agent for collection. Sec 131 is applicable for cheques and drafts but not for bill of exchange and promissory notes. Bankers cheque, divided warrants, interest warrants which are drawn in form of cheques are covered under this Sec. Conditions for Protection: As per Sec 131, a banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specifically to himself, shall not in case the title of the cheque.
1) 2) 3) 4) 5)
The bank must have acted in good faith and without negligence. The cheque collected must be crossed. Bank has received the payment as agent for collection. Bank has collected the cheque in the duty introduced Account of customer only. Collection has been good faith and without negligence I) With faith: To get protection, the collecting bank should have acted bonafide and should not have any fraudulent or malafide intention.
II) Without Negligence: A banker is said to be negligent if the circumstances are such that he should have doubted the genuineness of the title of the customer to the cheque but has failed to do so. Example of Negligence: Three circumstances have to be consideration in deciding the question whether a collecting bank has discharge its responsibility to come within Sec 131. These are: Opening of an Account by its customer whether proper introduction was obtained. The endorsement leading to the collection of the instrument whether there is anything suspicious in it. The operation of the Account whether there was anything peculiar in operating the Account which could have aroused the suspicion of a banker.
DISHONOUR OF CHEQUES DUE TO INSUFFICIENCY OF FUNDS

With a view to discourage the issuing of cheques without sufficient balance, provisions were introduced in NI Act in Secs 138 to 147. By these provisions returning of cheques with the insufficient balance was made the criminal offence. The pre-requisites for criminal prosecution under the Act are: 1) The cheque should have been issued for discharge of lawful liability. A cheque given in gift will not fall in the framework. The cheque should be presented within validity period. Cheque should be returned with the reason insufficient balance but due to different judgements of Supreme Court reasons like Refer to drawer, Account closed, Exceeds arrangement, Payment stopped by drawer and effects not clear are treated equal to insufficient balance. Holder can have the legal remedy against drawer only. The payee or holder in due course should give notice to drawer within 30 days of return of cheque with the reason insufficient balance and demanding payment within 15 days of his receiving information of dishonour. The drawer can make payment within 15 days of the receipt of notice and only if he fails to do so prosecution could take place. The complaint can be made only by the payee or holder in due course. The complaint is to be made within one month of the cause of action i.e. expiry of notice period. No court inferior to that of Metropolitan Magistrate or Judicial Magistrate of 1st class will try the offence.
2)
3) 4)
5) 6) 7) 8)
Two types of procedure for providing the punishment have been prescribed under the law: Summary Proceedings: Punishment is fine up to Rs.5000 or imprisonment up to 1 year or both.
Regular Proceedings: Punishment is fine up to double the amount of cheque or imprisonment up to 2 year or both. All partners are liable except dormant partner and in case of company all Directors are liable except Nominated Director. Under regular proceeding, the court will conclude the trial within six months from the day of filing of the complaint. Magistrate issuing summons to an excused may direct a copy of summons to be served at the place where such accused ordinarily resides or carries on business. Banks cheque returning memo will be treated as prima facie evidence of return of cheque by the court.
DEALING WITH INCIDENCE OF FREQUENT DISHONOUR:

With a view to enforce financial discipline among the customers, banks should introduce a condition for operation of Accounts with cheque facility that in the event of dishonour of a cheque valuing rupees one crore and above drawn on a particular Account of the drawer on four occasions during the financial year for want of sufficient funds in the Account, no fresh cheque book would be issued. Also, the bank may consider closing current Account at its discretion. However, in respect of advances Accounts, such as cash credit Account, OD Account, the need for continuance or otherwise of these credit facilities and the cheque facility relating to these Accounts should be reviewed by appropriate authority higher than the sanctioning authority. For the purposes of introduction of the condition mentioned above in relation to operation of the existing Accounts, banks may at the time of issuing new cheque book, issue a letter advising the constituents of the new condition. If a cheque is dishonoured for a third time on a particular Account of the drawer during the financial year, banks should issue a cautionary advice to the concerned constitute drawing his attention to aforesaid condition and consequential stoppage of cheque facility in the event of cheque being dishonoured on fourth occasion on the same Account during the financial year. Similar cautionary advice may be issued if a bank intended to close the Account. n
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CHAPTER - 5
THE INDIAN CONTRACT ACT-1872
[W.e.f. 25th April, 1872]
Definition of a Contract: Sec. 2(h) defines a Contract as an agreement enforceable by law. Every agreement and Promise enforceable at law is a contract. Agreement & Enforceability by Law: An agreement comes in to existence whenever one or more persons promise to one or others, to do or not to do something. As per the act agreement is defined as every promise and every set of promises forming consideration for each other. ESSENTIALS OF A VALID CONTRACT: Agreements become Contracts only if certain conditions mentioned below are satisfied. Offer & Acceptance must exist Capacity to contract Free consent Certainly Lawful consideration should exist Intention to create a legal relationship should exist Possibility of performance. Legality of the object of contract He has attained the age of majority He is of sound mind & He is not disqualified from entering in to a contract by any law to which he is subject.
Sec 11 of the Contract Act lays down that every person is competent to enter in to a contract if:
Minors Contracts: As per Sec. 11 of the act, one has to have attained the age of majority. As such, an agreement made with a minor is Void-ab inito. A minor therefore is not liable to perform any promise made by him under any agreement. In India minor will attain majority at age 18. Contracts with a Pardanashin Lady: In banks we often come across contracts to be made such as Account opening, a locker to be rented etc where the customer is a Pardanashin lady. It is therefore essential for bankers to know that a contract with a Pardanashin lady is presumed to be under undue influence; one has to show that there was no undue influence and full disclosure of facts was shown to her before she entered the contract. Void Agreements/Contracts: Contracts which cannot be carried out at all (even with the consent of the parties concerned where available) are known as void contracts. For example, a contract with the minor is void and even if he gives consent after becoming major, it will remain void. All void contracts are invalid but they are not illegal. A contract with a minor is valid but it is not illegal because no action can be taken against the person. But if the agreement is for opening a gambling den, the agreement is invalid and also illegal and against public policy and the parties is liable to be arrested. Agreements which can either be avoided or carried out by the aggrieved party are called Voidable agreements.
Example: Mr. Venkatesh has entered in to an agreement to sell Basmati rice of A+ grade quality to Shiva. However, when the consignment arrived. Shiva found that the rice received is of B+ quality. The actual consignment received by Shiva was of inferior quality. Shiva, therefore, is the aggrieved party. It is up to him either to accept the consignment or refuse. Law will not interfere. The following kinds of agreements have been specifically declared void under the act: 1) 2) 3) 4) 5) 6) 7) 8) 9) Agreements without consideration (other than exception allowed) Unlawful consideration The object of the agreement is unlawful Reciprocal promises where there are void promises Where capacity to contract does not exist Where there is Mistake of fact and law Where Fraud exists Wagering agreements Agreements in restraint of trade
10) Agreement in restraint of marriage 11) Agreement in restraint of legal proceedings 12) Agreements where performance is impossible 13) Vague agreements
PRELIMINARY
Section 1-Short title This Act may be called the Indian Contract Act, 1872.Extent, Commencements.-It extends to the whole of India 2*[except the State of Jammu and Kashmir]; and it shall come into force on the first day of September, 1872.3* Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent with the provisions of this Act.
Section 2-Interpretation clause

In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context:(a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal: (b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise: (c) The person making the proposal is called the promisor and the person accepting the proposal is called the promisee:(d) When, at the desire of the promisor, the promisee or any other person has clone or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such Act or abstinence or promise is called a consideration for the promise: (e) Every promise and every set of promises, forming the consideration for each other, is an agreement: (f) Promises, which form the consideration or part, of the consideration for each other are called reciprocal promises;
(g) An agreement not enforceable by law is said to be void; (h) An agreement enforceable by law is a contract; (i) (j) An agreement which is enforceable by law at the option of one or more of the partiesthereto, but not at the option of the other or others, is a voidable contract; A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.
CHAPTER I-OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS

Section 3-Communication, acceptance and revocation of proposals Communication, acceptance and revocation of proposals.-The communication of proposals the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of_ the party proposing, accepting or revoking by which he intends to communicate such proposal acceptance or revocation, or which., has the effect of communicating it Section 4-Communication when complete Communication when complete.-The, communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. The communication of an acceptance is complete, as against the proposer, when it is put in a course of transmission to him, so as to be out of the power of the acceptor; as against the acceptor, when it comes to the, knowledge, of the proposer. The communication of a revocation is complete, as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person, to whom it is made, when it comes, to his knowledge. Examples: (1) A proposes, by letter, to sell a house to B at a certain price. The communication of the proposal is complete when B receives the letter. (2) B accepts As proposal by a letter sent by post. The communication of the acceptance is complete, as against A when the letter is posted as against B, when the letter is received by A. (3) A revokes his proposal by telegram. The revocation is complete as against A when the telegram is despatched. It is complete as against B when B receives it. B revokes his acceptance by telegram. Bs revocation is complete as against B when the telegram is despatched, and as against A when it reaches him. Section 5-Revocation of proposals and acceptances A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards. Examples: A proposes, by a letter sent by post, to sell his house to B. B accepts the proposal by a letter sent by post. A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.
B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards. Section 6-Revocation how made A proposal is revoked(1) by the communication of notice of revocation by the proposer to the other party(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance; (3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or (4) by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. Section 7-Acceptance must be absolute In order to convert a proposal into a promise, the acceptance must(1) be absolute and unqualified; (2) be expressed in Some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but if he fails to do so, he accepts the acceptance. Section 8-Acceptance by performing conditions, or receiving consideration Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal. Section 9-Promises, express and implied In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.
CHAPTER II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS

Section 10-What agreements are contracts. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in [India] and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. Section 11-Who are competent to contract Every person is competent to contract who is of the age of majority according to the law to which he is subject, 3*and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. Section 12-What is a sound mind for the purposes of contracting A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgement as to its effect upon his interests.
A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. A person, who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind. Examples: (a) A patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals. (b) A sane man, who is delirious from fever or who is so drunk that he cannot understand the terms of a contract or form a rational judgement as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts. Section 13-Consent defined Two or more persons are said to consent when they agree upon the same thing in the same sense. Section 14-Free consent defined Consent is said to be free when it is not caused by1) 2) 3) 4) 5) coercion, as defined in section 15, or undue influence, as defined in section 16, or fraud, as defined in section 17, or misrepresentation, as defined in section 18, or mistake, subject to the provisions of sections 20, 21 and 22. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.
Section 15-Coercion defined Coercion is the committing, or threatening to commit, any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. Explanation.-It is immaterial whether the Indian Penal Code is or is not in force in the place where the coercion is employed. Examples: A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code. A afterwards sues B for breach of contract at Calcutta. A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Indian Penal Code was not in force at the time when or place where the act was done. Section 16-Undue influence defined (1) A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. (2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another (a) where he holds a real or apparent authority over the other or where he stands in a fiduciary relation to the other;
or (b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress. (3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other. Nothing in this sub-section shall affect the provisions of section Ill of the Indian Evidence Act, 1872. Examples: A having advanced money to his son, B, during his minority, upon Bs coming of age obtains, by misuse of parental influence, a bond from B for a greater amount than the sum due in respect of the advance. An employes undue influence. A, a man enfeebled by disease or age, is induced, by Bs influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services. B employs undue influence. A, being in debt to B, the money-lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence. A applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. This is a transaction in the ordinary course of business, and the contract is not induced by undue influence.]
Section 17-Fraud defined Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his agent, or to induce him to enter into the contract:(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true ; (2) the active concealment of a fact by one having knowledge or belief of the fact ; (3) a promise made without any intention of performing it (4) any other act fitted to deceive ; (5) any such act or omission as the law specially declares to be fraudulent. Explanation.-Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, 1* or unless his silence is, in itself, equivalent to speech. Section 18-Misrepresentation defined; Misrepresentation means and includes(1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true (2) any breach, of duty which, without an intent to deceive, gains an advantage to the
person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of any one claiming under him; (3) causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement. Section 19-Voidability of agreements without free consent. Voidability of agreements without free consent.-When consent to an agreement is caused by coercion,1* fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract whose consent was caused by fraud or mis-representation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true. Exception.-If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence. Explanation.-A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable. Examples; (1) A, intending to deceive B, falsely represents that five hundred tonnes of indigo are made annually at As factory, and thereby induces B to buy the factory. The contract is voidable at the option of B. (2) A, by a misrepresentation, leads B erroneously to believe that, five hundred kgs of indigo are made annually at As factory. B examines the accounts of the factory, which show that only four hundred kgs of indigo have been made. After this B buys the factory. The contract is not voidable on account of as misrepresentation. (3) A fraudulently informs B that as estate is free from encumbrance. B thereupon buys the estate. The estate is subject to a mortgage. B may either avoid the contract, or may insist on its being carried out and the mortgage debt redeemed. (4) B, having discovered a vein of ore on the estate of A, adopts means to conceal, and does conceal, the existence of the ore from A. Through As ignorance B is enabled to buy the estate at an under-value. The contract is voidable at the option of A. (5) A is entitled to succeed to an estate at the death of B; B dies: C, having received intelligence of Bs death, prevents the intelligence reaching A and thus induces A to sell him his interest in the estate. The sale is voidable at the option of A. Power to set aside contract induced by undue influence. When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit there under, upon such terms and conditions as to the Court may seem just. Examples; (1) As son has forged Bs name to a promissory note. B, under threat of prosecuting as son, obtains a bond from A for the amount of the forged note. If B sues on this bond, the Court may set the bond aside.
(2) A, a money-lender, advances Rs. 100 to B, an agriculturist, and, by undue influence, induces B to execute a bond for Rs. 200 with interest at 6 per cent. per month. The Court may set the bond aside; ordering B to repay the Rs. 100 with such interest as may seem just. Section 20-Agreement void where both parties are under mistake as to matter of fact. Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. Explanation.-An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact. Examples: (a) A agrees to sell to B a specific cargo of goods supposed to be on its way from England to Bombay. It turns out that, before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of the facts. The agreement is void. (b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void. (c) A, being entitled to an estate for the life of B, agrees to sell it to C. B was dead at the time of the agreement, but both parties were ignorant of the fact. The agreement is void. Section 21-Effect of mistakes as to law. A contract is not voidable because it was caused by a mistake as to any law in force in [India]; but a mistake as to a law not in force in (India) has the same effect as a mistake of fact. Example; A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation: the contract is not voidable. Section 22-Contract caused by mistake of one party as to matter of fact. A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact. Section 23-What considerations and objects are lawful and what not. The consideration or object of an agreement is lawful, unless- it is forbidden by law or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another or; the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. Examples : (a) A agrees to sell his house to B for Rs.10000. Here Bs promise to pay the sum of Rs.10000 is the consideration for As promise to sell the house, and As promise to sell the house is the consideration for Bs promise to pay the Rs.10000. These are lawful considerations. (b) A promises to pay B Rs.1000 at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here the promise of each party is the consideration for the promise of the other party and they are lawful considerations.
(c) A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain voyage. Here as promise is the consideration for Bs payment and Bs payment is the consideration for As promise and these are lawful considerations. (d) A promise to maintain Bs child and B promise to pay Rs.1000 yearly for the purpose. Here the promise of each party is the consideration for the promise of the other party. They are lawful considerations. (e) A, B and C enter into an agreement for the division among them of gains acquired, or to be acquired, by them by fraud. The agreement is void, as its object is unlawful. (f) A promises to obtain for B an employment in the public service, and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful. (g) A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void. as it implies a fraud by concealment, by A, on his principal. (h) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful. (i) As estate is sold for arrears of revenue under the provisions of an Act of the Legislature, by which the defaulter is prohibited from purchasing, the estate. B, upon an understanding with A, becomes the purchaser, and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect a purchase by the defaulter, and would so defeat the object of the law. A, who is Bs mukhtar, promises to exercise his influence, as such, with B in favour of C, and C promises to pay Rs.1000 to A. The agreement is void, because it is immoral.
(j)
(k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code.
Void agreements
Section 24-Agreement void, if considerations and objects unlawful in part. If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void. Examples : A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the object of As promise, and the consideration for Bs promise, being in part unlawful. Section 25-Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law. An agreement made without consideration is void, unless(1) it is expressed in writing and registered under the law for the time being in force for the registration of 1*[documents], and is made on account of natural love and affection between parties standing in a, near relation to each other ; or unless (2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless
(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract. Explanation 1 - Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made. Explanation 2 - An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given. Examples : (a) A promises, for no consideration, to give to B Rs.1000. This is a void agreement. (b) A, for natural love and affection, promises to give his son, B, Rs.1000. A puts his promise to B into writing and registers it. This is a contract. (c) A finds Bs purse and gives it to him. B promises to give A Rs. 50. This is a contract. (d) A supports Bs infant son. B promises to pay As expenses in so doing. This is a contract. (e) A owes B Rs.1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract. (f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. As consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration. (g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the agreement was freely given. The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not As consent was freely given. Section 26-Agreement in restraint of marriage void. Every agreement in restraint of the marriage of any person, other than a minor, is void. Section 27-Agreement in restraint of trade void. Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Saving of agreement not to carry on business of which good-will is sold.Exception 1.-One who sells the good-will of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the good-will from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business. Section 28-Agreements in restraint of legal proceedings void. Every agreement,(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or (b) which extinguishes the rights of any party thereto, or discharges any party thereto from
aby liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent. Section 29-Agreements void for uncertainty. Agreements, the meaning of which is not certain, or capable of being made certain, are void. Examples : (a) A agrees to sell to B a hundred tons of oil. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty. (b) A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void. (c) A, who is a dealer in cocoanut-oil only, agrees to sell to B one hundred tons of oil. The nature of As trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of cocoanut-oil. (d) A agrees to sell to B all the grain in my granary at Ramnagar. There is no uncertainty here to make the agreement void. (e) A agrees to sell B one thousand tonnes of rice at a price to be fixed by C. As the price is capable of being made certain, there is no uncertainty here to make the agreement void. (f) A agrees to sell to B my white horse for rupees five hundred or rupees one thousand. There is nothing to show which of the two prices was to be given. The agreement is void, Section 30-Agreements by way of wager void. Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. Exception in favour of certain prizes for horse-racing.-This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be awarded to the winner or winners of any horse-race. Section 294A of the Indian Penal Code not affected. Section 294A of the Indian Penal Code not affected.-Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to which the provisions of section 294A of the Indian Penal Code apply.
CHAPTER III OF CONTINGENT CONTRACTS

Section 31.Contingent contract defined. A contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. Example: A contracts to pay B Rs. 10,000 if Bs house is burnt. This is a contingent contract. Section 32-Enforcement of contracts contingent on an event happening. Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened.
If the event becomes impossible, such contracts become void. Examples : (a) A makes a contract with B to buy Bs horse if A survives C. This contract cannot be enforced by law unless and until C dies in As lifetime. (b) A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law unless and until C refuses to buy the horse. (c) A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void. Section 33-Enforcement of contracts contingent on an event not happening. Contingent contracts to do or not to do anything if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible, and not before. Examples: A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks. Section 34-When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person. If the future event on which a contract is contingent is the way in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies. Examples : A agrees to pay B a sum of money if B marries C. C marries D. The marriage of B to C must now be considered impossible, although it is possible that D may die and that C may afterwards marry B. Section 35-When contracts become void which are contingent on happening of specified event within fixed time. Contingent contracts to do or not to do anything if a specified uncertain event happens within a fixed time become void if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible. When contracts may be enforced which are contingent on specified event not happening within fixed time.-Contingent contracts to do or not to do anything if a specified uncertain event does not happen within a fixed time may be enforced by law when the time fixed has expired and such event has not happened or, before the time fixed has expired, if it becomes certain that such event will not happen. Examples : (a) A promises to pay B a sum of money if a certain ship returns within a year. The contract may be enforced if the ship returns within the year, and becomes void if the ship is burnt within the year. (b) A promises to pay B a sum of money if a certain ship does not return within a year. The contract may be enforced if the ship does not return within the year, or is burnt within the year. Section 36-Agreement contingent on impossible events void. Contingent agreements to do or not to do anything, if an impossible event happens, are void,
whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made. Examples: (a) A agrees to pay B Rs.1000 if two straight lines should enclose a space. The agreement is void. (b) A agrees to pay B Rs.1000 if B will marry As daughter C. C was dead at the time of the agreement. The agreement is void.
CHAPTER IV-OF THE PERFORMANCE OF CONTRACTS Contracts which must be performed

Section 37-Obligation of parties to contracts. The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law. Promises bind the representatives of the promisors in case of the death of such promisors before performance, unless a contrary intention appears from the contract. Examples: (a) A promises to deliver goods to B on a certain day on payment of Rs. 1,000. A dies before that day. As representatives are bound to deliver the goods to B, and B is bound to pay the Rs. 1,000 to As representatives. (b) A promises to paint a picture for B by a certain day, at a certain price. A dies before the day. The contract cannot be enforced either by As representatives or by B. Section 38-Effect of refusal to accept offer of performance. Where a promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights under the contract. Every such offer must fulfil the following conditions:(1) it must be unconditional; (2) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by his promise to do (3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver.
An offer to one of several joint promisees has the same legal consequences as an offer to all of them. Examples: A contracts to deliver to B at his warehouse, on the 1st March, 1873, 100 bales of cotton of a particular quality. In order to make an offer of a performance with the effect stated in this section, A must bring the cotton to Bs warehouse, on the appointed day, under such circumstances that B may have a reasonable opportunity of satisfying himself that the thing offered is cotton of the quality contracted for, and that there are 100 bales.
Section 39-Effect of refusal of party to perform promise wholly. When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance. Examples: (a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her 100 rupees for each nights performance. On the sixth night A wilfully absents herself from the theatre. B is at liberty to put an end to the contract. (b) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her at the rate of 100 rupees for each night. On the sixth night A wilfully absents herself. With the assent of B, A sings on the seventh night. B has signified his acquiescence in the continuance of the contract, and cannot now put an end to it, but is entitled to compensation for the damage sustained by him through As failure to sing on the sixth night. By whom contracts must be performed Section 40-Person by whom promise is to be performed. If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it. Examples: (a) A promises to pay B a sum of money. A may perform this promise, either by personally paying the money to B or by causing it to be paid to B by another; and, if A dies before the time appointed for payment, his representatives must perform the promise, or employ some proper person to do so. (b) A promises to paint a picture for B. A must perform this promise personally. Section 41-Effect of accepting performance from third person. When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor. Section 42-Devolution of joint liabilities. When two or more persons have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives, and, after the death of any of them, his representative jointly with the survivor or survivors, and, after the death of the last survivor, the representatives of all jointly, must fulfil the promise. Section 43-Any one of joint promisors may be compelled to perform. When two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any [one or more] of such joint promisors, to perform the whole of the promise. Each promisor may compel contribution. Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.
Sharing of loss by default in contribution.-If any one of two or more joint promisors makes default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares. Explanation-Nothing in this section shall prevent a surety from recovering from his principal, payments made by the surety on behalf of the principal; or entitle the principal to recover anything from the surety on account of payments made by the principal. Examples: (a) A, B and C jointly promise to pay D Rs.3000. D may compel either A or B or C to pay him Rs.3000. (b) A, B and C jointly promise to pay D the sum of Rs.3000. C is compelled to pay the whole. A is insolvent, but his assets are sufficient to pay one-half of his debts. C is entitled to receive Rs.500 from As estate, and Rs.1250 from B. (c) A, B and C are under a joint promise to pay D Rs.3000. C is unable to pay anything, and A is compelled to pay the whole. A is entitled to receive Rs.1500 from B. (d) A, B & C are under a joint promise to pay D Rs.3000, A & B being only sureties for C. C fails to pay. A & B are compelled to pay the whole sum. They are entitled to recover it from C. Section 44-Effect of release of one joint promisor. Where two or more persons have made a joint promise, a release of one of such joint promisors by the promisee does not discharge the other joint promisor or joint promisors; neither does it free the joint promisors so released from responsibility to the other joint promisor or joint promisors. Section 45-Devolution of joint rights. When a person has made a promise to two or more persons jointly, then, unless a contrary intention appears from the contract, the right to claim performance rests, as between him and them, with them during their joint lives, and, after the death of any of them, with the representative of such deceased person. Jointly with the survivor or survivors, and, after the death of the last survivor, with the representatives of all jointly Examples: A, in consideration of 5,000 rupees, lent to him by B and C, promises B and C jointly to repay them that sum with interest on a day specified. B dies. The right to claim performance rests with Bs representative jointly with C during Cs life, and after the death of C with the representatives of B & C jointly.
Time and place for performance

Section 46-Time for performance of promise, when no application is to be made and no time is specified. Where, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time. Explanation.-The question what is a reasonable time is, in each particular case, a question of fact. Section 47-Time and place for performance of promise, where time is specified and no application to be made. When promise is to be performed on a certain day, and the promisor has undertaken to perform
it without application by the promisee, the promisor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed. Examples: A promises to deliver goods at Bs warehouse on the first January. On that day A brings the goods to Bs warehouse, but after the usual hour for closing it, and they are not received. A has not performed his promise. Section 48-Application for performance on certain day to be at proper time and place. When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee, it is the duty of the, promisee to apply for performance at a proper place and within the usual hours of business. Explanation-The question what is a proper time and place is, in each particular case, a question of fact. Section 49-Place for performance of promise, where no application to be made and no place fixed for performance. When a promise is to be performed without application by the promisee, and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at such place. Examples: A undertakes to deliver a thousand kgs of jute to B on a fixed day. A must apply to B to appoint a reasonable place for the purpose of receiving it, and must deliver it to him at such place. Section 50-Performance in manner or at time prescribed or sanctioned by promisee. The performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions. Examples: (a) B owes A Rs.2000. A desires B to pay the amount to As account with C, a banker. B, who also banks with C, orders the amount to be transferred from his account to As credit, and this is done by C. Afterwards, and before A knows of the transfer, C fails. There has been a good payment by B. (b) A and B are mutually indebted. A and B settle an account by setting off one item against another, and B pays A the balance found to be due from him upon such settlement. This amounts to a payment by A and B, respectively, of the sums which they owed to each other. (c) A owes B Rs.2000. B accepts some of As goods in reduction of the debt. The delivery of goods operates as a part payment. (d) A desires B, who owes him Rs.100, to send him a note for Rs. 100 by post. The debt is discharged as soon as B puts into the post a letter containing the note duly addressed to A.
Performance of reciprocal promises

Section 51-Promisor not bound to perform, unless reciprocal promisee ready and willing to perform. When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.
Examples: (a) A and B contract that A shall deliver goods to B to be paid for by B on delivery. A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery. B need not pay for the goods, unless A is ready and willing to deliver them on payment. (b) A and B contract that A shall deliver goods to B at a price to be paid by instalments, the first instalment to be paid on delivery. A need not deliver, unless B is ready and willing to pay the first instalment on delivery. B need not pay the first instalment, unless A is ready and willing to deliver the goods on payment of the first instalment. Section 52-Order of performance of reciprocal promises. Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and, where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires. Examples: (a) A and B contract that A shall build a house for B at a fixed price. As promise to build the house must be performed before Bs promise to pay for it. (b) A and B contract that A shall make over his stock-in-trade to B at a fixed price, and B promises to give security for the payment of the money. As promise need not be performed until the security is given, for the nature of the transaction requires that A should have security before he delivers up his stock. Section 53-Liability of party preventing event on which the contract is to take effect. When a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract. Examples: A and B contract that B shall execute certain work for A for a thousand rupees. B is ready and willing to execute the work accordingly, but A prevents him from doing so. The contract is voidable at the option of B; and, if he elects to rescind it, he is entitled to recover from A compensation for any loss which he has incurred by its non-performance. Section 54-Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises. When a contract consists of reciprocal promises, such that one of them cannot be performed, or that Sections performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract. Examples: (a) A hires Bs ship to take in and convey, from Calcutta to the Mauritius, a cargo to be provided by A, B receiving a certain freight for its conveyance. A does not provide any cargo for the ship. A cannot claim the performance of Bs promise, and must make compensation to B for the loss which B sustains by the non-performance of the contract. (b) A contracts with B to execute certain builders work for a fixed price, B supplying the scaffolding and timber necessary for the work. B refuses to furnish any scaffolding or timber, and the work cannot be executed. A need not execute the work, and B is bound to make compensation to A for any loss caused to him by the non-performance of the contract.
(c) A contracts with B to deliver to him, at a specified price, certain merchandise on board a ship which cannot arrive for a month, and B engages to pay for the merchandise within a week from the date of the contract. B does not pay within the week. As promise to deliver need not be performed, and B must make compensation. (d) A promises B to sell him one hundred bales of merchandise, to be delivered next day, and B promises A to pay for them within a month. A does not deliver according to his promise. Bs promise to pay need not be performed, and A must make compensation. Section 55-Effect of failure to perform at fixed time, in contract in which time is essential. When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. Effect of such failure when time is not essential. Effect of such failure when time is not essential.-If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. Effect of acceptance of performance at time other than that agreed upon. If, in case of a contract voidable on account of the promisors failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance he gives notice to the promisor of his intention to do so. Section 56-Agreement to do impossible act. An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful. A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the Promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Compensation for loss through non-performance of act known to be impossible or unlawful. Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise. Examples: (a) A agrees with B to discover treasure by magic. The agreement is void. (b) A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void. (c) A contracts to marry B, being already married to C, and being forbidden by the law to Which he is subject to Practise polygamy, A must make compensation to B for the loss caused to her by the non-performance of his promise. (d) A contracts to take in cargo for B at a foreign port. As Government afterwards declares war against the country in which the port is situated. The contract becomes void when war is declared.
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(e) A contracts to act at a theatre for six months in consideration of a sum paid in advance by B. On several occasions A is too ill to act. The contract to act on those occasions becomes void. Section 57-Reciprocal promise to do things legal and also other things illegal. Where persons reciprocally promise, firstly, to do certain things which are legal, and, secondly, under specified circumstances to do certain other things which are illegal, the first set of promises is a contract, but the second is a void agreement. Examples: A and B agree that A shall sell B a house for Rs.10000, but that, if B uses it as a gambling house, he shall pay A Rs.50000 for it. The first set of reciprocal promises, namely, to sell the house and to pay Rs.10000 for it, is a contract. The second set is for an unlawful object, namely, that B may use the house as a gambling house, and is a void agreement. Section 58-Alternative promise, one branch being illegal. In the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced. Examples: A and B agree that A shall pay B Rs.1000 for which B shall afterwards deliver to A either rice or smuggled opium. This is a valid contract to deliver rice, and a void agreement as to the opium. Appropriation of payments Section 59-Application of payment where debt to be discharged is indicated. Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly. Examples: (a) A owes B, among other debts, Rs.1000 upon a promissory note which falls due on the first June. He owes B no other debt of that amount. On the first June A pays to B Rs.1000. The payment is to be applied to the discharge of the promissory note. (b) A owes to B, among other debts, the sum of 567 rupees. B writes to A and demands payment of this sum A sends to B 567 rupees. This payment is to be applied to the discharge of the debt of which B had demanded payment. Section 60-Application of payment where debt to be discharged is not indicated. Where the debtor has omitted to intimate and there are no other circumstances, indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits. Section 61-Application of payment where neither party appropriates. Where neither party makes any appropriation the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportion ably.
Contracts which need not be performed Section 62-Effect of novation, rescission, and alteration of contract If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed. Examples: (a) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted. (b) A owes B Rs.10000. A enters into an arrangement with B, and gives B a mortgage of his (As) estate for Rs.5000 in place of the debt of Rs.10000. This is a new contract and extinguishes the old. (c) A owes B Rs.1000 under a contract. B owes C Rs.1000. B orders A to credit C with Rs.1000 in his books, but C does not assent to the arrangement. B still owes C Rs.1000, and no new contract has been entered into. Section 63-Promisee may dispense with or remit performance of promise. Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit. Examples: (a) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise. (b) A owes B Rs.5000. A pays to B, and B accepts, in satisfaction of the whole debt, Rs.2000 paid at the time and place at which the Rs.5000 were payable. The whole debt is discharged. (c) A owes B Rs.5000. C pays to B Rs.1000, and B accepts them, in satisfaction of his claim on A. This payment is a discharge of the whole claim. (d) A owes B, under. a contract, a sum of money, the amount of which has not been ascertained. A without ascertaining the amount, gives to B, and B, in satisfaction thereof, accepts, the sum of Rs.2000. This is a discharge of the whole debt, whatever may be its amount. (e) A owes B Rs.2000, and is also indebted to other creditors. A makes an arrangement with his creditors, including B, to pay them a [composition] of eight annas in the rupee upon their respective demands. Payment to B of Rs.1000 is a discharge of Bs demand. Section 64-Consequences of rescission of voidable contract. When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he have received any benefit there under from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received. Section 65-Obligation of person who has received advantage under void agreement, or contract that becomes void. When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.
Examples: (a) A pays B Rs.1000 in consideration of Bs promising to marry C, As daughter. C is dead at the time of the promise. The agreement is void, but B must repay A the Rs.1000. (b) A contracts with B to deliver to him 250 tonnes of rice before the first of May. A delivers 130 tonnes only before that day, and none after. B retains the 130 tonnes after the first of May. He is bound to pay A for them. (c) A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her a hundred rupees for each nights performance. On the sixth night, A wilfully absents herself from the theatre, and B, in consequence, rescinds the contract. B must pay A for the five nights on which she had sung. (d) A contracts to sing for B at a concert for 1,000 rupees, which are paid in advance. A is too ill to sing. A is not bound to make compensation, to B for the loss of the profits which B would have made if A had been able to sing, but must refund to B the 1,000 rupees paid in advance. Section 66-Mode of communicating or revoking rescission of voidable contract. The rescission of a voidable contract may be communicated or revoked in the same manner, and subject to the same rules, as apply to the communication or revocation of a proposal. Section 67-Effect of neglect of promisee to afford promisor reasonable facilities for performance. If any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to any non-performance caused thereby. Examples: A contracts with B to repair Bs house. B neglects or refuses to point out to A the places in which his house requires repair.
CHAPTER IX-OF BAILMENT

Section 148-Bailment bailor & bailee defined. A bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the bailor. The person to whom they are delivered is called, the bailee . Explanation : If a person already in possession of the goods of another contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment. Section 149-Delivery to bailee how made. The delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorized to hold them on his behalf. Section 150-Bailors duty to disclose faults in goods bailed. The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is aware, and which materially interfere with the use of them, or expose the bailee to extraordinary risks;
and if he does not make such disclosure, he is responsible for damage arising to the bailee directly from such faults. If the goods are bailed for hire, the bailor is responsible for such damage, whether he was or was not aware of the existence of such faults in the goods bailed. Examples: (a) A lends a horse, which he knows to be vicious, to B. He does not disclose the fact that the horse is vicious. The horse runs away. B is thrown and injured. A is responsible to B for damage sustained. (b) A hires a carriage of B. The carriage is unsafe, though B is not aware of it, and A is injured. B is responsible to A for the injury. Section 151-Care to be taken by bailee. In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed. Section 152-Bailee when not liable for loss,etc., of thing bailed. The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care of it described in section 151. Section 153-Termination of bailment by bailees act inconsistent with conditions. A contract of bailment is avoidable at the option of the bailor, if the bailee does any ad with regard to the goods bailed, inconsistent with the conditions of the bailment. Examples: A lets: to B, for hire, a horse for his own riding. B drives the horse in his carriage. This is, at the option of A, a termination of the bailment. Section 154-Liability of bailee making unauthorized use of goods bailed. If the bailee makes any use of the goods bailed, which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them. Examples: (a) A lends a horse to B for his own riding only. B allows C, a member of his family, to ride the horse. C rides with care, but the horse accidentally falls and is injured. B is liable to make compensation to A for the injury done to the horse. (b) A hires a horse in Calcutta from B expressly to march to Benares. A rides with clue care, but marches to Cuttack instead. The horse accidentally falls and is injured. A is liable to make compensation to B for the injury to the horse. Section 155-Effect of mixture, with bailors consent, of his goods with bailees. If the bailee, with the consent of the bailor, mixes the goods of the bailor with his own goods, the bailor and the bailee shall have an interest, in proportion to their respective shares, in the mixture thus produced. Section 156-Effect of mixture without bailors consent, when the goods can be separated. If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods, and the goods can be separated or divided, the property in the goods remains in the parties respectively; but the bailee is bound to bear the expense of separation or division, and any damage arising from the mixture.
Examples: A bails 100 bales of cotton marked with a particular mark to B. B, without As consent, mixes the 100 bales with other bales of his own, bearing a different mark : A is entitled to have his 100 bales returned, and B is bound to bear all the expense incurred in the separation of the bales, and any other incidental damage. Section 157-Effect of mixture, without bailors consent, when the goods cannot be separated. If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods, in such a manner that it is impossible to separate the goods bailed from the other goods and deliver them back, the bailor is entitled to be compensated by the bailee for the loss of the goods. Examples: A bails a barrel of Cape flour worth Rs.45 to B. B, without As consent, mixes the flour with country flour of his own, worth only Rs. 25 a barrel. B must compensate A for the loss of his flour. Section 158-Repayment, by bailor, of necessary expenses. Where, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment. Section 159-Restoration of goods lent gratuitously. The lender of a thing for use may at any time require its return, if the loan was gratuitous, even though he lent it for a specified time or purpose. But, if, on the faith of such loan made for a specified time or purpose, the borrower has acted in such a manner that the return of the thing lent before the time agreed upon would cause him loss exceeding the benefit actually derived by him from the loan, the lender must, if he compels the return, indemnify the borrower for the amount in which the loss so occasioned exceeds the benefit so derived. Section160-Return of goods bailed on expiration of time or accomplishment of purpose. It is the duty of the bailee to return, or deliver according to the bailors directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired, or the purpose for which they were bailed has been accomplished. Section 161-Bailees responsibility when goods are not duly returned. If, by the default of the bailee, the goods are not returned, delivered or tendered at the proper time, he is responsible to the bailor for any loss, destruction or deterioration of the goods from that time. Section 162-Termination of gratuitous bailment by death. A gratuitous bailment is terminated by the death either of the bailor or of the bailee. Section 163-Bailor entitled to increase or profit from goods bailed. In the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from the goods bailed. Example: A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow to A.
Section 164-Bailors responsibility to bailee. The bailor is responsible to the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the goods or to give directions, respecting them. Section 165-Bailment by several joint owners. If several joint owners of goods bail them, the bailee may deliver them back to, or according to the directions of, one joint owner without the consent of all, in the absence of any agreement to the contrary. Section 166-Bailee not responsible on re-delivery to bailor without title. If the bailor has no title to the goods, and the bailee, in good faith, delivers them back to, or according to the directions of, the bailor, the bailee is not responsible to the owner in respect of such delivery. Section 167-Right of third person claiming goods bailed. If a person, other than the bailor, claims goods bailed, he may apply to the Court to stop the delivery of the goods to the bailor, and to decide the title to the goods. Section 168-Right of finder of goods; may sue for specific reward offered. The finder of goods has no right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner; but he may retain the goods against the owner until he receives such compensation; and, where the owner has offered a specific reward for the return of goods lost, the finder may sue for such reward, and may retain the goods until he receives it. Section 169-When finder of thing commonly on sale may sell it. When a thing which is commonly the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses, upon demand, to pay the lawful charges of the finder, the finder may sell it(1) when the thing is in danger of perishing or of losing the greater part of its value, or, (2) when the lawful charges of the finder, in respect of the thing found, amount to twothirds of its value. Section 170-Bailees particular line. Where the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them. Examples: (a) A delivers a rough diamond to B, a jeweller, to be cut and polished, which is accordingly done. B is entitled to retain the stone till he is paid for the services he has rendered. (b) A gives, cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as soon as it is finished, and to give a three months credit for the price. B is not entitled to retain the coat until he is paid. Section 171-General lien of bankers, factors, wharfingers, attorneys and policy brokers. Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods
bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect. Section 172-Bailments of Pledges Pledge pawnor, and pawnee defined. The bailment of goods as security for payment of a debt or performance of a promise is called pledge. The bailor is in this case called the pawnor. The bailee is called the pawnee. Section 173-Pawnees right of retainer. The pawnee may retain the goods pledged, not only for payment of the debt or the performance of the promise, but for the interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged. Section 174-Pawnee not to retain for debt or promise other than that for which goods pledged. Presumption in case of subsequent advances. The pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debt or promise for which they are pledged; but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee. Section 175-Pawnees right as to extraordinary expenses incurred. The pawnee is entitled to receive from the pawnor extraordinary expenses incurred by him for the preservation of the goods pledged. Section 176-Pawnees right where pawnor makes default. If the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledge as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale. If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor. Section 177-Defaulting pawnors right to redeem. If a time is stipulated for the payment of the debt, of performance of the promise, for which the pledge is made, and the pawnor makes default in payment of the debt or performance of the promise at the stipulated time, he may redeem the goods pledged at any subsequent time before the actual sale of them; but he must, in that case, pay, in addition, any expenses which have arisen from his default. Section 178-Pledge by mercantile agent. Where a mercantile agent is, with the consent of the owner, in possession of goods or the document of title to goods, any pledge made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the pawnee acts in good faith and has not at the time of the pledge notice that the pawnor has no authority to pledge. Explanation : In this section, the expressions mercantile agent and documents of title shall have the meanings assigned to them in the Indian Sale of Goods Act, 1930.
Section 178A-Pledge by person in possession under voidable contract. When the pawnor has obtained possession of the goods pledged by him under a contract voidable under section 19 or section 19A, but the contract has not been rescinded at the time of the pledge, the pawnee acquires a good title to the goods, provided he acts in good faith and without notice of the pawnors defect of title. Section 179-Pledge where pawnor has only a limited interest. Where a person pledges goods in which he has only a limited interest, the pledge is valid to the extent of that interest. Section 180-Suits by bailees or bailors against wrong-doers If a third person wrongfully deprives the bailee of the use or possession of the goods bailed, or does them any injury, the bailee is entitled to use such remedies as the owner might have used in the like case if no bailment had been made; and either the bailor or the bailee may bring a suit against a third person for such deprivation or injury. Section 181-Apportionment of relief or compensation obtained by such suits. Whatever is obtained by way of relief or compensation in any such suit shall, as between the bailor and the bailee, be dealt with according to their respective interests.
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CHAPTER - 6
LIMITED LIABILITY PARTNERSHIP ACT - 2008
Need for the New Corporate Entity LLP
Concept, Condensed form of the Act 1. With the growth of the Indian economy, the role played by its entrepreneurs as well as its technical and professional manpower has been acknowledged internationally. It is felt opportune that entrepreneurship, knowledge and risk capital combine to provide a further impetus to Indias economic growth. In this background, a need has been felt for a new corporate form that would provide an alternative to the traditional partnership, with unlimited personal liability on the one hand, and, the statute-based governance structure of the limited liability company on the other, in order to enable professional expertise and entrepreneurial initiative to combine, organize and operate in flexible, innovative and efficient manner.
2. The Limited Liability Partnership (LLP) is viewed as an alternative corporate business vehicle that provides the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement. The LLP form would enable entrepreneurs, professionals and enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles suited to their requirements. Owing to flexibility in its structure and operation, the LLP would also be a suitable vehicle for small enterprises and for investment by venture capital. 3. Keeping in mind the need of the day, the Parliament enacted the Limited Liability Partnership Act, 2008 which received the assent of the President on 7th January, 2009.
The salient features of the LLP Act 2008 inter alia are as follows:
(i) The LLP shall be a body corporate and a legal entity separate from its partners. Any two or more persons, associated for carrying on a lawful business with a view to profit, may by subscribing their names to an incorporation document and filing the same with the Registrar, form a Limited Liability Partnership. The LLP will have perpetual succession.
(ii) The mutual rights and duties of partners of an LLP inter se and those of the LLP and its partners shall be governed by an agreement between partners or between the LLP and the partners subject to the provisions of the LLP Act 2008. The act provides flexibility to devise the agreement as per their choice. In the absence of any such agreement, the mutual rights and duties shall be governed by the provisions of proposed the LLP Act. (iii) The LLP will be a separate legal entity, liable to the full extent of its assets, with the liability of the partners being limited to their agreed contribution in the LLP which may be of tangible or intangible nature or both tangible and intangible in nature. No partner would be liable on account of the independent or un-authorized actions of other partners or their misconduct. The liabilities of the LLP and partners who are found to have acted with intent to defraud creditors or for any fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the LLP.
(iv) Every LLP shall have at least two partners and shall also have at least two individuals as Designated Partners, of whom at least one shall be resident in India. The duties and obligations of Designated Partners shall be as provided in the law. (v) The LLP shall be under an obligation to maintain annual accounts reflecting true and fair view of its state of affairs. A statement of accounts and solvency shall be filed by every LLP with the Registrar every year. The accounts of LLPs shall also be audited, subject to any class of LLPs being exempted from this requirement by the Central Government. (vi) The Central Government have powers to investigate the affairs of an LLP, if required, by appointment of competent Inspector for the purpose. (vii) The compromise or arrangement including merger and amalgamation of LLPs shall be in accordance with the provisions of the LLP Act 2008. (viii) A firm, private company or an unlisted public company is allowed to be converted into LLP in accordance with the provisions of the Act. Upon such conversion, on and from the date of certificate of registration issued by the Registrar in this regard, the effects of the conversion shall be such as are specified in the LLP Act. On and from the date of registration specified in the certificate of registration, all tangible (movable or immovable) and intangible property vested in the firm or the company, all assets, interests, rights, privileges, liabilities, obligations relating to the firm or the company, and the whole of the undertaking of the firm or the company, shall be transferred to and shall vest in the LLP without further assurance, act or deed and the firm or the company, shall be deemed to be dissolved and removed from the records of the Registrar of Firms or Registrar of Companies, as the case may be. (ix) The winding up of the LLP may be either voluntary or by the Tribunal to be established under the Companies Act, 1956. Till the Tribunal is established, the power in this regard has been given to the High Court. (x) The LLP Act 2008 confers powers on the Central Government to apply provisions of the Companies Act, 1956 as appropriate, by notification with such changes or modifications as deemed necessary. However, such notifications shall be laid in draft before each House of Parliament for a total period of 30 days and shall be subject to any modification as may be approved by both Houses. (xi) The Indian Partnership Act, 1932 shall not be applicable to LLPs.
Origin and Development

United Kingdom Since the middle of the 19th century, there has been a continuing pressure to relax the provisions surrounding the limited company form and to introduce a new corporate structure for small and medium sized business organisations. 1980-1990: Major accountancy firms organised in the form of partnerships with unlimited liability, wanting to limit the liability of an individual partner to acts specifically related to that partner, launched a campaign for the creation of the LLP vehicle in the UK. 1989: The UK Companies Act, 1989 was amended to allow accountancy firms to work as limited liability companies. The joint and several liabilities of general partners, however, remained. Accordingly, in such an event if a wrong was done by a partner, the general partner. 1990-2000: In the 1990s, the accountancy firms in the UK again campaigned to secure proportional liability in Partnership firms. This finally led to the passing of the Limited Liability Partnership Act, in the year 2000.
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United States of America Texas (1991): The Texas LLP statute was enacted in response to the liability that had been imposed on partners of firms by government agencies in relation to massive savings and loan failures in the 1980s. Another reason for the introduction of LLPs was the increasing number of malpractice suits that were being filed against larger general partnerships. The statute protected partners from personal liability for claims related to a co-partners negligence, omission, in competency, errors or malfeasance. 1994: The Revised Uniform Partnership Act (RUPA) was promulgated in 1994 to reinforce the changes occurring in Partnership law generally. A number of states permitted formation of LLPs. 1997: The success of LLPs in various states triggered the adoption of comprehensive LLP provisions into the RUPA. 2001: The concept of LLPs spread rapidly from 2 states in 1992 to all 51 U.S. jurisdictions by 2001. US state laws did initially vary on the kinds of protections that they provide to partners in an LLP. Although, the first Texas law protected partners from personal liability only for partnership obligations arising from the misconduct of other partners. Over a period of time more recent laws protect partners in LLPs from personal liability for all partnership debts.
India 1957: Suggestion to introduce LLP legislation rejected by 7th Law Commission on Partnership Act, 1932. The suggestion was made by the iron, steel and hardware merchants chamber at that time. The ground for seeking the creation of such business organisation was that the Companies Act had become cumbersome for private companies, with directors and shareholder interests protection clauses, company secretary being compulsory, etc. It was rejected inter alia on the basis that the whole purpose of the recent Companies Act amendment would fail if this proposal was accepted. 1997: Abid Hussain Committee on Small Scale Industries recommended introduction of LLPs in India. 2003: Naresh Chandra Committee Report (Regulation of Private Companies and Partnerships) highlighted the grave need to introduce LLPs in India suggested application of LLPs to service industry. It is pertinent to note that the intent was not to extend to all forms of trade as the form of the private company existed for all forms of trade. The recommendation was that LLPs should be permitted in phase 1 only for professional firms, such as chartered accountants, architects, lawyers, doctors, cost accountants, etc. 2005: JJ Irani Expert Committee on Company Law recommended introduction of LLPs suggested that small enterprises should be included in the scope of LLPs and there should be a separate LLP Act. They viewed that this could provide flexibility to small enterprises to form joint ventures and enter into agreements that enable them to access technology. December 7, 2006: 2006 LLP Bill approved by Union Cabinet. December 15, 2006: 2006 LLP Bill introduced in Parliament. 2007: 2006 LLP Bill referred to Parliamentary Standing Committee (PSC) headed by Mr. Ananth Kumar for examination. November 27, 2007: PSC submitted its report to the Parliament recommending changes and suggestions in relation to the 2006 LLP Bill.
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May 1, 2008: Union Cabinet gave its approval to introduction of a new bill (2008 LLP Bill) replacing the 2006 LLP Bill October 21, 2008: LLP Bill 2008 introduced in Parliament October 24, 2008: LLP Bill 2008 passed by the Rajya Sabha December 13 2008: LLP Bill 2008 passed by the Lok Sabha January 7, 2009: Presidents assent given to the LLP Bill 2008 January 9, 2009: LLP Act 2008 published in the official gazette (YET TO BE NOTIFIED TO COME INTO FORCE)
A brief overview An LLP is a body corporate. Apart from individuals, even body corporates may be partners. Minimum two partners and two Designated Partners who must be individuals, but no limit on the maximum number of partners. Designated Partners are liable for compliance. If any compliance is not carried out, they will be liable for all penalties. LLP may carry on any lawful business, trade, profession, service or occupation. Unlike the Naresh Chandra Committee Report, the flexibility has been provided for LLPs to be incorporated in such manner as they deem fit. Inter se relationship, rights and duties between partners is governed by LLP Agreement (which would also require to be registered). In the absence of agreement principles set out in schedule 1 apply (general principles of equality, in terms of sharing of profits and losses, etc). The Name of the LLP must end with either the words Limited Liability
Partnership or the acronym LLP Agency: Every partner is an agent of the LLP and not of the other partners Unauthorised Acts: An LLP is not bound by unauthorized acts of any partner in dealing with a third person provided such third person (a) is aware that the acts are unauthorised; or (b) does not know or believe that the partner is a partner of the LLP v Wrongful Acts or Omissions: An LLP is liable for wrongful acts or omissions of partners in the course of business of the LLP or with its authorityThe partner(s) committing such act or omission will be personally liable Other partners not to be liable for such wrongful act or omission. An obligation of the limited liability partnership is solely the obligation of the limited liability partnership. The liabilities of the limited liability partnership shall be met out of the property of the limited liability partnership. Accordingly, unlike the Texas first law, even liability for debt is limited.
v v
Right to share profits transferable v v v v v

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Right of a partner to share profits is transferable (either wholly or in part) Transfer does not imply that the transferor/assignor has ceased to be a Partner Transferee/ assignee not entitled to participate in the management of the LLP Transferee/assignee not entitled to any information relating to transactions of LLP Statements of Accounts and Solvency: An LLP must prepare a Statement of Accounts
and Solvency Statement within a period of 6 months from the end of the financial year to which the statement or solvency relates - The statements must be filed with the Registrar. v Annual Return: Every LLP must file in Form 11 an annual return with the Registrar within 60 days of the end of the financial year the annual return should be accompanied by a certificate from a company secretary confirming the veracity of the particulars/ statements contained in such annual return. Partnership Firm: An existing partnership firm may be converted into an LLP. The partners of the LLP, on conversion, must comprise all the partners of the original partnership firm and no one else. Private Company: A private limited company registered under the Companies Act, 1956 can convert itself into an LLP. A company may apply for conversion provided all the shareholders of the Company and no one else shall be partners of the LLP. Unlisted Public Company: An unlisted Public Company registered under the Companies Act, can convert itself into an LLP. A company may apply for conversion provided all the shareholders of the Company and no one else shall be partners of the LLP. A listed Public Ltd. Company cannot convert into an LLP. Foreign LLPs: The Act states that the Central Government may make Rules for establishment of place of business for foreign LLPs in India and conduct of business by such foreign LLPs. Provisions relating to setting up foreign LLP establishments in India are contained in the Rules framed in this regard. Compromise, arrangement and reconstruction: The Act provides for compromise and arrangement between the LLP and its creditors/partners. The Act also provides for reconstruction of LLPs. The Relevant provisions are contained in Chapter XII of the Act (Sections 60 65). Defunct LLP: The Registrar has the power to strike off the name of an LLP from the register if the LLP is not carrying any business or operation in accordance with the Act and the Rules. An application can also be made in this regard in Form 24 to the Registrar. (Section 75 and Rule 37 of the Rules). One key condition for the conversion of a company (Private or unlisted Public) to an LLP is that the company may convert into an LLP provided there is no security interest subsisting on its assets or in force at the time of application. It is difficult for most companies to be in a scenario where there is no security interest subsisting on any assets. One needs to analyse and understand the reason for such a clause. Under the provisions, all assets and liabilities vest in the LLP. In such an event, why such a clause? Why restrict the convertibility of a private limited company or an unlisted public company? For conversion of an unlimited liability partnership concern to a limited liability partnership concern, there are no provisions requiring the consent of the lenders. Lenders may have a position on the re-organisation, but that is irrelevant. Possibly, as personal liability will continue for all contracts and liabilities which were contracted prior to such conversion, even after such conversion. Hence, even if the contract is deemed substituted with a contract with an LLP, protection against individual partners continues. A partner may lend money to and transact other business with the limited liability partnership and has the same rights and obligations with respect to the loan or other transactions as a person who is not a partner.
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v v
v v
v v v
v v v v v
Why is there a need for a statutory provision of this nature? Would this prohibit subordinate debt, where partners agree not to recover their debts until external debt is paid off? Section 71 The provisions of this Act would be in addition to, and not in derogation of, the provisions of any other law for the time being in force. Therefore one would need to analyse provisions of various statutes governing professionals to decide whether they can take advantage of this LLP. For instance, the Chartered Accountants Act, 1949, provides uses in a number of places the term firm, which would usually refer to a firm under the Indian Partnership Act, 1932. The said Act also prohibits companies from practicing as chartered accountants. Are amendments necessary? For instance, for lawyers, under the Advocates Act, only Advocates can appear before courts. As a firm is not a person in the eyes of law, a partnership firm is permitted. In light of the LLP Act, where a firm would be treated as a person in the eyes of law with perpetual succession, it is difficult to see how an LLP can be a firm under the provisions of the Advocates Act, which could be recognised as having a right to practice. For instance, even today, a lawyer cannot be part of a company and a company cannot be the lawyer appointed for a client. Filing of accountsAccounts of a firm is a private affair, except for disclosures which have to be made to the income tax authorities Now accounts would have to be filed with the Registrar. Would this be acceptable to the Indian legal firms, chartered accountants and other professionals? One issue that arose in proposing a bill for limited liability partnerships was that paper thin LLPs should not be permitted as they could completely undermine the credibility of LLPs. At that point of time the Naresh Chandra committee had suggested that there should be provisions for Compulsory Insurance under the LLP Act. The proposal has disappeared in the winds of changes. The entire proposal of LLPs is based on a one way street. While you can convert from a firm or a company to an LLP, there are no provisions for erring and deciding to reconvert back into a partnership or a company. In such a case, the decision has to be well weighed realising that there is no U turn available down the road. Section 27(4) of the Act states that the liabilities of a limited liability partnership shall be met out of the property of the limited liability partnership. One issue that arises is whether this would preclude in any manner, lenders and contracting parties from obtaining personal and corporate guarantees from the partners as a precondition to providing any loans. The arguments against this is that the principles of a guarantee arise from contract law and this would not preclude the application of such principles. The argument in favour of treating such guarantees as void is that this is a special law that mandates that the liability is to be met out of the property of a limited liability partnership. Perhaps the absence of the words exclusively or only would be a determinant in the event any litigation happens around this point. Questions arise, whether like a traditional partnership, there could be paid partners,
v v
v v v v v v v
v v
v v
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who do not have a share in profit or have a fixed share of profit, without being liable for losses. Could one also have a zero share partner. v In this regard, it is pertinent to note the provisions of section 23(1) which provides that the mutual rights and duties of the partners of a limited liability partnership, and the mutual rights and duties of a limited liability partnership and its partners, shall be governed by the limited liability partnership agreement between the partners, or between the limited liability partnership and its partners. Accordingly, so long as it could be contractually provided, there should be no restriction to having such partners. It is pertinent to note that the provisions of equality come into play under Schedule 1 of the Act only in the absence of any such agreement/provision. Accordingly, contractually it could be provided that certain partners may have zero share, fixed shares, receive only remuneration or commission, etc. The law by adding section 23(1) has provided for tremendous flexibility recognising that by contract, parties may govern their inter se rights and obligations. Under section 34, statement of accounts are to be prepared within a period of six months from the end of the financial year. As per the draft concept rules, the filing needs to be made within a period of one month there after. Under section 35 of the Act, annual returns need to be filed within a period of sixty days of closure of the financial year. On an examination of the draft forms relating to such filings, annual returns seem to provide only for the details of the partners, the designated partners, their obligations to contribute and any penalties levied against them, and information of compounding of offences. Hence the times seem reconcilable for the present. Section 34 and 35 which deal with filing of documents, state that in the event the documents are not filed then there is a liability for payment of fine. On the other hand section 69 provides that if a document is not filed then within a grace period of 300 days, it may be filed along with additional fee of one hundred rupees for every day of such delay in addition to any fee as is payable for filing of such document or return. The section also provides that even after three hundred days it may be filed, without prejudice to any other action or liability under the Act. Would this mean that no fine can be levied for a period of 300 days as a grace period is provided. On one hand sections such as 34 and 35 specifically provide that if filings are not made as per those sections, there is a possibility of a fine. Sections 34 and 35 do not provide any such grace periods. The harmonious interpretation seems to be that section 69 does prejudice penalties and liabilities if section 69 is to be given a meaning.
v v
v v
v v
The LLP Act is silent on the issue of taxation of LLPs. In the absence of any specific provision, individuals/entities proposing to form/convert into LLPs will face uncertainty until the next Finance Bill clarifies the position. The tax treatment is more your specialisation and this is only a prima facie analysis. Pass Through Mechanism: The Naresh Chandra committee suggested that LLPs be conferred pass through status. Under such a structure the LLPs will not be taxed at all and the tax burden shall be borne entirely by the partners of the LLP. Pertinently, LLPs in UK enjoy similar pass through status. In USA, a flexible system exists where the partners decide whether the tax is to be borne by the firm or the partners themselves. However, the pass through principle is also adopted in the USA.
Current Regime: Pending clarification, under the current tax regime, an LLP would not qualify under the definition of firm or company. In the circumstances for the purposes of income tax, it may be treated as an association of persons and taxed accordingly. In this interim period it may perhaps not be advisable to recommend the setting up of any LLP to a client, until clarity emerges on the potential of a pass through status. Conversion and Taxation: Pending specific exemption from taxation at the time of conversion, authorities may seek to tax conversion as a capital gain. Clarity is required on this front too. The provisions of sections 47(xiii) and (xiv) of the Income Tax Act, 1961 specifically provide that transfers from sole proprietorships to companies or partnerships to companies, in case of certain conversions, would not be treated as transfers. However this does not specifically deal with partnerships into LLPs or companies into LLPs. Questions would also arise on what is the consideration that is paid, as on conversion, usually no consideration would be paid?? In other words, where is the gain? Significant differences between an LLP and a General Partnership Limited Liability Partnership 1 2 3 4 5 6 Liability of Partners limited to contribution Partners not jointly liable for acts of other partners LLP is a separate legal entity Incorporation of LLP is mandatory LLP required to make financial disclosures LLP is a body corporate having perpetual succession An LLP can have more than 20 partners Filing of accounts, statements of solvency and annual return are mandatory The Act silent on the issue of admission of minor as partner of LLP. May provisions of Contract Act apply. General Partnership Liability of Partners Unlimited Partners jointly and severally liable A general partnership is not an entity legally separate from its members Registration of partnership is not mandatory General Partnership not required to make financial disclosures Partnership firms are neither body corporates nor do they have perpetual succession A general partnership cannot have more than 20 partners Filing of accounts, statements of solvency and annual return are not required Minor can be admitted to the benefits of partnership
7 8 9
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Significant differences between an LLP and a Company Limited Liability Partnership 1 2 Incorporation procedure relatively simple and expeditious Flexible management structure-Partners are entitled to participate in management Flexible Capital Structure No provision relating to reddressal in case of oppression and mismanagement Limited statutory compliance as compared to Companies Incorporated Company Incorporation procedure more complex than LLP Management structure usually complexShareholders do not have ordinarily participate in day to day management Capital structure less flexible than LLP Elaborate provision relating to reddressal in case of oppression and management Complex statutory requirements compliance
3 4 5
Conclusion The hybrid structure of an LLP, which combines the organisational flexibility of general partnership and the limited liability benefits of an incorporated company is innovative, appealing and is likely to attract small and medium size entrepreneurs, service providers and professionals into setting up LLPs in India. The structure is also likely to improve the efficiency of Indian enterprises and facilitate an increased participation of the Indian service industry in the global market. Even the issues that arise are not irresolvable. The LLP Act is, no doubt, a step in the positive direction.
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CHAPTER-7
BANKERS BOOK EVIDENCE ACT-1891
The Bankers Book Evidence Act, 1891 pertains to the law of evidence with respect to bankers books, including ledgers, day-books, cash-books and all other records used in the ordinary business of the bank, whether these records are kept in written form or stored in a microfilm, magnetic tape or in any other form of mechanical or electronic data retrieval mechanism, either on-site location including a back up or disaster recovery site or both. A certified copy of any entry in a bankers book shall, in all legal proceedings, be received as prima facie of the existence of such entry, and shall be admitted as evidence of the matters, transactions and Accounts therein recorded in every case, as the original entry itself. The Act has undergone several amendments since its inception the latest being amendment by the Negotiable Instruments (Amendments and Miscellaneous Provision) Act, 2002, substituting the definition of Banking books and inserting a new sub-clause defining certified copy. As per this amendment, the certified copy includes the application software, such as record in floppy or in CD will be submitted to the court and court itself will monitor and inspect the record through its own computers and if any physical print out is required that will be taken out by the Court itself.
Legal Proceedings under the Bankers Book Evidence Act includes the following:
(i) (ii) Any proceedings or enquiry in which evidence is or may be given, An arbitration; and
(iii) Any investigation or enquiry under the Code of Criminal Procedure, 1973(2) 1974, or under any other law for the time being in force for the collection of evidence, conducted by a Police Officer or by any other person (not being a Magistrate) authorised in this behalf by a Magistrate or by any law for the time being in force. Entries from the book of Accounts or copies thereof are not adequate to charge a borrower with any sort of liability. However, the certified copy of entries from the books of Accounts is only primary evidence of recording of transactions and has the same value as the original entries. By virtue of duly certified statement of Account, the evidence about the amount due will be accepted actually by the court and court may pass a decree in favour of a bank unless a particular entry is challenged and proved incorrect. (United Commercial Bank Vs G.C. Dey, AIR, 1974, Calcutta). Bank is not compelled to produce books Sec. 5: No officer of a Bank shall in any legal proceedings to which the bank is not a party be compelled to produce any bankers book the contents of which can be proved under this Act, or to appear as a witness to prove the matters, transactions and Accounts therein recorded, unless by order of the court or a judge made for special cause. The magistrate may make an order under Sec. 94 of the Code of Criminal Procedure, for production of original documents by bank but the bank producing the documents may object to its inspection as per this act, because this act is a special law and the criminal procedure code does not affect the act. An order of the court for inspection of the books of Account of banks cannot be made without hearing the bank. (Central Bank of India Ltd. Vs P.D. Shamdasani AIR, 1938 BOM). n
CHAPTER-8
INDIAN EVIDENCE ACT-1872
A. LEGAL ASPECTS OF DOCUMENTATION
DOCUMENT: Sec 3 of the Indian Evidence Act defines a document as any matter expressed or described upon any substance by mean of letters, figures or marks or by more than one of these means, intended to be used or which may be used, for the purpose of recording that matter. Sec 3(8) of the General Clauses Act 1897, also defines a documents as above. For a banker the term documents relate to a written record created for the purpose of evidence while lending money by the bank. DOCUMENTATION: The execution of documents in a proper form and according to the law is known as Documentation. Execution means the whole process of obtaining the signature of borrowers on the necessary documents after proper stamping and registration thereof, wherever necessary, and other formalities connected therewith. Importance of proper executions of Documentation: Proper execution of document serves the following purposes: a) b) c) d) e) f) g) Serves the purpose of recording the transaction as written evidence. Helpful in producing evidence acceptable to a Court of law. Serves as an acknowledgement of debt. Documentation helps to identify the borrower. It helps to identify the Security. It is a means of creating a charge over the Security. Documentation gives bankers a right of filing a summary suit.
Nature & Type of Documents: The nature and type of documents to be executed depend on various aspects detailed below. It differs with the facility and also the constitution of the borrower needs to be obtained depending upon the types: a) Type of Borrower: The nature of document depends on the type of borrower. Letter of proprietorship for sole proprietary concern. Letter of partnership in case of partnership firms. Karta Form case of Hindu United family borrowers. Society/Club/Association Resolution of the governing Body. Certificate of Incorporation, certificate of commencement, memorandum and articles of association in case of borrower being Joint Stock Company. Besides these documents, demand promissory note will also be obtained as follow: Single liability in case of individuals and sole proprietorship firm. Joint and several liabilities in case of partnership firm and other case were the borrower borrows jointly with other.
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b)
Type of Charge: The documents to be obtained will also depend upon the type of charge to be created such as: Hypothecation Pledge Lien/Set-off Mortgages Type of Facility: Further the type of facility extended to the borrower will also determine the nature and type of documents to be obtained. In cases of cash credit and OD Accounts, letter of continuity is to be obtained. In cases of term loan, term loan agreement is to be obtained. In all the above cases and in demand loans, demand promissory note is to be taken.
c)
B. Who has to Execute the Documents?

In order to make the documents legally valid and enforceable in a court of law, not properly but it is also very important that the documents are executed by person who has legal capacity to execute. In order words, the borrowers should be competent to enter into legal contract. As per Sec. II of Contract Act only a person who is of sound mind and is of the age of majority and is not expressly debarred by court of law is competent to enter into contract. Hence following are not competent to contract. Minors Lunatics Insolvent Once it has been ensured that the borrowers are legally competent then the documents should be executed by the following types of borrowers. INDIVIDUALS: In case of individual borrowers the documents should be executed by them in their personal capacity singly. In case of individuals borrowers jointly with others, the documents should be executed by them jointly and severally. HINDU UNDIVIDED FAMILY (JHF): In case of a JHF, if the Karta is empowered to sign on behalf of the joint family, then Karta can execute the documents. However, as a matter of practice all the male adult members of the joint family should sign and on behalf of the minor male members the guardians should execute the documents, to make the coparceners personally liable for firms obligation. PARTNERSHIP FIRMS: If the borrower is a partnership firm all the partners of the firm should execute the documents both in their personal capacity as well as in their capacity as partners of the firm. COMPANIES: Duly authorised persons, as per the boards resolution can execute the documents, while availing loan from the Bank. ILLITERATE BORROWERS: Emphasis should be laid that photographs of illiterate borrowers are obtained at the time of execution of documents. Left hand thumb impression of male and right hand thumb impression of female borrowers/guarantors is obtained as per uniform practice amongst banks in India. Further, a letter signed by an independent person that the contents, terms and conditions have been read before the illiterates who have executed the documents, is invariably obtained and kept as part of the document BLINDS: An additional declaration from an independent person is obtained that all the documents, terms and conditions have been read to the borrowers/guarantors before the execution of
documents. There are chances that illiterates and blinds, in case a suit has to be fled for recovery of dues, may not take a defence that they were not aware of the terms written in the documents or they were told otherwise what actually has been written, under such circumstances, this document provides adequate safeguards to the bank. DATED & PLACE: Date and Place are very important aspects of proper documentation. Any lacuna in these particulars can render the whole documentation invalid and put the entire loan amount at risk. Not only the date should be actual when the documents are got executed, but there should not be any overwriting. The place, i.e. the name of the city should be written where the borrower or guarantor has actually signed the documents. This is necessary so that in the event of legal recourse for recovery, the concerned person may not take a defence that he was not available at the place on the date written on the documents. Moreover, it is the place that ultimately decides the jurisdiction of the court and in the event the legal process has been initiated at a place which may not fall under the jurisdiction of the concerned court, the entire exercise can go waste. Any overwriting in the date can give the benefit of doubt to the borrower or guarantor in respect of expiry of limitation.
DOCUMENTATION FROM BORROWERS STAYING AT DIFFERENT PLACES AND ON DIFFERENT DATES

Normally documents should be executed in the branch premises. However, if the borrowers are staying at different places, documents should be got signed either by deputing a competent bank official, or through the branch located at that place. Documents so got executed at different places and on different dates, should have the mention of the place, where these were actually got executed and the actual date when the concerned persons signed these. Though such documents are being signed on different dates, the same are said to have been completed on the date when last of the documents was signed. Vernacular Signatures: When documents are signed in the language other than the language of the documents, these are said to have been signed in vernacular language. Documents of most of the banks are bilingual, in English and regional language or Hindi. If, the customer signs the documents in some other language, a separate declaration, usually printed by the bank, stating that the contents of the documents have been read and translated in the language known to the customer and have been signed only after having fully understood the same. The absence of this letter can lead the entire documents to be invalid, if the same are signed in a vernacular language.
When Limits are to be utilised at different Branches:

When the borrower intends to avail the limit at different branches of the bank, the documents are to be executed at the branch where proposal was submitted. The other concerned branches are advised of sub-limits or allocated limits: terms and conditions for availing the limits and other important instructions related to the sanction. A separate set of documents should not be got executed at the branch where sub limits are to be availed. Witness: Some documents, mainly deeds executed to cover the debt, like mortgage, guarantee, sale, assignment etc require witnessing under the law. It is implied that all the documents where a column to be signed by the witness has been provided, it is essential and required under the law and should not be left bank. Any document which required witnessing, if not got witnessed, is an invalid document and carries no legal weight. Moreover, all documents executed by the blinds and illiterates should be got witnessed to avoid any complications. Care should be taken that independent witness from not less than two persons is obtained along with their complete address. n
CHAPTER-9
INDIAN REGISTRATION ACT-1908
I. Objective of Registration:
The objective of registration is to provide a method of public registration of documents so as to give information to people regarding legal rights and obligations arising or affecting a particular property and to perpetuate documents, which may afterwards be of legal importance and also to prevent. In short registration of Document/Security is intended to prevent people from purchasing property from a person who does not own it.
II. What document are to be registered under Indian Registration Act:

According to Sec 17, of the Indian Registration Act, the following documents are required to be registered compulsory with the Registrar or Sub-Registrar: a) Other non-testamentary instruments, which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent of the value of Rs.100/- and upwards to or in immovable property. b) Non-testamentary instruments which acknowledge the receipt or payment on Account of the creation, declaration, assignment, limitations or extinction of any such right, title or interest. c) Instruments of gifts of immovable properties. d) Lease of immovable property from year to year or for any term exceeding one year or reserving in yearly rent. e) Non-testamentary instruments transferring or assigning any decree or order or order of a court or any award when such presented at the office of the Registrar or sub-registrar within four months from the date of its execution. Sec 23 of the Indian Registration Act, within specifies the period of Registration Act, which specifies the period of shall be accepted for registration unless presented for that purpose to the proper within four months from the date of its execution. All documents, which are required by Section 17 of the Indian Registration Act, to be registered, should be presented at the office of the Registrar or Sub-Registrar within four months from the date of its execution. Section 23 of the Indian Registration Act, specifies the period of Registration Act, and thus says subject to the provision of Section 24, 25 and 26, no document other than will or shall be accepted for registration unless presented for that purpose to the proper within four months from the date of its execution. Provided a copy of the decree of order may be presented within four months from the day on which the decree or order was made, or, where it is applicable, within four months from the day on which it becomes final. III. Who is competent to register the Documents? The Indian Registration Act allows the following persons to present documents for registration. Except in the cases, mentioned in Sec 31, 88 and 89 ever documents to be registered under this Act (The Indian Registration Act), whether such registration be compulsory or optional, shall be presented at the proper registration officer.
a) b) c)
By some person executing or claiming under the same or, in the same of copy of a decree or order, claiming under decree or order, or By the representative or assignee of such person, or By the agent of such person, representative, or assignee, duly authorised by the power of attorney executed and authenticated in the manner here in after mentioned (Sec 32).
IV. Where to Register the Documents?

Documents relating to land will have to be presented for registration either in the office of the sub-registrar in whose sub-district the whole or some portion of the property to which such documents relate is situates (Sec 28). All other documents not being a document referred to in Sec 28 or a copy of decree or order may be presented for registration either in the office of the sub-Registrar in the whose sub-district the document was executed, or in the office of any other sub-registrar under the State Government at which all the persons executing and claiming under the documents desire the same to be registered (Sec 28 and 29).
V. Time from which registered documents operate?

A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration (Sec 47).
VI. Effect of Non-Registration of document:

Any document, which is required to be registered by Sec 17 of the Indian Registration Act, if not registered, will not. a) b) c) Confer any power to adopt or Affect any immovable property comprised in the document or Be received as evidence of any transaction affecting such property or conferring such power.
It is, therefore mandatory on the part of the banker to register the documents, registration of which is compulsory, in order to secure the advance as also to protect interest of the bank.
VII. How to Register documents executed by several persons at different times?

It is quite unavoidable in certain cases that documents will be executed by different persons (borrower connected to the same loan or advance) at different times, at different places. This is possible in big partnership firms, companies etc. In such cases, such documents will have to be presented for registration and re-registration within four months from the date of each execution, Sec 24 of the Indian Registration Act, states that where there are several persons executing a document at different times, such document may be presented for registration and re-registration within four months from the date of each execution.
VIII. When a document, submitted for registration, is deemed registered?

The registering officer shall endorse, sign and affix the date on those documents, presented for registration after complying with the provisions of Sec 34, 58 and 59 of the Indian Registration Act, a certificate containing the work Registered such endorsement and certificate will be recorded in the Registrars book. There upon, the registration of the document shall be deemed completed. n
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CHAPTER-10
INDIAN STAMP ACT-1899
IMPLICATIONS OF DOCUMENTS
Indian Stamps Act, 1899: Stamping of documents is one of the sources of revenue of the Central/State Govt. and all documents named in the Indian Stamp Act, 1899, require proper stamping. The Act is applicable in whole of India except the state of J & K. Indian Stamps Act, 1899-Sec. 2: This Sec of the Stamps Act states that, A document is demand to be stamped, if it bears on adhesive or impressed stamp of proper amount under the law and same has been affixed and used in accordance with the law prevailing in India. Indian Stamp Act, 1889 Sec. 18: This Sec states that All the documents should be properly and adequately stamped before or at the time of execution. Indian Stamp Act, Sec. 19: This Sec. provides that Promissory Notes and Bills of Exchange executed outside India are required to be stamped in India by its first holder in India before presenting the same for acceptance, payment or negotiation. CATEGORIES OF STAMPS: Stamps have been classified into two categories as per Indian Stamps Act. These are: Judicial Stamps: Such stamps are used exclusively for court purposes and are governed under Court Fees Act. Documents related to the Plaints and Suits filed in the courts, obtaining copies of court orders and other judicial matters. Non-Judicial Stamps: These stamps are used for all the commercial purposes.
Central and State Govt. lists for Stamping: In all, 65 documents have been listed under the Act which requires stamping. Further, these 65 documents have been divided into two lists i) Where stamp duty is required under Union/Centre List, ii) Documents under State List. Obviously, the rates of stamps duty are fixed and can be changed by the concerned Govt., only. Documents to be stamped under Central Govt. List: Entry 91 (Union List): This schedule contains 10 documents which are related to banks and are to be stamped as per prescribed stamp duty. The following are the documents on which the stamp duty is same in all the states (except J&K) and the States have no authority to change the rate of stamp duty: 1. Promissory Note 2. Bill of exchange 3. Cheques 4. Transfer of shares 5. Debentures 6. Proxy 7. Insurance policy 8. Letter of credit 9. Bill of Lading 10. Money/Cash Receipt Documents under State list: The remaining 55 documents have been covered under the State List. Proper Stamping: The important aspects of proper stamping can be short listed as under; Documents should be stamped with right types of stamps, i.e. Judicial or Non-Judicial, according to their nature. Documents should have been stamped with adequate stamp duty.
Documents should have been stamped prior to execution or at the time of execution. Adhesive stamped should have been properly cancelled as per law.
EFFECTS OF UNDER STAMPING OR NON-STAMPING OF DOCUMENTS - TWO TYPES:

First type : If the documents are unstamped, it is treated as invalid. U/s 35 of The Stamp Act, such documents cannot be made effective any more, either by way of properly stamping or paying any penalty at a later state. As such, under stamped documents falling under this category cannot be adduced in the court of law as a proof of debt. The following important documents are covered under this type. Pronote Promissory Notes Usance Bills of Exchange Debt Acknowledgement letters(Balance Confirmation Letter) Thus an under stamped DP Note will not be admissible as evidence for any purpose i.e. the writing therein cannot be use as an acknowledgement of claim. The rule of strict inadmissibility of a pronote comes into play when transaction merges into a pronote which becomes its only basis. Any evidence of such a transaction is barred under Sec. 91 of the Evidence Act, and such a case any deficiency in stamping the pronote will be fatal to the whole suit. Usance Bills of Exchange are stamped according to the tenor and amount of the bill. Second type : Certain documents, like agreements and undertakings, if under stamped while execution can be adequately stamped before filing of the civil suit. Type of stamps: Basically, stamping is of two types: Impressed Stamps Adhesive Stamps Impressed and Embossed Stamps: Stamp papers issued by the Union/State Govt., bear printed or embossed stamps in various denominations. In other words, the respective Stamp Officers or concerned authorities issue such stamp papers, which are really stamped. These are also called Hundi Papers. Printed Loan Agreements, Guarantee Deeds and some other such papers supplied by the Bank to the branches normally bear impressed or embossed stamps, which are stamped by the authorities. As such, these require no further stamping. Adhesive Stamps: Such stamps are in the look and shape of usual stamps, which are not prior affixed or plain on the papers. As such, documents written on plain papers can be stamped with adhesive stamps. Adhesive Revenue Stamps: These are one of the adhesive stamps. Such stamps are for exclusively use of stamping money receipts or cash receipts. All cash receipts for a sum over Rs. 5000/- require Revenue stamps of 1 Re. All payment vouchers in case of fixed loan and term loan are required to be stamped by a one rupee revenue stamp. Apart from this, revenue stamps are required in case of Pronote, Acknowledgement, and Balance Confirmation etc.
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The Revenue stamps of the following value are required on the Demand Promissory Note: Up to Rs.250/5P Above Rs.250/- up to Rs.1000/10P Above Rs.1000/15P
When the Documents should be stamped?

a) Instruments Drawn within India: As per Sec 17 of Stamp Act, all the instruments or document chargeable with duty if they are executed in India must be stamped before or at the time of execution. Documents should always be stamped before the time of execution of the document. In many of the documents was done much later than the date of execution. In some cases stamping was done just before filling the suit. In some cases it was proved that the adhesive stamps affixed on the documents were printed much later than the data of these documents and a court of law did not and does not recognise such practice and orders were passed against the bankers. Instruments other than Bill and Note executed outside India: As per Sec 18 of Stamp Act, the instruments, which is not a promissory note or bill of exchange, if it is executed abroad then it must be stamped within 3 months after has been first received in India. In the case of instruments received from abroad the required stamp may be adhesive or impressed. If an adhesive stamp is permissible, the party must affix and cancel it himself. But if, an adhesive stamp is not permission then the instruments must be taken to the collector to be stamped by the proper officer with an impressed label. BOE or DPN drawn out of India: As per Sec 19, in case of bills of exchange payable otherwise than on demand or promissory note down or made out of India, the first holder in India should affix a proper stamp & cancel it before he presents it for acceptance, payment or endorsement or endorses the same himself negotiates it in any manner, unless it is already stamped before he received it.
b)
c)
Adjudication as to proper Stamp-(Sec. 31(i): Where the stamp duty is not determined or the instrument which is executed is not according to the instruments, for which the rates have already been prescribed in schedule according to the Indian Stamp Act, 1899, the person can apply to the collector of stamps, to have his opinion regarding the stamp rate applicable on those instruments. For this, collector shall determine the duty (if any), which will be final and cannot be challenged in court. Cancellation of Stamps: As per Sec 12, of Indian Stamp Act: a) Whoever affixes any adhesive stamp to any instrument chargeable with duty which has been executed by any person shall, at the time of execution, unless such stamps has been already cancelled in manner aforesaid, cancel the same so that it cannot be used again. However, when a person executed any instruments on any paper bearing an adhesive stamp shall, at the time of execution, unless such stamp has already cancelled in manner aforesaid, cancel the same so that it cannot be used again. Any instrument bearing an adhesive stamp, which has not been cancelled so that it cannot be used again, shall, so far as such stamp is concerned, be deemed to be unstamped.
b)
c)
Stamp duty and alteration in documents. If any material alteration is made in any document with the consent of the parties after the completion of execution of the document, then such documents will be required to be stamped afresh. Alteration of demand promissory note by the insertion of rate of interest, as an after though, was held to require fresh stamping.
Blank or un-written stamp papers: A document executed on impressed value of lesser amount than required, even though attached with another blank impressed paper to cover up the deficiency will not be considered as duly or other stamp papers are pasted or stitched together to make up the required stamp duty and all such papers are signed by both the parties and the seal placed thereon, they shall be considered as duly stamped. A document requiring be engrossing on impressed stamp but affixing with adhesive stamps contravening the provisions shall be deemed to be unstamped and the effect can be remedied by payment of duty and the penalty. An instrument, which is required to be written on stamp paper, will not be considered as dully stamped if it bears an adhesive stamp of equal value. All documents, which are not duly stamped, are inadmissible in evidence unless the duty and penalty have been paid as provided in Sec 35 of the Indian Stamp Act. Execution of documents in different states & stamp duty payable: When any document is executes in more than one state in India then the stamp duty payable on the document so executed will be higher of the stamp duty payable. For example, a document is executed in State A where stamp duty payable on the documents is Rs. 100 and the same documents is also executed in State B, where the stamp duty payable on the document is Rs.500 the stamp duty of Rs. 100 should be paid while executing the document in State A and the different of Rs. 400 should be paid while executing in State B. Refund of unused & obsolete stamps: Unused or obsolete stamps can be surrendered and refund claimed u/s 50 to 54. The % of refund depends upon the date of issue and surrender. Banks can avail a refund of 100 percent at any moment. For others, 90% of refund is available, if stamps are not old for more than six months. Penalty for under-stamping/non stamping: Under stamping or non-stamping of documents tantamount to financial offence, as it is evasion of Govt. revenue. This leads to the imposition of fine up to ten times the amount by which documents have been under stamped. Further, the person committing the offence can be additionally fined up to Rs.500. The minimum penalty which is imposed is of Rs.5. n
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CHAPTER 11
FOREIGN EXCHANGE MANAGEMENT ACT-1999
Rational for replacing with FERA is:
The FERA was draconian in nature with criminal punishments for its violation while FEMA violation viewed as civil punishment. The FERA was outdated, obsolete, not in tune with Liberalisation, Privatisation & Globalisation policy adopted by India during early 90s. The onus of explanation of use of forex rests with the user and the Bankers only manage the forex resources under FEMA. An Act (w.e.f. 29-12-1999) to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. BE it enacted by Parliament in the Fiftieth Year of the Republic of India as follows:
Section 1-PRELIMINARY Short title, extent, application & commencement.

(1) This Act may be called the Foreign Exchange Management Act, 1999. (2) It extends to the whole of India. (3) It shall also apply to all branches, offices and agencies outside India owned or controlled by a person resident in India and also to any contravention thereunder committed outside India by any person to whom this Act applies. (4) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint: Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.
Section 2-Definitions
In this Act, unless the context otherwise requires, (a) Adjudicating Authority means an officer authorised under sub-section (1) of section 16; (b) Appellate Tribunal means the Appellate Tribunal for Foreign Exchange established under section 18; (c) Authorised person means an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised under sub-section (1) of section 10 to deal in foreign exchange or foreign securities; (d) Bench means a Bench of the Appellate Tribunal; (e) Capital account transaction means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or
liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6; (f) Chairperson means the Chairperson of the Appellate Tribunal; (g) Chartered accountant shall have the meaning assigned to it in clause (b) of subsection (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949); (h) Currency includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, travellers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank; (i) Currency notes means and includes cash in the form of coins and bank notes; (j) Current account transaction means a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes:(i) Payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business,
(ii) Payments due as interest on loans and as net income from investments, (iii) Remittances for living expenses of parents, spouse and children residing abroad, and (iv) Expenses in connection with foreign travel, education and medical care of parents, spouse and children; (k) Director of Enforcement means the Director of Enforcement appointed under subsection (1) of section 36; (l) Export, with its grammatical variations and cognate expressions, means (i) the taking out of India to a place outside India any goods, (ii) provision of services from India to any person outside India; (m) Foreign currency means any currency other than Indian currency; (n) Foreign exchange means foreign currency and includes, (i) deposits, credits and balances payable in any foreign currency, (ii) drafts, travellers cheques, letters of credit or bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency, (iii) drafts, travellers cheques, letters of credit or bills of exchange drawn by banks, institutions or persons outside India, but payable in Indian currency; (o) Foreign security means any security, in the form of shares, stocks, bonds, debentures or any other instrument denominated or expressed in foreign currency and includes securities expressed in foreign currency, but where redemption or any form of return such as interest or dividends is payable in Indian currency; (p) Import, with its grammatical variations and cognate expressions, means bringing into India any goods or services; (q) Indian currency means currency which is expressed or drawn in Indian rupees but does not include special bank notes and special one rupee notes issued under section 28A of the Reserve Bank of India Act, 1934 (2 of 1934); (r) legal practitioner shall have the meaning assigned to it in clause (i) of sub-section (1) of section 2 of the Advocates Act, 1961 (25 of 1961); (s) Member means a Member of the Appellate Tribunal and includes the Chairperson thereof; (t) notify means to notify in the Official Gazette and the expression notification shall be construed accordingly;
(u) Person includes (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and (vii) any agency, office or branch owned or controlled by such person; (v) Person resident in India means (i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include (A) a person who has gone out of India or who stays outside India, in either case (a) for or on taking up employment outside India, or (b) for carrying on outside India a business or vocation outside India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period; (B) a person who has come to or stays in India, in either case, otherwise than (a) for or on taking up employment in India, or (b) for carrying on in India a business or vocation in India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; (ii) any person or body corporate registered or incorporated in India, (iii) an office, branch or agency in India owned or controlled by a person resident outside India, (iv) an office, branch or agency outside India owned or controlled by a person resident in India; (w) Person resident outside India means a person who is not resident in India; (x) Prescribed means prescribed by rules made under this Act; (y) Repatriate to India means bringing into India the realised foreign exchange and (i) the selling of such foreign exchange to an authorised person in India in exchange for rupees, or
(ii) the holding of realised amount in an account with an authorised person in India to the extent notified by the Reserve Bank, and includes use of the realised amount for discharge of a debt or liability denominated in foreign exchange and the expression repatriation shall be construed accordingly; (z) Reserve Bank means the Reserve Bank of India constituted under sub-section (1) of section 3 of the Reserve Bank of India Act, 1934 (2 of 1934); (za) Security means shares, stocks, bonds and debentures, Government securities as defined in the Public Debt Act, 1944 (18 of 1944), savings certificates to which the Government Savings Certificates Act, 1959 (46 of 1959) applies, deposit receipts in respect of deposits of securities and units of the Unit Trust of India established under sub-section (1) of section 3 of the Unit Trust of India Act, 1963 (52 of 1963) or of any mutual fund and includes certificates of title to securities, but does not include bills of exchange or promissory notes other than Government promissory notes or any other
instruments which may be notified by the Reserve Bank as security for the purposes of this Act; (zb) Service means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, medical assistance, legal assistance, chit fund, real estate, transport, processing, supply of electrical or other energy, boarding or lodging or both, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service; (zc) Special Director (Appeals) means an officer appointed under section 18; (zd) Specify means to specify by regulations made under this Act and the expression specified shall be construed accordingly; (ze) Transfer includes sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.
Section 3-Dealing in foreign exchange, etc.

Save as otherwise provided in this Act, rules or regulations made there under, or with the general or special permission of the Reserve Bank, no person shall (a) deal in or transfer any foreign exchange or foreign security to any person not being an authorised person; (b) make any payment to or for the credit of any person resident outside India in any manner; (c) receive otherwise through an authorised person, any payment by order or on behalf of any person resident outside India in any manner; Explanation : For the purpose of this clause, where any person in, or resident in, India receives any payment by order or on behalf of any person resident outside India through any other person (including an authorised person) without a corresponding inward remittance from any place outside India, then, such person shall be deemed to have received such payment otherwise than through an authorised person; (d) enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person. Financial Transaction means making any payment to, or for the credit of any person, or receiving any payment for, by order or on behalf of any person, or drawing, issuing or negotiating any bill of exchange or promissory note, or transferring any security or acknowledging any debt.
Section 4-Holding of foreign exchange, etc.

Save as otherwise provided in this Act, no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India.
Section 5-Current account transactions

Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawal is a current account transaction: Provided that the Central Government may, in public interest and in consultation with the Reserve Bank, impose such reasonable restrictions for current account transactions as may be prescribed.
Section 6-Capital account transactions:

(1) Subject to the provisions of sub-section (2), any person may sell or draw foreign exchange to or from an authorised person for a capital account transaction. (2) The Reserve Bank may, in consultation with the Central Government, specify (a) any class or classes of capital account transactions which are permissible; (b) the limit up to which foreign exchange shall be admissible for such transactions : Provided that the Reserve Bank shall not impose any restriction on the drawal of foreign exchange for payments due on account of amortization of loans or for depreciation of direct investments in the ordinary course of business. (3) Without prejudice to the generality of the provisions of sub-section (2) the Reserve Bank may, by regulations, prohibit, restrict or regulate the following (a) Transfer or issue of any foreign security by a person resident in India; (b) Transfer or issue of any security by a person resident outside India; (c) Transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India; (d) Any borrowing or lending in foreign exchange in whatever form or by whatever name called; (e) any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India; (f) Deposits between persons resident in India and persons resident outside India; (g) Export, import or holding of currency or currency notes; (h) Transfer of immovable property outside India, other than a lease not exceeding five years, by a person resident in India; (i) (j) Acquisition or transfer of immovable property in India, other than a lease not exceeding five years, by a person resident outside India; Giving of a guarantee or surety in respect of any debt, obligation or other liability incurred (i) By a person resident in India and owed to a person resident outside India; or (ii) By a person resident outside India. (4) A person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India. (5) A person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India. (6) Without prejudice to the provisions of this section, the Reserve Bank may, by regulation, prohibit, restrict, or regulate establishment in India of a branch, office or other place of business by a person resident outside India, for carrying on any activity relating to such branch, office or other place of business.
Section 7-Export of goods and services:

(1) Every exporter of goods shall (a) furnish to the Reserve Bank or to such other authority a declaration in such form and in such manner as may be specified, containing true and correct material particulars, including the amount representing the full export value or, if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in a market outside India; (b) Furnish to the Reserve Bank such other information as may be required by the Reserve Bank for the purpose of ensuring the realisation of the export proceeds by such exporter. (2) The Reserve Bank may, for the purpose of ensuring that the full export value of the goods or such reduced value of the goods as the Reserve Bank determines, having regard to the prevailing market conditions, is received without any delay, direct any exporter to comply with such requirements as it deems fit. (3) Every exporter of services shall furnish to the Reserve Bank or to such other authorities a declaration in such form and in such manner as may be specified, containing the true and correct material particulars in relation to payment for such services.
Section 8-Realisation and repatriation of foreign exchange

Save as otherwise provided in this Act, where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realise and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank.
Section 9-Exemption from realisation and repatriation in certain cases

The provisions of sections 4 and 8 shall not apply to the following, namely: (a) Possession of foreign currency or foreign coins by any person up to such limit as the Reserve Bank may specify; (b) Foreign currency account held or operated by such person or class of persons and the limit up to which the Reserve Bank may specify; (c) Foreign exchange acquired or received before the 8th day of July, 1947 or any income arising or accruing thereon which is held outside India by any person in pursuance of a general or special permission granted by the Reserve Bank; (d) Foreign exchange held by a person resident in India up to such limit as the Reserve Bank may specify, if such foreign exchange was acquired by way of gift or inheritance from a person referred to in clause (c), including any income arising therefrom; (e) Foreign exchange acquired from employment, business, trade, vocation, services, honorarium, gifts, inheritance or any other legitimate means up to such limit as the Reserve Bank may specify; and (f) Such other receipts in foreign exchange as the Reserve Bank may specify.
Section 10-Authorised Person

(1) The Reserve Bank may, on an application made to it in this behalf, authorise any person to be known as authorised person to deal in foreign exchange or in foreign securities as an authorised dealer, money changer or off-shore banking unit or in any other manner as it deems fit.
(2) An authorisation under this section shall be in writing and shall be subject to the conditions laid down therein. (3) An authorisation granted under sub-section (1) may be revoked by the Reserve Bank at any time if the Reserve Bank is satisfied that (a) it is in public interest so to do; or (b) the authorised person has failed to comply with the condition subject to which the authorisation was granted or has contravened any of the provisions of the Act or any rule, regulation, notification, direction or order made thereunder: Provided that no such authorisation shall be revoked on any ground referred to in clause (b) unless the authorised person has been given a reasonable opportunity of making a representation in the matter. (4) An authorised person shall, in all his dealings in foreign exchange or foreign security, comply with such general or special directions or orders as the Reserve Bank may, from time to time, think fit to give, and, except with the previous permission of the Reserve Bank, an authorised person shall not engage in any transaction involving any foreign exchange or foreign security which is not in conformity with the terms of his authorisation under this section. (5) An authorised person shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declaration and to give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of any contravention or evasion of the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder, and where the said person refuses to comply with any such requirement or makes only unsatisfactory compliance therewith, the authorised person shall refuse in writing to undertake the transaction and shall, if he has reason to believe that any such contravention or evasion as aforesaid is contemplated by the person, report the matter to the Reserve Bank. (6) Any person, other than an authorised person, who has acquired or purchased foreign exchange for any purpose mentioned in the declaration made by him to authorised person under subsection (5) does not use it for such purpose or does not surrender it to authorised person within the specified period or uses the foreign exchange so acquired or purchased for any other purpose for which purchase or acquisition of foreign exchange is not permissible under the provisions of the Act or the rules or regulations or direction or order made there under shall be deemed to have committed contravention of the provisions of the Act for the purpose of this section.
Section 11-Reserve Banks powers to issue directions to authorised person.

(1) The Reserve Bank may, for the purpose of securing compliance with the provisions of this Act and of any rules, regulations, notifications or directions made there under, give to the authorised persons any direction in regard to making of payment or the doing or desist from doing any act relating to foreign exchange or foreign security. (2) The Reserve Bank may, for the purpose of ensuring the compliance with the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder, direct any authorised person to furnish such information, in such manner, as it deems fit. (3) Where any authorised person contravenes any direction given by the Reserve Bank under this Act or fails to file any return as directed by the Reserve Bank, the Reserve Bank may, after giving reasonable opportunity of being heard, impose on the authorised person a penalty which may extend to ten thousand rupees and in the case of continuing contravention with an additional penalty which may extend to two thousand rupees for every day during which such contravention continues.
Section 12-Power of Reserve Bank to inspect authorised person.

(1) The Reserve Bank may, at any time, cause an inspection to be made, by any officer of the Reserve Bank specially authorised in writing by the Reserve Bank in this behalf, of the business of any authorised person as may appear to it to be necessary or expedient for the purpose of (a) verifying the correctness of any statement, information or particulars furnished to the Reserve Bank; (b) obtaining any information or particulars which such authorised person has failed to furnish on being called upon to do so; (c) securing compliance with the provisions of this Act or of any rules, regulations, directions or orders made there under. (2) It shall be the duty of every authorised person, and where such person is a company or a firm, every director, partner or other officer of such company or firm, as the case may be, to produce to any officer making an inspection under sub-section (1), such books, accounts and other documents in his custody or power and to furnish any statement or information relating to the affairs of such person, company or firm as the said officer may require within such time and in such manner as the said officer may direct.
Section 13-Contravention and Penalties

(1) If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorisation is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues. (2) Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government and further direct that the foreign exchange holdings, if any of the persons committing the contraventions or any part thereof, shall be brought back into India or shall be retained outside India in accordance with the directions made in this behalf. Explanation : For the purposes of this sub-section, property in respect of which contravention has taken place, shall include (a) deposits in a bank, where the said property is converted into such deposits; (b) Indian currency, where the said property is converted into that currency; and (c) any other property which has resulted out of the conversion of that property.
Section 14-Enforcement of the orders of Adjudicating Authority.

(1) Subject to the provisions of sub-section (2) of section 19, if any person fails to make full payment of the penalty imposed on him under section 13 within a period of ninety days from the date on which the notice for payment of such penalty is served on him, he shall be liable to civil imprisonment under this section. (2) No order for the arrest and detention in civil prison of a defaulter shall be made unless the Adjudicating Authority has issued and served a notice upon the defaulter calling upon him to appear before him on the date specified in the notice and to show cause why he should not
be committed to the civil prison, and unless the Adjudicating Authority, for reasons in writing, is satisfied (a) that the defaulter, with the object or effect of obstructing the recovery of penalty, has after the issue of notice by the Adjudicating Authority, dishonestly transferred concealed, or removed any part of his property, or (b) that the defaulter has, or has had since the issuing of notice by the Adjudicating Authority, the means to pay the arrears or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same. (3) Notwithstanding anything contained in sub-section (1), a warrant for the arrest of the defaulter may be issued by the Adjudicating Authority if the Adjudicating Authority is satisfied, by affidavit or otherwise, that with the object or effect of delaying the execution of the certificate the defaulter is likely to abscond or leave the local limits of the jurisdiction of the Adjudicating Authority. (4) Where appearance is not made pursuant to a notice issued and served under sub-section (1), the Adjudicating Authority may issue a warrant for the arrest of the defaulter. (5) A warrant of arrest issued by the Adjudicating Authority under sub-section (3) or sub-section (4) may also be executed by any other Adjudicating Authority within whose jurisdiction the defaulter may for the time being be found. (6) Every person arrested in pursuance of a warrant of arrest under this section shall be brought before the Adjudicating Authority issuing the warrant as soon as practicable and in any event within twenty-four hours of his arrest (exclusive of the time required for the journey): Provided that, if the defaulter pays the amount entered in the warrant of arrest as due and the costs of the arrest to the officer arresting him, such officer shall at once release him. Explanation: For the purposes of this sub-section, where the defaulter is a Hindu undivided family, the karta thereof shall be deemed to be the defaulter. (7) When a defaulter appears before the Adjudicating Authority pursuant to a notice to show cause or is brought before the Adjudicating Authority under this section, the Adjudicating Authority shall give the defaulter an opportunity showing cause why he should not be committed to the civil prison. (8) Pending the conclusion of the inquiry, the Adjudicating Authority may, in his discretion, order the defaulter to be detained in the custody of such officer as the Adjudicating Authority may think fit or release him on his furnishing the security to the satisfaction of the Adjudicating Authority for his appearance as and when required. (9) Upon the conclusion of the inquiry, the Adjudicating Authority may make an order for the detention of the defaulter in the civil prison and shall in that event cause him to be arrested if he is not already under arrest: Provided that in order to give a defaulter an opportunity of satisfying the arrears, the Adjudicating Authority may, before making the order of detention, leave the defaulter in the custody of the officer arresting him or of any other officer for a specified period not exceeding fifteen days, or release him on his furnishing security to the satisfaction of the Adjudicating Authority for his appearance at the expiration of the specified period if the arrears are not satisfied. (10)When the Adjudicating Authority does not make an order of detention under sub-section (9), he shall, if the defaulter is under arrest, direct his release. (11)Every person detained in the civil prison in execution of the certificate may be so detained, (a) where the certificate is for a demand of an amount exceeding rupees one crore, up to three years, and
(b) in any other case, up to six months: Provided that he shall be released from such detention on the amount mentioned in the warrant for his detention being paid to the officer-in-charge of the civil prison. (12)A defaulter released from detention under this section shall not, merely by reason of his release, be discharged from his liability for the arrears, but he shall not be liable to be arrested under the certificate in execution of which he was detained in the civil prison. (13)A detention order may be executed at any place in India in the manner provided for the execution of warrant of arrest under the Code of Criminal Procedure, 1973 (2 of 1974).
Section 15-Power to compound contravention

(1) Any contravention under section 13 may, on an application made by the person committing such contravention, be compounded within one hundred and eighty days from the date of receipt of application by the Director of Enforcement or such other officers of the Directorate of Enforcement and Officers of the Reserve Bank as may be authorised in this behalf by the Central Government in such manner as may be prescribed. (2) Where a contravention has been compounded under sub-section (1), no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing such contravention under that section, in respect of the contravention so compounded.
Section 16-Appointment of Adjudicating Authority

(1) For the purpose of adjudication under section 13, the Central Government may, by an order published in the Official Gazette, appoint as many officers of the Central Government as it may think fit, as the Adjudicating Authorities for holding an inquiry in the manner prescribed after giving the person alleged to have committed contravention under section 13, against whom a complaint has been made under sub-section (hereinafter in this section referred to as the said person) a reasonable opportunity of being heard for the purpose of imposing any penalty: Provided that where the Adjudicating Authority is of opinion that the said person is likely to abscond or is likely to evade in any manner, the payment of penalty, if levied, it may direct the said person to furnish a bond or guarantee for such amount and subject to such conditions as it may deem fit. (2) The Central Government shall, while appointing the Adjudicating Authorities under subsection (1), also specify in the order published in the Official Gazette, their respective jurisdictions. (3) No Adjudicating Authority shall hold an enquiry under sub-section (1) except upon a complaint in writing made by any officer authorised by a general or special order by the Central Government. (4) The said person may appear either in person or take the assistance of a legal practitioner or a chartered accountant of his choice for presenting his case before the Adjudicating Authority. (5) Every Adjudicating Authority shall have the same powers of a civil court which are conferred on the Appellate Tribunal under sub-section (2) of section 28 and (a) all proceedings before it shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860); (b) shall be deemed to be a civil court for the purposes of sections 345 and 346 of the Code of Criminal Procedure, 1973 (2 of 1974). (6) Every Adjudicating Authority shall deal with the complaint under sub-section (2) as expeditiously as possible and endeavour shall be made to dispose of the complaint finally within one year from the date of receipt of the complaint:
Provided that where the complaint cannot be disposed off within the said period, the Adjudicating Authority shall record periodically the reasons in writing for not disposing off the complaint within the said period.
Section 17-Appeal to Special Director (Appeals)

(1) The Central Government shall, by notification, appoint one or more Special Directors (Appeals) to hear appeals against the orders of the Adjudicating Authorities under this section and shall also specify in the said notification the matter and places in relation to which the Special Director (Appeals) may exercise jurisdiction. (2) Any person aggrieved by an order made by the Adjudicating Authority, being an Assistant Director of Enforcement or a Deputy Director of Enforcement, may prefer an appeal to the Special Director (Appeals). (3) Every appeal under sub-section (1) shall be filed within forty-five days from the date on which the copy of the order made by the Adjudicating Authority is received by the aggrieved person and it shall be in such form, verified in such manner and be accompanied by such fee as may be prescribed : Provided that the Special Director (Appeals) may entertain an appeal after the expiry of the said period of forty-five days, if he is satisfied that there was sufficient cause for not filing it within that period. (4) On receipt of an appeal under sub-section (1), the Special Director (Appeals) may after giving the parties to the appeal an opportunity of being heard, pass such order thereon as he thinks fit confirming, modifying or setting aside the order appealed against. (5) The Special Director (Appeals) shall send a copy of every order made by him to the parties to appeal and to the concerned Adjudicating Authority. (6) The Special Director (Appeals) shall have the same powers of a civil court which are conferred on the Appellate Tribunal under sub-section (2) of section 28 and (a) all proceedings before him shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860); (b) shall be deemed to be a civil court for the purposes of sections 345 and 346 of the Code of Criminal Procedure, 1973 (2 of 1974).
Section 18-Establishment of Appellate Tribunal

The Central Government shall, by notification, establish an Appellate Tribunal to be known as the Appellate Tribunal for Foreign Exchange to hear appeals against the orders of the Adjudicating Authorities and the Special Director (Appeals) under this Act.
Section 19-Appeal to Appellate Tribunal

(1) Save as provided in sub-section (2), the Central Government or any person aggrieved by an order made by an Adjudicating Authority, other than those referred to sub-section (1) of section 17, or the Special Director (Appeals), may prefer an appeal to the Appellate Tribunal: Provided that any person appealing against the order of the Adjudicating Authority or the Special Director (Appeals) levying any penalty, shall while filing the appeal, deposit the amount of such penalty with such authority as may be notified by the Central Government : Provided further that where in any particular case, the Appellate Tribunal is of the opinion that the deposit of such penalty would cause undue hardship to such person, the Appellate Tribunal may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the realisation of penalty.
(2) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made by the Adjudicating Authority or the Special Director (Appeals) is received by the aggrieved person or by the Central Government and it shall be in such form, verified in such manner and be accompanied by such fee as may be prescribed: Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period. (3) On receipt of an appeal under sub-section (1), the Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (4) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Adjudicating Authority or the Special Director (Appeals), as the case may be. (5) The appeal filed before the Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within one hundred and eighty days from the date of receipt of the appeal: Provided that where any appeal could not be disposed of within the said period of one hundred and eighty days, the Appellate Tribunal shall record its reasons in writing for not disposing of the appeal within the said period. (6) The Appellate Tribunal may, for the purpose of examining the legality, propriety or correctness of any order made by the Adjudicating Authority under section 16 in relation to any proceeding, on its own motion or otherwise, call for the records of such proceedings and makes such order in the case as it thinks fit.
Section 20-Composition of Appellate Tribunal

(1) The Appellate Tribunal shall consist of a Chairperson and such number of Members as the Central Government may deem fit. (2) Subject to the provisions of this Act, (a) the jurisdiction of the Appellate Tribunal may be exercised by Benches thereof; (b) a Bench may be constituted by the Chairperson with one or more Members as the Chairperson may deem fit; (c) the Benches of the Appellate Tribunal shall ordinarily sit at New Delhi and at such other places as the Central Government may, in consultation with the Chairperson, notify; (d) the Central Government shall notify the areas in relation to which each Bench of the Appellate Tribunal may exercise jurisdiction. (3) Notwithstanding anything contained in sub-section (2), the Chairperson may transfer a Member from one Bench to another Bench. (4) If at any stage of the hearing of any case or matter it appears to the Chairperson or a Member that the case or matter is of such a nature that it ought to be heard by a Bench consisting of two Members, the case or matter may be transferred by the Chairperson or, as the case may be, referred to him for transfer, to such Bench as the Chairperson may deem fit.
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Section 21-Qualifications for appointment of Chairperson, Member and Special Director (Appeals).
(1) A person shall not be qualified for appointment as the Chairperson or a Member unless he (a) in the case of Chairperson, is or has been, or is qualified to be, a Judge of a High Court; and (b) in the case of a Member, is or has been, or is qualified to be, a District Judge. (2) A person shall not be qualified for appointment as a Special Director (Appeals) unless he (a) has been a member of the Indian Legal Service and has held a post in Grade I of that Service; or (b) has been a member of the Indian Revenue Service and has held a post equivalent to a Joint Secretary to the Government of India.
Section 22-Term of office.

The Chairperson and every other Member shall hold office as such for a term of five years from the date on which he enters upon his office : Provided that no Chairperson or other Member shall hold office as such after he has attained, (a) in the case of the Chairperson, the age of sixty-five years; (b) in the case of any other Member, the age of sixty-two years.
Section 23-Terms and conditions of service.

The salary and allowances payable to and the other terms and conditions of service of the Chairperson, other Members and the Special Director (Appeals) shall be such as may be prescribed: Provided that neither the salary and allowances nor the other terms and conditions of service of the Chairperson or a Member shall be varied to his disadvantage after appointment.
Section 24-Vacancies.
If, for reason other than temporary absence, any vacancy occurs in the office of the Chairperson or a Member, the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Appellate Tribunal from the stage at which the vacancy is filled.
Section 25-Resignation and removal.

(1) The Chairperson or a Member may, by notice in writing under his hand addressed to the Central Government, resign his office: Provided that the Chairperson or a Member shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of term of office, whichever is the earliest. (2) The Chairperson or a Member shall not be removed from his office except by an order by the Central Government on the ground of proved misbehaviour or incapacity after an inquiry made by such person as the President may appoint for this purpose in which the Chairperson or a Member concerned has been informed of the charges against him and given a reasonable opportunity of being heard in respect of such charges.
Section 26-Member to act as Chairperson in certain circumstances.

(1) In the event of the occurrence of any vacancy in the office of the Chairperson by reason of his death, resignation or otherwise, the senior-most Member shall act as the Chairperson until the date on which a new Chairperson, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office. (2) When the Chairperson is unable to discharge his functions owing to absence, illness or any other cause, the senior most Member shall discharge the functions of the Chairperson until the date on which the Chairperson resumes his duties.
Section 27-Staff of Appellate Tribunal and Special Director (Appeals).

(1) The Central Government shall provide the Appellate Tribunal and the Special Director (Appeals) with such officers and employees as it may deem fit. (2) The officers and employees of the Appellate Tribunal and office of the Special Director (Appeals) shall discharge their functions under the general superintendence of the Chairperson and the Special Director (Appeals), as the case may be. (3) The salaries and allowances and other conditions of service of the officers and employees of the Appellate Tribunal and office of the Special Director (Appeals) shall be such as may be prescribed.
Section 28-Procedure and powers of Appellate Tribunal and Special Director (Appeals)
(1) The Appellate Tribunal and the Special Director (Appeals) shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908) but shall be guided by the principles of natural justice and, subject to the other provisions of this Act, the Appellate Tribunal and the Special Director (Appeals) shall have powers to regulate its own procedure. (2) The Appellate Tribunal and the Special Director (Appeals) shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908); while trying a suit, in respect of the following matters, namely: (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavits; (d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872) requisitioning any public record or document or copy of such record or document from any office; (e) issuing commissions for the examination of witnesses or documents; (f) reviewing its decisions; (g) dismissing a representation of default or deciding it ex parte; (h) setting aside any order of dismissal of any representation for default or any order passed by it ex parte; and (i) any other matter which may be prescribed by the Central Government.
(3) An order made by the Appellate Tribunal or the Special Director (Appeals) under this Act shall be executable by the Appellate Tribunal or the Special Director (Appeals) as a decree of civil court and, for this purpose, the Appellate Tribunal and the Special Director (Appeals) shall have all the powers of a civil court.
(4) Notwithstanding anything contained in sub-section (3), the Appellate Tribunal or the Special Director (Appeals) may transmit any order made by it to a civil court having local jurisdiction and such civil court shall execute the order as if it were a decree made by that court. (5) All proceedings before the Appellate Tribunal and the Special Director (Appeals) shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860) and the Appellate Tribunal shall be deemed to be a civil court for the purposes of sections 345 and 346 of the Code of Criminal Procedure, 1973 (2 of 1974)
Section 29-Distribution of business amongst Benches.

Where Benches are constituted, the Chairperson may, from time to time, by notification, make provisions as to the distribution of the business of the Appellate Tribunal amongst the Benches and also provide for the matters which may be dealt with by each Bench.
Section 30-Power of Chairperson to transfer cases.

On the application of any of the parties and after notice to the parties, and after hearing such of them as he may desire to be heard, or on his own motion without such notice, the Chairperson may transfer any case pending before one Bench, for disposal, to any other Bench.
Section 31-Decision to be by majority.

If the Members of a Bench consisting of two Members differ in opinion on any point, they shall state the point or points on which they differ, and make a reference to the Chairperson who shall either hear the point or points himself or refer the case for hearing on such point or points by one or more of the other Members of the Appellate Tribunal and such point or points shall be decided according to the opinion of the majority of the Members of the Appellate Tribunal who have heard the case, including those who first heard it.
Section 32-Right of appellant to take assistance of legal practitioner or chartered accountant and of Government, to appoint presenting officers.
(1) A person preferring an appeal to the Appellate Tribunal or the Special Director (Appeals) under this Act may either appear in person or take the assistance of a legal practitioner or a chartered accountant of his choice to present his case before the Appellate Tribunal or the Special Director (Appeals), as the case may be. (2) The Central Government may authorise one or more legal practitioners or chartered accountants or any of its officers to act as presenting officers and every person so authorised may present the case with respect to any appeal before the Appellate Tribunal or the Special Director (Appeals), as the case may be.
Section 33-Members, etc. to be public servants.

The Chairperson, Members and other officers and employees of the Appellate Tribunal, the Special Director (Appeals) and the Adjudicating Authority shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).
Section 34-Civil court not to have jurisdiction.

No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which an Adjudicating Authority or the Appellate Tribunal or the Special Director (Appeals) is empowered by or under this Act to determine and no injunction shall be granted by any court or
other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.
Section 35-Appeal to High Court.

Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. Explanation.In this section High Court means (a) the High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on business or personally works for gain; and (b) where the Central Government is the aggrieved party, the High Court within the jurisdiction of which the respondent, or in a case where there are more than one respondent, any of the respondents, ordinarily resides or carries on business or personally works for gain.
Section 36-Directorate of Enforcement

(1) The Central Government shall establish a Directorate of Enforcement with a Director and such other officers or class of officers as it thinks fit, who shall be called officers of Enforcement, for the purposes of this Act. (2) Without prejudice to provisions of sub-section (1), the Central Government may authorise the Director of Enforcement or an Additional Director of Enforcement or a Special Director of Enforcement or a Deputy Director of Enforcement to appoint officers of Enforcement below the rank of an Assistant Director of Enforcement. (3) Subject to such conditions and limitations as the Central Government may impose, an officer of Enforcement may exercise the powers and discharge the duties conferred or imposed on him under this Act.
Section 37-Power of search, seizure, etc.

(1) The Director of Enforcement and other officers of Enforcement, not below the rank of an Assistant Director, shall take up for investigation the contravention referred to in section 13. (2) Without prejudice to the provisions of sub-section (1), the Central Government may also, by notification, authorise any officer or class of officers in the Central Government, State Government or the Reserve Bank not below the rank of an Under Secretary to the Government of India to investigate any contravention referred to in section 13. (3) The officers referred to in sub-section (1) shall exercise the like powers which are conferred on income-tax authorities under the Income-tax Act, 1961 (43 of 1961) and shall exercise such powers, subject to such limitations laid down under that Act.
Section 38-Empowering other officers.

(1) The Central Government may, by order and subject to such conditions and limitations as it thinks fit to impose, authorise any officer of customs or any central excise officer or any police officer or any other officer of the Central Government or a State Government to
exercise such of the powers and discharge such of the duties of the Director of Enforcement or any other officer of Enforcement under this Act as may be stated in the order. (2) The officers referred to in sub-section (1) shall exercise the like powers which are conferred on the income-tax authorities under the Income-tax Act, 1961 (43 of 1961), subject to such conditions and limitations as the Central Government may impose.
Section 39-Miscellaneous-Presumption as to documents in certain cases.

Where any document (i) is produced or furnished by any person or has been seized from the custody or control of any person, in either case, under this Act or under any other law; or (ii) has been received from any place outside India (duly authenticated by such authority or person and in such manner as may be prescribed) in the course of investigation of any contravention under this Act alleged to have been committed by any person, and such document is tendered in any proceeding under this Act in evidence against him, or against him and any other person who is proceeded against jointly with him, the court or the Adjudicating Authority, as the case may be, shall (a) presume, unless the contrary is proved, that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that persons handwriting, and in the case of a document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested; (b) admit the document in evidence notwithstanding that it is not duly stamped, if such document is otherwise admissible in evidence; (c) in a case falling under clause (i), also presume, unless the contrary is proved, the truth of the contents of such document.
Section 40-Suspension of operation of this Act.

(1) If the Central Government is satisfied that circumstances have arisen rendering it necessary that any permission granted or restriction imposed by this Act should cease to be granted or imposed, or if it considers necessary or expedient so to do in public interest, the Central Government may, by notification, suspend or relax to such extent either indefinitely or for such period as may be notified, the operation of all or any of the provisions of this Act. (2) Where the operation of any provision of this Act has under sub-section (1) been suspended or relaxed indefinitely, such suspension or relaxation may, at any time while this Act remains in force, be removed by the Central Government by notification. (3) Every notification issued under this section shall be laid, as soon as may be after it is issued, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification or both Houses agree that the notification should not be issued, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that notification.
Section 41-Power of Central Government to give directions.

For the purposes of this Act, the Central Government may, from time to time, give to the Reserve Bank such general or special directions as it thinks fit and the Reserve Bank shall, in the discharge of its functions under this Act, comply with any such directions.
Section 42-Contravention by companies.

(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made there under is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly : Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised due diligence to prevent such contravention. (2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made there under has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Explanation : For the purposes of this section (i) company means anybody corporate and includes a firm or other association of individuals; and
(ii) director, in relation to a firm, means a partner in the firm.
Section 43-Death or insolvency in certain cases.

Any right, obligation, liability, proceeding or appeal arising in relation to the provisions of section 13 shall not abate by reason of death or insolvency of the person liable under that section and upon such death or insolvency such rights and obligations shall desolve on the legal representative of such person or the official receiver or the official assignee, as the case may be : Provided that a legal representative of the deceased shall be liable only to the extent of the inheritance or estate of the deceased.
Section 44-Bar of legal proceedings.

No suit, prosecution or other legal proceeding shall lie against the Central Government or the Reserve Bank or any officer of that Government or of the Reserve Bank or any other person exercising any power or discharging any functions or performing any duties under this Act, for anything in good faith done or intended to be done under this Act or any rule, regulation, notification, direction or order made there under.
Section 45-Removal of difficulties.

(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, do anything not inconsistent with the provisions of this Act for the purpose of removing the difficulty:
Provided that no such order shall be made under this section after the expiry of two years from the commencement of this Act. (2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.
Section 46-Power to make rules.

(1) The Central Government may, by notification, make rules to carry out the provisions of this Act. (2) Without prejudice to the generality of the foregoing power, such rules may provide for, (a) the imposition of reasonable restrictions on current account transactions under section5; (b) the manner in which the contravention may be compounded under sub-section (1) of section 15; (c) the manner of holding an inquiry by the Adjudicating Authority under sub-section (1) of section 16; (d) the form of appeal and fee for filing such appeal under sections 17 and 19; (e) the salary and allowances payable to and the other terms and conditions of service of the Chairperson and other Members of the Appellate Tribunal and the Special Director (Appeals) under section 23; (f) the salaries and allowances and other conditions of service of the officers and employees of the Appellate Tribunal and the office of the Special Director (Appeals) under subsection (3) of section 27; (g) the additional matters in respect of which the Appellate Tribunal and the Special Director (Appeals) may exercise the powers of civil court under clause (i) of sub-section (2) of section 28; (h) the authority or person and the manner in which any document may be authenticated under clause (ii) of section 39; and (i) any other matter which is required to be, or may be, prescribed.
Section 47-Power to make regulations.

(1) The Reserve Bank may, by notification, make regulations to carry out the provisions of this Act and the rules made there under. (2) Without prejudice to the generality of the foregoing power, such regulations may provide for, (a) the permissible classes of capital account transactions, the limits of admissibility of foreign exchange for such transactions, and the prohibition, restriction or regulation of certain capital Account transactions under section 6; (b) the manner and the form in which the declaration is to be furnished under clause (a) of sub-section (1) of section 7; (c) the period within which and the manner of repatriation of foreign exchange under section 8; (d) the limit up to which any person may possess foreign currency or foreign coins under clause (a) of section 9; (e) the class of persons and the limit up to which foreign currency account may be held or operated under clause (b) of section 9; (f) the limit up to which foreign exchange acquired may be exempted under clause (d) of section 9;
(g) the limit up to which foreign exchange acquired may be retained under clause (e) of section 9; (h) any other matter which is required to be, or may be, specified.
Section 48-Rules and regulations to be laid before Parliament.

Every rule and regulation made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation, or both Houses agree that the rule or regulation should not be made, the rule or regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or regulation.
Section 49-Repeal and saving.

(1) The Foreign Exchange Regulation Act, 1973 (46 of 1973) is hereby repealed and the Appellate Board constituted under sub-section (1) of section 52 of the said Act (hereinafter referred to as the repealed Act) shall stand dissolved. (2) On the dissolution of the said Appellate Board, the person appointed as Chairman of the Appellate Board and every other person appointed as Member and holding office as such immediately before such date shall vacate their respective offices and no such Chairman or other person shall be entitled to claim any compensation for the premature termination of the term of his office or of any contract of service. (3) Notwithstanding anything contained in any other law for the time being in force, no court shall take cognizance of an offence under the repealed Act and no adjudicating officer shall take notice of any contravention under section 51 of the repealed Act after the expiry of a period of two years from the date of the commencement of this Act. (4) Subject to the provisions of sub-section (3) all offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act had not been repealed. (5) Notwithstanding such repeal, (a) anything done or any action taken or purported to have been done or taken including any rule, notification, inspection, order or notice made or issued or any appointment, confirmation or declaration made or any license, permission, authorization or exemption granted or any document or instrument executed or any direction given under the Act hereby repealed shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act; (b) any appeal preferred to the Appellate Board under sub-section (2) of section 52 of the repealed Act but not disposed of before the commencement of this Act shall stand transferred to and shall be disposed of by the Appellate Tribunal constituted under this Act; (c) every appeal from any decision or order of the Appellate Board under sub-section (3) or sub-section (4) of section 52 of the repealed Act shall, if not filed before the commencement of this Act, be filed before the High Court within a period of sixty days of such commencement :
Provided that the High Court may entertain such appeal after the expiry of the said period of sixty days if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period. (6) Save as otherwise provided in sub-section (3), the mention of particular matters in subsections (2), (4) and (5) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of
ORGANISATION SET-UP
The Enforcement Directorate, with its Headquarters at New Delhi has seven Zonal offices at Bombay, Calcutta, Delhi, Jalandhar, Madras, Ahmedabad and Bangalore. The Zonal offices are headed by the Deputy Directors. The Directorate has nine Sub-Zonal offices at Agra, Srinagar, Jaipur, Varanasi, Trivandrum, Calicut, Hyderabad, Guwahati and Goa, which are headed by the Assistant Directors. The Directorate has also a Unit at Madurai, which is headed by a Chief Enforcement Officer. Besides, there are three Special Directors of Enforcement and one Additional Director of Enforcement. FUNCTIONS : The main functions of the Directorate are as under: 1) To collect and develop intelligence relating to violation of the provisions of Foreign Exchange Regulation Act and while working out the same, depending upon the circumstances of the case: 2) To conduct searches of suspected persons, conveyances and premises for seizing incriminating materials (including Indian and foreign currencies involved) and/or. 3) To enquire into and investigate suspected violations of provisions of the Foreign Exchange Management Act. 4) To adjudicate cases of violations of Foreign Exchange Management Act for levying penalties departmentally and also for confiscating the amounts involved in contraventions; 5) To realise the penalties imposed in departmental adjudication; In addition to the above functions relating to the Foreign Exchange Management Act, the Directorate also processes and recommends cases for detention of habitual offenders under the Conservation of Foreign Exchange and Prevention of smuggling Activities Act, 1974 (52 of 1974), which provides inter-alia for detention of a person with a view to preventing him from acting in a manner prejudicial to the conservation and augmentation of foreign exchange.
PROCEDURAL PROVISIONS
For enforcing the provisions of various sections of FEMA,l999, the officers of Enforcement Directorate of the level of Assistant Director and above will have to undertake the following functions 1. 2. 3. 4. 5. 6. 7. 8.
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Collection and development of intelligence/information. Keeping surveillance over suspects. Searches of persons/vehicles as per provisions of Income-tax Act, 1961. Searches of premises as per provisions of Income-tax Act, 1961. Summoning of persons for giving evidence and producing of documents as per provisions of Income-tax Act, l96l. Power to examine persons as per provisions of Income-tax Act, 196l. Power to call for any information/document as per provisions of Income-tax Act , 1961. Power to seize documents etc. as per provisions of Income-tax Act, 196l.
9.
Custody of documents as per Income-tax Act, 196l.
10. Adjudication and appeals- Officers of and above the rank of Dy Director of Enforcement, are empowered to adjudicate cases of contravention of the provisions of the Act; these proceedings which are quasi-judicial in nature, start with the issuance of show cause notice; in the event of cause shown by the Notice-not being found satisfactory, further proceedings are held, vis. personal hearing, in which the noticee has a further right to present his defence, either in person or through any authorised representative; on conclusion of these proceedings, the adjudicating authority has to examine and consider the evidence on record, in its entirety and in case the charges not being found proved, the noticee is acquitted, and in the event of charges being found substantiated, such penalty, as is considered appropriate as per provisions of section 13 of the Act can be imposed, besides confiscation of amount involved in these contraventions. The penalty imposed has to be deposited in the concerned office of the Dy. Director within 45 days of the date of receipt of the Adjudication order. In case the party feels aggrieved by the orders of the adjudicating authority, he/she/they can refer appeal, before the Appellate Tribunal/ Special Director (Appeal), Foreign Exchange. Whereas, another appeal lies to the High Court, against the order of the Appellate Tribunal, however, only in the matters involving question/ points of Law.
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CHAPTER-12
SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS & ENFORCEMENT OF SECURITY INTEREST ACT (SARFAESI)-2002
The Act is effective from 21st Aug 2002 (Ordinance promulgated on 21-6-2002).
OBJECTIVE: The Securitisation, Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 was enacted to solve one of the biggest maladies of non-performing advances/ over dues faced by the banks, which is basically because of weak creditors rights-the weak ability of lenders to recover dues from borrowers. When a loan is in default, it has been operationally difficult for lenders to take control of collateral, or to utilise recovery procedures designed for a company that goes into bankruptcy. The Securitisation Act will radically change the existing system and bring about structural reforms to the Indian credit market. The Act supersedes Sec 69A of the Transfer or Property Act, 1882, which shielded borrowers from creditors by disallowing the confiscation of immovable property. This act empowers lenders to take over immovable properties. SARFAESI empowers Banks/Financial Institutions to recover their non-performing assets without the intervention of the Court. The Act provides three alternative methods for recovery of nonperforming assets, namely: Securitisation Asset Reconstruction Enforcement of Security without the intervention of the Court
The provisions of this Act are applicable only for NPA with outstanding above Rs. 1.00 lac. NPA Accounts where the amount is less than 20% of the principal and interest are not eligible to be dealt with under this Act. Non-performing assets should be backed by Securities charged to the Bank by way of hypothecation or mortgage or assignment. Security Interest by way of Lien, pledge, hire purchase and lease not liable for attachment under Sec.60 of CPC, are not covered under this Act.
The Act empowers the Bank:

To issue demand notice to the defaulting borrower and guarantor, calling upon them to discharge their dues in full within 60 days from the date of the notice. To give notice to any person who has acquired any of the Secured assets from the borrower to surrender the same to the Bank. To ask any debtor of the borrower to pay any sum due or becoming due to the borrower.
The Security interest on moveable assets or immoveable assets is enforceable under SARFAESI Act. Section 13(2) provides that notwithstanding anything contained in section 69 of Section 69A of the Transfer of Property Act, 1882 (4 of 1882) any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.
Securitisation Act 2002 Challenged: The Securitisation Act 2002 was challenged in various courts on grounds that it was powered heavily in favour of lenders, giving little chance to the borrowers to explain their views once recovery process is initiated under the legislation. The Supreme Court in its judgement in the matter of Merdia Chemical Ltd., upheld the constitution validity of the SARFAESI Act, but struck down sub-Sec (2) of Sec 17, which provides for a deposit of 75% of the claimed amount before the appeal is admitted by DRT. To bring the provision of the act in conformity with the Supreme Court judgement, to dissuade the borrower from indulging in delay tactics and enable Secured creditors to make speedy recovery by enforcement of Securities, the SARFAESI Act 2002 has been amended by the promulgation of the Enforcement of Security Interest and Recovery of Debt Laws (Amendment) Ordinance, 2004. ADVANTAGES: In the event of default by a borrower, Secured creditor shall have the following powers: a) Take over the management of the business of the borrower u/s 13 (4) b) To appoint a Manager; c) To take possession, sell or lease the Secured assets (both movable and immovable assets); d) To recover any money payable by third parties to the borrower. e) In case of joint financing under consortium or multiple lending arrangements, if 75% of the Secured creditors in value agree to initiate recovery action, the same shall be binding on all the Secured creditors. The act is partially retrospective i.e. cases that have already been referred to BIFR can now be called back if the majority of the lenders, more than three-fourth of the loans disbursed lenders, choosing to do so. The new legislation also provides for exclusion of any Security interest created in agricultural land, agricultural crops/implements are covered. In caseswhere the borrower has already paid 80% of the total dues to Secured creditor. Outstandings above Rs.1 lac will be covered by the provisions of this Act. In case of NPA Account, the Secured creditor after giving 60 days notice, in writing, can take the possession of the assets in the nature of Security for the loans/ advances. If the borrower makes an objection, the bank is bound to file the reply within a weak. No civil court has the jurisdiction to entertain any suit and no injunction can be granted by any court in the cases falling under the jurisdiction of this Act. Any borrower or any person aggrieved by the action of the Secured creditors can file a petition to the concerned DRT within 45 days and DRTs would have to disposeoff cases within 60 days of any application being filed before it by borrowers whose assets are taken possession of by lenders. If the DRTs fails to take a decision within 4 months, the bank or the borrower can prefer an appeal to the DRAT for expeditious disposal. To ensure that such appeal provision is not abused to delay or defeat the proceedings for recovery, a provision has been made requiring the defaulting borrower to deposit 50% of the amount claimed with the DRT before filing an appeal to the Debt Recovery Appellate Tribunal (DRAT) against orders of the DRT. The DRT has been given the powers to lower the upfront payment; but not less than stipulated payment of less than 25 % of the decreed amount. The ordinance also confers power upon the appellate tribunal to transfer all pending applications before different DRTs to one DRT.
CHAPTER-13
CONSUMER PROTECTION ACT-1986
The Consumer Protection Act, 1986, popularly known as COPRA has been enacted with the following primary objectives viz., a) b) To provide very simple, quick and easy remedy to consumers under the three-tier quasijudicial reddressal machinery established under the Act. To protect the consumers interests against unscrupulous traders and businessman.
COPRA is simplified, minimal technical and legalistic procedure, providing access to easier reddressal systems and people friendly courts with a majority of non-legal background members. COPRA ENACTMENT: COPRA came into the effect w.e.f 15th April 1987 and is applicable to public, private and cooperative Banks all over India (excluding J&K). A comprehensive amendment in the shape of The Consumer Protection (Amendment Act) 2002 has been passed and implemented w.e.f 15th March 2003 the World Consumer Rights Day. Who can file a complaint? - A complaint under this Act can be made by: a) b) c) d) Any consumer; or Any voluntary consumer association; or The Central Government or any State Government; or Any one or more consumers where there are numerous consumers having the same interest, i.e., they should have a common cause of action.
WHO IS CONSUMER?
Under COPRA, a Consumer is person who buys any goods or hires any service for consideration. However, goods obtained for commercial purposes or for the resale are not covered under the Act. Grounds for complaint: Under this Act, a complaint may be made by the complaint in writing with a view to obtain any relief provided by law under this Act alleging that: a) b) c) d) An unfair trade practice or a restrictive trade practice has been adopted by any trader; The goods bought by him or agreed to be bought by him suffer from one or more defects; The services hired or availed of, or agreed to be hired or availed of by him suffer from deficiency in any respect, The trader has charged for the goods mentioned in the complaint a price in excess of the price fixed by or under any law for the time being in force or displayed on the goods or any package containing such goods; Goods which will be hazardous to life and safety when used, are being offered for sale to the public in contravention of the provisions of any law for the time being in force, requiring traders to display information in regard to the contents, manner and effect of use of such goods.
e)
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Hierarchy of Courts: The Act has established a hierarchy of courts, with: a) b) c) At least one District Forum at the District level, A State Commission at the State Capitals and The National Commission at New Delhi.
The Forum / Commission, in which the complaint is required to be filed, depends upon the value of goods / services complained against and the compensation, if any, claimed and is as under:
Value of claims/ Compensation

Up to Rs.20 lakhs Exceeding Rs.20 lakhs but not exceeding Rs.1crore. Exceeding Rs.1 crore.
Forum/Commission where complaint to be filed

The District Forum-Its head is President equivalent in status in to District and Session judge. The State Commission-Its head is President equivalent in status to a High Court Judge. The National Commission-Its head is President equivalent in status to Supreme Court Judge.
The limitation period for loading the complaint to any of the three forums is as per their pecuniary jurisdiction, within two years from the date of cause of action.
Appeals:
a) b) c) Appeal against the judgement of District Forum are to be filed before the State Commission by deposit of Rs.25000 or 50% of the claim amount whichever is less. Appeal against the judgement of State Commission are to be filed before the National Commission by deposit of Rs.35000 or 50% of the claim amount whichever is less. Appeal against the judgement of National Commission are to be filed before the Supreme Court by deposit of Rs.50000 or 50% of the claim amount whichever is less.
The limitation period for appeal in all cases referred above is 30 days. Non-Compliance of decision: Can make fine from Rs.2000 to Rs.10000. Imprisonment of 1 month to 3 years- or both. Appeal can be made by both parties. Frivolous Complaint-Fine can be up to Rs.10000 and will be given to the opposite party. (Power of Judicial Magistrate will be exercised).
Time Limit:
Without analysis or testing of commodities With analysis or testing 3 months. 5 months.
Admissibility of Complaint shall ordinarily be decided within 21 days from the date on which the complaint was received.
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CHAPTER-14
RIGHT TO INFORMATION ACT-2005
The Right to Information Act which replaces the Freedom of Information Act, 2002 came into force on 12th Oct. 2005 (120th day of its enactment on 15th June 2005).
Important Points of the Act:

a) b) c) d) All Public Sector Banks constituted by an Act of Parliament or owned and controlled by the Government are Public Authorities are covered under the Act. As Public Authorities, the public sector banks are required to designate Public Information Officers. The right to information is provided to all citizens and a company or any other incorporated entity, which is not a citizen, cannot call for any information under the Act. An applicant making request for information is not required to give any reason for requesting the information or any other personal details except those that may be necessary for contacting him. In terms of Sec 7(1) of the Act, any request for information is to be disposed-off within 30 days of receipt of request. If required for information is rejected, the concerned Public Information Officer has to record reasons for rejection, state the period within which an appeal against such rejection may be preferred and particulars of the appellate authority, in the order of rejection. As per the Act, it is permissible for the public authority to demand further fees being the cost of providing the information. All the public sector banks are advised to maintain records for 20 years as envisaged under the Right to Information Act. Such requirement would be effective from the date the Right th to Information Act has come into force, i.e. 15 June 2005. If the citizen is not satisfied by the reply given by PIO or wishes to appeal against rejection by PIO, the competent authority is State Information Commission & Central information commission.
e) f)
g) h)
i)
Exemptions from disclosures (Sec 8 & 9): Information including commercial confidence/ trade Secrets or intellectual property, the disclosure of which would harm the competitive position of a third party unless the competent authority is satisfied that larger public interest warrants the disclosure of such information. In cases where a bank is acting in capacity as a trustee, any information conveyed to the bank as a trustee can be treated as confidential and exempted from disclosure. Personal information which has no relation to any public activity or interest or which would cause unwarranted invasion of the privacy of the individual.
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CHAPTER 15
PREVENTION OF MONEY LAUNDERING ACT 2002PMLA W.E.F. 01-07-2005
The Prevention of Money Laundering Act, 2002 (PMLA) forms the core of the legal framework put in place by India to combat money laundering. PMLA and the Rules notified there under came into force with effect from July 1, 2005. Director, FIU-IND and Director (Enforcement) have been conferred with exclusive and concurrent powers under relevant sections of the Act to implement the provisions of the Act. The PMLA and rules notified there under impose obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information to FIU-IND. PMLA defines money laundering offence and provides for the freezing, seizure and confiscation of the proceeds of crime.
Short title, extent and commencement

Section 1 calls the Act as the Prevention of Money Laundering Act, 2002 (1) This Act may be called the Prevention of Money-laundering Act, 2002. (2) It extends to the whole of India. (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.
Section 2-Definitions
Prevention of Money Laundering Act, 2002 defines various terms. 2. (1) In this Act unless the context otherwise requires,(a) Adjudicating Authority means an Adjudicating Authority appointed under sub-section (1) of section 6; (b) Appellate Tribunal means the Appellate Tribunal established under section 25; (c) Assistant Director means an Assistant Director appointed under sub-section (1) of section 49; (d) Attachment means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III; [(da) authorised person means an authorised person as defined in clause (c) of section 2 of the Foreign Exchange Management Act, 1999;]* (e) Banking Company means a banking company or a co-operative bank to which the Banking Regulation Act, 1949 applies and includes any bank or banking institution referred to in section 51 of that Act; (f) Bench means a Bench of the Appellate Tribunal;
(g) Chairperson means Chairperson of the Appellate Tribunal; (h) Chit Fund Company means a company managing, conducting or supervising, as foreman, agent or in any other capacity, chits as defined in section 2 of the Chit Funds Act, 1982; (i) (j) Co-operative Bank shall have the same meaning as assigned to it in clause (dd) of section 2 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961; Deputy Director means a Deputy Director appointed under sub-section (1) of section 49; [(ja) designated business or profession means carrying on activities for playing games of chance for cash or kind, and includes such activities associated with casino or such other activities as the Central Government may, by notification, so designate, from time to time;]*
(k) Director or Additional Director or Joint Director means a Director or Additional Director or Joint Director, as the case may be, appointed under sub-section (1) of section 49; (l) Financial Institution means a financial institution as defined in clause (C) of section 45-I of the Reserve Bank of India Act, 1934 and includes a chit fund company, a cooperative bank, a housing finance institution, [an authorized person, a payment system operator and a non-banking financial company]**;
(m) Housing Finance Institution shall have the meaning as assigned to it in clause (d) of section 2 of the National Housing Bank Act, 1987; (n) Intermediary means a stock-broker, sub-broker, share transfer agent, banker to an issue, trustee to a trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and any other intermediary associated with securities market and registered under section 12 of the Securities and Exchange Board of India Act, 1992; (o) Member means a Member of the Appellate Tribunal and includes the Chairperson; (p) money-laundering has the meaning assigned to it in section 3; (q) Non-Banking Financial Company shall have the same meaning as assigned to it in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 [and includes a person carrying on designated business or profession]*; (r) Notification means a notification published in the Official Gazette; (ra) Offence ofCross Border Implications, means (i) any conduct by a person at a place outside India which constitutes an offence at that place and which would have constituted an offence specified in Part A, Part B or Part C of the Schedule, had it been committed in India and if such person remits the proceeds of such conduct or part thereof to India; or
(ii) any offence specified in Part A , Part B or Part C of the Schedule which has been committed in India and the proceeds of crime, or part thereof have been transferred to a place outside India or any attempt has been made to transfer the proceeds of crime, or part thereof from India to a place outside India. Explanation: Nothing contained in this clause shall adversely affect any investigation, enquiry, trial or proceeding before any authority in respect of the offences specified in Part A or Part B of the Schedule to the Act before the commencement of the Prevention of Money laundering (Amendment) Act 2009; (rb) Payment System means a system that enables payment to be effected between a
payer and a beneficiary, involving clearing, payment or settlement service or all of them. Explanation: For the purpose of this clause, payment system includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar operations;
(rc) Payment System Operator means a person who operates a payment system and such person includes his overseas principal. Explanation : For the purpose of this clause, Overseas Principal means, (A)in the case of a person, being an individual, such individual residing outside India, who owns or controls or manages, directly or indirectly, the activities or functions of payment system in India; (B)in the case of a Hindu undivided family, Karta of such Hindu undivided family residing outside India who owns or controls or manages, directly or indirectly, the activities or functions of payment system in India; (C)in the case of a company, a firm, an association of persons, a body of individuals, an artificial juridical person, whether incorporated or not, such company, firm, association of persons, body of individuals, artificial juridical person incorporated or registered outside India or existing as such and which owns or controls or manages, directly or indirectly, the activities or functions of payment system in India;]* (s) Person includes;(i) an individual (ii) a Hindu undivided family, (iii) a company, (iv) firm, (v) an association of persons or a body of individuals whether incorporated or not, (vi) every artificial juridical person not falling within any of the preceding sub-clauses, and (vii) any agency, office or branch owned or controlled by any of the above persons mentioned in the preceding sub-clauses; (t) Prescribed means prescribed by rules made under this Act; (u) Proceeds of Crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property; (v) Property means any property or assets of every description, whether corporeal or incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments evidencing title to, or interest in, such property or assets, wherever located; (w) Records include the records maintained in the form of books or stored in a computer or such other form as may be prescribed; (x) Schedule means the Schedule to this Act; (y) Scheduled Offence means (i) the offences specified under Part A of the Schedule; or
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(ii) the offences specified under Part B of the Schedule if the total value involved in such offences is thirty lakh rupees or more; or (iii) the offences specified under Part C of the Schedule.]*** (z) Special Court means a Court of Session designated as Special Court under sub-section (1) of section 43; (za) Transfer includes sale, purchase, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien., (zb) Value means the fair market value of any property on the date of its acquisition by any person, or if such date cannot be determined, the date on which such property is possessed by such person. (2) Any reference, in this Act or the Schedule, to any enactment or any provision thereof shall, in relation to an area in which such enactment or such provision is not in force, be construed as a reference to the corresponding law or the relevant provisions of the corresponding law, if any, in force in that area. * Inserted vide Prevention of Money-laundering (Amendment) Act, 2009 ** Substituted for [a non-banking financial company] vide Prevention of Money-laundering (Amendment) Act, 2009 *** Substituted for sub-clause (ii) vide Prevention of Money-laundering (Amendment) Act, 2009
Section 12-Obligations of Banking Companies, Financial Institutions and Intermediaries of securities market
(1) Every banking company, financial institution and intermediary shall (a) maintain a record of all transactions, the nature and value of which may be prescribed, whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other, and where such series of transactions take place within a month; (b) furnish information of transactions referred to in clause (a) to the Director within such time as may be prescribed; (c) verify and maintain the records of the identity of all its clients, in such a manner as may be prescribed. Provided that where the principal officer of a banking company or financial institution or intermediary, as the case may be, has reason to believe that a single transaction or series of transactions integrally connected to each other have been valued below the prescribed value so as to defeat the provisions of this section, such officer shall furnish information in respect of such transactions to the Director within the prescribed time. (2) (a) The records referred to in clause (a) of sub-section (1) shall be maintained for a period of ten years from the date of transactions between the clients and the banking company or financial institution or intermediary, as the case may be. (b) The records referred to in clause (c) of sub-section (1) shall be maintained for a period of ten years from the date of cessation of transactions between the clients and the banking company or financial institution or intermediary, as the case may be.]* *Substituted for sub-section (2) vide Prevention of Money-laundering (Amendment) Act, 2009
Section 13 - Powers of the Director

(1) The Director may, either of his own motion or on an application made by any authority, officer or person, call for records referred to in sub-section (1) of section 12 and may make such inquiry or cause such inquiry to be made, as he thinks fit. (2) If the Director, in the course of any inquiry, finds that a banking company, financial institution or an intermediary or any of its officers has failed to comply with the provisions contained in section 12, then, without prejudice to any other action that may be taken under any other provisions of this Act, he may, by an order, levy a fine on such banking company or financial institution or intermediary which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure. (3) The Director shall forward a copy of the order passed under sub-section (2) to every banking company, financial institution or intermediary or person who is a party to the proceedings under that sub-section.
Section 14 - No civil proceedings

Section 14 of the Prevention of Money Laundering Act, 2002 gives immunity to banking companies, financial institutions and intermediaries of securities market, etc., against civil proceedings for furnishing information. 14. Save as otherwise provided in section 13, the banking companies, financial institutions, intermediaries and their officers shall not be liable to any civil proceedings against them for furnishing information under clause (b) of sub-section (1) of section 12.
Section 15 - Prescribing the procedure and manner of maintaining and furnishing information
The Central Government may, in consultation with the Reserve Bank of India, prescribe the procedure and the manner of maintaining and furnishing information under sub-section (1) of section 12 for the purpose of implementing the provisions of this Act.
Section 26 - Appeal to Appellate Tribunal

(1) Save as otherwise provided in sub-section (3), the Director or any person aggrieved by an order made by the Adjudicating Authority under this Act, may prefer an appeal to the Appellate Tribunal. (2) Any banking company, financial institution or intermediary aggrieved by any order of the Director made under sub-section (2) of section 13, may prefer an appeal to the Appellate Tribunal. (3) Every appeal preferred under sub-section (1) or sub-section (2) shall be filed within a period of forty-five days from the date on which a copy of the order made by the Adjudicating Authority or Director is received and it shall be in such form and be accompanied by such fee as may be prescribed: Provided that the Appellate Tribunal may, after giving an opportunity of being heard, entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period. (4) On receipt of an appeal under sub-section (1), or sub-section (2), the Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.
(5) The Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Adjudicating Authority or the Director, as the case may be. (6) The appeal filed before the Appellate Tribunal under sub-section (1) or sub-section (2) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of filing of the appeal.
Section 39 - Right of Appellant

(1) A person preferring an appeal to the Appellate Tribunal under this Act may either appear in person or take the assistance of an authorised representative of his choice to present his case before the Appellate Tribunal. (2) Explanation - For the purposes of this sub-section, the expression authorized representative shall have the same meaning as assigned to it under sub-section (2) of section 288 of the Income Tax Act, 1961. (3) The Central Government or the Director may authorise one or more authorised representatives or any of its officers to act as presenting officers and every person so authorised may present the case with respect to any appeal before the Appellate Tribunal.
Section 40 - Director and officers subordinate to him deemed to be public servants Section 3 - Offence of Money-Laundering
Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering.
Section 4 - Punishment for Money-Laundering

Whoever commits the offence of money-laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine which may extend to five lakh rupees: Provided that where the proceeds of crime involved in money-laundering relates to any offence specified under paragraph 2 of Part A of the Schedule, the provisions of this section shall have effect as if for the words which may extend to seven years, the words which may extend to ten years had been substituted. The Chairperson, Members and other officers and employees of the Appellate Tribunal, the Adjudicating Authority, Director and the officers subordinate to him shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code, 1860 (45 of 1860).
Section 66 - Disclosure of information

The Director or any other authority specified by him by a general or special order in this behalf may furnish or cause to be furnished to(i) any officer, authority or body performing any functions under any law relating to imposition of any tax, duty or cess or to dealings in foreign exchange, or prevention of illicit traffic in the narcotic drugs and psychotropic substances under the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985); or
(ii) such other officer, authority or body performing functions under any other law as the Central Government may, if in its opinion it is necessary so to do in the public interest, specify by
notification in the Official Gazette in this behalf, any information received or obtained by such Director or any other authority, specified by him in the performance of their functions under this Act, as may, in the opinion of the Director or the other authority so specified by him, be necessary for the purpose of the officer, authority or body specified in clause (i) or clause (ii) to perform his or its functions under that law.
Section 69 - Recovery of fines

Where any fine imposed on any person under section 13 or section 63 is not paid within six months from the day of imposition of fine, the Director or any other officer authorised by him in this behalf may proceed to recover the amount from the said person in the same manner as prescribed in Schedule 11 of the Income-tax Act, 1961 (43 of 1961) for the recovery of arrears and he or any officer authorised by him in this behalf shall have all the powers of the Tax Recovery Officer mentioned in the said Schedule for the said purpose.
Obligations
Rule 3 of the Rules notified by Notification No. 9/2005 require e very banking company, financial institution and intermediary to maintain a record of, Provision under Rule 3 of the Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005 is reproduced as under:
Rule 3. Maintenance of records of transactions (nature and value)

(1) Every banking company or financial institution or intermediary, as the case may be, shall maintain a record of, (A) all cash transactions of the value of more than rupees ten lakhs or its equivalent in foreign currency; (B) all series of cash transactions integrally connected to each other which have been valued below rupees ten lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month; (BA) all transactions involving receipts by non-profit organisations of value more than rupees ten lakh, or its equivalent in foreign currency;* (C) all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security has taken place; (D) all suspicious transactions whether or not made in cash and by way of (i) deposits and credits, withdrawals into or from any accounts in whatsoever name they are referred to in any currency maintained by way of : (a) cheques including third party cheques, pay orders, demand drafts, cashiers cheques or any other instrument of payment of money including electronic receipts or credits and electronic payments or debits, or (b) travellers cheques, or (c) transfer from one account within the same banking company, financial institution and intermediary, as the case may be, including from or to Nostro and Vostro accounts, or (d) any other mode in whatsoever name it is referred to;
(ii) credits or debits into or from any non-monetary accounts such as d-mat account, security account in any currency maintained by the banking company, financial institution and intermediary, as the case may be; (iii) money transfer or remittances in favour of own clients or non-clients from India or abroad and to third party beneficiaries in India or abroad including transactions on its own account in any currency by any of the following:(a) payment orders, or (b) cashiers cheques, or (c) demand drafts, or (d) telegraphic/wire transfers or electronic remittances transfers or (e) internet transfers, or (f) Automated Clearing House remittances, or (g) lock box driven transfers or remittances, or (h) remittances for credit or loading to electronic cards, (i) any other mode of money transfer by whatsoever name it is called; (iv) loans and advances including credit or loan substitutes, investments and contingent liability by way of: (a) subscription to debt instruments such as commercial paper, certificate of deposits, preferential shares, debentures, securitized participation, interbank participation or any other investments in securities or the like in whatever form and name it is referred to, or (b) purchase and negotiation of bills, cheques and other instruments, or (c) foreign exchange contracts, currency, interest rate and commodity and any other derivative instrument in whatsoever name it is called, or (d) letters of credit, standby letters of credit, guarantees, comfort letters, solvency certificates and any other instrument for settlement and/or credit support; (v) collection services in any currency by way of collection of bills, cheques, instruments or any other mode of collection in whatsoever name it is referred to. * Inserted vide Notification No. 13/2009 dated 12-11-2009
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CHAPTER-16
LIMITATION ACT-1963
Law of limitation is based on the principle that law aids only the diligent; those who slept over their rights will not be allowed to litigate after an unduly long time. Limitation does not either create or extinguish a right. It simply bars judicial remedy after the prescribed period of time without extinguishing the right. Limitations of Documents: In general, limitation is the period up to which legal remedies are available against or on the strength of some document in the court of law. When limitation of a particular document stands expire, it is only that document which cannot be adduced as an evidence. But other modes of recovery, if an, remain opened to the bankers. For example, if a balance confirmation letter has expired, the banks can exercise the right of set off or lien. WHY AT ALL LIMITATION? In the absence of such a law, we all would have to live under the constant threat of litigation. If controversies are allowed to be perpetual, it will result in considerable confusion, and retard the growth of any society. At first sight, limitation may seem to be an unjust law, since it helps a dishonest debtor to avoid his liabilities after the prescribed period. It is true that the rules of limitation may in certain cases because injustice and hardship to a genuine creditor by barring a remedy at law. But public policy at large demands that there should be a specified time limit after which a person may not be harassed by litigation. LIMITATION AN ABSOLUTE LAW: Law of limitation is an absolute law and parties cannot evade it by way of private agreements. An agreement between parties that the defendant will not plead limitation in a suit brought against him by the other is void. Similarly, any agreement, which limits or extends the time within which a party may enforce his rights by the usual legal proceedings, is void by virtue of Sec 23 and 28 of the Indian Contract Act. Sec 3(i) of the Limitation Act provides that subject to the provision contained in Sections 4 to 24 of the Act, every suit instituted, appeal preferred and application made after the prescribed period shall be dismissed by the court although limitation has not been set up as a defence. So, courts do not have any discretion in the matter (except in the case of an appeal or application as provided in Sec 5) and they have to take notice and give effect to the provisions of the Act even though no plea of limitation is raised by the defendant. The plea of limitation may be raised at any stage of a case. It may be raised for the first time in an appeal or even in a Sec.ond appeal. Extension of period of Limitation in cases of disabilities: Limitations Act is no harsh on those who are unable to institute a suit due to disability like minority, lunacy etc. Sec 6 of the Act provides, that where a person entitled to institute a suit or make an application for execution of a decree is at the time from which the prescribed period is to be reckoned a minor, insane or an idiot, he may institute the suit or make the application within the same period after the disability has ceased, as he would otherwise have been allowed. If the disability continues up to the death of that person, his legal representative may institute the suit within the same period after the death, as would otherwise have been allowed from the time so specified. It should be noted that the disability should be continuous and also that the person should have
been under the disability when the right to sue accrued. Further, the disability must be of a person entitled to sue, i.e. the privilege is extended only to the plaintiff and not to the defendant. Extension of Limitation period: Limitation period can be extended by any other following ways: Acknowledgement of Debt: As per Sec. 18, by obtaining Letter of Acknowledgement of Debt (LAD) i.e. by acknowledging debt on a revenue stamp. LAD should be signed by all the borrowers and guarantors as in case of Demand Promissory Note. Part Payment: By making part payment of Interest/Instalment (Sec 19), by the borrower or authorised agent. The limitation period will start from the date of such part payment (pay-in-slip should be signed by the borrower or his agent singly and / or jointly). Obtaining Fresh Documents: By obtaining fresh documents for outstanding balance in loan Accounts and for the limit in case of CC/OD Account. Limitation period will start from the date of fresh documents. Under Sec. 25(3) of the Contract Act, payment of a time barred debt is a valid consideration for fresh promise to pay. Thus, liabilities can be enforced if there is a fresh promise to pay the time barred debt. Borrower Staying Abroad/Imprisoned: Validity period of the documents will automatically be extended in case borrower stayed abroad or imprisoned i.e., for a period he remains out of India or imprisoned during the validity period of the document executed by him. Guarantor and Limitation: Under law, liability of the guarantor is co-extensive along with the principal borrower. But a demand has to be made from the guarantor for repayment of the debt along with the borrower. In the absence of such demand, limitation aspects and benefits of documents cannot be availed against the guarantor.
CHECK LIST:
Revival Letter in case of all documents once in every three years except where monthly repayments are properly credited either Current OD or TL Accounts. Balance confirmation letter should be taken before expiry of documents. When the borrower has not specified the Account in the pay-in-slip, the bank has option to credit any Account even time-barred debt. In case of mortgage, no fresh documents to be obtained, but letter of acknowledgement of debts should be obtained within every 3 years and subsequently till the validity of the mortgage. In case of increase in limit, documents for increased limit only to be obtained along with acknowledgement of debts for the existing facilities outstanding. In case of dishonour of cheques, for filling of civil suit, limitation period is 3 years from the date of dishonour. For criminal proceedings, as per Sec 142 of N.I. Act, it is to be initiated within one month from the date of the cause of action.
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CHAPTER 17
THE LEGAL TENDER (INSCRIBED NOTES) ACT-1964
(W.e.f. 30th September, 1964.) updated on 01.02.2008 An Act to restrict the negotiability of currency and other notes inscribed with messages of a political character. Be it enacted by Parliament in the Fifteenth Year of the Republic of India as follows:-
Section 1-Short title and extent.

This Act may be called the Legal Tender (Inscribed Notes) Act, 1964. It extends to the whole of India.
Section 2-Notes bearing messages of a political character not to be legal tender.

2. Notes bearing messages of a political character not to be legal tender. Notwithstanding anything contained in the Reserve Bank of India Act, 1934 (2 of 1934), or in the Currency Ordinance, 1940 (Ord. 4 of 1940), or in any other law for the time being in force, a currency note of the Government of India, a bank note issued by the Reserve Bank of India, or a Government of India one-rupee note issued under the Currency Ordinance, 1940, which bears written upon it any extrinsic words or visible representations intended to convey or capable of conveying a message of a political character, shall not be legal tender and the Reserve Bank of India shall not be under any legal obligation to receive any such note, or to issue rupee coin or other coin or currency notes or bank notes in exchange for any such note, or to refund the value of any such note: Provided that the Reserve Bank of India may refund as of grace the whole or part of the value of any such note.
Section 3-Repeal and savings.

(1) The Legal Tender (Inscribed Notes) Ordinance, 1942 (Ord. 59 of 1942), is hereby repealed (2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance, shall be deemed to have been done or taken under this Act as If this Act were in force on the day on which such thing was one or such action was taken.
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CHAPTER 18
TRANSFER OF PROPERTY ACT-1882
The most condensed portion of Property Act which is relevant to the Bankers are provided here as the Act in itself is a very extensive topic. Entry 6 of List III (Concurrent List) of Seventh Schedule to Constitutions reads Transfer of property other than agricultural land; registration of deeds and documents. Thus, transfer of property is a Concurrent Subject. Both Central and State Government can take legislative action in respect of transfer of property except that relating to agricultural land. Transfer of agricultural land is a State subject under Entry 18 of List II (State List). Section 4 of the Act clarifies that the part of the Act which relates to contracts shall be taken as part of the Indian Contract Act and some specified sections shall be read as supplemental to Indian Registration Act. Thus, the Act is complimentary to the Indian Contract Act and Registration Act. The Act applies both to movable and immovable property. Transfer of Property-Transfer of Property means an act by which a living person conveys property, in present or future, to one or more living persons, or to himself or to himself and one or more other living persons. Living Person includes a company or association or body of individuals, whether incorporated or not. Section 5 Transfer of Property defined. The Property may be movable or immovable, present or future. Such transfer can be made orally, unless transfer in writing is specifically under any law. Section 7 Any person competent to contract and entitled to transferable property, or authorised to dispose of transferable property on his own, is competent to transfer such property. The property can be transferred wholly or in part. It can be transferred either absolutely or conditionally. Such transfer can be only to the extent and in manner allowed and prescribed by law. Section 54 Sale defined - Sale of immovable property Sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part promised. Such transfer in case of tangible immovable property of value of Rs.100 or more can be made only by a registered instrument. Delivery of tangible immovable property is made when seller places the buyer or such person as he directs, in possession of property. Thus, delivery of immovable property can be only by handing over actual possession to buyer or to a person authorised by buyer. Section 58 a Mortgage/mortgagee defined Mortgage is the transfer of an interest in specific immovable property for the purpose of securing payment of money advanced or to be advanced, by way of loan or an existing or future debt. The transferor is called a mortgagor, the transferee a mortgagee, the principal money and interest of which payment is secured are called as mortgage money and the instrument by which transfer is effected is called a mortgage-deed. Mortgages can be a. Simple Mortgage b. Mortgage by Conditional Sale
c. d. e. f.
Usufructuary Mortgage English Mortgage Mortgage by deposit of title deeds (Equitable Mortgage EM) Anomalous Mortgage
When mortgagee can take possession of mortgaged property in case of default Under provisions of Section 69 of Transfer of Property Act, mortgagee can take possession of mortgaged property and sale the same without intervention of Court only in case of English mortgage, if there is default of payment of mortgage money. In addition, mortgagee can take possession of mortgaged property where there is specific provision in mortgage deed and the mortgaged property is situated in towns of Kolkata, Chennai or Mumbai. In other cases, possession of property can be taken only with intervention of Court. (English Mortgage is where mortgagor binds himself to repay the mortgaged money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer the property to the mortgagor upon payment of the mortgage-money as agreed. Section 100 - Charges Where immovable property of one person is, by act of parties or by operation of law, made security for payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all provisions in respect of simple mortgage will apply to such charge. Mortgage is not a Charge as per section 100 of TP Act, but it will be Charge for purpose of registration under Companies Act as per Section 124 of Indian Companies Act. A Charge is not Mortgage. In every Mortgage, there is Charge, but every charge is not a Mortgage. Section 100 of TP Act states that immovable property is made as security for payment of money and if it does not amount to mortgage, then the later person is said to have a charge on property. However, a Charge does not create an interest in the property. Dattatreya Mote Vs Anand Datar (1994 2 SCC 799). Thus, no particular form is necessary to create Charge. However, for the purpose of registration under Indian Companies Act, Charge includes Mortgage. Section 105 Lease defined - Lease of immovable property A lease of immovable property is transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity. Such transfer of right should be in consideration of a price paid or promised, or of money, or a share of crops, or service or anything of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. Section 106 Duration of Lease - Lease of property from year to year or for any term exceeding one year can be made only by registered instrument. Section 118 Exchange When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an exchange. Section 130 Actionable Claim Actionable Claim means a claim to any debt or to any beneficial in movable property not in possession (either actual or constructive) of the claimant. The debt should be other than a debt secured by mortgage of immovable property or pledge of movable property. The claim should be such as Civil Court would recognise as affording grounds for relief. Such debt or beneficial interest be existent, accruing, conditional or contingent. (Section 3 para 6). Such transfer of an actionable claim shall be effected only by execution of an instrument in writing. One normal example is that receivable from a person is actionable claim, which can be transferred to another (e.g., one bank may transfer some of its receivables to another).
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CHAPTER 19
INFORMATION TECHNOLOGY ACT-2000
Preamble
An Act to provide legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communication, commonly referred to as electronic commerce, which involve the use of alternative to paper-based methods of communication and storage of information to facilitate electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the India Evidence Act, 1872, the Bankers Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters connected therewith or incidental thereto; WHEREAS the General Assembly of the United Nations by resolution A/RES/ 51/162, date 30th January 1997 has adopted the Model Law on Electronic Commerce adopted by the United Nations Commission on International Trade Law; AND WHREAS the said resolution recommends, inter alia, that all States give favourable consideration to the said Model Law when they enact or revise their laws, in view of the need for uniformity of the law applicable to alternatives to paper based methods of communication and storage of information; AND WHEREAS it is considered necessary to give effect to the said resolution and to promote efficient delivery of Government services by means of reliable electronic records; BE it enacted by Parliament in the Fifty-first Year of the Republic of India as follows:In view of risk perception of the Banking business which is a commercial too, the following points be noted and understood. Risk is a natural part of the business landscape. If left unmanaged, the uncertainty can spread like weeds. If managed effectively, losses can be avoided and benefits obtained. In business today, risk plays a critical role. Almost every business decision requires executives and managers to balance risk and reward. Effectively managing the business risks is essential to an enterprises success. Too often, IT risk (business risk related to the use of IT) is overlooked. Other business risks, such as market risks, credit risk and operational risks have long been incorporated into the corporate decision-making processes. IT risk has been relegated to technical specialists outside the boardroom, despite falling under the same umbrella risk category as other business risks: failure to achieve strategic objectives In view of the Banks initiatives to have State-of-the-art IT technology in the Bank with Core Banking Solution and also with Payment Systems Group aggressively marketing Technology Based products such as ATM, INB, CINB, Mobile Banking etc., it is very important for the Bankers to understand and know the implications of the IT Act in relevance to the General Banking.
THE INFORMATION TECHNOLOGY ACT, 2000 [9th June, 2000] An Act to provide legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communication, commonly referred to as electronic commerce, which involve the use of alternatives to paper-based methods of communication and storage of information, to facilitate electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the Indian Evidence Act, 1872, the Bankers Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters connected therewith or incidental thereto. WHEREAS the General Assembly of the United Nations by resolution A/RES/51/162, dated the 30th January, 1997 has adopted the Model Law on Electronic Commerce adopted by the United Nations Commission on International Trade Law; AND WHEREAS the said resolution recommends inter alia that all States give favourable consideration to the said Model Law when they enact or revise their laws, in view of the need for uniformity of the law applicable to alternatives to paper-based method of communication and storage of information; AND WHEREAS it is considered necessary to give effect to the said resolution and to promote efficient delivery of Government services by means of reliable electronic records. BE it enacted by Parliament in the Fifty-first Year of the Republic of India as follows:-
PRELIMINARY 1. Short title, extent and commencement.

(1) This Act may be called the Information Technology Act, 2000. (2) It shall extend to the whole of India and, save as otherwise provided in this Act, it applies also to any offence or contravention thereunder committed outside India by any person. (3) It shall come into force on such date as the Central Government may, by notification, appoint and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the commencement of that provision. (4) Nothing in this Act shall apply to,- (a) a negotiable instrument as defined in section 13 of the Negotiable Instruments Act, 1881 (26 of 1881); (b) a power-of-attorney as defined in section 1A of the Powers-of-Attorney Act, 1882; (c) a trust as defined in section 3 of the Indian Trusts Act, 1882; (d) a will as defined in clause (h) of section 2 of the Indian Succession Act, 1925 (39 of 1925) including any other testamentary disposition by whatever name called; (e) any contract for the sale or conveyance of immovable property or any interest in such property; (f) any such class of documents or transactions as may be notified by the Central Government in the Official Gazette.
2. Definitions
(1) In this Act, unless the context otherwise requires,(a) access with its grammatical variations and cognate expressions means gaining entry into, instructing or communicating with the logical, arithmetical, or memory function resources of a computer, computer system or computer network; (b) addressee means a person who is intended by the originator to receive the electronic record but does not include any intermediary; (c) adjudicating officer means an adjudicating officer appointed under sub-section (1) of section 46;
(d) affixing digital signature with its grammatical variations and cognate expressions means adoption of any methodology or procedure by a person for the purpose of authenticating an electronic record by means of digital signature; (e) appropriate Government means as respects any matter,- (i) enumerated in List II of the Seventh Schedule to the Constitution; (ii) relating to any State law enacted under List III of the Seventh Schedule to the Constitution, the State Government and in any other case, the Central Government; (f) asymmetric crypto system means a system of a secure key pair consisting of a private key for creating a digital signature and a public key to verify the digital signature; (g) Certifying Authority means a person who has been granted a license to issue a Digital Signature Certificate under section 24; (h) certification practice statement means a statement issued by a Certifying Authority to specify the practices that the Certifying Authority employs in issuing Digital Signature Certificates; (i) computer means any electronic magnetic, optical or other high-speed data processing device or system which performs logical, arithmetic, and memory functions by manipulations of electronic, magnetic or optical impulses, and includes all input, output, processing, storage, computer software, or communication facilities which are connected or related to the computer in a computer system or computer network; (j) computer network means the interconnection of one or more computers through(i) the use of satellite, microwave, terrestrial line or other communication media; and (ii) terminals or a complex consisting of two or more interconnected computers whether or not the interconnection is continuously maintained; computer resource means computer, computer system, computer network, data, computer data base or software;
(j)
(k) computer system means a device or collection of devices, including input and output support devices and excluding calculators which are not programmable and capable of being used in conjunction with external files, which contain computer programme, electronic instructions, input data and output data, that performs logic, arithmetic, data storage and retrieval, communication control and other functions; (l) Controller means the Controller of Certifying Authorities appointed under subsection (1) of section 17;
(m) Cyber Appellate Tribunal means the Cyber Regulations Appellate Tribunal established under sub-section (1) of section 48; (n) data means a representation of information, knowledge, facts, concepts or instructions which are being prepared or have been prepared in a formalised manner, and is intended to be processed, is being processed or has been processed in a computer system or computer network, and may be in any form (including computer printouts magnetic or optical storage media, punched cards, punched tapes) or stored internally in the memory of the computer; (o) digital signature means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of section 3;
(p) Digital Signature Certificate means a Digital Signature Certificate issued under sub-section (4) of section 35; (q) electronic form with reference to information means any information generated, sent, received or stored in media, magnetic, optical, computer memory, micro film, computer generated micro fiche or similar device; (r) Electronic Gazette means the Official Gazette published in the electronic form; (s) electronic record means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche; (t) function, in relation to a computer, includes logic, control, arithmetical process, deletion, storage and retrieval and communication or telecommunication from or within a computer; (u) information includes data, text, images, sound, voice, codes, computer programmes, software and data bases or micro film or computer generated micro fiche; (v) intermediary with respect to any particular electronic message means any person who on behalf of another person receives, stores or transmits that message or provides any service with respect to that message; (w) key pair, in an asymmetric crypto system, means a private key and its mathematically related public key, which are so related that the public key can verify a digital signature created by the private key; (x) law includes any Act of Parliament or of a State Legislature, Ordinances promulgated by the President or a Governor, as the case may be, Regulations made by the President under article 240, Bills enacted as Presidents Act under sub-clause (a) clause (1) of article 357 of the Constitution and includes rules, regulations, byelaws and orders issued or made there under; (z) license means a license granted to a Certifying Authority under section 24; (za) originator means a person who sends, generates, stores or transmits any electronic message or causes any electronic message to be sent, generated, stored or transmitted to any other person but does not include an intermediary; (zb) prescribed means prescribed by rules made under this Act; (zc) private key means the key of a key pair used to create a digital signature; (zd) public key means the key of a key pair used to verify a digital signature and listed in the Digital Signature Certificate; (ze) secure system means computer hardware, software, and procedure that- (a) are reasonably secure from unauthorised access and misuse; (b) provide a reasonable level of reliability and correct operation; (c) are reasonably suited to performing the intended functions; and (d) adhere to generally accepted security procedures; (zf) security procedure means the security procedure prescribed under section 16 by the Central Government; (zg) subscriber means a person in whose name the Digital Signature Certificate is issued; (zh) verify in relation to a digital signature, electronic record or public key, with its grammatical variations and cognate expressions means to determine whether- (a) the initial electronic record was affixed with the digital signature by the use of private key corresponding to the public key of the subscriber; (b) the initial electronic record is retained intact or has been altered since such electronic record was so affixed with the digital signature. (2) Any reference in this
Act to any enactment or any provision thereof shall, in relation to an area in which such enactment or such provision is not in force, be construed as a reference to the corresponding law or the relevant provision of the corresponding law, if any, in force in that area.
CHAPTER 3-DIGITAL SIGNATURE

Authentication of electronic records. (1) Subject to the provisions of this section any subscriber may authenticate an electronic record by affixing his digital signature. (2) The authentication of the electronic record shall be effected by the use of asymmetric crypto system and hash function which envelop and transform the initial electronic record into another electronic record. Explanation.-For the purposes of this subsection, hash function means an algorithm mapping or translation of one sequence of bits into another, generally smaller, set known as hash result such that an electronic record yields the same hash result every time the algorithm is executed with the same electronic record as its input making it computationally infeasible - (a) to derive or reconstruct the original electronic record from the hash result produced by the algorithm; (b) that two electronic records can produce the same hash result using the algorithm. (3) Any person by the use of a public key of the subscriber can verify the electronic record. (4) The private key and the public key are unique to the subscriber and constitute a functioning key pair.
CHAPTER III ELECTRONIC GOVERNANCE 4. Legal recognition of electronic records.

Where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is- (a) rendered or made available in an electronic form; and (b) accessible so as to be usable for a subsequent reference.
5. Legal recognition of digital signatures.

Where any law provides that information or any other matter shall be authenticated by affixing the signature or any document shall be signed or bear the signature of any person then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied, if such information or matter is authenticated by means of digital signature affixed in such manner as may be prescribed by the Central Government. Explanation.-For the purposes of this section, signed, with its grammatical variations and cognate expressions, shall, with reference to a person, mean affixing of his hand written signature or any mark on any document and the expression signature shall be construed accordingly.
6. Use of electronic records and digital signatures in Government and its agencies.
(1) Where any law provides for- (a) the filing of any form, application or any other document with any office, authority, body or agency owned or controlled by the appropriate Government in a particular manner; (b) the issue or grant of any license, permit, sanction or approval by whatever name called in a particular manner; (c) the receipt or payment of money in a particular manner,
then, notwithstanding anything contained in any other law for the time being in force, such requirement shall be deemed to have been satisfied if such filing, issue, grant, receipt or payment, as the case may be, is effected by means of such electronic form as may be prescribed by the appropriate Government. (2) The appropriate Government may, for the purposes of sub-section (1), by rules, prescribe- (a) the manner and format in which such electronic records shall be filed, created or issued; (b) the manner or method of payment of any fee or charges for filing, creation or issue any electronic record under clause (a).
7. Retention of electronic records.

(1) Where any law provides that documents, records or information shall be retained for any specific period, then, that requirement shall be deemed to have been satisfied if such documents, records or information are retained in the electronic form, if- (a) the information contained therein remains accessible so as to be usable for a subsequent reference; (b) the electronic record is retained in the format in which it was originally generated, sent or received or in a format which can be demonstrated to represent accurately the information originally generated, sent or received; (c) the details which will facilitate the identification of the origin, destination, date and time of despatch or receipt of such electronic record are available in the electronic record: Provided that this clause does not apply to any information which is automatically generated solely for the purpose of enabling an electronic record to be despatched or received. (2) Nothing in this section shall apply to any law that expressly provides for the retention of documents, records or information in the form of electronic records.
8. Publication of rule, regulation, etc., in Electronic Gazette.

Where any law provides that any rule, regulation, order, bye-law, notification or any other matter shall be published in the Official Gazette, then, such requirement shall be deemed to have been satisfied if such rule, regulation, order, bye-law, notification or any other matter is published in the Official Gazette or Electronic Gazette: Provided that where any rule, regulation, order, byelaw, notification or any other matter is published in the Official Gazette or Electronic Gazette, the date of publication shall be deemed to be the date of the Gazette which was first published in any form.
9. Sections 6, 7 and 8 not to confer right to insist document should be accepted in electronic form.
Nothing contained in sections 6, 7 and 8 shall confer a right upon any person to insist that any Ministry or Department of the Central Government or the State Government or any authority or body established by or under any law or controlled or funded by the Central or State Government should accept, issue, create, retain and preserve any document in the form of electronic records or effect any monetary transaction in the electronic form.
10. Power to make rules by Central Government in respect of digital signature.

The Central Government may, for the purposes of this Act, by rules, prescribe- (a) the type of digital signature; (b) the manner and format in which the digital signature shall be affixed; (c) the manner or procedure which facilitates identification of the person affixing the digital signature; (d) control processes and procedures to ensure adequate integrity, security and confidentiality of electronic records or payments; and (e) any other matter which is necessary to give legal effect to digital signatures.
CHAPTER IV ATTRIBUTION, ACKNOWLEDGEMENT AND DESPATCH OF ELECTRONIC RECORDS 11. Attribution of electronic records.
An electronic record shall be attributed to the originator- (a) if it was sent by the originator himself; (b) by a person who had the authority to act on behalf of the originator in respect of that electronic record; or (c) by an information system programmed by or on behalf of the originator to operate automatically.
12. Acknowledgement of receipt.

(1) Where the originator has not agreed with the addressee that the acknowledgment of receipt of electronic record be given in a particular form or by a particular method, an acknowledgement may be given by- (a) any communication by the addressee, automated or otherwise; or (b) any conduct of the addressee, sufficient to indicate to the originator that the electronic record has been received. (2) Where the originator has stipulated that the electronic record shall be binding only on receipt of an acknowledgement of such electronic record by him, then unless acknowledgement has been so received, the electronic record shall be deemed to have been never sent by the originator. (3) Where the originator has not stipulated that the electronic record shall be binding only on receipt of such acknowledgement, and the acknowledgement has not been received by the originator within the time specified or agreed or, if no time has been specified or agreed to within a reasonable time, then the originator may give notice to the addressee stating that no acknowledgement has been received by him and specifying a reasonable time by which the acknowledgement must be received by him and if no acknowledgement is received within the aforesaid time limit he may after giving notice to the addressee, treat the electronic record as though it has never been sent.
13. Time and place of despatch and receipt of electronic record.

(1) Save as otherwise agreed to between the originator and the addressee, the despatch of an electronic record occurs when it enters a computer resource outside the control of the originator. (2) Save as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely:- (a) if the addressee has designated a computer resource for the purpose of receiving electronic records,- (i) receipt occurs at the time when the electronic record enters the designated computer resource; or (ii) if the electronic record is sent to a computer resource of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee; (b) if the addressee has not designated a computer resource along with specified timings, if any, receipt occurs when the electronic record enters the computer resource of the addressee. (3) Save as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be despatched at the place where the originator has his place of business, and is deemed to be received at the place where the addressee has his lace of business. (4) The provisions of sub-section (2) shall apply notwithstanding that the place where the computer resource is located may be different from the place where the electronic record is deemed to have been received under sub-section (3). (5) For the purposes of this section,- (a) if the originator or the addressee has more than one place of business, the principal place of business, shall be the place of business; (b) if the originator or the addressee does not have a place of business, his usual place of residence shall be deemed to be the place of business; (c) usual place of residence, in relation to a body corporate, means the place where it is registered.
CHAPTER V SECURE ELECTRONIC RECORDS AND SECURE DIGITAL SIGNATURES 14. Secure electronic record.
Where any security procedure has been applied to an electronic record at a specific point of time, then such record shall be deemed to be a secure electronic record from such point of time to the time of verification.
15. Secure digital signature.

If, by application of a security procedure agreed to by the parties concerned, it can be verified that a digital signature, at the time it was affixed, was- (a) unique to the subscriber affixing it; (b) capable of identifying such subscriber; (c) created in a manner or using a means under the exclusive control of the subscriber and is linked to the electronic record to which it relates in such a manner that if the electronic record was altered the digital signature would be invalidated, then such digital signature shall be deemed to be a secure digital signature.
16. Security procedure.

The Central Government shall for the purposes of this Act prescribe the security procedure having regard to commercial circumstances prevailing at the time when the procedure was used, including(a) the nature of the transaction; (b) the level of sophistication of the parties with reference to their technological capacity; (c) the volume of similar transactions engaged in by other parties; (d) the availability of alternatives offered to but rejected by any party; (e) the cost of alternative procedures; and (f) the procedures in general use for similar types of transactions or communications.
REGULATION OF CERTIFYING AUTHORITIES CHAPTER VI REGULATION OF CERTIFYING AUTHORITIES 17. Appointment of Controller and other officers.
(1) The Central Government may, by notification in the Official Gazette, appoint a Controller of Certifying Authorities for the purposes of this Act and may also by the same or subsequent notification appoint such number of Deputy Controllers and Assistant Controllers as it deems fit. (2) The Controller shall discharge his functions under this Act subject to the general control and directions of the Central Government. (3) The Deputy Controllers and Assistant Controllers shall perform the functions assigned to them by the Controller under the general superintendence and control of the Controller. (4) The qualifications, experience and terms and conditions of service of Controller, Deputy Controllers and Assistant Controllers shall be such as may be prescribed by the Central Government. (5) The Head Office and Branch Office of the office of the Controller shall be at such places as the Central Government may specify, and these may be established at such places as the Central Government may think fit. (6) There shall be a seal of the Office of the Controller.
18. Functions of Controller.

The Controller may perform all or any of the following functions, namely:- (a) exercising supervision over the activities of the Certifying Authorities; (b) certifying public keys of the Certifying Authorities; (c) laying down the standards to be maintained by the Certifying Authorities; (d) specifying the qualifications and experience which employees of the Certifying Authorities should possess; (e) specifying the conditions subject to which the Certifying Authorities shall conduct their business; (f) specifying the contents of written, printed or visual materials and advertisements that may be
distributed or used in respect of a Digital Signature Certificate and the public key; (g) specifying the form and content of a Digital Signature Certificate and the key; (h) specifying the form and manner in which accounts shall be maintained by the Certifying Authorities; (i) specifying the terms and conditions subject to which auditors may be appointed and the remuneration to be paid to them; (j) facilitating the establishment of any electronic system by a Certifying Authority either solely or jointly with other Certifying Authorities and regulation of such systems; (k) specifying the manner in which the Certifying Authorities shall conduct their dealings with the subscribers; (l) resolving any conflict of interests between the Certifying Authorities and the subscribers; (m) laying down the duties of the Certifying Authorities; (n) maintaining a data base containing the disclosure record of every Certifying Authority containing such particulars as may be specified by regulations, which shall be accessible to public.
19. Recognition of foreign Certifying Authorities.

(1) Subject to such conditions and restrictions as may be specified by regulations, the Controller may with the previous approval of the Central Government, and by notification in the Official Gazette, recognise any foreign Certifying Authority as a Certifying Authority for the purposes of this Act. (2) Where any Certifying Authority is recognised under sub-section (1), the Digital Signature Certificate issued by such Certifying Authority shall be valid for the purposes of this Act. (3) The Controller may, if he is satisfied that any Certifying Authority has contravened any of the conditions and restrictions subject to which it was granted recognition under sub-section (1) he may, for reasons to be recorded in writing, by notification in the Official Gazette, revoke such recognition.
20. Controller to act as repository.

(1) The Controller shall be the repository of all Digital Signature Certificates issued under this Act. (2) The Controller shall- (a) make use of hardware, software and procedures that are secure from intrusion and misuse; (b) observe such other standards as may be prescribed by the Central Government, to ensure that the secrecy and security of the digital signatures are assured. (3) The Controller shall maintain a computerised data base of all public keys in such a manner that such data base and the public keys are available to any member of the public.
21. License to issue Digital Signature Certificates.

(1) Subject to the provisions of sub-section (2), any person may make an application, to the Controller, for a license to issue Digital Signature Certificates. (2) No license shall be issued under sub-section (1), unless the applicant fulfils such requirements with respect to qualification, expertise, manpower, financial resources and other infrastructure facilities, which are necessary to issue Digital Signature Certificates as may be prescribed by the Central Government. (3) A license granted under this section shall- (a) be valid for such period as may be prescribed by the Central Government; (b) not be transferable or heritable; (c) be subject to such terms and conditions as may be specified by the regulations.
22. Application for license

(1) Every application for issue of a license shall be in such form as may be prescribed by the Central Government. (2) Every application for issue of a license shall be accompanied by- (a) a certification practice statement; (b) a statement including the procedures with respect to identification of the applicant; (c) payment of such fees, not exceeding twenty-five thousand rupees as may be prescribed by the Central Government; (d) such other documents, as may be prescribed by the Central Government.
23. Renewal of license.

An application for renewal of a license shall be- (a) in such form; (b) accompanied by such fees, not exceeding five thousand rupees, as may be prescribed by the Central Government and shall be made not less than forty-five days before the date of expiry of the period of validity of the license.
24. Procedure for grant or rejection of license.

The Controller may, on receipt of an application under sub-section (1) of section 21, after considering the documents accompanying the application and such other factors, as he deems fit, grant the license or reject the application: Provided that no application shall be rejected under this section unless the applicant has been given a reasonable opportunity of presenting his case.
25. Suspension of license.

(1) The Controller may, if he is satisfied after making such inquiry, as he may think fit, that a Certifying Authority has,- (a) made a statement in, or in relation to, the application for the issue or renewal of the license, which is incorrect or false in material particulars; (b) failed to comply with the terms and conditions subject to which the license was granted; (c) failed to maintain the standards specified under clause (b) of sub-section (2) of section 20; (d) contravened any provisions of this Act, rule, regulation or order made there under, revoke the license: Provided that no license shall be revoked unless the Certifying Authority has been given a reasonable opportunity of showing cause against the proposed revocation. (2) The Controller may, if he has reasonable cause to believe that there is any ground for revoking a license under sub-section (1), by order suspend such license pending the completion of any inquiry ordered by him: Provided that no license shall be suspended for a period exceeding ten days unless the Certifying Authority has been given a reasonable opportunity of showing cause against the proposed suspension. (3) No Certifying Authority whose license has been suspended shall issue any Digital Signature Certificate during such suspension.
26. Notice of suspension or revocation of license.

(1) Where the license of the Certifying Authority is suspended or revoked, the Controller shall publish notice of such suspension or revocation, as the case may be, in the data base maintained by him. (2) Where one or more repositories are specified, the Controller shall publish notices of such suspension or revocation, as the case may be, in all such repositories: Provided that the data base containing the notice of such suspension or revocation, as the case may be, shall be made available through a web site which shall be accessible round the clock: Provided further that the Controller may, if he considers necessary, publicise the contents of data base in such electronic or other media, as he may consider appropriate.
27. Power to delegate.

The Controller may, in writing, authorise the Deputy Controller, Assistant Controller or any officer to exercise any of the powers of the Controller under this Chapter.
28. Power to investigate contraventions.

(1) The Controller or any officer authorised by him in this behalf shall take up for investigation any contravention of the provisions of this Act, rules or regulations made there under. (2) The Controller or any officer authorised by him in this behalf shall exercise the like powers which are conferred on Income-tax authorities under Chapter XIII of the Income-tax Act, 1961 (43 of 1961) and shall exercise such powers, subject to such limitations laid down under that Act.
29. Access to computers and data.

(1) Without prejudice to the provisions of sub-section (1) of section 69, the Controller or any person authorised by him shall, if he has reasonable cause to suspect that any contravention of the provisions of this Act, rules or regulations made there under has been committed, have access to any computer system, any apparatus, data or any other material connected with such system, for the purpose of searching or causing a search to be made for obtaining any information or data contained in or available to such computer system. (2) For the purposes of sub-section (1), the Controller or any person authorised by him may, by order, direct any person in charge of, or otherwise concerned with the operation of, the computer system, data apparatus or material, to provide him with such reasonable technical and other assistance as he may consider necessary.
30. Certifying Authority to follow certain procedures.

Every Certifying Authority shall,- (a) make use of hardware, software and procedures that are secure from intrusion and misuse; (b) provide a reasonable level of reliability in its services which are reasonably suited to the performance of intended functions; (c) adhere to security procedures to ensure that the secrecy and privacy of the digital signatures are assured; and (d) observe such other standards as may be specified by regulations.
31. Certifying Authority to ensure compliance of the Act.

Every Certifying Authority shall ensure that every person employed or otherwise engaged by it complies, in the course of his employment or engagement, with the provisions of this Act, rules, regulations and orders made there under.
32. Display of license.

Every Certifying Authority shall display its license at a conspicuous place of the premises in which it carries on its business.
33. Surrender of license.

(1) Every Certifying Authority whose license is suspended or revoked shall immediately after such suspension or revocation, surrender the license to the Controller. (2) Where any Certifying Authority fails to surrender a license under sub-section (1), the person in whose favour a license is issued, shall be guilty of an offence and shall be punished with imprisonment which may extend up to six months or a fine which may extend up to ten thousand rupees or with both.
34. Disclosure.
(1) Every Certifying Authority shall disclose in the manner specified by regulations- (a) its Digital Signature Certificate which contains the public key corresponding to the private key used by that Certifying Authority to digitally sign another Digital Signature Certificate; (b) any certification practice statement relevant thereto; (c) notice of the revocation or suspension of its Certifying Authority certificate, if any; and (d) any other fact that materially and adversely affects either the reliability of a Digital Signature Certificate, which that Authority has issued, or the Authoritys ability to perform its services. (2) Where in the opinion of the Certifying Authority any event has occurred or any situation has arisen which may materially and adversely affect the integrity of its computer system or the conditions subject to which a Digital Signature Certificate was granted, then, the Certifying Authority shall- (a) use reasonable efforts to notify any person who is likely to be affected by that occurrence; or (b) act in accordance with the procedure specified in its certification practice statement to deal with such event or situation.
CHAPTER VII DIGITAL SIGNATURE CERTIFICATES 35. Certifying Authority to issue Digital Signature Certificate.
(1) Any person may make an application to the Certifying Authority for the issue of a Digital Signature Certificate in such form as may be prescribed by the Central Government. (2) Every such application shall be accompanied by such fee not exceeding twenty-five thousand rupees as may be prescribed by the Central Government, to be paid to the Certifying Authority: Provided that while prescribing fees under sub-section (2) different fees may be prescribed for different classes of applicants. (3) Every such application shall be accompanied by a certification practice statement or where there is no such statement, a statement containing such particulars, as may be specified by regulations. (4) On receipt of an application under sub-section (1), the Certifying Authority may, after consideration of the certification practice statement or the other statement under sub-section (3) and after making such enquiries as it may deem fit, grant the Digital Signature Certificate or for reasons to be recorded in writing, reject the application: Provided that no Digital Signature Certificate shall be granted unless the Certifying Authority is satisfied that(a) the applicant holds the private key corresponding to the public key to be listed in the Digital Signature Certificate; (b) the applicant holds a private key, which is capable of creating a digital signature; (c) the public key to be listed in the certificate can be used to verify a digital signature affixed by the private key held by the applicant: Provided further that no application shall be rejected unless the applicant has been given a reasonable opportunity of showing cause against the proposed rejection.
36. Representations upon issuance of Digital Signature Certificate.

A Certifying Authority while issuing a Digital Signature Certificate shall certify that- (a) it has complied with the provisions of this Act and the rules and regulations made there under; (b) it has published the Digital Signature Certificate or otherwise made it available to such person relying on it and the subscriber has accepted it; (c) the subscriber holds the private key corresponding to the public key, listed in the Digital Signature Certificate; (d) the subscribers public key and private key constitute a functioning key pair; (e) the information contained in the Digital Signature Certificate is accurate; and (f) it has no knowledge of any material fact, which if it had been included in the Digital Signature Certificate would adversely affect the reliability of the representations made in clauses (a) to (d).
37. Suspension of Digital Signature Certificate.

(1) Subject to the provisions of sub-section (2), the Certifying Authority which has issued a Digital Signature Certificate may suspend such Digital Signature Certificate,- (a) on receipt of a request to that effect from- (i) the subscriber listed in the Digital Signature Certificate; or (ii) any person duly authorised to act on behalf of that subscriber; (b) if it is of opinion that the Digital Signature Certificate should be suspended in public interest. (2) A Digital Signature Certificate shall not be suspended for a period exceeding fifteen days unless the subscriber has been given an opportunity of being heard in the matter. (3) On suspension of a Digital Signature Certificate under this section, the Certifying Authority shall communicate the same to the subscriber.
38. Revocation of Digital Signature Certificate.

(1) A Certifying Authority may revoke a Digital Signature Certificate issued by it- (a) where the subscriber or any other person authorised by him makes a request to that effect; or (b) upon the death of the subscriber; or (c) upon the dissolution of the firm or winding up of the company where the subscriber is a firm or a company. (2) Subject to the provisions of sub-section (3) and
without prejudice to the provisions of sub-section (1), a Certifying Authority may revoke a Digital Signature Certificate which has been issued by it at any time, if it is of opinion that- (a) a material fact represented in the Digital Signature Certificate is false or has been concealed; (b) a requirement for issuance of the Digital Signature Certificate was not satisfied; (c) the Certifying Authoritys private key or security system was compromised in a manner materially affecting the Digital Signature Certificates reliability; (d) the subscriber has been declared insolvent or dead or where a subscriber is a firm or a company, which has been dissolved, wound-up or otherwise ceased to exist. (3) A Digital Signature Certificate shall not be revoked unless the subscriber has been given an opportunity of being heard in the matter. (4) On revocation of a Digital Signature Certificate under this section, the Certifying Authority shall communicate the same to the subscriber.
39. Notice of suspension or revocation.

(1) Where a Digital Signature Certificate is suspended or revoked under section 37 or section 38, the Certifying Authority shall publish a notice of such suspension or revocation, as the case may be, in the repository specified in the Digital Signature Certificate for publication of such notice. (2) Where one or more repositories are specified, the Certifying Authority shall publish notices of such suspension or revocation, as the case may be, in all such repositories.
CHAPTER VIII DUTIES OF SUBSCRIBERS 40. Generating key pair.

Where any Digital Signature Certificate, the public key of which corresponds to the private key of that subscriber which is to be listed in the Digital Signature Certificate has been accepted by a subscriber, then, the subscribe shall generate the key pair by applying the security procedure.
41. Acceptance of Digital Signature Certificate.

(1) A subscriber shall be deemed to have accepted a Digital Signature Certificate if he publishes or authorises the publication of a Digital Signature Certificate- (a) to one or more persons; (b) in a repository, or otherwise demonstrates his approval of the Digital Signature Certificate in any manner. (2) By accepting a Digital Signature Certificate the subscriber certifies to all who reasonably rely on the information contained in the Digital Signature Certificate that- (a) the subscriber holds the private key corresponding to the public key listed in the Digital Signature Certificate and is entitled to hold the same; (b) all representations made by the subscriber to the Certifying Authority and all material relevant to the information contained in the Digital Signature Certificate are true; (c) all information in the Digital Signature Certificate that is within the knowledge of the subscriber is true. 42. Control of private key. (1) Every subscriber shall exercise reasonable care to retain control of the private key corresponding to the public key listed in his Digital Signature Certificate and take all steps to prevent its disclosure to a person not authorised to affix the digital signature of the subscriber. (2) If the private key corresponding to the public key listed in the Digital Signature Certificate has been compromised, then, the subscriber shall communicate the same without any delay to the Certifying Authority in such manner as may be specified by the regulations. Explanation.- For the removal of doubts, it is hereby declared that the subscriber shall be liable till he has informed the Certifying Authority that the private key has been compromised.
CHAPTER IX PENALTIES AND ADJUDICATION 43. Penalty for damage to computer, computer system, etc.
If any person without permission of the owner or any other person who is in charge of a computer, computer system or computer network,- (a) accesses or secures access to such computer, computer system or computer network; (b) downloads, copies or extracts any data, computer data base or information from such computer, computer system or computer network including information or data held or stored in any removable storage medium; (c) introduces or causes to be introduced any computer contaminant or computer virus into any computer, computer system or computer network; (d) damages or causes to be damaged any computer, computer system or computer network, data, computer data base or any other programmes residing in such computer, computer system or computer network; (e) disrupts or causes disruption of any computer, computer system or computer network; (f) denies or causes the denial of access to any person authorised to access any computer, computer system or computer network by any means; (g) provides any assistance to any person to facilitate access to a computer, computer system or computer network in contravention of the provisions of this Act, rules or regulations made there under; (h) charges the services availed of by a person to the account of another person by tampering with or manipulating any computer, computer system, or computer network, he shall be liable to pay damages by way of compensation not exceeding one crore rupees to the person so affected. Explanation.-For the purposes of this section,- (i) computer contaminant means any set of computer instructions that are designed- (a) to modify, destroy, record, transmit data or programme residing within a computer, computer system or computer network; or (b) by any means to usurp the normal operation of the computer, computer system, or computer network; (ii) computer data base means a representation of information, knowledge, facts, concepts or instructions in text, image, audio, video that are being prepared or have been prepared in a formalised manner or have been produced by a computer, computer system or computer network and are intended for use in a computer, computer system or computer network; (iii) computer virus means any computer instruction, information, data or programme that destroys, damages, degrades or adversely affects the performance of a computer resource or attaches itself to another computer resource and operates when a programme, data or instruction is executed or some other event takes place in that computer resource; (iv) damage means to destroy, alter, delete, add, modify or rearrange any computer resource by any means.
44. Penalty for failure to furnish information, return, etc.

If any person who is required under this Act or any rules or regulations made there under to(a) furnish any document, return or report to the Controller or the Certifying Authority fails to furnish the same, he shall be liable to a penalty not exceeding one lakh and fifty thousand rupees for each such failure; (b) file any return or furnish any information, books or other documents within the time specified therefor in the regulations fails to file return or furnish the same within the time specified therefor in the regulations, he shall be liable to a penalty not exceeding five thousand rupees for every day during which such failure continues; (c) maintain books of account or records, fails to maintain the same, he shall be liable to a penalty not exceeding ten thousand rupees for every day during which the failure continues.
45. Residuary penalty.

Whoever contravenes any rules or regulations made under this Act, for the contravention of which no penalty has been separately provided, shall be liable to pay a compensation not exceeding twenty five thousand rupees to the person affected by such contravention or a penalty not exceeding twenty five thousand rupees.
46. Power to adjudicate.

(1) For the purpose of adjudging under this Chapter whether any person has committed a contravention of any of the provisions of this Act or of any rule, regulation, direction or order made there under the Central Government shall, subject to the provisions of sub-section (3), appoint any officer not below the rank of a Director to the Government of India or an equivalent officer of a State Government to be an adjudicating officer for holding an inquiry in the manner prescribed by the Central Government. (2) The adjudicating officer shall, after giving the person referred to in sub-section (1) a reasonable opportunity for making representation in the matter and if, on such inquiry, he is satisfied that the person has committed the contravention, he may impose such penalty or award such compensation as he thinks fit in accordance with the provisions of that section. (3) No person shall be appointed as an adjudicating officer unless he possesses such experience in the field of Information Technology and legal or judicial experience as may be prescribed by the Central Government. (4) Where more than one adjudicating officers are appointed, the Central Government shall specify by order the matters and places with respect to which such officers shall exercise their jurisdiction. (5) Every adjudicating officer shall have the powers of a civil court which are conferred on the Cyber Appellate Tribunal under sub-section (2) of section 58, and- (a) all proceedings before it shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860); (b) shall be deemed to be a civil court for the purposes of sections 345 and 346 of the Code of Criminal Procedure, 1973 (2 of 1974).
47. Factors to be taken into account by the adjudicating officer.

While adjudging the quantum of compensation under this Chapter, the adjudicating officer shall have due regard to the following factors, namely:- (a) the amount of gain of unfair advantage, wherever quantifiable, made as a result of the default; (b) the amount of loss caused to any person as a result of the default; (c) the repetitive nature of the default.
CHAPTER X THE CYBER REGULATIONS APPELLATE TRIBUNAL 48. Establishment of Cyber Appellate Tribunal.
(1) The Central Government shall, by notification, establish one or more appellate tribunals to be known as the Cyber Regulations Appellate Tribunal. (2) The Central Government shall also specify, in the notification referred to in sub-section (1), the matters and places in relation to which the Cyber Appellate Tribunal may exercise jurisdiction.
49. Composition of Cyber Appellate Tribunal.

A Cyber Appellate Tribunal shall consist of one person only (hereinafter referred to as the Presiding Officer of the Cyber Appellate Tribunal) to be appointed, by notification, by the Central Government.
50. Qualifications for appointment as Presiding Officer of the Cyber Appellate Tribunal.
A person shall not be qualified for appointment as the Presiding Officer of a Cyber Appellate Tribunal unless he- (a) is, or has been, or is qualified to be, a Judge of a High Court; or (b) is or has been a member of the Indian Legal Service and is holding or has held a post in Grade I of that Service for at least three years.
51. Term of office.

The Presiding Officer of a Cyber Appellate Tribunal shall hold office for a term of five years from the date on which he enters upon his office or until he attains the age of sixty-five years, whichever is earlier.
52. Salary, allowances and other terms and conditions of service of Presiding Officer.
The salary and allowances payable to, and the other terms and conditions of service including pension, gratuity and other retirement benefits of, the Presiding Officer of a Cyber Appellate Tribunal shall be such as may be prescribed: Provided that neither the salary and allowances nor the other terms and conditions of service of the Presiding Officer shall be varied to his disadvantage after appointment.
53. Filling up of vacancies.

If, for reason other than temporary absence, any vacancy occurs in the office of the Presiding Officer of a Cyber Appellate Tribunal, then the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Cyber Appellate Tribunal from the stage at which the vacancy is filled.
54. Resignation and removal.

(1) The Presiding Officer of a Cyber Appellate Tribunal may, by notice in writing under his hand addressed to the Central Government, resign his office: Provided that the said Presiding Officer shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest. (2) The Presiding Officer of a Cyber Appellate Tribunal shall not be removed from his office except by an order by the Central Government on the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court in which the Presiding Officer concerned has been informed of the charges against him and given a reasonable opportunity of being heard in respect of these charges. (3) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of the aforesaid Presiding Officer.
55. Orders constituting Appellate Tribunal to be final and not to invalidate its proceedings.
No order of the Central Government appointing any person as the Presiding Officer of a Cyber Appellate Tribunal shall be called in question in any manner and n act or proceeding before a Cyber Appellate Tribunal shall be called in question in any manner on the ground merely of any defect in the constitution of a Cyber Appellate Tribunal.
56. Staff of the Cyber Appellate Tribunal.

(1) The Central Government shall provide the Cyber Appellate Tribunal with such officers and employees as that Government may think fit. (2) The officers and employees of the Cyber Appellate Tribunal shall discharge their functions under general superintendence of the Presiding Officer. (3) The salaries, allowances and other conditions of service of the officers and employees of the Cyber Appellate Tribunal shall be such as may be prescribed by the Central Government.
57. Appeal to Cyber Appellate Tribunal.

(1) Save as provided in sub-section (2), any person aggrieved by an order made by Controller or an adjudicating officer under this Act may prefer an appeal to a Cyber Appellate Tribunal having jurisdiction in the matter. (2) No appeal shall lie to the Cyber Appellate Tribunal from an order made by an adjudicating officer with the consent of the parties. (3) Every appeal under subsection (1) shall be filed within a period of forty-five days from the date on which a copy of the order made by the Controller or the adjudicating officer is received by the person aggrieved and it shall be in such form and be accompanied by such fee as may be prescribed: Provided that the Cyber Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period. (4) On receipt of an appeal under sub-section (1), the Cyber Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (5) The Cyber Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned Controller or adjudicating officer. (6) The appeal filed before the Cyber Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal.
58. Procedure and powers of the Cyber Appellate Tribunal.

(1) The Cyber Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908) but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Cyber Appellate Tribunal shall have powers to regulate its own procedure including the place at which it shall have its sittings. (2) The Cyber Appellate Tribunal shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:- (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents or other electronic records; (c) receiving evidence on affidavits; (d) issuing commissions for the examination of witnesses or documents; (e) reviewing its decisions; (f) dismissing an application for default or deciding it ex parte; (g) any other matter which may be prescribed. (3) Every proceeding before the Cyber Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code (45 of 1860) and the Cyber Appellate Tribunal shall be deemed to be a civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
59. Right to legal representation.

The appellant may either appear in person or authorise one or more legal practitioners or any of its officers to present his or its case before the Cyber Appellate Tribunal.
60. Limitation.
The provisions of the Limitation Act, 1963 (36 of 1963), shall, as far as may be, apply to an appeal made to the Cyber Appellate Tribunal.
61. Civil court not to have jurisdiction.

No court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which an adjudicating officer appointed under this Act or the Cyber Appellate Tribunal constituted under this Act is empowered by or under this Act to determine and no injunction shall be granted by any
court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.
62. Appeal to High Court.

Any person aggrieved by any decision or order of the Cyber Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Cyber Appellate Tribunal to him on any question of fact or law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.
63. Compounding of contraventions.

(1) Any contravention under this Chapter may, either before or after the institution of adjudication proceedings, be compounded by the Controller or such other officer as may be specially authorised by him in this behalf or by the adjudicating officer, as the case may be, subject to such conditions as the Controller or such other officer or the adjudicating officer may specify: Provided that such sum shall not, in any case, exceed the maximum amount of the penalty which may be imposed under this Act for the contravention so compounded. (2) Nothing in sub-section (1) shall apply to a person who commits the same or similar contravention within a period of three years from the date on which the first contravention, committed by him, was compounded. Explanation.-For the purposes of this sub-section, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention (3) Where any contravention has been compounded under sub-section (1), no proceeding or further proceeding, as the case may be, shall be taken against the person guilty of such contravention in respect of the contravention so compounded.
64. Recovery of penalty.

A penalty imposed under this Act, if it is not paid, shall be recovered as an arrear of land revenue and the license or the Digital Signature Certificate, as the case may be, shall be suspended till the penalty is paid.
CHAPTER XI OFFENCES 65. Tampering with computer source documents.

Whoever knowingly or intentionally conceals, destroys or alters or intentionally or knowingly causes another to conceal, destroy or alter any computer source code used for a computer, computer programme, computer system or computer network, when the computer source code is required to be kept or maintained by law for the time being in force, shall be punishable with imprisonment up to three years, or with fine which may extend up to two lakh rupees, or with both. Explanation.-For the purposes of this section, computer source code means the listing of programmes, computer commands, design and layout and programme analysis of computer resource in any form.
66. Hacking with computer system.

(1) Whoever with the intent to cause or knowing that he is likely to cause wrongful loss or damage to the public or any person destroys or deletes or alters any information residing in a
computer resource or diminishes its value or utility or affects it injuriously by any means, commits hacking. (2) Whoever commits hacking shall be punished with imprisonment up to three years, or with fine which may extend up to two lakh rupees, or with both.
67. Publishing of information which is obscene in electronic form.

Whoever publishes or transmits or causes to be published in the electronic form, any material which is lascivious or appeals to the prurient interest or if its effect is such as to tend t deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it, shall be punished on first conviction with imprisonment of either description for a term which may extended to five years and with fine which may extend to one lakh rupees and in the event of a second or subsequent conviction with imprisonment of either description for a term which may extend to ten years and also with fine which may extend to two lakh rupees.
68. Power of Controller to give directions.

(1) The Controller may, by order, direct a Certifying Authority or any employee of such Authority to take such measures or cease carrying on such activities with the provisions of this Act, rules or any regulations made there under. as specified in the order if those are necessary to ensure compliance (2) Any person who fails to comply with any order under sub-section (1) shall be guilty of an offence and shall be liable on conviction to imprisonment for a term not exceeding three years or to a fine not exceeding two lakh rupees or to both.
69. Directions of Controller to a subscriber to extend facilities to decrypt information.

(1) If the Controller is satisfied that it is necessary or expedient so to do in the interest of the sovereignty or integrity of India, the security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of any cognizable offence, for reasons to be recorded in writing, by order, direct any agency of the Government to intercept any information transmitted through any computer resource. (2) The subscriber or any person in charge of the computer resource shall, when called upon by any agency which has been directed under subsection (1), extend all facilities and technical assistance to decrypt the information. (3) The subscriber or any person who fails to assist the agency referred to in sub-section (2) shall be punished with an imprisonment for a term which may extend to seven years.
70. Protected system.

(1) The appropriate Government may, by notification in the Official Gazette, declare that any computer, computer system or computer network to be a protected system. (2) The appropriate Government may, by order in writing, authorise the persons who are authorised to access protected systems notified under sub-section (1). (3) Any person who secures access or attempts to secure access to a protected system in contravention of the provisions of this section shall be punished with imprisonment of either description for a term which may extend to ten years and shall also be liable to fine.
71. Penalty for misrepresentation.

Whoever makes any misrepresentation to, or suppresses any material fact from, the Controller or the Certifying Authority for obtaining any license or Digital Signature Certificate, as the case may be, shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.
72. Penalty for breach of confidentiality and privacy.

Save as otherwise provided in this Act or any other law for the time being in force, any person who, in pursuance of any of the powers conferred under this Act, rules or regulations made there under, has secured access to any electronic record, book, register, correspondence, information, document or other material without the consent of the person concerned discloses such electronic record, book, register, correspondence, information, document or other material to any other person shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.
73. Penalty for publishing Digital Signature Certificate false in certain particulars.
(1) No person shall publish a Digital Signature Certificate or otherwise make it available to any other person with the knowledge that- (a) the Certifying Authority listed in the certificate has not issued it; or (b) the subscriber listed in the certificate has not accepted it; or (c) the certificate has been revoked or suspended, unless such publication is for the purpose of verifying a digital signature created prior to such suspension or revocation. (2) Any person who contravenes the provisions of sub-section (1) shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.
74. Publication for fraudulent purpose.

Whoever knowingly creates, publishes or otherwise makes available a Digital Signature Certificate for any fraudulent or unlawful purpose shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.
75. Act to apply for offence or contravention committed outside India.

(1) Subject to the provisions of sub-section (2), the provisions of this Act shall apply also to any offence or contravention committed outside India by any person irrespective of his nationality. (2) For the purposes of sub-section (1), this Act shall apply to an offence or contravention committed outside India by any person if the act or conduct constituting the offence or contravention involves a computer, computer system or computer network located in India.
76. Confiscation.
Any computer, computer system, floppies, compact disks, tape drives or any other accessories related thereto, in respect of which any provision of this Act, rules, orders or regulations made there under has been or is being contravened, shall be liable to confiscation: Provided that where it is established to the satisfaction of the court adjudicating the confiscation that the person in whose possession, power or control of any such computer, computer system, floppies, compact disks, tape drives or any other accessories relating thereto is found is not responsible for the contravention of the provisions of this Act, rules, orders or regulations made there under, the court may, instead of making an order for confiscation of such computer, computer system, floppies, compact disks, tape drives or any other accessories related thereto, make such other order authorised by this Act against the person contravening of the provisions of this Act, rules, orders or regulations made there under as it may think fit.
77. Penalties or confiscation not to interfere with other punishments.

No penalty imposed or confiscation made under this Act shall prevent the imposition of any other punishment to which the person affected thereby is liable under any other law for the time being in force.
78. Power to investigate offences.

Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), a police officer not below the rank of Deputy Superintendent of Police shall investigate any offence under this Act.
CHAPTER XII NETWORK SERVICE PROVIDERS NOT TO BE LIABLE IN CERTAIN CASES 79. Network service providers not to be liable in certain cases.
For the removal of doubts, it is hereby declared that no person providing any service as a network service provider shall be liable under this information or data made available by him if he proves that the offence or contravention was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence or contravention. Act, rules or regulations made there under for any third party Explanation.-For the purposes of this section,- (a) network service provider means an intermediary; (b) third party information means any information dealt with by a network service provider in his capacity as an intermediary;
CHAPTER XIII MISCELLANEOUS 80. Power of police officer and other officers to enter, search, etc.
(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any police officer, not below the rank of a Deputy Superintendent of Police, or any other officer of the Central Government or a State Government authorised by the Central Government in this behalf may enter any public place and search and arrest without warrant any person found therein who is reasonably suspected or having committed or of committing or of being about to commit any offence under this Act. Explanation.-For the purposes of this sub-section, the expression public place includes any public conveyance, any hotel, any shop or any other place intended for use by, or accessible to the public. (2) Where any person is arrested under sub-section (1) by an officer other than a police officer, such officer shall, without unnecessary delay, take or send the person arrested before a magistrate having jurisdiction in the case or before the officer-in charge of a police station. (3) The provisions of the Code of Criminal Procedure, 1973 shall, subject to the provisions of this section, apply, so far as may be, in relation to any entry, search or arrest, made under this section.
81. Act to have overriding effect.

The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
82. Controller, Deputy Collector and Assistant Controllers to be public servants.

The Presiding Officer and other officers and employees of a Cyber Appellate Tribunal, the Controller, the Deputy Controller and the Assistant Controllers shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).
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83. Power to give directions.

The Central Government may give directions to any State Government as to the carrying into execution in the State of any of the provisions of this Act or of any rule, regulation or order made there under.
84. Protection of action taken in good faith.

No suit, prosecution or other legal proceeding shall lie against the Central Government, the State Government, the Controller or any person acting on behalf of him, the Presiding Officer, adjudicating officer and the staff of the Cyber Appellate Tribunal for anything which is in good faith done or intended to be done in pursuance of this Act or any rule, regulation or order made there under.
85. Offences by companies.

(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made there under is a company, every person who, at the time the contravention was committed, was in charge of and was responsible to, the company for the conduct of business of the company as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this subsection shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention. (2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made there under has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Explanation.-For the purposes of this section,- (i) company means anybody corporate and includes a firm or other association of individuals; and (ii) director, in relation to a firm, means a partner in the firm.
86. Removal of difficulties.

(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for removing the difficulty: Provided that no order shall be made under this section after the expiry of a period of two years from the commencement of this Act. (2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.
87. Power of Central Government to make rules.

(1) The Central Government may, by notification in the Official Gazette and in the Electronic Gazette make rules to carry out the provisions of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:- (a) the manner in which any information or matter may be authenticated by means of digital signature under section 5; (b) the electronic form in which filing, issue, grant or payment shall be effected under sub-section (1) of section 6; (c) the manner and format in which electronic records shall be filed, or issued and the method of payment under sub-section (2) of section 6; (d) the matters relating to the type of digital signature, manner and format in which it may be affixed under section 10; (e) the security procedure for the purpose of creating secure electronic record and secure digital signature under section 16; (f) the qualifications, experience
and terms and conditions of service of Controller, Deputy Controllers and Assistant Controllers under section 17; (g) other standards to be observed by the Controller under clause (b) of subsection (2) of section 20; (h) the requirements which an applicant must fulfil under sub-section (2) of section 21; (i) the period of validity of license granted under clause (a) of sub-section (3) of section 21; (j) the form in which an application for license may be made under sub-section (1) of section 22; (k) the amount of fees payable under clause (c) of sub-section (2) of section 22; (l) such other documents which shall accompany an application for license under clause (d) of subsection (2) of section 22; (m) the form and the fee for renewal of a license and the fee payable thereof under section 23; (n) the form in which application for issue of a Digital Signature Certificate may be made under sub-section (1) of section 35; (o) the fee to be paid to the Certifying Authority for issue of a Digital Signature Certificate under sub-section (2) of section 35; (p) the manner in which the adjudicating officer shall hold inquiry under sub-section (1) of section 46; (q) the qualification and experience which the adjudicating officer shall possess under sub-section (3) of section 46; (r) the salary, allowances and the other terms and conditions of service of the Presiding Officer under section 52; (s) the procedure for investigation of misbehaviour or incapacity of the Presiding Officer under sub-section (3) of section 54; (t) the salary and allowances and other conditions of service of other officers and employees under sub-section (3) of section 56; (u) the form in which appeal may be filed and the fee thereof under sub-section (3) of section 57; (v) any other power of a civil court required to be prescribed under clause (g) of sub-section (2) of section 58; and (w) any other matter which is required to be, or may be, prescribed. (3) Every notification made by the Central Government under clause (f) of sub-section (4) of section 1 and every rule made by it shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total peri d of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification or the rule or both Houses agree that the notification or the rule should not be made, the notification or the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that notification or rule.
88. Constitution of Advisory Committee.

(1) The Central Government shall, as soon as may be after the commencement of this Act, constitute a Committee called the Cyber Regulations Advisory Committee. (2) The Cyber Regulations Advisory Committee shall consist of a Chairperson and such number of other official and nonofficial members representing the interests principally affected or having special knowledge of the subject-matter as the Central Government may deem fit. (3) The Cyber Regulations Advisory Committee shall advise- (a) the Central Government either generally as regards any rules or for any other purpose connected with this Act; (b) the Controller in framing the regulations under this Act. (4) There shall be paid to the non-official members of such Committee such travelling and other allowances as the Central Government may fix.
89. Power of Controller to make regulations.

(1) The Controller may, after consultation with the Cyber Regulations Advisory Committee and with the previous approval of the Central Government, by notification in the Official Gazette, make regulations consistent with this Act and the rules made there under to carry out the purposes of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely:- (a) the particulars relating to maintenance of data-base containing the disclosure record of every Certifying Authority
under clause (m) of section 18; (b) the conditions and restrictions subject to which the Controller may recognise any foreign Certifying Authority under sub-section (1) of section 19; (c) the terms and conditions subject to which a license may be granted under clause (c) of sub-section (3) of section 21; (d) other standards to be observed by a Certifying Authority under clause (d) of section 30; (e) the manner in which the Certifying Authority shall disclose the matters specified in sub-section (1) of section 34; (f) the particulars of statement which shall accompany an application under sub-section (3) of section 35; (g) the manner in which the subscriber shall communicate the compromise of private key to the Certifying Authority under sub-section (2) of section 42. (3) Every regulation made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation. regulation should not be made, the regulation shall thereafter have.
90. Power of State Government to make rules.

(1) The State Government may, by notification in the Official Gazette, make rules to carry out the provisions of this Act. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:- (a) the electronic form in which filing, issue, grant receipt or payment shall be effected under sub-section (1) of section 6; (b) for matters specified in sub-section (2) of section 6; (c) any other matter which is required to be provided by rules by the State Government. (3) Every rule made by the State Government under this section shall be laid, as soon as may be after it is made, before each House of the State Legislature where it consists of two Houses, or where such Legislature consists of one House, before that House.
91. Amendment of Act 45 of 1860.

The Indian Penal Code shall be amended in the manner specified in the First Schedule to this Act.

The Indian Evidence Act, 1872 shall be amended in the manner specified in the Second Schedule to this Act.

The Bankers Books Evidence Act, 1891 shall be amended in the manner specified in the Third Schedule to this Act.

The Reserve Bank of India Act, 1934 shall be amended in the manner specified in the Fourth Schedule to this Act
Amendment to IT Act (2008)

The Information Technology (Amendment) Act, 2008 has come into force. The Rules pertaining to section 52 (Salary, Allowances and Other Terms and Conditions of Service of Chairperson and Members), section 54 (Procedure for Investigation of Misbehaviour or Incapacity of Chairperson
and Members), section 69 (Procedure and Safeguards for Interception, Monitoring and Decryption of Information), section 69A (Procedure and Safeguards for Blocking for Access of Information by Public), section 69B (Procedure and safeguard for Monitoring and Collecting Traffic Data or Information) and notification under section 70B for appointment of the Indian Computer Emergency Response Team have also been notified. The Information Technology Act was enacted in the year 2000 with a view to give a fillip to the growth of electronic based transactions, to provide legal recognition for e-commerce and e-transactions, to facilitate e-governance, to prevent computer based crimes and ensure security practices and procedures in the context of widest possible use of information technology worldwide. With proliferation of information technology enabled services such as e-governance, e-commerce and e-transactions; data security, data privacy and implementation of security practices and procedures relating to these applications of electronic communications have assumed greater importance and they required harmonization with the provisions of the Information Technology Act. Further, protection of Critical Information Infrastructure is pivotal to national security, economy, public health and safety, thus it had become necessary to declare such infrastructure as protected system, so as to restrict unauthorised access. Further, a rapid increase in the use of computer and Internet has given rise to new forms of crimes like, sending offensive emails and multimedia messages, child p*rnography, cyber terrorism, publishing s*xually explicit materials in electronic form, video voyeurism, breach of confidentiality and leakage of data by intermediary, e-commerce frauds like cheating by impersonation - commonly known as phishing, identity theft, frauds on online auction sites, etc. So, penal provisions were required to be included in the Information Technology Act, 2000. Also, the Act needed to be technology-neutral to provide for alternative technology of electronic signature for bringing harmonization with Model Law on Electronic Signatures adopted by United Nations Commission on International Trade Law (UNCITRAL). Keeping in view the above, Government had introduced the Information Technology (Amendment) Bill, 2006 in the Lok Sabha on 15th December 2006. Both Houses of Parliament passed the Bill on 23rd December 2008. Subsequently the Information Technology (Amendment) Act, 2008 received the assent of President on 5th February 2009 and was notified in the Gazette of India.
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CHAPTER 20
The Sale of Goods Act-1930 (15th March, 1930)

An Act to define and amend the law relating to the sale of goods. WHEREAS it is expedient to define and amend the law relating to the sale of goods, it is hereby enacted as follows: -
Chapter 1 Preliminary
1. Short title, extent and commencement. (1) This Act may be called the Sale of Goods Act, 1930. (2) It extends to the whole of India (except the State of Jammu and Kashmir). (3) It shall come into force on the 1st day of July, 1930 2. Definitions - In this Act, unless there is anything repugnant in the subject of content(1) buyer means a person who buys or agrees to buy goods, (2) delivery means voluntary transfer of possession from one person to another. 3. Applications of provisions of Act 9 of 1882.The unrepealed provisions of the Indian Contract Act, 1872 save insofar as they are inconsistent with the express provisions of this Act, shall continue to apply to contracts for sale of goods.
Chapter 2 - Formation of the Contract

4. Sale and agreement to sell (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods in transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. 5. Contract of Sale how made (1) A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed. (2) Subject to the provisions of any law for the time being in force, a contract of sale may be
made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties. 6. Existing or future goods (1) The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or future goods. (2) There may be a contract for the sale of goods the acquisition of which by the seller depends upon a contingency which may or may not happen. (3) Whereby a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods. 7. Goods perishing before making of contract Where there is a contract for the sale of specific goods, the contract is void if the goods without the knowledge of the seller have, at the time when the contract was made, perished or become so damaged as no longer to answer to their description in the contract. 8. Goods perishing before sale but after agreement to sell Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become so damaged as no longer to answer to their description in the agreement before the risk passes to the buyer, the agreement is thereby avoided. 9. Ascertainment of price (1) The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties. (2) Where the price is not determined in accordance with the foregoing provisions, the buyer shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. 10. Agreement to sell at valuation (1) Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party and such third party cannot or does not make such valuation, the agreement is thereby avoided. Provided that, if the goods or any part thereof have been delivered to, and appropriated by, the buyer, he shall pay a reasonable price therefor. (2) Where such third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may maintain a suit for damages against the party in fault. 11. Stipulations as to time Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract. 12. Condition and warranty (1) A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty.
(2) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to right to treat the contract as repudiated. (3) A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated. (4) Whether a stipulation in a contract of sale is condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the 13. When condition to be treated as warranty (1) Where a contract of sale is subject to any condition to the fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for relating the contract as repudiated. (2) Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect. (3) Nothing in this section shall affect the case of any condition or warranty fulfilment of which is excused by law by reason of impossibility of otherwise. 14. Implied undertaking as to tile, etc In a contract of sale, unless the circumstances of the contract are such as to show a different intention there is(a) an implied condition on the part of the seller that, in the case of a sale, he has a right to sell the goods and that, in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass. (b) an implied warranty that the buyer shall have and enjoy quiet possession of the goods. (c) an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made. 15. Sale by description Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description, and, if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description. 16. Implied condition as to quality or fitness Subject to the provisions of this Act and of any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, excepts as follows:(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the sellers skill or judgement, and the goods are of a description which it is in the course of the sellers business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose. Provided that, in the case of a contract for the sale of a specified article under its patent
or other trade name, there is no implied conditions to its fitness for any particular purpose. (2) Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality. Provided that, if the buyer has examined the goods, there shall be no implied conditions as regards defects which such examination ought to have revealed. (3) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade. (4) An express warranty or conditions does not negative a warranty or condition implied by this Act unless inconsistent therewith. 17. Sale by sample (1) A contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect. (2) In the case of a contract for sale by sample there is an implied condition (a) that the bulk shall corresponded with the sample in quality. (b) that they shall have a reasonable opportunity of comparing the bulk with the sample. (c) that the goods shall be free from any defect, rendering them un-merchantable, which would not be apparent on reasonable examination.
Chapter 3 - Effects of the Contract

18. Goods must be ascertained Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are sanctioned. 19. Property passes when intended to pass (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. (3) Unless a different intention appears, the rules contained in Section 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. 20. Specific goods in a deliverable state Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed. 21. Specific goods to be put into a deliverable state Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.
22. Specific goods in a deliverable state, when the seller has to do anything thereto in order to ascertain price Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof. 23. Sale of unascertained goods and appropriation (1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made. (2) Delivery to carrier.- Where, in pursuance of the contract, the seller delivers the goods 24. Goods sent on approval or on sale or return When goods are delivered to the buyer on approval or on sale or return or other similar terms, the property therein passes to the buyer(a) when he signifies his approval or acceptance to the seller to does not other act adopting the transaction. (b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if not time has been fixed, on the expiration of a reasonable time. 25. Reservation of right of disposal (1) Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. (2) Where goods are shipped or delivered to a railway administration for carriage by railway and by the bill of landing or railway receipt, as the case may be, the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal. (3) Where the seller of goods draws on the buyer for the price and transmits to the buyer the bill of exchange together with the bill of lading or, as they may be, the railway receipt, to secure acceptance to payment of the bill of exchange, the buyer is bound to return the bill of lading or the railway receipt if he does not honour the bill of exchange, and, if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does not pass to him. Explanation.- In this section, the expression Railway and Railway administration shall have the meanings respectively assigned to them under the Indian Railways Act, 1890.
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26. Risk Prima facie passes with property Unless otherwise agreed, the goods remain at the sellers risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyers risk whether delivery has been made or not provided that, where deliver has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault provides also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party. 27. Sale by person not the owner Subject to the provisions of this Act and of any other law for the time being in force, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by conduct precluded from denying the sellers authority to sell. Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same, provided that the buyer act is good faith and has not at the time of the contract of sale notice that the seller has no authority to sell. 28. Sale by one of joint owners If one of several joint owners of goods has the sole possession of them by permission of the co-owners, the property in the goods in transferred to any person how buys them of such joint owner in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell. 29. Sale by person in possession under voidable contract When the seller of gods has obtained possession thereof under a contract voidable under Section 19 or Section 19A of the Indian Contract Act, 1872, but the contract has not rescinded at the time of the sale, the buyer acquires a god title to the goods, provided he buys them in good faith and without notice of the sellers defect of title. 30. Seller or buyer in possession after sale (1) Where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the gods or documents of title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery to transfer were expressly authorised by the owner of the goods to make the same. (2) Where a person, having bought or agreed to buy goods, obtains with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have effect as if such lien or right did not exist.
Chapter 4 - Performance of the Contract

31. Duties of seller and buyer It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. 32. Payment and delivery are concurrent conditions Unless otherwise agreed, delivery of the gods and payment of the price are concurrent conditions, that is to say, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for possession of the goods. 33. Delivery Delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorised to hold them on his behalf. 34. Effect of part delivery A delivery of part of goods, in progress of the delivery of the whole has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole, but a delivery of part of the gods, with an intention of severing it from the whole, does not operate as a delivery of the remainder. 35. Buyer to apply for delivery Apart from any express contract, the seller of goods in not bound to deliver them until the buyer applies for delivery. 36. Rules as to delivery (1) Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, goods sold are to be delivered at the place at which they are the time of the sale, and goods agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell, if not then in existence, at the place at which they are manufactured or produced. (2) Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time. (3) Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf. Provided that nothing in this section shall affect the operation of the issue or transfer of any document of title to goods. (4) Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact. (5) Unless otherwise agreed, the expense of and incidental to putting the goods into a deliverable state shall be borne by the seller. 37. Delivery of wrong quantity (1) Where the seller delivers to the buyer a quantity of good less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered he shall pay for them at the contract rate.
(2) Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell the buyer may accept the goods included in the contact and reject the rest, or he may reject the whole. If the buyer accepts the whole of the goods so delivered, he shall pay for them at the contract rate. (3) Where the seller delivers to the buyer the gods he contract to sell mixed with goods of a different description not included in the contract., the buyer may accept the goods which are in accordance with the contract and reject the rest, or may reject the whole. (4) The provisions of this section are subject to any usage of trade, special agreement or course of dealing between the parties. 38. Instalment deliveries (1) Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by instalments. (2) Where there is a contract for the sale of goods to be delivered by stated instalments which are to be separately paid for, and the seller makes no delivery or defective delivery in respect of one or more instalments, or the buyer neglects or refuses to take delivery of or pay for one or more instalments, it is a question in each cased depending on the terms of the contract and the circumstances of the case, whether the breach of contract is a repudiation of the whole contract, or whether it is a severable breach giving rise to a claim for compensation, but not a right to treat the whole contract as repudiated. 39. Delivery to carrier or wharfinger (1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger for safe custody, is prima facie deemed to be a delivery of the goods to the buyer. (2) Unless otherwise authorised by the buyer, the seller shall makes such contract with the carrier or wharfinger on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case. If the seller omits so to do and the goods are lost or damaged in course of transit or whilst in the custody of the wharfingers, the buyer made decline to treat the delivery to the carrier or wharfingers as a delivery to himself, or may hold the seller responsible in damages. (3) Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit, in circumstances in which it is usual to insure, the seller shall give such notice to the buyer as may enable him to insure them during their sea transit and if the seller fails so to do, the goods shall be deemed to be at his risk during such sea transit. 40. Risk where goods are delivered at distant place Where the seller of goods agrees to deliver them at his own risk at place other than that where they are when sold, the buyer shall, nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of transit. 41. Buyers right of examining the goods (1) Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.
(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. 42. Buyer not bound to return rejected goods Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient it he intimates to the seller that he refuses to accept them. 43. Buyer not bound to return rejected goods Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is he intimates to the seller that he intimates to the seller that he refuses to accept them. 44. Liability of buyer for neglecting or refusing delivery of goods When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery and also for a reasonable charge for the care and custody of the goods. Provided that nothing in this section shall affect the rights of the seller where the neglect or refusal of the buyer to take delivery amounts to a repudiation of the contract.
Chapter 5 - Rights of unpaid seller against the goods

45. Unpaid seller defined (1) The seller of goods is deemed to be an unpaid seller within the meaning of this Act(a) When the whole of the price has not been paid or tendered. (b) When a bill of exchange or other negotiable instrument has been received as conditional payment and the conditions on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise. (2) In this Chapter, the term seller includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who himself paid, or is directly responsible for the price. 46. Unpaid sellers rights (1) Subject to the provisions of this Act and of any law for the for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law. (a) a lien on the goods for the period while he is in possession of them, (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them. (c) a right of re-sale as limited by this Act. (2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer.
47. Sellers lien.(1) Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely :(a) where the goods have been sold without any stipulations as to credit. (b) where the goods have been sold on credit, but the term of credit has expired. (c) where the buyer becomes insolvent. (2) The seller may exercise his right of lien notwithstanding that he in possession of the goods as agent or bailee for the buyer. 48. Part delivery Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien. 49. Termination of lien (1) The unpaid seller of goods losses his lien thereon (a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods. (b) when the buyer or his agent lawfully obtains possession of the goods, (c) by waiver thereof. (2) The unpaid seller of goods, having a lien thereon, not lose his lien by reason only that he has obtained a decree for the price of the goods. 50. Right of stoppage in transit Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit, and may retain them until payment or tender of the price. 51. Duration of transit (1) Goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent in that behalf takes delivery of them from such carrier or other bailee. (2) If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end. (3) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee for the buyer or his agent, the transit is at an end and it is immaterial that a further destination for the goods may have been indicated by the buyer. (4) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, the transit is not deemed to be at an end, even if the seller has refused to receive them back. (5) When goods are delivered to a ship chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the possession of the master as a carrier or as agent of the buyer.
(6) Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf, the transit is deemed to be at an end. (7) Where part delivery of the goods has been made to the buyer or his agent in that behalf, the remainder of the goods may be stopped in transit, unless such part delivery has been given in such circumstances as to show an agreement to give up possession of the whole of the goods. 52. How stoppage in transit is effected (1) The unpaid seller may exercise his right to stoppage in transit either by taking actual possession of the goods, or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Such notice may be given either to the person in actual possession of the goods or to his principal. In the later case the notice, to be effectual, shall be given at such time and in such circumstances, that the principal, by the exercise of reasonable diligence, may communicate is to his servant or agent in time to prevent a delivery to the buyer. (2) Whether notice of stoppage in transit is given by the seller to the carrier or other bailee in possession of the goods, he shall re-deliver the goods to, or according to the directions of, the seller. The expenses of such re-delivery shall be borne by the seller. 53. Effect to sub-sale or pledge by buyer (1) Subject to the provisions of this Act, the unpaid sellers right of lien or stoppage in transit is not affected by any sale or other disposition of the gods which the buyer may have made, unless the seller has assented thereto. Provided that where a document of title to goods has been issued or lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for consideration, then, if such last mentioned transfer was by way of sale, the unpaid sellers right of lien of stoppage in transit is defeated, and, if such last mentioned transfer was by way of pledge or other disposition for value, the unpaid sellers right of lien or stoppage in transit can only be exercised subject to the rights of the transferee. (2) Where the transfer is by way of pledge, the unpaid seller may require the pledge to have the amount secured by the pledge satisfied in the first instance, as far as possible, out of any other goods or securities of the buyer in the hands of the pledge and available against the buyer. 54. Sale not generally rescinded by lien or stoppage in transit (1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or stoppage in transit. (2) Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notices to the buyer of his intentions to resell, the unpaid seller may, if the buyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may occur on the re-sale. If such notices is not given, the unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale.
(3) Where an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the re-sale has been given to the original buyer. (4) Where the seller expressly reserves a right of re-sale in case the buyer should make default, and on, the buyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim which the seller may have for damages.
Chapter 6 - Suits for Breach of the Contract

55. Suit for price (1) Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods. (2) Where under a contract of sale the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price although the property in the goods has not passed and the goods have not been appropriated to the contract. 56. Damages for non-acceptance Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance. 57. Damages for non-delivery Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery. 58. Specific performance Subject to the provisions of Chapter II of the Specific Relief Act, 1877, in any suit for breach of contract to deliver specific or ascertained goods, the Court may, if it thinks fit, one the application of the plaintiff, by its decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages. The decree may be unconditional, or upon such terms and conditions as to damages, payment of the price or otherwise, as the Court may deem just, and the application of the plaintiff may be made at any time before the decree. 59. Remedy for breach of warranty (1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may(a) Set up against the seller the breach of warranty in diminution or extinction of the price; or (b) Sue the seller for damages for breach of warranty. (2) The fact that a buyer has set up a breach of warranty in diminution or extinction of the price does not prevent him from suing for the same breach of warranty if he has suffered further damage.
60. Repudiation of contract before due date Where either party to a contract of sale repudiates the contract before the date of delivery, the other may either treat the contracts as subsisting or wait till the date of delivery, or he may treat the contract as rescinded and use for damages for the breach. 61. Interest by way of damages and special damages (1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special damages in any case whereby law interest or special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed. (2) In the absence of a contract to the contrary, the Court may award interest at such rate as it think fit one the amount of the price(a) to the seller in a suit by him for the amount of the price.- from the date of the tender of the goods or from the date on which the price was payable. (b) to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on the part of the seller- from the date on which the payment was made.
Chapter 7 Miscellaneous
62. Exclusion of implied terms and conditions Where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varies by express agreement or by the course of dealing between the negatives or varied by express agreement or by the course of dealing between the parties, or by usage, if the usage is such as to bind parties to the contract. 63. Reasonable time is a question of fact Where in this Act any reference is made to a reasonable time, the question what is a reasonable time is a question of fact. 64. Auction sale In the case of sale by auction(1) where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale. (2) the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner, and, until such announcement is made,any bidder may retract his bid. (3) a right to bid may be reserved expressly by or on behalf of the seller and, where such rights is expressly so reserved, but not otherwise, the seller or any one person on his behalf may, subject to the provisions hereinafter contained, bid at the auction. (4) where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person, and any such person, and any sale contravening this rule may be treated as fraudulent by the buyer. (5) the sale may be notified to be subject to a reserved or upset price. (6) if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.
64A. In contracts of sale, amount of increased or deceased to tax to be added or deducted (1) Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulations as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such good tax- paid where tax was chargeable at that time. (a) if such imposition or increase so takes effect that the tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition, and (b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer made deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction. (2) The provisions of sub-section (1) apply to the following taxes, namely:(a) any duty of customs or excise on goods. (b) any tax on the sale or purchase of goods. 65. (Repeal.) By the Repealing Act, 1938 (1of 1938), S. 2 and Sch. 66. Savings (1) Nothing in this Act or in any repeal effected thereby shall affect or be deemed to affect. (a) any right, title, interest, obligations or liability already acquired, accrued or incurred before the commencement of this Act, or (b) any legal proceedings or remedy in respect of any such right, title, interest, obligation or liability, or (c) anything done or suffered before the commencement of this Act, or (d) any enactment relating to the sale of goods which is not expressly repealed by this Act, or (e) any rule of law not inconsistent with this Act. (2) The rules of insolvency relating to contracts for the sale of goods shall continue to apply thereto, notwithstanding anything contained in this Act. (3) The provisions of this Act relating to contracts of sale do not apply to any transaction in the form of a contract of sale which is intended to operate by way of mortgage, pledge, charge or other security.
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SNAPSHOT OF IMPORTANT SECTIONS OF THE VARIOUS ACTS

CHAPTER 1 - Important Sections of SBI Act, 1955
Sections 1 2 3 4 5 6 7 8 9 10 11 12 13 13A 14 15 16 17 18 19 20 21 21A 21B 21C 22 23 24 25 26 Details/Particulars Chapter 1-Short title & commencement Definitions Establishment of State Bank Authorised Capital Issued Capital Transfer of assets & liabilities of the IBI to SBI Transfer of service of existing officers and employees of the IBI Existing provident and other fund of the IBI Compensation to be given to shareholders of IBI Transferability of shares Restrictions on voting rights Shares to be approved securities Register of shareholders Register of beneficial owners (Repeales) Trusts not to be entered on the register of shareholders Offices, branches & agencies Management Central Board to be guided by directions of Central Government Composition of the Central Board Term of office of chairman, managing director, etc., Local Boards Term of office of members of Local Board Power of Local Board Local Committees Disqualifications for directorship of Central Board or membership of Local Board or Committees Vacation of office of directors, etc., Removal from office of directors, etc., Casual vacancies Remuneration of directors
157
Chapter 2-Incorporation & Share Capital of SBI
Chapter 3-Transfer of Undertaking of the Imperial Bank to State Bank
Chapter-4 Shares
Chapter-5 Management
27 28 29 30 31 31A 32 33 34 35 35A 36 37 38 39 40 41 42 43 43A 44 45 46 47 48 49 50 51 52 53 54 55 56 57
Powers and remuneration of chairman Powers and remuneration of vice-chairman Powers and remuneration of managing director Executive and other committees of the Central Board Meetings of the Central Board Meetings of Local Boards State Bank to act as agent of the Reserve Bank Other business which the State Bank may transact Business which the State Bank may not transact State Bank may acquire the business of other Bank Arrangement with the State Bank on appointment of directors to prevail Integration and Development Fund Reserve Fund Disposal of profits Books to be balanced each year Returns Audit Balance Sheet, etc., of State Bank may be discussed at general meeting State Bank may appoint officers and other employees Bonus Obligations as to fidelity and secrecy Bar to liquidation of State Bank Indemnity of directors and members of Local Boards and Local Committees, etc., Defects in appointment or constitution not to invalidate acts or proceedings (Repealed) Power of Central Government to make rules Power of Central Board to make regulations Requirements of foreign law to be complied within certain cases (Repealed) (Repealed) (Repealed) No proceeding to lie in India against Imperial Bank after appointed day References to the Imperial Bank, the Bank of Bengal, etc., in other laws Dissolution of Imperial Bank, etc., The First Schedule compensation for the Transfer of shares of the Imperial Bank to the Reserve Bank The Second Schedule- Declaration of Fidelity and Secrecy The Third Schedule- (Repealed) The Fourth Schedule-(Repealed) The Fifth Schedule-(Repaled)
Chapter-6 Business of the State Bank
Chapter-7 Funds, Accounts and Audit
Chapter-8 Miscellaneous
158
CHAPTER 2 Important sections of RBI ACT

SECTIONS Sec. 2(e) CONTENTS Scheduled Bank: As per this Section, a scheduled bank means a bank whose nd name is included in the 2 schedule of RBI Act 1934. For inclusion, a bank should satisfy conditions laid down in section 42(6).The essential condition of capital is that the affairs will be conducted by the bank in a way that will not jeopardize the interests of the depositors. Bank which are not included in the 2 Bank. Sec.17
nd
Schedule of RBI are called Non-scheduled
Types of Business: Defines various types of business which RBI may transact, which include acceptance of deposit without interest from Central/State government, any other person/institution, purchase/sale of foreign exchange, securities, rediscounting the bills/promissory notes, grant loans etc. Energy Loans: RBI provides emergency loans to banks on liberal terms. Right to Transact Govt. Business: RBI has the right to transact Govt. business in India i.e. remittance, exchange, keeping deposit free of interest etc. Bank Notes: Sole right to issue bank notes. Issue Department: Bank notes shall be issued by Issue Deptt. Against security consisting of gold coins, bullion, rupee coins, foreign securities and other approved securities. Denomination of Notes: RBI issues all currency notes for denomination 2,5,10,20,50,100,500,1000,5,000,10,000. It has power to direct discontinuation or non-issue of currency note of any denomination. The currency note of denomination of rupee 2 and 5 has already been discontinued. Rules for Refunding Value: RBI can frame rules for refunding value of mutilated, soiled or imperfect notes as a matter of grace. Prohibits issue of Bill of Exchange, Hundi or Promissory Note payable to bearer: No person in India other than RBI or the central Govt. is authorized to draw, accept make or issue any bill of exchange, hundi, and promissory note payable to bearer. Further it restricts on drawing bearer drafts. Assets of the Issue Department: The assets if issue deptt. Consists of gold coins, gold bullion, foreign securities etc. The aggregate value of gold coins, gold bullion, and foreign securities held as assets and the aggregate value of the gold coins, and gold bullion so held shall not at any time be less than Rs 200 crores and Rs 115 crores respectively.
Sec.18 Sec.21 Sec.22 Sec.23
Sec.24
Sec.28 Sec.31
Sec.33
Sec.42(1) Cash Reserve Ratio: RBI (Amendment) Bill 2006 has been enacted with effect from June 22, 2006. Consequent upon the amendment, RBI can prescribe the Cash Reserve Ratio (CRR) for scheduled banks without any floor rate or ceiling rate. Further, RBI will not be applying any interest on the CRR balances maintained by Scheduled Commercial Banks with effect from the fortnight beginning June 24, 2006 (earlier the floor limit was 3% and ceiling limit was 20%). Sec.45-A-F Collecting and Furnishing of Credit Information: Empowers RBI to collect credit information related to borrowers and suit-filed accounts. Borrower enjoying secured credit limits of Rs.10 lac and above unsecured limits of Rs.5 lac and above: Return as on last Friday of April and approval every year.
Doubtful, loss and suit filed accounts with aggregate of outstanding Rs.100 lac and above: Half-yearly March and September. Basic Statistical Return (BSR): BSR-I regarding borrowal accounts of above Rs.2 lac. BSR-II containing information about deposits with break-up into current savings and term deposits. Sec.45-H-T Provision relating to Non-banking Institution: No non-banking financial company shall commence business or carry on the business of a non-banking financial company without obtaining a certificate of registration and having net owned fund of twenty-five lac rupees or such other amount not exceeding two hundred lac rupees, as the RBI may notify / specify. Sec.49 Publication(Declaration) of Bank Rate: RBI shall make public from time to the standard rate at which it is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under this Act.
CHAPTER 3 Important sections of Banking Regulations Act-1949

SECTION DESCRIPTION Sec.5(a) Approved Securities: It mean such securities authorized by the Central Govt. of securities in which a trustee may invest money of trust under Indian Trust Act 1882. Banking: Banking means the acceptance of deposit for the purpose of lending or investment, the deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Banking Company: It means any company, which transacts the business of Banking in India. Banking Policy: Policy which is specified from time to time by RBI. Forms of Banking Business: In addition to the banking business, a banking company may engage in raising/accepting deposits, borrowing, money lending or advancing of money, dealing in bills of exchange, hundis, promissory notes, issuing letter of credits, buying and selling of foreign exchange, safe deposit locker, safe custody, acting as an agent for any Govt. or local authority, undertaking the administration of estates as executor, trustee, leasing, mortgaging etc, or any other form of business which the Central Govt. may notify in the official Gazette. Prohibition on Trading: No banking company shall directly or indirectly deal on the buying or selling of goods (every kind of movable property other than actionable claim), except in connection with realization of security held by it. Disposal of Non-Banking Assets: No bank shall hold any immovable property howsoever acquired (except for its own use) for any period exceeding 7 years. RBI may extend the period by 5 years where it is satisfied that such extension would be in the interest of the depositors of the bank. Employment of Managing Agents: The period of office of an MD/whole time Chairman cannot exceed 5 years at a time (may be renewed or extended by further periods not exceeding 5 years on each occasion). No bank can employ a person who is/has been adjudged insolvent or has suspended payment to his creditors or his compounded with his creditors or who has been convicted of an offence involving moral turpitude.
Sec.5(b)
Sec.5(c) Sec.5(ca) Sec.6
Sec.8
Sec.9
Sec.10
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Sec.11
Paid up Capital and Reserve Requirement. For Domestic Banks Minimum Paid up Capital and Reserves Rs. 5 lac. For Foreign Banks Minimum Rs. 15 lac (it is Rs. 20.00 lac where the bank has place of business in Bombay, or Calcutta or both).
Sec.12 Sec.13
Capital Structure The ratio of authorized, subscribed and paid-up capital must be minimum 4:2:1. Restriction on Commission, Brokerage, Discount etc: Stipulation that a bank will not pay commission, brokerage, discount, etc. more than 2.5% of the paid up value of one share. Prohibition on Charge on Unpaid Capital: No bank shall create any charge upon any unpaid capital. Any such charge shall be invalid. Prohibition of Floating Charge on Assets: No Banking company shall create a floating charge on the undertaking or any property unless the same is certified in writing by RBI. Payment of Dividend: Prohibits payment of dividend by any bank until all of its capitalized expenses have been completely written off. Common Directors: No bank shall have a director on its Board of Directors any person who is a director of any other banking company.
Sec.14 Sec.14(a)
Sec.15 Sec.16
Sec.17(1) Reserve Fund: Stipulation that a bank must create reserve fund equivalent to not less than 20% of profits out of the balance of profit of each year, before any st dividend is declared (RBI has enhanced it to 25% of net profit w.e.f. 31 March 2001). Sec.18 Cash Reserve: Every banking company, not being a scheduled bank shall maintain 3% of demand and time liabilities by way of cash reserve with itself or by way of balance in current account with RBI. Restriction on nature of subsidiary company: A bank shall not form any subsidiary company except for undertaking business which is permissible for a banking company.
Sec.19
Sec.19(2) Holding of Shares of any Company: No banking company shall hold shares in any company whether as pledge, mortgagee or absolute owner of an amount exceeding 30% of paid-up share capital of that company or 30% of its own paidup capital and reserves, whichever is less. Sec.20 Restriction on advances against own shares: No banking company shall grant loans/advances on the security of its own shares, since it shall amount to purchase of its own capital. Powers to Control Advances: Where the Reserve Bank is satisfied that it is necessary and expedient in the public interest or in the interest of depositors or banking policy they may frame any policy which shall be binding on banking companies generally or on any banking company in particular. RBI can restrict the banks from lending against certain notified commodities, maintenance of a minimum margin, ceiling limit of advance or the charging of a minimum rate of interest etc. Rate of Interest charged by banks not to be subject to scrutiny by Courts: A transaction between the banking company and its debtor shall not be reopened by any court on the ground of excessive charging of rate of interest. Licensing of Banking Companies: No Banking company can commence the business without obtaining the license from RBI. Restriction on Opening of New and Transfer of Existing Place of Business: Prior permission of RBI is required for opening of new branch, sub-office, sub pay office, and extension counter etc except for one month.
161
Sec.21
Sec.21(a)
Sec.22 Sec.23
Sec.24
Maintenance of SLR: A banking company is required to maintain at the close of business on any day a certain percentage of its total demand and time liabilities in India in form of cash, gold and unencumbered approved securities. This is known as SLR. Minimum SLR 25% and Maximum 40% to be maintained. SLR to be maintained with reference to Total Demand and Time Liabilities as on last Friday of the second preceding fortnight.
Sec.25 Sec.26
Assets in India: The assets of every banking company as on last Friday of every quarter must not be less than 75% of its demand and time liabilities in India. Return of Unclaimed Deposits: Every Bank shall within 30 days after the close of each calendar year submit a return to RBI on all deposit accounts which have not been operated upon for 10 years (unclaimed accounts). In case of Fixed Deposits, this period will start from due date i.e. date of expiry of such fixed period. Accounts and Balance Sheet: Balance sheet and Profit & Loss a/c must be prepared as on last working day of March every year in the format given in III Schedule of the Act. Audit: The balance sheet and profit and loss account shall be audited by a person duly qualified. Submission of Return: The a/cs and balance sheet together with the auditors report shall be published in the prescribed manner and 3 copies of the same shall be furnished to RBI within 3 months from the end of the period to which the balance sheet pertains. Inspection: empowers RBI to undertake inspection of banks.
Sec.29
Sec.30 Sec.31
Sec.35
Sec.35(A) RBI has been given powers to give directions to the banks in the public interest are in the interest of banking policy so that banking is not conducted detrimental to the interest of the depositors and also secures proper management of banking company. Sec.36(AA) Powers to Remove Managerial or other persons: Where the RBI is satisfied that in the public interest or for preventing the affairs of a banking company being conducted in a manner detrimental to the interest of the depositors or for securing the proper management of any banking company, RBI may remove from office any Chairman, Director or other officers or employees of the banking company. Sec.44(A) Amalgamation of Banking Companies: The Scheme containing the terms of amalgamation shall first be approved by general body by two third majority in value and then further approval by RBI is required. Sec.45(y) Preservation of Bank Records: Central Govt. in consultation with RBI has power to frame rules regarding preservation of books, accounts and other documents. Returns of Paid Instruments to Customer: Guidelines for returning the paid instruments to customer by keeping a true copy.
Sec.45 Z
Sec.45 ZA Nomination: For nomination in Deposit accounts. Sec.45 ZC Nomination: For nomination in Safe Custody accounts. Sec.45 ZE Nomination: For nomination in Locker accounts. Sec.46 Penalties: Whoever in any return, balance sheet or other documents willfully makes a statement which is false in any material particular or willfully omits to make a material statement shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.
162
CHAPTER-4 CRR & SLR -(Scheduled Commercial Banks)

SL NO. 1 PARTICULARS Concept and Objectives CASH RESERVE RATIO(CRR) CRR is a quantitative tool of monetary and credit policy to regulate the money supply in the economy. RBI by varying the CRR regulates the lendable funds of the commercial banks. STATUTORY LIQUIDITY RATIO(SLR) STATUTORY LIQUIDITY RATIO(SLR) SLR is a quantitative tool of monetary and credit policy to regulate the money supply in the economy. RBI by varying the SLR regulates the lendable funds of the commercial banks, by way of investments in Govt. securities. Section 24 (2-A) of BR Act 1949. Minimum 25% and Maximum 40%
2 3
Provision Limits
Section 42(1) of Reserve Bank Act 1934 Subsequent to amendments to RBI act minimum/ maximum are no more prescribed. CRR will be stipulated by RBI as per its discretion. 5.5% (w.e.f.6 Jan 2007). Net Demand and Time Liabilities (NDTL) In India on fortnightly basis. RBI
th
4 5
Current Obligation Applicable on
25% Total Demand and Time Liabilities in India as on the last Friday of the second preceding fortnight. To be kept in Securities within India. (a) In cash (b) Gold or (c) Unencumbered approved securities defined u/s 5(a) and 25(a) of BR Act. Last Friday of second preceding fortnight.
6 7
Maintained with
Type of Investment In cash only
Requirements
Fortnightly Basis: Saturday to following Friday 14 days. Daily Basis: All schedule commercial banks are required to maintain minimum CRR balance up to 70% of the total CRR requirement on all days of the fortnight.
163
SL NO. 9
PARTICULARS Conversion
CASH RESERVE RATIO(CRR) Overseas foreign currency assets and bank credit in India in foreign currency in four major currencies viz. US $, GBP, Japanese Yen and Euro at the FEDAI noon mean rate to be converted on reporting Friday. Loans out of Foreign Currency Non-Resident Accounts (Bank), FCNE (B), and Inter Bank Foreign Currency Deposits to be included. As per RBI (Amendment) Bill 2006 w.e.f. June 22, 2006, RBI can prescribe CRR without any floor rate or ceiling rate. Further, RBI will not be paying any interest on the CRR balances w.e.f. the fortnight beginning June 24,2006.
STATUTORY LIQUIDITY RATIO(SLR) Overseas foreign currency assets and bank credit in India in foreign currency in four major currencies viz. US $, GEP, Japanese Yen and Euro at the FEDAI noon mean rate to be converted on reporting Friday. Loans out of Foreign Currency Non-Resident Accounts (Bank), FCNE (B), and Inter Bank Foreign Currency Deposits to be included. Return depends upon type of investment made by the bank.
10
Loans out of FCNR (B) Deposits and IBFC Deposits
11
Interest
12
Penalties
Any shortfall in the maintenance of CRR is reckoned against the eligible cash balance required to be maintained on the NDTL. The total amount on interest payable so arrived at is being reduced by an amount calculated at the rate of 25% per annum on the amount of shortfall.
If a bank fails to maintain required amount of SLR, it shall be liable to pay to RBI in respect of that default, the penal interest for that day at the rate of 3% per annum above bank rate on the shortfall and if the default continuous on the next succeeding working day, the penal interest may be increased to a rate of 5% per annum above the bank rate for the concerned days of default on the shortfall.
164
SL NO. 13
PARTICULARS Returns
CASH RESERVE RATIO(CRR) All SCBs are required to submit to RBI a provisional return in Form A within 7 days from the expiry of relevant fortnight. It is used for preparing press communiqu. The final Form A is required to be sent to RBI within 20 days from expiry of the relevant fortnight.
STATUTORY LIQUIDITY RATIO(SLR) Banks should submit to the RBI before 20th day of every month, a return in Form VIII, showing the amounts of SLR held on alternative Friday during immediate preceding month with particulars of their DTL in India on such Fridays or if any such Friday is public holiday under NI Act, at the close of business of the preceding working day.
CHAPTER 5 Various Types of Banker Customer Relationships

Some important relationships based upon the nature of business conducted by the banks are given below: SL. NO. 1 2 3 4 5 6 7 8 9 10 11 12 TYPE OF TRANSACTION Deposit Accounts, CC (with Credit Balance) O.D, CC, Loan Accounts (with debit balance) Collection of Cheques Sale or Purchase of Securities Issuing / Purchase of Draft by purchaser Payee of Drafts at Paying Branch Mail Transfers, Telegraphic Transfers Complying with Standing Instruction Providing Various Services to non Account Holders Money / Cheques deposited pending Instructions for disposal thereof Safe Custody of Articles Leasing of Locker POSITION OF BANK Debtor Creditor Agent Agent Debtor Trustee Agent Agent Agent Trustee Bailee Lessor Landlord Licensor Mortgagee Pledgee Hypothecatee Agent Agent POSITION OF CUSTOMER Creditor Debtor Principal Principal Creditor Beneficiary Principal Principal Principal Beneficiary Bailor Lessee Tenant Licensee Mortgagor Pledgor Hypothecator Principal Principal
165
13 14 15 16 17
Mortgage of Immovable Property Pledge of Securities / Shares Hypothecation of Securities Sale / Purchase of Shares etc Maintaining Currency Chest (RBIs property)
SL. NO. 18 19
TYPE OF TRANSACTION Fixed Deposit has matured but the customer has not taken the payment so far. A wrong credit given by the bank where the amount has not so far been recovered.
POSITION OF BANK Debtor Beneficiary
POSITION OF CUSTOMER Creditor Trustee
CHAPTER 6 Important Sections of Negotiable Instruments Act,1881

SECTION 1 3 4 5 6 8 9 10 13 15 18 20 22 25 26 31 45A 63 82 85-A 85-(1) 85-(2) 87 89 CONTENTS / TITLE Act is applicable throughout India including J & K Banker includes any person acting as a banker and any post office saving bank Definition of Promissory Note Definition of Bill of Exchange Definition of Cheque Holder Holder in due course Payment in due course Meaning of Negotiable instrument Endorsement: Endorsement should be in free running handwriting and not in block letters also it should tally, letter to letter, with the name of the payee in the cheque When there is difference in amount between the words and figures, the amount in words is to be treated as the amount ordered by the drawer to pay Inchoate Instrument Three days of grace for calculating the maturity date of usance instrument Maturity date in holiday usance instrument is payable on next preceding business day Minor may draw, endorse and accept a negotiable instrument so as to bind all parts except himself Liability of drawee banker: Banker to compensate for wrongful dishonour Holder rights to get duplicate of lost bill The drawee of a Bill of Exchange has to accept it within 48 hours of presentation (excluding public holidays) If no rate of interest is mentioned in the Promissory Note, interest @ 18% p.a. is to be paid Protection paying banker in case of Bank drafts. Paying banker is protected by payment in due course of an order cheque which is properly endorsed by the payee or his agent Protection to Paying banker in case of bearer cheque. Once a bearer, always a bearer Material alteration of Negotiable Instrument renders it void Paying Banker gets protection where a cheque is materially altered but does not appear to have been altered
166
99 100 118 123 124 128 130 131 138 139 142
Noting Protest Presumptions as to negotiable instruments of consideration Cheque crossed Generally Cheque crossed Specially Payment in due course of crossed cheque Not Negotiable crossing The transferee cannot have a better title to the cheque than that of the transferor Collecting Bankers protection in respect of crossed cheques Dishonour of cheque for insufficiency, etc. of funds in the account Presumption in favour of holder The payee / holder of the cheque should file a case within 1 month under Sec 138 of NI Act
HOLDER (Sec.8) Consideration Actual Possession Defective Title Not essential Not essential Will effect the instrument
HOLDER IN DUE COURSE (Sec.9) Essential Essential Will not effect the instrument.
Note: But due to the presumptions given in Section 118 of Negotiable Instrument Act in favour of holder this difference has become immaterial / insignificant.
Difference between BoE & Cheque

BILL OF EXCHANGE Can be drawn payable on demand or usance Drawee of the bill can be any one Usance bills need to be accepted Grace period of 3 days is allowed in case of usance bill Bills are not crossed Can be made payable on demand or on maturity date (due day) CHEQUE It is always payable on demand It is drawn on a bank and such drawee can be only a bank Cheque does not require acceptance Grace period is not allowed Cheque can be crossed Cheque is always payable on demand up to the time it does not become stale.
Various types of Customers & Natural Guardians of a minor

a) b) c) d) e) Hindu Married Hindu Girl Window Hindu Girl Illegitimate Boy or illegitimate unmarried girl Adopted Son Father and after the death of Father, the Mother of minor Husband Guardian of the husband Mother and after her father Adoptive Father and after him the adoptive mother
167
f) g) h)
Minor with Step Father Minor with Step Mother Muslim
Mother and after her father Father and after him mother Father and after him executor of fathers will except mother and after him fathers father
CHAPTER 7 Important sections of Partnership Act 1932

S 18 S 19 S 20 S 25 S 30 S 42 S 69 A Partner is an agent of the firm for the purposes of the business of the firm. Each partner is an agent of other partners; hence, has an equal right to manage the partnership business. Implied authority of a partner can be curtailed or enlarged by all partners. Joint and several liability of partners for all acts done while he is a partner. A minor can be admitted to the benefits of a partnership. Death, insolvency etc of a partner dissolves the partnership. A registered firm can sue its creditors. An unregistered firm cannot, but the creditors of an unregistered firm can sue the firm.
CHAPTER 8 Important sections of Indian Companies Act (1956)

S 11 S 48 S 100 S 125 No partnership / association can be formed with more than 20 partners. In the case of banking firms, the number shall not exceed 10. A company may empower person to act as its attorney. The authorization should be in writing and under the common seal of the company. A special resolution is necessary for reduction of capital of a company; further, the approval of National Company Law Tribunals (NCLT) is required. Charges to be filed with the Registrar of companies within 30 days from the date of creation.
S 130(3) The Register of Charges kept by the Company Registrar is open for inspection by any person on payment of a fee. These facilities the prospective creditor can find out whether any charge is subsisting on the assets of the Company. S 135 S 138 S 141 S293 (1)(d) Modification of Charge to be filed. Satisfaction of Charge to be filed. If a Charge is not registered within 60 days, the company or any Interested party can approach NCL for registration showing satisfactory reasons for the omission. If the borrowings exceed the aggregate of the paid up capital and free reserves, the borrowings should be authorized by the general meeting of the shareholders.
168
CHAPTER 9 Verification of Documents obtained from Customers

FEATURES Accounts of Individuals Legal name and any other names used. Correct permanent address DOCUMENTS (i)Passport (ii) PAN card (iii) Voters Identity Card (iv) Letter from a recognized Identity card (subject to the banks satisfaction)(vi) Letter form a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank: (i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity bill (v) Ration Card (vi) Letter from employer (subject to satisfaction of the bank) (any one document which provides customer information to the satisfaction of the bank will suffice). (i) Certificate of incorporation and Memorandum & Articles of Association (ii) Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account. (iii) Power of Attorney granted to its managers, officers or employees to transact business on its behalf (iv) Copy of PAN allotment letter (v) Copy of the telephone bill. (i) Registration certificate, if registered (ii) Partnership deed (iii) Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf (iv) Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses (v) Telephone bill in the name of firm/partners. (i) Certificate of registration, if registered (ii) Power of Attorney granted to transact business on its behalf (iii) Any officially valid document to identify the trustees, settlers, beneficiaries and those holding power of attorney, founders/ managers/directors and their address (iv) Resolution of the managing body of the foundation/association (v) Telephone bill
Accounts of Companies Name of the Company Principal place of business Mailing address, Telephone / Fax Number
Accounts of Partnership Firms Legal name Address Names of all partners and their addresses, Telephone numbers.
Accounts of Trusts & Foundations Names of trustees, settlers, beneficiaries and signatories Names and addresses of the founder, the managers,/directors and the beneficiaries, Telephone / Fax numbers.
169
CHAPATER 10 Joint Accounts-Method of operation

Sl. No. 1 Particulars OPENING OF ACCOUNT STOP PAYMENT OF CHEQUE Either Or Survivor Both have to sign Former Or Survivor Both have to sign Joint Account (Two Or More) Both/All have to sign
Either can stop the payment
Former only can take premature payment Former only can take premature payment
Anyone can stop the payment
PREMATURE PAYMENT OF FIXED DEPOSIT RECEIPT(FDR) CLOSING OF ACCOUNT
Either can take premature payment
Both/All have to discharge the FDR for premature payment
Either can close the account
Only former has to sign to close the account Both have to sign for change in nomination
Both/All have to sign to close the account
MAKING / CANCELLATION / CHANGE OF NOMINATION ATTACHMENT ORDER
Both have to sign for charge in nomination
Both/All have to sign for change in nomination
Either or survivor is a joint account. As such each of them is equally liable Survivor can claim the amount
Former or survivor is a joint account. As such each of them is equally liable Survivor can claim the payment after the death of former Survivor can claim the amount
In case of joint account each of them are equally liable
DEATH OF EITHER
Surviving person and legal heirs of deceased
DEATH OF EITHER / FORMER
Survivor can claim the amount
Legal heirs along with surviving account holder can claim the balance Both have to discharge the FDR for taking loan
LOAN AGAINST FDR
Either can discharge the FDR and take loan
Only former cam discharge the FDR and take loan
170
Sl. No. 10
Particulars PAYMENT IN CASE OF DEATH OF ONE A/c WHERE NOMINATION HAS BEEN MADE
Either Or Survivor Payment will be made to the survivor. Only on the death of both, payment will be made to the nominee
Former Or Survivor Payment will be made to the survivor. Only o the death of both, payment will be made to the nominee
Joint Account (Two Or More) Payment will be made to the survivors or survivor along with legal heirs of deceased account holder(s). Only on the death of both/all, payment will be made to the nominee If order is in the joint names it will be applicable to the joint account and also in the individual account but reverse is not true.
11
GARNISHEE ORDER
If order is in the joint names it will be applicable to Either or Survivor account and also in the Individual accounts but reverse is not true
If order is in the join names full amount will be applicable. If it is the formers again full amount will be applicable. However if it is in the name of survivor no amount is applicable
Where right is available

DEPOSIT IN THE NAME OF Single person Partner in a firm Single name Proprietor Joint-former / survivor Where right not available DEPOSIT IN THE NAME OF Joint account Partnership firm Trust Trustee Dividend A/c. of Company Minor (under Guardianship) LOAN IN THE NAME OF One of joint holders One of the partners Trustee Trust Loan A/c., of the Co. Guardian LOAN IN THE NAME OF Jointly with others Partnership firm Same name Proprietorship firm Former
171
CHAPTER 11 Right of Lien, Set off & Appropriation

SL NO. 1. 2. PARTICULARS Legal statute Meaning RIGHT OF SET-OFF Universal customs and practice amongst bankers APPROPRIATION Indian Contract Act (Sections 59, 60 and 61)
Rights of the Bank to club or Method of crediting amount consolidate different deposited by the customer to accounts of same borrower its outstanding loan in CC/ Current(OD) Amount of claim Accounts in the same with same rights If prior agreement with the bank is to keep the accounts separate, then bank can't exercise this right. Deposit account of sole Proprietor and its loan. Trading A/c can be clubbed Partners are jointly and severally liable and it gives the implied authority to the bank to recover the loan amount from any of the partners' personal accounts. Bank can't exercise this right on the joint deposit account if the borrower is one of them Not Applicable Not applicable Amount should be specific and final Applicable to both Amount of claim Any of the loan accounts of same borrower Applicable to the account as per directions of the borrower or implied intentions to which account the amount to be credited. Clayton's Rule is applicable.
3. 4. 5.
Applicable on Applied to More than one account of same person
6.
Sole Proprietor Account Partners' Accounts (personal deposit)
7.
Clayton's Rule is applicable
8.
Joint Deposit Accounts
Applicable only to Current Overdraft & CC accounts and not. Applicable Applicable Amount should be specific First interest and then principal amount (Kharavela Ind Vs Orissa State Financial Corpn.Orissa HC 1956)
9. 10. 11. 12.
Trust Accounts Future Contingent Debts Quantum of Amount Principal Amount & Interest
172
SL NO. 13.
PARTICULARS Bank's Discretionary rights`
RIGHT OF SET-OFF At the discretion of the Bank
APPROPRIATION Bank's discretion only if the borrower has not specified to which account the amount should be credited. Not applicable.
14.
Requirement of legal notice
Required except in case of death, insolvency or receipt of a garnishee order Bank cannot exercise this right if it has been informed of such assignment by borrower Allowed No Limitation Bank should exercise this right for adjusting its owns debts before complying with the garnishee order Bank has automatic and implied right
15.
Assignment of credit balance to another bank Against 2nd Mortgage Limitation Garnishee Order
Bank cannot exercise this right.
16. 17. 18.
Not Applicable No Limitation To be obeyed
19.
Death of the customer
Applicable
CHAPTER 12 Garnishee Order & Attachment Order

PARTICULARS Concept GARNISHEE ORDER Garnishee Order is issued by the court on the applicable made by the judgement creditor in a situation where the judgement debtor fuses to pay debt payable by him. The garnishee order is issued on the banker maintaining account of the judgement debtor. Competent Court at the request of judgement creditor ATTACHMENT ORDER Attachment Orders are issued by the Assessing Officer or Tax Recovery Officer on the Bank having any type of deposit in the assessee from whom money is due or may become due.
Issuing Authority
Government authorities such as Income Tax, Sales Tax, Custom Authorities etc. for collection of tax and government dues.
173
PARTICULARS Legal Provision
GARNISHEE ORDER Civil Procedure Code, Sec 60, Order XXI, Rule 46 First, Order Nisi and then Order Absolute Private liability Recovery of private dues. Judgement debtor Judgement debtor's debtor May be mentioned specifically On clear balance available in the account at the time of receipt Execution of decree 12 years Demand deposits and time deposits
ATTACHMENT ORDER Related status such as Income Tax Act, Sales Tax Act, Wealth Tax Act, Enforcement Directories etc., Always in the Absolute form. Statutory liability. Recovery of dues of Income Tax / Govt. dues Assessee in default Assessee debtor Must be mentioned specially
Stages / Steps Nature of liability Nature of recovery Depositor Bank Amount Applicable to which amount Nature of dues Limitation period Deposits
Applicable on subsequent balance up to the time total amount is not recovered. Government liability 30 years Demand deposits and time deposits
Right of Set-off and Available for certain and due Available for ascertainable and due debts Appropriation debts Joint accounts, order received in single name Joint account & order in same joint names Order in the name of partner, trusts, official assignee / executor receiver, administrator & liquidator etc. Not applicable Equal share depending upon the number of account holders Applicable up to the order amount
Applicable up to the order amount
Not applicable for accounts in the name of firm as to settle the liability of the partners, firm account cannot be debits. In case of other accounts it is not applicable as they are in the representative capacity.
Not applicable for accounts in the name of firm. To settle the liability of the partners, firm amount cannot be debited. In case of other accounts, it is not applicable as they are in the representative capacity.
174
PARTICULARS Deceased
GARNISHEE ORDER Applicable as the liability has been predetermined by the court and execution proceeding cannot be stopped after the death. Not applicable, as after insolvency, the recovery is to be done by the official Assignee / Receiver in the preferential order Balance Amount of FDR Not applicable
ATTACHMENT ORDER Applicable as the liability has been pre-determined by the statutory authority and recovery cannot be stopped after the death. Not applicable. The amount has been sanctioned to do the productive activity and not to settle any statutory liability. Balance Amount of FDR Not applicable Over and above the order amount
Insolvent
Unutilised portion of limit against FDR FDR as collateral security
Bank's liability to Over and above the order honour the amount customer's cheques Preference Attachment order, being the liability to govt., will have the preference over Garnishee Order if both received simultaneously.
Attachment order, being the liability to Govt., will have the preference over Garnishee Order if both are received simultaneously.
CHAPTER 13 Charges on Security

TYPE OF CHARGE Mortgage Pledge Hypothecation Lien Assignment TYPE OF SECURITY Immovable securities Moveable assets Moveable assets COLLATERAL SECURITY Land, building, machinery embedded to the earth. Stocks, Gold, jewellery Stocks, motor vehicles, standing crops.
Securities which are already Goods and securities except in possession of the creditor. actionable claims and money. Actionable claims LIC policies, book debts, FDR.
175
CHAPTER 14 Various types of Mortgage (Sec 58 of TPA)

SL. NO. 1 PARTICULARS OTHER NAMES EQUITABLE MORTGAGE SIMPLE MORTGAGE CONDITIONAL SALE MORTGAGE Nil USUFRUC ENGLISH TUROY MORTGAGE MORTGAGE Nil Nil
By deposit of Simple Title Deeds Mortgage 58(f) In Bombay, Calcutta & Madras or in cities permitted used Act passed by State Govt. 58(B) All over India
2 3
U/S OF TPA ALLOWED CITIES
58(c) All over India
58(d) All over India
58(e) Bombay, Calcutta & Madras and places notified under Act passed by State Govts. Rs 100/-
MINIMUM AMT OF LOAN METHOD OF CREATION
No Limit
Rs 100/-
Rs 100/-
Rs 100/-
By Deposit of Title Deed
By Writing of Mortgage Deed Two
By Writing of Mortgage Deed
WITNESSES REQUIRED PURPOSE
No
Two
Security debt or perform-ance of obligation Only Borrower/ Guarantor Not required
Security debt or performance of obligation Only Borrower/ Guarantor Not required
Security debt or performance of obligation
Security debt or performance of obligation Only Borrower/ Guarantor Required
Security debt or perform-ance of obligation Only Borrower/ Guarantor Required
MORTGAGOR
Only Borrower/ Guarantor Required
REGISTRATION
176
SL. NO. 10
PARTICULARS POSSESSION AND OWNERSHIP
EQUITABLE MORTGAGE Not Transferred
SIMPLE MORTGAGE Not Transferred
CONDITIONAL SALE MORTGAGE Not transferred but property is sold on a condition to be retransferred if debt is paid back With Mortgagor
USUFRUC ENGLISH TUROY MORTGAGE MORTGAGE Transferred till repayment of debt Title is Transfer-able but not the posses-sion
11
RIGHTS ON INCOME OF PROPERTY RIGHT OF FORECLOSURE RIGHT OF REDEMPTION
With Mortgagor
With Mortgagor
With Mortgagor
With Mortgagor
12
No Right
No Right
Mortgage can sue on default Yes, available to mortgagor
No Right
No Right
13
Yes, available Yes, to mortgagor available to mortgagor Required 12 years Required 12 years
Yes, Yes, but available to not mortgagor ownership Required 12 years Required 12 years
14 15
LEGAL NOTICE LIMITATION
Required 12 years
CHAPTER 15 Various types of Securities & their charge

Sl. No. 1 Type of Security Land & Building Type Of Charge Mode Of Valuation Registration Of Charge Possible only when the property is 'Free Hold'. Nonencumbrance certificate, search reports and prior sale deeds should be gone through properly. In case of companies, charge should be got registered with the Posssession The Security Title Deeds remain with the Bank
Equitable Mortgage Banks ii) Registered Approved Mortgage Valuer
Plant & Machinery
Hypothecation
Original invoice and depreciated value
The physical possession remains with the
177
Sl. No.
Type of Security
Type Of Charge
Mode Of Valuation
Registration Of Charge Registrar of Companies.
Posssession The Security borrowers, bank has constructive possession Physical possession remains with the borrower and bank has an equitable charge physical possession remains with bank in an independently accessible store. Documents of title remain with the bank
Stocks
i) Hypothecation ii) Pledge
Market Report, Newspapers, Invoices. -do-
By way of obtaining inventories and stock reports at regular intervals -do-
Pledge of Receipts Railway/ of Bills in full set of Lorry Receipts, Air- issue way Bill And Bill Of Lading
Invoice
By way of delivery and a valid endorsement. Though no legally required, but Railway or Transport authorities should be notified. By way of assignment in favour of the Bank
LIC Policies
Assignment of Receipts
Surrender value certificate issued by the company Face Value plus Interest accrued thereon
Original Policies remains with the bank
NSC, Indira Vikas Patra Other Govt. Securities
Pledge & Security
Blank endorsement or transfer assignment in favour of the bank
Original Securities remain with the Bank
Banks Own Term Deposits
Pledge & Security
Face Value plus interest accrued
By way of Assignment
Original deposit receipt remains with the bank
178
Sl. No. 8
Type of Security Ornaments
Type Of Charge Pledge
Mode Of Valuation Newspapers, weight certificate from approved jeweler Newspapers, SEBI approved agents and brokers. Books of the party, certificate from a Act Certificate issued by the Govt. undertaking invoices, copy of contract and delivery note.
Registration Of Charge Delivery / possession
Posssession The Security Jewellery is kept in safe custody with the bank.
UTI, Shares Of Approved Cos
Pledge
Letter of Pledge, Blank Transfer Deeds / Dematerialization
Certificates remain with the bank
10
Book Debts
Hypothecation
Hypothecation deed and assignment letter
N.A.
11
Supply Bills
Hypothecation
A letter of N.A instruction to the PSU for making the payment to the bank
CHAPTER 16 Hypothecation & Charge

SL NO. 1 PARTICULARS Legal Provision HYPOTHECATION Section 2(n) of Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 A charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and PLEDGE Section 172 of The Indian Contract Act, 1872
Definition
The bailment of goods as security for payment of a debt or performance of a promise.
179
SL NO.
PARTICULARS
HYPOTHECATION includes floating charge and crystalisation of such charge into fixed charge on movable property.
PLEDGE
Parties
Borrower-Hypothecator Bank-Hypothecatee Movable
Borrower-Pledgor / Pawnor. Bank-Pledgee/Pawnee Moveable
Nature of Securities Nature of Charge Rights of Ownership Rights of Sale
Equitable Floating With the borrower
Legal Fixed With the borrower
Through Court of Law
Private Sale- after giving reasonable notice (Sec-176contract Act) With Bank Not applicable
8 9
Possession
With Borrower
Delivery of Goods Actual Symbolic Constructive Limitation period General lien Degree of care 3 years Not Available Borrower to take care of the Hypothecated goods
10 11 12
No Limited Period Available The bank is bound to take as much care of the goods bailed to the bank as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quantity and value as the goods bailed.
180
CHAPTER 17 Various types of Charge on Securities

SL. NO. 1 PARTICULARS Meaning LIEN Right to retain the amount till adjustment of the debt. U/s 171 of Contract Act ASSIGNMENT Transfer of rights, interests, or title in favour of the creditor. U/s 3 HYPOTHECATION Not defined in any legal statute. It is extended concept of pledge. It is a charge on moveable securities with debtor having the possession of the same Nil PLEDGE Bailment of goods as security for payment of debt and interest. U/s 172 of Contract Act MORTGAGE Transfer of interest in some immovable property for securing existing or a future debt (Sec-158 of Transfer of Property Act)
Legal Statute
Indian Contract Act
Transfer of Property Act
Indian Contract Act Movable goods
Transfer of Property Act
Applications
On goods and securities Goods and securities
Title deeds, Movable instruments, goods policies Supply Bills, LIC Policies, Book Debts, FDR Stocks, Vehicles, Plant & Machinery, Standing crops
Immovable property
Different types of Assets covered
Shares, KVP, NSC, Materials or other goods not embedded to the earth With the Bank Can sell after giving a notice
Land, Building, Machinery embedded to the earth
Possession
With the Bank Bank cannot sell but only retain
With the Bank Can claim amount from the issuers
With the Borrower Can convert the hypothecation into pledge
With the Debtor
Rights of Bank to Sell
Can sell
181
CHAPTER-18 Safe Deposit Articles & Lockers

SL NO. 1 PARTICULARS Banker -Customer Relationship Leasing out the space SAFE DEPOSIT OF ARTICLES Bank is a Bailee and the Customer is a Bailor. No space is leased out to the customer LOCKERS The Bank is a lessor and the customer is a lessee. A small locker in the lockers cabinet is leased out to the customer. The locker is operated jointly by the bank and the customer by using master key and hirers key simultaneously Lockers could be hired in the names of joint persons and could be authorized to be operated by the persons by Power of Attorney with prior arrangements with the bank. If there is no such prior arrangement, third parties are not allowed to operate the lockers In case locker has been hired by a single person, 'nomination is permitted in favour of one person only. However, if the locker is hired jointly - joint operations, each person can nominate one (but not more than two) The customer itself keeps the articles in the locker. Bank is not concerned with the packing of the articles The bank is not concerned with the packing of the articles
Operation
There is no involvement of the customer with the operation of the vault where the valuables have been kept by the bank In case the depositor is very well know and is of very good reputation, the bank can deliver the articles to an authorized third person after proper verification of his identify
Third Parties
Nomination
Nomination is allowed to one person
Acceptance of Articles
The customer delivers the valuables/articles to the bank for keeping in safe custody
Type of Packaging
Bank accepts sealed packets or envelops duly signed by the customer The packets has a mention of full particular of the depositor
Particulars of the Depositors
Locker cabinets are immovable in the strong room. The bank can only see whether the lockers have been property locked after the customer has completed the operation or not.
182
SL NO. 9
PARTICULARS Duty of the Bank
SAFE DEPOSIT OF ARTICLES
LOCKERS
The bank charges periodical rent The bank is expected to take proper and extra care regarding as per size of the locker safely of the articles deposited by the customer The bank takes charges according to the size of the articles The customer can take the delivery of the goods on surrender of safe custody receipt The customer operates the locker itself and may take out any article as per need. Contents of the lockers could be delivered only to the legal heirs after recovery of rent, if any, and completion of all the formalities. If no legal heirs turn up, bank can issue a notice at the address of the deceased and issue a Public Notice in the news papers. A period of 3 years is sufficient to wait and thereafter, the bank can break-open the locker. The articles so recovered would be properly recorded and kept in safe custody.
10
Charges
11
Delivery of articles
12
Death of the Depositor
In the event of death of the depositor, in case, if on some envelop, if has been mentioned that it contains a 'Will' and the name of person to whom it is to be delivered; the bank can deliver the same on identification of the person. Articles can be delivered to the nominee, if any. Succession Certificate is not valid in respect of Safe Deposit of Articles of a deceased. Only Probate of the 'Will' or Letter of Administration is required for delivery of the articles
CHAPTER 19 Important sections of Bankers Book of Evidence Act 1891

S4 S6 S8 A Certified copy is a prima facie evidence of the entry in the records of the bank. The Court may order inspection of any bankers books in a proceeding before it. Further it may also order taking out copies of the bankers books. The order of a court for production and inspection of books of the bank shall be construed as referring to an order made by an officer of the rank of Superintendent of Police and above as specified by the Govt.
183
CHAPTER 20 Important sections of Indian Contract Act-1872:

SECTION 11 25 28 42 43 68 72 124 126 128 129 131 133 134 152 170 173 182 148 151 171 172 176 AGENCY 185 190 201 202 No consideration required for Agency. An agent cannot delegate his authority. Death / Insolvency / Insanity of the debtor terminate Agency. Agency coupled with interest agency not terminated by death. CONTENTS Minor cannot enter into a contract. An agreement without consideration is void. An agreement curtailing the normal limitation period for filling a civil suit is void. In a joint promise, all the promisors are liable both jointly and severally. Any or more joint promisor may be compelled to perform whole of the promise. Loans to minors to meet necessaries of life are binding on the minors estate: Quasicontracts. Payment made by mistake or under coercion must be returned. Definition of Indemnity. Definition of Guarantee. Suretys liability is co-extensive with that of the principal debtor, unless provided otherwise. Continuing guarantee extends to a series of transactions. Death of a surety revokes the continuing guarantee for future transactions. Any change in the contract, without suretys consent, discharges the surety. Surety is not liable if principal debtor is released from liability, by any act or omission of the creditor. Bailee is not liable for loss, destruction / deterioration of things bailed, if he has exercised the standard of care as defined in S 151. Bailee has particular lien over the things bailed to him. Pledgee can retain the goods till he receives his payment. Agent and Principal defined. Bailment defined. Bailee to take reasonable care of goods bailed to him. Bankers, factors etc have a general lien. Pledge defined Statutory notice of sale to be given to the Pledgor before sale of good when he defaults to pay.
25(3) A promise to pay a time-barred debt is valid.
59-61 Appropriation of payment (Claytons Rule).
BAILMENT
184
CHAPTER 22 SECTION DEALING WITH NOMINATION

Particulars Deposits Safe Custody Lockers Acceptance of nomination Section 45ZA Section 45ZC Section 45ZD Pay / deliver only the nominee Section 45ZB Section 45ZD Section 45ZF
(Nomination provision available as under) Types of A/c Deposits Safe Custody Lockers Nature of A/c Single / Joint Only single Single Joint-E/S Joint-E/S Joint operation One only One only One only One only One only Each can nominate one (but not more than two) Nominee
Types of nomination forms Account Deposit Safe Custody Lockers Registration DA-1 SC-1 SL-1 or SL 1A joint Cancellation DA-2 SC-2 SL-2 Variation DA-3 SC-3 SL-3 or SL 3A joint
NRI Accounts: The nomination facility is available in both resident as well as non-resident accounts. Nature of A/c Resident Status of Nominee Non-Resident Provision of settlement in favour of nominee Repatriation of fund to non-resident nominee as credit to NRE/FCNR account of nominee requires prior RBI approval. Repatriation of fund outside India requires RBI permission, irrespective of the account maintained by NRI. For credit to resident nominee, no RBI approval is required. Repatriation of fund requires RBI permission, but utilization in India requires no approval.
Non-Resident
Resident
Non-Resident
Non-Resident
185
CHAPTER 23 Limitation Act, 1963

DESCRIPTION OF SUIT Article 1 For the balance due on a mutual, open and Current A/c, where there have been reciprocal demands between the parties. Article 19 For money payable for money lent. Article 22 For money deposited under an agreement that it shall be payable on demand, including money of a customer in the hands of his banker so payable. Article 31 On a bill of exchange or promissory-note payable at a fixed time after date. Article 32 On a bill of exchange payable at sight, or after sight but not at fixed time. Article 33 On a bill of exchange accepted payable at a particular place Article 34 On a bill of exchange or promissory note payable at a fixed time after sight or after demand. Article 35 On a bill of exchange or promissory note payable on demand and not accompanied by any writing restraining or postponing the right to sue. Article 36 On a promissory note or bond payable by installments. Period of Limitation 3 years TIME FROM WHICH PERIOD BEGINS TO RUN The close of the year in which the last item admitted or proved is entered in the a/c; such year to be computed as in the a/c. When the loan is made
3 years
3 years
When the demand is made
3 years
When the bill or note falls due
3 years
When the bill is presented
3 years
When the bill is presented at that place When the fixed time expires
3 years
3 years
The date of the bill or note
3 years
The expiration of the first term of payment as to the part then payable and for the other parts the expiration of the respective terms of payment. When the default is made unless where the payee or beneficiary waives the benefit of the provision and when fresh default is made in respect of which there is no such waiver.
Article 37 On a promissory note, bond payable by instalments which provides that if default be made in payment of one or more instalments, the whole shall be due.
3 years
186
DESCRIPTION OF SUIT Article 39 On a dishonoured foreign bill where protest has been made and notice is given.
Period of Limitation 3 years
TIME FROM WHICH PERIOD BEGINS TO RUN When the notice is given
Article 54 For specific performance of a contract
3 years The date fixed for the performance, or if no such date is fixed when the plaintiff has notice that performance is refused. When the right to redeem of to recover possession accrues When the transfer becomes known to the plaintiff
Article 61 By a mortgagor (a) To redeem or recover possession of immovable property mortgaged (b) To recover possession of immovable property mortgaged and afterwards transferred by the mortgage for a valuable consideration Article 63 By a Mortgagee a) For foreclosure b) For possession of immovable property mortgaged Article 116 Under the Code of Civil Procedure 1908 a) To a High Court from any decree or order b) To any other court from any decree or order Article 117 For a decree or order of any High Court to the same Court Article 118 For leave to appear and defend a suit under summary procedure. Article 119 Under the Arbitration Act, 1940 a) For the filling in Court of an award; b) For setting aside an award or getting an award remitted for reconsideration Article 120 Under the Code of Civil Procedure 1908 to have the legal representation of a deceased plaintiff or appellant or of a deceased defendant or respondent, made a party.
30 years 12 years
30 years 12 years When the money secured by the mortgagee becomes due. When the transfer becomes entitled to possession.
90 days 30 days The date of the decree or order The date of the decree or order. 30 days The date of the decree or order 10 days When the summons is served
30 days 30 days The date of service of the notice of the making of the award The date of service of the notice of the filling of the award. The date of death of the plaintiff, appellant defendant or respondent, as the case may be.
90 days
187
DESCRIPTION OF SUIT Article 127 To set aside a sale in execution of a decree including any such application by a judgment-debtor Article 137 Any other application for which no period of limitation is provided elsewhere in this connection.
Period of Limitation 60 days
TIME FROM WHICH PERIOD BEGINS TO RUN The date of the sale
3 years
When the right to apply accrues
CHAPTER 24 LIMITATION ACT IMPORTANT SECTIONS

Sec 3 Sec 4 Courts cannot condone the delay in filing the suits due to expiry of limitation When there happens to be a court holiday on the day, the limitation is expiring, then suit can be filed on the next working day of the court but limitation is not extended. Courts can condone the delay in preferring appeals Where once the time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it. This rule is strictly applied. However, there are some exceptions allowed vide In computing the period of limitation for an appeal or application, the time taken for obtaining a copy of the judgement/order shall be excluded In computing the period of limitation, the time, and diligence and in good faith, another civil proceeding against the same party for the same relief shall be excluded If an institution of a suit or application has been stayed by injunction or order, the period of the continuance of the injunction or order will not be reckoned for the purpose of limitation When notice has been given or sanction requested from the Govt. before the institution of a suit in accordance with law, limitation will be suspended during the period of notice In computing the period of limitation for any suit, time during which the defendant has been absent from India shall be excluded In case of fraud or mistake, the period of limitation will not begin to run until the plaintiff or applicant has discovered the fraud or mistake, or could with reasonable diligence, have discovered it
Sec 5 Sec 9
Sec 12 Sec 14
Sec 15(1)
Sec 15(2)
Sec 15(5) Sec 17
Sec. 12 to 15. Wherein running of time is suspended
188
CHAPTER 25 SARFAESI ACT-TIME FRAME TO BE OBSERVED

Sl. No. 1 Action Time to be allowed to the borrower/ guarantor in demand notice to repay the dues Time within which the borrower can submit representation/objection to the above notice Time within which the Bank has to convey its decision against the above representation/objection Time within which Borrower can file a petition in the DRT against Bank for having taken possession of property Maximum time within which DRT has to pass the order for the above Time within which the Bank/Borrower can file appeal with the Appellate Tribunal against the order of the DRT Minimum Time Bank has to permit for the borrower to repay the debt, while issuing the sale Notice Time Limit 60 days from the date of notice
60 days from the date of notice
7 days from the date of receipt of the representation/objection
Within 45 days from the date of action of the Bank
Within 4 months from the date of application in the DRT Within 45 days from the date of receipt of the order of the DRT
30 days from the date of notice
189

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PART A

BANKING RELATED ACTS

BRAVE - Banking Related Acts and Various Enactments

State State State State

Bank Bank Bank Bank

of Hyderabad of Mysore of Patiala of Travancore

PART A - Banking Related Acts

No. of pensioners including family pension No. of Branches

Net Interest Income

11448 100% Core 8581 92 in 32 countries 6 14 29 61 46 04 Gurgaon

BRAVE - Banking Related Acts and Various Enactments

Banker to Central/State Governments:

PART A - Banking Related Acts

Promotion of Agriculture, Industry, Commerce & Trade:

BRAVE - Banking Related Acts and Various Enactments

Classification & Valuation of Security for the purpose of SLR: classification):

BRAVE - Banking Related Acts and Various Enactments

PRESUMPTIONS AS TO NEGOTIABLE INSTRUMENTS

RULE OF ESTOPPEL (SEC 120-122)

BRAVE - Banking Related Acts and Various Enactments

KINDS OF NEGOTIABLE INSTRUMENTS:

PART A - Banking Related Acts

Parties to a Bill of Exchange:

PRINCIPLES FOR CALCULATING THE DUE DATE:

Holders in Different Situations

Privileges of a Holder in due Course:

Where holder in due course cannot be there?

Conditions to become Holder in due course:

DISTINCTION BETWEEN HOLDER AND HOLDER IN DUE COURSE:

DISTINCTION BETWEEN NEGOTIATION & ASSIGNMENT

PART A - Banking Related Acts

DISTINCTION BETWEEN NEGOTIATION AND ENDORSEMENTS

When cheque cannot be endorsed?

PART A - Banking Related Acts

PART A - Banking Related Acts

PAYEE OF CHEQUESAFE GUARDS:

BEARER OR ORDER CHEQUES

PART A - Banking Related Acts

DRAWERS SIGNATURES: FORGED CHEQUE

Cheque with impossible Date:

Post dated cheque:

DISHONOUR OF CHEQUES DUE TO INSUFFICIENCY OF FUNDS

DEALING WITH INCIDENCE OF FREQUENT DISHONOUR:

BRAVE - Banking Related Acts and Various Enactments

Section 2-Interpretation clause

CHAPTER I-OF THE COMMUNICATION, ACCEPTANCE AND REVOCATION OF PROPOSALS

CHAPTER II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS

CHAPTER III OF CONTINGENT CONTRACTS

CHAPTER IV-OF THE PERFORMANCE OF CONTRACTS Contracts which must be performed

Time and place for performance

Performance of reciprocal promises

BRAVE - Banking Related Acts and Various Enactments

CHAPTER IX-OF BAILMENT

BRAVE - Banking Related Acts and Various Enactments

Origin and Development

PART A - Banking Related Acts

Right to share profits transferable v v v v v

PART A - Banking Related Acts

BRAVE - Banking Related Acts and Various Enactments

PART A - Banking Related Acts

PART A - Banking Related Acts

B. Who has to Execute the Documents?

DOCUMENTATION FROM BORROWERS STAYING AT DIFFERENT PLACES AND ON DIFFERENT DATES