Legal and Regulatory Aspects of Bank (JAIIB)

As per Sale of Goods Act, “goods” means every kind of movable property other than actionable claims and money.

Under the Limitation Act, 1963, a suit is instituted in an ordinary case, when the plaint is presented to the proper officer or in an ordinary case, when the plaint is presented to the proper officer.

As indicated in Section 5(b) of Banking Regulation Act - “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise.

Correct Answer: (a), (b) and (c) only

In addition to the business of banking, banking company may engage in any other forms of business which the Central Government may by notification in the Official Gazette, specify as a form of business in which it is lawful for a banking company to engage u/s 6(1).

In computing the period of limitation for an appeal or an application for leave to appeal or for revision or for review of a judgment, the day on which the judgment complained of was pronounced and the time requisite for obtaining a copy of the decree, sentence or order appealed from or sought to be revised or reviewed shall be excluded.
In computing the period of limitation for an application to set aside an award, the time requisite for obtaining a copy of the award shall be excluded.
Thus, option 4 is the correct answer. 

In computing the period of limitation for an appeal or an application for leave to appeal or for revision or for review of a judgment, the day on which the judgment complained of was pronounced and the time requisite for obtaining a copy of the decree, sentence or order appealed from or sought to be revised or reviewed shall be excluded.

Under The Banking Regulation Act, 1949,
Section 45 states: Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution of amalgamation.

Under sale of goods act, specific goods mean goods identified and agreed upon at the time a contract of sale is made.

Correct Answer: (a) to (d) all

No banking company shall pay any dividend on its shares until all its capi­talised expenses (including preliminary expenses, organisation expenses, share-selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off.

Under Section 2 in The Sale of Goods Act, 1930, future goods mean goods to be manufactured or acquired by the seller after the making of the contract of sale.

Correct Answer: The provision of 10% ceiling restricts the transfer and registration of such transfer.

Income which is deemed, arised, received or earned in India by a non-resident will be taxable. 

Power of Reserve Bank to appoint chairman of the Board of Directors appointed on a whole-time basis or a managing director of a banking company:
Where the office of a banking company is vacant, the Reserve Bank may, if it is of opinion that the continuation of such vacancy is likely to adversely affect the interests of the banking company, appoint a person eligible under sub-section (4) of section 10B to be so appointed, to be the chairman of the Board of directors appointed on a whole-time basis.

“Authorised capital” or “nominal capital” means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the
company. 

“Paid-up share capital” or “share capital paid-up” means such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called. 

The income tax department has extended the time limit for depositing TDS on sale of property. Such TDS can now be deposited within 30 days from the end of the month in which it was deducted.
So, if you have deducted TDS on property on 10th August, 2016, you can deposit it by 30th September. 

A contract of sale or lease is a contract for sale or lease by sample if there is a term in the contract, express or implied, to that effect. In a contract for sale or lease by sample,
(a) there is an implied condition that the bulk must correspond with the sample in quality,
(b) there is an implied condition that the buyer or lessee must have a reasonable opportunity of comparing the bulk with the sample, and
(c) there is an implied condition that the goods must be free from any defect rendering them unmerchantable that would not be apparent on reasonable examination of the sample.

Thus, all are true. Therefore, option 4 is the correct answer. 
 

Procedurely, foreign banks are required to apply to RBI for opening their branches in India. Foreign banks’ application for opening their maiden branch is considered under the provisions of Sec 22 of the BR Act, 1949. Before granting any licence under this section, the general character of the proposed management of the proposed bank will be in public interest or the interest of its depositors. RBI may require to be satisfied that the Government or the law of the country in which it is incorporated does not discriminate in any way against banks from India.

Correct Answer: Govt. can exempt a bank from provisions of Banking Regulation Act, on its own.

Correct Answer: None of the above

The sale of the securities by the pawnee bank without giving reasonable notice to the pawner is bad and not binding on him. What Section 176 contemplates is not merely a notice but a reasonable notice, of intended sale of the security by the creditor within a certain date so as to afford an opportunity to the debtor to pay up the amount within the time mentioned in the notice.

ST-3 Return is required to be filed twice in a financial year ± half yearly. Other options are not true.

In terms of section 17 (1) and 11 (1)(b) (ii) of the Banking Regulation Act, 1949, banks are required to transfer, out of the balance of profit as disclosed in the profit and loss account, a sum equivalent to not less than 20 per cent of such profit to Reserve Fund. This provision is a minimum requirement.  Considering the imperative need for augmenting the reserves, it was advised vide circular DBOD.No.BP.BC.24/21.04.018/ 2000-2001 dated September 23, 2000 that all scheduled commercial banks operating in India (including foreign banks) should transfer not less than 25 per cent of the ‘net profit’ (before appropriations) to the Reserve Fund with effect from the year ending 31 March, 2001. 

Amalgamation of banks: Voluntary Amalgamation: A banking company may be amalgamated with another banking company.

Amalgamation by Govt: After Consultation with RBI, Central Govt. is empowered to order amalgamation of two banking companies (u/s 396 of Companies Act). 

The unpaid seller of goods loses his lien thereon —
(a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods;
(b) when the buyer or his agent lawfully obtains possession of the goods;
(c) by waiver thereof.

A Lok Adalt shall have jurisdiction to determine and to arrive at a compromise or settlement between the parties to a dispute in respect of - (a) any case pending before; or (b) any matter which is falling within the jurisdiction of, and is not brought before, any court for which the Lok Adalt is organised.

When the vires of the SARFAESI Act was challenged, the Supreme Court in Mardia Chemicals Ltd. vs. Union of India, (2004) 4 SCC 311 has upheld the validity of the SARFAESI Act, except Section 17(2) of the SARFAESI Act which required depositing of 75% of the amount claimed before entertaining an appeal under Section 17 of the SARFAESI Act.

In exercise of the powers conferred by section 45Y of the Banking Regulation Act, 1949 (10 of 1949), the Central Government, after consultation with the Reserve Bank of India, hereby makes the following rules, namely: Every banking company shall preserve, in good order, its books, accounts and other documents, relating to a period of not less than five years immediately preceding the current calendar year.

Reserve Bank may, having regard to the factors specified in sub-section (1) of section 35A, by an order in writing, direct any banking company to preserve any of the books, accounts or other documents mentioned in those rules, for a period longer than the period specified for their preservation, in the said rules.

45-ZC states - Nomination for return of articles kept in safe custody with banking cornpany - (1) Where any person leaves any article in safe custody with a banking company such person may nominate, in the prescribed manner, one person to whom in the event of the death of the person leaving the articles in safe custody, such article may be returned by the banking company.

"Corresponding new bank" means a corresponding new bank constituted under Sec 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act. Thus, it is under Banking Regulation Act, 1949.

Under provisions of SBI Act 1955, SBI is managed by - The Central Board and it should consist of the following, namely:
(a) a chairman and a vice-chairman to be appointed by the Central Government in consultation with the Reserve Bank
The chairman and the vice-chairman and each managing director shall hold office for such term, not exceeding five years, as the Central Government may fix when appointing them and shall be eligible for reappointment. 
A Local Board is constituted for the new local head office, any person who is, at the time of such constitution or holding office as a member of a Local Board for an existing local head office. Local Board consists of Chairman and other elected and nominated members.

Bank is always liable to the person whomsoever the cheque is favourable to, not the bearer. Thus, in the given case, the bank is liable to true owner of the cheque. 

The securitisation involves two stages.
In the first stage, it is acquisition of financial assets and undivided interest therein.
Second stage is issue of security receipts in favor of investors for the purpose of raising money from investors. Thus, option 1 is the correct answer.

The National Commission held that the bank couldn't escape responsibility in comparing signatures. Thus, in both the given cases, the bank is liable for both the cheques.

Sec 2 (c) of FEMA 1999 define Authorised Persons means as Authorised Dealer, Money Changer, Offshore Banking Unit or any other person authorised u/s 10 (1) to deal in Foreign Exchange or Foreign Securities.

RTI Act 2005 is to provide for setting out the practical regime of right to information for citizens to secure access to information under the control of public authorities, in order to promote transparency and accountability in the working of every public authority, the constitution of a Central Information Commission and State Information Commissions and for matters connected therewith or incidental thereto. All the mentioned are true in respect to the act. Thus, option 4 is the correct answer.

Correct Answer: None of the above

Right to Information Act 2005 mandates timely response to citizen requests for government information. Thus, option 3 is the correct answer.

Banks can issue notice for enforcement of security interest under SARFAESI Act when the account is NPA and security is in possession of the bank. The SARFAESI Act, 2002 gives powers of “seize and desist” to banks. Banks can give a notice in writing to the defaulting borrower requiring it to discharge its liabilities within 60 days. If the borrower fails to comply with the notice, the Bank may take recourse to one or more of the following measures:
Take possession of the security for the loan
Sale or lease or assign the right over the security
Manage the same or appoint any person to manage the same 

The mutual rights and duties of the partners and the mutual rights and duties of the LLP and its partners shall be determined on the basis of LLP agreement between the partners, or between the limited liability partnership and its partners. If there is no agreement as to any matter, the mutual rights and duties of the partners and the mutual rights and duties of the LLP and its partners shall be determined by the provisions relating to that matter as set out in the First Schedule.

A company has a distinct legal entity independent of its mem­bers. It can own property, make contracts and file suits in its own name. Shareholders are not the joint owners of the company's property. A shareholder cannot be held liable for the acts of the company. Similarly, members of the company are not its agents.

Trusts and charitable institutions registered under the Indian Trusts Act, 1882. Public Trust Act, if it is a public trust. Those engaged in pure religious and charitable work registered under the Religious Endowments Act, 1863; the Charitable and Religious Trusts Act, 1920; the Waqf Act, 1995 and similar other State Acts. As a legal transaction, the Waqif (settler) appoints himself or another trustworthy person as Mutawalli (manager) in an endowment deed (Waqfnamah) to administer the Waqf (charitable trust).

The Central Public Information Officer or State Public Information Officer, as the case may be, shall, within five days from the receipt of the request, give a written notice to such third party of the request.

In the case of pledge, the possession of pledged goods will be passed on to the pawnee from the pawnor, and the possession of moveables will be transferred to the pawnee and he will be in possession and the pawnor will not be able to enjoy the same as the possession has already been parted with the goods. So, pledge deals with transfer of possession of moveable property to the creditor as security to the loan advanced.

If the Director, in the course of any inquiry, finds that a reporting entity or its designated director on the Board or any of its employees has failed to comply with the obligations, then, without prejudice to any other action that may be taken under any other provisions of this Act, he may - by an order, levy a fine on such reporting entity or its designated director on the Board or any of its employees, which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure.

Persons found guilty of an offence of Money Laundering are punishable with imprisonment for a term which shall not be less than three years but may extend up to seven years and shall also be liable to a fine up to Rs. 5 lac (Section 4 of the Act).

A term loan is a loan from a bank for a specific amount that has a specified repayment schedule and a fixed or floating interest rate. Thus, it is fund based. However,
DPG is a payment guarantee issued to your exporter for deferred or timely payment of the goods, and corresponding interest. ICBC undertakes to pay your exporter in the event you are unable to pay the principal and interest as scheduled in the contract. Thus, that depends on situation, i.e. contingent.

Usufructuary mortgage is where the mortgagor delivers possession of the mortgaged property to the mortgagee, and authorises him to retain such possession until payment of the mortgage-money and to receive the rents and profits accruing from the property. In such mortgage, there is no personal liability of the mortgager.

Section 35 of the Companies Act, 1956 deals with the conclusiveness of the certificate of incorporation. It provides that “A certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, and that the association is a company authorised to be registered and duly registered under this Act.”

Any person aggrieved by an order made by the Adjudicating Authority may prefer an appeal to the Special Director (Appeals).

A public company may be a company limited by shares or company limited by guarantee with or without share capital. Thus, option 4 is the correct answer. 

A mortgage when created through an instrument in writing (called mortgage deed) is required to be registered with Registrar of Assurances within 4 months, if the value of mortgage money is Rs. 100 or more. Registration is compulsory for other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees, and upwards, to or in immovable property.  

Correct Answer: (+) or (-) 5 calendar days

The offences which are compoundable under any Law cannot be brought within the purview of the Lok Adalt.
This means that the Lok Adalt has no authority of its own to pass judgements.

According to the bill of exchange, the drawee is to make the payment. Thus, 1 does not state the truth.   

Some of the key features of LLPs are: They are a separate legal entity from their members.
They have the benefit of limited liability for their members.
They are taxed as a partnership.
Thus, all the mentioned are the features of limited liability partnership. Thus, option 4 is the correct answer.

Deferred Payment Guarantee is a guarantee for a payment which has been deferred or postponed. The necessity to issue deferred payment guarantee arises in case of purchase of capital goods like machinery. 

All the given options are true for a person residing in India or NRI, who is residing in India but was not previously.

Conditional contract is an agreement that is enforceable only if another agreement is performed or if another specific condition is satisfied. A conditional contract is also termed as hypothetical contract.

Correct Answer: 3, 12, 30

Bill of lading - a detailed list of a ship's cargo in the form of a receipt given by the master of the ship to the person consigning the goods.
A warehouse receipt is a document that provides proof of ownership of commodities (e.g. bars of copper) that are stored in a warehouse, vault, or depository for safekeeping.
A Delivery Order (abbreviated D/O) is a document from a Consignee, or an owner or his agent of freight Carrier which orders the release of the transportation of cargo to another party.

An airway bill (AWB) or air consignment note is a receipt issued by an international airline for goods and an evidence of the contract of carriage, but it is not a document of title to the goods. Hence, the airway bill is non-negotiable.

A mortgage in which the lender is secured by taking possession of all the original title documents of the property that serves as security for the mortgage, gives the mortgagee the right to foreclose on the property, sell it, or appoint a receiver in case of nonpayment and it can be at any place.

A mortgage deed is a document in which the mortgagor transfers an interest in real estate to a mortgagee for the purpose of providing a mortgage loan. The mortgage deed is the evidence of the interest transferred to the mortgage holder.
An assignee can sue in his own name if he had complied with the Act (Policies of Assurance Act, 1867) and had obtained on assignment either by endorsement on the policy or by separate instrument.
The borrower may pledge the documents of title with the bank and, on the other hand, mange to obtain the delivery of goods on the basis of indemnity bond or some other device.
Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company's general meetings of shareholders. Thus, (b) is not correct. 

Capital account transaction is defined as a transaction which alters the assets or liabilities, including contingent liabilities, outside India, of persons resident in India.

Correct Answer: Pledge and Lien

Qualified Institutional Buyer shall mean:

• Scheduled commercial banks;
• Mutual funds;
• Foreign institutional investor registered with SEBI;
• Multilateral and bilateral development financial institutions;
• Venture capital funds registered with SEBI;
• Foreign Venture capital investors registered with SEBI;
• State Industrial Development Corporations. etc. Thus, option 4 is the correct answer.

The following are the disadvantages of private limited company:
The shares in a private limited company cannot be sold or transferred to anyone else without the agreement of other shareholders.
It has limited growth and restricted number of shareholders.
It is not allowed to invite public to subscribe to its shares.

Reserve Bank of India has the authority under SARFAESI Act to prescribe income recognition, accounting standards, and provisioning norms for Securitisation or Reconstruction Companies. The provisions of the guidelines and directions shall apply to SC/RC registered with the RBI under Section 3 of the SARFAESI Act, 2002.

Using a public key is to authenticate that a message originated with a holder of the paired private key; or to encrypt a message with a public key to ensure that only the holder of the paired private key can decrypt it.

Correct Answer: (a) to (c) all correct

Securitization is the process of pooling various types of debt - mortgages, car loans, or credit card debt, for example - and packaging that debt as bonds, pass-through securities, or collateralized mortgage obligations (CMOs), which are sold to investors. In a securitization transaction, all the given documents, but (e), are required. Thus, (1) is the correct answer.

If any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules made thereunder, he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.

Where a request has been rejected under sub-section (1), the Central Public Information Officer or State Public Information Officer, as the case may be, shall communicate to the person making the request —

(i)   the reasons for such rejection;
(ii)  the period within which an appeal against such rejection may be preferred; and
(iii) the particulars of the appellate authority.

The provisions of this Act are applicable only for NPA loans with outstanding above Rs. 1.00 lac. NPA loan accounts where the amount is less than 20% of the principal and interest are not eligible to be dealt with under this Act.

As per Rules under Prevention of Money Laundering Act 2002, the banks are required to obtain the following documents:

(i)   Certificate of incorporation and Memorandum and Articles of Association
(ii)  Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account
(iii) Power of Attorney granted to its managers, officers or employees to transact business on its behalf
(iv) Copy of PAN allotment letter
(v)  Copy of the telephone bill

Thus, all the given documents are important. 

Where a Central Public Information Officer or a State Public Information Officer, as the case may be, intends to disclose any information or record, or part thereof on a request made under this Act, which relates to or has been supplied by a third party and has been treated as confidential by that third party, the Central Public Information Officer or State Public Information Officer, as the case may be, shall, within five days from the receipt of the request, give a written notice to such third party of the request and of the fact that the Central Public Information Officer or State Public Information Officer, as the case may be, intends to disclose the information or record.

The Tribunal is a quasi-judicial body set up under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The selected candidates will be appointed on tenure basis for a period of five years from the date they enter upon the office of the Tribunal or till they attain the age of 62 years, whichever is earlier.

One's complaint will not be considered if:

• One has not approached his bank for redressal of his grievance first.
• The subject matter of the complaint is pending for disposal / has already been dealt with at any other forum like court of law, consumer court etc.
• Frivolous or vexatious
• The institution complained against is not covered under the scheme.
• The subject matter of the complaint is not within the ambit of the Banking Ombudsman.
• If the complaint is for the same subject matter that was settled through the office of the Banking Ombudsman in any previous proceedings.

Under DRT Act 19(4), on receipt of application under sub-section(1) or (2), the Tribunal has to issue summons to the defendant requiring him to show cause within 30 days of the service of summons as to why the relief prayed for should not be granted.

English mortgage - The borrower promises to repay the borrowed money on a certain date. The borrower transfers the property to the lender. The lender will re-transfer the property when the money is repaid. The mortgaged property is absolutely transferred to the mortgagee.

Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) Act 2002, an appeal can be filed before the DRAT against orders passed by the DRT.

Correct Answer: Where a suit has been filed by one bank in DRT, other bank having interest in the case, can join.

Correct Answer: such record is not in the custody of the bank

Section - 226, Income Tax Act, 1961-2014

(3) (i) The 11[Assessing] Officer 12 [or Tax Recovery Officer] may, at any time or from time to time, by notice in writing require any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money, for or on account of the assessee to pay to the Assessing Officer or Tax Recovery Officer either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount.

(iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary. 

Section 106 of the Transfer of Property Act 1882 deals with the duration of leases and states that in the absence of a contract, or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable on the part of either lessor or lessee, by six month notice and a lease of immovable property for any other purpose shall be deemed to be lease from month to month, terminable, on the part of either lessor or lessee by 15 day notice.

A digital signature in its simplest description is a hash of the data that is subsequently encrypted with the signer's private key. Since that is something only the signer has, that is where the trust comes from. EVERYONE has access to the signer's public key. So, to validate a digital signature, the recipient (1) calculates a hash of the same data, (2) decrypts the digital signature using the sender's PUBLIC key, and (3) compares the 2 hash values. If they match, the signature is considered valid. If they don't match, it either means that a different key was used to sign it, or that the data has been altered. Thus, public key helps in verification. The private key is used to encrypt the hash. The encrypted hash along with other information, such as the hashing algorithm, is the digital signature. Thus, it helps in creating the electronic signature.

Void contract is an agreement not enforceable by law. A void contract is a contract which ceases to be enforceable by law. A contract when originally entered into may be valid and binding on the parties. It may subsequently become void.

According to sub-section (1) of Section 10 of the Consumer Protection Act – (a) the President of the Forum should be a person who is, or has been, or is qualified to be a District Judge; (b) two other members, one of whom shall be a woman, who shall have the following qualifications, namely: (i) be not less than 35 years of age, (ii) possess a bachelor’s degree from a recognized university, (iii) be persons of ability, integrity and standing.

Under enforcement of mortgages through court, while executing the mortgage decree, the decree-holder can bring the properties mortgaged to sale without first seeking an order of attachment from the court.

Section 127 of Contract Act 1872: Consideration for Guarantee: Anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee. Your remuneration may be a part of consideration for guarantee.

X can take any of the given actions as X is yet to be paid by Y. Thus, all the actions (according to X) are possible. 

Bailor will not be liable for the defects which are not within his knowledge. However, if the bailor is aware about the defect, then he is liable to bailee. The bailor must disclose to the bailee any faults or defects in the goods. 

According to the Reserve Bank, 'fit and proper' is for the status of the directors nominated by the Government or elected by the shareholders to the Boards of the Public Sector Banks.

It is the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.

Under partnership contract, any business should be in accordance to the laws. The owners are all personally liable for any legal actions and debts the company may face, unless otherwise provided by law or in the agreement. 

According to Hindu Minority and Guardianship Act, 1956, natural guardian of a Hindu minor cannot mortgage or charge any part of the property of the minor without the permission of the court.

Agreement without consideration is void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law.

The borrowing powers of the Board of a public limited company are defined under section 180 ("Restrictions on powers of Board") of the Companies Act 2013.

As per Clause 49, for a company with an Executive Chairman, at least 50 per cent of the board should comprise independent directors in the listed company.

A Guarantee which extends to a series of transactions is called a continuing guarantee. A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor. 

Tax assessed by the Assessing Officer shall be paid within 30 days.

"Delivery" means voluntary transfer of possession from one person to another. 

A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated.

Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description and if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description.

Correct Answer: The resolution in its present fo<span style="font-family:" arial;="" font-size:="" small;="">rm is not a proper resolution due to which account cannot be opened.

Agency law refers to the relationship between a person, or “agent”, that acts on behalf of another person, company, or government, usually called the “master” or “principal". This form of agency can be, and often is, enforced by written agreements made through a power of attorney.

Government companies are the companies where the central govt. or one or more state govt. or the central and the state govt. (jointly) hold, at least 51 per cent of the paid-up capital.

The unpaid seller’s lien is a possessory lien, i.e. the lien can be exercised as long as the seller remains in possession of the goods. He may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.

The 1956 Act prescribed minimum 2 directors for a private and 3 for a public company to constitute a Board. This criterion has been retained by the new Act, but the maximum limit of directors on the Board has now been raised from 12 to 15.

Minimum number of members required to form a private company is 2, whereas a public company requires at least 7 members.

In a public limited company, minimum number of shareholders is 7 and there is no limit on maximum number of shareholders.

The Sales of Goods Act was enacted on 15^th March, 1930 and was enforced in July 1930.

The articles of a company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting, as an additional director at any time who shall hold office up to the date of the next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier.

Indemnity contract includes two parties namely, indemnifier and indemnity holder. The person who is promising to pay compensation is called indemnifier and the person whose loss is compensated is called indemnity holder.

Government companies, under the provisions of Companies Act 1956, are the companies where the Central Govt. or one or more State Govt. or the Central and the State Govt. (jointly) hold, at least 51 per cent of the paid-up capital.

In the case of a public company, if the office of any director appointed by the company in general meeting is vacated before his term of office expires in the normal course, the resulting casual vacancy may, in default of and subject to any regulations in the articles of the company, be filled by the Board of Directors at a meeting of the Board.

According to the Companies Act, 2013, every company has to give a declaration to the Registrar of Companies (RoC), stating its paid-up capital is not less than Rs. 5 lakh in the case of public companies (the listed ones, as well as those that have raised money from the market through debt); and not less than Rs. 1 lakh in the case of private companies. This declaration is necessary for obtaining a commencement certificate for business.

Every public company or a private company which is a subsidiary of a public company, having a paid up share capital of Rs. 5 crores or more, must have a managing director or whole time director or manager.

A revolving letter of credit is a special letter of credit type which is structured in a way so that it revolves either in value or in time covering multiple shipments over a long period of time under single letter of credit. As, in the given case, they don't want to open an LC again and again, so revolving LC is suitable for them.

An important step in the formation of a company is to prepare a document called memorandum of association. It is the charter of the company and is a very important document as it contains the basic conditions on which the company is incorporated.