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LEGAL ASPECTS OF BANKING OPERATIONS INDIAN INSTITUTE OF BANKING & FINANCE MODULE C & D 11.10.07 **SARFAESI Act 2002, extends to whole of India including the State of Jammu & Kashmir. Also applicable to housing finance companies.
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.. The act is effective from 21.06.2002. It also covers the earlier loans which are outstanding.
. The word Board is used in the Act refers to the Securities and Exchange Board of India (SEBI)
a.. Regional Rural Banks
b.. Nationalized Banks
c.. Co-operative Banks
d.. State Bank of India and their Associate banks
. The borrower’s account should have been classified as NPA as per the guidelines of RBI.
. The Act is applicable only to a Secured creditor and not to an unsecured creditor
a.. A charge in or upon any movable property
b.. Right in favour of the creditor
c.. Possession also with the lender
d.. Retaining the ownership with the owner of the property
a.. Borrower N b.. Bank G
c.. Both are not Originators
As per the contract terms and conditions or otherwise.
He has to discharge any obligation in respect of a financial asset whether existing, future, conditional or contingent or and includes a borrower.
b.. Insurance company
c.. Individual Investor
d.. An Asset Management Company
Company to raise funds from qualified
institutional buyers by formulating schemes.
.Separate scheme wise accounts to be
.The Scheme invites subscription to security
receipts proposed to be issued by such company
under the scheme.
c.. Transfer of Assets
d.. None of these
.. RBI is the regulatory authority for securitisation or reconstruction company.
a.. Rs. 30 Crore
b.. Rs. 50 Crore
c.. Rs.100 Crore
d.. Rs.200 Crore
.. Security agreement includes an agreement, instrument or any other document or arrangement under which security interest is created in favor of secured creditor
a.. Investors b.. Debtors c.. Creditors d.. Lending Bankers
a.. Security Receipt
b.. Security Agreement
c.. Secured Asset
d.. Secured Debt
..Secured Asset means the property on which security interest is created.
.. The powers given by SARFAESI Act for enforcement of securities are against secured assets only
a.. To Borrower by the Bank
b.. To Qualified Institutional buyer by the Reconstruction Company
c.. To Creditor by the Securitisation Company
d...To Reconstruction company by the Securitisation Company
..These receipts are transferable in the market.
.. Sponsor is a person holding not less than 10% of the paid up capital of securitisation or reconstruction company.
the powers to specify different amounts of owned
funds for different companies.
..The company can formulate separate schemes for
acquisition of financial asset.
..The securitisation or reconstruction company can
act as trustees for such trusts and manage the assets
held in trust.
..Assignment is complete on the acquiring company issuing debenture or bond and incorporating therein the terms and conditions of acquisition.
In the first stage it is acquisition of financial assets and undivided interest therein.
Second stage is issue of security receipts in favor of investors for the purpose of raising money from investors
a.. Payment of stamp duty
b.. As per the provisions of the Indian Stamp Act
c.. State Stamp duty laws
d.. Central Stamp duty laws
a...an acquisition of funded assets should not include take over of outstanding commitments, if any, of any bank or financial institution to lend further.
b…terms of acquisition of security interest in non-fund based transactions should provide for the relative commitments to continue with bank or financial institute till demand for further funding arises
a.. The Obligor b.. Such notice is not optional
c.. The Obligor, which is compulsory
d.. The Obligor which is not compulsory under the Act.
However, if such notice is given to the obligor company, then notice to the Registrar of companies becomes essential.
a.. The bank can utilise the funds
b.. The bank has an obligation to remit to the securitisation company
c.. The bank first of all should not accept such payment
d.. The bank has to enquire why the debtor had not paid earlier when the liability was outstanding with them.
..Realisation of the asset is held and applied towards redemption. i.e., repayment of investments as assured while issuing the security receipt.
a.. The first institutional buyer has the right to call for such meeting
b.. The qualified institutional buyers holding not less than 75%
of the total value of security receipts has the right
c.. Any one of the Institutional investor who takes the lead gets the priority
d.. None of the above
.. In such an event the security receipt does not require registration which is other wise compulsory under the Registration Act,1908
a.. Such security receipt need not be registered
b.. Such security receipt has to be registered
c.. Such security receipt cannot be transferred
d.. Such security receipt has to be retained by the bank who is the original institutional investor and hence there is no question of registration / non registration.
a.. Under special circumstances only
b.. Cannot raise funds by way of deposits
c.. If need arises with the permission of RBI
d.. As and when required with the permission of RBI,SEBI and Company Law Board
a.. True b.. False
c.. Not 6 years but 5 years
d.. No such restriction on number of years
a… At the time of enforcing securities as per the provisions of SARFAESI Act, the securitisation company may itself acquire secured assets for use or resale if such resale is through a public auction.
b.. The Securitisation company is permitted to set up trusts who can issue security receipts.
c.. While issuing security receipts detailed disclosures are required to be made by the securitisation company
d.. While issuing security receipts detailed disclosures are not required to be made by the reconstruction company.
a.. Debenture b.. Security Receipt
c.. Undertaking d.. None of these
of the Court or Tribunal.
..The act deals with how the notice to be given by the secured creditor asking for repayment of the out standings.
.. The above is applicable to such debtors who have defaulted and classified as NPA.
.. There is no bar for the creditor to seek the other legal remedies such as resorting to filing of suit in a competent court
a.. Notice as per the provisions of the act is a routine one
b.. Notice as per the provisions of the act is a statutory notice.
c.. The Act does contemplate a reply form the borrower to the notice.
d.. When the offer of sale of property is accepted by the purchaser and the secured creditor accepting the offer confirms the sale, the purchaser has to deposit 50% of the offer price.
a.. True b.. False
c.. Relevant State Laws
d.. Central Laws
..The authorised officer is required to publish the possession notice in two leading newspapers, one
of which should be in vernacular language.
a.. 30 days of sale b. 15 days of sale
c.. 45 days of sale d. 60 days of sale
a.. Then his decision will be final
b.. With the consent of the secured creditor
c.. With the consent of the borrower and the secured creditor
d.. Without consulting any one
..For seeking their help a request in writing is required.
..To approach the authority within whose jurisdiction the secured asset or documents related to it are situated.
a.. If the borrower is a company as defined in the Companies Act, 1956 to be the directors of such company, or
b.. In any other case, to be the administrator of the business of borrower.
a.. 30 days b.. 45 days
c.. 60 days d.. 90 days
a.. 30 days form the date of receipt of the order of Debt Recovery Tribunal
b.. 15 days form the date of receipt of the order of Debt Recovery Tribunal
c.. 60 days form the date of receipt of the order of Debt Recovery Tribunal
d.. 45 days form the date of receipt of the order of Debt Recovery Tribunal
b. From 75% to 50% and tribunal cannot reduce further
c.. From 75% to 50% in the first stage and Tribunal can reduce the same to 25%
..The record of Central Registrar can be kept fully or partially in computer, floppies, diskettes, or any other electronic form. The Central Registrar shall have the control and management of the Central Registrar.
b.. Not 21 days and no such limit
c.. Not 21 days but 30 days
a.. Within 7 days
b.. Within 14 days
c.. Within 21 days
d.. Within 30 days
a.. Not in correct
c.. Rs.5 lacs and Rs.10000/- per day respectively
d.. Rs.7 lacs and Rs 5000/- per day respectively
a.. A pledge of movable within the meaning of the Indian Contract Act,1872(sec172)
b.. Any right of an unpaid seller as per Sale of Goods Act,1930 (sec 47)
c.. Any security interest created in an agricultural land
d.. All the above
a.. Can proceed against the borrower under Civil Law
b.. Since the bank had availed the support of SARFAESI Act has to forego the balance outstanding
c.. The bank should have applied their mind before invoking Securitisation Act
d.. The bank can proceed against the borrower under Civil Law subject to the provisions of Limitation Act as well.
a.. Bank has to seek legal remedy through the Civil Court.
b.. Bank has to seek legal remedy through DRT
c.. Bank has to forego since they have already availed the legal avenue
d.. Bank may have to approach the borrower straight away and request him to settle the balance amount.
a.. Non-issue of drafts to customers and others
b.. Inordinate delay in collection of cheques
c.. Both a & b
d.. None of the two
..The complaint is not in respect of the subject matter, which was settled through the office of the Banking Ombudsman in any previous proceedings
.. He shall be guided by the evidence placed before him, the principles of law and practice, directions, instructions and guidelines issued by RBI from time to time to pass the necessary award.
a.. There is no such requirement
b.. It is not Surety but Indemnity
c.. It is not only Indemnity but also suitable Surety
d.. None of the above
a.. The Arbitration Act, 1996
b.. The Banking Regulation Act,1949
c.. The Reserve Bank of India Act,1934
d.. None of these
b.. In correct
c.. Not 5 years and 62 years but 3 years and 63 years respectively
d.. Not 5 years but 7 years whereas 62 years of age is correct .
.. Every application to be filed before the DRT shall be accompanied by appropriate fees.
.. The Tribunal may , on giving opportunity to both the sides of being heard, pass interim or final order for payment of amount including interest thereon.
a.. Will be decided by the DRT
b.. Standard fees to be paid as applicable to a new case referred to the DRT
c.. No fees required to be paid
d.. None of the above
b.. Not permissible
c.. Not permissible since both the contracts are different
d.. DRT would not entertain and advise the bank to file a separate case.
a.. Within 45 days form the date on which copy of the order is received.
b.. If the order was made by the Tribunal with the consent of the parties no appeal possible
c.. Both a & b
d.. Within 60 days from the date on which copy of the order is received.
a.. Attachment and sale of movable and immovable property of the defendants
b. Arrest of the defendant and his detention in prison
c.. Appointment of a receiver for the management of the movable and immovable properties of the defendant.
..Bankers’ books’ include ledgers, daybooks, cashbooks, account books and all other records used in the ordinary course of business of a bank.
a.. Judge of a special Court
b.. Judge of a High Court
c.. Judge of a DRT
d.. Judge of Supreme Court
c.. Not 5 days but 3 days
d.. At least 3 clear working days
..The Act is for better protection of the interests of the consumers and for that purpose to make provision for the establishment of consumer councils and other authorities for the settlement of consumers’ dispute.
..The Act is social welfare benefit oriented legislation for the consumer providing self-contained quasi-judicial machinery to provide speedy and simple redressal to consumer disputes.
b.. Consumer Dispute
c.. At least One meeting
d.. At least Three meetings
a.. Valid contract
b.. In valid contract
c.. Quasi contract
d.. No contract
a.. A is the promisor
b.. B is the promisee
c.. Bank is the promiser
d.. Bank is the promisee and both A& B promisors
a.. Proposal and acceptance
c.. Free consent
d.. Agreement under force
.. A contract guarantee is a contract to perform the promise, or discharge the liability, of a 3rd person in case of default.
a.. The stand of L is incorrect
b.. The stand of Bank is incorrect
c.. What L says has relevant substance
d.. Bank will succeed if they proceed against L even without
proceeding against R based on the guarantee agreement
creditor of one of them does not discharge the
others. Also, the surety released does not become
free from his responsibility to the other sureties.
..A surety has the right of Subrogation.
..Any guarantee obtained by means of
misrepresentation made by the creditor is invalid.
..Any guarantee which the creditor has obtained by
means of keeping silence as to material circumstance is also
a.. He has the right to discontinue
b.. Bank will uphold his decision to discontinue
c.. Bank need not concur with the decision of the surety
d.. Borrower will have to permit the surety to leave
a.. The bank’s stand is correct
b.. The bank will succeed if contested by the pledgor
c.. The bank will fail if contested by the pledgor
d.. As the creditor the bank has the right to dispose off
.. In an emergency, an agent has authority to do all acts to protect his principal form loss as would be done by a person in his own case.
.. An agent can detain money received by him on account of goods sold, even if all the goods consigned to him for sale are not sold.
misplaced the cheque accepted for collection.
The customer when he approached to know
about the realisation of the cheque, then only
the bank could realise it has misplaced the
a.. The bank is responsible
b.. Till the cheque is realized or returned, the bank is not responsible.
c.. If the cheque had been purchased then the bank would have been responsible and not for collection item.
d.. The bank is not responsible
.. A sale is a contract in which the parties have already performed their part.
.. The ownership of goods stands transferred under a sale
.. If the seller fails to deliver, the buyer can sue the seller
..The ownership of the goods yet to pass on to the seller
.. In case the seller fails to deliver the goods, the buyer can claim only damages.
.. The seller can only sue for damages.
c.. Both of them
d.. None of them
.. If the sale of goods is by description, there is an implied condition that the goods shall correspond with the description.
c.. It is not implied condition but implied
d.. It is not only implied condition but also implied warranty
a.. Taking actual possession of the goods
b.. Giving notice of his claim to the carrier
c.. Both of them
d…Any one of them
a.. The bank is in order in paying both the cheques
b.. The bank is not in order in paying both the cheques
c.. The bank is in order in paying the cheque signed by B and not by C
d.. The bank is in order in paying the cheque signed by C and not by B
.. A firm can also be dissolved by agreement between the partners or by the court
a.. A private company is prohibited from acceptance of any deposit from public
b.. A private company should have a minimum paid up capital of Rs.2 lcs
c.. A foreign company is incorporated in India but has a place of business in foreign countries
d.. A public company should have minimum 5 members
a.. Any terms of the Articles of Association can be altered by an ordinary resolution
b.. Change of Registered Office in another State or the object clause can be altered only by a special resolution and passed by the company and with the sanction of the Company Law Board
c.. The borrowings in excess of the paid up capital plus free reserves in respect of a public limited company can be done based on resolution by way of circulation among the board of directors.
d.. Both Memorandum and Articles of Associations are not considered as Public documents.
.. Any other act of the company which is outside the scope of the objects clause of the Memorandum of Association is called Ultra vires(i.e., beyond the powers of ) the company
…Doctrine of Indoor Management lays down that the outsiders are not required to see the compliance of internal regulations of the company.
a.. Ordinary Member
b.. Acquiescence Member
c.. Special Member
d.. Non member
a.. Transmission of Shares
b.. Transfer of Shares
c.. Assignment of Shares
d.. Negotiation of Shares
a.. To receive notice of meetings, attend and vote at meetings
a.. Proprietary Right
b.. Statutory Right
c.. General Right
d.. Documentary Right
.. Every application form for shares must be accompanied by a copy of the prospectus except application forms issued to underwriters and existing shareholders and debenture holders.
a.. The Registrar of Companies
c.. Stock Exchange
d.. No one
a.. Capital account Transaction
b.. Current account Transaction
c.. Both a & b
d.. Neither a nor b
c.. Possible by way of assignment
d.. Not possible since the FDR is not transferable
Best wishes to one and all