Corporate and Banking Law - Associateship
ISQ Examination (Summer-2007)


Q.1 Answer every question with a clear “Yes” or “No” and then give reasons for your answer.
i
 You are maintaining a current account of a partnership firm. A Police Officer comes to you and demands a statement of that account without any written request or producing any authority. Will you give it to him? (10)
ii
 One of your valued customers has a minor son. He wishes to send him abroad for further studies and desires to obtain a loan for that purpose against mortgage of a residential house which is in the name of the minor. Can you accept the mortgage? (10)
iii
 You have provided a Running Finance facility to a partnership firm in the sum of rupees one million against hypothecation of stocks. The account is stuck up and when you go to inspect the godown you find that there is nothing in it. Can you institute any criminal proceedings against the partners of the firm? (10)
iv
 No single partner of a partnership firm has a right to mortgage the immovable property of the firm without specific written authority from the other partners. Is this correct? (10)
v
 A Public limited company ABC & Co. Ltd., has seven directors who are all very wealthy people. You have provided a Running Finance facility of rupees ten million to the Company against hypothecation of stocks and mortgage of its factory property. The Company is not repaying the outstanding liability and all the hypothecated stocks are gone. One of the Directors is maintaining a deposit of fifty million rupees in your branch. Can you appropriate the Director’s deposit towards the Company’s outstanding liability? (10)

Q.2
Discuss the precautions which a bank must taken when restructuring a stuck-up account dealing specially with the consequences of failure to take each such precaution. (10)

Q.3
You have opened a D/A Letter of Credit against which you have received negotiated documents with some discrepancies. The Customer asks you to waive the discrepancies and accept the documents and promises that he will pay and retire the documents on maturity. How will you deal with this request? Give detailed reasons for your answer. (10)

Q.4
You have provided a Demand Finance facility to a customer against which he is paying you quarterly installment of Rs. 500,000 consisting of Principal of Rs. 300,000 and mark-up of Rs. 200,000. One quarter he pays only Rs. 400,000. State how you will appropriate the amount giving detailed reasons for your answer. (10)

Q.5
Discuss the precautions the Bank, as the pledgee, must take, with regard to the pledged goods taken as security for its advance. (10)

Q.6
Given below is an extract from State Bank of Pakistan circular dated April 23, 2007 regarding the responsibilities of the Board of Directors.

“The Board of Directors shall assume its role independent of the influence of the Management and should know their responsibilities and powers in clear terms. It should be ensured that the Board of Directors focus on policy making general direction, oversight and supervision of the affairs and business of the bank / DFI and does not play any role in its day-to-day operations, as that is the role of the Management.

The Board shall approve and ensure implementation of policies, including but not limited to, in areas of Risk Management, Credit, Treasury & Investment, Internal Control System and Audit, IT Security, Human Resource, Expenditure, Accounts Disclosure, and any other operational area which the Board and/or the Management may deem appropriate from time to time. The Board shall also be responsible to review and update existing policies periodically and whenever circumstances justify”.

Develop a note for the benefit of the Board of Directors of your bank, highlighting the mandatory requirements and your comments/suggestions for implementations. (10)