City Union Bank Limited

CENTRAL OFFICE
KUMBAKONAM

LEGAL & REGULATORY ASPECTS OF BANKING

(JAIIB EXAMINATION -1)

KNOWLEDGE IS POWER . . .

UNIT-I LEGAL FRAMEWORK OF REGULATION OF BANKS

SL.NO
1(i)

(ii)
(iii)

(iv)

(v)

2
3
4
5

6
7(i)
(ii)
(iii)
(iv)
(v)

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

10
11
12

13
14

15
16

15
16
17

18

19

20

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

Reserve Bank.
Authorities under the Companies
Act.
SEBI.

UNIT-II CONTROL OVER ORGANISATION OF BANKS

SL.NO
1(i)

(ii)

(iii)

(iv)

(v)

(vi)

2.(i)

(ii)

(iii)

(iv)

(v)

QUESTION
A company has to obtain a-----------from the Reserve bank to commence
banking business in terms of section
22 of the BR Act.
Shifting of a bank's branch in the
same -----------does not require
Reserve Bank's permission under
Section 23.
Foreign banks are required under
section 11 of the BR Act to deposit----------arising out of their business
in India with the Reserve Bank.
Banks may float subsidiaries for
carrying on the business specified in
----------------.
A shareholder of a banking
company can exercise voting rights
up to------------of the total voting
rights of all shareholders.
Banking
companies
are
not
permitted to give dividend until all------------are written off.
A temporary branch for less than
thirty days in a town where a bank
has an existing branch does not
require permission from Reserve
bank.
A company whose banking licence is
rejected can undertake business as a
moneylender or undertake other
business.
The decision of Reserve bank to
revoke licence is final and no appeal
lies from it.
Banking companies are permitted to
give brokerage up to two-and-half
percent of the paid-up value of
shares.
No person can hold the shares of
banks beyond ceiling specified
under the BR Act.

ANSWER
Licence

Same city, town or village

20 percent of profit for each year

Section 6(1)(a) to (o) of BR Act.

10 per cent

Capitalised expenses

True

True

False

True

True

(vi)

3(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

4(i)

(ii)

(iii)
(iv)

(v)

A banking company cannot hold

shares in any other company other
than a subsidiary.
A director of a banking company
should not have-----------in any other
company.
At least---------------of the directors
should have the qualifications
prescribed under Section 10A(2) of
the BR Act.
When the board of a banking
company is ordered to be
reconstituted under section 10A of
the BR Act, directors will be
removed-----------for the purpose of
reconstitution.
Before removing the chairman of a
bank from office,Reserve bank has
to---------------.
The provisions of Section 36AA of
the BR Act regarding removal of
managerial personnel have----------over other laws.
Reserve Bank is authorised to
appoint---------under section 36AB
of the BR Act.
The----------has stipulated the 'fit
and proper' criteria for directors of
banking companies.
The maximum period of office that
may be held continuously by an
ordinary director in a banking
company is eight years.
The decisions of the board of
directors, during the period when
the board's constitution is defective
shell be void.
The post of chairman of a banking
company may be on part-time basis.
The chairman of a banking
company can hold office only for a
maximum period of eight years.
From the order removing chairman
of a banking company,appeal lies to
Central Government within 30 days

False

Substantial interest

51 per cent

By lots

Give opportunity to being heard.

Overriding effect.

Additional Directors

RBI

True

False

True
False

True

(vi)

(vii)

5.(i)

(ii)

(iii)

(iv)

(v)

6
(i)

(ii)

(iii)

7(i)

(ii)

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

(iii)

8(i)

(ii)

(iii)
9(i)

(ii)

(iii)

10(i)

(ii)

(iii)

provided in the BR Act.

At least fifty-one per cent of the
directors of a banking company
should be charted accounts or
experts in finance.
There
is
no
provision
for
maintenance of reserves by a
banking company under the BR
Act.
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.
The maintenance of a reserve fund
is optional for a bank.
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
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.
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.
A banking company can from
subsidiaries for undertaking any
business approved by its board of
directors.
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.
A banking company does not

require the permission of the

Reserve Bank to form a subsidiary
for
doing
banking
business
exclusively outside India.

UNIT-III REGULATION OF BANKING BUSINESS

SL.NO
1(i)

(ii)

(iii)
(iv)

(v)

(vi)

2.(i)

(ii)

(iii)
(iv)

(v)

(vi)

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

ANSWER
Loans and Advances

Reserve Bank

A bank and its customers

In public Interest

Selective credit control

Usurious Loans Act.

True

True

False
True

False

True

3(i)

(ii)

(iii)

(iv)

(v)

(vi)

4(i)

(ii)

(iii)

(iv)

(v)

(vi)

The amount transferable to the

reserve fund by the
banks
incorporated in India is -------------of the profit for each year.
Every banking company has to
maintain certain amount of assets
under Section 25 of the banking
regulation Act as at the ----------The penalty which is payable by a
banking company which is a
scheduled bank for failure to
maintain the cash reserve in any
week for the first time is----------------------------have to maintain cash
reserve under Section 18 of the BR
Act.
The liquid assets to be maintained
under section 24(2A) of BR Act are----------of the balances maintained
under section 42 of the RBI Act.
The payment of penalty under
section 24 of BR Act can be
enforced by making an application
before------------Only scheduled banks have a duty
to maintain cash reserve under
section 42 of the Reserve Bank of
India Act
Every banking company has to
maintain the liquid assets as
required under section 24 of the
banking regulation Act.
The share capital and reserves of a
banking company form part of its
demand and time liabilities for the
purpose of section 42 of the RBI Act
The cash reserve required under
section 42(1) of the RBI Act will be
a minimum of three percent of the
demand and time liabilities
Interest is payable to scheduled
banks on the cash reserve
maintained as required under
section 42(1) of the RBI Act.
No banking company incorporated
in India is required to maintain

10

20 per cent

Last Friday of every quarter

3 per cent over the bank rate

Banking companies which are not

scheduled banks.
Not inclusive

Civil court

True

True

False

False

False

False

5.1.

6.
(i)

(ii)

(iii)

7.(i)

(ii)

reserve fund under section 17(1) of

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

11

(iii)

8(i)

(ii)

(iii)

9(i)

(ii)

(iii)

10(i)

(ii)

(iii)

A direction regarding advance can

be issued by the Reserve bank only
in the interest of banking policy and
on no other grounds.
The depositor of a banking
company can make a nomination in
the form prescribed under the
banking
Companies(Nomination)
rules,1985.
There is no no form prescribed for
nomination by depositors under
Banking Companies (Nomination)
Rules, 1985
The nominee is entitled to receive
the proceeds of the deposit on
maturity of the deposit during the
lifetime of the depositor or later.
Banking Ombudsman is appointed
by the Government under the
Banking Regulation Act.
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.
Banking Ombudsman is appointed
by the Reserve Bank under the
Reserve Bank of India Act.
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.
Loan taken from the Reserve bank
and Exim Bank are included in
'demand and time liabilities' under
Section 42 of the RBI Act.
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.

12

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

13

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.

14

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--------------.

Choose the correct statements from

following
Reserve Bank may publish, if they
consider in the public interest to do
so, any information obtained by them

(i)

15

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

16

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.

17

UNIT-5 PUBLIC SECTOR BANKS AND CO-OPERATIVE BANKS

Sl.No
Question
1
The State Bank of India is a -----------constituted under the State Bank of India Act
2
The Chairman of State Bank of India is
appointed by --------------in consultation with the
Reserve Bank.
3
State Bank has to act as ----------and carry out
Central Government Business and other
business entrusted by the Reserve Bank.
4
The provisions of the ---------are applicable to
State Bank as stipulated in Section 51 of the BR
act.
5
The majority of shares of subsidiary banks are
held by
6
Regional rural banks operate in
7
The management of the affairs of a regional
rural bank vests in
8
The State Bank can make statutory regulations
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
give any directions to the State Bank in matters
of policy involving public interest
10
The provisions of Section 42 of the Reserve
Bank of India Act relating to cash reserve apply
to State Bank.
11
Subsidiary banks do not have to maintain liquid
assets under Section 24 of BR Act
12
Regional rural banks may transact the business
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
by the Reserve Bank by notification in the
gazette
14
The management of Nationalised Banks is
governed
by
the
Naitonalised
Banks(Management
and
Miscellaneous
provisions) Schemes of 1970 and 1980
15
Unless the context otherwise requires, the
reference to a ---------in the Banking Regulation

18

Answers
Body corporate
Central Government

Agent of Reserve Bank

Banking Regulation Act.

State Bank of India

Notified area
Its board of directors
True

False
(RA-)
True

False
(RA-)
True

False
(RA-)
True

Banking Company

16

17

18

19

20

21

22

23

24

25

26

27

28

Act shall be construed as reference to a cooperative bank.

------------in relation to a co-operative society,
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.
The requirement of minimum paid-up capital
and reserves for a co-operative bank to
commence or carry on banking business is -----There are restrictions on co-operative banks on
----in other co-operative societies under Section
19 of the BR Act.
Central and State co-operative banks have to
submit their returns under Section 31 of BR Act
to---Under Section 23 of BR Act. Without the
permission of Reserve Bank a---------can open a
new place of business within the area of its
operation
Co-operative Banks have to prepare their
balance sheet and profit and loss account in the
forms set out in the Third Schedule to --Banking Regulation Act was made applicable to
Co-operative
banks
by
the
Banking
Laws(Application to Co-operative Societies)
Act,1965
A primary co-operative bank does not require
licence from the Reserve Bank to carry on
banking business
The provisions of the Banking Regulation Act as
provided in Section 56 of the Act apply to cooperative banks.
Aco-operative Bank means a primary cooperative bank, central co-operative bank and
state co-operative bank
There are no restrictions under the BR Act on
lending by co-operative banks to their directors
or firms in which they are interested.
A scheduled co-operative bank has to maintain
cash reserve as stipulated in section 42 if the
Reserve Bank of India Act(as applicable to cooperative societies)
Inspection of co-operative banks is done by the
State Government under the co-operative
societies Act and the Reserve Bank has no

19

Director

Rs.1Lakh

Holding of shares

Reserve Bank and National

Bank
Central co-operative Bank

Banking Regulation Act

True

False
(RA-)
True

True

False
(RA-)
True

False
(RA-)

29
30
31

32
33
34

power to inspect under the Banking Regulation

Act.
State Bank may act as agent of the Reserve
Bank-------------------shall be the ex-officio chairman of the
subsidiary banks
The thrust of business of regional rural banks is
to make loans d advances available in rural
areas
Nationalised Banks can undertake ---The auditor of a Nationalised bank has to be

20

UNIT-6 CASE LAWS ON RESPONSIBILITY OF PAYING BANK

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

21

Answers
False

True

True
False

True
False
False

True

False

False

UNIT-7 CASE LAWS ON RESPONSIBILITY OF COLLECTING BANK

Sl.No
Question
1
The statutory protection to a collecting banker
is as per section 6 of the Indian Contract Act
2
Section 131A of the Negotiable Instruments Act
extends the protection granted to a banker
while receiving payment of cheque, and drafts
3
The duties of collecting bank to claim protection
has been laid down under the Indian Contract
Act and Banking Regulation Act
4
In the absence of proper reference the banker
can be held liable on the grounds of negligence
5
It is necessary for the banker to make enquiries
regarding the reference given by the customer

22

Answers
False
True

False

True
True

UNIT-8 INDEMNITIES
Sl.No
Question
1
Section ------OF Indian Contract Act defines an
indemnity
2
A person promising to save another from loss is
called
3
-------------is a person who is promised to be
saved from loss
4
Contract of indemnity as defined in the
Contract Act is exhaustive
5
Insurance contracts are not contracts of
indemnity
6
There are----parties to a contract of indemnity
7
Indemnifiers liability in a contract of indemnity
is
8
There are three parties to a contract of
indemnity the indemnifier, indemnity holder d
the person on whose behalf the indemnity is
given
9
Indemnifiers liability occurs only if the
indemnity holder suffers loss
10
Customers as matter of right and without an
indemnity can obtain duplicate of demand
drafts or travellers cheque
11
Indemnities are required by banks purely as a
formality and do not serve any other purpose.
12
The indemnity obtained by a banker only
protects him from the actual value of the
instrument
13
The two conditions that an indemnity holder is
bound to comply before being indemnified for a
loss

14

15

Answers
124
Indemnifier
Indemnity holder
False
False
2
Primary
False

True
False

False
False

He should act within the

scope of his authority and
should not contravene any
directions
of
the
indemnifier
Indemnity holder entitle to be indemnified
To the extent of the
damages suffered costs
incurred and sums paid
for compromise of any
suit
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

23

16
17
18

authorized the indemnity

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

24

UNIT-9 BANK GUARANTEES

Sl.No
Question
1
In bank guarantees the bank makes payment on
2

Answers
Merely on demand by the
beneficiary.
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
1
A letter of credit is a form of guarantee given by
banks on behalf of its customer
2
Letters of credit are bills of exchange drawn by
a seller or a buyer
3
LCs are negotiable instruments
4
The letter of credit is opened on the request of
5
The LC issuing bank is also called
6

8
9

10

11
12
13

14
15
16
17
18
19

20

21

Answers
True
False

False
Applicant
The importers bank or the
opening bank
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
The advising banks responsibility is
To
inform
the
beneficiary/seller
about
the letter of credit
The advising bank is also called the
Notifying bank
Negotiating bank is the bank which
Makes payment of the
bills drawn by the seller
and accepts the documents
When the LC specifies the bank that is to Nominated Bank
negotiate the bills drawn under the LC then the
bank is also called
The confirming bank is
The advising bank when it
confirms the LC
When the confirming bank confirm the credit it Undertakes on its part the
liability under the LC
Reimbursing bank is the bank
That
reimburses
the
negotiating/paying
or
confirming bank
Ordinary letter of credit is usually---Sight credits
Letter of credit under which usance bills can be Acceptance credits
drawn is called an
In a revocable LC the credit can be amended or Issuing bank
cancelled by the
Only---letters of credit can be confirmed
Irrevocable
Credit in which the beneficiary is not liable for Without recourse
the bills drawn thereunder is----credit
A back-to-back credit would involve at least --- Three:
the
issuing,
bank, viz.,the---bank,-----------bank and the---- advising and third
bank
All parties to a letter of credit transaction need False
to comply with the terms only as far as practical
and not strictly
In case the documents submitted by seller do False
26

22
23
24

25
26

not comply with the terms of letter of credit

then the same can be accepted and sent for
confirmation of buyer
A bill of exchange is document to title to goods
A bill of exchange is also called a bill or a
draft
Invoice in a letter of credit transaction is a
document similar to a quotation based on which
the buyer places his order
A bill of lading on a bona fide transfer confers
on the transferee a right to the goods
An airway bill is also a document evidencing
title to goods

27

False
True
False

True
False

UNIT-11 DEFERRED PAYMENT GUARANTEE

Sl.No
Question
1(i) In a deferred payment guarantee, the guarantee
is to ensure delivery of goods.
(ii) A deferred payment guarantee is mostly based
on a primary contract between the buyer and
the seller.
(iii) A deferred payment guarantee differs from
other kinds of guarantee issued by banks as
regards payment liability of the bank on
invocation.
(iv) In a deferred payment guarantee the banks
liability comes into existence only if all the
installments are not paid and not on the nonpayment of any one installment by the
customer.

28

Answers
False
True

False

False

UNIT-12 LAWS RELATING TO BILL FINANCE

Sl.No
Question
1
Bill of exchange means a unconditional
direction to the drawer to pay the moneys.
2
The maker of the bill is called-------------.
3
Bill purchase facility is granted in the case of
demand bills.
4
----------------facility is granted in the case of
usance bills.
5
----------------of the bill is bound in case of
dishonour of bill.
6
Ownership of goods can be transferred by
endorsement and delivery of----------------------7
In bills co-acceptance facility the banker
becomes a surety for the value of bill.

29

Answers
True
Drawer
True
Bill Discounting
Drawer
Document of title to goods
True

UNIT-13 VARIOUS TYPES OF SECURITIES

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

30

Answers
True

False
False

True
False
False
True
True

False
True
True
True
False
False.

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

Sl.No
Question
1
Mortgage is ------------in the immovable
property.
2
Simple mortgage is created by an instrument in
writing.
3
Mortgage by deposit of title deeds is required to
be registered.
4
In the case of usufructuary mortgage the
possession of the properties is given.
5
In mortgage by way of conditional sale the
property is sold with a condition for reconveyance.
6
All successive mortgages created will rank
equally and no mortgage will have a greater
priority over the other.
7
To decide as to which mortgage will have
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
mortgaged properties is----------------years from
the date the mortgage debt becomes due.
9
Mortgage suits are filed in the Court within
whose jurisdiction the mortgagee resides.

31

Answers
Transfer of interest
True
False
True
False

False

Execution of

Twelve

False

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

Sl.No
Question
1
Pledge means-------------of goods for purpose of
securing a payment of debt or performance of
promise.
2
The most important characteristic of pledge is-------------of goods.
3
Owner of goods cannot make a pledge.
4
Hypothecation letter gives a banker right to
possession of goods is given
5
Hypothecation letter gives a banker right to
possession of goods in the event of default.

32

Answers
Bailment

Possession
False
True
True

UNIT-16 DIFFERENT TYPES OF BORROWERS

Sl.No
Question
1
Individual borrowers are governed by the-----------Act
2
In a Hindu undivided family the business of the
family is managed by--------------3
A company is------------and---------------from its
members.
4
A Private Limited Company has minimum--------number of members and a maximum of----------numbers of members.
5
A Public Limited company shares are----------transferable.
6
Statutory corporations are established by Acts
of------------7
Private trusts are governed by the------------Act.
8
Trusts of Hindus are governed by the---------Act.
9
Trust of Muslims are governed by the----------Act

33

Answers
Indian Contract
Karta
Separate and distinct
2,50

Freely
Parliament
Parliament
Religious and Charitable
Endowments Act
Wakf

UNIT-17 TYPES OF CREDIT FACILITIES

Sl.No
1

Question
Credit facilities are mainly classified in to

Fund based facilities, among other things,

include

Non-fund based facilities, among other things,

include
Term loans based on period of repayment are
classified into

5
6
7
8

Answers
(i)Fund based facilities
(ii)Non
fund
based
facilities
(i)Cash credits/Overdrafts
(ii)Term Loans
(iii)Bill Finance
(i)Bank guarantee
(ii)Letter of credit facility
(i)Short-term loan
(ii)Medium-term loan
(iii)Long-term loan
Fund based facility
Non-Fund based facility
Banking custom

Cash Credit facility is a------------Bills co-acceptance facility is a------------Banker is entitled to charge interest on
temporary overdraft under---------------.
Limitation period for filling a suit in term loans Three
is-----------years from the date of default of
installment
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
1
Charge means any form of----------for----------2
Charges created by company shall be registered
with-------------3
Under Companies Act a charge includes---------4
Charge, if not registered is not enforceable
against company.
5
Charge shall be registered within------------days
from the date of creation of charge.

36

Answers
Security, Debt
Registrar of Companies
Mortgage
False
30

UNIT-20 INTRODUCTION TO SECURITISATION AND RECONSTRUCTION

OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST,
2002 (SARFAESI ACT, 2002)
Sl.No
Question
1
Banks obtain security while lending, so that in
the case of need, the money can be------------of
securities.
2
The SARFAESI Act is applicable to the housing
finance companies whose names are notified by
the Central Government.
3
In Mardia Chemical Case the Supreme Court
decided that the condition of deposit of amount
is fully invalid.
4
After Mardia Chemical Case, the amendment
made in the SARFAESI Act stipulates deposit of
---------------amount before preferring the appeal
to DRT (Appellate Tribunal).
5
Whether movable securities in possession of the
bank can be sold by the bank without the
intervention of the Court?
6
As per the laws existing today, the mortgaged
security cannot be sold without a Court
intervention. Is this correct?
7
Provisions of SARFAESI Act, 2002 applies to
which securities?

Answers
Realised by sale

True

True

50 Per cent

Yes, bank can sell as

provided in the Contract
Act, 1872
No, SARFAESI Act, 2002
has now made enabling
provisions.
Where
the
security
interests are created for
repayment of financial
assistance given by the
bank or a financial
institution.
In the Mardia case what did the Supreme Court Condition to pay seventydeclared 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
1
The SARFAESI Act is applicable for pledged
securities also.
2
For the enforcement of a mortgage security,
court intervention is required even for actions
under the SARFAESI Act.
3
Banks and financial institutions can issue notice
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
after notice by the secured creditor the creditor
can-----------------of the security.
5
After receipt of notice from the secured creditor
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
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
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
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,
2002 be invoked for proceeding against the
charged property?
10
11

Answers
False
False

In possession, NPA

Sixty, take possession

True

True

False

With the central Registry.

When there is default in

repayment and the bank
declares the account as
NPA.
Whether existing or future receivables are Yes
property?
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
1
A securitisation or reconstruction company
needs registration from the RBI for
commencement of business.
2
Right of acquisition of a financial asset by the
securitisation or reconstruction company is
subject to the prior agreements or contracts
about the asset.
3
Acquisition of a financial asset by the
securitisation company or reconstruction
company is with the liability also over such an
asset.
4
Which are the four documents involved in the
securitisation transaction?
5

10

Answers
True

False

False

Offer
document,
debenture, agreement and
security receipt
For each asset acquired or to be acquired, by Separate
the
securitisation
company
or
the
reconstruction company there should be-------------scheme.
When
the
securitisation
company
or Undivided interest
reconstruction company issues security receipts,
the holder thereof, is entitled to a-------------in
the financial asset.
The security receipt issued by the securitisation False
or
reconstruction
company
requires
registration.
Any direction issued by the RBI under the Statutory, binding
SARFAESI Act has----------effect and is-------------on the parties concerned.
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.
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
1
Asset reconstruction means-------------by any
securitisation company or reconstruction
company of any right or interest of the creditor
in any---------------2
SARFAESI Act is applicable to the Regional
Rural Banks.
3
Mortgage or asset backed debt instruments can
be issued by the securitisation company or
reconstruction company to the general public.
4
A guarantor to the loan is within the meaning of
the word borrower under SARFAESI Act.
5
SARFAESI Act is applicable only when there is
security.
6
Has SARFAESI Act defined Hypothecation and
whether the Act is applicable to Hypothecation
security?
7
On giving of a default notice by the creditor, the
borrower gives a reply to it. What should the
creditor do?

Answers
Acquisition,
Financial
assistance

False
False

True
True
True

Give the consideration to

the reply as per the
guidelines issued in the
Mardia Chemical case by
the Supreme Court and
reply to it.
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
1
After coming into operation, the provisions
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
of security interest is--------------days.
3
Duty to report satisfaction of charge to the
central register is on creditor or on the
borrower?
4
Besides the SARFAESI Act, some other laws
require some registration of charge created in
the property. Is such double registration
avoidable?

41

Answers
True

30
Creditor

No, registration under the

SARFAESI Act as well as
only other applicable law
will have to be made as
the SARFAESI Act is not
substitution of any other
law.

UNIT 25 OFFENCES AND PENALTIES

Sl.No
Question
1
Is there any punishment provided in the Act for
not following RBI directions?
2
Can the Honorary Magistrate take cognisance
of offence under the SARFAESI Act?
3
Whether breach of RBI directives is punishable
offence and to what extent?

42

Answers
Yes
No
Yes, a fine up to Rs.5
Lacs and for continuation
of offence a fine of up to
Rs.10,000 per day.

UNIT 26 MISCELLANEOUS PROVISIONS

Sl.No
Question
1
For challenging an action initiated by secured
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
against a deposit under lien with it?
3
Are hire-purchase and lease contracts covered
under SARFAESI Act?
4
After the bank's notice a defaulting borrower
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
of Property Act and the SARFAESI Act are
different, which act will prevail?
6
Can a bank proceed to take possession of the
security after four years of cause of action?
7
Provisions of the SARFAESI Act are applicable
to which of the following?
8

Answers
False

No
No
No

SARFAESI Act

No

Securities charged
to
creditors and not in
possession of the creditor.
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
1
Disputes amongst two banks can be taken up
before the banking ombudsman.
2
Co-operative banks are not covered by the
banking ombudsman scheme.
3
Banking ombudsman is appointed by a
committee of Supreme Court Judges.
4
It is not within the powers of banking
ombudsman to deal with the complaint unless
both parties agree for his intervention.
5
What is the object of introducing the banking
ombudsman scheme, 2006?
6

Complaints relating to non-acceptance of small

denomination notes by a bank, can be made to a
banking ombudsman.
Complaints can be made against promises
made by sales agents but not fulfilled by the
bank represented by them under the banking
ombudsman Scheme 2006?

44

Answers
True
False
False
False

To enable resolution of
complaints relating to
banking services.
Banking ombudsman can
deal with the complaints
under the scheme.
The banking ombudsman
can
entertain
the
complaint
under
the
scheme.

UNIT 28 PROCEDURE FOR REDRESSAL OF GRIEVANCE

Sl.No
1

5
6
7

10

Question
Bank can refuse acceptance of small
denomination notes from the customer and
therefore, on this ground there cannot be a
complaint to banking ombudsman.
On valid grounds bank can refuse the opening
of a new account, but on this ground, compliant
before the banking ombudsman is maintainable.
Can a prospective borrower go before the
banking ombudsman for non-sanction of his
loan by the bank?
Banking ombudsman has powers to call for any
information and certified copies from the bank
when he is dealing with the complaint.
For settling the complaint the banking
ombudsman is bound by legal rules of evidence.
What is the maximum amount the banking
ombudsman can award as compensation?
Limitation period for filing of the review
application against the award given by the
banking ombudsman is -------------days.
Can a customer from whose account someone
fraudulently has withdrawn money make a
complaint before the banking ombudsman?
Reserve Bank and the Central Government may
forward a complaint to the banking
ombudsman?

Answers
False

False

No

Yes

False
Rs.10 Lacs
45

Yes, as this aspect comes

under the powers of the
banking ombudsman.
Reserve bank and the
Central Government are
empowered to send the
complaint received by
them to the banking
ombudsman.
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
1
2
3
4

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

46

Answers
Rs.10 Lacs
True
False
False

Yes, as it is a legally
recoverable amount by
the bank.

UNIT 30 ESTABLISHMENT OF TRIBUNAL AND APPELLATE TRIBUNAL

Sl.No
1
2
3
4

Question
Answers
Debt recovery tribunals are established by------- Central Government
----Debt recovery tribunals consist benches of three False
persons.
Jurisdiction of appellate tribunal is with the False
respective High Courts.
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
1
2

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

48

Answers

UNIT 32 PROCEDURE OF TRIBUNALS

Sl.No
1
2

3
4
5

6
7

Question
DRT jurisdiction for a bank is where the head
office of the bank is located.
If a bank has filed recovery application, other
bank can join the application if the defendants
are same.
When a case get transferred from Civil Court to
tribunal fresh court fee is required to be paid.
A counterclaim field before DRT has the same
effect as a -------------Since DRT is not a Civil Court it cannot pass
interim orders such as attachment, injunction
receiver, etc.
A person who has to file appeal before the
Appellate Tribunal has to pay------------While filing appeal before the appellate
Tribunal has to pay-----------------

49

Answers
False
True

False
Plaint in cross-suit
False

75 per cent of the debt

ordered by the Tribunal.
Yes, 75 per cent of the
amount determined by
the tribunal is required
to be deposited at the
timing of filing of the
appeal.

UNIT 33 RECOVERY OF DEBTS DETERMINED BY TRIBUNAL AND

MISCELLANEOUS PROVISIONS
Sl.No
1

5
6

Question
Recovery officers appointed under DRT Act can
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.
The defendant can raise a plea before the
Recovery Officer about correctness of the
amount ordered to be paid.
If the recovery certificate has clerical or
arithmetical mistake-------------can correct the
same.
For recovery the Recovery Officer can adopt the
same methods as adopted for recovery of
income tax under the Income Tax Act.
Recovery Officer can ask the defendant to
furnish by affidavit particulars of his asset.
A company is under winding up process.
Whether High Court permission is required to a
bank to proceed against it before DRT?
Doctrine of election will come into play

50

Answers
True

False

Presiding Officer of the

Tribunal.
True

True
No, as the DRT Act
specially provides to that
effect.
When all the aforesaid
elements are to be
present in a case.

UNIT 34 THE BANKER'S BOOKS EVIDENCE ACT, 1891

Sl.No
1

2
3

Question
If the books of the bank are maintained in the
electronic form, does all the provisions of this
Act are applicable to it.
Does this Act apply to any investigation or
inquiry under the Criminal Procedure Code?
A certified copy of any entry in a banker's Book
is received in legal proceeding as-----------evidence for existence of such entry.
Unless the Court otherwise directs, bank officer
cannot be compelled to produce----------------to
prove any banker's book's contents when copy
is produced.
In a civil suit, to which bank is not a party, one
of the parties has produced certified copy of
books account. One party to the suit wants to
call bank officer as witness to prove the contents
of copy. Can it be done?

51

Answers
Yes

Yes
Prima facie

Original books

No, as the certified copy

is a prima facie evidence
that is admissible in
evidence.

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

Sl.No
1
2
3
4
5

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

52

Answers
False
False
False
True
True

UNIT 36 THE CONSUMER PROTECTION ACT, 1986: PREAMBLE, EXTENT

AND DEFINITIONS
Sl.No
1
2
3
4
5

Question
Consumer protection act is enacted to protect
the manufacturing conditions of the Industries.
The agencies appointed under Consumer
Protection Act are quasi-judicial in nature.
Can a voluntary consumer association file a
complaint on behalf of consumer?
A consumer has purchased goods for resale.
Can he file complaint?
'N. has purchased a draft from a bank
favouring 'B'. The draft is lost in transit and for
duplicate draft in liew of first bank need some
formalities to be completed by 'N'. Can 'B' file a
consumer case against the formalities as it is
delaying payment to him.

53

Answers
False
True
Yes
No
No, as he is not consumer
of the bank and is not
taking any service from
the bank.

UNIT 37 CONSUMER PROTECTION COUNCILS

Sl.No
1
2

3
4
5

Question
Central Consumer Protection Council is the
apex council having all India jurisdiction.
Minister-in-Charge of consumer affairs in the
Central Government is the Chairman of Central
Consumer Protection Council.
State Consumer Protection Council is appointed
by Central Government.
State Consumer Protection Council has to meet
at least-------------in a year.
Who is the Chairman of the Central Consumer
Protection Council?

54

Answers
True
True

False
Twice
Minister-in-Charge
of
Consumer Affairs in the
Central Government.

UNIT 38 CONSUMER DISPUTES REDRESSAL AGENCIES

Sl.No
1

2
3

Question
To appoint a person as President of District
Forum, he must be qualified to be a District
Judge.
Appointment of District Forum is made by the
High Court.
Can few consumers file a representative
complaint on behalf of general consumers at
large?
As the agencies appointed for under the Act are
quasi-judicial, they do not have powers of Civil
Court while conducting the case.
District Forum has passed order to pay
compensation. How recovery of the ordered
amount is made?

55

Answers
True

False
Yes, but with permission
of District Forum
False

By referring the order to

collector for making
recovery as if it is land
revenue recovery.

UNIT 39 THE LAW OF LIMITATION

Sl.No
1
2

3
4
5

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

56

Answers
True
False

True
True
True

False

False

UNIT 40 TAX LAWS

Sl.No
1

2
3
4
5
6
7
8
9
10
11

12
13

14
15
16
17
18
19

Question
Liability to pay income tax arises on account of
residential status and place of the source of
income.
Assessment year represents the period of 12
months beginning from 1st April each year.
Previous year is the financial year immediately
preceding the assessment year.
Income is taxed only on salaries.
Income exempt from tax is to be deducted out of
taxable income before computation of tax.
Assessment is of two types (a) summary
assessment (b) scrutiny assessment.
Partnership firm, if it has no income, need not
file a tax return.
Tax assessed by AO shall be paid within------days.
Entire advance tax is to be paid by 15th March.
Tax deduction is to be made before making
payment to-------------non-residents.
Tax deducted at source is to be deposited within
one week from the end of the month in which it
is to be deducted.
Person deducting tax at source is required to file
a quarterly return of TDS.
FBT consists of specific items and certain
benefits or expenditure incurred by the
employer as deemed fringe benefit.
For FBT a separate return has to filed.
Service Tax Act deals with levy of tax on
services.
Cenvat credit can be availed of in respect of tax
paid on certain specified input services.
Failure to deduct tax at source will result in

Answers
True

True
True
False
False
True
False
30
True
True
True

True
True

False
False
True

Dis
allowance
of
expenditure
Banking Cash Transaction Tax is payable if Rs. 50,000 in a day.
withdrawal by an individual exceeds
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
1

2
3
4
5

6
7

Question
A-------------is free when the parties to the
contract agree to the same thing in the same
sense.
A contract without-----------is void.
A person who makes a proposal is known as------------.
A person is said to be competent to contract if------------.
A enters into an agreement with B to rob C and
share the money. B runs away with all the
money. A can file a suit against B to recover the
money.
Mr. X (aged 17) can enter into an agreement
with Mr. Y (aged 25) to buy a car.
A contract is concluded only when the party to
whom the proposal is made, accepts the
proposal.

58

Answers
Consent

Consideration
Promisor
He is a major and of
sound mind.
False

False
True.

UNIT 42 CONTRACTS OF INDEMNITY

Sl.No
1
2
3

Question
Answers
Insurance policies are contracts which are in the Indemnity
nature of------------------.
There are------------parties in a contract of Two
indemnity.
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
1(i)
(ii)
(iii)

(iv)

(v)
2(i)
(ii)
(iii)
(iv)
(v)

Question
In a Contract of Indemnity the indemnifier is
primarily liable.
In a Contract of Guarantee the liability of the
surely is secondary.
Anything done for the benefit of the principal
debtor is a sufficient consideration to the surety
for giving the guarantee.
Where there are co-sureties, a release by the
creditor of one of them does not discharge the
others.
Principal debtor need not pay the surety after
the surety has paid the amount to the creditor.
Surety is also known as the-------------Liability of the surety is-----------that of the
principal debtor.
A guarantee which extends to a series of
transactions is known as a-------------guarantee.
Surety is------------if the principal debtor is
released by the creditor.
Guarantee obtained by--------------is invalid.

60

Answers
True
True
True

True

False
Guarantor
Co-extensive with
Continuing
Discharged.
Misrepresentation.

UNIT 44 CONTRACT OF BAILMENT

Sl.No
1
2
3
4
5

6
7

Question
Bailor is a person who delivers his goods to the
surety to enable him to give a guarantee.
Bailee can use the goods given by the bailor, in
the manner as he likes.
The bailee can keep the goods bailed to him and
he need not return the same to the bailor.
Giving a product on rent for use to another
person is a contract of bailment.
If ornaments kept in the safe locker of bank are
stolen, in spite of due care by the bank, the bank
is liable to the depositor of ornaments.
It is the obligation of the bailee to keep his goods
separate from the goods of the bailor.
The bailor is liable for any loss to the bailee if
the goods bailed are defective and the bailor
knowingly does not disclose this fact to the
bailee.
If the bailee has rendered any service involving
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

Answers
False
False
False
True
False

True
True

True

UNIT 45 CONTRACT OF PLEDGE

Sl.No
Question
1
In a pledge, the goods are delivered to be kept
as security for a debt or for performance of a
promise.
2
The pawnee can sell the goods, if the pawnor
fails to pay.
3
The pawnee can sell the goods without giving
notice to the pawnor.
4
The pawnee can keep the goods even after the
pawnor has paid the dues.

62

Answers
True

True
False
False.

UNIT 46 CONTRACT OF AGENCY

Sl.No
Question
1
Agent can be appointed by-------------.
(i)Express appointment
(ii)Implication of law
(iii)Ratification by principal
2
The usual form of contract of agency is by way
of a-------------.
3
When a person by his words or conduct
appoints someone as his agent it is known as
agency by-----------.
4(i) Consideration is the most essential element in
any contract of agency.
(ii) A contract of agency is terminated if the agent
does not wish to continue ad agent any more.
(iii) An agent can have a lien on the goods of the
principal for the dues payable by the principal
to the agent.
(iv) Minor can be a principal or agent
(v) The principal has to indemnify the agent for all
the lawful acts done by the agent in the course
of his duties.

63

Answers
Any of the three modes

Power of Attorney
Estoppel

False
True
True

False
True.

UNIT 47 MEANING AND ESSENTIALS OF A CONTRACT OF SALE

Sl.No
Question
1(i) ------------means the consideration for a sale of
goods.
(ii) Goods as defined under Sale of Goods Act do
not include-------------.
(iii) -------------goods
are
to
be
manufactured/produced/acquired by the seller
after making of the contract of sale.
(iv) -------------goods means goods identified and
agreed upon at the time a contract of sale is
made.
(v) --------------means
voluntary
transfer
of
possession from one person to another.
(vi) When the transfer of the property in the goods
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
pass from the seller to the buyer.
2(i) Shares are goods within the meaning of the Sale
of Goods Act.
(ii) Fixtures can be regarded as movable goods only
if they are intended to be served and sold
separately.

64

Answers
Price
Actionable Claim
Future

Specific

Delivery
Agreement to sell

Agreement to sell.
True
True.

UNIT 48 CONDITIONS AND WARRANTIES

Sl.No
Question
1(i) If the stipulation agreed to between the parties
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
main purpose of the contract.
(iii) There is an implied condition on the part of the
seller that he has a right to--------------the goods.
(iv) If the sale of goods is by---------------there is an
implied condition that the goods shall
correspond with the description.
2(i) In every contract of sale it is implied that the
seller has got the right to sell the goods.
(ii) An implied warranty as to quality or fitness for
particular purpose may be annexed by the
usage of trade.

65

Answers
Condition

Warranty
Sell
Description

True
True.

UNIT 49 UNPAID SELLER

Sl.No
Question
1(i) The seller of goods is deemed to be an unpaid
seller when the-----------------has not been paid
(ii) There is no----------------as to the quality or
fitness of goods for any particular purpose.
(iii) When the-------------is in possession of goods, a
lien can be exercised.
(iv) ---------------is terminated when the buyer gets
the possession of the goods.
2(i) When property in the goods has not passed to
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
as an absolute payment is no longer an unpaid
seller.

66

Answers
Price
Implied condition
Seller
Lien
True

True.

UNIT 50 DEFINITION, MEANING AND NATURE OF PARTNERSHIP

Sl.No
Question
1
If one partner cheats a customer of the
partnership firm then all the partners of the
partnership firm are liable to compensate the
customer.
2
Registration of firms is compulsory under the
Partnership Act.
3
It is compulsory to enter into a partnership
deed.
4
The partners are free to decide their mutual
rights and liabilities.
5
A partnership deed can even provide that a
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
change the nature of business carried on by the
firm.
7
A partnership at will can be dissolved by notice.

67

Answers
True

False
False
True
True

True

True.

UNIT 51 RELATIONS OF PARTNERS TO ONE ANOTHER

Sl.No
Question
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

Answers

UNIT 52 RELATIONS OF PARTNERS TO THIRD PARTIES

Sl.No
Question
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

Answers

UNIT-53 MINOR ADMITTEED TO THE BENEFITS OF PARTNERSHIP

Sl.No
Question
1
A Minor can be a partner in a partnership firm
2
3
4

False
(RA-)
A Minor can be admitted to the benefits of a True
partnership firm
A Minor is personally liable like other partners False
to pay the debts of the firm
(RA-)
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

Answers

UNIT-54-DISSOLUTION OF A FIRM
Sl.No
Question
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

Answers

UNIT-55-EFFECT OF NON-REGISTRATION
Sl.No
Question
1
A Partner of an unregistered firm can file a suit False
against other partners to get his share of
profits.

72

Answers

UNIT-56-DEFINITION AND FEATURES OF A COMPANY

Sl.No
Question
1
Directors are the actual owners of a company
2

False
(RA-)
A Company has to be compulsorily registered True
under the Companies Act 1956

A company cannot enter into contracts in its False

own name.
(RA-)

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

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

73

Answers

UNIT-57-TYPES OF COMPANY
Sl.No
Question
1
In case of a company limited by shares the
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
company without the consent of other members.
3
The minimum number of members required in
a private company is
4
The minimum number of members required in
a Public company is
5
The maximum number of members in a private
company can be
6
The maximum number of members in a public
company can be
7
A private company should have a minimum
paid-up capital of Rupees
8
A public company should have a minimum
paid-up capital of Rupees
9
In a government company the government
holds at leastpercent of the paid-up capital

74

Answers
False

False
2
7
50
Any number
One lakh
Five lakh
51

UNIT-58-MEMORANDUM OF ASSOCIATION AND

ARTICLES OF ASSOCIATION
Sl.No
Question
1
In case of conflict between the memorandum of
association and articles of association, the
articles of association prevail

75

Answers
False

UNIT-59-DOCTRINES OF ULTRA VIRES/CONSTRUCTIVE NOTICE/

INDOOR MANAGEMENT
Sl.No
Question
1
Doctrine of ultra vires lays down that every
outsider is assumed to have read the
memorandum of association and articles of
association
2
Doctrine of constructive notice states that the
outsiders are not required to see the compliance
of internal regulations of the company.
3
Doctrine of indoor management lays down that
a company cannot carry on the objects not
permitted by its memorandum of association

76

Answers
False

False

False

UNIT-60 MEMBERSHIP
Sl.No
Question
1
A minor can be a member of a private company
but not of a public company
2
A member can inspect the register of members

77

Answers
False
True

UNIT-61-PROSPECTUS
Sl.No
Question
1
There are no remedies available for
misstatements in prospectus by directors

78

Answers
False

UNIT-62-DIRECTORS
Sl.No
Question
1
The maximum number of directors in a private
company can be
2
The maximum number of directors in a public
company can be
3
The minimum number of directors in a public
company can be
4
The minimum number of directors in a private
company can be
5
At least --- of the total number of directors of a
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
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 ---8
Alternate directors are appointed by the
9
Casual vacancies in the board of directors is
filled in by the -----

79

Answers
12
12
3
2
Two-third

Five Crore

Board of directors
Board of directors
Board of directors

UNIT-63 FOREING EXCHANGE MANAGEMENT ACT 1999

Sl.No
Question
1
Authorised person is an individual appointed
by the RBI to deal in foreign exchange
2
A current account transaction alters the assets
or liabilities outside India of persons resident in
India
3
A capital account transaction includes
payments due in connection with foreign trade
in the ordinary course of business
4
Foreign exchange includes travellers cheques
5
RBI can revoke any authorization given to an
authorized person
6
Civil Court has the jurisdiction to entertain any
suit or proceeding in respect of any matter
under the FEMA

80

Answers
False
False

False

True
True
False

UNIT-64-TRANSFER OF PROPERTY ACT 1882

Sl.No
Question
1
Transfer of Property Act basically contains
provisions relating to transfer of moveable
property and goods
2
Mortgage is a transfer of an interest in specific
immoveable property to secure the payment of
money given by way of loan
3
In a simple mortgage the mortgagor does not
deliver possession of the mortgaged property to
the mortgagee
4
In a mortgage by conditional sale the property
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
delivers possession of the mortgaged property
to the mortgagee
6
In an English mortgage the property is
transferred absolutely by the mortgagor to the
mortgagee with a condition for retransfer
7
In a mortgage by deposit of title deeds the
property given as a mortgage has to be situated
in notified towns.
8
A lease of from year to year or for any term
exceeding one year can be made by transfer of
possession
9
The debtor has to be given a notice of transfer
of actionable claim
10
A lease for agricultural or manufacturing
purpose can be terminated by the lessor or
lessee by giving -----notice to one another
11
A memorandum recording mortgage by deposit
of title deeds does not require
12
The essentials for valid equitable mortgage are
debt, deposit of title deeds and
13
In case of accession to the mortgaged property,
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
mortgaged property, shall have -----to make
leases thereof.
15
The power of sale without intervention of the
Court is given to the mortgagee in the case of

81

Answers
False

True

True

True

True

True

False

False

False
6 months

Registration
Intention of security
Entitled

Power

English mortgage

16

A lease for an agricultural or manufacturing

purpose is deemed to be a lease for

82

Year to year

UNIT-65-THE RIGHT TO INFORMATION ACT 2005

Sl.No
Question
1
The right to Information Act,2005 was enacted
to contain corruption
2
The Right to Information Act,2005 came in to
force on October 12,2005
3
The right to Information Act, 2005 repealed the
Freedom of Information Act, 2002
4
The right to Information Act,2005 applies to all
organizations.
5
Central Public Information Officers are
appointed by the Central Government
6
Public authority means

Right to Information means the right to

83

Answers
True
False
True
False
False
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.
All the above and
obtaining information in
the form of diskettes,
floppies etc., of
information stored in a
computer or in any other
device.

UNIT-66 RIGHT TO INFORMATION AND OBLIGATIONS OF PUBLIC

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

84

Answers
True

True

False
False
True

True
False
True
False

True

UNIT-67 THE PREVENTION OF MONEY LAUNDERING ACT,2002

Sl.No
Question
1
The Prevention of Money Laundering Act,2002
does not apply to banking transactions
2
The term money laundering has been defined in
the Prevention of Money Laundering Act, 2002
3
Director under the Act is appointed by the
Reserve Bank of India
4
Record of transactions specified under the Act
is to be maintained for ten years
5
RBI and SEBI can prescribe the nature of
records to be maintained by a banking
company
6
Documents to be verified depend upon the type
of the client
7
Bank is not required to enquire the financial
status of the client
8
All cash transactions of the value of more than
ten lakhs or its equivalent in foreign currency
are covered by the Act

85

Answers
False
False
False
True
True

True
False
True

UNIT-68 INFORMATION TECHNOLOGY ACT ,2000

Sl.No
Question
1
The IT Act was introduced on account of the
initiatives of

Answers
United Nations
commission on
International Trade Law.

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

ALL THE BEST!

86