Nikash House-NPL-Bankers Book Evidence Act-Endorsement etc.
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Nikash House-NPL-Bankers Book Evidence Act-Endorsement etc.
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11.0 Nikash House
The clearing activities of the banks:
Currently Bangladesh Bank is receiving the information of cheques/instruments on diskettes from all member banks of clearing house and processes the same using a software ‘NIKASH’ developed in-house.
- Branches of each bank dealing with the clearing house use the above software provided by Bangladesh Bank to capture the data of cheque into floppy disks.
- Where branches do not have suitable hardware for data input the “Local” (Service Branch) office of that bank will perform the data capture job on behalf of those branches.
- Cheques are physically sorted by bank/branch.
- A clearing schedule is printed for each bank.
- This outward clearing schedule, sorted cheques and data disks are then taken to the clearing house.
12.0 A Non-performing loan
A sum of borrowed money upon which the debtor has not made his or her scheduled payments for at least 90 days. A nonperforming loan is either in default or close to being in default. Once a loan is nonperforming, the odds that it will be repaid in full are considered to be substantially lower. If the debtor starts making payments again on a nonperforming loan, it becomes a reperforming loan, even if the debtor has not caught up on all the missed payments. A Non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 90 days, but this can depend on the contract terms. “A loan is nonperforming when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons to doubt that payments will be made in full” (International Monetary Fund).[citation needed] By bank regulatory definition non-performing loans consist of:
- other real estate owned which is taken by foreclosure or a deed in lieu of foreclosure,
- loans that are 90 days or more past due and still accruing interest, and
- loans which have been placed on nonaccrual (i.e., loans for which interest is no longer accrued and posted to the income statement).
In India, non-performing loans are usually the loans given to the agricultural sector where the farmers can’t pay back the loan or the interest amount due to lack of rain due to which they don’t have any crops to sell, due to floods etc.
13.0 Contingent liability
Contingent liabilities are liabilities that may be incurred by an entity depending on the outcome of a future event such as a court case. These liabilities are not recorded in a company’s accounts and shown in the balance sheet when both probable and reasonably estimable as ‘contingency’ or ‘worst case’ financial outcome. A footnote to the balance sheet may describe the nature and extent of the contingent liabilities. The likelihood of loss is described as probable, reasonably possible, or remote. The ability to estimate a loss is described as known, reasonably estimable, or not reasonably estimable. A potential obligation that may be incurred depending on the outcome of a future event. A contingent liability is one where the outcome of an existing situation is uncertain, and this uncertainty will be resolved by a future event. A contingent liability is recorded in the books of accounts only if the contingency is probable and the amount of the liability can be estimated.
Outstanding lawsuits and product warranties are common examples of contingent liabilities. For example, a company may be facing a lawsuit from a rival firm for patent infringement. If the company’s legal department thinks that the rival firm has a strong case, and the company estimates that the damages payable if the rival firm wins the case are $2 million, it would book a contingent liability of this amount on its balance sheet. If, on the other hand, the company’s legal department is of the opinion that the lawsuit is frivolous and very unlikely to be won by the rival company, no contingent liability would be necessary.
Examples
- Outstanding lawsuits
- Claims against the company not acknowledged as debts
- Legal liability
- Liquidated damages
- Tort
- Bills Discounted with bank
- Unliquidated damages
- Destruction by Flood
- product warranty
- Income Tax Disputed
- Sales Tax Disputed
- Financial guarantees given
14.0 Alteration of Instruments
A change in the meaning or language of a legal document, such as a contract, deed, lease, or Commercial Paper, that is made by one party to the document without the consent of the other after it has been signed or completed. If such a change is made by a third party without the consent of either party to the instrument, it is called a spoliation or mutilation.
Method
The face of an instrument is changed by its alteration. A difference in handwriting, a change in words or figures, an erasure, and the striking out of particular words are some methods used to alter an instrument. Since there must be a change in the meaning or language of a document, retracing an original writing—as when a figure written in pencil is retraced in ink—is not an alteration.
Material Changes
The alteration of an instrument materially changes it. The document no longer reflects the terms that the parties originally intended to serve as the basis of their legal obligation to each other. To be material, the change must affect an important part of the instrument and the rights of the parties to it. Any material alteration relieves the nonconsenting party of any obligation to perform according to the terms of the instrument. If the altered instrument is a contract, then the original contract is void. The nonconsenting party cannot be legally obligated by the new contract since he or she never agreed to it. A document that has been materially altered does not regain its original validity if it is restored to its original form by erasing or deleting unauthorized words.
The date of an instrument is often considered a material provision when it establishes the time within which the parties to a document must perform their obligations under it. An unauthorized change of date that shortens the time of payment or extends the time of performance so that more interest will become due is a material alteration. An alteration of a signature that changes the legal effect of an instrument is material. Erasing words that show that the signer is acting as an agent, for example, changes the signer’s liability under the instrument and, therefore, is a material alteration. However, when a signature that was improperly placed on a document is erased, there is no material alteration since the legal meaning of the document is not changed. Any change in the terms of the instrument that affects the obligations of the parties is material. In a contract to sell land on commission, a change in the rate of commission is material. A change in a description in a deed so that it transfers a smaller piece of land, a change in the name of a purchaser in a sales contract, or an alteration in the terms of financing set forth in a mortgage is also material.
Time of Alteration
A modification in a document before its completion is not an alteration. The parties are bound to review the document and to have agreed upon its terms before executing it. In order for an alteration to nullify the legal effect of an instrument, the change must be made after its completion.
Intention
A material change must be intentionally made. The motive behind the alteration is unimportant. If a mistake or accident causes a change, this is not considered a material alteration, but the document may be reformed or rescinded.
The Person Making the Change
The change to the instrument must be made by a party or someone authorized by him or her to do so. No change made by a third person without the consent of either party to the document will invalidate it if its original terms can be learned. When a material alteration is made by a party to commercial paper, such as a check or promissory note, the paper will be enforced as originally written against the party who made the changes.
Consensual Alteration
A change in an instrument made with the consent of the parties is binding upon them. Such consensual alteration is usually evidenced by the signing by each party of his or her initials and the date that the agreement to the changes to the instrument was reached.
15.0 Bankers Book Evidence Act, 1891
Banks keep their accounting and its details in various ledgers, registers etc. When any claim of the Bank is required to be established or proved in the Courts of Law or any other such forums, these books are required to be produced in original. As it is difficult to do so, its extracts and statement of accounts are produced. To facilitate the production of such evidence in easy way and to have evidentiary value to the extracts and copies, this Act was enacted.
Bankers’Books
‘Bankers’ books’ include ledgers, day-books, cash-books, account-books and all other records used in the ordinary business of a bank. These records may be kept in written form or stored in a micro film, magnetic tape or any other form of mechanical or electronic data retrieval mechanism. Such record can be either on site or at any offsite location and includes a back-up or disaster recovery site. When the books of the bank are not written in the handwritten and copies are taken by way of printout the copy must accompany following,
- i) a certificate by the principal accountant or the manager to the effect that it is a print out of such entry or a copy of such printout; and.
- ii) a certificate by a person in-charge of computer system containing a brief description of the computer system and the particulars of,
- the safe guards adopted by the system to ensure that data is entered or any other operation performed is only by authorized person;
- the safeguards adopted to prevent and detect unauthorized change of data;
- the safeguards available to retrieve data that is lost due to systemic failure or any other reasons;
the manner in which the data is transferred from the system to removable media like floppies, discs, tapes or other electro-magnetic data storage devices;
- the mode of verification in order to ensure that data has been accurately transferred to such removable media;
- the mode of identification of such data storage device;
- the arrangement for the storage and custody of such storage devices;
- the safeguards to prevent and detect any tampering with the system; and
- any other factor which will vouch for the integrity and accuracy of the system.
Bank Officer’s attendance cannot be compelled
In any proceeding where the bank is not a party, no officer shall be compellable to produce any bankers’book contents of which can be proved under this Act by production of certified copies.
Similarly no officer of the bank shall be called as witness to prove the matters, transactions and accounts recorded in the certified copies.
However, the Court may order otherwise for special cause.
What do you mean by endorsement? What are its different types?
An endorsement is the mode of negotiating a negotiable instrument. A negotiable instrument payable otherwise than to a bearer can be negotiated only by endorsement and delivery. An endorsement, according to sec. 15 of the NI Act is “when the maker or holder of a negotiable instrument signs the same, otherwise than as such marker. For the purpose of negotiation on the back or face thereof or on a slip of paper annexed thereto, he is said to endorse the same and is called the endorser. The person to whom the instrument is endorsed is called the endorsee. “The word endorsement is said to have been derived from Latin ‘en’ means ‘upon’ and ‘dorsum’ meaning ‘the back’. Thus usually the endorsement is on the back of the instrument though it may be even on the face of it. Where no space is left on the instrument, the endorsement may be made on a slip of paper attached to it. This attached slip of paper is called ‘Allonge’.
Types of Endorsement: According to the N.I. Act, 1881 endorsement may take any of the following forms: 1. Endorsement in blank or general endorsement. 2. Endorsement in full or special endorsement. 3. Restrictive endorsement. 4. Partial endorsement. 5. Conditional endorsement.
Endorsement in Blank or General Endorsement: In case of an endorsement in blank, the payee or endorser does not specify an endorsee and he simply signs his name (S. 16 NIA).
Endorsement in Full or Special Endorsement: When the payee or endorser specifies the person to whom or to whose order the instrument is to be paid, the endorsement is called special endorsement or endorsement in full. The specified person i.e. the endorsee then becomes the payee of the instrument.
Restrictive Endorsement: An endorsement is restrictive when it prohibits further negotiation of a negotiable instrument. Sec. 50 of the NI Act 1881states. “The endorsement may, by express words, restrict of exclude the right to negotiable or pay constitute the endorsee an agent to endorse the instrument or to receive its contents for the endorser or for some other specified person.” For example, if B endorses an instrument payable to barer as follows, the right of C to further negotiate is excluded • Pay the contents to C only • Pay C for my use
Partial Endorsement: If only a part of the amount of the instrument is endorsed, it is a case of partial endorsement. An endorsement which purports to transfer to the endorsee only a part of the amount payable, or which purports to transfer the instrument to two or more endorsees severally, is not valid.
Conditional Endorsement: If the endorser of a negotiable instrument, by express words in the endorsement, makes his liability or the right of the endorsee to receive the amount due thereon, dependent on the happening of a specified event, although such event may never happen, such endorsement is called a conditional endorsement (Section 52 of NI Act). Such an endorser gets the following rights: He may make his liability on the instrument conditional on the happening of a particular event. He will not be liable to the subsequent holder if the specified event does not take place to the instrument even before the particular event takes place. For example, “pay C if he returns from London”. Thus C gets the right to receive payment only on the happening of a particular event, i.e. if he returns from London.
Effect of Endorsement An unconditional endorsement of a negotiable instrument followed by its unconditional delivery has the effect of transferring the property therein to the endorsee. The endorsee acquires a right to negotiate the instrument further to anyone he likes. Section 50 of NI Act also permits that an instrument may also be endorsed so as to constitute the endorsee an agent of the endorser. • To endorse the instrument further or • To receive its amount for the endorser or for some other specified person.
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