CS Final :: Banking and Insurance - law and Practice : December 2004

Suresh had applied New Age Bank for a term loan of Rs.10 lakh for buying a truck. Vasudeo & Sons, a partnership firm dealing in clothing trade, had given the guarantee for the said loan. The guarantee agreement was signed by Vasudeo, the managing partner of the firm. The term loan account became NPA and the bank served a notice on the partnership firm. The firm disowned its liability. Explain the position of the bank.

A branch of Sat Yug Bank Ltd. is maintaining a joint account of Ram and Shyam with an overdraft limit of Rs.10 lakh. The branch received a notice of death of Ram on 26th April, 2004. Two cheques for Rs.50,000 and Rs.70,000 dated 22nd April, 2004 signed by Ram are presented on the counter for payment. The branch refused to pay these cheques. A friend of Ram argued that since the overdraft limit in the joint account has not been utilised fully, as such these cheques should be paid using the unutilised overdraft limit. Another friend of Ram approached the branch with a request to pay the amount of these cheques to the payee and he is ready to deposit that much amount (Rs.50,000 and Rs.70,000) in the joint account of Ram and Shyam. Whether the branch of the bank should accede to the request of friends of Ram ? Explain.

Mohan is maintaining a current account with a branch of Old Bank. Due to some genuine reasons, the branch had permitted Mohan to over draw his current account. Now, Mohan is not cooperating with the Old Bank to clear his dues in the current account. The branch had found the following transactions /instruments/accounts of Mohan at the branch:

(i)	Rs.10,000 deposited by Mohan for retiring a bill drawn on the firm of Mohan.
(ii)	Some national savings certificates in the name of Mohan left at the branch by mistake.
(iii)	Gold ornaments worth Rs.50,000 against which a loan has been granted to Mohan. (The outstanding balance at present in this loan account is Rs.10,000 only)
Whether the Old Bank can exercise the right of lien against aforesaid transactions/instruments/accounts of Mohan ? Explain

336

On 6th July, 2003, the deposits of Rs.1 lakh were kept by Madhu in joint names with Surender in a savings bank account and in a term deposit indicating that it would be payable to either or survivor. Madhu died on 30th December, 2003. After her demise, Surender approached for encashment of the deposits, and the only son of the deceased, Prakash also filed a suit in the court to claim the amount. Prakash also produced succession certificate. Explain whether the amount is payable to heirs as absolute property ?

Define ‘securitisation’. What are its advantages ? Describe the process of debenture securitisation.

Explain the significance of various types of endorsement.

Attempt any five of the following :

(i)	In case of a bearer cheque, the drawee bank does not take note of any endorsement on it. Explain.
(ii)	If the name of ‘drawee in case of need’ has been mentioned on a bill, it will not be treated as dishonoured, till it is presented to him. Explain.
(iii)	Whether the cheques drawn by pencil are not honoured by banks. Explain.
(iv)	Write short note on ‘fair practices code for lenders’.
(v)	What is meant by ‘real time gross settlement’ (RTGS) system?
(vi)	XL Ratna Ltd., a well-established company approaches you for opening an account. As a banker, what precautions will you take in such a case ?
(vii)	Discuss the various schemes of assistance provided by SIDBI.

The income-tax department has served a notice on the Life Insurance Corporation of India (LIC) for attaching a policy favouring Ramesh for Rs.25 lakh. On verifying the records, the LIC observed that the policy has already been assigned to wife of Ramesh. However, the income-tax department directed the LIC not to pay the policy money to wife of Ramesh, till further instructions. Whether the LIC should accede to the directions of the income-tax department ? Discuss the relevant legal position.

336

Shalimar & Co. had obtained the following two fire insurance policies from different insurance companies for stocks lying at its godown—
Policy-A — sum insured Rs.4 lakh
Policy-B — sum insured Rs.5 lakh.
One day the stock worth Rs.3 lakh were destroyed due to fire. The company claimed the amount of loss (Rs.3 lakh each) from both the insurance companies separately on the ground that it has been paying premium to both the insurance companies. Hence, both the insurance companies should make good the loss. Enumerate the procedure to be followed by both the insurance companies in settling the claim of Shalimar & Co.

336

Attempt any five of the following :

(i)	Explain ‘material information’ in motor insurance.
(ii)	Elucidate IRDA guidelines on reinsurance arrangements.
(iii)	Distinguish between ‘passive credit risk management’ and ‘active credit risk management.’
(iv)	Distinguish between ‘ chance of loss’ and ‘risk’.
(v)	Write short note on ‘e-insurance’.
(vi)	What do you understand by hedging price risks ?

Give reasons in support of private participants in insurance sector.

Identify the essentials of a valid insurance contract.

Describe briefly the role of insurance ombudsman in complaints redressal relating to claims

Explain briefly the difference between ‘insurance management’ and ‘risk management’ and explain the process of risk management in an organisation.