Exercise Book on Business

Laws
Exercise Book on
Business Laws
Exercise Book on Business Laws

Topics
Chapter 1: Business Law Cases .............................................................................3
Chapter 2: Exercise on Banker Customer Relationship......................................17
Chapter 3: Exercises on NI Act ............................................................................19

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Exercise Book on Business Laws

Chapter 1: Business Law

Cases

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Exercise Book on Business Laws

Case 1 / 1 BL/ 1001

Narration Mr. Rajinder Kumar, an existing customer of your branch, approaches

the CSM to open a joint account along with his minor friend Master
Sachin, aged 12, whose parents died in a recent accident. The account
would be needed to facilitate Sachin to draw the family pension.

Questions 1. Can the CSM accede to this request? If so, what is the procedure for
opening the a/c
2. What precautions you will take while opening the account?

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Case 2 / 1 BL/ 1002

Narration Mrs. Pandey who is living separately from her husband for the last 6
years is a teacher in a private school. She maintains a Saving Account
with National Bank in the name of her daughter Samriti. The account is
operated under her guardianship.
Mr. Pandey, who also maintains his personal accounts with a
substantial balance, visits the branch and approaches the CSM. He
requests the CSM to stop operations and close the account, since the
said account had been opened by Mrs. Pandey without his consent.
He apprehends that Mrs. Pandey may resort to fraudulent payments in
the account of his daughter. He also threatens that on failure to close
the account, he will close his own account with the Bank.

Questions 1. As the CSM, how will you handle the request of Mr. Pandey?
2. Is there any lapse in opening Samritis Account with her mother as
the guardian?

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Case 3 / 1 BL/ 1003

Narration Master Deepu, aged 13 years has been living with his maternal aunt, as
his mother had expired 5 years ago. His father, who is employed with a
foreign company, has been out of the country for 3 years. Deepu's
mother had opened a Savings Bank Account in the name of Deepu
under her guardianship, which has been showing substantial balance.
Deepu needs the money for his necessities and makes a request to the
CSM for allowing withdrawal of the money by his aunt, as she is his
guardian.

Questions 1. How will the CSM facilitate Deepu to withdraw the amount and
operate the account?

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Case 4 / 1 BL/ 1004

Narration Our Bank had opened a joint Savings Account in the name of Mr. Dayal
Singh with his minor daughter Miss. Gurdeep, aged 15.
Unfortunately, in a road accident, Mr. Dayal Singh dies. Miss Gurdeep
approaches the CSM for a withdrawal of the entire money in the deposit
account, which is presently around Rs 2.3 lakhs.

Questions 1. How would you help Miss. Gurdeep in withdrawing the amount?

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Case 5 / 1 BL/ 1005

Narration Mr. Sampath, a customer of your branch, has issued a cheque for Rs
.22,000 to his relative. The cheque has been received for payment
through his relatives banker. On scrutiny, it was found that the amount
written in words was Rupees twenty thousand only.

Questions 1. What action will you take to ensure the payment of the cheque?

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Case 6 / 1 BL/ 1006

Narration Mr. Khanna, a customer of your branch has issued a cheque in favour of
M/s. Dharm Paints Ltd., for Rs. 45,000 and the same has been presented
by the payees bank through clearing for payment. Meantime, Mr.
Khanna has given a stop payment instruction to the Bank. The official
making the payment did not observe the caution and paid the cheque in
question. Mr. Khanna has now raised an objection towards the debit
raised by the Bank.

Questions 1. What may be the reasons for the stop payment of the cheque by the
drawer?
2. How would you deal with the situation?

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Case 7 / 1 BL / 1007

Narration Ramnarain is a customer of Midland Bank. He has a Savings Bank

Account in his name and a Current Account in the name of M/s.
Sangam Hotels, for which he is the proprietor. He has given standing
instructions to his Bank, stating that whenever he issues a cheque on
his Current Account and if there is insufficient balance, the Bank should
transfer the deficit amount from his SB account and ensure that no
cheque is returned.
Today morning the Bank received a cheque drawn on his SB account
and found that the balance in the account was insufficient by Rs. 12,000.
The cheque was promptly returned by the Bank for the reason
insufficient funds. Mr. Ramnarain was informed of the return of
cheque by the Bank and he was very angry that the Bank returned the
cheque instead of transferring the deficit amount from the Current
Account.

Questions 1. Do we have the right to debit any other account other than the one
on which a cheque is issued?
2. How would you deal with the situation?
3. What solution would you recommend in order to avoid such
situations in the future?

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Case 8 / 1 BL / 1008

Narration Manchandani is a textile merchant of your town and he has a Current

Account in the name of his firm Jagat Textiles, in which he is a partner.
The firms account is operated by him jointly with Balwanth Roy.
On 31st July, 2011 the firm issued a cheque for Rs. 2.30 lakhs in favour
of M/s. High-tech Machines, who presented the cheque to their Banker
for collection through clearing. The collecting banker presented the
cheque through clearing and got the amount cleared. The
corresponding Challan was prepared for the credit of the Current
Account in the name of Jalaluddin, one of the partners of M/s. High-tech
Machines. The amount was credited to the account of Jalaluddin and he
promptly invested that amount in Fixed Deposits in the same branch.

Questions 1. What is the position of the Paying Bank and that of the Collecting
Bank?

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Case 9 / 1 BL / 1009

Narration Your branch receives a cheque of Rs. 30000, drawn by Mr. Ahmed, who
is a power of attorney holder of Mr. Abdulla. You note that the bank
also has received a confirmed report about the death of Mr. Ahmed.

Questions 1. How would you deal with this situation?

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Case 10 / 1 BL / 1010

Narration Your customer Mr. Varinder Kumar had granted an irrevocable power of
attorney in favour of his cousin Mr. Ramesh Chander, for operating his
current account for a period of 2 years, as he had planned to go outside
India for 2 years. After 6 months of granting the power of attorney, you
receive information that Mr. Varinder Kumar has been admitted to a
mental hospital in the UK.
Meanwhile, you also receive a cheque of Rs. 2,010 drawn by Mr.
Ramesh Chander through clearing which is drawn in favour of LIC of
India.

Questions 1. How will you handle the situation?

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Case 11 / 1 BL / 1011

Narration A reputed customer of your branch (Dr. Hamid) presents a cheque of

Rs. 15,400, for cash payment drawn by your saving bank account
customer Mr. Alla-udin, which is signed by his mandate holder Mr Fazal.
When you check the system to pay the cheque, you learn about the
death of Mr. Alla-udin.
Hamid insists on immediate payment.

Questions 1. How will you handle the situation?

2. What is meant by a mandate and what precaution should be taken
while handling a letter of mandate?

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Exercise Book on Business Laws

Case 12 / 1 BL / 1012

Narration Mr. Ram Chander delivers to you a power of attorney granted in his
favour by his maternal uncle Mr. Krishna Kumar. Through this power of
attorney Mr. Krishna Kumar has vested wide powers in favour of Mr.
Ram Chander.
Details of the powers granted for various matters have been given.
Incidentally, the power of attorney does not make any mention about
the operations of account or drawing of the cheques relating to the
savings account.
You also note that the power of attorney contains a paragraph which
empowers Mr. Ram Chander to generally act in relation to the estate of
Mr. Krishna Kumar.

Questions 1. Can you accept the power of attorney? If so, what precautions will
you observe to permit Mr. Ram Chander to operate the account on
the basis of power of attorney?

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Case 13 / 1 BL / 1013

Narration Mr. Sham Sunder, a current account holder of your branch executes a
power of attorney, to remain in force for one year in favour of Mr.
Sunder Lal for operating the current account as Mr. Sham Sunder has to
go out of town very often.
After two months, the account holder finds that, Mr. Sunder Lal is not
performing his duty well and instructs the bank not to pay the cheque
signed by Mr. Sunder Lal. Mr. Sunder Lal, however, insists that the
power of attorney was given for one year and it has not been cancelled
as yet by Mr. Sham Sunder.

Questions 1. What solutions could be provided by the bank?

2. Can the bank continue to allow operations as per the POA?

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Exercise Book on Business Laws

Chapter 2: Exercise on
Banker Customer
Relationship

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Exercise
The following is to be printed in advance and pasted on separate slips of cue cards and to
be distributed to students, one each. If there are more students, print more copies of
some of them. They should go around and find out the Matching Partner. If more copies
are printed & distributed, there could be a mismatch or one to many matches. Let it be so.

Mr. A deposits money in a savings Pledgor

bank account.

Pledgee
Mr. B avails a loan from the Bank.

Hypothecator
Mr. C deposits valuables in a safe
deposit locker.

Hypothecatee
Mr. D hands over to the bank gold
jewelry as security to the loan.
Bailor

Mr. E has availed an overdraft against

the security of stocks in his shop, with Bailee
an agreement that the sales proceeds
of the stock will be credited to the
overdraft account. Principal

Mr. F gives a cheque for collection.

Agent

The bank sells mutual funds of other

entities. Debtor

The bank sells insurance products of Creditor

other companies.

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Exercise Book on Business Laws

Chapter 3: Exercises on NI
Act

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Exercise Book on Business Laws

(A) Questions on crossing

1. What is crossing?
2. What is general crossing as per NI Act? Give examples.
3. What is special crossing as per NI Act? Give examples.
4. What is an Account Payee Crossing?
5. What is a Non-Negotiable Crossing?
6. Who can cross a cheque?
7. What happens if a cheque is specially crossed for two bankers?
8. What is the payment in due course of a crossed cheque?
9. What is the payment out of due course of a crossed cheque?
10. Are all these provisions applicable to drafts also?

(B) Quiz on various aspects of cheques

1. An open cheque means .
2. A cheque with two parallel lines on the top left hand corner is known as: (a/c Payee
Crossing, Special Crossing/ General Crossing)
3. A bearer cheque affixed with an HDFC Bank Stamp is presented for cash payment;
you can make the payment. (True/False)
4. A bearer cheque with the words a/c Payee on the top left hand corner of the cheque
(without two parallel lines) is presented for cash payment; you can make the payment.
(True/False)
5. Crossing should be always on the top left hand corner of the cheque. (True/ False)
6. A DD of Rs. 500 having a/c payee crossing is presented for cash payment by your
customer and you can make the payment since the amount is very small. (True/ False)
7. A payee of a cheque can cancel the crossing and authenticate the cancellation, if the
payee is your customer. (True/ False)
8. Mention the items coming under 3 on left while passing a cheque.
9. A bearer cheque can also have a/c Payee crossing. (True/ False)
10. Small value DDs can be issued without crossing. (True/False)

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(C) Payment of cheques Items to be allotted to the groups

1. Mutilated cheques.
2. Crossing of cheques.
3. Date mentioned on the cheques.
4. Payee indicated on the cheques.
5. Amount in words and figures.
6. Alteration of the cheque.
7. Available Balance in the account.
8. Signature of the customer.
9. Seven gold rules for verification of signatures.
10. Payment at the branch where the account is held.
11. Anywhere banking.
12. Bearer / Order cheques and endorsements.
13. Presentment within banking hours.
14. Cheques stopped by drawer.
15. Payment of high value cheques.
16. Return of a cheque financial reasons.
17. Return of a cheque technical reasons.
18. Return timings and return memo.
19. Wrongful dishonour of cheques meaning and consequences.
20. Protection to paying banker.

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(D) Fill in the blank

1. When a banker merely collects the proceeds of a cheque, he is an ___________ of the
customer.
2. The collecting banker must present the cheque for payment without __________
3. A banker must serve his customer with _________ __ ____________ if the cheque is
dishonoured.
4. It is the bankers ___________ to make over the proceeds to the customer.
5. The statutory protection is available to a banker only when he collects a
_______Cheque and not an ________ Cheque.
6. Collection must be for the customer and not as _______ _____ ___________, to get
protection under Section 131 of NI Act.
7. Such collection should be done in ___________ __________ and _________ ___________
to get such a protection.
8. If the banker knowingly collects a cheque for a customer of which he is not the true
owner, the banker will become __________ to the true owner of the cheque.
9. The collecting banker who collects the amount of the cheque to an accountholder
who has a defective title and he has knowledge of the same, is ___________ of the
protection under Section _____ of the NI Act.
10. When a customer opens an account with a meager deposit and immediately
thereafter puts in a cheque or draft of large value, the banker should be put on
___________.
11. As per the amendment to Sec. 131 of the NI Act, if a banker receives payment of a
crossed cheque for a customer within the meaning of this section, not with standing
that he ___________ the customers account with the amount of the
cheque___________ receiving payment thereof.
12. Where a banker pays a cheque, crosses it to himself and collects it, then it is
____________ if he will be protected under this section.
13. When a bank affixes its crossing stamp on a cheque paid in by the customer, it is
done to ensure that the cheque is not collected by someone else. It is not considered
___________ of a crossed cheque.
14. The protection is not available for cheques on which the drawers signature is
___________.
15. The protection is not available when the banker has failed to follow the __________
procedures for opening a new account.
16. The protection is not available when there is an omission to verify that all the
________________ on the cheques are regular.
17. The protection is not available while collecting for the _________ account of an official
a cheque received in his _____________ capacity.
18. The protection is not available when collecting a cheque for a partner's account in the
name of the___________.

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19. The protection is not available when the banker has failed to exercise _______ that
would be required based on __________ available to the banker on the face of the
cheque.( E.g. Where an agent or a power of attorney is using funds in the principals
account for his personal purposes.)
20. The protection is not available if a banker collects a cheque marked account payee for
a person who is not the ___________ of the cheque.
21. The protection is not available when due care to ________ particulars is not taken by a
banker, when collecting a cheque for a customers account which is endorsed to him.

(E) Learning confirmation : Cheques

1. Drawee of a cheque means..
2. Conversion of a cheque means .
3. Mention two instances of negligence while collecting a cheque.
4. An outstation cheque dated 31st January and received on 30th January, can be sent for
collection on 30th January. (True/False)
5. The bank will not get protection if the cheques are collected for a non-customer.
(True/False)
6. Banks can refuse to collect the cheques of high value in a dormant a/c. (True/False)
7. An a/c Payee cheque is to be collected only to the credit of the payee. (True/False)
8. We cannot collect a cheque in case we do not have a branch in the center where the
cheque is drawn. (True/False)
9. We have to affix our rubber stamp the moment we receive the cheque for collection.
(True/False)
10. Cheques for collection can be accepted even after business hours. (True/ False)

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