1

AMITY GLOBAL BUSINESS SCHOOL

MUMBAI

MASTERS OF BUSINESS ADMINISTRATION

SPECIALISED CUSTOMERS OF BANKS

NAME – HERSH LILARAMANI

ROLL NO – 106
NAME OF THE PROFESSOR – Mrs. LATIKA LODHA
DATE – 15/12/2008
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DECLARATION

I, HERSH. S. LILARAMANI, AMITY GLOBAL

BUSINESS SCHOOL (SEMISTER 1) HEREBY DECLARE
THAT, I HAVE COMPLETED THIS PROJECT ON
SPECIALISED CUSTOMERS OF BANKS IN ACADEMIC
YEAR 2008-2009. THE INFORMATION SUBMITTED IN THIS
PROJECT IS TRUE AND ORIGINATE TO THE BEST OF
STUDENT.

SIGN OF STUDENT.
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CERTIFICATE

I, PROF. MRS. LATIKA LODHA HEREBY

CERTIFY THAT HERSH.S.LILARAMANI OF AMITY GLOBAL
BUSINESS SCHOOL (SEMISTER 1) HAS COMPLETED THE
PROJECT ON SPECIALISED CUSTOMERS OF BANKS IN
ACADEMIC YEAR 2008-2009. THE INFORMATION
SUBMITTED IS TRUE AND ORIGINATE TO THE BEST OF
MY KNOWLEDGE.

SIGN OF PROJECT SIGN OF

STUDENT
CO-ORDINATOR
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INDEX

Sr Chapter Particulars Page

. No. No.
1 ACKNOWLEDGEMENT 5
2 EXECUTIVE SUMMARY 6
3 1 A BANK, A CUSTOMER – BASICS 7
4 2 SPECIAL TYPES OF CUSTOMERS……WHO 10
ARE THEY?
5 3 THE MINOR CUSTOMER 13
6 4 LEGAL STATUS – MARRIED WOMAN 21
7 5 A LUNATIC 24
8 6 TRUSTEES-EXECUTORS-ADMINISTRATORS 26
9 7 CUSTOMER’S ATTORNEY 28
10 8 JOINT-HOLDING------JOINT ACCOUNT 30
11 9 JOINT HINDU FAMILY BUSINESS 36
12 10 THE PARTNERSHIP FIRM 38
13 11 A JOINT STOCK COMPANY 47
14 12 NON-TRADING INSTITUTIONS – CLUBS, 55
SOCIETIES & CHARITABLE INSTITUTIONS
15 CASE STUDY – HSBC’S PREMIER 57
CUSTOMER
16 APPENDIX 66
17 BIBLOGRAPHY 70
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ACKNOWLEDGEMENT

I wish to mention a special thanks to all those who have helped me

shape this project and guided me throughout. I specially thank my
project guide and my Professor, Mrs. LODHA who have always
willingly helped me and solved my queries. This project would also
not have been possible without the help of some professionals and
friends who have provided with vital inputs and first hand
information. Among them are Mr. Niraj Kumar – Vice President of
Premier Account HSBC Bank, Mr Hussain Electricwala – Premier
Customer of HSBC Bank who I owe my gratitude. I am also
extremely thankful to; MR. SURESH LILARAMANI, for helping
me gather the required matter for my project. It is due to the co-
operation received from these people, which has made this project
possible and meaningful.
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EXECUTIVE SUMMARY

• A banking institution solicits deposits of money from the

members of the public. An account in a bank for this purpose
may be opened by any person who (a) is legally capable of
entering into valid contract, (b) applies to the banker in the
proper manner, i.e., he follows the procedure laid down by the
banker, and (c) accepts the terms and conditions stipulated by the
latter.
• The banker, however, possesses the right to reject an application
for opening an account, if the latter is deemed to be an
undesirable person.
• Some persons like the minors, lunatics and drunkards are not
competent to enter into valid contracts.
• Some persons who act on behalf of others have limited powers to
contract e.g., the agents, trustees, executors etc.
• Institutions like school, colleges, clubs, societies and corporate
bodies are impersonal customers of a banker.
• The authority, powers and functions of the persons managing
these institutions are embodied in their respective constitution.
• The banker should, therefore, take special care and precautions to
ensure that the accounts of these institutions are being conducted
in accordance with the provisions of their respective charters.
• When a banker opens an account in the name of a customer,
there arises a contract between the two.
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• This contract will be valid one only when both the parties are
competent to enter into contracts.
• Since the banker has to deal with different kinds of persons with
different legal status, he ought to be very careful about the
competency of the customers.
• Any carelessness on his part may land him in troubles.
• Hence, different kinds of customers need different treatments at
the hands of the banker.
• A few special types of customers and their treatment have been
discussed in the following chapters.

Ch – 1

A BANK, A CUSTOMER - BASICS

Definition Of Banking

A banking company is defined as a company, which transacts the

business of banking in India. The Banking Regulation Act defines the
business of banking by stating the essential functions of a banker. It
also states the various other businesses a banking company may be
engaged in and prohibits certain businesses to be performed by it.
The term banking is defined as, “accepting, for the purpose of lending
or investment, of deposits of money from public, repayable on demand
or otherwise, and withdraw able by cheque, draft, order or otherwise”

Salient Features Of The Definition Of Banking

1. A banking company must perform both of the essential functions,

viz., (a) accepting of deposits, and (b) lending or investing the
same. If the purpose of accepting of deposits is not to lend or
invest, the business will not be called banking business. The
explanation to section 5(c) makes it clear that any company
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which is engaged in the manufacture of goods or carries on any

trade and which accepts deposits of money from the public
merely for the purpose of financing its business as such, the
manufacturer or trader shall not be deemed to transact the
business of banking.
2. The phrase ‘deposit of money from public’ is significant. The
banker accepts deposits of money and not of anything else. The
word ‘public’ implies that a banker accepts deposits from anyone
who offers his/her money for such purpose. The banker,
however, can refuse to open an account in the name of the
person who is considered as an undesirable person, e.g., a
thief, robber, drunkard, lunatic etc. Acceptance of deposits
should be the known business of a banker. The moneylenders
and indigenous bankers depend on their own resources and do
not accept deposits from the public. If they ask money from their
friends and relatives in case of need, such money is not deemed
as deposit accepted from public.
The definition also specifies the time and mode of withdrawal of the
deposits. The deposited money should be repayable to the depositor on
demand made by the latter or according to the agreement reached
3. Between the two parties. The essential feature of banking
business is that the banker does not refund the money on his own
accord, even if the period for which it was deposited expires. The
depositor must make a demand for the same the Act also
specifies that the withdrawal should be effected through an order,
cheque, draft or otherwise. It implies that the demand should be
made in a proper manner and through an instrument in writing
and merely by verbal order or a telephonic message.

Definition Of A Customer

Law does not define the term ‘customer’ of a bank. Ordinarily, a person
who has an account in a bank is considered its customer. Banking
experts and the legal judgments in the past, however, used to qualify
this statement by laying emphasis on the period for which such account
had actually been maintained with the bank.
In Sir John Paget’s view “to constitute a customer there must be some
recognizable course or habit of dealing in the nature of regular banking
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business.” This definition of a customer of a bank lays emphasis on the

duration of the dealings between the banker and the customer and is,
therefore, called the ‘Duration Theory’. According to this viewpoint a
person does not become a customer of the banker on the opening of an
account, he must have been accustomed to deal with the banker before
he is designated as a customer.
The above-mentioned emphasis on the duration of the bank account is
now discarded. According to Dr. Hart, “a customer is one who has an
account with a banker or for whom a banker habitually undertakes to
act as such.”
“Broadly speaking, a customer is a person who has the habit of
resorting to the same place or person to do business. So far as banking
transaction are concerned he is a person whose money has been
accepted on the footing that the banker will honour up to the amount
standing to his credit, irrespective of his connection being of short or
long standing”
An important consideration, which determines a person’s status as a
customer, is the nature of his dealings with the banker. It is evident
from the above that his dealings with the banker must be relating to the
business of banking. A banker performs a number agency functions and
tenders various public utility services besides performing essential
functions of the banker, i.e., accepting of deposits and lending of
money, but avails of any of the services rendered by the banker, is not
called a customer of the banker. A customer of a banker need not
necessarily be a person. A firm, Joint Stock
Company, a society or any separate legal entity may be a customer,
which can rightly be called Special Types Of Banks Customer.
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CH - 2

SPECIAL TYPES OF CUSTOMERS…………WHO ARE THEY?

Who Are They?

A banking institution solicits deposits of money from the members of

the public. An account in a bank for this purpose may be opened by any
person who
(i) Is legally capable of entering into valid contract,
(ii) Applies to the banker in the proper manner, i.e., he follows
the procedure laid down by the banker, and
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(iii) Accepts the terms and conditions stipulated by the latter.

The banker, however, possesses the right to reject an application for

opening an account, if the latter is deemed to be an undesirable person.
Some persons like the minors, lunatics and drunkards are not competent
to enter into valid contracts. Some persons who act on behalf of others
have limited powers to contract e.g., the agents, trustees, executors etc.
Institutions like school, colleges, clubs, societies and corporate bodies
are impersonal customers of a banker. The authority, powers and
functions of the persons managing these institutions are embodied in
their respective constitution. The banker should, therefore, take special
care and precautions to ensure that the accounts of these institutions are
being conducted in accordance with the provisions of their respective
charters.

Example Of Standard Chartered Bank

The Standard Chartered Bank follows the following procedure to

open an account for a customer:

1. The Bank will provide you with details of various types of

accounts that you may open with the Bank.
2. You can have your choice on what type of account would best
suit you, based on your needs and requirements
3. The Bank will, prior to opening an account, require
documentation and information as prescribed by the "Know Your
Customer" (KYC) guidelines issued by RBI and or such other
norms or procedures adopted by the Bank prior to opening the
account.
4. The due diligence process that the Bank would follow, will
involve providing documentation verifying your identity,
verifying your address, and information on your occupation or
business and source of funds. As part of the due diligence
process the Bank may also require an introduction from a person
acceptable to the Bank if they so deem necessary and will need
your recent photographs.
5. The Bank is required by law to obtain Permanent Account
Number (PAN) or General Index Register (GIR) Number or,
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where you do not possess such registration, declaration in Form

No. 60 or 61 as specified under the Income Tax Rules.
6. In the event that the account opening process is likely to take
longer than normal, the Bank will inform you of the revised
timeline.
7. You can also call your branch or the executive for any queries
that you may have and the branch / executive will revert on the
query at the earliest.
8. The Bank will provide you with the account opening forms and
other relevant material to enable you open the account. Bank
personnel will advise you on the complete details of information
that would be required by the Bank for the verification process.
9. The Bank reserves the right, at its sole discretion, to open any
account and at such terms as the Bank may prescribe from time
to time.

On the other hand if for example the customer were illiterate or blind
which is a bankers special type of customer the procedure to be
followed by Standard Chartered Bank would be as follows:

1. The Bank may at its sole discretion, open deposit accounts, not
being Current Accounts, in the name of an illiterate person.
Subject to such terms and documents that the Bank may
prescribe from time to time.
2. The account of such person may be opened provided he/she calls
on the Bank personally along with a witness known to both the
depositor and the Bank, and after due completion of KYC
requirements.
3. No cheque book facility is provided for such Savings Bank
Account therefore at the time of withdrawal/ repayment of
deposit amount and/or interest, the account holder should affix
his / her thumb impression or mark in the presence of the
authorized Bank officer who would verify the identity of the
person.
4. The Bank may explain the need for proper care and safe keeping
of the statement given to the account holder. The Bank official
may explain the terms and conditions governing the account to
the illiterate / blind person prior to opening the account.
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The Arising Of Contract

When a banker opens an account in the name of a customer, there arises

a contract between the two. This contract will be valid one only when
both the parties are competent to enter into contracts. Since the banker
has to deal with different kinds of persons with different legal status, he
ought to be very careful about the competency of the customers. Any
carelessness on his part may land him in troubles. Hence, different
kinds of customers need different treatments at the hands of the banker.
A few special types of customers and their treatment have been
discussed in the following chapters.
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Ch – 3
THE MINOR CUSTOMER

A person who has not completed 18 years of age is a minor. If a

guardian of his person or property is appointed by the court before he
completes 18th year, he remains minor till he completes his 21st year.
According to the Indian Contract Act, 1872, a minor is not capable of
entering into valid contract and a contract entered into by a minor is,
however, a valid contract. In case of all other contracts, a minor may
repudiate his promise or consent.

The Privileges Of A Minor Guaranteed by Law

1. As per Sec. 11 of the Indian Contract Act, a contract entered into

by minor is void. Hence a minor’s contract is not at all
enforceable. A contract entered into by a minor is absolutely void
as was decided in the case of.
2. Even if he borrows money by falsely representing himself as an
adult, he cannot be compelled to repay the loan since the contract
is a void one.
3. An Adult, who gives a bill of exchange for the debt contracted
during the period of his infancy, cannot be sued.
4. It was established that even a guarantee given in respect of a
minor’s debt is not valid since the primary contract between the
banker and the customer is void.
5. A minor who borrows money cannot be compelled to repay,
unless it is for the necessaries of his life as per Sec. 11 of the
Indian Contract Act.
6. A minor has the right to get back the securities pledged for the
purpose of securing a loan even without repaying the loan, which
is not for the necessaries of his life.
7. A minor can recover even a third party’s securities pledged
without repaying the debt.
8. A minor can even be appointed as a trustee.
9. A minor can enjoy the benefits of a partnership firm. But, he is
not liable for the debts of the partnership firm. According to Sec.
30 of the Indian Partnership Act, 1932 a minor must expressly
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repudiate the contract of partnership within six months of his

attaining the age of maturity. If he does not do so, he will be
regarded as having ratified the agreement and will be thereafter,
regarded as a full-fledged partner and his liability commences
from the date of joining the firm.
10. A minor can act as an agent of an adult who has given the
necessary authority to him. Thus he can draw, endorse and
discount a bill and obtain a loan on behalf of the principal
provided such powers have been delegated to him in writing.
11. Sec. 26 of the Negotiable Instruments Act permits a minor to
draw and endorse any cheque, bill or promissory note. It will be
valid against all parties excepting a minor.
12. A minor can be appointed as an executor, but he can commence
his work only after his coming of age.
13. Even a guarantee given by a minor is not valid.
14. A minor cannot be judged as an insolvent either on his own
petition or of other.

In short, minors are regarded as “pet children of law.” The above

privileges have been given to a minor just to protect his own interest.
Law protects the minor because he is not matured enough to form a
rational judgment to things and so some unscrupulous persons may take
advantage of that. But, a minor cannot take Law into his hands. This is
why Lord Kenyon has rightly pointed out that the above privileges
should be used as “a shield and not a sword.”

Banker’s Duty

As it has been mentioned earlier, a minor at times may try to exploit the
above privileges and hence, a banker should be very careful while
dealing with him. He must observe the following precautions:
1. Saving account and not Current Account – The banker may
open a saving bank account (and not a current account) in the
name of a minor, in any of the following ways:
(a) In the name of the minor, to be operated upon by the
natural guardian of the minor or the guardian appointed by
the Court. Such account can also be opened in the joint
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names of two or more minors, to be operated upon by the

guardian.
(b) In the name of the minor, to be operated upon by himself,
if he has attained the age of 12 years. Two such minors
can jointly open such an account, to be operated upon by
them jointly.
2. On majority – The bank records the date of birth of the minor as
given by the minor or his/her guardian. On the attainment of
majority, the account of the minor in the name of the guardian
should be closed and the balance paid to the minor (then major)
or be transferred to a new account in his/her own name. In case
of a joint account the minor is also permitted to operate the
account and his signature is taken on the account opening form.
3. Guardians – If the father of a Hindu minor dies, his mother
becomes his natural guardian. After the death of the mother,
during the minority of the boy there is either the testamentary
guardian or the guardian appointed by the court. The banker may
return the money to such guardian.
4. Death of minor – In case the minor dies, the balance in the
account is permitted to be withdrawn by the guardian and in case
of joint account the balance will be held at the absolute disposal
of the guardian.
5. Overdraft granted to the minor – No risk is involved if an
account is opened in the name of a minor so long as the account
is not overdrawn by the minor. But if an overdraft or advance is
granted to a minor, even by mistake or unintentionally, the
banker has no legal remedy to recover the amount from minor.
The assets of a minor pledged with the banker as security for the
advance taken by the minor are not legally available to the
banker because such pledge itself is invalid. The banker shall
have to return these securities to the minor and he cannot
exercise his right of sale in case of default by the minor.
6. In case of contract of guarantee – If an advance is granted to a
minor on the guarantee of a third party, such advance cannot be
recovered from the guarantor also because the contract of
guarantee is invalid on the ground that the contract between the
creditor and the principal debtor (minor) itself is a void contract.
According to Sec. 128 of the Indian Contact Act, 1872, the
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liability of the surety is co-extensive with that of the principal

debtor, unless it is otherwise provided by the contract. The
surety, therefore, cannot he held liable on a guarantee given for
default by a minor. According to the law a minor cannot enter
into a valid contract and he cannot undertake a liability upon
himself. Thus he cannot default. Surety’s liability is a secondary
one and does not arise, if the liability of the primary debtor does
not arise. The liability of a surety is ancillary. It materializes if
there is a valid obligation on the part of the debtor whose debt or
obligation is guaranteed. However, if the contract of guarantee
specially provides contrary to the above, the guarantor may be
held liable for the debts of a minor.
But if a minor enters into an agreement by representing himself
as major and later on claims such a contract as void on account
of restore the benefit derived by him under the agreement.
According to Sec. 65 of the Indian Contract Act which states that
“when an agreement is discovered to be void or when a contract
becomes void, any person who has received any advantage under
such agreement or contract is bound to restore it or to make
compensation for it to the person from whom he recovered it.”
7. In case of Negotiable Instruments – A minor may draw endorse
or negotiate a cheque or a bill but cannot be held liable on such
cheque or bill. He cannot be sued in respect of a bill accepted by
him during his minority. Such bill or cheque, nevertheless, will
be a valid instrument and all other parties will be liable in their
respective capacities (Sec. 26 of the Negotiable Instruments Act,
1881). The banker should, therefore, be very cautious in dealing
with a negotiable instrument, to which a minor is a party.
8. When a Minor is a partner – A minor can be admitted to the
benefit of partnership with the consent of all the partners but he
will not be liable for the losses or debts of the firm. Within six
months after he attains majority he should repudiate his liability
as partner otherwise be will be held liable as a partner of the firm
from the date he was admitted to the benefit of the partnership
[Sec. 30 (7) (a) of the Indian Partnership Act, 1932].
9. Minor agent – A minor may be appointed as an agent to act on
behalf of his principal. According to Sec. 184 of the Indian
Contract Act, 1872, “as between the principal and third person,
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any person may become an agent; but no person who is not of the
age of majority and of sound mind can be appointed as an agent,
so as to be responsible to his principal.” Thus a minor agent
cannot be held responsible to the third parties in respect of the
acts of his minor agent. Therefore, all his dealings with the
banker will be valid and binding on his principal. The banker
should obtain written authority of the principal specifying the
power and the extent of authority entrusted to the agent in this
regard and should see that the minor-agent does not deal beyond
such delegated powers.

Legal Provisions Regarding Guardianship Of A Minor

The guardian of a minor may be either –

1. a natural guardian, or
2. a testamentary guardian, or
3. a guardian appointed by the court.
The first two types of guardians are governed by the provisions of the
Hindu Minority and Guardianship ACT, 1956, whereas a guardian is
appointed by a Court under the Guardians and Wards ACT, 1890.
1. Natural guardian - According to section 6 of the Hindu Minority
and Guardianship Act, 19556, in case of a minor a boy or an
unmarried girl, his/her father and after him the mother shall be
the natural guardian. In case of a married girl (minor), her
husband shall be the natural guardian. The terms father or mother
does not include stepfather or stepmother. If the father becomes a
sanyasi or does not remain Hindu, he shall not be entitled to
remain as guardian. If the father is alive and is not removed from
guardianship, the mother does not become the natural guardian of
her minor child.
2. Testamentary Guardian – A Hindu father, who is entitled to act
as the natural guardian of his minor legitimate children may, by
will, appoint a guardian for any of them in respect of the minor’s
person or property. Such guardian acts after the death of the
father or the mother.
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3. Guardian appointed by court – A guardian may be appointed by

the court under the Guardians and Wards Act, 1890, but the
Court shall not be authorized to appoint or declare a guardian of
the person of the minor, if his father is alive and is not, in the
opinion of the court, unfit to be guardian of the person of a
minor. Similar is the case with the minor girl, whose husband is
not, in the opinion of the court, unfit to be guardian of her
person. Thus the father (or the husband in case of a married girl)
is exclusively entitled to be the guardian. The welfare of the
minor shall be a paramount consideration of the court while
appointed a guardian.

Mother As A Natural Guardian

In a landmark judgment on the guardianship of a minor under the above

mention two Acts, the Supreme Court has held that the mother can also
act as natural guardian of a Hindu minor even during the lifetime of the
father. The Supreme Court held that in all situations where the father is
not in actual charge of the affairs of the minor either because of his
indifference or because of an agreement between him and the mother of
the minor (oral or written) and the minor is in the exclusive care and
custody of the mother or, the father for any other reason is unable to
take care of the minor because of his physical and/or mental incapacity,
the mother can act as natural guardian of the minor.
The court further held that the definition of ‘guardian’ and ‘natural
guardian’ do not make any discrimination against the mother and she,
being one of the guardians mentioned Section 6 of the 1956 Act, would
undoubtedly be a ‘natural guardian, as defined in that Act. The
Supreme Court further clarifies that the words ‘the father, and after
him, the mother’, need not necessarily mean ‘after the lifetime of the
father’. Rather the word ‘after’ means in the absence of and the word
absence refers to the father’s absence from the care of the minor’s
property or person for any reason whatever.
Reserve Bank has advised the banks to allow opening of minor’s
accounts (fixed, saving and recurring deposit accounts) with mother as
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guardian. Thus banks are now permitted to open account of minors in

the guardianship of the mother, even if the father of the minor is alive.

Documentation Required (ICICI Bank)

Documentation of Parent/Guardian
Applicants must satisfy the following documentation requirements
1. Identity proof
2. Proof of communication address
3. Self cheque (if the applicants are not visiting the branch for
opening account)
4. Proof of date of birth of the minor

Identity proof – (any one of the following)

1. Original letter of introduction from existing bank along with
KYC cheque of the same Bank.
2. Driving License, Book type or laminated & embossed.
3. Voter Identity Card with KYC cheque for operating accounts.
4. Employee Identity Card.
5. PAN Card.
6. Defence Dependent's card.
7. Ex-Service Man Card.
8. Bar Council/Indian Medical Association Card/Senior Citizen
Card.
9. PIO Booklet for returning NRIs.
10.MAPIN card

Proof of communication address – (any one of the following)

1. Introduction by an existing and satisfactory customer as address
proof.
2. Latest Electricity Bill.
3. Certificate from the postal office confirming address of
applicant.
4. Original Letter from Employer certifying the residential address
of applicant. Signature of the employee has to be attested on the
letter.
 21

5. Telephone bills from any telephone service providers and mobile

service providers (KYC cheque mandatory for mobile service
providers).
6. Consumer gas connection card/book/Pipe Gas bill (same as
electricity bill).
7. Certificate from the ward/equivalent rank officer, maintaining
election roll, certifying address of the applicant.
8. Registered and valid Lease/ Leave agreement with copies of
utility bills.
9. Post Office Savings Pass Book with KYC cheque.
10.Statement of account or Pass Book of a scheduled commercial
bank with entries of at least last 3 months along with KYC
cheque.
11.Premium Receipt from any life insurance company.
12.Certificate by Village Extension Officer (VEO)/Village Head or
equal rank officers.
13.Domicile Certificate with communication address and
photograph.

Identity and Address proof – (any one of the following)

1. Passport.
2. Arms License issued by State/Central Government of India
authorities.
3. Freedom fighter's pass issued by Ministry of Home affairs,
Government of India with photograph of applicant.
4. Pension payment order/book/Card issued by State/Central
Government of India.
5. Printed Ration Card with Photograph of applicant.
6. House hold Card with photograph issued by Govt. of Andhra
Pradesh.
7. ID card with photograph issued by Govt. of Jammu and Kashmir.
8. Bank Pass Book with photograph issued by SBI and its
subsidiaries or Nationalized Banks.
9. Photo Social Security Card (Smart Card) issued by Central/State
Govts. or Union territories.
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Proof of age of Minor

1. Passport.
2. Birth Certificate issued by Municipal or Zilla Parishad or Gram
Panchayat or Private Nursing Home or Church.
3. Transfer Certificate issued by School/ College/ University.
4. Passing Certificate issued by School/College/Examination
boards/University.
5. Mark sheet issued by Educational
institutions/college/Examination Board /University Baptism
Certificate issued by church.

Ch – 4

LEGAL STATUS – MARRIED WOMAN

A married woman is competent to enter into valid contracts. The banker

may, therefore, open an account in the name of a married woman. In
case of a debt taken by a married woman, her husband shall not be
liable except in the following circumstances:

1. If the loan is taken with his consent or authority; and

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2. If the debt is taken for the supply of necessaries of life to the

wife, in case the husband defaults in supplying the same to her.

The husband shall not be liable for the debts taken by his wife in any
other circumstances. The creditor may in that case recover his debt out
of the personal assets of the married woman. While granting a loan to a
married woman, the banker should, therefore, examine her own assets
and ensure that the same are sufficient to cover the amount of the loan.

Position Of Married Woman Earlier

A banker would open an account in the name of a married woman. Like

other customer she had the power to operate her account herself and the
bonafide dealing with the account cannot be questioned. But, there was
a time when married women were allowed to open accounts only after
getting the consent of their husbands. Moreover, all her properties
became the properties of her husband on her marriage. She was not
allowed to hold property in her own name. So, the position of a married
woman was far from satisfactory in those days.

The Present Position Of Married Woman

1. Now the position of a married has considerably improved. She

can open and operate an account even without the consent of her
husband.
2. She can own properties in her name even after marriage.
According to Hindu Marriage Act, 1956 a Hindu married woman
can have separate properties in her own name. Moreover, the
Indian Succession Act, 1925 and the Married Women’s Property
Act, 1874 permit the other women to have properties in their own
names.
3. Even though she can own properties, in certain cases the
properties would have been settled in such a way that she can
enjoy only the income from those properties and the ownership
would not have been transferred. If a banker was to lend under
 24

those circumstances, he could not attach the property for non-

payment of money.
4. But, under certain circumstances, she can make her husband
liable for the overdraft enjoyed by her. They are:
(a) If she borrows money for the necessaries of her life.
(b) If she borrows for the necessaries of her household.
(c) If she acts as the agent of her husband.
However, the husband can escape from his liability if he proves that, he
has already supplied her with the necessaries of life and household and
he never allowed her to act as his legal agent.
5. Further a married woman enjoys certain privileges under law.
They are:
(a) She cannot be imprisoned for non-payment of a judgment
debt, and
(b) She cannot be made an insolvent, unless, she carries on
some trade or business.

Pardanashin Woman

A pardanashin woman observes complete seclusion in accordance with

the custom of her own community. She does not deal with the people,
other than the members of her own family. As she remains completely
secluded, a presumption in law exists that:
1. Any contract entered into by her might have been subject to
undue influence; and
2. The same might not have been made with her free will and with
full understanding of what the contract actually means.
Thus a contract entered into by a pardanashin woman is not a contract
free from all defects. The other party to the contract shall have to prove
that the contract with her was free from the above-mentioned defects in
order to enforce the same. The banker should, therefore, take due
precaution in opening an account in the name of a pardanashin woman.
As the identity of such a woman cannot be ascertained, the banker
generally refuses to open an account in her name.

Banker’s Duty
 25

1. Safety of banker – A banker can very well open an account in

the name of a married woman. A banker is safe as long as her
account shows a credit balance.
2. Bank overdraft – But, in case she applies for an Overdraft., the
banker should see that she owns separate property in her own
name. In addition to this, he must see that her husband is also
made liable for the repayment of the loan for which he should
obtain his consent.
3. Illiterate – In, case of illiterate women, their left hand thumb
impression should be obtained on the account opening form.

Ch – 5
A LUNATIC
 26

According to the Indian Contract Act, 1872, a person of unsound mind

is not competent to enter into valid contact. A person is said to be of
sound mind for the purpose of making a contract if he is capable of
understanding it and of forming a rational judgment as to its effect upon
his interest (section 12). It is important that he should be of a sound
mind at the time he enters into a contract. If a person is usually of
sound mind but occasionally of unsound mind, he cannot enter into a
valid contract when he is of unsound mind. A contract entered into by a
person of unsound mind is a void contract according to the Indian
Contract Act, 1872.
The banker should, therefore, not open an account in the name of a
person who is of unsound mind. But if a banker as discounted a bill
duly written, accepted or endorsed by a lunatic he can realize the
money due on the same from such person except in the circumstances
where it is proved that the banker was aware of the lunacy of the person
concerned at the time he discounted the bill. The banker should suspend
all operations on the account of a customer as soon as he receives the
news of his lunacy till he gets the proof of his sanity or is served with
an order of the Court.

The Position Of Lunatic Under Law

1. A lunatic is a person of unsound mind. He cannot form a national

judgment on matters. Hence, he has no capacity to enter into a
contract. According to Sec. 12 of the Indian Contract Act 1872,
persons of unsound mind are disqualified from entering into a
valid contract.
2. However this disqualification does not apply (a) to contracts
entered into by lunatics during the period of sanity, or (b) to
contracts, which are ratified during such periods.
3. In England, the contract with a lunatic is voidable whereas it is
void in India. Obviously, such contracts have inherent defects in
India.
 27

Banker’s Duty

1. Opening of account – Since a lunatic has no capacity to enter

into a contract, no banker will knowingly open an account in a
lunatic’s name.
2. Void Contract – But, it may so happen that an existing customer
may become insane. Under such circumstances, a banker must
immediately stop the operation of the account. It is so because
the banker has no right to debit his account for payment made out
of his account. From the moment the bankers knows the fact
about the lunacy of his customer, the contract between him and
the lunatic becomes void.
3. Definite proof of lunacy – A banker must not be carried away
by hearsay information or rumours. He must get a definite proof
for the lunacy of his customer. When a banker is informed that a
particular customer has been detained in a lunatic asylum, he can
presume that the customer is insane. In doubtful cases, it is
advisable to wait till he gets a written proof. If a customer is
judicially declared as insane, it is an official proof.
4. Banker’s liability – So long as a banker has no knowledge of his
customer’s insanity, he can go on honouring his cheques and the
operation of the account cannot be questioned. If a banker
dishonouors a cheque in a hurry without having any proof of the
lunacy, he will be liable for wrongful dishonor of the cheque.
5. Receiver appointed by Court – Usually the court appoints a
receiver when a customer becomes insane and the banker can
safely deal with that receiver and can honour the cheques drawn
by him. It is the usual practice to pay the balance to the
guardian/receiver appointed by the competent court.
6. Removal of temporary suspension – If the alleged insane-
customer is declared to be sane by a competent authority, the
banker can allow him to operate his account and the temporary
suspension to the account should be removed.
 28

Ch – 6

TRUSTEES – EXECUTORS – ADMINISTRATORS

According to the Indian Trusts Act, 1882, a ‘trust’ is an obligation

annexed to the ownership of the property, and arising out of a
confidence reposed in and accepted by the owner, or declared and of a
confidence reposed in and accepted by the owner, or declared and
accepted by him, for the benefit of another, or of another and owner
(Section 3). The person in who reposes the confidence is called the
author of the trust. Trustee is person in whom the confidence is
reposed. The person for whose benefit the trust is formed is called the
beneficiary. A trust is usually formed by means of a document called
‘Trust Deed’.
Executors and administrators are persons who are appointed to conduct
the affairs of a person after his death. When a person known as testator
appoints another person for this purpose through a will, he is known as
an executor. If the will of the testator does not mention the name of the
executor, or if the person appointed as executor dies or refuses to act,
the Court appoint a person for the purpose who is know as
administrator. Both the executor and the administrator perform the
same duties, i.e., to realize the assets of the deceased and to pay off his
debts. The executor is appointed by the will. His powers and authority
are vested therein. He has to act according to the directions given in the
will, but he is required to obtain a probate appointed by the court
through a Letter of Administration and is directed, in the absence of the
will, to settle the affairs according to the provision of the law.

Banker’s Duty While Dealing With Trustees

1. Trust Deed – The banker should thoroughly examine the Trust

Deed appointing the applicants as the Trustees. The Trust Deed
contains the names of the trustees, power vested in them and
conditions. The trustees are authorized to act jointly and are not
competent to delegate their powers unless the Trust Deed
authorizes them to do so. The banker should thoroughly examine
 29

the Trust Deed to ascertain the powers and functions of the

Trustees.
2. Joint charge of trustees – In case of two or more trustees, the
banker should ask for clear instruction regarding the person or
persons who shall operate the account. In the absence of such
instruction, all the trustees must sigh the cheques, etc., because
the estate is placed under their joint charge.
3. Death of trustee(s) – If one or more of the trustees dies or
retires; the authority vested in the remaining trustees depends
upon the provisions of the Trust Deed. When all the trustees are
dead, new trustees any be appointed by the court.
4. Insolvency – The insolvency of a trustee does not affect the trust
property and the creditor of the trustee cannot recover their
claims from such property.
5. Beneficiaries of trust – The banker should take all possible
precautions to safeguard the interest of the beneficiaries of a
Trust, falling, which he shall be liable to compensate the latter
for any fraud on the part of the trustee. For example, if the
banker permits the transfer of Trust money to the personal
account of the trustee, already overdrawn, with clear knowledge
and understanding, the banker shall be liable to refund the money
to the Trust account. The banker is, thus, placed in the same
position in which the trustee is, so far as the use of Trust money
is concerned. He shall be held liable for the misuse of the Trust
money if it is within his knowledge.
6. Loans to the trustees – The trustees may borrow money from
the banker and pledge or mortgage the Trust property only if the
trust Deed specifically confers such power on them. The banker
should, therefore, grant loans to the trustee after thorough
examination of the borrowing powers as given in the Trust deed.
To be on safer side, the banker should grant on advance for a
Trust only when the trustees are respectable persons and give
personal guarantee also, apart from creating a charge on the
assets of the Trust.
 30

Ch – 7

CUSTOMER’S ATTORNEY

A customer may appoint an attorney to deal with his bank account. The
power of attorney is a general notice and an authority for this purpose.
It is different from an ordinary mandate authorizing a person to operate
his bank account.
The power of attorney may be special or general. In the former case the
person so authorized gets powers in regard to certain matters only, e.g.,
sale or purchase of property, etc. In case of the general power of
attorney, the grantor of such power authorizes the other person
generally, to act on his behalf in al matters concerning business.

Banker’s Duty
While opening an account in the name of an Attorney for a person the
banker should take the following precautions:
1. Duly Stamped And Registered – The power of attorney should
be duly stamped and registered with the Registrar of documents
or attested by a Notary Public. The banker must retain with him
its attested copy for his own record.
2. Period Of Power Of Attorney – The power of attorney must be
in force at the time of opening the account. The power of
attorney may be granted for a specific period or for a particular
purpose. The banker should ensure that such specific period has
not expired or the specific purpose not fulfilled at the time of
opening the account. The period for which authority has been
 31

granted must be noted at the top of the account so that the

account does not continue beyond such period.
3. Terms – The banker should note all the terms of the Power of
Attorney, which are likely to be concerns to him at any time in
future.
4. Specific Powers – The banker should find out what specific
powers have been entrusted by the principal to the attorney, i.e.,
to open accounts, to draw and endorse cheques and to overdraw
the account. If the power to overdraw is not entrusted, the fact
should be specifically recorded.
5. Identified Person – The person presenting the power of attorney
for opening the account must be properly identified and his
address noted.
6. Other Formalities – The account opening form should be signed
as far as possible by the principal. He should attest the signature
of the attorney. If the power of attorney authorizes the attorney to
open a bank account, the bank may open an account at his
request. Confirmation from the principal must be obtained before
actual operation of the account is allowed.
7. Name Of The Principal – The account should be opened in the
name of the principal with the following heading:
“XYZ (principal) by his agent ABC”
Inclusion of the words “constituted attorney” are not necessary, if
the agent signs “Per Pro XYZ” it indicates that the agent has
limited authority only to sign such cheques. The banker should
ensure that the act of the agent is not beyond the powers
conferred upon him.
8. Condition Clause – The banker should also see that the Power
of Attorney does not contain any condition or event on the
occurrence of which it will be enforceable. A condition like
“During my absence from India” implies that the power of
attorney is automatically cancelled as soon as the principal
returns to India. The banker should not accept such condition.
9. Termination Of Agency – According to Section 201 of the
Indian Contract Act, an agency is terminated in the following
cases:
a. If the principal revokes his authority;
b. If the agent renounces the business of the agency;
 32

c. If the agent business of agency is completed; and

d. If the principal or the agent dies, becomes insolvent or of
unsound mind.
It is to be noted that the death, insolvency or insanity of the principal
revokes the authority vested in the agent and the latter ceases to act as
agent of the principal.

Ch – 8

JOINT – HOLDING --------- JOINT ACCOUNT

When two or more persons open an account jointly, it is called a joint

account. Such an account may be opened by any persons for the sake of
convenience of operation of account and also for withdrawal of money
after the death of any one of them. The banker should take the
following precautions in opening and dealing with a joint account:
1. Signature – The application for opening a joint account must be
signed by all the persons intending to open a joint account.
2. Mandate – The banker should obtain clear instruction in writing,
signed by all the joint account-holders, regarding the operation of
the account. The joint account may be operated in any of the
following ways:
(a) By all the depositors jointly
(b) By either or survivor of them
(c) By former or survivor of them.
 33

The mandate must include the name or names of the persons who are
authorized to operate the joint account and must specify the extent to
which they are authorized to take advance or to pledge the securities,
etc. in the absence of such instructions, the banker should honour only
those cheques which bear the signature of all the persons in whose
names the account stands.
3. Appointment Of Attorney – The joint account-holder, who is
authorized to operate joint account, himself alone cannot appoint
an agent or attorney to operate the account an his behalf. Such
attorney or agent may be appointed with the consent of all joint
account-holders.

Example: A, B and C open a joint account with SBI and authorize C to

operate the account. After some time C wants to go abroad and wants to
appoint D as his agent to operate the joint a/c. C himself alone cannot
do so. He shall to seek the written consent of both A and B for this
purpose.
4. Stopping Of Payment Of Cheque – Any joint account-holder
(including the one who is not authorized to operate the account)
can stop payment of a cheque issued on a joint account. Banker
must honour such order even if an agent or attorney has been
appointed to operate the account.
5. Name – The full name of the account must be given in all
documents furnished to the banker, even if the account is to be
operated upon by one or a few of the joint account-holders.
6. Several Liability – The banker should also take a mandate to
ascertain whether the persons operating the joint account are also
authorized to overdraw the account. If so, it is desirable to
establish separate individual liability of all the joint account-
holders in addition to their joint liability. This is secured by
asking the customers to sign a joint and several promissory note
and also by declaring such separate and joint liability in all
documents executed by them. In case the several liability is also
established, the banker can recover the amount from all the joint
account-holders individually or from one or more of them. He
can file suits against all of them individually. Further, the banker
can exercise his right of set-off against the credit balances in the
accounts of the joint account-holders, if they have established
 34

their several liability also. But in case of joint liability only, a suit
may be filed against all of them jointly and if any of them dies,
his legal heir will not be liable for the same.
7. Revocation – The authority to operate the account can be
revoked by any of the persons giving such authority. It is
automatically revoked if any of the joint account-holders dies,
becomes bankrupt or of unsound mind. The banker must stop
payment in such cases.
8. Securities – The banker should be given clear instructions
regarding the withdrawal of securities on the joint account and
the power conferred upon the person operating the account to
pledge the securities. In case the shares are in the joint names, all
such persons must sign the transfer form.
9. Alterations – A joint account may be operated by either of the
joint account-holders. But if a cheque is drawn and signed by one
of them, any alterations therein should also be done by the same
person and not the other one. The alterations should bear the
signature of the drawer.
10.Balance Payable – The person opening a joint account are also
required to give a mandate, in the application form itself,
specifying the person to whom the balance in the account shall
be payable to –

(a) Both or all of them or the survivor or survivors of them; or

(b) Either or any one or more of them or the survivor or
survivors of them.
The balance in the joint account shall be payable to all the joint
account-holders together, if the instruction is given in form (a) above,
and to any one of them if it is in form (b). In both the cases, if one of
the joint account-holders dies, the balance is payable to the survivor or
survivors.

The above instruction is given by all the joint account-holders. Hence

any one of them is competent to revoke it in writing. Thereafter the
banker will treat the account as one without such instruction and the
amount from the account will be payable on the discharge of all the
joint account-holders.
 35

Death Of A Joint Account-Holder

In case of a joint account, the bank happens to be a debtor to two or

more creditors jointly and promises to repay the same to them. The
Indian Contracts Act, 1872, provides for the devolution of the joint
rights in such cases as follows:

“When a person has made a promise to two or more persons jointly,

then, unless a contrary intension appears from the contract, the right to
claim performance rests, as between him and them, with them during
their joint lives and after death of any of them, with the representative
of such deceased person jointly with the survivor or survivors, and,
after the death of the last survivor, with the representatives of all
jointly.”

The above section implies that if there is no agreement to the contrary,

on the death of one of the joint account-holders, his representative and
the surviving account holder are jointly entitled to claim money from
the bank. If all joint account-holders die, the legal representatives of all
of them can jointly claim amount.

When a joint account is opened by a bank with the instruction “either or

survivor”, these words imply an agreement contrary to the provision of
Sec. 45. In such a situation, the banker is not bound to repay the
amount to the representatives of the deceased and the
survivor/survivors jointly; but the mandate given in the words “either or
survivor” permits him to repay the money to the survivor alone.

Thus in the event of death of any one or more of the joint account-
holders, the balance becomes payable to the survivor without reference
to the representatives of the deceased person or persons. Generally, the
banker asks the surviving account-holders to withdraw the balance in
the joint account and deposits it in a new account opened in the names
of the surviving joint account-holders. The banker should not honour
the cheques drawn by the deceased joint account-holders before his
death obtaining instructions from the surviving joint account-holders.
 36

If he joint account shows a debit balance at the time of death of a joint

account-holder, the banker must close the account so as to determine
the liability of the deceased joint account-holder. If it is not done, the
rule in the Clayton’s case becomes applicable, i.e., the subsequent
deposits will be adjusted against the debit balance in the account and
thus the estate of the deceased joint account-holder will not be held for
the debt.

The position of the banker in case of death of a joint account-holder is

quite obvious. He gets good discharge from his obligation if he pays the
amount to the survivor or survivors, as per the mandate of the joint
account-holders. He need not investigate into the fact whether the
survivor is really entitled to the amount in question. The legal
representatives of the deceased may seek legal redressal to their claims
in the court of law.

Sometimes, banks do encounter difficulties in giving effect to the terms

of contract with the customer when there are conflicting claims on
balance held in joint account. In Nagarajamma vs. State Bank of
Hyderabad (AIR 1962 A.P. 260), the bank issued a fixed deposit receipt
in the joint names of one D and lady N who claimed to be his wife.
After D’s death, another lady, contending to be his real wife, claimed
the amount from the bank. The Bank instead of paying the amount to N
as per the contract, filed an interpleaded suit though it could have got
discharge by paying the money to N. on the basis of the facts of the
cases the Court held that N, the survivor, was not entitled to the amount
and the other lady, being his real wife, was his heir to receive the
amount. Thus is case of conflicting claims, the banks may ask for the
production of legal representation.

In Krushandas Nagindas Bhate vs. Bhagwandas Ranchhoddas and

others (A.I.R. 1976 Bom. 153), the Bombay High Court, upholding the
above, observed that –

“In respect of a joint account opened in the bank, the law seems to be
settled that on the death of one, there is a resulting trust in favour of his
heirs and legal representatives, unless there are special facts and
circumstances to show contrary intension.” The High Court further held
 37

that “if from the facts and circumstances of the case it could be held
that the intension was to make the survivor the owner of the amount
lying in the account, then he and not the heirs would be entitled to
recover the amount. If the facts and circumstances of the case do not
establish and such intension, although the holder of the joint account
may be authorized to withdraw legal representatives of the deceased
joint holder. The bank may be discharged by payment to the survivor.
But the survivor may in the absence of an intension to make him the
owner, be accountable to the heirs of the deceased joint holder.”

In Padmanabhan Bhawani & Others vs. Govindan Bhargava 7 Another

(A.I.R. 1975 Kerala 83), the High Court held that on the death of the
depositor the amounts deposited in the joint names, payable to rather or
survivor, could not be treated as a gift to the survivor, because the
depositor continues to be the owner of the amounts in question till his
death. In such cases without any declaration of trust, there is a resulting
trust in favour of the depositor in the absence of any contrary intension
or unless it can be proved that an actual gift of the amount was
intended. The burden of proving a contrary intension of gift is on the
person who seeks to rebut the resulting trust in favour of the person
who makes the deposit.

About the rule of the banks that on the death of one, the account would
be converted into a single account to be operated by the survivor, the
High Court observed that such provisions were designed only to
regulate easy operation of accounts and payments of money to the
survivor. The provisions did not touch the rights inter se among the
depositors of the rights of inheritance.

Facility Of Nomination
The Banking Laws (Amendment) Act, 1983, has inserted a new section
45 ZA, which provides for the facility of nomination by depositors.
Such facility shall also be available in case of joint account. In such
cases, all the joint-depositors together may nominate, in the prescribed
manner, one person to whom in the event of death of al the depositors,
the amount of deposit may be returned by the banking company. Such
nominee shall become entitled to all the rights of the depositors in
 38

relation to such deposit. The banking company shall be discharged of

its liability in respect of the deposit by making payment to the nominee.

Insolvency
In case of insolvency of one or more of the joint account-holders, the
mandate jointly given by them to the banker ceases to operate. The
banker should, therefore, stop payment from the account to determine
the liability of the insolvent person. Payment from the joint account
may be made on the instructions jointly signed by the solvent account-
holders as well as the Official Receiver of the insolvent one. Preferably,
a new account should be opened to record all receipts and payments
after the declaration of insolvency.
 39

Ch – 9

JOINT HINDU FAMILY BUSINESS

A joint Hindu family possesses ancestral properties and carries on

ancestral business. The ownership of such property passes on to the
member of the family according to the Hindu Law. In case of joint
Hindu family governed by the Mitakshara School of Hindu Law, every
male member of a family acquires an interest in the joint property by
birth. After the enforcement of the Hindu Succession Act, 1956, the
share of a deceased coparcener, who was member of the joint Hindu
family, is also divisible amongst his wife, daughters and other female
relatives as given in the Act. While dealing with the account of a joint
Hindu family and granting it a loan, the banker is naturally faced with a
difficult task of ascertaining the right of the coparceners in the joint
family.

Bankers Duty
1. Karta – The family business and its assets are managed by
the eldest male member as the karta. According to the law, the
karta has an implied authority to take loan, execute necessary
documents and pledge the securities on behalf of the family
for the purpose of the business of the family. However, to be
on the safe side, the loan documents should be executed by all
the adult members of the family or with their consent by the
head of the family in his capacity as its karta or manager.
2. Power of Karta – The power of the karta to borrow money
on the security of the family property is subject to one
limitation, i.e., the loan is taken for the purpose necessary for
or beneficial to the family. He can take a loan and pledge the
property of the family for the purpose of meeting the needs of
the usual business of the family and not for any speculative
business or for starting a new business. Other coparceners will
 40

not be liable for a loan contracted for a purpose other than that
in the interest of the family business. The principles of a law
which govern borrowing by the karta of a joint Hindu family
were clearly enunciated by the Rajasthan High Court as
follows:

(a) The manager of a joint Hindu family has power to

alienate (i.e., transfer for value) joint Hindu family
property, so as to bind the interest of both adult and
minor coparceners in the property, provided that the
alienation is made for legal necessity or for the benefit
of the estate. The payments of debts incurred for
family business or other necessary purpose constitute a
legal necessity.
(b) The burden of proving legal necessity to support
alienation is upon the alienee (transferee).
(c) The alienee can succeed in (b) above, not only on proof
of legal necessity but also on the proof that the alienee
made reasonable enquires and was satisfied as to the
existence of legal necessity. In case of a dispute on this
point, the burden of proof that the bank was satisfied,
before granting a loan, that the loan was sought for the
benefit of the family business lies on the banker
himself. He should, therefore, be very careful in
ascertaining the purpose of the loan sanctioned on the
security of joint family assets.

3. Coparceners’ liability –The coparceners’ liability in case of

loans granted to a joint Hindu family is limited to the extent
of their interest in the joint property. But if the adult
coparceners themselves contract along with the karta or ratify
the contract entered into by the karta they become personally
liable for the loan.
If a suit is brought in a representative capacity as a manger of the joint
family, and a decree is granted in pursuance thereof, other members of
the family are held to be substantial parties to the suit through the
manger of the joint family. The fact that they are not co-nominee
parties to the suit will not render the decree in the suit any the less
 41

binding on them. A decree against the manger in such a suit will be

binding on the undivided coparceners and the entire joint family
properties can be taken in execution of such a decree even if the junior
coparceners is not a party to the suit.
4. Minor Coparcener – If there is a minor coparcener in a joint
family, his guardian must sign the documents on his behalf.
When the minor coparcener attains majority, he should also
sign the documents to give his assent to the undertaking given
by major coparceners.

Ch – 10

THE PARTNERSHIP FIRM

A partnership is not regarded as an entity separate from the

partners. The Indian partnership Act, 1932, defines partnership as
he “relation between parsons who have agreed to share the
profits of the business, carried on by all or any of them acting for
all”. A partnership firm is thus established by an agreement
amongst the partners. This agreement may be oral or written. The
object of constituting a partnership firm must be to –
(a) Carry on a business which may be conducted by all the
partners or by any of them on behalf of the rest, and
(b) To share the profit of such business amongst themselves.
The partnership deed contains the details of the agreement
reached between the partners. The Indian Partnership Act,
1932, lays down the general provisions, which govern a
partnership business.

Bankers Duty
1. Number Of Partners – The banker should very carefully
examine the Partnership Deed, which is the charter of the firm, to
acquaint himself with the constitution and business of the firm.
The banker should see that the number of partners does not
exceed the statutory limit. According to section 11 of the
 42

Companies Act, 1956, a partnership firm consisting of more that

10 persons for the purpose of carrying on banking business and
of more than 20 persons for the purpose of carrying on and other
business for the acquisition of gain on profit, shall be an illegal
association unless it is registered under the Companies Act,
1956, or is a joint Hindu family carrying on such business. If the
number of partners exceed these limits, the partnership becomes
an illegal association of persons, which cannot enter into any
contract, and cannot sue or be sued. The banker must refuse to
open an account in the name of a firm in such cases. The
minimum number of partners in a firm must be two, excluding a
minor partner, who is not competent to enter into a contract. A
minor may be admitted into the partnership with the consent of
all other partners but he shall not be liable for the losses or debts
of the firm. The banker should note the date when the minor
partner will attain majority so that a fresh partnership letter
signed by him and other partners is obtained by the banker.
2. Title Of The Firm’s Account – A firm’s account should always
be opened in the name of the firm and not in the name or names
of the individual partner/partners.
3. Opening Of An Account – An account in the name of a firm
may be opened by a banker on receipt of an application from one
or more of the partners. Banks, however, insist that all the
partners’ should join the partners. If any partner has gone out of
the country, the rest of the partners can open a bank account in
the name of the firm. Specimen signatures of all the partners
should also be taken for the purpose of record. Bit if any of the
partners is deprived of the right to open an account in the firm’s
name and this fact is within the knowledge of the banker, he
should not open the firm’s account at the request of such partner.
The banker should, therefore, confirm the right of the
applicant/applicants to open an account in the name of the firm
from the partnership deed or from any other available evidence,
e.g., the authority letter signed by all other partners.
4. The Partnership Letter Or Mandate – The banker should take
a letter signed by all the partners stating:
(a) The names and addresses of the partners;
(b) The nature of the business undertaken by the firm; and
 43

(c) The name/names of the partner/partners who will operate

the account on behalf of the firm and will have the
authority to draw and accept bills etc., and to sell and
mortgage the property of the firm.
The banker should honour the cheques signed by al the
partners or b those partners who are authorized too operate the
account.
5. Revocation Of Authority To Operate The Account – The
authority given in favour of a particular partner/partners to
operate the firm’s account may be withdrawn by any of them by
giving a notice to the banker. In such a circumstance, the banker
should stop payment of cheques signed by such partner and pay
the cheques, which are signed by all the partners. A partner can
also stop the payment of a cheque issued by any other on the
firm’s account.
The power to revoke the authority to operate the account is vested in
any partner who is sleeping partner or is not authorized to operate
the account.
6. Power Of Attorney – A partner authorized to operate the firm’s
account cannot delegate his authority to another person without
the consent in writing of all other partners. Is such consent is
given by all of them; the authorized partner may execute a Power
of Attorney in favour of such other person.
7. Endorsement Of Cheque – If a cheque payable to the firm is
endorsed by a partner in his own favour and is deposited by him
to be credited to his personal account, the banker should do so
after making inquiry about it from there partners and after being
satisfied about it. Otherwise, he will bear the risk of loosening
the statutory protection granted to the collecting banker under
Negotiable Instruments Act, 1881. The collecting banker should
be particularly careful in this regard if the partner sends such a
cheque in response to a request from the bank to repay overdraft
taken by him from the bank.

Implied Authority Of A Partner

A partner acts as agent of the firm for the purpose of the business of the
firm and binds the firm by his acts and deeds. According to section
19(1) of the Indian Partnership Act, 1932, “the act of a partner which is
 44

done to carry on, in the usual way, business of the kind carried on b the
firms binds the firm”. This authority of a partner is called the implied
authority. Every partner is liable both individually and jointly with
other partners for all the acts of the firm or the instruments executed
provided the same are done –
(a) In the name of the firm; and
(b) In connection with the business carried on by the firm.

The High Court observed that from the very definition of partnership
itself it follows tat there is implied mutual agency to each of the
partners of a registered firm. When an amount was borrowed by a
partner on behalf of the partnership firm, that act of his was binding on
the firm as well as on the members of he firm. Similarly, when a
promissory note is executed on behalf of a firm b its managing partner,
and the money is utilized for the purpose of the firm, every partner is
liable for the debt incurred.

It is to be noted that while one of the partners can bind the firm for the
debts incurred by him on behalf of the firm, it is not necessary that
documents for the debt are signed by all the partners. Signature of only
one partner will be sufficient. However, as a precautionary measure,
banks take the signatures of all the partners on loan documents.

If a partner signs an instrument on behalf of the firm, his intension to

do so must be apparent from the form in which he has signed.

The liability of a partnership firm in respect of a promissory note

signed by a partner was considered in the Madras High Court in m/s
M.M. Abbas Bros. And Others vs. Chethandas Fateh Chand and
Another (A.I.R 1979, Madras 272). In this case a partner of the firm
signed a promissory note in his name and thereafter added the words
“Partner M.M. Abbas and Bros.” The Court held that the words
“Partner M.M. Abbas and Bros.” represented only a description and did
not indicate that he had signed the instrument as a partner. If the said
partner had the intension of binding the firm, then he would have
signed ‘for and on behalf of the firm’. On another promissory note the
partner had signed ‘for and on behalf of the firm’. Pointing out the
difference between the two, the court held that “it is true that different
 45

legal result follows from the mere change in the collocation of the
words. But it is inevitable as difference are produced in law by the
change in the collocation (position or arrangement) of the words.” The
pronote in question was thus not binding on the firm.

The general principle of law, the High Court held, is that every one of
the partners in a mercantile firm is liable upon a bill drawn by a partner
in the recognized trading name of the firm for a transaction incidental
to the business of the firm, although the particular partner’s name does
not appear on the face of the instrument and although he is a sleeping
and secret partner. Partners are mutual agents and can bind the firm by
their acts. Even in the absence of an indication under the signature that
a person was singing as a partner, it may be possible to infer a liability
on the firm provided it is found on the face of the instrument that the
borrower is the firm and not he individual partner who signed the
instrument. A person merely describing himself as a partner cannot
bind the firm. There must be some indication in the instrument to show
that he was signing on behalf of the firm.

If a partner does something, which is not related to the kind of business

carried by the firm, other partners and the firm will not be liable for the
same. For example, if a partner of a firm dealing in cotton textiles
enters into a contract for the purchase of food grains, the latter will not
be binding on the firm unless other partners have authorized the said
partner to undertake such business on behalf of the firm. The partner
undertaking such unauthorized business will himself remain liable for
such transaction. Similarly, if a letter of guarantee or an indemnity band
is to be executed by a firm, it must be signed by all the partners unless
the normal business of the firm is to give guarantees. One of the
partners, in the normal course, is to give guarantee on behalf of the
firm, because such an act is not within the implied authority of a
partner.

In Porbander Commercial Co-operative Bank Ltd. Vs. M/s Bhanji Lavji

& Other (A.I.R. 1985 Gujarat 106), a loan from bank was guaranteed
by two firms and bonds was signed by one partner of each firm. The
court held that merely by signing as sureties on behalf of their
respective firms, the concerned two partners as sureties on behalf of
 46

their respective firms, the concerned two partners could not bind any
other partner of the firm or the firms themselves for the purpose of
repayment of the dues of the bank. The signatories to the surety bonds
were held personally liable to repay.

Borrowing Power Of A Partner

It is evident from section 19(1) of the Indian Partnership Act, 1932, that
a partner may justifiably do all that he is expected to do for carrying on
the business of the firm in the usual way. It implied that a partner, who
is not prohibited from managing the affairs of the firm, possesses the
power to borrow money on behalf of the firm for the purpose to borrow
money on behalf of the firm for the purpose of carrying on the firm’s
business. Such a debt shall be binding on the firm and all the partners
shall be liable to pay the same. But if the powers of a partner are
limited by the partnership deed or if he is not permitted to manage the
affairs of the firm, he does not possess the power to borrow money on
behalf of the firm.

According to Section 19 (2), a partner does not possess, in the absence

of any usage or custom of trade to the contrary, implied power to do the
following:
(a) To submit a dispute relating to the business of the firm to
arbitration;
(b) To open a bank account on behalf of the firm in his own
name;
(c) To compromise or relinquish any claim or portion of a
claim by the firm;
(d) To withdraw a suit filed on behalf of the firm;
(e) To admit any liability in a suit against the firm;
(f) To acquire immovable property on behalf of the firm or to
transfer the same; and
(g) To enter into partnership on behalf of the firm.

But he can do any of the above-mentioned acts with the express

authority of other partners or if the usage or custom of the trade permits
him to do so. For example, the immovable property of the firm cannot
be transferred until all the partners jointly transfer their interest. If one
 47

of the partners is empowered by other partners in this regard he may do

so on behalf of the firm.

Liability Of The Partners In Respect Of Firm’s Debts

The liability of the partner of a firm is unlimited and every partner is

liable to pay the obligations and debts of the firm to an unlimited
extent. But if debts are due from the firm and also from the partners on
the dissolution of the firm, Section 49 of the Indian Partnership Act,
1932, lays down that the debts of the firm shall be settled out of the
property of the firm and the surplus, if any, shall be available for paying
the private debts of the partners. But if the partners are also personally
indebted, the personal assets of the partner shall be applied first to meet
the claims of their individual creditors. Out of the reminder, if any,
claims of the firm’s creditors will be met.

Example. A and B are partners in a firm having assets amounting to Rs

40,000. The firm owes Rs 50,000 to X in respect of goods supplied.
Both the partners are adjudicated insolvent. Other claims against the
partnership amounted to Rs 30,000. A’s assets are worth Rs 14,000 but
he owes Rs 22,000. B has assets worth Rs 24,000 but owes Rs 14,000.

According to Section 49 of the Indian Partnership Act, 1932, the

personal debts of the partners would be repaid out of their personal
assets. A’s creditors will realize Rs 14,000 only from his personal
assets while B’s creditors will realize their full amount of Rs 14,000.
The surplus of cash realized from B’s assets (Rs 24,000 – Rs 14,000 =
10,000) would be made available for appropriation amongst the firm’s
creditors. The firm’s creditors, amounting to Rs 80,000 (Rs 50,000 +
Rs 30,000) would be able to recover Rs 50,000 (Rs 40,000 +10,000)
only and the rest of their claim would become irrecoverable.

But if the partners sign the loan documents in both of their capacities,
i.e., individually as well as jointly, the creditors of the firm can recover
their debt simultaneously from the assets of the firm and the partners.
The banker should, therefore, insist that the partners of the firm sign the
documents in both the capacities, i.e., individually as well as jointly.
This will enable the banker to recover the amount from individual
 48

assets of the partners and also to exercise his right to set-off against the
credit balance in their personal accounts with him. It is usual practice of
a banker to seek a declaration to this effect from all the partners at the
time of opening an account. The joint and several liability of the
partners continues until –
(a) All the debts of the firm are discharged, or
(b) The constitution of the firm changes due to death,
retirement or insolvency of a partner and the banker is
informed thereabout.

The personal property of a partner may be attached even before

judgment is delivered in a suit against the firm and its partners. The
High Court has held that when each partner is liable, in the event of
passing of a decree and in the event of the apprehension that one of the
partners is screening away the property and is removing the same out of
the jurisdiction of the court, the court is competent to pass an order
attaching his property under order 38 Rule 5 CPC.

Death Of A Partner

If a partner die, the firm stands dissolved automatically, if an agreement

to the contrary does not exist. It means that the firm is not dissolved on
the death of a partner if the partnership deed specifically provides for
this. The deceased partner’s heirs cannot succeed him as partners. They
can demand the share o the deceased in the firm from the surviving
partners, or they may be admitted as new partners by the existing
partners.

If the firm stands dissolved on the death of a partner, the banker must
close the firm’s account immediately on receipt of the intimation about
the partner’s death. This is important if the firm’s account shows a debit
balance at the time of a partner’s death because the latter’s estate would
be liable to pay the debts incurred by the firm before his death. Hence
to determine the liability of the deceased partner, the banker should
close e account of the firm soon after the death of a partner. If he
defaults in doing so, the rule in Clayton’s case will apply.
 49

If the firm does not stand dissolved, it is reconstituted by the surviving

partners with or without the admission of a new partner. The banker
should open a new account in the name of the reconstituted firm and
obtained a fresh mandate and undertaking from the partners. In any
case the cheques drawn by the deceased partner should not be honoured
by the banker without confirmation from the surviving partners.
Retirement Of A Partner

When a partner retires, his liability towards the banker or any other
third party ceases in respect of all transaction undertaken subsequent to
the date of his retirement. But if the banker is not informed about his
retirement, the retiring partner continues to be liable for the transaction
of the firm even after the date of his retirement. The retiring partner
should give a public notice for this purpose to terminate his liability to
the third parties.

If the bank account of the firm at the time of retirement of a partner

shows a debit balance, the banker must close the account of the firm, in
order to retain his right to claim money from the retiring partner. If this
is not done, the rule of Clayton’s case will apply. If an account shows a
credit balance, the banker need not close it but the cheques drawn by
the retiring partner should be honoured after securing confirmation
from other partners. On the opening of a new account or on the
continuance of the existing account after the retirement of a partner, a
fresh mandate should be taken from the partners of the new firm.

Liability Of Partners On Reconstruction/Dissolution Of The Firm

On retirement of the partners or on reconstitution or dissolution of the

firm, and on receipt of notice thereof by the banker the banker the
liability of the partners shall be as follows:
1. The liability for debts arising out of financial facility would
continue in respect of retired partner(s) till the date of notice.
Their liability for future loan ceases immediately on serving such
notice.
 50

2. Unless there is an agreement to the contrary, the firm’s account

should be closed, because the identity of the firm is reconstituted,
fresh accounts should be opened.
3. If, on the reconstituted of the firm, the account is not closed, and
the continuing partner(s) is/are allowed to operate the account(s)
of the erstwhile firm, the continuing partner(s) will alone be
liable for the financial facilities made after notice.
4. If the continuing partner(s) is/are treated as debtors, the retired
partner(s) does/do not get treated as debtor, the retired partner(s)
does/do not get discharged of the liability to reap the debt(s) as
on the date of notice, unless released by the bank expressly or
impliedly.
5. On receipt of notice, the proper course for the bank is to freeze
all the accounts, if there is more than one, merge them with each
other and take the consolidated balance resulting from the merger
of credits and debits in all the accounts. Such combination is
compulsory.
6. Pledge goods held as security is realized by giving notice to the
erstwhile partners, because they are entitled to the benefit of the
security. Otherwise bank will be held for negligence and the
erstwhile partners can claim discharge to the extent of the value
of the pledge goods.

Insolvency Of A Partner

In case of insolvency of a partner, the partnership comes to end, if an

agreement to the contrary does not exist. The insolvent partner ceases
to be a partner with effect from the date he is declared as insolvent and
he shall be liable to the firm for any of its transactions thereafter. The
insolvent partner does not remain competent to operate the firm’s
account. The solvent partner can operate the account for winding up the
affairs of the firm. The banker should honour the cheques drawn by the
insolvent partner before his jurisdiction only after getting confirmation
from the solvent partners. Bankers usually open a new account in the
name of the reconstituted firm to determine the liability of the insolvent
partner. Otherwise the rule in Clayton’s case will apply.
 51

Ch – 11

A JOINT STOCK COMPANY

Modern businesses are generally organized as joint stock companies

incorporated under the Companies Act, 1956. A joint stock company is
an artificial person with perpetual succession brought into existence
under the provisions of the Companies Act. Legally, a company is
considered as an entity separate from its members and hence it
possesses all power to enter into valid contract. It can own property in
its own name, carry on lawful business and incur liabilities in its name.
While opening an account in the name of a company, the banker must
satisfy himself about the following:

1. Examination Of Documents – As a company is an artificial

person, its constitution, powers and objectives, rules and
regulations, etc., are contained in the following important
documents. The banker should thoroughly and carefully examine
these documents:
(a) Certificate of Incorporation and Certificate of
Commencement Of Business – these certificates, issued by
the Registrar of Companies, provide conclusive proof that
the company is a duly incorporated body and all the
 52

necessary formalities regarding its formation have been

fulfilled by the promoters. A private limited company is
not required to obtain the Certificate of Commencement of
business. On its registration under the Companies Act, a
company is given recognition as an entity separate from its
members and acquires all powers to enter into contracts
and to commence business. The banker should ensure
from these certificates that the company applying for
opening an account is a duly registered and incorporated
body.
(b) Memorandum of Association – the Memorandum of
Association is the main document of a company, which
embodies its constitution and is called the charter of the
company/. It contains the name of the company, its
authorized capital, the name of the State in which the
registered office of the company is to be situated, the
objects of the company and the liability of its members,
which is generally limited to the extent of their
shareholding. The banker should examine the
Memorandum specially to note objective for which the
company is incorporated, because any contract entered
into by a company, which serves an object other than the
objects, mentioned in the memorandum is unenforceable
at law and ultra vires. Such a contract cannot be ratified by
the members of the company at their meeting even by a
unanimous vote.
(c) Article of Association – the Articles of Association contain
the rules and regulation of a company regarding its
internal management. It contains in detail all matters
which are concerned with the conduct of day-to-day
business of the company. For example, the Articles
contain the rights and powers of the directors, rules
regarding the conduct of the company meetings, the
business that can be transacted by the company and the
form in which it is to be done. Every person, including a
banker, who is dealing with a company or intends to deal
with a company is and he should take care that his
dealings with the company are not inconsistent with the
 53

provisions of these documents. This is known as

constructive notice. The banker should, therefore,
scrutinize these documents very carefully in regard to the
following:
I. The powers of the directors in conducting the affairs
of the company.
II. The procedure for borrowing and the limit on
borrowings, if any.
III. The power vested in the directors to borrow money
for the company and to mortgage the company’s
assets.
IV. The procedure and authority to draw and endorse
cheques, bills, etc., on behalf of the company.
The banker should also obtain printed and certified copies of the
Memorandum and Articles of Association for the purpose of his own
record.

2. Copy Of The Board’s Resolution – along with the application

to open an account in the company’s name, the banker should
obtain a certified copy of the resolution passed by the Board of
directors of the company containing the following in regard to
the opening of the bank account:
(a) Appointing the bank concerned as the banker of the
company;
(b) Naming the person or persons who are authorized to
operate the bank account on behalf of the company;
(c) Stating the names of the persons who are authorized to
execute the documents on behalf of the company, or in
whose presence the seal of the company will be affixed on
the documents;
(d) Authorizing the advance and stating all details of such
advance, e.g., limit, security, rate of interest, etc.; and
(e) Stating the names of the persons who are authorized to
deposit the title deeds in case of equitable mortgage.

3. The Borrowing Power Of The Company – all joint stock

companies engaged in trade or industry have the implied power
to borrow money for the purpose of carrying on their businesses.
 54

The borrowing power of the company may be restricted by its

Memorandum of Association. Section 293(1)(d) of the
Companies Act, 1956, provides that the Board of Directors of a
public company or of a private company which is a subsidiary of
a pubic company shall not, except with the consent of such
public company or subsidiary of the paid-up capital of the
company and its free reserves, i.e., reserves not set apart for any
specific purpose. The temporary loans obtained from the
company’s bankers in the ordinary course of the business are
excluded in computing total borrowing of the company for this
purpose. The term ‘temporary loan’ means loans repayable on
demand or within six months from the date of the loan; such as,
short-term cash credit arrangement, the discounting of bills and
other short-term loans of seasonal character, but dos not include
loans raised for the purpose of financing expenditure of capital
nature. Thus, the limit, a resolution shall specify the total amount
up to which money may be borrowed by the Board of Directors.

Banker should be very careful in ensuring that the total borrowings

of the company do not exceed the above limit because under Section
293(5) of the Companies Act, “no debt incurred by the company is
effectual, unless the lender proves that he advanced the loan in good
faith and without knowledge that the limit imposed had been
exceeded.”

According to Section 292, the Board of Directors of a company shall

exercise the power to borrow money otherwise than on debentures
only by means of resolutions passed at the meeting of the Board.
The Board may, by a resolutions, delegate the power to borrow to
any committee of directors, the managing director, secretaries and
treasurer, etc. and shall specify the total amount outstanding at any
one time up to which money may be borrowed by the delegate. The
resolution of Board of Directors, exercising the power to borrow,
should mention the arrangement to be made by the Company with
its bankers for the borrowing of money by way of overdraft or cash
credit or otherwise and not the actual day-to-day operation of these
accounts by means of which the arrangement so made is actually to
be availed of.
 55

Borrowing by Directors without Authorisation

The question whether the amount borrowed by the directors without

authority and used for the benefit of the company can be recovered
from the company or not, was considered by the Patna High Court in
Kumar Krishan Rohatgi & others vs. State Bank Of India and Others,
(1980) 50 Comp. Cases 722 (Patna). In this case the company contested
the suit filed by the State bank of India on the ground that the managing
Director of the Company had no authority to execute the pronote in the
absence of a resolution duly adopted by the Board of Directors and
hence it was not binding on the company.

The Division Bench of the High Court concerned with the proposition
of law that “when an agent borrows money for a principal without the
authority of the principal and if the principal takes benefit of the money
so borrowed or when the money so borrowed has gone into the coffers
of the principal, the law implies a promise to repay” this principle
applies to the joint stock companies as well. It was, therefore, held that
the company cannot repudiate its liability to repay.

It is to be noted that any borrowing by the company may be ultra vires

the directors but not ultra vires company. In such cases money can be
recovered from the company.

Precautions To Be Taken By The Banker

a) The banker should ascertain that the company borrows only for
the purpose mentioned in its Memorandum of Association and
within the limits, if any, specified therein.
b) A certified copy of the resolution of the Board of Directors
passed under Section 292 should be obtained by the banker for
his own record.
c) The Board of Directors should also pass a resolution certifying
that the company’s borrowings, including the proposed
borrowing, are within the limit specified by the Companies Act,
or are within the limit specified by the Companies Act, or the
limit sanctioned by the shareholders at the general meeting.
 56

4. Registration Of Charges Under The Companies Act – Section

125 of the Companies Act, 1956, requires that every charge
created by a joint stock company, falling within the following
categories, must be registered with the Registrar of Joint Stock
Companies within 30days of its creation, otherwise it shall be
void against the liquidator or any creditor of the company:
(a) A charge for the purpose of securing any issue of
debentures;
(b) A charge on uncalled share capital of the company;
(c) A charge on any immovable property or any interest
therein;
(d) A charge on any book debts of the company;
(e) A charge, not being a pledge, on any movable property of
the company;
(f) A floating charge on the undertaking or any property of
the company including stock-in-trade;
(g) A charge on calls made but not paid’
(h) A charge on a ship or any share in a ship; and
(i) A charge on goodwill, a patent or a license under a patent,
a trademark, or a copyright, or a license under a copyright.

It is to be noted that a charge on any book debts of the company is

required to be registered while it is not necessary in case of a charge
created by the pledge of any movable property of the company. The
Registrar of Companies contended that the amount of fixed deposits
was a book debt of the company and so a charge created thereon was
required to be registered. On the other hand, the company argued that
the transaction was a pledge of movable property, namely, the fixed
deposit receipt, and so the charge was not required to be registered. The
High Court held that the fixed deposits would also movable property. If
the company could, treated the transaction as a pledge, avoid
registration of the charge, it was not necessary for it to register the
charge merely because it could also be registered as a charge on book
debts.

The company must file the prescribed particulars of the charge together
with the instrument, if any, by which the charge is created or a verified
 57

copy thereof within the prescribed time. Failure to get the charge
registered will render the charge void against the liquidator and any
creditor of the company, so far as any security on the company’s
property is conferred by the charge. This implies that if a charge which
is required to be registered under Section 125 is not registered it does
not mean that the transaction itself becomes void or the debt is not
recoverable. The non-registration of the charge shall have the effect that
the security created by it becomes void as against the liquidator and/or
other creditors. In other words, such debt becomes an unsecured one
when a liquidator is appointed and such security is made available to
meet the claims of all unsecured creditors.

In State Bank of India vs. Viswaniryas (1987(2) Kerala Law Times –

317), the Kerala High Court held that want of registration under section
125 of the Companies Act would affect the holder of an unregistered
charge in case of winding up proceedings and that too against the
official liquidator. Such a holder of an unregistered charge would be
entitled to claim a preferential right and would not be entitled to stand
outside the winding up proceedings. The Court further held that so long
as the company was a going concern, the unregistered charge would not
become void against an unsecured creditor of the company.
The consequence of non-registration of charge under section 125
continues even if the mortgage has obtained a decree prior to the issue
of order winding up the company. In case of Official Receiver of
Kamani Brothers (P) Ltd. Vs. Suryakani Natvarlal Surati & Others, a
decree was passed and the mortgage property was to be sold by public
auction in the event of the company committing default in payment of
the sum by the due date. In the meanwhile, the company was ordered to
be wound up. In the circumstances of the case, the Bombay High Court
held that the unregistered charge in favour of the mortgagee was kept
alive and hence the mortgage would have been extinguished if the sale
had taken place before the winding up order was issued.

The banker should ensure that the charge over the assets of the
company created in his favour is duly registered with the Registrar of
Joint Stock Companies within the prescribed period. Though the
company is not under any legal obligation to register such charge, the
registration of the charge safeguards the interests of the creditors
 58

including the bankers. According to Section 126, where any charge on

any property of a company has been registered under Section 125, any
person acquiring such property or any thereof or any share or interest
therein shall be deemed to have notice of the charge as from the date of
its registration and not from the date of its creation. For example, a
company borrows from X on 1st January and from Y on 15th January
and mortgage the same property to both. But if the charge in favour of
Y is registered on 16th January while that in favour of X is registered on
20th January (i.e., within the permissible period of 30 days the creation),
the charge in favour of Y will have precedence over the charge created
in favour of X because the former was registered earlier than the latter.

Precautions Regarding Prior Charge Over The Assets

Generally, banker grants secured loans on the basis of a fixed charge on
the fixed asset of the company and a floating charge over its stock-in-
trade, book debts and other movable assets. Sometimes, in addition to
the above, personal guarantee is also secured from the directors of the
company as a collateral security.

While granting a loan on the basis of a fixed or floating charge over

assets of a company, the banker should be careful about any prior
charge – fixed or floating over the same assets. In some cases
debentures are secured by floating charge over the assets of the
company with a stipulation that the company cannot create any other
charge over the assets ranking above or at par with the charge in favour
of the debenture-holders. A charge by the company subsequently will,
therefore, not have priority over the earlier charge. The banker should,
therefore, be very careful in finding out the existence of an prior charge
over the assets of the company by inspecting the Register of charges,
which every company is required to maintain at its registered office.

The banker should also inspect the ‘Register of Mortgages and

Charges’ maintained at the office of the Registrar of the joint stock
companies, which contains all the details of the charge registered under
Section 125 of the Companies Act.

5. Directors’ Personal Account – The banker of a company

having personal accounts of the directors of the company must
 59

handle the latter with care. If a director, who is authorized to

operate the company’s account and to endorse cheques on its
behalf, deposit cheques drawn in favour of the company to be
credited to his personal account, the banker should first enquire
the purpose for which such cheques are intended to be credited to
his personal account and on being satisfied about the genuine
reason, credit them to his account. If the banker does not make an
enquiry in such a case or credits the amount in the personal
account of the director despite unsatisfactory reasons given by
him, he shall be liable to refund the money credited to the
director’s account.

Additional Precautions In Case Of Private Limited Companies

The banker should be very careful in advancing loans to a Pvt. ltd.

company, which has recently been incorporated by conversion of the
business of a sole trader. In such cases the creditors of the sole trader
cannot recover their dues from the company, which is deemed to be an
entity separate from its shareholders. Sometimes sole traders convert
their business into Pvt. Ltd. Companies primarily to “defeat or
Defraud” their creditors, to whom they owe large sums. According to
the Insolvency Act, such transfer of assts is considered to be an act of
insolvency and the insolvency proceeding may be instituted against
such persons. When a trader is declared insolvent, all transfers made by
him within a period of two years become void against the Official
Receiver or Assignee except in the following circumstances:
a) Transfer made before and in consideration of marriage, or
b) Transfer to a purchaser in good faith and for valuable
consideration.

The Official Receiver gets title to the property of the insolvent with
effect from the date on which an act of insolvency takes place. This is
called the ‘Doctrine of Relation Back’. According to this doctrine the
dealing of the insolvent from the date of the Act of Insolvency will not
be valid and all such property sold or transferred shall vest in the
Official receiver. The banker should, therefore, make inquiry to avoid a
situation.
 60

Ch – 12

NON-TRADING INSTITUTIONS – CLUBS, SOCIETIES &

CHARITABLE INSTITUTIONS

Clubs, societies, charitable and religious institutions, libraries, school,

colleges, etc., not engaged in trading activities, maintain precautions in
dealing with them:

1. The Society Must Be Incorporated – The Societies Registration

Act, 1860, provides for the registration of societies for the
promotion of literature, science, and fine arts or for charitable
purpose. Such institution may also be incorporated under the
Companies Act, 1956, or the Co-operative Societies Acts. A
society gets the legal recognition as an entity separate from its
members only after its incorporation under any of these acts.
Thereafter, it is empowered to enter into valid contracts and to
sue or sued. The banker should, therefore, ensure that the
applicant society is a properly incorporated body. The
unregistered society cannot be sued in law.
2. Rules And By-Laws Of The Society – A registered society is
governed by the provisions the Act under which it has been
registered. It may have its own Constitution. Charter or
Memorandum of Association and rules and by-laws, etc., to carry
 61

on its activities. A copy of the same should be furnished by the

society to the banker to acquaint the latter with the powers and
functions of the persons managing affairs. The banker should
ensure that these rules are observed by the persons responsible
for managing the society.
3. Resolution Of The Managing Committee – For opening bank
account, the Managing Committee of the society must pass a
resolution –
(a) Appointing the bank concerned as a banker of the society;
(b) Mentioning the name/names of the persons, who are
authorized to operate the account;
(c) Giving any other directions for the operation of the said
account; and
(d) A copy of the resolution must be obtained by the bank for
its own record
4. Borrowing Power Of The Society – In case a registered society
intends to borrow, the bankers must ascertain the borrowing
power of the society from its Charter or Memorandum. The
purpose for which such borrowing is permissible must also be
noted and the powers of the managing committee or its office-
bearers to create a charge over the assets of the society for the
purpose of borrowing should be enquired into. A resolution must
be passed by the managing Committee for this purpose and a
copy thereof must be sent to the banker.
5. Death Or Resignation – in case the person authorized to operate
the account on behalf of a society dies or resigns; the banker
should stop the operation of the society’s account till the society
nominates another person to operate its account.
6. Care To Be Executed In Case Of Personal Account – if the
person authorized to operate the society’s account is also having
his personal account with the same branch of the bank, the
banker is under an obligation to ensure that the funds of the
society are not being credited to the personal account of the said
person or office bearer. For example, the principal o a college is
authorized to operate the account of the college with bank X. he
also has his personal account with the same bank. He sends to the
bank for collection and credit to his personal account a cheques
dawn by a donor in favour of the college. The banker is under an
 62

obligation to ensure that he receives payment on behalf of the

true owner of the said cheque, i.e., on behalf of he college. If he
fails to do so he will be held guilty of negligence and shall not be
able to avail of the statutory protection under section 131 of the
Negotiable Instruments Act. In these circumstances, the banker
should not collect such cheque for crediting the same to the
account of the principal.

CASE STUDY

HSBC’S PREMIER CUSTOMER

ABOUT HSBC

HSBC's origins in India date back to 1853, when the Mercantile Bank
of India was established in Mumbai. The Bank has since, steadily
grown in reach and service offerings, keeping pace with the evolving
banking and financial needs of its customers.

In India, the Bank offers a comprehensive suite of world-class products

and services to its corporate and commercial banking clients as also to a
fast growing personal banking customer base.

HSBC Group entities in India

• The Hongkong and Shanghai Banking Corporation Limited

(HSBC)
 63

• HSBC Asset Management (India) Private Limited

• HSBC Electronic Data Processing (India) Private Limited
• HSBC Insurance Brokers (India) Private Limited
• HSBC Operations and Processing Enterprise (India)
Private Limited
• HSBC Primary Dealership (India) Private Limited
• HSBC Private Equity Management (Mauritius) Limited
• HSBC Professional Services (India) Private Limited
• HSBC Securities and Capital Markets (India) Private
Limited
• HSBC Software Development (India) Private Limited

Commercial Banking
The Hong Kong and Shanghai Banking Corporation Limited
(HSBC)
Personal banking
HSBC offers a wide range of personal financial services, including
personal lending and deposit products, through its branch network in
Ahmedabad, Bangalore, Chennai, Chandigarh, Coimbatore, Gurgaon,
Hyderabad, Jaipur, Kochi, Kolkata, Ludhiana, Mumbai, New Delhi,
Noida, Pune, Thane, Trivandrum and Visakhapatnam. Also offered
branch-wide are international Gold and Classic credit cards from VISA
and MasterCard and debit cards from Visa. Customers have access to
24-hour banking services through an extensive network of automated
teller machines (ATMs), an integrated Call Centre, and internet banking
- online@hsbc .
Non Resident Indian banking
HSBC's Non Resident Indian Banking (NRI) centres located in Asia-
Pacific, the Middle East, Europe and North America, together with
HSBC's offices worldwide, provide the international Indian Diaspora
access to a range of products and services. These include NRI related
investment (both international and domestic), transactional and deposit
products, together with a full range of personal and private banking
products in India and overseas. Internet banking also provides easy
access to HSBC's services.
Financial planning services
Services include investment and custodian management and access to
 64

stock broking and insurance services, which are offered to resident as

well as non-resident Indians.
Corporate banking
HSBC has well-established, long-term corporate banking relationships
with large domestic Indian corporations and foreign multinationals
operating in India. Services include term and working capital finance,
trade facilities, corporate deposits, syndications, payments and cash
management services and factoring.
Business banking
HSBC's Extra Mile Business Banking offers two types of account to
small and medium-sized businesses - The Business Account and the
BusinessVantage Account. Services include Business PhoneBanking,
Business Doorstep Banking and Multi Branch Business Banking.
Payments and cash management
HSBC provides integrated domestic and regional transaction support to
corporate clients through a sophisticated range of cash management
solutions, including collection and payment services and integration
with customer back-end systems. Operations and client services are
ISO 9001 certified. Hexagon, the HSBC Group's dedicated electronic
banking service allows users to perform financial transactions, obtain
international financial markets information, and review details of their
domestic and international accounts, from anywhere in the world, 24
hours a day.
Trade (international and domestic) and factoring services
A wide range of solutions tailored to meet customer's requirements for
both domestic and international businesses is offered. HSBC is also one
of the leading banks involved in the bullion business through its offices
in Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi
and is supported by the Group's global expertise in the precious metal
business. HSBC is the leading provider of trade services in India and its
trade centres are ISO 9002 certified.
Institutional banking
Working closely with Group offices in India and overseas, trade
services, payments and cash management, treasury and capital markets,
custody and clearing, and correspondent and electronic banking
activities are offered to banks, financial institutions, securities houses,
insurance companies, asset management companies and other non-
 65

banking companies, non-government and development organisations

operating in India.
Treasury and capital markets
Clients consistently rate HSBC's Treasury business as one of the best in
India. Its dealing room in Mumbai is one of the largest in the country,
serving clients in Mumbai and in the major metropolitan centres across
the country. It provides a comprehensive range of products which
include - foreign exchange, money market and fixed income products
and derivatives in both rupees and major currencies.
Custody and clearing
The leading custodian in Asia, HSBC's custody and clearing services
are available in 28 markets in Asia-Pacific and the Middle East. With
experienced staff and the latest technology, HSBC is the premier
provider of sub-custodian and clearing services to foreign institutional
investors (FIIs) in India. HSBC clients include the domestic fund
management sector in both the retail and institutional segments.
Institutional Fund Services launched by the bank offers a
comprehensive suite of products to domestic mutual funds and
insurance companies ranging from custody, fund administration
services, unit distribution and cash management services.

Technology
The HSBC Group develops and applies advanced technology to the
efficient and convenient delivery of banking and related financial
services. In India, the Group provides:

• Self-service banking with over 150 in-branch and off-branch

ATMs and 24-hour phonebanking.
• Trade and corporate banking services with real-time access to a
centralised information database
• Instantaneous inter-city transactions through online connections
between all branches
• A state-of-the-art treasury dealing system

• A sophisticated card system supporting debit and credit cards,

domestic and international VISA, MasterCard, and co-branded
cards
 66

• A dedicated acquiring system for both MasterCard and Visa

transactions
• online@hsbc, HSBC's internet banking service, provides
customers with an integrated and secure platform to access their
accounts.
• Internet Payment Gateway handles credit card transactions on the
internet

Asset management
HSBC Asset Management (India) Private Limited offers mutual
funds to its customers. With the Group's global fund management
expertise and investment capabilities, it is able to deliver quality
products to meet customers' investment objectives.

Global Resourcing
HSBC Electronic Data Processing (India) Private Limited,
through its offices in Hyderabad, Bangalore and Visakhapatnam
provides data processing / customer service facilities for the HSBC
Group's overseas operations.

Insurance
HSBC Insurance Brokers (India) Private Limited is licensed by
the Insurance Regulatory Development Authority (IRDA) to operate
as a composite insurance broking company, which will function as a
direct and a reinsurance broker.

Data processing
HSBC Operations and Processing Enterprise (India) Private
Limited, through two centres in Mumbai and Chennai, provides
operational processing services for HSBC offices in India.

Primary dealership
HSBC Primary Dealership (India) Private Limited has been
authorised by the Reserve Bank of India to act as a primary dealer in
the government securities market.

Private equity
HSBC Private Equity Management (Mauritius) Limited, a
subsidiary of HSBC Private Equity (Asia) Limited in Hong Kong,
 67

has a Liaison Office in Mumbai. The company specialises in the

provision of equity capital to unlisted growth companies in India
and Sri Lanka.

Audit Service
HSBC Professional Services (India) Private Limited provides
internal audit services to the HSBC Group's internal audit units
worldwide, with particular emphasis on the IT, Treasury, Asset
Management, Private Banking and Insurance functions

Investment banking
HSBC Securities and Capital Markets (India) Private Limited
has two main business lines. Its Institutional and proprietary broking
business is based in Mumbai and, has seats on two of India's premier
stock exchanges, the Bombay Stock Exchange and the National
Stock Exchange. It deals in Indian securities for both Indian and
international institutions and for select retail clients and is backed by
an extensive research team. The Corporate Finance and Advisory
business, with offices in Mumbai and New Delhi, offers a full range
of integrated investment banking services in India and
internationally.

Software development
HSBC Software Development (India) Private Limited has
established a software centre in Pune to develop solutions for
HSBC's Group offices worldwide.

Division Of Customers

The customers of HSBC bank can be divided into Retail customers and
Institutional customers. In the retail category the customer who’s
relation with the bank 1 to 25 lakhs is known as Power Vantage
Customer. The customer whose relation with the bank is above 25
lakhs is known as Premier Customer. In the Institutional category
customers are Small Enterprises (SME), Medium Enterprises
(MME) and Large Customers.

Power Vantage
 68

HSBC’s Power Vantage account is an exclusive product, which helps

to meet the present and future financial requirements. Power Vantage
account offers a unique feature, called the Personal Financial Review
(PFR), which sets this account apart from any other banking account.
PFR enables the banks financial planners to draw up financial plans,
which helps to manage the customer’s money. Besides enabling
financial planning, Power Vantage account also offers an array of other
banking benefits.

Premier

HSBC’s Premier, a service so premium, that it’s only being offered to

most selected customers. It is truly a global relationship banking
services which will dramatically change the way the finance a customer
handles today. HSBC premier eases the pressures of meeting countless
deadlines, especially when the customer’s on the move. Managing the
customers financial portfolio is more convenient with the range of
highly personalized, comprehensive, time-saving and rewarding
facilities and services. An HSBC premier customer can be easily
recognized globally and is given priority whenever they contact the
bank. The one-to-one relationship banking ensures that the dedicated
HSBC premier relationship manager is always on hand to assist and
guides him in the most effective management of the finances. The
customers will enjoy specialized facilities that go beyond regular
banking. Theses include top-line investment and broking services,
home banking, no-bounce cheque protection and much more. HSBC is
committed to understanding and anticipating the customer’s every
banking need. The bank will harness the financial strength of the HSBC
Group to fulfill those needs and add value to the customer’s life.

Eligibility
HSBC Premier is available to both resident and non-resident
individuals at a minimum average quarterly relationship balance of Rs.
25,00,000.
For resident Indians individuals, this relationship balance includes a
combination of deposits or investments and loans, of which:
 69

a. A minimum of Rs. 20,00,000 is to be held in deposits or

investments (Mutual funds) purchased through the Bank.
b. The remaining Rs. 5,00,000 of the relationship can consist of
loans taken from the Bank.
For non-resident Indian individuals, the relationship balance
comprises of Rs. 25,00,000 in deposits with the bank.

Benefits
• Relationship Management – The customer will enjoy access to
a dedicated HSBC Premier Relationship Manager who will be
the customer’s single-point contact with the bank. All the
banking needs will be anticipated, understood and
comprehensively addressed by the HSBC premier relationship
manager, who will manage the financial portfolio by offering
customized solution, liaising with different departments and
securing the best financial terms for the customer.
• Investment Services – The Financial Consultant is committed to
understanding every banking need that the customer may have
and has one objective – to harness the financial strength of the
HSBC Group to provide the best solutions to meet the needs of
the customers. If required, the financial consultant will provide
specialist advice on the investment portfolio and offer valuable
recommendations on wealth creation and management.
• Broking Services – Broking services made available through
HSBC Securities India Holding Limited bring the convenience of
executing the customer’s buying and selling transactions.
• Exclusive HSBC Premier Centres – As an HSBC Premier
Customer, he can access dedicated HSBC Premier centers around
the world, designed with the needs in mind. Whether he needs
cash in foreign country or mere respite from a hectic day, the
service centers provide an exclusive, confidential and
comfortable environment, where he can conduct his banking
transactions.
• Special Account For Children – Avail of the benefits of
HSBC’s GenNext account (exclusive account for children of
HSBC Premier customers), which offers the child a range of
benefits that include zero balance savings accounts, Systematic
 70

Investment Plan and a Debit card (for minors over the age of 16
years.)
• HSBC Premier Debit card – This premium debit card gives the
customer access to over 6,70,000 HSBC and VISA/PLUS
ATM’s across the world. It also allows the customer to make
purchase transactions at 10 million merchant establishments
worldwide. With the HSBC premier debit card, he can have
access to unlimited free cash withdrawal and balance enquiry
transactions at over 6,000 non-HSBC VISA ATM’s in India.
• High Cash Withdrawals – The premier customer can withdraw
up to or equivalent to Rs. 1,00,000 per day from any
HSBC/VISA ATM in the world.
• HSBC Premier Master Card Credit Card – This premium
credit card comes with a pre-approved credit limit of at least Rs.
2,00,000. It also provides access to all HSBC Group ATM’s as
well as the Master Card ‘Cirrus’ network of ATMs in India.
• Home Banking – The customer can enjoy home banking
services, which include the physical delivery of cash (for amount
up to Rs. 2,00,000) and receipt or delivery of cheques, drafts,
etc., via special courier.
• No-bounce Cheque Protection – The customer can avail of No-
bounce cheque protection of up to Rs. 1,00,000 on any HSBC
Premier cheque the customer issue.
• Safe Deposit Locker Service – The bank gives the customer
preference for provision of a locker.
• Consolidated statements – With a consolidated statement of the
customers account/s, he can get a snapshot of his portfolio with
the bank.
• Write-in tax Advisory Service – The customer can write to the
banks tax advisory for guidance on personal tax-related matters,
free of charge.
• HSBC Premier Global Services – As an HSBC premier
customer he can have access to a wide a range of special
services, 24 hours a day, 365 days a year, anywhere in the world.
In addition, he can enjoy a range of other services, available to
him around the world. For instance, he can:
a. Exchange foreign currency, free of commission at any
branch of HSBC that handles foreign currency exchange.
 71

b. Report lost or stolen cards or documents with ease and get

an emergency replacement card.
c. Gain immediate access to emergency medical and dental
referral service across the world.
d. Benefit from medical repatriation or evacuation in case of
any serious health problem.
e. Obtain emergency legal assistance while traveling outside
our country.
f. Avail of emergency messaging and interpretation services.
g. Gain access to business service arrangements and courier
services.
h. Obtain air travel, hotel and car hire reservation information
and services.
i. Seek special information to help him know his destination
better, even before he arrives there.
j. Can enjoy meals at preferred restaurant based on his
location and/or cuisine preference. Information provided
includes opening hours, dress code, and acceptable forms
of payment and menu highlights.
k. Obtains information on golf courses, locations, tee times,
fees and pars and even arranges bookings and payments.
l. Track lost luggage, which will be located and delivered to
him.
m. Select, purchase and gifts will be delivered to him.
 72

APPENDIX

Interview of Mr. Niraj Kumar the Vice President of Premier Account

of HSBC Bank.

Q. What is the unique feature of HSBC Bank that distinguishes it

from other banks?
A. HSBC is also known as the world’s local bank. It is a conservative
bank and not aggressive like other banks. It is takes every step very
carefully and cautiously. It assures that its customers are satisfied with
the services offered and enjoys the banking experience in the real sense.
Because of this our customer base has gone up quite a lot in the recent
years.

Q. What is the procedure of opening an account in your bank?

A. Its simple fill up the application form, give in your details, like your
personal details, how many members are there in your family, your
financial details, what kind of business you do in case of a business
man, your address, where your living, income proof, identity proof,
date of birth, your net worth etc., in short covering all possible details.
This is necessary under KYC (Know Your Customer) norm laid down
by the RBI. The Customer Relationship Manager will examine them
and if satisfied will open your account.

Q. What all is included in the KYC norm of the RBI?

A. As I told you earlier, KYC i.e., Knowing Your Customer is nothing
but getting all the possible details about your customer financial,
 73

personal, economical etc. It includes details like how many members

are there in your family, your address, your date of birth, where you are
living, your income proof, identity proof, what kind of business or
service what ever your doing, your net worth etc., in short all possible
details.

Q. How regularly do you investigate your existing customer’s

details?
A. As according to the KYC we have to check our customer’s details
every year. So the details are update every year.

Q. Do you have a separate department working for this purpose?

A. The person who opens an account is called the Relationship
Manager. He takes care that; all the KYC norms are taken care of while
opening the account. He remains constantly in contact with the
customer. So there’s no such department working for this purpose. It’s
the relationship manager who takes care of checking the customer’s
details regularly.

Q. Do you prefer some customers to the other?

A. It’s nothing like that. Each of our customer is Power Vantage for us.
All are growing and all are sources of growth. So there is nothing like
preferring one to the other.

Q. When can you completely deny a customer to open an account

with your bank?
A. When a customer is either a lunatic, or involved in any illegal
activity, criminal activity, or any other customer whose reputation is
tainted in any manner. The Bank will never breach the Law.

Q. How frequently does this happen?

A. It happens in very remote cases. It usually doesn’t happen. And
fortunately HSBC has never encountered such a problem.

Q. What would you do if you later on come to know that the

customer has not given you the right details about him?
 74

A. At first we investigate, ask him questions and if satisfied that he is

tainted in any manner, close his account. And in the worst to worst case
we report it to the regulatory, then he decides what is to be done to him.
Q. What features your bank has, that can attract customers?
A. HSBC is a Universal Bank. It has all the features that a universal
bank has. And moreover it is a very trustworthy bank and never
involved in any controversies. This is the main feature of HSBC bank
that has the power to attract the customers.

Q. Which big corporate companies have accounts with your bank?

A. Sorry we cant tell you that. It’s the matter of Customer
Confidentiality. We are very particular about such things.

Q. Are you targeting any particular customer?

A. No Nobody in particular. Each segment has its own benefits. And
moreover we don’t differentiate between our customers.

Q. Which customer you think will provide you the highest source of
income?
A. This again depends. A Corporate may have an account with us for
Rs. 75 Lakhs and a Married Woman may have an account for Rs. 80
Lakhs and visa-versa. So its not that a particular segment of customer
may be a higher source of income.

Q. Which is the lowest customer segments in you bank?

A. Well, tentatively it is the Trustees. We have very few trusts account
in HSBC.

Q. How have seen HSBC grow up since the past 5 years and how do
you see it growing in the next 5 years?
A. If you talk of 5 years prior, it was a service bank. Its custom was
proving services. It used to receive income mainly from treasury
operations. Now new avenue have opened. HSBC is involved in Fee
based income i.e., selling products of the third party. Products have
increased and also new sources of income have increased considerably.
And talking about the next 5 years, you will surely see HSBC rising
 75

higher and higher in all aspects relating to services, customer care, etc.
HSBC will deliver great service and achieve newer heights and will be
the top most bank globally.

Q. In what ways has HSBC grown compared to other banks?

A. If you are talking about growth, it is a very relative concept. And
comparing two banks is not possible. This is so because, growth for one
bank may mean increasing the number of branches and for other
increasing customer base. Taking example of HDFC, the numbers of
branches have increased drastically. While HSBC concentrates more on
its customer base. So its customers have increased overwhelmingly. It
could be said that both the banks have grown but one in consideration
of branches and the other in the manner of its customer base.

Q. Can HSBC called a one-stop finance super market?

A. Yes absolutely! Today HSBC in one play that takes care of the
entire array of customers needs. It ranges from banking to the financial
ones. From banking side it includes Personal banking, NRI banking,
Corporate banking, Business banking, Institutional banking, Investment
banking etc. And from the Financial side it includes Payments and Cash
management, Trade and Factoring services both Domestic and
International, Treasury and Capital Markets, Custody and Clearing,
Asset management, Global Resourcing, Insurance, Audit services, etc.
So you have all services packed in one bag you just have to go and grab
it!
 76

BIBLOGRAPHY

Books
1.Banking Law And Practice – P. N. Varshney
2.Banking Theory And Practice – Gordon Natarajan

Websites
1.www.google.com
2.www.icicibank.com
3.www.standardchartered.com
4.www.hsbc.com
5.www.wekipedia.com
77