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City Union Bank Limited

CENTRAL OFFICE
KUMBAKONAM

LEGAL & REGULATORY ASPECTS OF BANKING

(JAIIB EXAMINATION -1)

KNOWLEDGE IS POWER . . .

1
UNIT-I LEGAL FRAMEWORK OF REGULATION OF BANKS

SL.NO QUESTION ANSWER


1(i) A public sector bank is a body True
corporate created under a special
statue.
(ii) A banking company is registered False
under the banking regulation Act.
(iii) Co-operative banks are registered True
under the Multi-State Co-operative
Societies Act or a State Co-operative
Societies Act.
(iv) Subsidiaries of the State Bank are False
companies registered under the
Companies act.
(v) Accepting deposits for safe custody False.
would fall within the definition of
“banking”.
2 Reserve Bank was constituted RBI Act
under--------------
3 A Regional Rural Bank is------------ A body corporate created under a
special statue.
4 Banking companies are licensed by- Reserve Bank
---------------
5 Business which a banking company BR Act
may undertake other than banking
is as stipulated by --------------.
6 BR Act was enacted for--------------. For regulating banking companies
7(i) Central Government can give True
direction to the Reserve bank.
(ii) All kinds of business of banks is False
regulated only by the Reserve Bank
(iii) Central Government is the primary False
regulator of banks.
(iv) State Governments have no control False
over Co-operative banks.
(v) On cancellation of licence of any True
bank, an appeal lies with Central
Government
8 CO-operative banks operating in Multi-State Co-operative Societies
different states are registered Act.
under--------------.
9 Government can exempt a bank On recommendation of RBI
from the provisions of BR Act--------

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10 ----------exercises the central Reserve Bank.
banking function in India.
11 Company matters of a banking Authorities under the Companies
company are regulated by------------. Act.
12 Trading in shares and securities by SEBI.
banks is subject to regulation by-----
------
13 One of the essential characteristics
of banking is------------
14 Banking companies operating in
India are constituted in the form of-
--------------.
15 Companies Act applies to banking
companies------------------.
16 Under the reserve Bank of India Act
, Reserve Bank regulates acceptance
of deposits by---------------.
15 BR Act is applicable to co-operative
banks---------------.
16 “Corresponding new banks” means-
--------------.
17 Central Government may give
directions to the Reserve Bank when
considered necessary in public
interest only after consulting----------
18 A Co-operative society registered
under the Multi-State Co-operative
Societies Act-----------------.
19 A multi-state CO-operative bank
means a multi-state co-operative
society which is a ----------------.
20 For the purposes of the BR Act, a
“co-operative society” means a
society registered or deemed to have
been registered under--------------.

3
UNIT-II CONTROL OVER ORGANISATION OF BANKS

SL.NO QUESTION ANSWER


1(i) A company has to obtain a------------ Licence
from the Reserve bank to commence
banking business in terms of section
22 of the BR Act.
(ii) Shifting of a bank's branch in the Same city, town or village
same -----------does not require
Reserve Bank's permission under
Section 23.
(iii) Foreign banks are required under 20 percent of profit for each year
section 11 of the BR Act to deposit--
---------arising out of their business
in India with the Reserve Bank.
(iv) Banks may float subsidiaries for Section 6(1)(a) to (o) of BR Act.
carrying on the business specified in
----------------.
(v) A shareholder of a banking 10 per cent
company can exercise voting rights
up to------------of the total voting
rights of all shareholders.
(vi) Banking companies are not Capitalised expenses
permitted to give dividend until all--
-----------are written off.
2.(i) A temporary branch for less than True
thirty days in a town where a bank
has an existing branch does not
require permission from Reserve
bank.
(ii) A company whose banking licence is True
rejected can undertake business as a
moneylender or undertake other
business.
(iii) The decision of Reserve bank to False
revoke licence is final and no appeal
lies from it.
(iv) Banking companies are permitted to True
give brokerage up to two-and-half
percent of the paid-up value of
shares.
(v) No person can hold the shares of True
banks beyond ceiling specified
under the BR Act.

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(vi) A banking company cannot hold False
shares in any other company other
than a subsidiary.
3(i) A director of a banking company Substantial interest
should not have-----------in any other
company.
(ii) At least---------------of the directors 51 per cent
should have the qualifications
prescribed under Section 10A(2) of
the BR Act.
(iii) When the board of a banking By lots
company is ordered to be
reconstituted under section 10A of
the BR Act, directors will be
removed-----------for the purpose of
reconstitution.
(iv) Before removing the chairman of a Give opportunity to being heard.
bank from office,Reserve bank has
to---------------.
(v) The provisions of Section 36AA of Overriding effect.
the BR Act regarding removal of
managerial personnel have-----------
over other laws.
(vi) Reserve Bank is authorised to Additional Directors
appoint---------under section 36AB
of the BR Act.
(vii) The----------has stipulated the 'fit RBI
and proper' criteria for directors of
banking companies.
4(i) The maximum period of office that True
may be held continuously by an
ordinary director in a banking
company is eight years.
(ii) The decisions of the board of False
directors, during the period when
the board's constitution is defective
shell be void.
(iii) The post of chairman of a banking True
company may be on part-time basis.
(iv) The chairman of a banking False
company can hold office only for a
maximum period of eight years.
(v) From the order removing chairman True
of a banking company,appeal lies to
Central Government within 30 days

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of order.
(vi) Reserve Bank has the power to True
remove any officer or other staff of
a banking company under section
36M of the BR Act.
(vii) The concept of 'fit and proper' False
criteria for directors is not
applicable to public sector banks.
5.(i) Reserve bank may issue licence to a
banking company under section 22
of the BR Act subject to--------------.
(ii) Reserve Bank is not empowered to
cancel the licence granted to a
banking company on the ground
that ---------------.
(iii) A bank requires permission of the
Reserve Bank for opening a new
branch or shifting an existing
branch------------
(iv) In addition to the requirements as
to minimum capital and reserves
under section 11 of the BR Act,
Reserve bank--------------.
(v) In the case of banking company,a
shareholder cannot exercise voting
rights on poll------------.
6 Choose the correct statements from
the following
(i) There are no restrictions in the BR
Act on payment of dividend by
banking companies.
(ii) Before payment of dividend by a
banking company, all its capitalised
expenses, unless specifically
exempted under the BR Act, have to
be completely written off.
(iii) Banking companies are not
permitted to pay dividend above ten
per cent of net profits.
7(i) There are no specific qualifications
required for the directors of a
banking company
(ii) At least fifty-one per cent of the
directors of a banking company
should consist of persons with
professional or other experience as

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provided in the BR Act.
(iii) At least fifty-one per cent of the
directors of a banking company
should be charted accounts or
experts in finance.
8(i) There is no provision for
maintenance of reserves by a
banking company under the BR
Act.
(ii) Every banking company has to
maintain a reserve fund and
transfer before declaring
dividend,not less than twenty per
cent of the profit to the reserve
fund.
(iii) The maintenance of a reserve fund
is optional for a bank.
9(i) The chairman of a banking
company has to be always on whole
-time basis and should be entrusted
with the management of the whole
of the affairs of the banking
company
(ii) The chairman of a banking
company can be on part-time basis
and a managing director can be
appointed on whole-time basis who
shall be entrusted with the whole of
the affairs of the banking company.
(iii) The chairman of a banking
company can be on part-time basis
and the whole of the affairs of the
banking company shall be entrusted
to a committee of the board of
directors.
10(i) A banking company can from
subsidiaries for undertaking any
business approved by its board of
directors.
(ii) A banking company can form
subsidiaries for undertaking any
business mentioned in section 6(1)
(a) to (o) of the BR Act, which is
permissible for a banking company
to undertake.
(iii) A banking company does not

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require the permission of the
Reserve Bank to form a subsidiary
for doing banking business
exclusively outside India.

8
UNIT-III REGULATION OF BANKING BUSINESS

SL.NO QUESTION ANSWER


1(i) Reserve Bank may issue directions Loans and Advances
to banking companies under section
21 of BR Act on------------------
(ii) ------------may regulate acceptance of Reserve Bank
deposits including rate of interest on
deposits by banking business under
section 35A of the BR Act.
(iii) The banking Ombudsman can settle A bank and its customers
a dispute between ------------
(iv) Directions can be issued to banking In public Interest
companies on loans and advances ---
------------
(v) The purpose of ------------is to make Selective credit control
credit available to essential sectors
of the economy according to
national priorities
(vi) -----------Act prohibits lending at Usurious Loans Act.
exorbitant rates and empowers
reopening of such contracts.
2.(i) Reserve Bank can issue directions True
on loans and advances under section
21 of the Banking Regulation Act
(ii) Regulation of credit to different True
sectors of the economy is known as
selective credit control.
(iii) Banks are free to lend to their False
directors
(iv) Banks have to file a return to True
Reserve Bank regarding unclaimed
deposits under section 26 of the BR
Act
(v) Directions may be issued under RBI False
Act to banks in respect of loans and
advances in the interest of
depositors.
(vi) The directions issued by Reserve True
bank under section 35A of the BR
Act may be either generally to
banks or to a particular bank.

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3(i) The amount transferable to the 20 per cent
reserve fund by the banks
incorporated in India is --------------
of the profit for each year.
(ii) Every banking company has to Last Friday of every quarter
maintain certain amount of assets
under Section 25 of the banking
regulation Act as at the -----------
(iii) The penalty which is payable by a 3 per cent over the bank rate
banking company which is a
scheduled bank for failure to
maintain the cash reserve in any
week for the first time is--------------
(iv) ---------------have to maintain cash Banking companies which are not
reserve under Section 18 of the BR scheduled banks.
Act.
(v) The liquid assets to be maintained Not inclusive
under section 24(2A) of BR Act are-
----------of the balances maintained
under section 42 of the RBI Act.
(vi) The payment of penalty under Civil court
section 24 of BR Act can be
enforced by making an application
before-------------
4(i) Only scheduled banks have a duty True
to maintain cash reserve under
section 42 of the Reserve Bank of
India Act
(ii) Every banking company has to True
maintain the liquid assets as
required under section 24 of the
banking regulation Act.
(iii) The share capital and reserves of a False
banking company form part of its
demand and time liabilities for the
purpose of section 42 of the RBI Act
(iv) The cash reserve required under False
section 42(1) of the RBI Act will be
a minimum of three percent of the
demand and time liabilities
(v) Interest is payable to scheduled False
banks on the cash reserve
maintained as required under
section 42(1) of the RBI Act.
(vi) No banking company incorporated False
in India is required to maintain

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reserve fund under section 17(1) of
the BR Act.
5.1. The directions of the Reserve bank
issued to the banking companies
under section 35A of the banking
Regulation Act are--------------.
2 A contract if entered into by a
banking company with any party in
contravention of a direction issued
by the reserve bank-------------
3 Liquid assets are required to be
maintained in India under section
24 of the BR Act,may be held in the
form of-----------------
4 For the purpose of maintenance of
liquid assets under section 24 of the
BR Act,unencumbered approved
securities shall be valued at----------
5 The penal interest chargeable on a
banking company under section
under section 24(2A) of the Act------
---------
6. Choose the correct statement from
(i) following:
There are no restrictions on a
banking company against grant of
loans or advances on the security of
its own shares.
(ii) A banking company can lend to any
firm in which its director is a
partner.
(iii) A banking company is prohibited
from entering into any commitment
for granting loans or advances to or
on behalf of any individual in
respect of whom any of its directors
is a partner or guarantor.
7.(i) The power of the Reserve Bank to
control advances extends to
specifying the purposes for which
advances may or may not be made.
(ii) A direction ,regarding advances
may be issued by Reserve Bank to
banking companies generally and
not to any banking company in
particular.

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(iii) A direction regarding advance can
be issued by the Reserve bank only
in the interest of banking policy and
on no other grounds.
8(i) The depositor of a banking
company can make a nomination in
the form prescribed under the
banking Companies(Nomination)
rules,1985.
(ii) There is no no form prescribed for
nomination by depositors under
Banking Companies (Nomination)
Rules, 1985
(iii) The nominee is entitled to receive
the proceeds of the deposit on
maturity of the deposit during the
lifetime of the depositor or later.
9(i) Banking Ombudsman is appointed
by the Government under the
Banking Regulation Act.
(ii) Banking Ombudsman is appointed
by the Reserve bank under the
banking Ombudsman scheme,2006
framed in the nature of directions
under the Banking Regulation
Act,1949.
(iii) Banking Ombudsman is appointed
by the Reserve Bank under the
Reserve Bank of India Act.
10(i) For maintenance of cash reserve
under section 42 of the RBI
Act,'demand and time liabilities' do
not include paid-up capital of the
banking company.
(ii) Loan taken from the Reserve bank
and Exim Bank are included in
'demand and time liabilities' under
Section 42 of the RBI Act.
(iii) Any loan taken by a regional rural
bank from its sponsor, forms part of
its demand and time liabilities for
the purpose of cash reserve under
section 42 of the RBI Act.

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UNIT IV RETURNS, INSPECTION, WINDING UP

SL.NO QUESTION ANSWER


1(i) A banking company has to prepare End of calender year.
profit and loss accounts and balance
sheet as at the -----------or at the
expiration of twelve months ending
with such date as notified by the
Central Government.
(ii) The balance sheet and profit and loss Auditor of companies
account shall be audited by a person
duly qualified to be----------
(iii) Three copies of the balance sheet and Registrar of Companies
accounts along with the auditor's
report of a banking company sent to
the Reserve bank under Section 31 of
the BR Act,have also to be sent to ----
------------
(iv) Reserve bank is empowered to Inspection
conduct------------of a banking
company under section 35(1) of the
BR Act
(v) A copy of the inspection Should be given
report,relating to banking company
,-----------to that banking company.
(vi) The board for financial supervision is Reserve Bank
constituted by-----------------
(vii) Under section 35(4) of the BR Act, To the detriment of interest of
Central Government can prohibit a depositors
banking company from accepting
fresh deposits if the business of the
banking company is conducted--------
------
3(i) The undertaking of a banking Directions under sections 21 and
company may be acquired by the 35A of the BR Act.
Central Government if it is satisfied
on a report from the Reserve Bank
that the banking company has failed
on more than one occasion to comply
with the ---------------------
(ii) The Central Government may make Scheme

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SL.NO QUESTION ANSWER
a----------after consultation with the
Reserve Bank for carrying out the
purpose of part IIC of the BR Act, in
relation to an acquired bank.
(iii) ------------may apply to the high court Reserve Bank.
for winding up of a banking
company under section 38 of the of
the BR Act.
(iv) The High Court shall order winding Pay its debts
up of a banking company if the
banking company is unable to ---------
------
(v) In a winding up proceeding the Be deemed to have filed claim.
depositors shall ---------for the
amounts shown in the books of the
bank standing to their credit.
(vi) The-------------may apply to the Reserve Bank
Central Government for an order of
moratorium in respect of a banking
company.
(vii) The provisions of a scheme of Have overriding effect on
amalgamation sanctioned by the
Central Government under section
45 of the BR Act will--------------the
provisions of other laws.
4(i) Central Government can acquire the False
undertaking of a banking company
under Section 36AE of the banking
Regulation Act in the interest of
banking policy without any report
from the Reserve Bank on the affairs
of the banking company.
(ii) The undertaking of an acquired bank True
may vest in the Central Government
or in any company or corporation as
directed by the Central Government.
(iii) On the application of Reserve Bank, False
the High Court may stay the
commencement or continuance of
proceedings against any banking
company for any period.

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SL.NO QUESTION ANSWER
(iv) The Reserve Bank or State Bank or True
another person as specified by the
Reserve Bank in its application
before the High Court may be
appointed as liquidator of a banking
company.
(v) On winding up of a banking False
company, all the depositors as a class
get the first preference for payment.
(vi) The reserve bank may prepare a True
scheme for reconstruction or
amalgamation of a banking company
under Section 45 of the BR Act.
(vii) Making any false statement in a True
return or other document submitted
under the provisions of the BR Act is
punishable with imprisonment and
fine also.
5(i) A banking company has to prepare
its annual accounts in the forms-------
---------
(ii) A banking company has to submit
three copies of its accounts and
balance sheet together with auditor's
report-------------------.
(iii) The expenses incidental to a special
audit under section 30(1B) of the BR
Act shall be borne by ------------.
(iv) The balance sheet and profit and loss
account of a banking company, have
to be audited, as stipulated under
section 30 the banking regulation
Act, by------------------.
(v) Reserve bank shall cause on
inspection of a banking company, by
one or more of its officers--------------.
6 Choose the correct statements from
following
(i) Reserve Bank may publish, if they
consider in the public interest to do
so, any information obtained by them

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SL.NO QUESTION ANSWER
under the BR Act in such
consolidated form as it thinks fit.
(ii) Reserve Bank may not publish any
information in whatever form
collected from a banking company in
exercise of the powers under the BR
Act.
(iii) Reserve bank may not publish
information obtained during
inspection of a banking company
even in a consolidated form.
7(i) Board of Financial Supervision is a
body established by the Government
under the provisions of the BR Act.
(ii) Board of Financial Supervision is a
body established under the Reserve
Bank of India Act for the supervision
of banks and financial companies.
(iii) Board of financial supervision is a
body established by the Government
for supervising the securities market.
8(i) The Reserve Bank may order
moratorium in respect of a banking
company when it is satisfied that
there is good reason to do so.
(ii) The Central Government may order
moratorium on its own motion when
it is satisfied that the financial
position of the banking company is
not satisfactory.
(iii) The Central Government may after
considering the application made by
the Reserve Bank for an order of
moratorium in respect of a banking
company, order moratorium staying
the commencement and continuance
of all actions and proceedings against
the banking company.
9(i) The High Court shall under section
38 of the BR Act order winding up of
a banking company if it is unable to

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SL.NO QUESTION ANSWER
pay its debts.
(ii) The High Court shall under section
38 of the BR Act order winding up of
a banking company if the
Government makes an application
therefore under section 37 of the BR
Act
(iii) The High Court shall under section
38 of the BR Act order winding up of
a banking company if the
continuance of the banking company
is prejudicial to the interests of its
shareholders and the Reserve bank
applies to the court on that ground.
10(i) No provisions of the Companies Act
apply to the liquidator in the winding
up of a banking company.
(ii) All provisions of the Companies Act
apply to the liquidator in the winding
up of a banking company.
(iii) All provisions of the Companies Act
relating to liquidator, insofar as they
are consistent with BR Act, apply to
a liquidator of a banking company.

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UNIT-5 PUBLIC SECTOR BANKS AND CO-OPERATIVE BANKS

Sl.No Question Answers


1 The State Bank of India is a ------------ Body corporate
constituted under the State Bank of India Act
2 The Chairman of State Bank of India is Central Government
appointed by --------------in consultation with the
Reserve Bank.
3 State Bank has to act as ----------and carry out Agent of Reserve Bank
Central Government Business and other
business entrusted by the Reserve Bank.
4 The provisions of the ---------are applicable to Banking Regulation Act.
State Bank as stipulated in Section 51 of the BR
act.
5 The majority of shares of subsidiary banks are State Bank of India
held by
6 Regional rural banks operate in Notified area
7 The management of the affairs of a regional Its board of directors
rural bank vests in
8 The State Bank can make statutory regulations True
for carrying out the purposes of the State Bank
of India Act, in consultation with Reserve Bank
and with previous approval of the Central
Government
9 The Central Government is not authorized to False
give any directions to the State Bank in matters (RA-)
of policy involving public interest
10 The provisions of Section 42 of the Reserve True
Bank of India Act relating to cash reserve apply
to State Bank.
11 Subsidiary banks do not have to maintain liquid False
assets under Section 24 of BR Act (RA-)
12 Regional rural banks may transact the business True
of banking as defined in Section 5(b) of the BR
Act and also other business specified in Section
6(1) of that Act.
13 Two regional rural banks may be amalgamated False
by the Reserve Bank by notification in the (RA-)
gazette
14 The management of Nationalised Banks is True
governed by the Naitonalised
Banks(Management and Miscellaneous
provisions) Schemes of 1970 and 1980
15 Unless the context otherwise requires, the Banking Company
reference to a ---------in the Banking Regulation

18
Act shall be construed as reference to a co-
operative bank.
16 ------------in relation to a co-operative society, Director
for the purpose of BR At, includes a member of
any committee or body for the time being vested
with the management of the affairs of that
society.
17 The requirement of minimum paid-up capital Rs.1Lakh
and reserves for a co-operative bank to
commence or carry on banking business is ------
18 There are restrictions on co-operative banks on Holding of shares
----in other co-operative societies under Section
19 of the BR Act.
19 Central and State co-operative banks have to Reserve Bank and National
submit their returns under Section 31 of BR Act Bank
to----
20 Under Section 23 of BR Act. Without the Central co-operative Bank
permission of Reserve Bank a---------can open a
new place of business within the area of its
operation
21 Co-operative Banks have to prepare their Banking Regulation Act
balance sheet and profit and loss account in the
forms set out in the Third Schedule to ---
22 Banking Regulation Act was made applicable to True
Co-operative banks by the Banking
Laws(Application to Co-operative Societies)
Act,1965
23 A primary co-operative bank does not require False
licence from the Reserve Bank to carry on (RA-)
banking business
24 The provisions of the Banking Regulation Act as True
provided in Section 56 of the Act apply to co-
operative banks.
25 A‟co-operative Bank‟ means a primary co- True
operative bank, central co-operative bank and
state co-operative bank
26 There are no restrictions under the BR Act on False
lending by co-operative banks to their directors (RA-)
or firms in which they are interested.
27 A scheduled co-operative bank has to maintain True
cash reserve as stipulated in section 42 if the
Reserve Bank of India Act(as applicable to co-
operative societies)
28 Inspection of co-operative banks is done by the False
State Government under the co-operative (RA-)
societies Act and the Reserve Bank has no

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power to inspect under the Banking Regulation
Act.
29 State Bank may act as agent of the Reserve
Bank----------
30 ----------shall be the ex-officio chairman of the
subsidiary banks
31 The thrust of business of regional rural banks is
to make loans d advances available „in rural
areas‟
32 Nationalised Banks can undertake ----
33 The auditor of a Nationalised bank has to be
34

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UNIT-6 CASE LAWS ON RESPONSIBILITY OF PAYING BANK

Sl.No Question Answers


1 The law relating to payment of cheques and False
protection to banker is contained in the Indian
Contract Act.
2 The responsibility of a banker to pay back the True
money of the customer specifically stated in the
Negotiable Instruments Act,1881
3 Section 31 of the Negotiable Instruments Act True
applies only to the banker
4 The banker is first bound to honour a customer False
cheque and only thereafter exercise his right of
set off.
5 A forged signature is no mandate of the True
customer
6 A customer is bound to inform the bank about False
lost cheque leaves
7 In a joint account if one of the signatures is False
forged, the bank and the customer are equally
liable.
8 Payment to be made in due course need not True
always be made to holder but can be made to
his agent or servant
9 In case bank makes payment by mistake it can False
recover the same even if the payee has changed
his position.
10 If a bank makes payment without checking the False
instrument under an ultraviolet lamp, it can be
held liable on the grounds of negligence

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UNIT-7 CASE LAWS ON RESPONSIBILITY OF COLLECTING BANK

Sl.No Question Answers


1 The statutory protection to a collecting banker False
is as per section 6 of the Indian Contract Act
2 Section 131A of the Negotiable Instruments Act True
extends the protection granted to a banker
while receiving payment of cheque, and drafts
3 The duties of collecting bank to claim protection False
has been laid down under the Indian Contract
Act and Banking Regulation Act
4 In the absence of proper reference the banker True
can be held liable on the grounds of negligence
5 It is necessary for the banker to make enquiries True
regarding the reference given by the customer

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UNIT-8 INDEMNITIES

Sl.No Question Answers


1 Section ------OF Indian Contract Act defines an 124
indemnity
2 A person promising to save another from loss is Indemnifier
called
3 -------------is a person who is promised to be Indemnity holder
saved from loss
4 Contract of indemnity as defined in the False
Contract Act is exhaustive
5 Insurance contracts are not contracts of False
indemnity
6 There are----parties to a contract of indemnity 2
7 Indemnifiers liability in a contract of indemnity Primary
is
8 There are three parties to a contract of False
indemnity the indemnifier, indemnity holder d
the person on whose behalf the indemnity is
given
9 Indemnifier‟s liability occurs only if the True
indemnity holder suffers loss
10 Customers as matter of right and without an False
indemnity can obtain duplicate of demand
drafts or travellers‟ cheque
11 Indemnities are required by banks purely as a False
formality and do not serve any other purpose.
12 The indemnity obtained by a banker only False
protects him from the actual value of the
instrument
13 The two conditions that an indemnity holder is He should act within the
bound to comply before being indemnified for a scope of his authority and
loss should not contravene any
directions of the
indemnifier
14 Indemnity holder entitle to be indemnified To the extent of the
damages suffered costs
incurred and sums paid
for compromise of any
suit
15 In case of compromise the indemnity holder has 1)The compromiser was
to satisfy certain conditions before recovering not contrary to the orders
the loss from the indemnifier, the conditions are of the indemnifier
2) Such compromise was
prudent
3) the indemnifier had

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authorized the indemnity
holder to compromise the
suit
16 An indemnity holder can act beyond his False
authority
17 An indemnity holder can be compensated only False
for damages and not for the costs incurred by hi
18 An indemnity holder is entitled to compromise a False
suit as thought fit by him though contrary to the
orders of the indemnifier

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UNIT-9 BANK GUARANTEES

Sl.No Question Answers


1 In bank guarantees the bank makes payment on Merely on demand by the
beneficiary.
2 In case of bank guarantee s on behalf of Must pay the beneficiary
company that is in liquidation the bank on
invocation of the guarantee by the beneficiary

25
UNIT-10 LETERS OF CREDIT

Sl.No Question Answers


1 A letter of credit is a form of guarantee given by True
banks on behalf of its customer
2 Letters of credit are bills of exchange drawn by False
a seller or a buyer
3 LCs are negotiable instruments False
4 The letter of credit is opened on the request of Applicant
5 The LC issuing bank is also called The importers bank or the
opening bank
6 The right to receive payment under a letter of The seller only
credit or the right to draw bills on a letter of
credit is vested in
7 The advising bank‟s responsibility is To inform the
beneficiary/seller about
the letter of credit
8 The advising bank is also called the Notifying bank
9 Negotiating bank is the bank which Makes payment of the
bills drawn by the seller
and accepts the documents
10 When the LC specifies the bank that is to Nominated Bank
negotiate the bills drawn under the LC then the
bank is also called
11 The confirming bank is The advising bank when it
confirms the LC
12 When the confirming bank confirm the credit it Undertakes on its part the
liability under the LC
13 Reimbursing bank is the bank That reimburses the
negotiating/paying or
confirming bank
14 Ordinary letter of credit is usually---- Sight credits
15 Letter of credit under which usance bills can be Acceptance credits
drawn is called an
16 In a revocable LC the credit can be amended or Issuing bank
cancelled by the
17 Only---letters of credit can be confirmed Irrevocable
18 Credit in which the beneficiary is not liable for Without recourse
the bills drawn thereunder is----credit
19 A back-to-back credit would involve at least --- Three: the issuing,
bank, viz.,the---bank,-----------bank and the---- advising and third
bank
20 All parties to a letter of credit transaction need False
to comply with the terms only as far as practical
and not strictly
21 In case the documents submitted by seller do False

26
not comply with the terms of letter of credit
then the same can be accepted and sent for
confirmation of buyer
22 A bill of exchange is document to title to goods False
23 A bill of exchange is also called a „bill‟ or a True
„draft‟
24 Invoice in a letter of credit transaction is a False
document similar to a quotation based on which
the buyer places his order
25 A bill of lading on a bona fide transfer confers True
on the transferee a right to the goods
26 An airway bill is also a document evidencing False
title to goods

27
UNIT-11 DEFERRED PAYMENT GUARANTEE

Sl.No Question Answers


1(i) In a deferred payment guarantee, the guarantee False
is to ensure delivery of goods.
(ii) A deferred payment guarantee is mostly based True
on a primary contract between the buyer and
the seller.
(iii) A deferred payment guarantee differs from False
other kinds of guarantee issued by banks as
regards payment liability of the bank on
invocation.
(iv) In a deferred payment guarantee the banks False
liability comes into existence only if all the
installments are not paid and not on the non-
payment of any one installment by the
customer.

28
UNIT-12 LAWS RELATING TO BILL FINANCE

Sl.No Question Answers


1 Bill of exchange means a unconditional True
direction to the drawer to pay the moneys.
2 The maker of the bill is called-------------. Drawer
3 Bill purchase facility is granted in the case of True
demand bills.
4 ----------------facility is granted in the case of Bill Discounting
usance bills.
5 ----------------of the bill is bound in case of Drawer
dishonour of bill.
6 Ownership of goods can be transferred by Document of title to goods
endorsement and delivery of-----------------------
7 In bills co-acceptance facility the banker True
becomes a surety for the value of bill.

29
UNIT-13 VARIOUS TYPES OF SECURITIES

Sl.No Question Answers


1 If money lent is more than Rs.100 on the True
security of land, then the mortgaged(simple)
requires registration.
2 A mortgage deed need not be witnessed. False
3 Permission from Income Tax authorities under False
the Section 230 to create mortgage is required
only if the land belongs to a company.
4 Arrears of tax constitute a preferential charge True
on the property.
5 There are three types of shares-ordinary,equity False
and preference.
6 Debenture is a kind of share issued by a False
company and has no voting rights.
7 Borrower can create a valid pledge with True
documents of title of goods.
8 Bills of lading, dock warrants, warehouse- True
keeper's certificate,etc., are some examples of
documents of title of goods.
9 Documents of title to goods are negotiable False
instruments.
10 Only Life Insurance Companies can issue life True
policies.
11 Insurance contracts are contracts of absolute True
good faith.
12 An assignee of a life policy can sue in his/her True
own name.
13 For a loan against fixed deposit receipt, the False
stamp duty is very high.
14 Supply bills are bills of exchange False.

30
UNIT-14 LAW RELATING TO SECURITIES AND MODES OF CHARGING-I

Sl.No Question Answers


1 Mortgage is ------------in the immovable Transfer of interest
property.
2 Simple mortgage is created by an instrument in True
writing.
3 Mortgage by deposit of title deeds is required to False
be registered.
4 In the case of usufructuary mortgage the True
possession of the properties is given.
5 In mortgage by way of conditional sale the False
property is sold with a condition for re-
conveyance.
6 All successive mortgages created will rank False
equally and no mortgage will have a greater
priority over the other.
7 To decide as to which mortgage will have Execution of
priority over the other in the case of two or
more mortgages on the same immovable
property, the date of ----------mortgage is
pertinent.
8 Limitation period for filling a suit for sale of Twelve
mortgaged properties is----------------years from
the date the mortgage debt becomes due.
9 Mortgage suits are filed in the Court within False
whose jurisdiction the mortgagee resides.

31
UNIT-15 LAW RELATING TO SECURITIES AND MODES OF CHARGING-II

Sl.No Question Answers


1 Pledge means-------------of goods for purpose of Bailment
securing a payment of debt or performance of
promise.
2 The most important characteristic of pledge is-- Possession
------------of goods.
3 Owner of goods cannot make a pledge. False
4 Hypothecation letter gives a banker right to True
possession of goods is given
5 Hypothecation letter gives a banker right to True
possession of goods in the event of default.

32
UNIT-16 DIFFERENT TYPES OF BORROWERS

Sl.No Question Answers


1 Individual borrowers are governed by the-------- Indian Contract
----Act
2 In a Hindu undivided family the business of the Karta
family is managed by---------------
3 A company is------------and---------------from its Separate and distinct
members.
4 A Private Limited Company has minimum------- 2,50
--number of members and a maximum of---------
--numbers of members.
5 A Public Limited company shares are----------- Freely
transferable.
6 Statutory corporations are established by Acts Parliament
of-------------
7 Private trusts are governed by the------------Act. Parliament
8 Trusts of Hindus are governed by the---------- Religious and Charitable
Act. Endowments Act
9 Trust of Muslims are governed by the----------- Wakf
Act

33
UNIT-17 TYPES OF CREDIT FACILITIES

Sl.No Question Answers


1 Credit facilities are mainly classified in to (i)Fund based facilities
(ii)Non fund based
facilities
2 Fund based facilities, among other things, (i)Cash credits/Overdrafts
include (ii)Term Loans
(iii)Bill Finance
3 Non-fund based facilities, among other things, (i)Bank guarantee
include (ii)Letter of credit facility
4 Term loans based on period of repayment are (i)Short-term loan
classified into (ii)Medium-term loan
(iii)Long-term loan
5 Cash Credit facility is a------------- Fund based facility
6 Bills co-acceptance facility is a------------- Non-Fund based facility
7 Banker is entitled to charge interest on Banking custom
temporary overdraft under---------------.
8 Limitation period for filling a suit in term loans Three
is-----------years from the date of default of
installment
9 Period of repayment in the case of medium- 5-7 years
term loan is------------

34
UNIT-18 SECURED AND UNSECURED LOANS, REGISTRATION OF FIRMS,
INCORPORATION OF COMPANIES

Sl.No Question Answers


1 Only personal security of the borrower is In secured
available in the case of----------loans.
2 Secured loans are normally secured by----------- Pledge, Hypothecation,
Mortgage or Assignment
of Debts
3 Pledge is------------of goods as a security for Bailment
debt.
4 Hypothecation is treated as-------------pledge. Constructive
5 Personal obligation of mortgagor is a distinct Mortgage of deposit of
feature of------------ title deeds
6 Section 58 of Partnership Act, 1932 provides Registration of
for------------- partnership
7 A partner on behalf of firm cannot institute a False
suit on contract, if the firm is registered.
8 Shares of public limited company are freely True
transferable.
9 Certificate of incorporation is a document True
evidencing existence of company.
10 Certificate of commencement of business is False
required for private limited company to start
business.

35
UNIT-19 REGISTRATION AND SATISFACTION OF CHARGES

Sl.No Question Answers


1 Charge means any form of----------for----------- Security, Debt
2 Charges created by company shall be registered Registrar of Companies
with--------------
3 Under Companies Act a charge includes---------- Mortgage
-
4 Charge, if not registered is not enforceable False
against company.
5 Charge shall be registered within------------days 30
from the date of creation of charge.

36
UNIT-20 INTRODUCTION TO SECURITISATION AND RECONSTRUCTION
OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST,
2002 (SARFAESI ACT, 2002)

Sl.No Question Answers


1 Banks obtain security while lending, so that in Realised by sale
the case of need, the money can be------------of
securities.
2 The SARFAESI Act is applicable to the housing True
finance companies whose names are notified by
the Central Government.
3 In Mardia Chemical Case the Supreme Court True
decided that the condition of deposit of amount
is fully invalid.
4 After Mardia Chemical Case, the amendment 50 Per cent
made in the SARFAESI Act stipulates deposit of
---------------amount before preferring the appeal
to DRT (Appellate Tribunal).
5 Whether movable securities in possession of theYes, bank can sell as
bank can be sold by the bank without the provided in the Contract
intervention of the Court? Act, 1872
6 As per the laws existing today, the mortgaged No, SARFAESI Act, 2002
security cannot be sold without a Court has now made enabling
intervention. Is this correct? provisions.
7 Provisions of SARFAESI Act, 2002 applies to Where the security
which securities? interests are created for
repayment of financial
assistance given by the
bank or a financial
institution.
8 In the Mardia case what did the Supreme Court Condition to pay seventy-
declared as invalid? five percent of the
amounts as pre-condition
while preferring appeal to
the DRT.

37
UNIT-21 DEFINITIONS OF SARFAESI ACT, 2002

Sl.No Question Answers


1 The SARFAESI Act is applicable for pledged False
securities also.
2 For the enforcement of a mortgage security, False
court intervention is required even for actions
under the SARFAESI Act.
3 Banks and financial institutions can issue notice In possession, NPA
for enforcement over security under SARFAESI
Act only if these securities are not------------------
creditor and only when the account is classified
as---------------
4 If the borrower does not pay within----------days Sixty, take possession
after notice by the secured creditor the creditor
can-----------------of the security.
5 After receipt of notice from the secured creditor True
for repayment of dues by the borrower, the
borrower is legally prevented from transferring
his property in any way.
6 On request of the secured creditor the District True
magistrate or the Chief Judicial Magistrate can
take possession of the security for handling over
it to the creditor.
7 When the management of the company is taken False
over by the secured creditor, the directors of
such company are entitled to compensation for
loss of office.
8 When any bank or financial institution obtains With the central Registry.
a charge against property, with which authority
will the transaction have to be registered under
the SARFAESI Act, 2002?
9 When can the provisions of SARFAESI Act, When there is default in
2002 be invoked for proceeding against the repayment and the bank
charged property? declares the account as
NPA.
10 Whether existing or future receivables are Yes
property?
11 From the following which function is of a Acquisition of financial
securitisation company? asset from the originator.

38
UNIT-22 REGULATION OF SECURITISATION AND RECONSTRUCTION OF
FINANCIAL ASSETS OF BANKS AND FINANCIAL INSTITUTIONS

Sl.No Question Answers


1 A securitisation or reconstruction company True
needs registration from the RBI for
commencement of business.
2 Right of acquisition of a financial asset by the False
securitisation or reconstruction company is
subject to the prior agreements or contracts
about the asset.
3 Acquisition of a financial asset by the False
securitisation company or reconstruction
company is with the liability also over such an
asset.
4 Which are the four documents involved in the Offer document,
securitisation transaction? debenture, agreement and
security receipt
5 For each asset acquired or to be acquired, by Separate
the securitisation company or the
reconstruction company there should be----------
----scheme.
6 When the securitisation company or Undivided interest
reconstruction company issues security receipts,
the holder thereof, is entitled to a-------------in
the financial asset.
7 The security receipt issued by the securitisation False
or reconstruction company requires
registration.
8 Any direction issued by the RBI under the Statutory, binding
SARFAESI Act has----------effect and is-----------
---on the parties concerned.
9 After application of the SARFAESI Act what They have to get
have the existing companies to do about registered within six
registration with RBI? months from the
commencement of the Act.
10 Which, from amongst the following, is a reason The company ceases to
for the cancellation of registration of the carry on the business of
securitisation company and reconstruction securitisation or
company without giving a hearing opportunity? reconstruction.

39
UNIT-23 ENFORCEMENT OF SECURITY INTEREST

Sl.No Question Answers


1 Asset reconstruction means-------------by any Acquisition, Financial
securitisation company or reconstruction assistance
company of any right or interest of the creditor
in any----------------
2 SARFAESI Act is applicable to the Regional False
Rural Banks.
3 Mortgage or asset backed debt instruments can False
be issued by the securitisation company or
reconstruction company to the general public.
4 A guarantor to the loan is within the meaning of True
the word borrower under SARFAESI Act.
5 SARFAESI Act is applicable only when there is True
security.
6 Has SARFAESI Act defined Hypothecation and True
whether the Act is applicable to Hypothecation
security?
7 On giving of a default notice by the creditor, theGive the consideration to
borrower gives a reply to it. What should the the reply as per the
creditor do? guidelines issued in the
Mardia Chemical case by
the Supreme Court and
reply to it.
8 On sale of the Security asset, the sale proceeds Towards payment of cost,
are appropriated firstly. charges and expenses for
the preservation and
protection of securities ,
insurance premiums, etc.

40
UNIT 24 CENTRAL REGISTRY

Sl.No Question Answers


1 After coming into operation, the provisions True
relating to central registry the banks and
financial institutes will have to register all
security will have to register all security
interests created in the asset.
2 The period stipulated in the Act for filing details 30
of security interest is--------------days.
3 Duty to report satisfaction of charge to the Creditor
central register is on creditor or on the
borrower?
4 Besides the SARFAESI Act, some other laws No, registration under the
require some registration of charge created in SARFAESI Act as well as
the property. Is such double registration only other applicable law
avoidable? will have to be made as
the SARFAESI Act is not
substitution of any other
law.

41
UNIT 25 OFFENCES AND PENALTIES

Sl.No Question Answers


1 Is there any punishment provided in the Act for Yes
not following RBI directions?
2 Can the Honorary Magistrate take cognisance No
of offence under the SARFAESI Act?
3 Whether breach of RBI directives is punishable Yes, a fine up to Rs.5
offence and to what extent? Lacs and for continuation
of offence a fine of up to
Rs.10,000 per day.

42
UNIT 26 MISCELLANEOUS PROVISIONS

Sl.No Question Answers


1 For challenging an action initiated by secured False
creditor against the defaulting borrower under
the SARFAESI Act, the borrower can go to the
Civil Court for an injunction.
2 Can the bank take action under SARFAESI Act No
against a deposit under lien with it?
3 Are hire-purchase and lease contracts covered No
under SARFAESI Act?
4 After the bank's notice a defaulting borrower No
has paid within sixty days a substantial amount
and the present dues are Rs.15 Lacs which is 15
percent of the claimed amount. Can bank
proceed to take possession of the security?
5 If on some point the provisions of the Transfer SARFAESI Act
of Property Act and the SARFAESI Act are
different, which act will prevail?
6 Can a bank proceed to take possession of the No
security after four years of cause of action?
7 Provisions of the SARFAESI Act are applicable
Securities charged to
to which of the following? creditors and not in
possession of the creditor.
8 When the rules, framed by the Central When both the Houses of
Government, under the Act get validity? parliament approve the
Rule so framed.

43
UNIT 27 THE BANKING OMBUDSMAN SCHEME, 2006: PURPOSE, EXTENT,
DEFINITIONS, ESTABLISHMENT AND POWERS

Sl.No Question Answers


1 Disputes amongst two banks can be taken up True
before the banking ombudsman.
2 Co-operative banks are not covered by the False
banking ombudsman scheme.
3 Banking ombudsman is appointed by a False
committee of Supreme Court Judges.
4 It is not within the powers of banking False
ombudsman to deal with the complaint unless
both parties agree for his intervention.
5 What is the object of introducing the banking To enable resolution of
ombudsman scheme, 2006? complaints relating to
banking services.
6 Complaints relating to non-acceptance of small Banking ombudsman can
denomination notes by a bank, can be made to a deal with the complaints
banking ombudsman. under the scheme.
7 Complaints can be made against promises The banking ombudsman
made by sales agents but not fulfilled by the can entertain the
bank represented by them under the banking complaint under the
ombudsman Scheme 2006? scheme.

44
UNIT 28 PROCEDURE FOR REDRESSAL OF GRIEVANCE

Sl.No Question Answers


1 Bank can refuse acceptance of small False
denomination notes from the customer and
therefore, on this ground there cannot be a
complaint to banking ombudsman.
2 On valid grounds bank can refuse the opening False
of a new account, but on this ground, compliant
before the banking ombudsman is maintainable.
3 Can a prospective borrower go before the No
banking ombudsman for non-sanction of his
loan by the bank?
4 Banking ombudsman has powers to call for any Yes
information and certified copies from the bank
when he is dealing with the complaint.
5 For settling the complaint the banking False
ombudsman is bound by legal rules of evidence.
6 What is the maximum amount the banking Rs.10 Lacs
ombudsman can award as compensation?
7 Limitation period for filing of the review 45
application against the award given by the
banking ombudsman is -------------days.
8 Can a customer from whose account someone Yes, as this aspect comes
fraudulently has withdrawn money make a under the powers of the
complaint before the banking ombudsman? banking ombudsman.
9 Reserve Bank and the Central Government may Reserve bank and the
forward a complaint to the banking Central Government are
ombudsman? empowered to send the
complaint received by
them to the banking
ombudsman.
10 Can the complaint be filed through an advocate Advocates are not
as the authorised representative of the allowed to act as
complainant? authorised
representatives of the
complainants under the
scheme.

45
UNIT 29 RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL
INSTITUTIONS ACT, 1993 (DRT ACT) PRELIMINARY

Sl.No Question Answers


1 DRT Act is applicable only if the debt Rs.10 Lacs
recoverable is above Rs.----------------
2 The debt recoverable through DRT may be True
secured or In secured.
3 Overdrawn amount in an account is not a debt False
recoverable under DRT Act.
4 If a Civil Court has passed a decree it has to be False
executed through that court only and cannot
come to recovery tribunal.
5 A bank has allowed a current A/c holder an ad Yes, as it is a legally
hoc overdraft of Rs.15 lacs. The amount is due. recoverable amount by
Whether this is recoverable under provisions of the bank.
DRT Act?

46
UNIT 30 ESTABLISHMENT OF TRIBUNAL AND APPELLATE TRIBUNAL

Sl.No Question Answers


1 Debt recovery tribunals are established by------- Central Government
-----
2 Debt recovery tribunals consist benches of three False
persons.
3 Jurisdiction of appellate tribunal is with the False
respective High Courts.
4 Can the order of Central Government in the No
appointment of the presiding officer of the
tribunal be challenged in any Court?

47
UNIT 31 JURISDICTION, POWERS AND AUTHORITY OF TRIBUNALS

Sl.No Question Answers


1 A decree passed by the foreign court can be
executed by the Tribunal.
2 For reasons the chairperson of the Appellate
Tribunal can transfer any case from one
tribunal to other Tribunal within his
jurisdiction.
3 For the matters for which the Tribunals are
empowered the Civil Courts have no
jurisdiction.

48
UNIT 32 PROCEDURE OF TRIBUNALS

Sl.No Question Answers


1 DRT jurisdiction for a bank is where the head False
office of the bank is located.
2 If a bank has filed recovery application, other True
bank can join the application if the defendants
are same.
3 When a case get transferred from Civil Court to False
tribunal fresh court fee is required to be paid.
4 A counterclaim field before DRT has the same Plaint in cross-suit
effect as a --------------
5 Since DRT is not a Civil Court it cannot pass False
interim orders such as attachment, injunction
receiver, etc.
6 A person who has to file appeal before the 75 per cent of the debt
Appellate Tribunal has to pay------------- ordered by the Tribunal.
7 While filing appeal before the appellate Yes, 75 per cent of the
Tribunal has to pay----------------- amount determined by
the tribunal is required
to be deposited at the
timing of filing of the
appeal.

49
UNIT 33 RECOVERY OF DEBTS DETERMINED BY TRIBUNAL AND
MISCELLANEOUS PROVISIONS

Sl.No Question Answers


1 Recovery officers appointed under DRT Act can True
attach and sell movable as well as immovable
property of the person against whom order is
passed even if the property is not charged to the
creditor.
2 The defendant can raise a plea before the False
Recovery Officer about correctness of the
amount ordered to be paid.
3 If the recovery certificate has clerical or Presiding Officer of the
arithmetical mistake-------------can correct the Tribunal.
same.
4 For recovery the Recovery Officer can adopt the True
same methods as adopted for recovery of
income tax under the Income Tax Act.
5 Recovery Officer can ask the defendant to True
furnish by affidavit particulars of his asset.
6 A company is under winding up process. No, as the DRT Act
Whether High Court permission is required to a specially provides to that
bank to proceed against it before DRT? effect.
7 Doctrine of election will come into play When all the aforesaid
elements are to be
present in a case.

50
UNIT 34 THE BANKER'S BOOKS EVIDENCE ACT, 1891

Sl.No Question Answers


1 If the books of the bank are maintained in the Yes
electronic form, does all the provisions of this
Act are applicable to it.
2 Does this Act apply to any investigation or Yes
inquiry under the Criminal Procedure Code?
3 A certified copy of any entry in a banker's Book Prima facie
is received in legal proceeding as------------
evidence for existence of such entry.
4 Unless the Court otherwise directs, bank officer Original books
cannot be compelled to produce----------------to
prove any banker's book's contents when copy
is produced.
5 In a civil suit, to which bank is not a party, one No, as the certified copy
of the parties has produced certified copy of is a prima facie evidence
books account. One party to the suit wants to that is admissible in
call bank officer as witness to prove the contents evidence.
of copy. Can it be done?

51
UNIT 35 THE LEGAL SERVICES AUTHORITIES ACT, 1987: LOK ADALATS

Sl.No Question Answers


1 Lok Adalats are organised under the Lok False
Adalats Act.
2 Lok Adalats are organised to settle only the False
existing disputes between the parties.
3 If one party intends to refer the dispute to Lok False
Adalat, the consent of the other is not required.
4 Lok Adalats shall strive at arriving a True
compromise or settlement between the parties.
5 There shall be no appeal against the award of True
the Lok Adalat.

52
UNIT 36 THE CONSUMER PROTECTION ACT, 1986: PREAMBLE, EXTENT
AND DEFINITIONS

Sl.No Question Answers


1 Consumer protection act is enacted to protect False
the manufacturing conditions of the Industries.
2 The agencies appointed under Consumer True
Protection Act are quasi-judicial in nature.
3 Can a voluntary consumer association file a Yes
complaint on behalf of consumer?
4 A consumer has purchased goods for resale. No
Can he file complaint?
5 'N. has purchased a draft from a bank No, as he is not consumer
favouring 'B'. The draft is lost in transit and for of the bank and is not
duplicate draft in liew of first bank need some taking any service from
formalities to be completed by 'N'. Can 'B' file a the bank.
consumer case against the formalities as it is
delaying payment to him.

53
UNIT 37 CONSUMER PROTECTION COUNCILS

Sl.No Question Answers


1 Central Consumer Protection Council is the True
apex council having all India jurisdiction.
2 Minister-in-Charge of consumer affairs in the True
Central Government is the Chairman of Central
Consumer Protection Council.
3 State Consumer Protection Council is appointed False
by Central Government.
4 State Consumer Protection Council has to meet Twice
at least-------------in a year.
5 Who is the Chairman of the Central Consumer Minister-in-Charge of
Protection Council? Consumer Affairs in the
Central Government.

54
UNIT 38 CONSUMER DISPUTES REDRESSAL AGENCIES

Sl.No Question Answers


1 To appoint a person as President of District True
Forum, he must be qualified to be a District
Judge.
2 Appointment of District Forum is made by the False
High Court.
3 Can few consumers file a representative Yes, but with permission
complaint on behalf of general consumers at of District Forum
large?
4 As the agencies appointed for under the Act are False
quasi-judicial, they do not have powers of Civil
Court while conducting the case.
5 District Forum has passed order to pay By referring the order to
compensation. How recovery of the ordered collector for making
amount is made? recovery as if it is land
revenue recovery.

55
UNIT 39 THE LAW OF LIMITATION

Sl.No Question Answers


1 In the Limitation Act, the definition of 'suit' True
does not include appeal or application.
2 The defendant is required to set up the plea of False
limitation if he has to succeed in a suit instituted
beyond the period of limitation.
3 A suit is said to be instituted when the plaint is True
presented before the proper officer.
4 Acknowledgment in writing gives rise to fresh True
period of limitation.
5 Part payment of a debt within the period of True
limitation entails the plaintiff to compute fresh
period of limitation from the date of payment.
6 Limitation for a mortgage suit is three years False
from the date when the mortgage money
becomes due.
7 A suit on demand promissory note can be filed False
within three years from the date on which the
demand was made.

56
UNIT 40 TAX LAWS

Sl.No Question Answers


1 Liability to pay income tax arises on account of True
residential status and place of the source of
income.
2 Assessment year represents the period of 12 True
months beginning from 1st April each year.
3 Previous year is the financial year immediately True
preceding the assessment year.
4 Income is taxed only on salaries. False
5 Income exempt from tax is to be deducted out of False
taxable income before computation of tax.
6 Assessment is of two types (a) summary True
assessment (b) scrutiny assessment.
7 Partnership firm, if it has no income, need not False
file a tax return.
8 Tax assessed by AO shall be paid within------- 30
days.
9 Entire advance tax is to be paid by 15th March. True
10 Tax deduction is to be made before making True
payment to-------------non-residents.
11 Tax deducted at source is to be deposited within True
one week from the end of the month in which it
is to be deducted.
12 Person deducting tax at source is required to file True
a quarterly return of TDS.
13 FBT consists of specific items and certain True
benefits or expenditure incurred by the
employer as deemed fringe benefit.
14 For FBT a separate return has to filed. False
15 Service Tax Act deals with levy of tax on False
services.
16 Cenvat credit can be availed of in respect of tax True
paid on certain specified input services.
17 Failure to deduct tax at source will result in Dis allowance of
expenditure
18 Banking Cash Transaction Tax is payable if Rs. 50,000 in a day.
withdrawal by an individual exceeds
19 Banking Cash Transaction Tax is payable to the 15th day of the next
credit of the Central Government by month.

57
UNIT 41 MEANING AND ESSENTIALS OF A CONTRACT

Sl.No Question Answers


1 A-------------is free when the parties to the Consent
contract agree to the same thing in the same
sense.
2 A contract without-----------is void. Consideration
3 A person who makes a proposal is known as----- Promisor
--------.
4 A person is said to be competent to contract if--- He is a major and of
----------. sound mind.
5 A enters into an agreement with B to rob C and False
share the money. B runs away with all the
money. A can file a suit against B to recover the
money.
6 Mr. X (aged 17) can enter into an agreement False
with Mr. Y (aged 25) to buy a car.
7 A contract is concluded only when the party to True.
whom the proposal is made, accepts the
proposal.

58
UNIT 42 CONTRACTS OF INDEMNITY

Sl.No Question Answers


1 Insurance policies are contracts which are in the Indemnity
nature of------------------.
2 There are------------parties in a contract of Two
indemnity.
3 A person who is indemnified can recover True.
damages as well as costs for claiming the
damages.

59
UNIT 43 CONTRACTS OF GUARANTEE

Sl.No Question Answers


1(i) In a Contract of Indemnity the indemnifier is True
primarily liable.
(ii) In a Contract of Guarantee the liability of the True
surely is secondary.
(iii) Anything done for the benefit of the principal True
debtor is a sufficient consideration to the surety
for giving the guarantee.
(iv) Where there are co-sureties, a release by the True
creditor of one of them does not discharge the
others.
(v) Principal debtor need not pay the surety after False
the surety has paid the amount to the creditor.
2(i) Surety is also known as the-------------- Guarantor
(ii) Liability of the surety is-----------that of the Co-extensive with
principal debtor.
(iii) A guarantee which extends to a series of Continuing
transactions is known as a-------------guarantee.
(iv) Surety is------------if the principal debtor is Discharged.
released by the creditor.
(v) Guarantee obtained by--------------is invalid. Misrepresentation.

60
UNIT 44 CONTRACT OF BAILMENT

Sl.No Question Answers


1 Bailor is a person who delivers his goods to the False
surety to enable him to give a guarantee.
2 Bailee can use the goods given by the bailor, in False
the manner as he likes.
3 The bailee can keep the goods bailed to him and False
he need not return the same to the bailor.
4 Giving a product on rent for use to another True
person is a contract of bailment.
5 If ornaments kept in the safe locker of bank are False
stolen, in spite of due care by the bank, the bank
is liable to the depositor of ornaments.
6 It is the obligation of the bailee to keep his goods True
separate from the goods of the bailor.
7 The bailor is liable for any loss to the bailee if True
the goods bailed are defective and the bailor
knowingly does not disclose this fact to the
bailee.
8 If the bailee has rendered any service involving True
the exercise of labour or skill in respect of the
goods bailed to him, he has a right to retain such
goods until he receives due remuneration for the
services he has rendered.

61
UNIT 45 CONTRACT OF PLEDGE

Sl.No Question Answers


1 In a pledge, the goods are delivered to be kept True
as security for a debt or for performance of a
promise.
2 The pawnee can sell the goods, if the pawnor True
fails to pay.
3 The pawnee can sell the goods without giving False
notice to the pawnor.
4 The pawnee can keep the goods even after the False.
pawnor has paid the dues.

62
UNIT 46 CONTRACT OF AGENCY

Sl.No Question Answers


1 Agent can be appointed by-------------. Any of the three modes
(i)Express appointment
(ii)Implication of law
(iii)Ratification by principal
2 The usual form of contract of agency is by way Power of Attorney
of a-------------.
3 When a person by his words or conduct Estoppel
appoints someone as his agent it is known as
agency by-----------.
4(i) Consideration is the most essential element in False
any contract of agency.
(ii) A contract of agency is terminated if the agent True
does not wish to continue ad agent any more.
(iii) An agent can have a lien on the goods of the True
principal for the dues payable by the principal
to the agent.
(iv) Minor can be a principal or agent False
(v) The principal has to indemnify the agent for all True.
the lawful acts done by the agent in the course
of his duties.

63
UNIT 47 MEANING AND ESSENTIALS OF A CONTRACT OF SALE

Sl.No Question Answers


1(i) ------------means the consideration for a sale of Price
goods.
(ii) Goods as defined under Sale of Goods Act do Actionable Claim
not include-------------.
(iii) -------------goods are to be Future
manufactured/produced/acquired by the seller
after making of the contract of sale.
(iv) -------------goods means goods identified and Specific
agreed upon at the time a contract of sale is
made.
(v) --------------means voluntary transfer of Delivery
possession from one person to another.
(vi) When the transfer of the property in the goods Agreement to sell
is to take place at a future time or subject to
some conditions thereafter to be fulfilled, the
contract is called------------.
(vii) In-------------the ownership of goods is yet to Agreement to sell.
pass from the seller to the buyer.
2(i) Shares are goods within the meaning of the Sale True
of Goods Act.
(ii) Fixtures can be regarded as movable goods only True.
if they are intended to be served and sold
separately.

64
UNIT 48 CONDITIONS AND WARRANTIES

Sl.No Question Answers


1(i) If the stipulation agreed to between the parties Condition
is essential to the main purpose of the contract
then such a stipulation is known as a-------------.
(ii) A--------------is a stipulation, Collateral to the Warranty
main purpose of the contract.
(iii) There is an implied condition on the part of the Sell
seller that he has a right to--------------the goods.
(iv) If the sale of goods is by---------------there is an Description
implied condition that the goods shall
correspond with the description.
2(i) In every contract of sale it is implied that the True
seller has got the right to sell the goods.
(ii) An implied warranty as to quality or fitness for True.
particular purpose may be annexed by the
usage of trade.

65
UNIT 49 UNPAID SELLER

Sl.No Question Answers


1(i) The seller of goods is deemed to be an unpaid Price
seller when the-----------------has not been paid
(ii) There is no----------------as to the quality or Implied condition
fitness of goods for any particular purpose.
(iii) When the-------------is in possession of goods, a Seller
lien can be exercised.
(iv) ---------------is terminated when the buyer gets Lien
the possession of the goods.
2(i) When property in the goods has not passed to True
the buyer and the buyer becomes insolvent
before the price is paid, the seller can withhold
the delivery of goods.
(ii) A seller who has accepted a negotiable security True.
as an absolute payment is no longer an unpaid
seller.

66
UNIT 50 DEFINITION, MEANING AND NATURE OF PARTNERSHIP

Sl.No Question Answers


1 If one partner cheats a customer of the True
partnership firm then all the partners of the
partnership firm are liable to compensate the
customer.
2 Registration of firms is compulsory under the False
Partnership Act.
3 It is compulsory to enter into a partnership False
deed.
4 The partners are free to decide their mutual True
rights and liabilities.
5 A partnership deed can even provide that a True
particular partner would not take part in the
day-to-day business decisions of the partnership
firm.
6 Consent of all the partners is necessary to True
change the nature of business carried on by the
firm.
7 A partnership at will can be dissolved by notice. True.

67
UNIT 51 RELATIONS OF PARTNERS TO ONE ANOTHER

Sl.No Question Answers


1 Every partner has a right to receive False
remuneration.
2 It is necessary that all the partners in the False
partnership firm must receive equal share of
profits in the partnership firm.
3 No partner is entitled to use the partnership True
property for his private purposes.

68
UNIT 52 RELATIONS OF PARTNERS TO THIRD PARTIES

Sl.No Question Answers


1 A single partner can be authorised to carry on True
business and sign documents on behalf of the
firm.
2 Every partner is liable jointly with all other True
partners and also severally for all acts of the
firm done while he is a partner.

69
UNIT-53 MINOR ADMITTEED TO THE BENEFITS OF PARTNERSHIP

Sl.No Question Answers


1 A Minor can be a partner in a partnership firm False
(RA-)
2 A Minor can be admitted to the benefits of a True
partnership firm
3 A Minor is personally liable like other partners False
to pay the debts of the firm (RA-)
4 A minor who is admitted to the benefits of a True
partnership firm, has a choice when he attain
majority as to whether he wants to continue as
a partner or not.

70
UNIT-54-DISSOLUTION OF A FIRM

Sl.No Question Answers


1 The partners can mutually agree and dissolve True
the firm
2 On the death of a partner the partnership firm False
is compulsorily dissolved (RA-)

71
UNIT-55-EFFECT OF NON-REGISTRATION

Sl.No Question Answers


1 A Partner of an unregistered firm can file a suit False
against other partners to get his share of
profits.

72
UNIT-56-DEFINITION AND FEATURES OF A COMPANY

Sl.No Question Answers


1 Directors are the actual owners of a company False
(RA-)
2 A Company has to be compulsorily registered True
under the Companies Act 1956

3 A company cannot enter into contracts in its False


own name. (RA-)

4 If all the members of a company die, then the False


company has to be wound up(i.e dissolved) (RA-)

73
UNIT-57-TYPES OF COMPANY

Sl.No Question Answers


1 In case of a company limited by shares the False
creditors of the company can recover the money
from the members if the company is not making
profits.
2 A Member cannot transfer shares in a public False
company without the consent of other members.
3 The minimum number of members required in 2
a private company is
4 The minimum number of members required in 7
a Public company is
5 The maximum number of members in a private 50
company can be
6 The maximum number of members in a public Any number
company can be
7 A private company should have a minimum One lakh
paid-up capital of Rupees
8 A public company should have a minimum Five lakh
paid-up capital of Rupees
9 In a government company the government 51
holds at least—percent of the paid-up capital

74
UNIT-58-MEMORANDUM OF ASSOCIATION AND
ARTICLES OF ASSOCIATION

Sl.No Question Answers


1 In case of conflict between the memorandum of False
association and articles of association, the
articles of association prevail

75
UNIT-59-DOCTRINES OF ULTRA VIRES/CONSTRUCTIVE NOTICE/
INDOOR MANAGEMENT

Sl.No Question Answers


1 Doctrine of ultra vires lays down that every False
outsider is assumed to have read the
memorandum of association and articles of
association
2 Doctrine of constructive notice states that the False
outsiders are not required to see the compliance
of internal regulations of the company.
3 Doctrine of indoor management lays down that False
a company cannot carry on the objects not
permitted by its memorandum of association

76
UNIT-60 MEMBERSHIP

Sl.No Question Answers


1 A minor can be a member of a private company False
but not of a public company
2 A member can inspect the register of members True

77
UNIT-61-PROSPECTUS

Sl.No Question Answers


1 There are no remedies available for False
misstatements in prospectus by directors

78
UNIT-62-DIRECTORS

Sl.No Question Answers


1 The maximum number of directors in a private 12
company can be
2 The maximum number of directors in a public 12
company can be
3 The minimum number of directors in a public 3
company can be
4 The minimum number of directors in a private 2
company can be
5 At least --- of the total number of directors of a Two-third
public company are to be persons whose period
of office is liable to determination by retirement
by rotation
6 Every public company or a private company Five Crore
which is a subsidiary of a public company
having a paid-up share capital of Rupees---- ---
must have a managing or whole-time director
or a manager.
7 Additional directors are appointed by the ---- Board of directors
8 Alternate directors are appointed by the Board of directors
9 Casual vacancies in the board of directors is Board of directors
filled in by the -----

79
UNIT-63 FOREING EXCHANGE MANAGEMENT ACT 1999

Sl.No Question Answers


1 Authorised person is an individual appointed False
by the RBI to deal in foreign exchange
2 A current account transaction alters the assets False
or liabilities outside India of persons resident in
India
3 A capital account transaction includes False
payments due in connection with foreign trade
in the ordinary course of business
4 Foreign exchange includes traveller‟s cheques True
5 RBI can revoke any authorization given to an True
authorized person
6 Civil Court has the jurisdiction to entertain any False
suit or proceeding in respect of any matter
under the FEMA

80
UNIT-64-TRANSFER OF PROPERTY ACT 1882

Sl.No Question Answers


1 Transfer of Property Act basically contains False
provisions relating to transfer of moveable
property and goods
2 Mortgage is a transfer of an interest in specific True
immoveable property to secure the payment of
money given by way of loan
3 In a simple mortgage the mortgagor does not True
deliver possession of the mortgaged property to
the mortgagee
4 In a mortgage by conditional sale the property True
is transferred the condition of sale is that on
default of payment of the mortgage money on a
certain date the sale shall become absolute.
5 In a usufructuary mortgage the mortgagor True
delivers possession of the mortgaged property
to the mortgagee
6 In an English mortgage the property is True
transferred absolutely by the mortgagor to the
mortgagee with a condition for retransfer
7 In a mortgage by deposit of title deeds the False
property given as a mortgage has to be situated
in notified towns.
8 A lease of from year to year or for any term False
exceeding one year can be made by transfer of
possession
9 The debtor has to be given a notice of transfer False
of actionable claim
10 A lease for agricultural or manufacturing 6 months
purpose can be terminated by the lessor or
lessee by giving -----notice to one another
11 A memorandum recording mortgage by deposit Registration
of title deeds does not require
12 The essentials for valid equitable mortgage are Intention of security
debt, deposit of title deeds and
13 In case of accession to the mortgaged property, Entitled
where the mortgagee is in possession of the
mortgaged property, the mortgagee is ----of the
accession
14 A mortgagor, while lawfully in possession of the Power
mortgaged property, shall have -----to make
leases thereof.
15 The power of sale without intervention of the English mortgage
Court is given to the mortgagee in the case of

81
16 A lease for an agricultural or manufacturing Year to year
purpose is deemed to be a lease for

82
UNIT-65-THE RIGHT TO INFORMATION ACT 2005

Sl.No Question Answers


1 The right to Information Act,2005 was enacted True
to contain corruption
2 The Right to Information Act,2005 came in to False
force on October 12,2005
3 The right to Information Act, 2005 repealed the True
Freedom of Information Act, 2002
4 The right to Information Act,2005 applies to all False
organizations.
5 Central Public Information Officers are False
appointed by the Central Government
6 Public authority means Any authority or body or
institution of self
government established
or constituted by or
under the Constitution,
by any other law made
by parliament; by any
other law made by State
Legislature; by
notification issued or
order made by the
appropriate
Government.
7 Right to Information means the right to All the above and
obtaining information in
the form of diskettes,
floppies etc., of
information stored in a
computer or in any other
device.

83
UNIT-66 RIGHT TO INFORMATION AND OBLIGATIONS OF PUBLIC
AUTHORITIES

Sl.No Question Answers


1 Every citizen is entitled to seek information True
under the Right to Information Act from a
public authority
2 Every public authority is required to display True
information about their organization,
employees, etc., and update them periodically
3 Central Government appoints Central Public False
Information Officer in every public authority
4 A person seeking information has to disclose the False
reason for seeking information
5 Central Assistant Public Information Officer True
has to forward the request for information to
the concerned public authority within five days
of the receipt of the request if it does not relate
to his organization
6 The request for information has to be disposed True
of ordinarily within thirty days
7 No third party information can be sought from False
a public authority
8 If information requested is not provided it will True
be treated as a deemed refusal
9 There is no redressal if the Central Public False
Information Officer refuses to provide
information
10 Central information commission can True
recommend taking disciplinary action against
the Central Public Information Officer if the
latter failed to furnish information within the
specified time

84
UNIT-67 THE PREVENTION OF MONEY LAUNDERING ACT,2002

Sl.No Question Answers


1 The Prevention of Money Laundering Act,2002 False
does not apply to banking transactions
2 The term money laundering has been defined in False
the Prevention of Money Laundering Act, 2002
3 Director under the Act is appointed by the False
Reserve Bank of India
4 Record of transactions specified under the Act True
is to be maintained for ten years
5 RBI and SEBI can prescribe the nature of True
records to be maintained by a banking
company
6 Documents to be verified depend upon the type True
of the client
7 Bank is not required to enquire the financial False
status of the client
8 All cash transactions of the value of more than True
ten lakhs or its equivalent in foreign currency
are covered by the Act

85
UNIT-68 INFORMATION TECHNOLOGY ACT ,2000

Sl.No Question Answers


1 The IT Act was introduced on account of the United Nations
initiatives of commission on
International Trade Law.

[Compiled by:R.John Mary Antony Raj, Chief Manager [Compliance])

ALL THE BEST!

86

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