KSLU Solved Question Papers
Banking Law
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 8
2015 Dec Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 8 Banking Law 2015 Dec Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Model answers written and edited by the munotes.in editorial desk.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2015 Dec examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2015 Dec examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2015 Dec examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all questions. (2) Figures to the right indicate marks.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Write short notes on
(a)Define the term 'Banker' and 'Customer'. Explain the general relationship and special features of the relationship between a Banker and customer.[10]
Answer
For full marks, cover: "banker" (section 3 of the Negotiable Instruments Act, 1881; section 5(b) and (c) of the Banking Regulation Act, 1949) and "customer" (no statutory definition; the account test, Commissioner of Taxation v. English, Scottish and Australian Bank); the general relationship (contract; debtor and creditor, Foley v. Hill); its special features compared with an ordinary debt (demand, place, form, limitation, ranking: Joachimson v. Swiss Bank Corporation); the further relationships (agent, trustee, bailee, lessor) and their legal effect (Barclays Bank Ltd. v. Quistclose Investments Ltd.); a short critical note.
The banker
- Negotiable Instruments Act, section 3: a "banker" "includes any person acting as a banker and any post office savings bank". The test is function.
- Banking Regulation Act, section 5(b): "banking" means accepting public deposits for lending or investment, repayable on demand or otherwise and withdrawable by cheque, draft or order. Section 5(c) makes a company that transacts such business a "banking company". It needs a licence (section 22).
So a banker is one who, as a regular business, takes the public's deposits, repays them on the depositor's order and lends or invests them.
The customer
No statute defines "customer", though section 131 of the Negotiable Instruments Act protects a banker who collects "for a customer". The courts supply the test. In Commissioner of Taxation v. English, Scottish and Australian Bank Ltd., [1920] AC 683, the Privy Council held that a person becomes a customer when an account is opened. A course of dealing over time is not required. So a customer is a person who has an account with the bank, however new.
The general relationship
The relationship is contractual, mostly on terms implied by law and custom. Its core is debtor and creditor. In Foley v. Hill, (1848) 2 HLC 28, a depositor sought an account in equity of sums deposited years earlier, and the bank pleaded limitation. The House of Lords held that money paid into a bank becomes the banker's own. He owes the depositor an equal sum as a debtor, not as a trustee. So the depositor's remedy was a common law action for debt, and limitation applied. When the customer borrows, the roles reverse.
Special features of this debt
The bank's debt differs from an ordinary debt in five ways.
- Demand. It is payable only when the customer demands it. In Joachimson v. Swiss Bank Corporation, [1921] 3 KB 110, a customer sued for his balance without first asking for it. The Court of Appeal held that a demand is a condition of the bank's liability.
- Place. The demand must be made at the branch where the account is kept.
- Form. The demand is made in writing, by cheque or other order, not orally.
- Limitation. Because repayment awaits demand, limitation runs from the demand, not from the deposit.
- Ranking. The depositor is an unsecured creditor if the bank fails. That is why deposits are insured, up to Rs 5 lakh per depositor.
The further relationships
For particular services the bank stands in other roles, each with different legal consequences.
- Agent, when it collects cheques or carries out standing instructions. It owes care and must follow instructions.
- Trustee, when money is given for a specific purpose. In Barclays Bank Ltd. v. Quistclose Investments Ltd., [1970] AC 567, money paid into a special account only to pay a dividend was held on trust when that purpose failed. The bank could not set it off against the company's overdraft. A trust gives the beneficiary a proprietary claim, which survives the bank's insolvency.
- Bailee, for articles in safe custody, which remain the customer's property.
- Lessor, for lockers, with liability now fixed by the Reserve Bank's locker rules.
| Situation | Bank's role | Customer's claim |
|---|---|---|
| Deposit | Debtor | Personal, unsecured |
| Loan | Creditor | Customer owes the bank |
| Collection | Agent | Care and account |
| Purpose money | Trustee | Proprietary |
| Safe custody | Bailee | Return of the same goods |
A critical note
The debtor-creditor model explains why banks can lend deposits, but it leaves depositors exposed on failure. The law has answered with licensing, supervision and deposit insurance rather than by changing the model. The further relationships show that the label matters. The same money may be the bank's own or held on trust, depending on the terms on which it was given.
Conclusion. A banker accepts public deposits, repayable on order, for lending or investment (section 5(b); section 3). A customer is a person with an account, from its opening (Commissioner of Taxation). Their general relationship is contractual, at its core debtor and creditor (Foley v. Hill). It is special in that repayment depends on a demand at the branch, limitation runs from that demand, and the depositor is unsecured (Joachimson). For particular services the bank is also agent, trustee (Quistclose), bailee or lessor.
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