Banking Laws Regulations in India

8/3/2019 Banking Laws Regulations in India

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LOCAL HEAD OFFICE, AHMEDABAD

M. L. MEENA, PO-2009 (09408685821) [email protected]

BANKING LAWS & REGULATIONS IN INDIA

SR

NO

YEAR LIST OF BARE ACTs

1 1872 INDIAN CONTRACT ACT / INDIAN EVIDENCE ACT

2 1875 INDIAN MAJORITY ACT

3 1881 NEGOTIABLE INSTRUMENTS (NI) ACT

4 1882 TRANSFER OF PROPERTY ACT / INDIAN TRUSTS ACT(Private Trusts and Trustees)

5 1891 BANKERS BOOKS EVIDENCE ACT

6 1899 INDIAN STAMP ACT

7 1925 INDIAN SUCCESSION ACT

8 1930 SALES OF GOODS ACT

9 1932 INDIAN PARTNERSHIP ACT10 1934 RESERVE BANK OF INDIA (RBI) ACT

11 1949 BANKING REGULATION ACT (BRA)

12 1955 STATE BANK OF INDIA ACT

13 1956 COMPANIES ACT / HINDU SUCCESSION ACT

14 1961 INCOME TAX ACT

15 1963 INDIAN LIMITATION ACT

16 1969 BANKING COMPANIES (ACQUISITION & TRANSFER OF UNDERTAKING)

ACT (ALSO IN 1980)

17 1986 CONSUMER PROTECTION ACT (COPRA)

18 1993 RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT19 1994 DEBTS RECOVERY APPELLATE TRIBUNAL (PROCEDURE) RULES

20 1999 FOREIGN MANAGEMENT REGULATION ACT (FEMA)

21 2000 THEINFORMATION TECHNOLOGY (IT) ACT

22 2002 SECURITISATION AND RECONSTRUCTION OF FINANCIAL

ASSESTS AND ENFORCEMENT OF SECURITY INTEREST (SARFAESI) ACT

23 2005 RIGHT TO INFORMATION (RTI) ACT

24 2006 BANKING OMBUDSMAN SCHEME / MICRO, SMALL AND MEDIUM

ENTERPRISES DEVELOPMENT (MSMED) ACT

25 2008 LIMITED LIABILITY PARTNERSHIP ACT

26 2009 COMPANIES BILL

INDIAN CONTRACT ACT 1872


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SECTION DESCRIPTION

11 Minors, Lunatics etc are incompetent to a contract and any contract with them

is void ab-initio

25 An agreement/contract must have consideration (promise to pay a debt) otherwise it is void

25 (3) An agreement to repay time-barred debt is a valid contract

42 All Joint borrowers are jointly and severally liable

43 Any one or more of the joint borrowers may be compelled to repay the whole

debt

44 If the bank releases one of the joint borrowers to repay debt, this does not

discharge the other joint borrowers

61 Appropriation Of Dues On First Come First Served Basis (CLAYTONS RULE)

Applicable To Demand Loan /Term Loan Only

68 In case of advance to minor his/her assets may be liable for the debt but he/shewould not be held personally liable

128 Suretys (guarantor) liability is co-extensive with that of Principle Debtor, unless

it is otherwise provided by the contract

131 In case of death of the guarantor (where there is no contrary contract), the

guarantee stands withdrawn/ terminated

133 Any change made (without the consent of the guarantor) in the terms of

contract discharges him for all subsequent transactions

134 The surety is discharged by any contract between the creditor and the principal

debtor, by which the principal debtor is released, or by any act or omission of

the creditor, the legal consequence of which is the discharge of the principaldebtor

146 Where two or more persons are co-sureties for the same debt or duty, either

jointly or severally, and whether under the same or different contract, and

whether with or without the knowledge of each other the co-sureties, in the

absence of any contract to the contrary, are liable to pay each an equal share of

the whole debt, or of that part of it which remains unpaid by the principal

debtor

151 A bailee(Bank) is bound to take reasonable care of ordinary prudence for the

goods bailed to him

165 Where two or more persons are co-sureties for the same debt or duty, eitherjointly or severally, and whether under the same or different contract, and

whether with or without the knowledge of each other the co-sureties, in the

absence of any contract to the contrary, are liable, as between themselves, to

pay each an equal share of the whole debt, or of that part of it which remains

unpaid by the principal debtor

166 If the bailor has no title to the goods, and the bailee, in good faith, delivers

them back to, or according to the directions of the bailor, the bailee is not

responsible to the owner in respect of such deliver

172 PLEDGE (The bailment of goods as security for payment of a debt or

performance of a promise)BAILOR = PAWNOR & BAILLEE = PAWNEE (BANK)


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173 The pawnee may retain the goods pledged, not only for payment of the debt or

the performance of the promise, but for the interests of the debt, and all

necessary expenses incurred by him in respect to the possession or for the

preservation of the goods pledged

176 If the pawnor makes default in payment of the debt, or performance, at thestipulated time, or the promise, in respect of which the goods were pledged,

the pawnee may bring as suit against the pawnor upon the debt or promise,

and retain the goods pledged as a collateral security; or he may sell the thing

pledged, on giving the pawnor reasonable notice of the sale.

If the proceeds of such sale are less than the amount due in respect of the debt

or promise, the pawnor is still liable to pay the balance. If the proceeds of the

sale are greater that the amount so due, the pawnee shall pay over the surplus

to the pawnor

188 Principal is liable for the acts done by an Agent (Power Of Attorney Holder) (if it

is within the delegated powers)

196 Where acts are done by one person on behalf of another, but without his

knowledge or authority, he may elect to ratify or to disown such acts. If he

ratifies them, the same effects will follow as if they had been performed by his

authority

227 When an agent does more than he is authorised to do, and when the part of

what he does, which is within his authority, can be separated from the part

which is beyond his authority, so much only of what he does as is within his

authority is binding as between him and his principal

228 Where an agent does more than he is authorised to do, and what he does

beyond the scope of his authority cannot be separated from what is within it,

the principal is not bound to recognise the transaction

INDIAN EVIDENCE ACT 1872

SECTION DESCRIPTION

85 Power of Attorney should be executed in the presence of Notary Public and be

verified by it

144 Notices sent to borrowers/ guarantors if returned back undelivered, are

deemed to have been notices delivered

INDIAN MAJORITY ACT 1875

SECTION DESCRIPTION

3 Where guardian has been appointed by a court, the minor will attain majority

at the age of 18 years


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NEGOTIABLE INSTRUMENTS ACT 1881

SECTION DESCRIPTION

DEFINITION

4 PROMISSIONARY NOTE

(An instrument in writing (not being a bank-note or a currency-note) containing

an unconditional undertaking, signed by the maker, to pay a certain sum of

money only to, or to the order of, a certain person, or to the bearer of the

instrument)

5 BILL OF EXCHANGE= BOE

(an instrument in writing, containing an unconditional order, signed by the

maker, directing a certain person to pay a certain sum of money only to, or to

the order of, a certain person or to the bearer of the instrument)

6 CHEQUE (BOE drawn on a specified Banker and not expressed to be payable

otherwise than on demand)

7 DRAWER (Maker Of BOE/Cheque) &

DRAWEE (the person thereby directed to pay) &

ACCEPTOR (After the drawee of a bill has signed his assent upon the bill, or, if

there are more parts thereof than one, upon one of such parts, and delivered

the same, or given notice of such signing to the holder or to some person on hisbehalf) &

ACCEPTOR FOR HONOUR([When a bill of exchange has been noted or

protested for non-acceptance or for better security,] and any person accepts it

supra protest for honour of the drawer or of any one of the endorsers) &

PAYEE (The person namedin the instrument, to whom or to whose orderthe

money is by the instrument directed to be paid)

8 HOLDER (any person entitled in his own name to thepossession thereof and to

receive or recoverthe amount due thereon from the parties thereto)

{Where the note, bill or cheque is lost or destroyed, its holder is the person so

entitled at the time of such loss or destruction}

9 HOLDER IN DUE COURSE (any person who for consideration became the

possessorof a promissory note, bill of exchange or cheque if payable to bearer,

or thepayee or indorsee thereof, if payable to order)

10 PAYMENT IN DUE COURSE (payment in accordance with the apparent tenor of

the instrument in good faith and without negligence to any person in possession

thereof under circumstances which do not afford a reasonable ground for

believing that he is not entitled to receive payment of the amount therein

mentioned)

11 INLAND INSTRUMENT (Negotiable instrumentdrawn or made in India and

madepayable in ordrawn upon any person resident)

12 FOREIGN INSTRUMENT (any such instrument not drawn, made or made


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payable in India)

13 NEGOTIABLE INSTRUMENT* (a promissory note, bill of exchange or cheque

payable either to order or to bearer)

14 NEGOTIATION (Negotiable instrument transferred to any person, so as to

constitute that person the holder thereof)15 INDORSEMENT(When the maker or holder of a negotiable instrument signs the

same, otherwise than as such maker, for the purpose of negotiation, on the

back or face thereof or on a slip of paper annexed thereto, or so signs for the

same purpose a stamped paper intended to be completed as a negotiable

instrument) = INDORSER

16 INDORSEMENT IN BLANK & IN FULL (If the indorser signs his name only,

the indorsement is said to be " in blank," and if he adds a direction to pay the

amount mentioned in the instrument to, or to the order of, a specified person,

the indorsement is said to be " in full ") INDORSEE = PAYEE

17 AMBIGOUS INSTRUMENT (Where an instrument may be construed either as apromissory note or bill of exchange, the holder may at his election treat it as

either, and the instrument shall be thenceforward treated accordingly)

18 WHERE AMOUNT IS STATED DIFFERENTLY IN FIGURES AND WORDS

(If the amount undertaken or ordered to be paid is stated differently in figures

and in words, the amount stated in words shall be the amount undertaken or

ordered to be paid)

19 INSTRUMENTS PAYABLE ON DEMAND(A promissory note or bill of exchange,

in which no time for payment is specified, and a cheque are payable on demand

20 INCHOATE STAMPED INSTRUMENTS (Where one person signs and delivers to

another a paper stamped in accordance with the law relating to negotiableinstruments then in force in India and either wholly blank or having written

thereon an incomplete negotiable instrument, he thereby gives prima facie

authority to the holder thereof to make or complete, as the case may be, upon

it a negotiable instrument, for any amount specified therein and not exceeding

the amount covered by the stamp. The person so signing shall be liable upon

such instrument, in the capacity in which he signed the same, to any holder in

due course for such amount: provided that no person other than a holder in due

course shall recover from the person delivering the instrument anything in

excess of the amount intended by him to be paid thereunder)

22 DAYS OF GRACE (Every promissory note or bill of exchange which is notexpressed to be payable on demand, at sight or on presentment is at maturity

on the third day after the day on which it is expressed to be payable)

25 WHEN DAY OF MATURITY IS A PUBLIC HOLIDAY (When the day on which a

promissory note or bill of exchange is at maturity is a public holiday, the

instrument shall be deemed to be due on the next preceding business day)

PARTIES To NOTES, BILLS AND CHEQUES

26 A MINOR may draw, indorse, deliver and negotiate such instrument so as to

bind all parties except himself

28 LIABILITY OF AGENT SIGNING (An agent who signs his name to a negotiable

instrument without indicating thereon that he signs as agent, or that he doesnot intend thereby to incur personal responsibility, is liable personally on the


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instrument, except to those who induced him to sign upon the belief that the

principal only would be held liable)

29 LIABILITY OF LEGAL REPRESENTATIVE SIGNING

(A legal representative of a deceased person who signs his name to a negotiable

instrument is liable personally thereon unless he expressly limits his liability tothe extent of the assets received by him as such)

30 LIABILITY OF DRAWER(The drawer of a bill of exchange or cheque is bound, in

case of dishonour by the drawee or acceptor thereof, to compensate title

holder, provided due notice of dishonour has been given to, or received by, the

drawer as hereinafter provided)

31 LIABILITY OF DRAWEE OF CHEQUE

The drawee of a cheque having sufficient funds of the drawer in his hands

properly applicable to the payment of such cheque must pay the cheque when

duly required so to do, and, in. default of such payment, must compensate the

drawer for any loss or damage caused by such default35 Every indorser after dishonour is liable as upon an instrument payable on

demand

36 Every prior party to a negotiable instrument is liable thereon to a holder in due

course until the instrument is duly satisfied

40 DISCHARGE OF INDORSER'S LIABILITY

Where the holder of a negotiable instrument, without the consent of the

indorser, destroys or impairs the indorser's remedy against a prior party, the

indorser is discharged from liability to the holder to the same extent as if the

instrument had been paid at maturity.

43 NEGOTIABLE INSTRUMENT MADE, ETC., WITHOUT CONSIDERATIONA negotiable instrument made, drawn, accepted, indorsed or transferred

without consideration, or for a consideration which fails, creates no obligation

of payment between the parties to the transaction. But if any such party has

transferred the instrument with or without indorsement to a holder for

consideration, such holder, and every subsequent holder deriving title from

him, may recover the amount due on such instrument from the transferor for

consideration or any prior party thereto

DISCHARGE FROM LIABILITY

82 DISCHARGE FROM LIABILITY

(a)Maker by cancellation; to a holder thereof who cancels suchacceptor's or indorser's name with intent to discharge him,

and to all parties claiming under such holder;

(b)Acceptor by release ; to a holder thereof who otherwise discharges such

maker, acceptor or indorser, and to all parties deriving title under such holder

after notice of such discharge;

(c)Indorser by payment ,to all parties thereto, if the instrument is payable to

bearer, or has been indorsed in blank, and such maker, acceptor or indorser

makes payment in due course of the amount due thereon

84 WHEN CHEQUE NOT DULY PRESENTED AND DRAWER DAMAGED THEREBY

The holder of the cheque as to which such drawer or- person is so dischargedshall be a creditor, in lieu of such drawer or person, of such banker to the


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extent of such discharge and entitled to recover the amount from him

87 EFFECT OF MATERIAL ALTERATION

Alteration by indorsee - Any material alteration of a negotiable instrument

renders the same void as against any one who is a party thereto at the time of

making such alteration and does not consent thereto, unless it was made inorder to carry out the common intention of the original parties

Alteration by indorsee - any such alteration, if made by an indorsee, discharges

his indorser from all liability to him in respect of the consideration thereof

88 An acceptor or indorser of a negotiable instrument is bound by his acceptance

or indorsement notwithstanding any previous alteration of the instrument

89 PAYMENT OF INSTRUMENT ON WHICH ALTERATION IS NOT APPARENT

Where a promissory note, bill of exchange or cheque has been materially

altered but does not appear to have been so altered, or where a cheque is

presented for payment which does not at the time of presentation appear to

be crossed or to have had a crossing which has been obliterated, paymentthereof by a person or banker liable to pay, and paying the same according to

the apparent tenor thereof at the time of payment and otherwise in due

course, shall discharge such person or banker from all liability thereon ; and

such payment shall not be questioned by reason of the instrument having been

altered or the cheque crossed

NOTICE OF DISHONOUR

92 DISHONOUR BY NON-PAYMENT

A promissory note, bill of exchange or cheque is said to be dishonoured by non-

payment when the maker of the note, acceptor of the bill or drawee of the

cheque makes default in payment upon being duly required to pay the same93 BY AND TO WHOM NOTICE SHOULD BE GIVEN

When a promissory note, bill of exchange or cheque is dishonoured by non-

acceptance or non payment, the holder thereof, or some party thereto who

remains liable thereon, must give notice that the instrument has been so

dishonoured to all other parties whom the holder seeks to make severally liable

thereon, and to some one of several parties whom he seeks to make jointly

liable thereon

97 WHEN PARTY TO WHOM NOTICE GIVEN IS DEAD

When the party to whom notice of dishonour is despatched is dead, but the

party despatching the notice is ignorant of his death the notice is sufficientCROSSED CHEQUES

131 NON-LIABILITY OF BANKER RECEIVING PAYMENT OF CHEQUE

A banker who has in good faith and without negligence received payment for a

customer of a cheque crossed generally or specially to himself shall not, in case

the title to the cheque proves defective, incur any liability to, the true owner of

the cheque by reason only of having received such payment

Explanation - A banker receives payment of a crossed cheque for

a customer within the meaning of this section notwithstanding -that he credits

his customer's account with the amount of the cheque before receiving

payment thereofPENALTIES IN CASE OF DISHONOUR OF CERTAIN CHEQUES FOR INSUFFICIENCY OF FUNDS


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IN THE ACCOUNTS

138 DISHONOUR OF CHEQUE FOR INSUFFICIENCY, ETC., OF FUNDS IN THE

ACCOUNT

Where any cheque drawn by a person on an account maintained by him with a

banker for payment of any amount of money to another person from out ofthat account for the discharge, in whole or in part, of any debt or other liability,

is returned by the bank unpaid.

eitherbecause of the amount of money standing to the credit of that account is

insufficient to honour the cheque or that it exceeds the amount arranged to be

paid from that account by an agreement made with that bank, such person

shall be deemed to have committed an offence and shall, without prejudice, be

punished with imprisonment for a term which may extend to one year,

orwith fine which may extend to twice the amount of the cheque / both

Provided that nothing contained in this section shall apply unless-

(a)the cheque has been, presented to the bank within a period of six months

from the date on which it is drawn or within the period of its validity,

whichever is earlier;

(b) the payee or the holder in due course. of the cheque as the case may be,

makes a demand for the payment of the said amount of money by giving a

notice, in writing, to the drawer of the cheque, within fifteen days of the

receipt of information by him from the bank regarding the return of the cheque

as unpaid; and

(c)the drawer of such cheque fails to make the payment of the said amount ofmoney to the payee or, as the case may be, to the holder in due course of the

cheque, within fifteen days of the receipt of the said notice

*Explanation

1. A negotiable instrument is payable to bearer which is expressed to be so payable or

on which the only or last endorsement is an endorsement in blank

2. A negotiable instrument either originally or by endorsement, is expressed to be

payable to the order of a specified person, and not to him or his order, it is

nevertheless payable to him or his order at his option

3. A negotiable instrument may be made payable to two or more payees jointly, or itmay be made payable in the alternative to one of two, or one or some of several

payees

TRANSFER OF PROPERTY ACT 1882

SECTION DESCRIPTION


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3 Crop, Grass and Timbers are not immovable properties

58 (F) Equitable Mortgage is created by delivering title deeds of immovable property

at notified centre for creating charge against security of loan

BANKERS BOOKS EVIDENCE ACT 1891

SECTION DESCRIPTION

2 (3) BANKERS' BOOKS (ledgers, day-books, cash-books, account-books and all other

books used in the ordinary business of a bank)

2 (8) CERTIFIED COPY (a copy of any entry in the books of a bank together with

certificate written at the foot of such copy that it is a true copy of such entry,

that such entry is contained in one of the ordinary books of the bank and was

made in the usual and ordinary course of business, and that such book is still inthe custody of the bank, such certificate being dated and subscribed by the

principal accountant or manager of the bank with his name and official title)

5 CASE IN WHICH OFFICER OF BANK NOT COMPARABLE TO PRODUCE BOOKS

(No officer of a bank shall in any legal proceeding to which the bank is not a

party be comparable to produce any baker's book the contents of which can be

proved under this Act, or to appear as a witness to prove the matters,

transactions and accounts therein recorded, unless by order of the Court or a

Judge made for special cause)

6 INSPECTION OF BOOKS BY ORDER OF COURT OR JUDGE(1) On the application of any party to a legal proceeding the Court or a Judge

may order that such party be at liberty to inspect and take copies of any entries

in a Banker's Book for any of the purposes of such proceeding, or may order the

bank to prepare and produce, within a time to be specified in the order, certified

copies of all such entries, accompanied by a further certificate that no other

entries are to be found in the books of the Bank relevant to the matters in issue

in such proceeding, and such further certificate shall be dated and subscribed in

manner herein before directed in reference to certified copies

(2) An Order under this or the preceding Section may be made either with or

without summoning the Bank and shall be served on the Bankthree clear days

(exclusive of Bank holidays) before the same is to be obeyed, unless the Court or

Judge shall otherwise direct

(3) The Bank may at any time before the time limited for obedience to any such

order as aforesaid either offer to produce their books at the trial or give notice

of their intention to show cause against such Order, and thereupon the same

shall not be enforced without further order

INDIAN STAMP ACT 1899


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SECTION DESCRIPTION

2 (11) LEGAL CONSEQUENCES OF DOCUMENTS NOT DULY STAMPED

24 HOW TRANSFER IN CONSIDERATION OF DEBT, OR SUBJECT TO FUTURE

PAYMENT TO BE CHARGEDWhere any property is transferred to any person in consideration, wholly or in

part, of any debt due to him, or subject either certainly or contingently to the

payment or transfer of any money or stock, whether being or constituting a

charge or incumbrance upon the property or not, such debt, money or stock is

to be deemed the whole or part, as the case may be, of the consideration in

respect whereof the transfer is chargeable with ad valorem duty:

Provided that nothing in this section shall apply to any such certificate of sale

Explanation --In the case of a sale of property subject to a mortgage or other

incumbrance, any unpaid mortgage-money or money charged, together with

the interest (if any) due on the same, shall be deemed to be part of theconsideration for the sale:

Provided that, where property subject to a mortgage is transferred to the

mortgagee, he shall be entitled to deduct from the duty payable on the transfer

the amount of any duty already paid in respect of the mortgage.

33 INSTRUMENT CAN BE IMPOUNDED IN CASE NOT DULY STAMPED

35 INSTRUMENTS NOT DULY STAMPED INADMISSIBLE IN EVIDENCE

No instrument chargeable with duty shall be admitted in evidence for any

purpose by any person having by law or consent of parties authority to receive

evidence, or shall be acted upon, registered or authenticated by any such

person or by any public officer, unless such instrument is duly stamped.(However may be admitted by levy ofpenalty of Rs. 5/- or 10 times the value of

the dutyby which deficient, which ever higher)

INDIAN SUCCESSION ACT 1925

SECTION DESCRIPTION

24 Succession certificate is applicable on deposits and debts due

370 Succession certificate is not applicable on items kept in Safe Custody and Safe

Deposit Lockers (Except in the states of UP, MP, Uttaranchal and Chhattisgarh)

SALES OF GOODS ACT 1930


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SECTION DESCRIPTION

2 (4) BILL OF LADING (document of title to merchandise goods and delivery of goods

may be taken from the shipping company on production set of any Bill of

Lading)

4 SALE AND AGREEMENT TO SELL (contract whereby the seller transfers or

agrees to transfer the property in goods to the buyer for a price. There may be a

contract of sale between one part-owner and another. it may be absolute or

conditional)

5 CONTRACT OF SALE HOW MADE (A contract of sale is made by an offer to buy

or sell goods for a price and the acceptance of such offer)

6 EXISTING OR FUTURE GOODS (The goods which form the subject of a contract

of sale may be either existing goods, owned or possessed by the seller, or futuregoods)

Accordingly, SHARES are movable goods & can be pledged as a security.

INDIAN PARTNERSHIP ACT 1932

SECTION DESCRIPTION

4 PARTNERSHIPis the relation between persons /an association of persons whohave agreed to share the profits of a business carried on by all or any of them

acting for all & individually " partners" and collectively " a firm" , and the name

under which their business is carried on is called the " firm name"

5 The relation of partnership arises from contract and not from status

(Members of Joint Hindu family and Burmese Buddhist husband & wife are not

partners)

9 Partners are bound to carry on the business of the firm to the greatest common

advantage, to be just and faithful to each other, and to render true accounts

and full information of all things affecting the firm to any partner or his legal

representative(Sleeping partner can file a suit for rendition of account)

10 Every partner shall indemnify the firm for any loss caused to it by his fraud in

the conduct of the business of the firm

13 All the partners are entitled & liable for equal share in loss & profit in absence

of any agreement

(a partner is not entitled to receive remuneration for taking part in the conduct

of the business &entitled for interest @ 6% per annum for any payment or

advance beyond the amount of capital)

15 Partner cannot transfer any part of the property of firm till the continuation of

the partnership18 A partner is an accredited agent to the firm & the other partners of the firm for


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the purpose of business of the firm

19 IMPLIED AUTHORITY OF PARTNER

(A partner is an accredited agent to the firm & the other partners of the firm

for the purpose of business of the firm)

24 Notice to a partner who habitually acts in the business of the firm of any matter

relating to the affairs of the firm operates, as notice to the firm, except in the

case of a fraud on the firm committed by or with the consent of that partner

25 Every partner is liable, jointly with all the other partners and also severally, for

all acts of the firm done while he is a partner.

30 &

30(1)

A MINOR may be admitted to be a partner in the firm, with the consent of all

the partners, to the benefits of partnership. Such minors share is liable for the

acts of the firm, but the minor is not personally liable for any such act

(if he fails to give such notice, he shall become a partner in the firm on the

expiry of the said six month after attaining majority)

32 Not withstanding the retirement of a partner from a firm, he and the partners

continue to be liable as partners to third parties for any act done by any of

them which would have been an act of the firm if done before the retirement,

until public notice is given of the retirement.

(a retired partner is not liable to any third party who deals with the firm without

knowing that he was a partner)

34 Where a partner in a firm is adjudicated an insolvent he ceases to be a partner

on the date on which the order of adjudication is made, whether or not the

firm is thereby dissolved and the firm is not liable for any act of the insolvent,

done after the date on which the order of adjudication is made

35 Where under a contract between the partners the firm is not dissolved by the

death of a partner, the estate of a deceased partner is not liable for any act of

the firm done after his death.

40 Firm can be dissolved with consent of all the partners or according to contract

between the partners

(Suit filed after 3 years of execution of dissolution deed for rendition of account

is barred by limitation)

41 When all the partners or all the partners except one declared insolvent, firm

shall be dissolved

42 (C&D) A partnership firm is dissolved by the death of a partner/ adjudication as an

insolvent

43 Dissolution of partnership at will Notice in writing to other partners is

necessary

45 Not withstanding the dissolution of a firm the partners continue to be liable as

such to third parties for any act done by any of them which would have been

an act of the firm if done before the dissolution unit public notice is given of

the dissolution.

49 Where there are joint debts due from the firm, and also separate debts due

from any partner, the property of the firm shall be applied in the first instance

in payment of the debts of the firm, and if there is any surplus, him. The


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separate property of any partner shall be applied first in the payment of his

separate debts and the surplus (if any) in the payment of the debts of the firm.

58 Registration of partnership firm with registrar of firms is not compulsory

69 An unregistered firm cannot file suit on others but others can

RESERVE BANK OF INDIA (RBI) ACT 1934

SECTION DESCRIPTION

20 Obligation of the RBI to transact government business

21 RBI have the right to transact government business in India

22 Only RBI shall have the sole right to issue currency bank notes in India

31 Only RBI is empowered to issue Demand Draft payable to bearer on demand,

Issue of Currency Notes

42 (6) Maintenance of CRR with RBI (Min 3% & Max 15% of net DTL)

45 RBI empowered SBI to conduct Govt. business (Sec. 32 of SBI Act 1955)

58 (B) Issue of Demand Draft payable to bearer on demand is an offence

BANKING REGULATION ACT (BRA) 1949SECTION DESCRIPTION

5 (B) BANKING (accepting of deposits of money from the public, repayable on

demand or otherwise, and withdrawal by cheque, draft, order or otherwise for

the purpose of lending or investment)

6 Form and business in which banking companies may be engaged

8 Prohibition of trading of goods directly/ indirectly except disposal of debts

9 Disposal of Non-banking assets (immovable property) within maximum 7 years

11 Requirement of minimum Paid Up Capital & Reserves

12 Regulation of paid-up capital, subscribed capital and authorised capital and

voting rights of shareholders

17 Min. 20% of profits of a bank to be transferred to reserve fund before declaring

dividends

18 Cash Reserve Ratio with RBI

19 Advance against shares not more than 30% of the paid up capital of that

company and/or 30% of Banks share capital plus reserves, whichever is less

20 Restrictions On Loans And Advances

(a) grant any loans or advances on the security of its own shares, or(b) enter into any commitment for granting any loan or advance to or on behalf


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of-

(i) any of its Directors

(ii) any firm in which any of its Directors is interested as Partner, Manager,

Employee or Guarantor

(iii) any company or a government company, of which any of the Directors of

the banking company is a Director, Managing Agent, Manager, Employee or

Guarantor or in which he holds substantial interest

(iv) any individual in respect of whom any of its Directors is a partner or

guarantor

21 Selective Credit Control by RBI

22 Licensing of Banking Companies

23 Restrictions on opening of new and transfer of existing places (allowed within

same city) of business without permission of RBI24 SLR (25 40 % of net DTL)

35 RBI is empowered for inspection of banks

36 AE Power of Central Government to acquire undertakings of banking companies in

certain cases

45 Z Return of paid instruments to customer (a Government department and a

corporation incorporated by or under any law)

45 ZA Nomination for payment of depositors' money (CASA/TDR/STDR)

(Where the nominee is a minor, it shall be lawful for the depositor making the

nomination to appoint in the prescribed manner any person to receive theamount of deposit in the event of his death during the minority of the nominee)

45 ZB Notice of claims of other persons regarding deposits not receivable

(No notice of the claim of any person, other than the person or persons in

whose name a deposit is held by a banking company, shall be receivable by the

banking company, nor shall the banking company be bound by any such notice

though even expressly given to it

Providedthat where any decree, order, certificate or other authority from a

court of competent jurisdiction relating to such deposit is produced before a

banking company, the banking company shall take due note of such decree,

order, certificate or other authority)

45 ZC Nomination for return of articles kept in safe custody with banking company

(The banking company shall, before returning any articles under this section to

the nominee or the person appointed when nominee is minor , prepare an

inventory of the said articles which shall be signed by such nominee or person

and shall deliver a copy of the inventory so prepared to such nominee or person)

45 ZD Notice of claims of other persons regarding articles not receivable (same as 45

ZB)


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45 ZE Release Of Contents Of Safety Lockers (same as 45 ZC)

45 ZF Notice of claims of other persons (other than hirers) regarding safety lockers

not receivable (No notice)

CONSUMER PROTECTION ACT (COPRA) 1986

FORUM DISPUTABLE AMOUNT

District upto 20 lac

State >20 lac & upto 1 crore

National >1 crore

SPURIOUS GOODS AND SERVICES (such goods and services which are claimed to be genuine

but they are actually not so)

UNFAIR TRADE PRACTICE (a trade practice which, for the purpose of promoting the sale,

use or supply of any goods or for the provision of any service, adopts any unfair method or

unfair or deceptive practice)

STATE BANK OF INDIA ACT 1955

SECTION DESCRIPTION

32 RBI empowered SBI to conduct Government business

(Sec. 45 of RBI Act 1934)

34 SBI can not own or acquire any immovable property except to carry on the

business of the bank or providing residential accommodation to its officers and

other employees

(Maximum @ 7 Years in case of recovery of debts)

44 Obligation for maintenance of fidelity and secrecy

COMPANIES ACT 1956

SECTION DESCRIPTION

3 (1-ii) Restricted transferability of shares of Private Limited Company & limits the

number of its members to fifty & prohibits any invitation to the public to

subscribe for any shares in, or debentures of, the company

11 Max. 10 partners in Banking business firm and max. 20 partners in any other

business firm13 The memorandum of a company limited by shares or by guarantee shall also


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state that the liability of its members is limited

45 Members severally liable for debts where business carried on for more than 6

months with fewer than seven, or in the case of a private company, two

members

125 In case of loan to joint stock company, the floating charge on its assets

(Hypothecation) in favour of the bank/ lending institution must be filed for

registration with the concerned R.O.C. within 30 days from the date of creation

of charge i.e. date of documentation

130 (3) Before granting advance to a joint stock company, a prior search at R.O.C. be

made to know existence of prior charge over the borrowing companys assets

(if any)

132 R.O.C. issues certificate regarding registration of charge U/S 125

(Form -8)135 Provision for filing modification of charge (Form -11)

138 Provision for filing satisfaction of charge (Form -13)

209A empowers the Registrar of Companies and the officers of the Central

Government who have been authorised in this behalf to undertake inspection

of the books of accounts and other records of companies

274 Insolvent person can not be a director of company

292 (1) Borrowing power of company vests with the board of directors who will

exercise the same by a resolution

295 (1) Every public limited company or a private limited company which is a subsidiaryof a public limited company, shall obtain prior approval of the Central

Government before giving any loan or giving any guarantee in connection with

the loans to directors, relatives of the directors or to a private limited company

or a firm in which directors of the company are interested

HINDU SUCCESSION ACT 1956

SECTION DESCRIPTION

3 (1f) HEIR (any person, male or female, who is entitled to succeed to the property of

an intestate)

3 (1g) INTESTATE (a person is deemed to die intestate in respect of property of which

he or she has not made a testamentary disposition capable of taking effect)

8 The property of a Male Hindu dying intestate shall devolve accordingly

(a) firstly, upon the heirs, being the relatives

(b) secondly, if there is no heir(a) , then upon the heirs, being the relatives

(c) thirdly, if there is no heir of any of the two classes, then upon the agnates

of the deceased; and

(d) lastly, if there is no agnate, then upon the cognates of the deceased


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29 If an intestate has left no heir qualified to succeed to his or her property in

accordance with the provisions of this Act, such property shall devolve on the

government; and the government shall take the property subject to all the

obligations and liabilities to which an heir would have been subjected

INCOME TAX ACT 1961

SECTION DESCRIPTION

194 (a) Deduction of Tax at source (reintroduced w.e.f. 01.07.1995) in respect of

payment of interest (>10000) on Term Deposits by banks

269 If the amount ofTerm Deposit(with or without interest) is Rs.20,000 or more,

it must be paid by an account payee Bankers Cheque or Demand Draft or by

credit to depositors bank account(Not To Pay In Cash)

271 The Bank official violating the provision u/s 269 of this Act is liable for fine

equal to the amount of Term Deposit (or) 2 years imprisonment (or) both

INDIAN LIMITATION ACT 1963

The law of limitation is based on public policy that there should be afinality to

matters. Persons acquire rights under contract or otherwise which rights can be

challenged. If no period is specified with in which such right can be challenged, there

will beperpetual uncertainty.

A debit balance confirmation is an acknowledgement of debtand limitation period

can be calculated from its date. (Sec.18)

We can save the debt from becoming time barredby limitation by taking balanceconfirmation or letter of acknowledgementbut this will not serve for the purpose of

the security.


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SR

NO

DESCRIPTION OF SUITS PERIOD OF

LIMITATION

DATE FROM WHICH PERIOD

OF LIMITATION WOULD

COMMENCE

1 For recovery of monies payable by

monthly instalments

3 Years

From the date when each

instalment falls due2 For money deposited under an

agreement that it shall be payable on

demand

When the demand is made

3 For enforcement of charge on

movable property

when the right to sue accrues

i.e. the date of refusal after

demand

4 A suit enforce a guarantee From the date money

becomes due against a

guarantor

5 Suit against a minor for recovery ofthe value of necessities supplied to

him (article 113)

From date of supply ofnecessities

6 For recovery of arrears of rent from

government

When arrears become due

7 For possession by the mortgagee of

the immovable property mortgaged

12 Years

When the mortgagee

becomes entitled to

possession

8 For enforcement of payment of

money secured by mortgagor charge

upon immovable property

When the money sued for

becomes due

9 All other claims by the banking

company against its directors

Date of the accrual of such

claims OR

(five years from the date of

the first appointment of the

liquidator) whichever is longer

10 For foreclosure by the mortgagee 30 Years When the money secured by

the mortgage becomes due

11 Against a trustee for breach of trust

(section 10)

Indefinite

From the date when breach is

noticed

12 For the recovery of arrears of calls

from any director of a banking

company which is being wound up or

for the enforcement by the banking

company against any of its directors

of any claim based on a contract,

express or implied

Date of the accrual of such

claims OR

(five years from the date of

the first appointment of the

liquidator) whichever is longer

Banking Laws Regulations in India

Documents

Transcript of Banking Laws Regulations in India