urukul’ UENCE OY Ca [ OUR RESULTS — OUR BRAND VALUE Dr. GS.Bhalla |Mr. Harsimran S. Bhalla MA (Eco), Dethi Univ., MS Financa, IIT Chicago, USA PhD. Deptt. of Business Mgmt (UBS), Panjab Univ, ‘Associate Director Director 09816009205 ‘M -09876092624 SCO 91, (1°78 2" FLOOR), SECTOR 47-D, NEAR PNB, CHANDIGARH, Mob: 9041086087, 9041074088 HYDERABAD BRANGH: Kachiguda Pride, Kachiguda Station Road, Opp. Traffic Police Station, Adjoin 7 Kachiguda, Hyderabad, Mob: 9395140742 ee eePREFACE a Aim of the book : Practicing bankers are finding it increasingly difficult to keep themselves up to date with the ever-changing legal aspects of the banking field due to pressure of work. Our aim is to.make all the important and relevant aspects available to them in a simple and lucid manner. The book is not an exhatistive compilation of the law, which aims to exhaust the reader but a concise and down to earth version, which aims to befriend the user. The focus is also to make available the needed information in a single window too. Contents Contents are chosen such that both the legal basics like the foundation acts and practical inputs such as documentation & operational aspects are covered. Efforts are ‘made to keep our reader up to date by adding the latest concepts used in banking and the legal aspects pertaining to them. Value Proposition This book is meant for practicing bankers. It is felt that not only the young bankers but seniors may also find value in the contents as the book not only informs but also up dates existing information. Young readers who are aspiring to take up banking as a career, MBA students who want to add practical information to the theory part of their Business law courses are also welcome to this book. Our institute has a self-set mission of assisting practicing bankers in sharpening their skills and improving their efficacy and efficiency. It is our firm belief that sclf- improvement is a continuous and constant process. This road leads people automatically to career advancement. We have developed core-competency in this area of assisting and empowering our readers in their efforts towards Career Advancement. Our publications are focused towards this. We at the institute believe that quality can become a reality only if there is input from the end users, We, therefore, welcome suggestions for improving this edition of the book from our readers. The institute acknowledges with appreciation the efforts of the entire team & particularly Mr. Vipin Sharma at CTDI for their pain staking efforts in bringing out *Gurukul Banking Law & Practice" book. \ Dr. G.S_Bhalia Mr. Harsimran S. Bhalla MA (Eco), Delhi Uni MS Finance, IT Chicago, USA PhD. Deptt. of Business Mgmt (UBS), Panjab Univ. Associate Director Director - 09316008205 M-09878092621BANKING LAW @ND PRACTICE CHAPTER TOPIC PAGE NO. 7 RBI ACT 1934 7 2 BANKING REGULATION AGT 1949, 3 3 ‘CASH RESERVE RATIO & STATUTORY LIQUIDITY RATIO. 5 a BANKER-CUSTOMER RELATIONSHIP. 7 a NEGOTIABLE INSTRUMENTS ACT @ @ DIFFERENT TYPES OF DEPOSIT ACCOUNTS. 29 7 DIFFERENT TYPES OF CUSTOMERS 39 a ‘OPERATIONAL INSTRUCTIONS, JOINT ACCOUNTS EITHER OR SURVIVOR, 5 3 BANKER’S RIGHTS -BANKER'S LIEN, SET- OFF, RIGHT OF APPROPRIATION 37 70 | GARNISHEE ORDER AND ATTACHMENT ORDER 60 71__| CHARGES ON SECURITIES & 72__| SAFE DEPOSITS OF ARTICLES & LOCKERS - BANKER'S BOOK EVIDENCE ACT.1054 8 73__ | BANKERS BOOK EVIDENCE ACT 1891 | "14 [INDIAN CONTRACT ACT 1072 70 15___| POWER OF ATTORNEY, 72 76 | NOMINATION RULES, i 74 47___ | OCUMENTATION 76 (7710 [DOCUMENTS AND INDIAN STAMP ACT, 1899 73 49 | DOCUMENT AND REGISTRATION ACT 1908 co (20 [ REGISTRATION OF CHARGES, 82 21 LIMITATION ACT — 1863, 33 22 | BANK OMBUDSMAN SCHEME 26 23 | COMPRISE SETTLEMENT THROUGH LOK ADALATS: 8 24 | CONSUMERS PROTECTION ACT. 1986 80 25 __| DEBTS RECOVERY TRIBUNALS, 2 26 | DEPOSIT ACCOUNTS AND IBA’S CODE : 3 27] ELECTRONIC CHEQUES & TRUNCATED CHEQUES 7, 28 | HANDLING OF ACCOUNTS OF DECEASED 29 [IBA CODE FOR BANKING PRACTICE ‘30 | PASS BOOKS AND STATEMENT OF ACCOUNTS, 102, ‘31 | STOP PAYMENT OR COUNTERMANDING. 703, '32__| TAX DEDUCTION AT SOURCE (TOS) 704 | ‘33 | SARFAESI ~ 2002, CERSA = 705, 34 [RIGHT TO INFORMATION AGT ~ 2005, ALL ABOUT TAN i097. (3s kYC - GUIDELINES — ANTI MONEY LAUNDERING STANDARDS 708 '36___ | DOORSTEP BANKING. a1 37 | MOBILE BANKING aR 38 | PERMANENT ACCOUNT NUMBER (PAN) 114, 39 | PAYMENT AND SETTLEMENT SYSTEM 18. 40 MONEY TRANSFER SERVICE SCHEME, KYG NORMS / AMLSTANDARDS: 7, composen By : Vipin Sharma ‘ORPORATE TRAINING & DEV. INSTITUTE (GURUKUL FOR BANKERS) Pric CO 81, (1* & 2% Floor), Sector 47-D, Chandigarh, MOB: 9041086057, 9041071058 Rs, 300 | ‘wwrw.corporatetraininginstitute.com, E-MAIL: training@corporatetraininginstitute.com For. ion. Check Our Webs!R&I was established on the recommendations of Royal Commission on Indian Currency & Finance (1928). The Act was passed in the year 1934 and the REI was estabiished on 1.4.1935 as a Private Sector Bank. It was nationalised on 1-1-1840, With ‘nationalization. the Central Govt. ovms hundred percent of the capital ofthe bank. The Share Capital of the banc (Paid-up) is Rs. 8 crores, with face value of a share of Rs. 100/-. The Ral is menaged by 2 Gp EUNGTIONS: RE! performs mainly five types of functionsix, a) ») 2 8) e) ASSUING OF CURRENGY: _ The Gentral Goris issuing one Rupee Note, (ernor, 4 Deputy Governors and 16 Directors. acts as currency issuing Bank. acts as a Banker to Central and State Govt ects as Benker to the Banks and regulates their working {works for the promotion and development of Agriculture, Tra {collects and communicates important information. ‘The Reserve Bank issues all currency notes aja6 called as ba 4.20. 50,100, 500, 1000, 5000 and 10,000, under the signature ‘The RBI issues currency notes against i fupee Securities, Mint, Promissory Notes or Bills of Exchan, monetary policy with the objective Y> provide necessary credit for development of Agriculture, suring price stabiity {8 Fontrois afd regulates money supply k Rate, Soo 47(a) | RESERVEFUND, Sipulis tal a bank moa cele eee lind equvaen toa tess han 20% of rot ol le balance of pall Leach ea, bear any Sidon doclared (RB has ehaneed 1 28% fel pf we 31 Mech 2001). Soa 16 | CASH RESERVE: Every baking company ol beng a scheded bak, shal maintan 3 of demend end Ue Tbies by way cosh serve ise or by way of baanczin gure zcout wih RSL Gee 1 | RESTRICTION ON NATURE OF SUBSIDIARY COMPANY: A bank sal nt orm any SDS company ence Tor rdaranng business whch is permissible or banking company. See 19(2) | HOLONG.OF SHARES OF AY COMPANY: No bang company sat) aes in sy company whote: 2 pees ntgate ec 19(2) | or absodie owner, of an amount exceeding 30% of pai-up share cgeffal of that bampany oF 30% of its own paid-up capital and tess, whichever aes. . ‘Sec ZO | RESTRICTION ON ADVANCES AGAINST OWN SHARES: Wo banking any shan in| loane vances ove ely os The policy on penal charges be approved by the Board of the bank ‘> The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference between the actual balance maintained and the minimum balance as agreed upon at the time of opening of account, A suitable slab structure for recovery of charges may be fnalised. ‘> The penal charges should be reasonable and not out of line with the average cost of providing the services. The balance in the savings account does not turn into negative balapde Yglely on account of levy of charges for non-maintenance of minimum balance. ISSUE OF CHEQUE BOOKS: : ‘Cheque books are issued in case the account Hias been opened in ‘SCO 91, (7 & 2 For more on Banking & Finance, Log on te: www.corporatetraininginstitute.comTHE NEW COMPANIES BILL 2013 ‘he new Companies Bt 2013, proves fr neepg changes te way compares epeate and eof in the cour. has placed the Companies Act 1956. I contains 470 sections and seven schedules. BACKGROUND: The frst Companies Act was enactéd fity-seven years back and has been emended 25: times but stil the act ‘was not in syne with the new economic and corporate realities. The environment has been fast changing and emerging Contemporary issues, such as corporate governance, inveslor protection, corporate socal responsibly and measures to chock frauds, have become significant ESSENTIAL FEATURES OF A COMPANY: 2) Registration: Registration of a Company is compulsory.unger the Compan; ithas been registered and received the Certificate of Incorporaiion, »b) Legal Status: A Company has o separate legal status distinct from its many capacities such es the capacity to contract just like an individual. It can ©) Perpetual Succession: A Company has a perpetual succession. It comes i up legally 4) Independent Corporate personality: A Company is distngLAronv 7 By fohynder the Companies Act it House of Lords in England. ) Limited Liability: Limitation of lability fs an advent ‘rom iis own members, a Company has iis ovn ag contebyte anything other than the nomial value 4 A common seal wth the named the comp The article of association stipulates the condition under yt 2 6 are extended to company, the bank wil insist on afatig of te X association and board resolutions. 013. it can come in to existence only after atificial egal person, which enjoys pose property in its own name. pany is distinct, fe nol bound 10 ‘9} Corporate Veil: Though a co m cfs. courts have from time to time ‘gone beyond the concept of sepatal RY directorsynembers of the company, before Sving theirjudgrents, Tiss ries Those nay te cbt componi ‘compat A) PRIVATE COMPANY: te company is defined fo mesn a company pital as may be prescribed, ‘debentures of the company; ersons hold one or more shares in company jointly, they id-up capital. The term further includes subsidiary ‘company may be incorporated as & private company or a publie company. A ions of the Companies Act unless exempted by the Ceatral Government. ated outside india but having a place of business in India. A foreign company is jn which more than 50% of the paid up share capita is in Inde hiands, it shoul for its business in Incia, treated as an Indian company. A foreign company W ceases, { carry on business in Indtrmay-bo-rf6und up in India, ) ONE PERSON COMPANY (OPC) - SEC. 2(6 © ‘One Person Company’ means a company which has only one person as a member. iis a private limited company. Only a tural person who is an Indian citizen and resident can set up the company or become a nominge forthe sole member of OPC. ’A person can incorporate one OPC only or became a nominee in one such company only. @0PC is meant for very small businesses. In the case of OPC the Memorandum of association should state the name of the ‘person, who, n the event ofthe death of thexsubscriber shall become the member of the company. F) SMALL COMPANY: ‘Small Company’ mesns 8 company other than a public company with paid up share, capital of Rs.50 lakhs or such higher ‘amount which shall nat be more than Rs.5 Cr or with turnover or Rs.2 Cr as per its last profit and loss account ot such higher ‘amount not exceeding Rs.20 Cr. G) STATUTORY COMPANY: A Statutory company is a company created by a special act of Parliament and is accordingly governed by he stale creating lt, However, the provisions ofthe Companies Act, 1856, apply to them insole, os the seme are ‘ot inconsistent with the special acts under which these companies are formed. H) LIMITED LIABILITY: Companies may limit the Fabilty oftheir members by tNe amount unpaid on the shares held by them or by the amount guaranteed or by bath. A company having no limit on the lability ofits members is an unimited company, ‘SCOT, (1" & 2” Floors), SECTOR 47-D, CHANDIGARH-160047 For more on Banking & Fingace, Log’on to: www.corporatetraininginstitute.com aSINCORPORATION OF COMPANY The main documents that are essential to incorporate a company are the ‘Memorandum of Association and the “Articles of Associalion: MEMORANDUM OF ASSOCIATION: © The first step in he formation of a company is the preparation of the memorandurh of association, Its the constitution ofthe Company. Itis @ document that defines the powers of he company. Any act beyond the scope of the memorandum is uiva since tne company and thus unenforceable, @ The purpose of memorandum of association among other is the enable the ‘company to know the permitted scope of is activities. © MAIN CLAUSE: ') Name Clause: Promoters are free to choose any suitable name for the cf a) The last word(s) is fare limited or private limited as the case may be. b)The name chosen is nol undesirable, ') Registered Office Clause: This clause states the name ofthe State in whidhhe regiaterBe offce of the company will be situated, Registered office of a company establishes ils domici ‘Notice of the situation of the registered office and of eveny’Change thereil days after the date of “incorporation of the company or after the date of the chang panies, iii) Object Clause: A company can have any lawful pBjectives. Co's Act requires RAIts objects into two paris: a) Main objects and objects incidental or anciliay thereto, aperb} ther abjects. smber’s creditors and those who deal with the {v) Liability Clause: This clause states the naturg’6flabilly off membErg In the casdoflimded company, X must also state thal the fabiliy of ts members is imited, Memorartium of an url ss this douse, y) Association or Subseription Clause: I ation wg Aubscripion clause at the end. The number of shares taken by i . vi) Capital Clause: In this clause, the al it ‘company will be aithorised to raise and the number * and the valve of shares into which it fer of shares, transmission of shares, 6, directors including first directors, their of the sharehold¥fs. This power is, however, subject to certain provisions of the Companies Act, or any other statute, it must not randum, It is the memorandum that prevails in the by passing a special resolution and with the sanction of the jon, any alteration can be altered by a special resolution and no approval is commitsag act in Zontraventian of the memorandum of association itis ultra vires Bnd is not binding on the 3d by th company. However, ifthe company acts in contravention of the provisions of is antcies of assodatjon, itis intra vires i.e. opfy a procedural iregularity and the same can be ratified by the sharsholdere at = The Memorandum and Afices wien registered wit the Registrar become public documents and then they canbe inspected by ‘any one on payment of a nominal fee. Oue to this, all those who deal with the company, are présumed not only to havo keowledge oftheir contents but have also understood them. Thus, even if the party dealing with the company toes net hove actual notice ofthe content of these documents, itis presumed that he has an implied notice of them. ves known oe deohace of constructive notice. RULE OF INDOOR MANAGEMENT: @The rule of constuctve notice has been held to be subject fo the rule of indoor management. The persons dealing with tha company af@ not bound to inquire into the reguiaiy of internal proceedings. The rule of indoor management offers preter e those dealing with the company through its offcere who fall to follow the procedures preserbed' under the ares bees exercising hose powers. {There is one limitation to the doctrine of constructive notice ofthe Memorandum and the Articles of Company. The outsiders dealing with the! company are entiled to assume that as far as the internal proveedinge of the company “are conesroc, everything has been regutay done. They are bound to rea the registered documents and to see that ine propated dealing fot inconsistent therewith, but they are not bound to do more: they need not inquire into the regularly of the site broceeaings. 1" & 2 Floors), SECTOR 47-D, GHANDIGARH-160047_ ‘on Banking & Finance, Log on to: wivw.corporatetraininginstitute.comDOCTRINE OF ULTRA VIRES: © fa company commits an actin contravertion of the memorandum of association iti ultra vires end are not bincing‘on the company and the came cannot be rated by the company. However, ifthe company acts in contravention ofthe provisions of its aicles of association, iis nt vires Le, only a procedural ireguiaily and the same can be ratified by the shareholders at a eneral meetin ‘SAn ula vires transaction f oid ebsinito and therfore cannot become ina vrs by resson of fata. However, #0 company has acquired an asset which ie ula vires, the ownership of such a property wil stil vest withthe company because {hat asset though wongly acquired represents the capital ofthe compary. {Ifa director of a company acts which isin contravention of memorandum ~ liabie tothe company and he cen be compelled to refund the'mioney. Inthe cast also be taken for fraud. tira vires act, the director will be personally Uelberate misapplication, criminal action can ‘) Transfer of shares. ¢) Membrsip by Roadescerce 'b) Minors and. capacity to contract. As is of a company, ‘company and the minor have a right to shall keep a register ofits member. A company may after giving not less than 1@ Newspaper circulating in the district in which the registered office of the te ably cause of metianeunrorascbeaion te event of sing wound op. @'n case of Company limited by Shares, the member is liable to pay the full nominal value of the shares and the lebilty ofthe member ends there. However, ifthe member has paid only a part of the amount of the shares then his lability is limited to the ‘unpaid amount on the shares for which he is a member! RIGHTS OF MEMBERS: a) Statutory Rights: These are the rights conferred by the Compenies Act. These rights cannat be taken away or modified by the Memorandum of association or the Articles of association. Some of the statutory rights available to members under the Companies Act are priorty to have new shares offered, in case the company proposes to increase capital; recewve copies of annual accounts of the company, to inspect the register of members, register of debenture holders and copies of annuel returns, ete. 'b) Documentary Rights: association of the company. ©) Proprietary Rights: Such rights include rights to be registered as a member in the company's register of members: no ‘personal Fabily of a company's debis; to receive dividends and to participate in the distribution of assets in case of liquidation of the company. nese rights are conferred upon the members by the memorandum of association and the articles of a7DIRECTORS: A Director may be defined as a person having control and on whose directions or instructions the Board of rectors of a company is accustomed to act. Further, a body corporate, association or frm cannot be appointed director of a company. Only an individual can be 80 appointed, MINIMUM NUMBER OF DIRECTORS: As per Se. 149 of Indian Co Act, 2013 every company must have: 21 minimum number of three crectors in the case of a Public company, two directors in the case of a Private company, and tne director in the case of a One person Company, and b} A maximum of fiteen divectors: Proviced that 2 company may appoint more than fiteen directors ater passing a@Degial Provided further that such class or classes of companies as may be prescripéé, shell Raye al least one woman director, Every company shall have al least one director who has stayed in indiaer a total pahigd of not less than one huridred and cighiy-two days in the previous calendar year. Every listed pubic company ast one-third of the total number of rectors as independent directors and the Central Govemment may prescribe case of any class or classed of public companies, CONSENT TO REGISTRAR OF COMPANIES: +A person cannot act as a director unless he/she. within consent to act as 3 director. This does not apply to the& director reappointed (afte a} oF (immediately on the expiry of his term of ofice); an additional or alternate director o al vavancy reappolited as director. on the expiry of his term of office) and a person nameg’as a di 5 first registprod, MAXIMUM NUMBER OF DIREGTORSHIP: ‘No, person after the commencement of this/A ching any Stemate ddeGtorship, in more than twenty companies at the same time. & In which a person can be . appointed as a director shall not excapd ten. 5 an, by 3 lution, specify any lesser number ‘of companies in which a director of {th company is to be bound by a negotiable instrument, it should show, on the face . acceped or endorsed by the company. This may be done either by ehowing the name ‘the person signing the instrument that he is doing so on behalf of the compa 2) Death of a\Qirector: As the company és an existence separate from that of the shareholders / directors, the death of @ director does hl affect the operations 4h the account. Even if a cheque signed by an authorised director who has died, ie resented after hi ‘eannot return the cheque. 3) A cheque payable to iy should never be deposited in the personal account of directors, as it would amount to ‘conversion under Section 131 of the Negotiable Instruments Act. . | 4) Advances to Companies: 8) The purpose of the advance should be within the scope of the Memorandum of Association of the company. It is not, the ‘advance will not be binding on the company, 'b) The Arlce of Association should specifically empawer the company to borrow. In case it does not, the Avticles will have to bbe suitably amended. This does not apply to trading companies, ©) The Companies Act, provides thal the Board of Directors ofa Public Company or the subsidiary of a Public Company shall ‘ot borrow limits in excess of the paid-up-capital and its free reserves. If the Co desires to borrow in excess, then t should be only ater resolution of the shareholders in a general body meeting, This section does not apply to private companies, ) A banking company cannot grant advances to any of its dicectors of to any company in which any of is dreclore are Interested ag per Section 20 of the Banking Regulation Act «}+ In the case of winding-up of @ company, all he powers of the directors will cease from the commencement of the winding- up except to the extent sanctioned by the liquidators or at the general meeting. The banker should not honour cheque drawn by directors after he has received the notice of resolution for winding-up the company.HINDU UNDIVIDED FAMILY (HUF) Hindu Undivides Farhily (HUE) of Joint Hindu Family is not based on any Act, however, the share in ancestral propery is decided on the basis of Hindu Succession Act, 1966. It is governed by Hindu Customs & Practices. OBJECTIVE FOR FORMING A HUE: HUF can be formed only to cary on the ancestral business, and / or SEetonce of ancestral property. HUF is managed by eldest member of the family known as Karta who is also Common ancastor and all persons lineally descendants are the members. All members male & female other than Karta are called co-parceners. HUF has perpetual succession. It doos notygquire any registration. MANAGEMENT OF THE HUE: The HUF are managedtby the eldes}fembt< called Karta. Other members are co- parceners by bith oF adoption including minor members. Only 4 gee ing Karta are members of HUF. Fifth generation is not member. There are no restrictions on the numb Dane's. One co-parcaner is not an agent of other co-parcener. ‘The Hindu Succession Act was amended w.ef. 9-9-2006, The hight 2) Daughters have been given equal rights in the, Mitalstara Coparce by birth is / becomes a coparcener in her own right female coparcener can also act as Karta. eperty. The Yaughter of a Coparcener eener property. The b) The disability on fervale heirs to ask for patijeh in respect ‘The eldest coparcener including female is thé Karta, The’Karta getg this righty ing Pre senior most member of the family and is not selected by dyer coparcdners. He / Sh én when he / she lives outside India, POWERS OF KARTA: Karla has powers to incur debt, aif of thp family business, and for that, ‘consent of the co-parceners is is ghers are liable to the extent of their share in HUF proper /oarceners, only then they are personally liable. ‘guardian of minor co-parceners if any in Karta expires or is declared personally @ of activity ¥g Trading, then Current account can be opened. The hag to be ot signed by Karta along with major co-parceners. In opGined and on his attaining majority, fresh HUF letter is SB ale dnd Karta will sigy/ However if the natu 06 account opening form CILITY TO HUF: While giving loan to HUF, the bank should the legal necessity of HUF. As such, the loan documents should be got executed ers, and guardians of minor co-parceners so that they become personally liable. When the ‘execujdd by the arta alone and not by the coparceners, HUF property is liable and Karta «in HUF is liable, but coparceners are not personally liable, ‘© [fall major co-parceni (UF is stil alive if any minor member is there. + If Karta stays abroad most of the time, he continues to be Karta and for operating the account he can give mandate to any one, may be the outsider or any member of the family «The Karta can compromise and refer to arbitration. He can give valid discharge of debt and can make part payment. He cannot revive a time-barred debt. : + Acco-parcener cannot countermanté the cheques unless the Karta has delegated the authority to operate the account HUF cannot become the partner in any other partnership firm. Nomination facility is not available in HUF account, (On the death of Kerta, next eldest member will become Karta ‘ Minor co-parcener's signature is to be done by his guardian and upon attaining majority his consent is to be ‘obtained Hence minor's birth date should be recorded Child conceived has the same right which the child born has the right in HUF property. a3 ‘360 91, (1 &P™ Floors), For more on Banking & Finance, EOTOR 47-0, 19 0n to: vrew.corporatotraininginsTRUST ACCOUNTS In india, Trusts are governed by two different legislations: one is Indian Trust Act 1882, which mainly deals with the private trusts. For chartable trust, Public Trust Act has been enacted by different states, Private trusts may bbe oral or written and do not require any registration whereas charitable trust must be in writing and is required to be registered with Charity Commissioner. According 16 the definition contained in Section 3 of Indian Trust Act, a trust is an obligation annexed to the ‘ownership of the property and arising out of confidence reposed in and abgepted by the third person(s) or declared and accepted by him for the benefit of another person(s) or of anotheyfersOn(s) and the owner. PARTIES IN A TRUST: a) Author / Settler / Owner b) Trustee / Trustees ‘A person who reposes or declares the confidence is called the author B¢ the trust. “the person who accepts the confidence is called the trustee and the person for benefit theNgonfidence \g accepted is called the beneficiary. The subject matter of the trust is called th 2 gd also obey the directive of the author of the trust. Directio cified by t the beneficiaries, competent to contract. IF 8 will have to be obtained from the Civil Court / Com It there is only one trustee, he is kng anagigg trustee, Re owner and the managing trustee cannot be the same person. However, if more jan one truStee iNgppointed, sgch trusjee will bp known as co-trustee. If the owner desires, he can act as oy : OPENING OF AGCOUMT: tain the flowing documents: a) Trust deed b). Registration cert ¢) Trustees’ resolutot itis the paramount duty 3 and every clause’ frustees’ resolution so that there must not Re, if the trust deed mentions that there will be four trustees 3s all the ystees are not appointed and resolution to operate the stees is not passbq, bank mUB not open the account. Trustées themselves cannot By are supposed to act strictly as.per the provisions Rt abouf the operation of account, all the trustees will have to Public TAsts are cohgtituted for the benef of either the public at large or for ascertainable dbject. The essence of Public TruSt lies in its Being for Je benefit of the public as a whole or for a section of the public. On the contrary, ily formed {fr the benefit of particular individual or a group of individuals; they mey Trustees cannot borrow untess is specifically mentioned in the trust deed. No public trust has the implied power to borrow. If the borrowings are required for the benefit ofthe trust, then they must be in tune with the trust deed. ‘The power of the trustee/s as such depends solely on the trust deed. ‘TRUSTEE'S DEATH, INSANITY OR INSOLVENCY: If any cheque is issued by the trustee before his death, insanity or insolvency and presented for payment at the bank after his death, insolvency or insanity, it will be paid if otherwise in order, The main principle behind this is that trustee is signing in the representative capacity and jf something happens to the representative, trust is still . ative like principal. z APPOINTMENT OF A NEW TRUSTEI ; ‘Whenever any person, appointed as trustee disciaims, or any trustee, either original or substituted, dies, or is for a Continuous period of six months absent from India or leaves India for the purpose of residing abroad, or is deciared arf insolvent, or desires to be discharged from the trust, or refuses to act or becomes in the opinion of the principal 9 Civil Court of Original Jurisdiction unfit or personally incapable to act in the trust or accepts an inconsistent trust, ‘Bnew {rustee may be appointed in his place by: CEPA 500.5 7 Floors), SECTOR 47-0, CHANDIGARH 160047 Sere, For more on Banking & Finance, Log on’ orporatetraininginsttute.com2) The person nominated for that purpose by the instrument of trust (ifany), or : b) If there is no such person, or no such persori able and willing to act, then the author of the trust, if he is alive ‘and competent to contract, or the surviving or continuing trustee or trustees for the time being, or legal representative of the last surviving and continuing trustes, or (with the consent of the Court) the retiring trustees. If they all rete simultaneously, of (with the lke consent), the last retiring trustee. , fi 74, lays down the princi be observe Court, while appointing such trustees. In appointing new trustees, the Court shall have Feaard: {a) To the wishes of the author of the trust as expressed in or to be int (b) To the wishes of the person (if any) empowered to appoint new tr (6) To the question whether appointment will promote or impede (@) Where there are more beneficiaries than one, to the interests of & i ‘The new trustees so appointed under the above sections get the sambpowers, autkerty and discretion as if they brad been originally nominated as trustees by the author of the trust. BANKS AS TRUSTEES: Banks can perform the role of trustees more ¢f from the instrument of trust; following reasons: <* “Banks are corporate institutions, have cof se withhan indjvual trustee. © Trustees as natural persons may it 3t proplyty and they/ may not follow the right path and act honestly wher pt involved. © This can be a profitable bus) vi ynissioy) for performing the role of 8 trustee. However, before ct iks will hgve to scrutinise the trust deed because as per Section ‘and loss of time involved it Banker, on its appojr tution regarding availabilty of other of the property of the tust. stages in the way of smooth functioning of the trust, it wil be instructibgs contained in the trust deed. The trustee may become sue him ithe Court of law. Under the limitation act, there is no a! and, for public trusts, registration is compulsory. t means} if the trust is oral there is no responsibility, on the part of the bank to ‘account is’ Trust account or not. Bank is not bound by trust, if it is not within its ‘opening form. & by all, untess deed permits less than all or any one of them to operate. + Ifany one trustee dies, the provisions of trust deed will operate. If the sole trustee dies, further ‘operation in the account should be stopped and cheque already signed by him should be paid. *+ Stop payment instructions for cheque can be given by any trustee including those wino is not authorised to operate the trust account. + Cheques in favour of the trust. depasited for credit of an overdrawn personal account of the trustee, are not to be accepted + Allthe trustees must act jointly as they have no powers to delegate their authority among themselves unless the trust deed so provides. + Trustee cannot delegate his powers unless it is provided in trust deed, Trustees have no implied authority to borrow unless so provided in the trust deed, On the death of a trustee, the trust property passes to the next appointed / elected tustee. In case of no such provisions, Cour's/Cherity Commissioner permission is to be obtained. ‘SCO 81, (1 & 2 Floors), BT For more on Banking & FiSOCIETIES (CLUBS, SCHOOL ETC.) Clubs, Schools and other non-trading associations can form the sociely and get themselves registered under Sociely Registration Act, 1860. Banks does not open the account of unregistered societies because office bestore of unregistered socities do not have the representative capacity. Even though, law does not prohibit tne tarne {rom opening the accounts of unregistered societies, due to the practical problems, banks aveid opening those accounts. If the bank opens the account, then all the members of the society will have to operate the Scene jointly For opening the accounts of Societies, following documents are pSquite a) By-laws / constitution of the Society b) Resistration certificate issued by the Registrar of Societies undes ¢) Ofice bester / Governing body resolution for opening the account, No Joan can be granted to the societies because they are non-trad ‘advance only against their own deposits, that too after spect the undertaking from the society that loan is required. A liquidator is a person appointed by the coug’f0 wind up Wig busines3Ns to realise the company's assels and apply funds thus cofected in thé repaym c ance among shareholders, He has powers to borrow oneon the sec mpany's dgsets ath| to dfaw, endorse and accept instruments on behalf of the gafnp’ : 1 quidator free from personal liability. 2 : + Every official liquidator is req : 1 is mentioned in the court ‘order otherwise reasonable org to open the R OPENING OF ACCOUNT: & d with the original, The account Should be titled in the follaéing manner: "AWG, Official Liquidat third parties. When more than one OPERATIONS IN THE’AGCOUNT: liquidator is appointed ccoyrt. They will have to operate the account jointly unless the court , ofS and administrators, the capacity of the liquidator i figueta of credits ang transfer of funds to the personal accounts should be fl These force in various states. They are governed by their respettive ru ; is; these have to be scrutinized to examine if there are any restrictions on bpening of bank , the Cooperative Societies cannot open accounts with the Registrar of Cooperative Societies and the Registrar may also spartment following documents are required to be obtained: '8) Copy of the Bancemed Act /notificatiot whereby the department has been constituled. 'b) The resolution passed by the a it for opening the account and the nature of the’ account to be opened with particular bank. . €) List of office bearers who will operate the account. Before opening the account of a Govt. department, Bank must ensure that their constitution / memorandum of 2ssociation permit them to open the account and resolution in no way is in contravention of memorandum of ‘association. 'No loan can be granted to the Govt. department except against their own deposits pravided the same has been approved vide resolution. Deposits will be accepted by the banks and the maximum term period can be upto 20 years as per IBA code of ethics instead of normal rule of-acgepting of deposits upto 10 years. 3 SORPORATIONS - STATUTORY BODIES - LOCAL AUTHORITIES Corporations, Statutory Bodies like Electricity Board, Local Authority are all created by Acts of Legislature. They can sue and can be sued in their name, Corporations, if they ere trading, business Corporations, are almost tire Rreited companies haviig a Board of Director with detailed powers of management including borrowing powers. In case of statutory bodies and local authorities, they have borrowing powers but there are many checks and ‘counter-checks, which should be examined before considering any proposal for advance to such bodies. In some cases, xpert legal help may be necessary in crating the document $6091, (78 For more on Banking & FiOLD / SICK / INCAPACITATED CUSTOMERS “The cases of sick ld incapecitated aocount elder fal info the folowing categories: 2} An account holder whois oo il to sian a cheque / cannot be physically present in the bank to withdraw money fem his bank account but can put his/her thumb impression on the cheque / withdrawal form, and~ . ‘i 'b) An account holder who is not only unable to be physically present in the bank but is also not-even able to put his/her thumb impression onthe cheque /wtirawal frm due to earain physical defect incapacity. THE BANKS MAY FOLLOW THE PROCEDURE AS UNDER: ; 2) Wherever thumb or foe impression of the sick / old igeapacitated identified by two independent witnesses known to the bank, one of b) Where the customer cannot even put his / her thumb impression znd also woul in the bank, @ mark should be obtained on the cheque / withd? independent witnesses, one of them should be a responsible bank offic In such cases, the customer may be asked to indicate fo the bat witnesses. The person who would be actually draw to the bank. In this context, according to an opinion obtained, ‘opening of a bank account of a person who hag must be physical contact between the persor id be a responsible bank officiel, ot be able to be physically present Yaigh should be identified by two be by means of mark bbeipg put bylan instrument which has had a Driving licence {gubject to the bank's satisfaction) (ui) Letter from a Dutnority or public servant verifying the identily and {o the satisfaction of bank. i (Bank account statement (li) Letter from any recognized Gif Electricity bill (v) Ration card. (i) Letter from employer pect fo satisfaction of the bank) ( any one document which provide mers information to the satisfaction of the bank wil sufice) ifcate of incorporation and Memorandum & Articles of Associaton (i) olution of the Board of Directors to open an account and identiigation of fse who have authority to operate the account (ii) Power of Ailomey gyanted to its managers, officers or employees to transact business on its Behalf (v) Copy of PAN allotment letter (v) Copy of the telephone bil © Names of all partners and their addresses, Telephone numbers. (@) Registration certificate, ifregistered (i) Partnership deed (ii) Power of Attomey granted to @ partner or an ‘employee of the firm to transact business on its behalf (v) Any offically valid document identifying the pertners and the persons holding the Power of Attomey and their addresses (v) Telephone bill in the name of frm / partners. ‘Accounts of Trusts.& Foundations @ Names of trustees, settlers, beneficiariés and signatories @ Names and addresses of the founder, the managers/directors and the beneficiaries, Telephone ) Certifcate of registration, if registered (i) Power of Atiomey granted to {transact business on its behalf (i) Any officially valid document to identify the trustees, settlers, beneficiaries and those holding power of attorney, founders J managers / directors and their addresses {iv) Resolution of the managing body of the foundation/association () Telephone bill [fax numbers ‘scosi, 2 Floors), For more on Banking & Finan; esCUSTOMER IDENTIFICATION REQUIREMENTS - INDICATIVE GUIDELINES ‘TRUST / NOMINEE OR FIDUCIARY ACCOUNTS: ‘There exists the possibilty that trust / nominee or fiduciary accounts can be used to circumvent the customer identification procedures. “Banks should determine whether the customer is acting on behalf of another person as trusteeinominee or any other intermediary. Ifs0, banks may insist on receipt of satisfactory evidence of the identily Of the intermediaries and of the persons on whose behalf they are acting, as.also obtain details of the nature of the trust or other arrangements in place. While opening an account for a trust, banks should take reasonable precautions to verify the identity of the trustees and the settlors of trust (jrsluding any person’ setting assets into the trust), grantors, protectors, beneficiaries and signatories, ACCOUNTS OF COMPANIES AND FIRMS: ‘ Banks need to be vigilant against business entities being used by Individuals aq with banks. Banks should examine the control structure of the entity, d&termine the ‘natural persons who have a controlling interest and who comprise the moderated according to the risk perception e.g, in the all the shareholders. ‘front’ for maintaining agcounts urce of funds and identify the ‘hese requirements may be Ruy it will mdk\be necessary to Identity sds held ‘on deposit’ 9 co-mingled at the bank and identified. Where such funds Where the banks rely on themselves that the inte the KYC requirements. mediary, they should satisfy pé ‘customer lue diligencd\(CDD) dome“ ‘I ystems in piace to comply with Gary is reguiat ‘ents, senior politcians, senior government/judicialimiitary {porations, Nqiportant political party officials, etc.” Banks should gather ef this cateduy intending to establish a relationship and check all the domain. B&gks should verify the identity of the person and seek informtion abo ating the-PEP as a customer. The decision to open an account for PEP should 6e taken at a senior level, which should bp’Clearly spelt out in Customer Acceptance Policy (CAP). to visit}he bank branch. In the case of non-face-to-face customers, apart from cation procedures, there must be specific and adequate procedures to mitigate ertii¢ation of sil the documents presented may be insisted upon and, if necessary, additional dotyments may be called fordn such cases, banks may also require the first payment to be, effected ier bank, which in turn, adheres to similar KYC standards, orrespondent banking is the provision. of banking services by one bank (the “correspondent bank’) to another bank (the “respondent bank”). These services may inchide cash/funds international wire transfers, drawing arrangements for demand drafts and rfail transfers, payablo- through-accounts, cheques clearing, etc. Banks should gather sufficient information to understand fully the nature of the business of the correspondentfrespondent bank. Information on the other bank’s management, major business activities, purpose of opening the account, identily of any third party entities that will use the Correspondent banking services, and regulatory / supervisory framework in the correspondents / respondent's country may be of special relevance. ae : \ SHELL BANK: Banks should refuse to enter into a correspondent relalionship with a “shell bank" (Le. a bank which is incorporated in a country where it has no physical presence and is unaffiliated to any regulated financial group). Shell banks are not permitted to operate in India. Banks should also guard against establishing relationships with respondent foreign. financial institutions that permit their accounts to be used by shell banks. Bariks should be"extremely cautious while continuing relationships with respondent banks located in countries with oor KYC standards and countries identified as ‘non-cooperative’ in the fight against money laundering and terrorist financing. ‘$6094, (1* & 2” Floors), SECTOR 47-D, CHANDIGARH-160047 For more on Banking & Finance, Log on to: www.corporatetrainingicuaprer- 9 JOINT ACCOUNTS: a = Up the case of joint accounts (Current, Savings or Term Deposits) in the names of two or mote persons, if the terms A2,n0t Provide for payment of the amount due in the account to the Survivor(s) then in the event of death of ove cf Fremetot the banks to obtain a valid discharge, payment should be magé aly to Survivoris) and the legel hers of= the deceased joint account holder. sree In such a case, in view of the difficully in ascertaining with Sertaint 's the practice among the banks to insist on the production of legal before setting the claim. “As obtaining a legal representation woult encourage the opening of joint accounts on terms such as, vor, (b) Former/Latter or Survivor, c) Anyone or Survivors, or Survivor, ete. BENEFITS OF SURVIVORSHIP: {f the beneft of survivorship is provided, the to the survivor will confer a valid discharge Q only as trustee {or the legal heirs (who may include the surv é balance in the “aceount or the sole legal heir of the de is onk\ Wf a mere right to collect the money from the bank. If int in the bank, they Should be advised that in terms ofthe cont accoun}, the surlivor is the person entilied to payment by the bank and that, ined by aihgrder of a competent court, the bank would be ‘within its rights to make the din the adsguft. The pobition, briefy, is that a payment to survivor cari be made i i Payments, RBI GUIDELINES: aa 7) Fitter of Survivor — Payment On Maturity: If fixed / term deposit accounts are opened with operating instuctions ‘Ether or Survivor, the signatures of both the depositors need not be obtained for payment oF he ‘amount of the deposits on maturity. ) Etther or Survivor — Payment before Maturity: The signatures of both the depositors may have to be obtained, in case the deposit is 10 be paid before maturly. If the operating instruction is ‘Either or SUIVWOr and one of are Ckrositors expires before the maturity, no pre-payment of the fixed / term deposit may be allowed without the Payment nears dhe legal heirs of the deceased join holder. This, however, would not stand inthe way of making payment tothe survivor on maturity 4), Rosmer or Survivor: In case the mandate is ‘Former or Sunivor, the ‘Former’ alone can operate / withdraw “the matured amount ofthe fixed / term deposit, when both the depositors are alive. However. the signature of hay® Sarorehasitors may have to be oblained, in case the deposit isto be paid before maturity. If the former sence eresete maturty of the fixed/term deposit, the ‘Survivor can withdraw the deposit on maturiy, Precio: ierawal would however. require the consent of both the parties, when both of them ate alive, ard that ef wre surviving depositor and the legal heirs pf the deceased in case of death of one depositor a) Pret withrawals_of Ten Deposits: Ifthe joint depositors prefer to allow premature withdrawals of fixed/term deposits also fance with the mandate of ‘Either or Survivor’ or ‘Former of Survivor, as the case fora pt pvould be open to banks to do so, provided they have taken a specific joint mandate from the denesinns for said purpose. SPECIAL CLAUSE IN THE APPLICATION / ACCOUNT OPENING FORM FOR TERM DEPOSIT RECEIPT: septa sct banks may consider incorporating a clause to the folowing effect in the account opening form / pplication form establishing the contract of term deposit ‘ “The Bank may, on receipt of written application from Shit the former / the latter / the first name Fecngcond name etc. of us of Either or Survivor of us, Any one oF Survivors of Survivor of us. mie sos, discretion and subject to such terms and conditions as the Bank may stipulate, CLD RY 50057, roars, sec ton arb, GHANDIGATI ns For more on Banking & Finance, Log on to: wiww.corporatetraininginstitute.com Gs to who the legal heirs’of the deceased are, it presentatidn (to the estate of the deceased)OPERATING INSTRUCTIONS IN JOINT ACCOUNTS OPERATING INSTRUCTIONS IN JOINT ACCOUNTS EITHER OR SURVIVOR Both have to sign FORMER OR SURVIVOR PARTICULARS: JOINT ACCOUNT (Two oR MoRE) Both /All have to sign ‘OPENING OF ACCOUNT, STOP PAYMENT [Either can stop the | Former only panNq ‘Any one can stpp the OF CHEQUE payment payment payment PREMATURE The signatures of bah the | In case tw Meda fe Fer ‘Both (All have fo discharge PAYMENT OF Sa | the FOR for premature FIXED DEPOSIT, RECEIPT (FDR) Both have to sign be paid efore matty If the operating instruction is ‘ther or Sunivor and one of the] However, the sighauye of BO the doposiers expires belore the | deposits may have Ue obit matury, no prepayment ofthe | in case the depost is BXb fred / tem deposit may be | def aloned witout the concurrence ZA Sessa 7 CLOSING OF Eithpr\ can closS\ the | Only ‘fo y Both 7 Al have to "sign to | fase” \ [Seen NG [2 Boe conaheseat CHAN Both have Ng joN Both have to sign for'change | Both All have to sign Tor aNZELLATION OF | change in nomi ‘omination hangs in nomination pHINATION j [ATTACHMEN Either or survivors Sint | Forplv or sunivor la jor | In cave of ont account each ‘ORDER account. As such each ef} apéount. As such each of | of them are equally lable. them is aqyally liable mn is equally liable Savor ob Suniver can claim the | Surviving person and Tegal payment after the death of | heirs of deceased. former. e FER | Syivo ‘Survivor can claim the | Legal_hare along with | Rg - ‘amount surviving account holder can claim the balance, ‘survivor PAYMENT | ent will be made to | Payment will be made to the | Payment wil be made fo the survivor. Only on the death of both, payment will be made to the nominee survivors or alongwith tegal heirs. of deceased account holder (8). 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, ‘CASE OF DEATH OF ONE AIC. HOLDER WHERE NOMINATION HAS. BEEN MADE. the-strvivor. Only on the death of both, payment will be made to the nominee Forder is in the joint names, = amount will be. applicable. if it is in the formers name, again, full ‘amount will be applicable, However if it is in the name of survivor no amount is applicable. GARNISHEE ORDER Wf order Is in the, joint names it will " be applicable to Either or ‘Survivor account and also in the Individual accounts i" & 2 Floors), SECTOR 4 For more on Banking & Finance, Log oCHAPTER -9 BANKER'S RIGHTS BANKER'S LIEN, SET- OFF, RIGHT OF APPROPRIATION DEFINITION: ; Lien has been defined as the right of the creditor to retain the possession of the goods and securities which are owned by the debtor unti the debts have been paid. ESSENTIALS: 2 fa) Right of the Lien gives the ereditor the right to retain but Mbt to sell b) Lien is available on goods and securities (shares, debentures, bo ge, cheques, promissory notes etc). No Lien is created on bank deposits. . ¢) Right of lien is lost when the possession is lost. 4) Right of lien is available on goods and securities in the nom ors Ind not in jointygmes with others. TTYPES OF LIEN: PARTICULAR LIEN: Particular lien gives the creditor the right to reta 3m the-debtor. For example: A watch repaid GENERAL LIEN: (Section 171 of indian ‘Under this, the crecitor has the right to, 3 paid. TH right is available to certain specified creditors such as bapKers, fa en is available to Re banker in case oMhose securities, which have come iat security obtained in one account can be utilized by tH © Implied Pledge: Bam tation. This means that banker has a right of lier against i 4 Lion into Particular Nen: When Pe security is Kept fora specific purpose and purpose is eo oe Cola obtained fr Issue guaydtce, banks general len wil be converted into parteular Fries fer realeaton expo he claim peapd under the guarentee, General en vill again be restored. sas and\securties in the frame of Guarantor: Bank can exercise lien on goods and Secures of guarantors, Becurties} Bank has a right of Set-off over the deposits of the debtor, S NOT AVAILABLE: other than hp: General Lien is ret svaleble on goods and secur handed over othe bank in the relationship_of trustet - beneficiary, agent - principal, baile ~ ballor, or where securities, documents or ‘valuables have been left in banks possession by.mistake or negligence of the customer. + Goods / Securities in Joint Names: General Lien is not available against goods / securities held by the creditor ‘which are in the joint names i.e. loan granted to one person but the property is owned by more than one person. + Contract which is contrary: General lien is not available if there is a contract expressed or implied of not exercising such len. : NEGATIVE LIEN: Negative len is an undertaking given by the borrower tothe bank that securities ‘olered forthe loan / iit are free from seats Je or encumbrance ana during the currency ofthe loan / limit, he wil not create any chaige or encumbrance or 20 fhe Secures without prior permission of the cfeitr. Ths lenis usualy taken from the borrower to create moral pressure as wel as creation of lagal right in favour of bank ae ecudes the ngnt of SeLoff and approptation because no separate definition of the Set-otf and appropriation Is elven Peirce he Silerence between len, Set-ff and appropriation i tha, en is avaiable against movable goods and ight ot Setaff and appropriation is available in case of deposit, SCO 91, (1 SP" Floors), SECTOR 4 oF For more on Banking & Finance, Log on institute.com* ‘RIGHT OF SET- OFF MEANING: Right of setoff is not defined in any law. However, it means right to adjust any credit balance in one account of the customer with debit balance in another. The right to combine accounts in order to arrive at the net sum due from the customer ie. final settlement of ability is called right of set-off STATUTORY RIGHT: The right of-set-off is a statutory right and is available to any creditopeven if there is no express agreement. However, itis not avaliable if there is agreement, express or implied, fornobexercising the right of set-of, SITUATION WHERE RIGHT OF SET-OFF IS AVAILABLE: 4) Relationship: + Debior & Creditor - Deposit * Creditor & Debtor - Loan € 2) Due and lawful debts: The right'tan be exercised inTespect «and not Paespect of contingent or future debt 3) Limitation: Not barred by the law of limitation, 4) Reasonable Notice: Prior notice has been, 5) Capacity: Same name, same capacity. / 6) Guarantor: Right of set-off is available &gainst quarchhtor's depost co-extensive with borrower. HoweverNfrst tug have to désgand the di gle perso: city with oth [singiename 7S same nis ~” ee Section 59, 60 and 613 CFtract Act, 1872, deal with the Appropriation of payments. When the debtor has Several debs with a creditor, the rules of appropriation of payment specify how the creditor must appropriate the payment for adjustment of different debts of the debtor. SECTION 59: EXPRESSLY MENTIONED BY DEBTOR: When a borrower is having different accounts with the bank and while depositing amount, he has exercised his choice as to which particular account this money is to be credited, the bank has no right to alter that choice. Borrower may deposit the money in that particular account ‘which is already in order instead of account which is overdrawn, ‘SECTION 60: OMISSION BY DEBTOR TO INTIMATE: The situation in which debtor has not specifically exercised his choice or indicated his intention regarding credit of the amount in a particular account, the banker has’the right to credit that amount in any account of the customer, even in that account which has become time barred due to law of imitation, SECTION 61: NO INDICATION FROM DEBTOR NOR CREDITOR APPROPRIATES: Where debtor does not inmate and creditor has also not made any apcfopration, the payment shall be applied in discharge of debts in chronolagical order (in order of time’. "SCO ST, (1 8 7" Floors), SECTOR 47-D, CHANDIGARH-160047 3B For mo‘d on Banking & Finance, Log on to: wws.corporatetraininginstitute.comRULE IN CLAYTON'S CASE This rule was lad down in Devaynes vs. Noble, (1816). To adjust the debit Delance with tie credit balance in the Giger gi time is, chronological order, This means that the first item on debit sige wil be discharged or reduced bo the subsequent item on the credit side. In case of debt due with interest, any payment made by debtor in the fre. instance, is to be applied towards satisfaction of interest and, thereaiter, toward the principal: uniese there ie ae agreement to contrary, 7 avoid application of Clayton Rule, banks crysiize the liability by serving the notice. The account is ruled-off and 2o further debits are permitted. Thereafter, the bank has to take the erediNecision of whether to continue with wre Credit facilty or to recall the credit facility. APPLIGABILIT a) Cash Credit and Overdraft: In all such accounts where thdgustomer frequently from the account b) Single Borrower / Joint Borrower: Applicable in cas aril of the borrower or joint borrower. ©) Partnership: Death, insolvency, insanity, retire 4) Guarantor: Insolvency of guarantor or revo RIGHT OF posits and withdraws money ‘SHO [PARTICULARS ZRIGHR OF SET-0) TION 7 | CEGAL STATUTE Tire esentae messties [sacar ons 05031961 7 | ERNE Fhe Bank ye of cote Tent hed fein amount deposed bye c0ais ol sanyaconer castomer ifs cutting tan CCiCarer(CD) acount rhe te of etof has ben ened, 3 | APPUERBLE Ow Reountatain ‘Aoypt tc 4 | APPLIED TO ‘Accoyet in thes jame with same rights, ‘Apt te loan account Of same borne | 5” | MORE Tian OWE \ [er Seren wi WRG To aapine aoc Appice Ta SoG PS GATOS ABS ACCOUNT OF SAME \. separate, Deg bank cant echise tis ot borrower or inped itetons fo whch account the Pa amourtis tobe creed. 7 [pote PROPRIETOR een gm Rees | arene same Account “Trasng Alcan be s 77 pase: S| Pees ajo and seSwaly Ladin ves he | Cayioas Res apple PERSOYAL DEPOST) | implod uty he tank theloan amount pares persona pours. : 7 aonrbeRosir rk cat ehycise ts shone jn cepoal | Apa on to Cel Greta CE anon ‘account si hebsrowe iene fem, a | erusr acco Tol pts Topi To] FOCURE CONTITBERT —| til Acpeatio|] ——> Tol ppkeaie oa nT | F ca 7 [ QUANTSOF AMOUNT | amount ahaps De spooTe Taco sabe spa 12| PaNciPaDAROUNT a | Apples | Fst est at fer pia smal ma INTEREST Ind v Orissa Ste Faancal Cap Osa 101 BY Bans Tithe dearebon oe bank Bonk’ dscrelon ony ifthe Eerower hos nek DISCRETIONARY Specie to wich account th amount shoul be rigits credied “4 | REQUIREMENT OF | Raqured exepin case of death, TachneyarTeODpT | Nat APES LESAL NOTICE of agamibnes oer 75] ASSIGNMENT OF Bank camo! excess igh hasbeen fomegot | Bank cane erode Bs AT CREDITBALANCE TO | such asgnnent by borewor, ANOTHER BANK. 7 PAGANS a Towed Tat Appice MoRTGAce [uration ToLiaion stints “8 | GARNISHEE ORDER | Gon stud eradae ie ight ahusghs om] Tote ctayed * debts before complying with the gamishee order. 49 | DEATH OF THE ‘Bank has automatic and'impied right. ‘Applicable CUSTOMER, ‘SCO 31, (1* 8.2" Floors), SECTOR 47-D, GHANDIGARH-160047 For more on Banking & Finance, Log on to: www.corporatetraininginstitute.com< CHAPTER-10 The Gamishee Order is issued under See. 60, Ordér XXI cule 46A-46E of Code of Civil Procedure 41808, This part of CPC deals withthe execution of decrees and ofde Jeagemront doce a fasued, BY the court on the application made by the judgement creditor in @ situation where the egemient cebios refuses to pay debt payable to him. The gemishee order ig ested onthe barker maftaining sexsent the judgement debtor. HERE ARE THREE PARTIES: 9) Judgement Debtor: Customer maintaining account wih the basKgnd who rokiges to pay the debt payable to the judgement creditor. 4) Judgement Creditor: At whose instance the order is issued. ©). Garnishee: A person / institutions / department who is ho On receipt of the Garnishee Order the judgement debtor and the banker cannot make any payment thereafter. 77 GARNISHEE ORDER IS ISSUED IN TWO PARTS: Ged upto the order amount led gamis’ a) Order Nisi 'b) Order Absolute : 7 isi: Its preliminary order wherein the n $ the explanation ‘rom the gamishee as to why the funds feed for meeting the judgement creditor's claim, Order Absolute: When on the basié the entire credit balance or a po APPLICABILITY: 8) On accounts in same (Ger and same capach + Order issued in a singe name wil ‘ ¥roprietorship concem and vice versa as both . vidual account of the partners but reverse is not possible, gid several lability concept, recovery can be made from the . ‘even though signatory in all the accounts is the same >) o posits and accruing due Le, time deposits. . 4 of collection item received subsequently. Itis also ineffective when the account e) Order is ‘balance a/the time when order is served to the banker and not onthe subsequent credits / amount debgeits, after the order is receivgd. 7 ) Gamishee oF factual debts and not contingent debts, ‘he actual cash payment even though the cheque has been passed for payment and token issued, the banke? Cp the payment of the said chaque as the Garnishee Order is applicable. ‘hy Gamishee Order is not applicable to money held abroad, |) Gamishee order is not applicable on the items in safe custody or in safe deposit lockers. 4) The trust account cannot be attached even wien a trustee is personally a judgement debtor. 1) Secures lodges with the Bank for meeting specific aby ofthe bank are not attached by the gamishoe, 1 Pies, cer fs apmlcable on the accounts of the deceased because it pertain to the previous Faby akesdy determined by the court but is not applicable on the account of the insolvent person, 'm) Gamishee order is not applicable to unutilised portion of credit limit or draving power. 9) Sate of Seto and eporopration is superior and as such Bank can exarcice the right of set-off and appropriation before meeting any liabilly under the gamishee order. 2) er @,nol applicable on Fixed Deposit hel es callteral secitiy, but ifthe FDR is held as primary secuty, garnishee ‘order is applicable on unullised portion of FOR. )_ Order is not applicable in Minor account. ine event of non-compliance of gamnishee order, the coun may issue the order to the bank (garnishee) which will be equivalent to the decree passed by the court against the bank Gua ‘SCO 81, (1 & 2" Floors), SECTOR 47-D, CHANDIGARH-T60047 Fees erereee rere reer For more on Ganking & Finance, Log on to: ww.corporatette@TTACHMENT ORDER Attachment Order refers to orders issued by Statutory authorities for recovery of Govt. dues. Section 226 (3) of.Income Tax Act, has delegated powers to Assessing Officer or Tax Recovery Oificer to require any person from whom money 1 due or may become due to assessee to pay to the income tax authority that much money which is sufficient to meet the liability under the Income Tax Act This section is also applicable to any Banking Company having any type of deposit in the name bf the assessee may be due oF accruing due. Normally we are fanliar with the atlachment orders Issued by income tax authorities only. But similar powers are available to others authorities in the different stalutasquch as Custom Authorities, Enforcement Directorate, authorities under Sales Tax, Excise and Money Laundering ‘authorities under any of the above mentioned Acts, recovery will be get recovered. If the bank does not comply with the attachment orders. Dagk will be Pagted as assessee in default which ‘means as if the bank was to make the payment and recovery will be mad the provisions of Income Tax Act 1961 RECEIPT OF ATTACHMENT ORDER: ‘As soon as the attachment order is received by the b comply with the same. If no amount is mentioned, operations in all the depo’ However, if the order comes for particular accguht of for a particular amo particular account and that particular amount on} Before remitting the money to attachment authe a) SAME ORDER AND GAPAGITY: Name a aceGunt ofthe customer int accpunt, it wit bbe applicable to the individual acoc \n the indifidual account it wil be presumed that in the joint account each at re in equal Proportion) and that puch amount will be applicable to the attachment oder pf no/Affect on the altachment order. Suppose the order has come in the fompér or e of survivdr, Which as fer bankiag practice Indicates that g former. But incase of attachment orders this presumption count and share of bath the parties wie treated equal and that much money altachment authorities. Similg7f, funds in the partnership fimn’s account gg fhe attaéhment order in the account, bank has F by exercising right of set-off and appropriation. Right of set-off the bank, which means if its a running account wth debit mer will be stopped. order wall Bs ») ° riG, this Rs 1 lac represents uncleared balance and hence on this e appicable. However, attachment order will be applicable on Rs, 2 lac only. I BALANGES: Witachmel order is applicable on the cubsequent balances also which means amounts ied by the cuftomer afler the receipt of order til the time lability under the attachment order is not . iment Kabilly and in case of government iabilly, limitation period is 20 years and bank vil apf of this ofder upto 20 years unless letter of satisfaction is not received from concemed a) ACCOUNTS: Attachment order is also applicable on the credit balances in the CC b the customer and not to the bank. The analysis of income tax rules indicates that Grcising the right of set-off and appropriation and there after money ying in the hands ‘of bank pertaining to the custemer will be remitted to setle the Fabilty under the attachment order. f) UNUTILISED LIMITS: Atachment order is not applicable on the unutlised limits in the accounts because that money docs ‘not belongs to the customer. The same is given to the customer es a loan for a particular purpose and not to meet the other liabitties. However, this order is applicable on the unuiilsed portion of the FDR. This situation arises where customer has taken a loan against his own FDR after keeping the same wih the bank as a primary security. 9) DEPOSITS AS COLLATERAL SECURITY: If the FDR has been kept as a collateral securly to secure the LC fimit or guarantee limi, the order will not be applicable because if bank wil part with this money, in case of invocation of labiity, bank will not be able to recover the paid amount and banks foan will become unsecured, However, ifthe total amount of the FOR exceeds the amount of lability, bank will keep the lability amount as a security and the remaining amount will be ‘emitted. Attachment authorities will be advised appropriately that the bank is having the deposit account in the name of the “| customer buts unable to remit as the bank is having a charge on the same and that the labilly can accrue ata later dato, h) BANK'S POWER TO HONOUR CUSTOMERS CHEQUE: Bank is not required to pay any cheque, in any one’s favour, issued by the customer whose account is attached, upto the order amount and bank will not be held liable for the same, ‘Customer cannot challenge the bank under Sec 31 of Negotiable Instruments Act, which clearly states that bank is bound to honour the customer's cheque so long the sufficient balance is there. Once the order is recelved, bank's iablity to honour the customer cheques is fully extinguished up to the order amount. ‘$6091, (7 & 2" Floors) FR 47-D, CHANDIGARIT-160047_ For more on Banking & Finance, Log on to: www-corporatetraininginet e) eTi) RECEIPT OF RDER AND ATTACHMENT ORDER IMULTANEOUSL) Wt'the Gamishee order and allachment orders are received simultaneously, tie priory will be given to the’affachment order because tha Game pertains to the statutory / government Habilly whereas in case of gamishee order lablily is of private nature. This prioty wil remain Upto the tine bank has not informed the court about the position of the account after receipt of gamishee ‘der. Once the matter is reported to the court, if the lability is not seed, i will amount to contempt of court. Bank will advise the ‘attachment authorities that they’are having the account but are unable to send the amount due fo receipt of gamishee ‘order. Copy of gamishee order along with the bank's report to the court will be submitted to the atlachment authorties. fin the meanwhile, atachntent authorites obtain the stay order, garnishee provisions will be stayed otherwise absolute order from the court wili come and bank after remitting the money to the cour }) INSOLVENT / DECEASED AIG: Altachment order's applicable in the d twill be discharged from the liability eccouns but notin the insolvent account, TEGAL PROVISION GARNISHEE ORDER & ATTACHMENT ORDER PARTICULARS ‘GARNISHEE ORDER \ATTAGHITENT ORDER CONCEPT ‘anaes Orders sued by We cout en te appleaion Y Atachent ONS ar esd by the Assessing ORS made bythe judgement cedar in a siuaion where the | BxTax Recovery Bier onthe Bank having ay type of Judgement debtor retuses to ay o i inthe name he assess fom wom money ‘The gash ace issued oe barker main. _zzount of ta judgemen dap ISSUING AUTHORITY ‘Compatent Cour atthe STAGESTSTEPS Alva the Apsouie frm NATURE OF LIABILITY Pav | Siptutory fbi TWATURE OF RECOVERY Renter of pve ite | Aecovero ales of ncone Tax Gow es DEPOSITOR estoy” ee BANK. udgemen! dos" BGeor es ‘AMOUNT a be mentioned sii rented peat ‘APPLICABLE TO WHICH Ga i a sa we IRE ai arnt Des GO eT ‘auount = tis not remvered NATURE OF ACTION anal Deshange ef Govenmaat ii LIMITATION 2 years ~[atyeas DEPOSITS, Demand depose ae Dae depos Demand depoat and Ge GWT OF SErOFF AD valle for cen and gos ‘vali resaranato and de Gas Tet apa Equal share depending upon We haber of ecco hebirs upio the order amount Applicable upto the order amount ORDER THE raat | nis in the name offi, To sell | Nol applicable for accounts in the name of frm. To PARTNER, TRUSTEE, OFFICIAL periners, firm account cannot be | seltle the ality of the panes, fm account cannot be ASSIGNEE ae ‘Incase of other aocouns, itis not applicable as } debited. In case of ether aocouns, tis nt applicable as RECENER, ADI valve capac. they arein te representaive capacity. ‘DECEASED Boor ‘the Tabity fas been predelernined by the | Appleable as the Fabliy has been pre-delemined by the ‘execution proceesng cannot be stopped after the | stuory auinonly and recovery cannol be stopped after deat —| te deat TASOLVENT ol appeals, as ater isalvenoy, Be recovery & to be | Nol appicabe. Afr insolvency, the Tedovey to be dane ee bye ol Assigned | Reivers e pretreat | by he Oficial Assignee Receverin epee cer 'UNDRAVIN CC OR OD LimiT | Nol applicable, asthe amount has been sancioned fo do | Not applicable. The amounl has been sancioned fo do {he productive actly and nto sell the private Faby. | the productive acivty and not to sete any statulory fbi UNUTILISED PORTION OF Limit | Balance Amount of FOR ‘Balance Amounl of FOR AGAINST FOR FDR AS COLLATERAL ‘Not appleable Nol applicable ‘BANK'S LIABILITY TO HONOUR” | Over and sbove the order arount ‘Over and above the oder amount "THE CUSTOMER'S CHEQUES PREFERENCE ‘tachment order, being the Wabi To govt, wil have the | Allachment order, being the tail fo Gov, wil have pretence ove Gamishee Order it both rocened simultaneous he preference over Gamistee Order i bolh axe recoved sirulzneous SCO 64, 1" & 2" Floors), SECTOR 47-0, GHANDIGARH-160047 For more on Banking & Finance, Log on to: www corporatetraininginstitute.com eCHAPTER -41 CHARGES ON SECURITIES (CHARGE DEFINED (SEC 100) Jn simple words, charging of security means attaching or annexing Bank's rights on the security so that in case of default, bank can recover the money out of the proceeds of sale of security through process of law. In case of any type of charge, irrespective of possession, the ownership of the property always remains with the borrower. However, in cas of loan against deposits, the ownership is transferred in favour of the bank because as per the agreed terms of the contract, benk is not required to return the identical currency deposited by the borrower bu} of charges, bank is bound to return the same security as deposited by thp ‘TYPES OF SECURITIES CONSIDERED FOR CREATING THE CHARGE: : Immovable. as well as moveable, both types of securities can be consNgred for erSding @ charge. Bank deposits, Life Insurance policies, Book debls, Stocks and Shares etc, are also valid sechyjies on whibd§ charge is created by the bank for giving diferent type of credit facilities. NATURE OF CHARGE: a) Fixed charge and Floating charge EIXED CHARGE & FLOATING CHARGE: Al types of charges created by the bank are of, . ‘case of hypothecation, charge to the bank corf . terial be semi-fifished goods and “to finished products and so on. However, gfropriation, pledge, equivalent amount. In case of other types PARI- PASSU CHARGE: It means the charge which ranks“equally ampr@ the Sige Jf side. Wen a single asset is offered as security to more than one cregifor, the char is called paf-passu chafge. Each creditor has the charge ‘over the secures in propopvén to the amouhkof loan. Such type charge is created, consortium / syndicate landing TYPES OF CHARGE XAMPLE OF SECURITY PLEDGE joveable ass ‘Stosks, Gold, Jewellery. HYPOTHECATION joveable_a5 locks, Motor Vehicles, Standing crops. MORTGAGE Immovable securitied, , Building, Machinery embedded to the earth. ‘except actionable claims ‘Securities which Nee ‘Goods and securi ion ( already -‘n\ possessi and money. the grediton\ ‘ActiSnable clyims LIC Policies, Book Debts, FDR PLEDGE ECTION 172 OF CONTI CT): ment of debt or for performance of a promise. Ballment is delivery of goods ct that they shall, when the purpose is accomplished, be retumed or otherwise disposed-off according to fons of the person delivering them. The person delivering the goods is called the ballor and person receiving the goods is called the bailee. As the pledge is also bailment, therefore there must be delivery of goods but the parties are known as pledger instead bailor and pledgee instead of baile. In case of pladge, purpose of Gelivery of goods is also specific that is to secure the loan. Whereas in the baiimant one can deliver the goods to anather for any purpose. For creating the pledge, physical delivery 1s not must - it may be symbolic or constructive also. Symbolic ‘and constructive delivery takes place through documients of ttle to goods. DUTY OF BANK IN PLEDGE: Under the contract of pledge, main duty of the bank is defined! in Section 181 of the Contract Act. This section states that, bank as beilee or pledgee is bound to take as much care of goods balled to him as ‘a man of ordinary prudence would take under similar circumstances, of his own goods of the same bulk, quantity and value. Any care less than that will make the bank negligent and bank will be liable for any loss to the borrower. This right ‘of the borrower cannot be contracted out by the bank. ‘ RIGHT OF THE BANK IN PLEDGE: As per Sec 176 of Contract Act, if the borrower makes a default, bank can sell the goods after giving the reasonable notice to the borrower without going to the court of law. As such, pledged goods can be Sold by the bank any time after default and no limitation period fs applicable in case of pledge. The relevance of limitation period arises only when the right is to be availed through court of aw. |HYPOTHECATION (SECTION 2 (N), OF SECURT ICAL AS: 1D ENFORCEMENT OF 3 INTEREST ACT, + Hypothecation means a charge in or upon any movable property, existing or future, crested by a borrower in favour of @ secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes floating charge and crystallization of such charge fixed charge on movable property. When the bank grants the loan against hypathecation of stocks, equitable charge is created in favour of the bank. Hypothecation agreement contains a clause that ifthe borr take the possession of goods, then the charge will be converted i become the fixed charge. lates the terms of agreement bank can and accordingly floating charge will —— PARTICULARS. HYPOTHECATION \gLeDGE 7 | Legal Provision | Section 2 (a) of Securlisaion & PeConetrucion Financial Assets & Enforcement, Securiy Interest ‘Act 2002 7 | Definition "A charge tor upon any apteble G in favouy6! @ secur e movable 2 secunty Bk fnancial charg and ‘ed oh 3 | Parties 7 [Nature of Securities. Nature of Charge. «ogi Fred : ‘With the borower Private Sale ale giving reasonable natce (See 17 Contract : a With Bank Leet Ta STC rea 40 | imitation period [3 years ‘No Limitation Period 41.| General in’ Nota Avalatle 12] Dayree of care Borrower tke caret the Hypathecaied goods The bank is bound to take as much care ofthe goods bated to the bank as a man of ordinay prudence would, under similar circumstances, toke of his own goods of the same bulk, quantity and value as the goods baled. MORTGAGE (SEC 58 TO 78 OF TRANSFER OF PROPERTY ACT) When the owner of a property transfers his interests in favour of the creditor to cover some debt, such type of charge is called as Mortgage. Under the Mortgage, existing or future debts both can be covered. : FEATURES OF MORTGAG! ‘The salient features of a mortgage are as under; + The owner transfers its interests in the assets, but not the ownership. Thus, the original tile of the property remains in the name of the debtor. + Itcan be only for covering a debt, or some pecuniary liability, and not for other purposes. * Itis only on immovable properties. Moveable assets cannot be mortgaged PARTIES TO THE MORTGAGE: © There are two parties to the mortgage. © Mortgagor: The owner or the person who transfers the rights is called mortgagor. + Mortgagee: The person in whose favour the rights are transferred is called a Morigagee. ‘SCO 1, (7 & 2" Floors), SECTOR 47 For more on Banking & Finance, Log on t ‘GHANDIGARH-160047 3: www corporatetraininginstitute.comDIFFERENT TYPES OF MORTGAGES (Sec 58 of TPA) MORTGAGE MORTGAGE — MORTGAGE MORTGAGE ela falluoreanial ag emer ae aa Th ome eae ahr a S 4 | MeTHODOF | By Deposit of | By ihieg a iting of writing of werico or [ey pane rie, ey = eevee i si] sunecsa 7 ecinaan a it ol ova Sarkg nw Seema | 2 ese ones ea Neem som id 71 womakoor om Lays?" R | eosceres [Saree fy nor“ Oo tr jl Yequired Required Required Required Nek Traneterrea lt transfered but | Transferred wi | Mortgego?” binds agor ostensibly | repayment of debt | himself” to repay 5 the mortgaged: morgage money & foperty and in the transfers mortgaged event of default the + | property abecutely sale becomes ‘subject toa absolute proviso that the + | propery “wil be : fetransfered on repayment forgeaor wth With Mortgagor | With Morigagee | With Morigagor Mortgagor 11 [RIGHT OF PNoRight | NoRight | Mortgages can | Novight No Right FORECLOSURE sue on default 42 [RIGHT OF | Ves, available to | Yes, avaliable | Yes, available to | Yes, available to| Yes, bul nol REDEMPTION _| morigagor tomorgagor | morigagor mortgagor ownership 13 | LEGAL NOTICE | Required Required _| Required Required Required 14 [ummration | tayears 12 years ‘ayers Ta years ‘2 years RIGHTS AND LIAB: iE MORTGAGOR: ‘Transfer of Property Act 1882 provides the following rights and liabilties of the mortgagor. RIGHT TO REDEEM (SEC 60): . ‘The mortgagor has the right to pay the morlgage amount to the mortgagee, at any time, affer the principal money has become due, On clearance of dues, the Mortgagee will deliver to:the mortgagor, the Mortgage deed and all other documents related to the mortgaged property **& 2 Floors), SECTOR 47-D, CHANDIGARH 160047OBLIGATIONS TO TRANSFER TO THIRD PARTY (SEC 60 Ay: +The’ Morigagee shall be bound to re-tansfer the mortgaged property to any third person, as desired by mortgagor, after the payment of mortgaged amount at mortgagors cost. © This provision does not apply in the case of a mortgagee who has been or who is in possession of the property. RIGHT TO INSPECTION AND PRODUCTION OF DOCUMENTS (SEC 60 ‘« The mortgagor, during the subsistence of its redemption rights, can inspect the mortgaged property at all reasonable times. ‘®The-morigagor can have the copies or abstracts from the doourp the possession of the mortgagee. All costs and expenses for su¢h abstractiwill be bome by the mortgagor. }HT_TO REDEEM SEPAR ‘The mortgagor is empowered to improve possession of the Mortgagee. = In case such improvement has been efte destruction, deterioration and becory POWER TO LEASE (SEC 65-A) ‘When the mortgagor is in posse binding for he Motgogee. When|the propgfty is under its: possession, the MOK ‘own. (Sec 76) yagee, the mortgagor succeeds in affecting a stibsequent mortgage in some actionable claims. faims are for interests in some property, which is not in possession with the claimant or the owner. Insurance Policies, FORs, Book Debts and Supply Bills are some of such lypes of assets, which are assigned. FEATURES: = Assignment could be only by way of writing a document of assignment, which is to be signed by the assignor or its authorised agent. © The assignment could be without consideration, Le. for purpose other than borrowings. + Actionable claims cannot be assigned fo a Judge, an office of the Court and Legal Pracitoner. (See 130- Transfer of Property Act) + The notice of assignment is not legally required, though it is preferred in the interest of the lender. However, in case of assignment of LIC policies, notice of assignment is required under Insurance Act, + Ifthe lender prefers a notice of assignment, then it should be in writing ors], SECTOR 47-D, CHANDIGARH. 160047 66 $60.91, (82 ‘& Finance, Log on to: www.corporatetraininginstitute.com For more oThere are two types of assignments. Legal Assignment: When the transfer of inteests in the actionable claims is absolite, it i called Legal Assignment In suéh type, notice of assignment is also required. The noice of assignment can be given either by the assignor. or by the assignes, Equitable Assignment: tis only by way of charge created in wring between the assignor and the assignee. Notice of assignment is not given. ACTIONABLE CLAIMS: It means any claim to debt not secured by pledge. Actionable clait\weans a cldim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation ar pledge of movable property or to any beneficial interest in movable property not in the possession, either actual or co courts recognize as affording grounds for relief, whell conditional or contingent ‘+ The transfer of an actionable claim can be et or its authorised agent. (Sec 130 of Transf © Allthe rights of the transferor shall vest. © The transferee of an actionable ¢} Example: X has assigned his Life 1 insurance Company wit In the event of dedth of A, the Bank can sue the x5 of X. 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"| eee ‘500.84, (1 & 2° Floors), SECTOR 47-0, CHANDIGARI-160047 o7 Forinore on Banking & Finance, Log on to: wiw.corporatetraininginstitute.com