Finance Solved Queston Paper' 2022AHSEC Class 12 Finance Solved Question Papers
Full Marks: 100
Pass Marks: 30
Time: Three Hours
The figures in the margin indicate full marks for the questions.
The figures in the margin indicate full marks for the questions.
1. (a) In which
year ‘Lead Bank Scheme’ was introduced? 1
Ans: Ans:
The Lead Bank Scheme was introduced in December, 1969.
(b) Who issues
one-rupee note? 1
Ans: Minister
of Finance, Government of India.
(c) Write the
full form of OTCEI? 1
Ans: Over the counter
exchange of India
(d) IFCI was
established in ______. 1
Ans: 1948
(e) State the
meaning of Hundi. 1
Ans: The
word, “Hundi” has been derived from the Sanskrit word “hund” or “huna” (2017) which
means to “collect”.
(f) Define
General Crossing of a cheque. 1
Ans:
A general crossing is a crossing where a cheque simply bears two parallel lines
with or without any words and without any specification.
(g) What is
meant by Bank Overdraft? 1
Ans: Bank
overdraft is an arrangement by which the customer is allowed to overdraw from
his account. It is granted against some collateral securities.
(h) Name two
subsidiaries of SBI. 1
Ans State
Bank of Bikaner and Jaipur. State Bank of Hyderabad.
2. Write a note on Presidency
Banks. 2
Ans: Presidency Banks: The banking business of
Agency House which survived and continued to carry on trade and banking
together was progressively taken over by the Presidency Banks. The three
Presidency Banks viz.:
a)
The Bank of Bengal (1809);
b)
The Bank of Mumbai (1840); and
c)
The Bank of Chennai (1843)
were
established under the Charter of the East India Company. These Banks acted as
banker to the East India Company at Kolkata, Mumbai and Chennai and performed
Central Banking functions for their respective areas.
3. What is the meaning of
underwriting? 2
Ans: Ans:
The term underwriting is used for the process through which an institution or
an individual takes on a financial risk for a fee or at a
predetermined cost. This risk is generally taken in the case of loans,
insurance or investments. In accordance with the term underwriting, the
term underwriter is used which stands for the person or institution
who writes their name under the total amount of risk that they are willing to
take for the specified amount of money or premium.
4. Write two objectives of IBRD.
2
Ans: The
objectives of World Bank are:
a)
To provide long-run capital to the
member countries for reconstruction and development.
b)
To promote private capital investment
by providing guarantee on private loans and capital investment.
5. What is a Post-dated Cheque? 2
Ans: If a
cheque bears a date later than the date of issue it is termed as post-dated
cheque. Post-dated cheque cannot be realised before the date mentioned in the
cheque.
6. Who is a Paying Banker? 2
Ans: The
term paying banker refers to the drawee banker who pays the amount of cheques
to his customer. The paying banker is defined as the “banker to whom the order
is made to pay, where the order is issued as the form of a cheque”.
7. Write three differences
between current account and saving deposit account. 3
Ans: Current
Deposit Account is one which the customer is allowed to deposit or withdraw
money at number of times as and when he likes.
Savings
Deposit Account is a type of deposit account which is opened by the customer
for depositing their small savings for their future benefits.
Difference
between current deposit account and saving deposit account:
|
Current deposit account |
Saving deposit account |
|
a) There are no restrictions on
withdrawal of money. |
a) There is restriction on withdrawal. |
|
b) No interest is given on this type of
account |
b) Small amount of interest is given. |
|
c) Overdraft facility is given to current
account holders |
c) No overdraft facility is given in this
type of account. |
8. Write three objectives of Money
Market. 3
Ans: Objectives,
Significance/Functions of Money Market
The major functions of money market
are given below:
(a)
Economic Development: The money market
helps in economic development of a country by providing short term funds to
both public and private institutions without any discrimination.
(b)
Funds for government: Money market
helps the government in borrowing short term funds at very low interest rate.
This can be done by issuing treasury bills.
(c)
Return on idle funds: Money market
helps the lenders to earn return on their idle or surplus funds for short
period.
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Also Read: AHSEC Class 12 Finance Solved Question Papers
Finance [Banking] Solved Question Paper' 2012
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9. Write three functions of
NABARD. 3
Ans: Objectives/Functions of NABARD
a)
To provide training and Research
facilities for rural Development.
b)
To keep a check on all the projects
which are refinanced by NABARD; through timely inspection, monitoring and
evaluation.
c)
To Act as a coordinator and regulator
for rural credit institutions.
10. Write a note on Endorsement
in blank. 3
Ans:
Blank or General Endorsement: An endorsement is said to be blank or general, if
the endorser sings on the back or on the face of the instrument without
specifying the name of any endorsee. The effect of his endorsement makes the
instrument payment to bearer even though originally it was payable to order.
For example, a cheque payable to Mr. X or order and Mr. X endorse the cheque to
Mr. Y by simply affixing his signature. The effect of this endorsement makes
the instrument payable to bearer even though originally it was payable to
order.
11. Under what circumstances
banker must pay a cheque? 3
Ans: The
Paying banker is bound to pay the cheque if the following conditions are
satisfied
a)
When the cheque has been drawn on the
proper form i.e. on the forms supplied by the banker.
b)
When the cheque bears a date and which
is due.
c)
When there is sufficient fund in the
account of the customer to pay the cheque in full.
d)
When the fund is properly applicable
for the payment of the cheque.
e)
When the amount of the cheque is
mentioned in both words and figures and they are same.
Or
State the minimum reserve system
of note issue. 3
Ans: The
minimum reserve system is followed in India since 1956. This is a system in
which the Central Bank is authorized to issue notes up to any limit by keeping
a certain minimum reserve of gold and foreign securities. In India, the RBI is
required to keep the minimum reserve of Rs. 200/- crore out of which Rs. 115/-
crore should be kept in gold. The system is very elastic and economical for
developing countries as it requires only a small and fixed amount of gold
reserve. However, it lacks in public confidence due to non-convertibility of
notes.
12. Write a note on social
control of Commercial Bank. 5
Ans: Social Control over banks: Primary
functions of banks are to accept deposit from public and lend it business for
its productive use. The banks are the custodian of savings of the public. They
mobilises the savings from all sections of the society and channelise them to
industries and other by way of granting loans and advances. Previously it was
observed that banks are directing their advances to medium and large scale
industries and small scale industries and other priority sectors such as
agricultural sector is neglected. The main reason behind this problem is that
the directors of the banks were mostly industrialists and interested in sanctioning
loans to those industries in which they are connected. To overcome these
deficiencies found in the working of the banks, the Banking Laws (Amendment)
Act was passed in December 1968 and came into force on 1-2-1969. It is known as
the scheme of ‘social control’ over the banks.
The
main purpose of social control was to make the commercial banks active
participation in the social welfare of the masses. The major steps in social
control legislation
1.
The establishment of the national credit council to formulate new credit policy
2.
Appointment of non - industrialist bankers having special knowledge of the
working of banking company as chairman of all banks as whole time employee for
a term not exceeding five years.
3.
Appointment of not less than 51% of professional directors.
4.
Prohibition to grant loans or advances or guarantees to directors or a firm in
which he is interested and
5.
Establishment of a training institute at highest level to improve the technical
expertise of bank executives.
The
purpose of social control was to achieve the social welfare objective of the
government.
Or
Discuss the organisational
set-up of the RBI. 5
Ans: The Reserve Bank was set up as corporate
body. The organizational structure of the Reserve Bank is provided by the
Reserve Bank of India Act, 1934. It comprises of the: (a) Central Board and (b)
Local Boards.
Central Board: The Central Board of
Directors is the supreme governing body of the Bank. It consists of 20 members.
The members include the following:
1)
A Governor and not more than four
Deputy Governors to be appointed by the Central Government.
2)
Four Directors to be nominated by the
Central Government, one each from the four local boards.
3)
Ten Directors to be nominated by the
Central Government. They are experts from the fields of business, industry,
finance and co-operation.
4)
One Government Official (Secretary,
Ministry of Finance) to be nominated by the Central Government.
The power of the Board vests with the
Governor who is the Chief Executive Officer of the Bank. The Governor has the
responsibility of directing the affairs and business of the Bank. The Governor
and Deputy Governors hold office for a period of 5years and are eligible for
the reappointment. The Governor in his work is assisted by four Deputy
Governors and four Executive Directors. The executive directors are not the members
of the Central Board but attend Board meetings by invitation. They are
subordinate to Deputy Governors.
Local Boards: Apart from Central Board
of Directors, four Local Boards are constituted representing each area
specified in the first schedule to the Act. There is a Local Board in Eastern,
Western, Northern and Southern regions of the country with headquarters at
Kolkata, Mumbai, New-Delhi and Chennai.
Local Board consists of five members,
each appointed by the Central Government. In each Local Board, a Chairman is
elected from amongst the members. The members of the Local Board hold office
for a period of four years and are eligible for reappointment.
13. Discuss the features of
Indian Capital Market. 5
Ans: Features of Indian Capital Market
a)
Dealing in Securities: It deals in
long-term marketable securities and non-marketable securities.
b)
Segments: It included both primary and
secondary market. Primary market is meant for issue of fresh shares and
secondary market facilitates buying and selling of second hand securities.
c)
Investors: It includes both individual
investors and institutional investors such as Mutual funds, banks, Insurance
companies etc. It also includes foreign institutional investors.
d)
Link between savers and investment
opportunities: Capital market is a crucial link between saving and investment
process. It facilitates flow of long term capital from those who have surplus
capital to those who need capital.
e)
Intermediaries: It acts through
intermediaries which includes bankers, brokers, underwriters etc.
f)
Government rules and regulations: The
capital market operates freely but under the guidance of government policies.
These market functions within the framework of government rules and
regulations.
Or
Write the functions of IMF. 5
Ans: Ans:
The IMF is an international monetary institution established by 44 nations
under the Bretton woods agreement of July 1944. It came into existence in
December 1945 and started functioning in March, 1947. It is an autonomous
organization and is affiliated to the U.N.O. It has its main office in
Washington. Initially, the IMF had 30 countries as its members. At the end of
2000, the membership of the IMF was 183. It was established to promote economic
and financial co-operation amongst member countries.
The
functions of IMF are:
a)
It functions as a short credit
institution.
b)
It provides machinery for the orderly
adjustments of exchange rates.
c)
It keeps reserves of the currencies of
all member countries.
d)
It lends to the borrowing countries in
the currencies which they require.
e)
It promotes the expansion of
International Trade for the mutual benefits of member countries.
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Also Read:
1. HS 12 Banking Chapter wise Notes
2. AHSEC Class 12 Banking Question Papers From 2012 Till Date
3. AHSEC Class 12 Banking Solved Question Papers From 2012 Till Date
4. Banking Chapter wise MCQs
5. Class 12 Banking Important Questions and Question Bank
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14. Write the features of
Negotiable Instruments. 5
Ans: The characteristics of a Negotiable
Instrument are:
a) Witting and Signature according to the
rules: A Negotiable Instrument must be in writing
and signed by the parties according to the rules relating to (a) promissory
notes, (b) Bills of Exchange and (c) Cheques.
b)
Payable
by Money: Negotiable Instruments are payable by the
legal tender money of India.
c)
Unconditional
Promise and order: If the
instrument is a promissory note, it must contain an unconditional promise to
pay. If the instrument is a bill or cheque, it must be an unconditional order
to pay money.
d)
Freely
transferable: A
negotiable instrument is transferable from one person to another by delivery or
by endorsement and delivery.
e)
Acquisition
of Property: Any
person, who possesses a negotiable instrument, becomes its owner and entitled
to the sum of money, mentioned on the face of the instrument.
f)
No
Need of Giving Notice: There is no need of giving a notice
of transfer of a negotiable instrument to the party liable to pay the money.
Or
Explain the duties of a
Collecting Banker. 5
Ans:
The duties of a collecting banker towards his customers are as
follows:
a)
Due care and Diligence in the
collection of cheques: The collecting banker is bound to show due care and
diligence in the collection of cheques presented to him. In case a cheque is
entrusted with the banker for collection, he is expected to show it to the
drawee banker within a reasonable time.
b)
Presentation of cheque for payment
within reasonable time: The collecting banker should present the cheque of his
customer to the drawee banker within a reasonable time. If the banker makes
undue delay in presentation of cheque and the customer suffers a loss, then the
banker will be held responsible for the loss and shall be required to reimburse
the loss.
c)
Remittance of proceeds to the
customer: It is the duty of the collecting banker to inform his customer immediately
about the collection of the cheques. When the proceeds are collected, the
banker may debit his customer’s account in respect of his commission and credit
the gross proceeds to the customer’s account.
d) Serving Notice of Dishonour: When the cheque is dishonoured, the collecting banker is bound to give notice of the same to his customer within a reasonable time. If he fails to give such a notice, the collecting banker will be liable to the customer for any loss that the customer may have suffered on account of such failure.
15. Write the functions of Stock
Exchange. 5
Ans: Functions
of stock exchange
As
the barometer measures the atmospheric pressure, the stock exchange measures
the growth of the economy. It performs the following vital functions:
1. Ready
market and liquidity: Stock exchange provides a ready and continuous market
where investors can convert their money into securities and securities into
money easily and quickly. It provides a convenient meeting place for buyers and
sellers of securities.
2. Evaluation
of securities: Stock exchange helps in determining the prices of various
securities that reflect their real worth. The forces of demand and supply act
freely in the stock exchange and help in the valuation of securities.
3. Mobilisation
of savings: Stock exchange helps in mobilising surplus funds of individuals and
institutions for investment in securities. In the absence of facilities for
quick and profitable disposal of securities, such funds may remain idle.
4. Capital
formation: Stock exchange not only mobilises the existing savings but also
induces the public to save money. It provides avenue for investment in various
securities which yield higher returns. It helps in allocation of available
funds into the most productive channels.
5. Regulation
of corporate sector: Stock exchanges frame their rules and regulations. Every
company which wants its securities to be dealt in at the stock exchange has to
follow the rules framed by the stock exchange in this regard.
Or
What are the objectives of LIC? 5
Ans: Objectives of LICI:
a)
Spread Life Insurance much more
widely and in particular to the rural areas and to the socially and
economically backward classes with a view to reaching all insurable persons in
the country and providing them adequate financial cover against death at
reasonable cost.
b)
Maximize mobilization of people’s
savings by making insurance linked saving adequately attractive.
c)
Bear in mind, in the investment
of funds, the primary obligation to its policyholders, whose money it holds in
trust, without losing sight of the interest on the community as a whole, the
funds to be deployed to the best advantage of the investors as well as the
community as a whole; keeping in views national priorities and obligations of
attractive return.
d)
Conduct business with utmost
economy and with the full realisation that the money belongs to the
policyholders.
e)
Act as trustees of the insured
public in their individual and collective capacities.
f) Meet the various life insurance needs of the community that would arise in the changing social and economic environment.
16. State the five differences
between Bill of Exchange and Promissory Note. 5
Ans: Ans:
Difference
between bill of exchange and Promissory Note
|
Basis |
Bill of
Exchange |
Promissory
Note |
|
Drawer |
It is
drawn by the creditor |
It is
drawn by the debtor. |
|
Parties |
There
can be three parties to it, viz. the drawer, the Drawee and the payee. |
There
are only two parties to it, viz. the drawer and the payee. |
|
Order or
Promise |
It
contains an unconditional order to pay. |
It
contains an unconditional promise to pay. |
|
Acceptance |
It
requires acceptance by the Drawee or someone else on his behalf. |
It does
not require any acceptance. |
|
Payee |
Drawer
and payee can be the same party |
Maker
cannot be the payee of it. |
|
Set |
A bill of exchange can be drawn in sets. |
Promissory note cannot be drawn in sets. |
Ans:
Ans: The bank may dishonour a cheque for the following cases.
a)
When the cheque is post dated and it
is presented for payment before the date it bears.
b)
When there are insufficient funds to
the credit of the drawer.
c)
When the cheque is presented for
payment at branch where the drawer of the cheque has no account.
d)
When a cheque is not duly, presented,
as for example a cheque presented outside banking hours.
e)
When the cheque is ambiguous,
mutilated, materially altered or irregular.
f)
When the cheque has become stale, that
is it is not presented within six months of the issue of the cheque.
g)
When the signatures of the drawer of a
cheque do not tally with the specimen signatures in the records of the bank.
h)
When the amount in figures and in
words is not the same in a cheque.
i)
When the cheque is crossed and it is
not presented through a bank.
j)
Where the bank receives a notice of
the insolvency or insanity of the customer.
18. State the factors that
affect cash reserve of a commercial bank. 5
Ans: Factors determining the cash balances:
The following factors help the banks to decide the quantum of cash balances to
be maintained:
1) Banking
habit: Banking habits play a significant role in determining the cash balances
of a bank. Banking habits refers to the utilisation of banking services by the
public. If the people have e-banking habits, then the use of cash in
transaction is reduced and the banks need to keep lesser amount of liquid cash.
2) Structure
of banking: The banking structure of the country also influence the liquidity
requirements of the bank. In a branch banking system, the banks can function
with less cash reserves because in case of emergency cash can be transferred
from one branch to another. Whereas in unit banking system higher cash reserve
is required.
3) Nature
of bank accounts: The nature of deposit accounts viz. savings, current or fixed
accounts affect the amount of cash balance to be kept by the banks. In case of
fixed deposit account holders, the bank can manage with less cash balance as
against current account where it must keep larger cash balance.
4) Type
of depositors: The type of depositors is another determinant of cash balance of
the banks. If the majority of the depositors of the bank are business firms,
corporations, schools, college etc. the bank will have to maintain high
liquidity because of unpredictable. On the other hand, if the deposits are
mostly by individual customers and are of personal nature, the bank can operate
with less liquid cash.
5) Nature
of advances: The nature of advances of bank i.e. loans, cash credit, overdraft
and purchasing and discounting of bills also affect the size of the cash
balances of the bank.
19. Discuss the principles
followed by a commercial bank in investing its funds in securities. 8
Ans: Principles of Sound Investment
Banks should follow some basic principles at the time of investing
funds. This ensures efficient and long term working of the banks. Some of the
basic principles of sound investments are as follows:
1)
Safety of principal: The most important rule for investment of funds is the safety of
funds. A banker deals in borrowed funds and therefore his main
consideration is safety of principal invested in securities. Banks must ensure
the solvency and sound financial position of the companies in which investments
is made. The government and semi-government securities are the safest
securities because they are guaranteed by the government.
2)
Marketability or liquidity: The second
important principle of sound investments is liquidity. Liquidity means
possibility of converting investments into cash without loss of time and money.
Thus, the banker should see that the security in which he invests his funds
possesses a ready market i.e. they can be sold in the market without loss of
time and money.
3)
Return or Profitability: Return
or profitability is another important principle. The funds of the bank should
be invested in securities to earn highest return, so that it may pay a
reasonable rate of interest to its customers on their deposits, reasonably good
salaries to its employees and a good return to its shareholders. However, a
bank should not sacrifice either safety or liquidity to earn a high rate of
interest.
4)
Price stability: The price of security
selected by the banker should remain stable. The safety of investments depends
on the stability in the prices of securities. Banker is not a speculator and
hence his object of buying security should not be to gain on wide fluctuations
in prices of the securities and should prefer those securities whose prices
remain fairly stable over a period of time. The Prices of government securities
remain stable and do not fluctuate.
5)
Diversification of Investment: One should not put all his eggs in one basket’ is an old proverb which
very clearly explains this principle. A bank should not invest all its funds in
one particular industry or security or company. In case that industry or
company fails, the banker will not be able to recover his funds. Hence, the
bank may also fail. So, the bank should diversify its investments in different
industries and should invest in variety of companies with sound financial
record.
6)
Refinance: To ensure the liquidity of
his investments the banker has to see that the security is eligible to obtain
refinance from the Central Bank and other refinancing institutions.
7)
Duration: In addition to the above
factor, a banker also considers the duration and denomination of security and
its future earnings prospects.
In conclusion, it may be said that for a
banker the government and semi-government securities are most ideal for
investment of funds. Government securities with virtually no risks, have a
ready market, are eligible for refinance and bring reasonably good return.
20. Discuss the various agency
services rendered by commercial bank. 8
Ans: Agency functions (2013, 2015, and
2017): These functions are performed by the banker
for its own customer. For these bank changes certain commission from its
customers. These functions are:
a)
Remittance of Funds: Banks help their
customers in transferring funds from one place to another through cheques,
drafts etc.
b)
Collection and payment of Credit
Instruments: Banks collects and pays various credit instruments like cheques,
bill of exchange, promissory notes etc.
c)
Purchasing and Sale of securities:
Banks undertake purchase and sale of various securities like shares, stocks,
bonds, debentures etc. on behalf of their customers.
d)
Income Tax Consultancy: Sometimes
bankers also employ income tax experts not only to prepare income tax returns
for their customer but to help them to get refund of income tax in appropriate
cases.
e)
Acting as Trustee and Executor: Banks
preserve the wills of their customers and execute them after their death.
f)
Acting as Representatives and
Correspondent: Sometimes the banks act as representatives and correspondents of
their customers. They get passports, travelers tickets secure passages for
their customers and receive letters on their behalf.
21. Explain the characteristics
of Non-Banking financial institutions. 8
Ans: Non-Banking Financial Institutions (NBFI’s): NBFI’s
include such institution such as life-insurance companies, mutual savings bank,
pension funds, building societies etc. which are doing diverse business. These
financial institutions are thus a heterogeneous group of financial institutions
other than commercial banks and co-operative societies. They include a wide
variety of financial institutions, which raise funds from the public, directly
or indirectly, to lend them to ultimate spenders. The growth of NBFI’s has been
much faster than that of commercial banks. The main reason for this is that, in
comparison to commercial banks, NBFI’s pay higher interest ratio to the
depositors and change lower interest rate from the borrowers. Thus, they are
competing with the commercial bank for public savings and as sources of
Loanable funds.
Characteristics
of Non-Banking financial institutions
1. Non-Banking Financial institution is a specialised financial
institution which provides medium and long term finance to business units.
2. It is a multi-purpose financial institution and not just a
term-lending institution.
3. NBFI accept deposits repayable on the expiry of specified time
and certain NBFI receive funds from government.
4. The liabilities of NBFI are not accepted as money as a means of
payment of debt.
5. NBFIs deal with medium and long-term funds in the capital market.
6. NBFIs are heterogeneous group doing diverse business in the
financial system of the economy.
7. People invest their surplus fund with NBFI for earning income
rather than safety and liquidity.
8. NBFIs supply term finance for acquiring fixed assets.
9. Mobilisation of savings by the NBFIs is highly affected by the
interest rate. NBFI are regulated by their special statutes.
10. Financial assistance is provided by a NBFI not only to the
private sector but also to the public sector undertakings.
11. One of its major aims is to promote the saving and investment
habit in the community.
12. Its major role is the gap-filler, i.e. to fill up the
deficiencies of the existing financial facilities.
13. Its motive is to serve the public interest. It works in the
general interest of the nation rather than to make profits. A development bank
is motivated by social profits.
Or
Discuss the objectives and
functions of Industrial Development Bank of India. 8
Ans: The
full form of IDBI is Industrial Development Bank of India. It was established
in July, 1964. However, in February 1976, the IDBI was taken over by the
government and was made an autonomous institution. It was established with the
object of recognizing and integrating the structure of the existing financial
institution in the country for gearing up the needs of rapid industrialization.
The objectives of IDBI are:
a)
Planning, promoting and developing
industries to fill the gaps in the industrial structure in India.
b)
Providing technical and administrative
assistance for promotion etc.
c)
Co-coordinating the working of
institutions engaged in financing.
d)
Undertaking market and investment
research and surveys for techno-economic studies in connection with development
of industry.
The functions of IDBI are:
a)
It renders technical, managerial and
administrative assistance for promotion, management and expansion of industry.
b)
It provides financing facilities to
IFCI, SFC and other financial institutions approved by the Government.
c) It co-ordinates the activities of
other financial institutions for the promotion and development of industries.
d)
By purchasing and / or underwriting
shares and debentures of industrial concerns it provides capital.
e) It also provides guarantee for deferred payments due from industrial concerns and for loans raised by them.
22. Explain the significance of
different kinds of endorsement. 8
Ans: Different kinds of endorsement with their respective
significance are explained below:
a)
Blank or General Endorsement: An
endorsement is said to be blank or general, if the endorser sings on the back
or on the face of the instrument without specifying the name of any endorsee.
The effect of his endorsement makes the instrument payment to bearer even
though originally it was payable to order. For example, a cheque payable to Mr.
X or order and Mr. X endorse the cheque to Mr. Y by simply affixing his
signature. The effect of this endorsement makes the instrument payable to
bearer even though originally it was payable to order. (2022)
b)
Full or Special Endorsement: If an
endorser signs his name and adds a direction to pay the amount mentioned in the
instrument to or to the order of a specified persons, such an endorsement is
said to be a full or special endorsement. For example, “Pay to Mr. X or order” S/d Mr. Y
is an example of full endorsement. Here Mr. Y is the endorser and he has
mentioned the name of the endorsee – Mr. X.
c)
Conditional Endorsement: An
endorsement is conditional or qualified if it limits or neglects the liability
of the endorser. For example, “Pay to
Mr. X on his marriage” s/d Mr. Y is a conditional endorsement. In case of
conditional endorsement, the liability of the endorser and the rights of the
endorsee becomes conditional on the happening of a particular event.
d)
Restrictive Endorsement: An
endorsement is said to be Restrictive, when it prohibits or restrictive the
future negotiability of the instrument, it merely entitles the holder of the
instrument to receive the amount on the instrument for a specified purpose. For
example, “Pay to Mr. X only” s/d Mr. Y. This endorsement confers all the rights
of an endorser to the endorsee except the right of negotiation.
e)
San Recourse endorsement and San frais
endorsement: In San recourse endorsement, the endorser by his expressed words
excludes his own liability and in San frais endorsement, the holders have no
right against the endorser if the instrument is dishonoured. For example, “Pay
to Mr. X or order – Notice of dishonour waived.” These types of endorsement are
generally used to avoid personal liability.
f)
Facultative endorsement: In such type
of endorsement, the endorser by his express words increases his liability or
give up some of his rights under the negotiable instruments Act.
g)
Partial Endorsement: When the endorser
intends to transfer to the endorsee only a part of the amount of instrument by
endorsement, the endorsement is said to be partial. Such type of endorsement is
legally invalid. For example, when a cheque of Rs. 10,000 is endorsed for Rs. 5000
is an example of partial endorsement.
h)
Forged endorsement: When a negotiable
instrument is endorsed with the forged signature of the endorser, the
endorsement is called forged endorsement.
Or
Explain briefly about the
different types of crossing of cheques with suitable examples. 8
Ans:
Crossing of a cheque: A cheque is said to be crossed when two parallel
transverse line with or without any words are drawn on the left hand corner of
the cheque. It is simply a direction to the paying banker that the cheque
should be paid only to a banker. Crossing of cheque is very safe because the holder
of the cheque is not allowed to encashed it across the counter of the bank. A
crossed cheque provides protection not only to the holder of the cheque but
also to the receiving and collecting bankers.
Types of
crossing: 2018
1. General crossing: A general crossing is a crossing where
a cheque simply bears two parallel lines with or without any words and without
any specification. According to Sec. 123 of the Negotiable Instrument Act,
1881, “When a cheque bears across its face an addition of the words. “and
company” or any abbreviations thereof between two parallel transverse line or
of two parallel transverse lines simply either or without the words, “Not
Negotiable” that addition shall be deemed a general crossing. Simplify, in case
of General crossing words such as “and company”, “not Negotiable”, “Account
payee” etc. may be inserted between the lines.
A general crossing cheque protects the drawer and also the payee or the holder thereof. Whenever a drawer desires to make payment to an outstation party, he can cross the cheque so that even if the cheque is lost, it means only a piece of paper is lost and nothing beyond that. If by any chance, it is encashed by a third and unauthorized person, it is possible to find out to whose account the amount is credited and the unauthorized person can be identified and suitable action taken against him.
2. Special crossing: Section 124 of the Negotiable Instruments Act,
1881 defines special crossing as “where a cheque bears across its face, an
addition of the name of a banker with or without the words “not negotiable”,
that addition shall be deemed a crossing and the cheque shall be deemed to be
crossed specially and to be crossed to that banker.”
Thus, in case of special crossing, the name of a particular bank is written in between the parallel lines. The main implication of this type of crossing is that the amount of the cheque will be paid to the specified banker whose name is written in between the lines. Special crossing is in a particular bank and by special crossing, he is assured of double safety, safety to the drawer and safety to the payee.
3. Account payee
crossing: This type of crossing is done by adding the words ‘Account
Payee’. This can be made both in general crossing and special crossing. The
implication of this type of crossing is that the collecting banker has to
collect the amount of the cheque only for the payee. If he wrongly credits the
amount of the cheque to another account, he will be held responsible for the
same.
4. Not negotiable
crossing: When the words ‘not negotiable’ is added in generally or
specially crossed cheques, it is called not negotiable crossing. A cheque
bearing not negotiable crossing cannot be transferred. If a cheque bearing ‘Not
negotiable crossing’ is transferred, care must be taken regarding the ownership
of title of both the transferor and transferee.
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