NI Act_Practicle Problems_43

Promissory note dated 1st February, 2001 payable two months after date was presented to the maker for payment 10 days after maturity. What is the date of Maturity? Explain with reference to the relevant provisions of the Negotiable Instruments Act, 1881 whether the endorser and the maker will be discharged by reasons of such delay.

NI Act_Practicle Problems_42

S writes "I promise to pay 'B' a sum of Rs.500, seven days after my marriage with 'C"'. Is this a promissory note?

Promissory note can be based on future event. The event should be certain, but date on which it will happen need not be certain. In this case, the event of S's marriage with 'C' is not certain, as S may not marry or marry some other person. Hence, this is not a promissory note.

How to draft resolution ?

It is a general practice to start a resolution with the words “Resolved that………, but strictly speaking it is not compulsory. It denotes that the text of the resolution is decided formally.


If a resolution runs into paragraphs then it is conventional to split the resolution into different parts eg: “Resolved further that……..


Usually surplus or meaningless words are not included in the resolutions.


The language used should be direct and simple, because it is meant for reading by the common shareholders etc.


Reference to documents approved at a meeting should be included. For eg: Appointment of MD – Draft agreement.


Must indicate the relevant Section pursuant to which that resolution is passed eg: “Resolved that pursuant to Section……of the Companies Act 1956……… This is preferably be included in beginning part of the resolution. If more than one provision is hit then, include the words “and any other applicable provisions in the Companies Act, 1956”.


Approvals required for the resolution should be mentioned. For eg: subject to the approval of Central Government or subject to the confirmation of Company Law Board……….
With effect from date of the resolution may be indicated. For eg: Appointment of sole selling agent.


It is conventional to write a preamble to resolution. For eg:


Kind of meeting: Board/GeneralType of resolution: Simple/ordinary/special
Connecting words like, be and is hereby (denoting one concept) or be and are hereby (denoting more than one concept) is conventional. For eg: “Mr…….., director of the company be and is hereby appointed…….”


“Mr……. and Mr……. be and are hereby appointed…….”

Provident Fund Act_Practicle Problems_5

Mrs. Tsunami who was an employee of M/s. Backbone Ltd. died in a sudden accident. She had taken a loan from a bank for purchasing a house and the loan was still out standing. After her death her legal representative applied for payment of her P.F dues. The bank lodged a claim with the authorities for payment of its balance loan amount from the P.F dues. Explain with reference to the provisions of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952

i) Whether the bank can recover the loan amount from the P.F. dues and

ii) If, Instead of the bank, Mrs. Tsunami had taken any loan from her legal representative what would have been the answer?

Provident Fund Act_Practicle Problems_4

M/s Harsh Ltd. has been regularly depositing the P.F. contributions to the Government in respect of the company's contribution as well the employees' contribution. The company is doing well and earning huge profit. But due to reverse market conditions the company suffered loss for the last two years. The management is thinking to reduce the salary/wages of the employees to reduce the company's contribution to P.F. and instead, to pay certain compensatory allowance so that the employee's pay packet remains same. Explain in terms of the provisions of Employee's Provident Fund and Miscellaneous Provisions Act, 1952 whether the company can reduce the salary/wages.

Provident Fund Act_Practicle Problems_3

M/S Atwal & Co. Pvt. Ltd. is engaged by M/s. Mine managers Ltd. for doing operational work at its mines. There are about 300 employees employed by M/s Atwal & Co. Pvt. Ltd. to do the mining operation. M/s Minemanagers Ltd. deducted from the amount payable to M/s Atwal & Co. Pvt. Ltd. a sum of Rs.2,00,000 being the P.F. contribution of the employees engaged by it. M/s Atwal in response to such deduction, deducted from the employees the entire amount of Rs. 2,00,000 in two installments to which the employees protested. Explain in terms of the provisions of Employees' Provident Fund and Miscellaneous Provisions Act, 1952.

i) Whether M/s Atwal & Co. Ltd. Can deduct from the salary/wages of the employee;

ii) Whether it can deduct the employee's contribution from the salary/wages paid to the employees in one installment.

iii) Can it recover the amount from the employees by entering into an agreement with employees?

Provident Fund Act_Practicle Problems_2

Manorama Group of Industries sold its textile unit to Giant Group of Industries. Manorama Group contributed 25% of the total contribution in pension scheme, which was due before sale under the provisions Employees' Provident Fund and Miscellaneous Provisions Act, 1952. The transferee company (Giant Group of Industries) refused to bear the remaining 75% contribution in the Pension Scheme. Decide in the light of the Employee's Provident Fund and Miscellaneous Provisions Act, 1952, who will be liable to pay for the remaining contribution in case of transfer of establishment and upto what extent?

As per Sec.17B of Employees' Provident Fund and Miscellaneous Provisions Act, 1952, Both Manorama Group of industries and giant Group of industries are liable to bear the amount of contribution. However, Giant Group of industries will bear only upto the value of the assets obtained by it.

Provident Fund Act_Practicle Problems_1

The P. F. authorities passed an order in 2000 determining dues from Feedback Co. Ltd. in July 2003 the concerned officer who passed the order issued a notice to the company as to why the amount determined earlier should not be re-determined. Explain in terms of the Employee's Provident Fund and Miscellaneous Provisions Act, 1952 as to power of the concerned officer to re-open the case if any amount hand been escaped his determination.

Bonus Act_Practical Problems_19

Sri Bholanath, an employee of Newtele Ltd. destroyed some electronic machines in the company premises after taking alcoholic with his friends in the company premises. He was found guilty and punished under the industrial Disputes Act, 1947. The Company loose huge amount due to break down of the machines. When the company paid bonus in that year to its employees it deducted the amount from the bonus payable to Sri Bholanath and he did not get any bonus in that year. Did the company violate any provisions of the Payment of Bonus Act, 1965 in not paying bonus to Sri Bholanath?

Bonus Act_Practical Problems_18

Sri. Sanjib is an employee of the Megatele Co. Ltd. There are three trade unions in the company. One of the unions prevented the workers belonging to the workers of another union and as a result Sri Sanjib was prevented from attending to his work for few days. The company paid bonus to its employees during the year 2003-04 but refused to pay full bonus to Sri Sanjib because of his not attending office during the period he was prevented from attending office. Explain in terms of the Payment of Bonus Act, 1965 whether Sri Sanjib would be entitled to bonus for those days.

Bonus Act_Practical Problems_17

Sri. K. Mukherjee, an employee of Bigboss Ltd. left the company on 30.11.04 on health ground. He was on sick leave since 5th August 2004 and did not work from that date. There was an agreement by the company with its worker in 1998 for payment of bonus to employees. The company refused to pay the bonus for the year 2003-04 and threatened the employees of retrenchment in case of any labour trouble in connection with the bonus issue. Explain in terms of the payment of Bonus Act, 1965

i) What remedy is available to the workers,

ii) Can Sri Mukherjee after leaving the company move to recover amt from company?

iii) What is the power of the appropriate Government to recover the amount?

Bonus Act_Practical Problems_16

State with reference to provisions of the Payment of Bonus Act, 1965 whether the following employees are eligible to payment of bonus in terms of provisions of said Act.

a) An employee working in Life Insurance Corporation of India.

b) Employees of a university or college.

c) Employees employed though contractors on building operation.

d) Employees of National Housing Bank.

e) Employee of Reserve Bank of India.

f) Employees of a Municipal Corporation.

Bonus Act_Practical Problems_15

For the financial years 2001-02, 2002-03 and 2003-04 the amount of available surplus allocable as bonus to all employees of the company were Rs. 6,35,000, Rs. 2,20,000 and Rs. 3,75,000 respectively. Maximum amount of bonus payable to all employee of the company as per the Payment of Bonus Act, 1965 is Rs. 2,50,000 for each of the said years. In terms of the provisions of the said Act calculate the amount a company can pay as bonus to its employees, the amount set on in such year and the cumulative set on amount at the end of the year 2003-04.

Bonus Act_Practical Problems_14

Mr. K, Who is a casual employee of PQR Company actually worked in a year for 27days. However, he was absent due to temporary disablement caused by an accident arising out of and in the course of his employment for 7 days and has been laid off for 2 days as per the service agreement. Is he eligible to bonus under the Payment of Bonus Act, 1965?

Bonus Act_Practical Problems_13

In an accounting year, A company to which the Payment of Bonus Act, 1965 applies, suffered heavy loss. The B.O.D of the Company decided not to give bonus to the employees. The employees of the company move to the court for relief. Decide in the light of the provisions of the said Act, whether the employee will get relief

The employees are entitled to get minimum bonus even if the company suffered any loss. As per Sec.10 of Act, Every employer shall bound to pay to every employee a minimum bonus which shall be 8.33% of salary/wages earned by the employee during the accounting year or Rs. 100 whichever is higher, whether or not the company has allocable surplus. In case of an employee who has not completed 15 years of age, such min. bonus would be Rs. 60 or 8.33% of the salary/wages, whichever is higher. In the present problem, Employer is liable to pay minimum bonus to the employee.

Bonus Act_Practical Problems_12

State whether an employee is eligible for payment of bonus for the following period -

a) An employee laid off under an agreement.

b) An employee on casual leave for 5 days in a year.

c) A woman employee on maternity leave.

d) An employee absent due to temporary disablement.

e) An employee prevented from working by reason of legal order of termination.

Bonus Act_Practical Problems_11

T Ltd. Carried on three business ventures viz., manufacturing sugar, cement and heavy engineering machinery, locating them in three different places in North India. They employed workmen on different terms in the different units. One of these units was financially feeling ill. The workers of this unit demanded bonus on the basis of treating these three units as one composite establishment. Can the workmen succeed in getting bonus?

Bonus Act_Practical Problems_10

S joins as a worker with Gokale Sugar Factory on 2nd February, 04. Will he be eligible for Bonus for the financial year 2003- 04?

Bonus Act_Practical Problems_9

A Company could not pay bonus to its employees even after the expiry of six months from the close of its accounting year. Can the employees sue the employer for this reason?

All amounts payable to an employee by way of bonus shall be paid in cash by his employer, within a period of 8 months from the close of the accounting year. This period of 8 months may be extended upto a maximum of 2 years by the appropriate government, on an application being made by the employer. Since the periods of 8 months have not expired, employees cannot sue the employer.

Bonus Act_Practical Problems_8

Mr. Sharma is a supervisor in a factory drawing a salary of Rs.3,500 per month. In a particular accounting year he was on one month leave with salary. His employer declared minimum bonus as per the Payment of Bonus Act, to all eligible employees. State in this connection:

a. What shall be the salary that shall be taken into account for the purpose of calculating bonus payable to him?

b. What shall be the total bonus payable to him in that accounting year?

c. What would be your answer if the company suffers losses in that accounting year?

d. Is bonus payable to him if he was illegally terminated?

Bonus Act_Practical Problems_7

In an accounting year, a company to which the payment of Bonus Act, applies, suffered heavy losses. The Board of Directors of the said company decided not to give bonus to the employees. The employees of the company move to the Court for relief. Decide in the light of the provisions of the said Act whether the employees will get relief ?

As per the act, minimum bonus is payable whether or not the employer has any allocable surplus in the accounting year i.e. even if the employer suffers losses during the accounting year he is bound to pay this (Sec.10). Applying the provisions of as contained in Section 10 the employees shall succeed and they are entitled to be paid minimum bonus at rate 8.33% of the salary or wage earn during the accounting year or Rs. 100 (Rs. 60 in case of employees below 15 Years of age), whichever is higher.

Bonus Act_Practical Problems_6

A Company in a particular accounting year suffered losses and hence was not able to pay even the minimum bonus to its workmen. State in this connection, whether the minimum bonus is payable irrespective of losses and any circumstances that the Company may get exemption under the Payment of Bonus Act, 1965.

Bonus Act_Practical Problems_5

X, a temporary employee drawing a salary of Rs.3,000 per month, in an establishment to which the Payment of Bonus Act, applies was prevented by the employers from working in the establishment for two months during the financial year 2001-2002, pending certain inquiry. Since there were no adverse findings ‘X’ was re-instated in service. Later, when the bonus was paid to other employees, the employers refuse to pay bonus to ‘X’, even though he has worked for the remaining ten months in the year. Examine the validity of employer’s refusal?

Bonus Act_Practical Problems_4

A person has worked only for 35 days in an accounting year. Is he eligible or entitled to be paid bonus by his employer for that year?

Bonus Act_Practical Problems_3

An employer had been paying to his employees every year at the time of Deepawali one month’s basic wages as Deepawali Bonus for the last 10 years, in addition to the bonus payable under the Payment of Bonus Act. The bonus had been paid even in those years when there were losses. The employer now wants to adjust Deepawali Bonus paid by him for the current accounting year against the bonus payable by him under the Act, for the current accounting year. State whether it is possible for the employer to make the above adjustments.

NI Act_Practicle Problems_41

Promissory Note dated 1st February 2001 payable two months after date was presented to the maker for payment 10 days after maturity. What is the date of maturity?

The date of maturity is 4th April, 2001 (1-4-2001 plus three days of grace).

NI Act_Practicle Problems_40

A promissory note, executed on 31stJuly, 1997, is made payable 'One month after date. When does the note become payable?

3rd September, 1997. It is calculated in the following manner: Date of Execu­tion-31st July, 1997. Date of maturity-31st August + 3 days of grace = 3rd September, 1997.

NI Act_Practicle Problems_39

Ascertain the date of maturity of a bill payable 100 days after sight and which is presented for sight on 4th May, 2000.

In case of bill payable after a certain period after sight, the date of maturity is calculated by adding three days of grace to the period after which the bill is payable. In case of bills payable after sight, the period is calculated from the date when the bill is presented for sight. In case the date of maturity happens to be a public holiday including Sunday, the bill falls due for payment on the day preceding the public holiday. In the given case, the bill is made payable 100 days after sight and the same was sighted on 4th May, 2000. 100 days from 4th of May, 2000 works out to 12th of August, 2000, adding three days of grace makes the bill due for payment on 15th of August, 2000 which happens to be a public holiday. Thus, the date of maturity of the bill shall be 14th of August, 2000 unless the same is also a public holiday (including Sunday).­

NI Act_Practicle Problems_38

A of Calcutta drew a bill of exchange on B of Honkong payable sixty days after sight. The holder C kept the bill with him for five months and then presents it for acceptance before B. B in the meanwhile becomes insolvent. C sues A for payment. Will he succeed?

NI Act_Practical Problem_40

Distinguish between 'at sight', 'on presentment' and 'after sight' bill of exchange.

Section 21 of the NI Act explains the terms 'at sight', 'on presentment' and 'after sight' promissory note and bill of exchange.
It states that
In a promissory note or bill of exchange the expressions "at sight" and "on presentment" means on demand.
The expression "after sight" means, in a promissory note, after presentment for sight, and, in a bill of exchange after acceptance, or noting for non-acceptance, or protest for non-acceptance.

NI Act_Practical Problem_39

Mr X draws a promissory note to pay Rs. 10,000/- to Mr B or order on which no time or date for payment is specified. Validate the status of the bill of exchange.

As per Section 19 of the NI Act, "A promissory note or bill of exchange, in which no time for payment is specified, and a cheque, are payable on demand." Therefor, in this case, the promissory note is payable to B or order on demand.

NI Act_Practical Problem_38

State whether the following instruments are valid promissory notes:

(i) Mr. X issues a promissory note to pay Rs. 500 to the bearer on demand.
(ii) Mr. X issues a promissory note to pay Rs. 500 to the bearer after sight.

In case (i) , the promissory note is not a valid negotiable instrument, while in case (ii), the promissory note is a valid negotiable instrument. Section 31 of the RBI Act, 1934 restricts any person other than a Bank or a Central Government Authority to issue a negotiable instrument payable to bearer on demand. The reason being, a promissory note payable to a bearer on demand is like a currency note, which can be issued only by Central Government. However, RBI Act does not restrict for the issue of a negotiable instrument payable to a bearer after sight. The After sight promissory notes need to be accepted by the drawer and do not amount to be a currency note.

Section 31 of the RBI Act, 1934 reads as:

(1) No person in India other than the Bank, or, as expressly authorised by this Act the Central Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of money payable to bearer on demand, or borrow, owe or take up any sum or sums of money on the bills, hundis or notes payable to bearer on demand of any such person:

PROVIDED that cheques or drafts, including hundis, payable to bearer on demand or otherwise may be drawn on a person's account with a banker, shroff or agent.

(2) Notwithstanding anything contained in the Negotiable Instrument Act, 1881 (26 of 1881), no person in India other than the Bank or, as expressly authorised by this Act, the Central Government shall make or issue any promissory note expressed to be payable to the bearer of the instrument.

NI Act_Practicle Problems_37

What is meant by “Payment of Due Course” in respect of a negotiable instrument? A cheque originally expressed payable to bearer is subsequently made payable to order by endorsement in full. Is it in order for the drawee bank to pay the amount to the bearer of the cheque?

In the cases of an instrument payable to order the drawee of a bill or maker of a note is discharged by payment in due course if it is indorsed by or on behalf of the payee. But, in the case of a cheque there is an exception. The rule is once a bearer instrument is always a bearer instrument. Hence the banker will be discharged by payment in due course to the bearer of a cheque which was originally expressed payable to bearer even though it was subsequently endorsed in full [Section 85(2)].

NI Act_Practicle Problems_36

X needs Rs.10,000 but cannot raise this amount because his credit is not good enough. Y whose credit is good, accomodates X by giving him a pronote made out in favour of X, though Y owes no money to X. X endorses the pronote to Z for value received. Z who is a holder in due course, demands payment from Y. Can Y refuse and plead the arrangement between him and X?

NI Act_Practicle Problems_35

A owes money to B. A makes a promissory note for the amount in favour of B. For safety of transmission he cuts the note in two halves and posts one half to B. He then changes his mind and calls upon B to return the half of the note which he had sent. B requires A to send the other half of the promissory note. Decides as to how the rights of the parties are to be adjusted.

The relevant question in the given situation is whether the making of the promissory note is complete when one half of the note was delivered to B. Under Section 46 of the Negotiable Instruments Act, 1881, the making of a promissory note is completed by delivery, actual or constructive. Delivery, of course, refers to the delivery of the whole of the instrument and not merely a part of it. Delivery of half instrument cannot be treated as constructive delivery of the whole. Therefore, the claim of B to have the other half of the Promissory note sent to him is not maintainable. Thus A is justified in demanding the return of the first half sent by him.

NI Act_Practicle Problems_34

X accepts a bill for the accommodation of A (drawer). A transfers it to B for value after maturity. B becomes the holder in good faith. Discuss the rights of A and B.

NI Act_Practicle Problems_33

X accepts a bill for the accommodation of A (drawer), A transfers it to B for value. The bill is dishonoured by X on the due date. B collects the amount from A. Can A sue X for the recovery of the amount?

In general, accommodating parties are liable on the bill to the same extent as that of an ordinary bill. However, they are not liable to the accommodated party - the person for whose benefit they signed the instrument. So, A cannot sue X for the recovery of the amount in view of the specific provision to that effect provided in Explanation I to section 43.

NI Act_Practicle Problems_32

X accepts a bill for the accommodation of A (drawer). A transfers it to B, without consideration. B transfers it to C without consideration. C transfers it to D for value. D transfers it to E, without consideration. On the due date, the bill dishonored by X. Discusse the rights of A, B, C, D and E.

NI Act_Practicle Problems_31

‘A’ signs, as maker, a blank stamped paper and gives it to ‘B’, and authorises him to fill it as a note for Rs. 500, to secure an advance which ‘C’ is to make to ‘B’. ‘B’ fraudulently fills it up as a note for Rs.2,000, payable to ‘C’, who has in good faith advanced Rs. 2,000. Decide, with reasons, whether ‘C’ is entitled to recover the amount, and if so, up to what extent?

NI Act_Practicle Problems_30

Which of the following is a bill of exchange? Give reasons.

a. “To Anderson, Dear Sir, We hereby authorise you to pay on our account, to the order of Wolf, the sum of six thousand rupees.”

b. “Rs. 500.” “Pay to my order the sum of five hundred rupees, for value received.” It is neither signed by any person as drawer nor addressed to any person as drawee. It is accepted by Lam.

Sec.5 of the Negotiable Instruments Act reads as “A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money, only to, or to the order of a certain person or to the bearer of the instrument.”

a. In the given case there is no definite order to pay the sum of money. So, it is not a bill of exchange.

b. In the given case, drawee is neither named nor indicated with certainty. So, it is not a bill of exchange.

NI Act_Practicle Problems_29

A bill is drawn as "Pay to X or order the sum of ten thousand rupees". In the margin the amount stated is Rs 1,000. Discuss the legal position.

NI Act_Practicle Problems_28

State, giving reasons, whether the following instruments are valid promissory notes - (i) X promises to pay Y, by a promissory note, a sum of Rs.5,000, fifteen days after the death of B. (ii) X promises to pay Y, by a promissory note, Rs.500 and all other sums, which shall be due.

a. The future event i.e. death of B is certain, though date is uncertain. The instrument is valid.


b. The sum payable is not certain. Hence, it is not a negotiable instrument.

NI Act_Practicle Problems_27

A bill is payable to X or order, X endorses the bill in blank. The bill is there after lost and comes into the hands of Y. Discuss the legal position in each of the following alternative cases:

a. If Y receives the payment of the bill.

b. If Y passes the bill by simple delivery to Z as a gift.

c. If Y passes the bill after maturity by simple delivery to Z who takes the bill in good faith for valuable consideration.If Y passes the bill before maturity by simple delivery to Z who takes the bill in good faith for valuable consideration.

NI Act_Practicle Problems_26

State whether the following alterations are material or not:

a. The holder of a bill inserts the words 'or order'.

b. A bill was dated 1989 instead of 1999 & subsequently the agent of the drawer corrected the mistake.

c. A cheque payable to bearer was converted into a cheque payable to order.

d. Crossing a cheque.

NI Act_Practicle Problems_25

State whether the following alterations are material or not:

a. A bill for Rs.1,000 is changed into a bill for Rs.2,000.

b. A bill is accepted payable at Dena Bank is changed to a bill accepted pay­able at Canara Bank.

c. A bill payable to P is changed into a bill payable to P and Q.

d. A bill was endorsed in blank and handed over to Y, who endorsed as 'Pay to Z or order’.

NI Act_Practicle Problems_24

A bill payable at Delhi is changed to bill payable at Bombay. Is it material alteration ?

NI Act_Practicle Problems_23

A bill payable 3 months after date is changed to a bill payable 3 months after sight. Is it material alteration ?

NI Act_Practicle Problems_22

A bill dated 1st April 1999 is changed to a bill dated 1st May 1999. Is it material alteration ?

Contract Act_Practical Problems_57

A bank sanctions an overdraft limit against the security of a continuing guarantee. The surety dies. Can the bank proceed against the heirs of the surety under the guarantee and, if so, to what extent ?

The death of the surety operates, in the absence of a contract to the contrary, as a revocation of a continuing guarantee as regards future transactions. It may, however, be noted that the estate of the surety shall be liable for all transactions entered into between the creditor and the principle debtor prior to the death of the surety, unless there was a contract to the contrary. However, his estate shall not be liable for the transactions entered into after his death, even if the creditor has no notice of the death.

Thus, in the given problem, since there is nothing against attachment of surety's properties after his death, the heirs of the surety shall be liable for the debit balance in the overdraft account but this liability shall be limited to the higher of the following two:

1. The amount of debit balance in the overdraft account as on the date of surety's death;
and

2. The value of the surety's estate acquired by the heirs.

Contract Act_Practical Problems_56

A guaranteed the honesty of a servant in the employment of B. The servant was guilty of dishonesty in the course of the service, but B continued to employ him and did not inform A of what had occurred. Subsequently, the servant committed further acts of dishonesty. B requires A to make good the loss. Discuss the liability of A.

In the given case, A cannot be held liable because of change in circumstances not brought to his notice by the creditor having knowledge of the same. Under such circumstances. Section 139 of the Indian Contract Act, 1872 becomes operative. It provides that if the creditor does any act which is inconsistent with the right of surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of surety himself against the principal debtor is thereby impaired, the surety is discharged. Thus, in the present case the omission of the creditor to inform A of servant's dishonesty and his conduct of continuing to employ him, shall discharge the surety A.

Contract Act_Practical Problems_55

A decree passed in favour of creditor against the debtor and the surety, stipulates that the decree shall not be executed against the surety, before the creditor has taken all steps to execute it against the debtor. Is the stipulation sustainable?

The stipulation in question that the decree shall not be executed against surety before the creditor has exhausted his remedies against debtor, is against law and, therefore, shall not be sustainable. Section 128 of the Indian Contract Act, 1872 makes the liability of the surety coextensive with that of the principal debtor, unless the

contract provides otherwise. Since no such provision is stated to have been so provided, the liability of the surety arises as soon as principal debtor defaults. Any such provision that the remedies be first exhausted against debtor will tantamount to postponement of surety's liability which shall be against the spirit of the provisions of the Indian Contract Act as stated above.

Hence, the decree passed in favour of creditor with the said stipulation is not valid and the creditor may proceed against the decree of the lower court and get the judgement rectified.

NI Act_Practicle Problems_21

B obtains A's acceptance to a bill by fraud. B indorses it to C who takes it as a holder in due course. C endorses the bill to D who knows the fraud. Can D recover from A?

NI Act_Practicle Problems_20

A cheque is payable to M or order. It is stolen and the thief forges M's signature and presents it to the banker who makes the payment in due course. Can M recover the amount from the banker?

NI Act_Practicle Problems_19

H is the holder in due course of a bill of which A is the acceptor. 0, the drawer of the bill is fictitious. Can A escape from his liability to H?

NI Act_Practicle Problems_18

A draws a cheque in favour of B. A's clerk forges B's endorsement and negotiates the cheque to C, who takes it in good faith and for value. C receives payment on the cheque. Discuss the rights of A and C.

NI Act_Practicle Problems_17

State with reasons whether the following shall amount to material alteration and invalidate the instrument.

a. D, in possession of an inchoate instrument where the amount has not been written on the instrument, writes himself the amount.

b. K, in possession of an uncrossed cheque received from A, write “Payee’s A/C only” on the face of the instrument.

NI Act_Practicle Problems_16

A promissory note did not contain the rate of interest in the space provided for the purpose. The creditor puts in the rate. The debtor contends that it is a material alteration and, therefore, he is not liable to pay. Decide.

NI Act_Practicle Problems_15

L had two promissory notes of Rs.500 each issued by S Banking Corporation. He placed them in the pocket of his coat and having forgotten, he washed, dried and starched the coat. He remembered of the notes while he was ironing his coat. He searched for them in the pocket of his coat and could find them in spoiled condition. The identity of the notes was rested to a certain extent except its numbers. Can he recover the money from the bank.

NI Act_Practicle Problems_14

State with reasons whether there is any 'material alteration' in following cases and whether to invalidates the instrument.

a. D, in possession of an inchoate instrument where the amount has not been written on the instrument, writes himself the amount

b. K, in possession of an uncrossed cheque received from A writes 'Payee's Account Only' on the face of instrument.

NI Act_Practicle Problems_13

When is an alteration made in negotiable instrument called ‘Material Alteration’? State with reasons whether there is any ‘Material Alteration’ in the following cases:

(i) the holder of a bill of exchange alters the date of the instrument to accelerate or prepone the time of payment;

(ii) the drawer of a bill exchange forgets to write the words, ‘or order’ on the bill. Subsequently, the holder of the bill of exchange inserts these words on the bill.

NI Act_Practicle Problems_12

Do the following alterations of a negotiable instrument render the instrument void?

(a) The holder of a bill alters the date of the instrument to accelerate or postpone the time of payment.

(b) The drawer of a negotiable instrument draws a bill but forgets to write the words 'or order'. Subsequently, the holder of the instrument inserts these words.

(c) A bill payable three months after date is altered into a bill payable three months after sight.

(d) A bill was dated 1992 instead of 1993 and' subsequently the agent of the drawer corrected the mistake.A bill is accepted payable at the Union Bank, and the holder, without the consent of the acceptor, scores out the name of the Union Bank and inserts that of the Syndicate Bank.

Unsolved_Practical Problems_15

X who is going out of town delivers a horse to Y for proper care. Is it an example of Bailment. Justify your answer.