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Distinguish between: Repo Rate & Reverse Repo Rate

Ans.: Following are the main points of distinction between repo rate and bank rate:

Points Repo Rate Reverse Repo Rate

Meaning Repo rate is the rate at which Reverse repo rate is the rate at which
Central Bank (RBI) lends money the Central Bank (RBI) borrows
to commercial banks in the event money from commercial banks
of any shortfall of funds. within the country.

Effect Repo transaction will inject Reverse Repo operation absorbs the
liquidity into the system Liquidity in the system

Rate Repo rate is always higher than Reverse repo rate is always lower
the reverse repo rate than the repo rate.

Current rate Current repo rate is 4%. (3-10- Current reverse repo rate is
2020) 3.35%.(3-10-2020)

Higher Rate Commercial bank will borrow less Commercial bank transfer more
Effect funds to RBI

Objective Control inflation by making debt Control to money supply

costly

Distinguish between: Cash reserve ratio & Statutory liquidity ratio

Ans.: Following are the main points of distinction between cash reserve ratio and statutory
liquidity ratio:

Points Cash Reserve Ratio (CRR) Statutory Liquidity Ratio

(SLR)

Meaning Cash Reserve Ratio (CRR) is a Liquidity maintained by the

specified minimum fraction of the banks in specified percentage of
total deposits of customers, which its ‘Demand & Time Liabilities’
commercial banks have to hold as is known as Statutory Liquidity
reserves either in cash with the Ratio
central bank.

Form Cash Reserve Ratio has to be Statutory Liquidity Ratio has to

maintained by the banks in cash. be maintained in a) cash b) Gold

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and c) Government securities

viz. Central and State
Government securities.

Maintenance Cash Reserve Ratio is to be Statutory Liquidity Ratio has to

with maintained in form of cash with RBI be maintained in cash and other
assets by the bank itself.

Purpose Cash Reserve Ratio controls the Statutory Liquidity Ratio helps
excess money flow in the economy. in meeting out the unexpected
demand of depositors.

Rate Currently Cash Reserve Ratio is 3% Currently Statutory Reserve

(3-10-2020) of total ‘Demand & Ratio is 18% (3-10-2020) of
Time Liabilities’. total ‘Demand & Time
Liabilities’.

Distinguish between: Appellate tribunal & Court

Ans.: Following are the main points of difference between Appellate Tribunal & Court:

Points Court Appellate Tribunal

Meaning The term ‘Courts’ refers to places Tribunals are special alter-native
where justice is administered or institutional mecha-nisms, usually
refers to Judges who exercise brought into existence by or under a
judicial functions. statute to decide disputes arising
with reference to that particular
statute, or to determine
controversies arising out of any
adminis-trative law.

Type Courts refer to the Civil Courts, Tribunals can be either private
Criminal Courts and High Courts. tribunals such as arbitral tribunals
or Tribu-nals constituted under the
Constitution or Tribunals authorized
by the Constitu-tion or Statutory
Tribunals which are created under a
statute.

Code of It has to follow the code of No such code of procedure

Procedure procedure strictly

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Deals with Variety of Cases Specific Cases

Headed by Judge, panel of judges and Chairperson and other judicial

Magistrate members

Party Court judegs are impartial Tribunal may be party to dispute

arbitrator and not the party to
dispute

Example Pune District Court National Company Law tribunal

(NCLT)

Distinguish between: Depository Receipts & Foreign Currency Convertible Bonds

Ans.: Following are the main points of difference between Depository Receipt & Foreign
Currency Convertible Bonds:

Points Depository Receipt Foreign Currency Convertible

Bonds

Meaning Depository Receipts are physical Foreign Currency Convertible

certificates, which allow investors Bonds (FCCBs) means a bond
to hold shares in equity of other issued by an Indian company
countries and are commonly known expressed in foreign currency, and
as American Depository Receipts the principal and interest in respect
(ADRs) & Global Depository of which is payable in foreign
Receipts (GDRs). currency.

Trading ADRs are typically traded on a US FCCBs are not traded in foreign
national stock exchange, such as the stock exchanges.
New York Stock Exchange while
GDRs are commonly listed on
European stock exchanges such as
the London Stock Exchange.

Type of Depository Receipts are is basically A Foreign Currency Convertible

instrument a negotiable instrument Bond (FCCB) is a quasi debt
denominated in foreign currency i.e. instrument.
US dollars.

Nature Depository Receipts represents the FCCBs can be exchanged for equity
beneficial interest in shares issued shares at later date after the issue of

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by the company. the bond.

Investors Depository Receipts are nothing but Investors have option to convert
option the shares denominated in foreign FCCBs into shares or GDRs. If
currency and investor get the return investors choose to hold the bond
just like dividend. Investor can also till maturity, the company has to
sale or transfer it other person and redeem them at maturity date.
get back the money invested by
him.

Distinguish between: ECBs & FCCBs

Ans.: Following are the main points of difference between ECB and FCCB:

Points ECBs FCCBs

Meaning ECBs refer to commercial loans in the FCCBs mean a bond issued by an
form of bank loans, securitized Indian company expressed in foreign
instruments, buyer’s credit, supplier’s currency, and the principal and
credit availed of from non-resident interest in respect of which is
lenders with a minimum average payable in foreign currency or shares
maturity of 3 years.

Nature ECB is borrowing and is thus purely FCCB is hybrid instrument. It is

debt finance. issued as bond but later it is
converted into equity.

Procedur ECBs are to be availed as per the FCCBs are required to be issued in
e relevant guideline, notification and accordance with the scheme viz.,
circulars issued by the RBI from time Issue of Foreign Currency
to time. Convertible Bonds and Ordinary
Shares (Through Depositary Receipt
Mechanism) Scheme, 1993.

Listing Since ECB is borrowing/loan it cannot FCCBs can be listed in stock

be listed at all in stock exchange. exchange after their conversion into
shares.

Term Generally, Short term Generally, Long Term

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Distinguish between: Banks & Non-Banking Financial Companies

Ans.: Following are the main points of distinction between Banks and Non-Banking
Financial Companies:

Points Banks Non Banking Financial Companies

Meaning Bank is a RBI authorized NBFC is a company engaged in the

financial institution that aims at business of loans and advances,
providing banking services to acquisition of shares, stocks, bonds,
the general public. debentures and securities issued by
Government or local authority or
other marketable securities of a like
nature, leasing, hire-purchase,
insurance business and chit business.

Demand Banks can accept terms deposits NBFCs can accept only term deposit
deposits as well as demand deposits. but not demand deposits.

Payment & Banks form part of the payment NBFCs do not form part of the
settlement and settlement system. payment and settlement system.
system

Cheque Banks can issue cheques drawn NBFCs cannot issue cheques drawn
on itself. on itself.

Credit Banks are termed as creators of NBFCs cannot be termed as creators

creation credit through money multiplier of credit.
activity.

Transaction Banks provides a variety of NBFCs do not facilitate transaction

services transaction services. services.

Reserve ratios Banks are required to maintain NBFCs are not required to maintain
reserve ratios with RBI. reserve ratios with RBI.

Deposit Available Not available

Insurance

The competition Act, 2002 is an improvement on the MRTP Act, 1969. Critically
analyze this statement

Ans.: It is true that Competition Act, 2002 is an improvement on the MRTP Act,1969
Following Difference in the MRTP Act,1969 is an improvement on the MRTP Act,1969

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Point Competition Act MRTP Act

Objective To Promote competition To Control monopolies

To Protect interest of consumer Concentration of economic power
To ensure freedom of trade Prohibition of monopolistic,
restrictive and unfair trade practises

Dominance Not prohibited but abuse of Dominance is bad

dominance is per se bad

Combination Regulation of merger and Does not provide any such regulation
acquisition

Penalties Imposition of penalties for Does not provide for penalties

violation of Act specifically

Advocacy No advocacy provision provided Competition advocacy provision for

Provision Competition Commission of India

Extra Does not provide for extra- Competition Commission of India is

Territorial territorial jurisdiction beyond vested with extra territorial
Jurisdiction India jurisdiction
Commission

From the above difference we can clearly state that Competition Act,2002 is an improvement
on the MRTP Act, 1969

Distinguish between: Pecuniary and territorial jurisdiction of the District Forum

Answer:-
Jurisdiction of the District Forum [Section 34]: The District Forum shall have jurisdiction
to entertain complaints where the value of the goods or services and the compensation
claimed does not exceed Rs 1 Crore. A complaint shall be instituted in a District Forum
within the local limits of whose jurisdiction:
 The opposite party or each of the opposite parties, where there are more than one, at the
time of the institution of the complaint, ordinarily resides or carries on business or has a
branch office or personally works for gain; or
 Any of the opposite parties, where there are more than one, at the time of the institution
of the complaint, actually and voluntarily resides, or carries on business or has a branch
office, or personally works for gain, provided that in such case the permission of the
District Commission is given; or

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 The cause of action arises.

 The complainant resides or personally works for gain.

Distinguish between: Contract of service and contract for service.

Points Contract of service Contract for service

Meaning A contract of service is an A contract for service is an

agreement whereby a person agreement whereby a person is
agrees to employ another as an engaged as an independent
employee and the employee contractor for carrying out an
agrees to serve his employer as assignment or project.
an employee.

Relationship There exists master and servant In contract for service there is no
relationship in contract of master and servant relationship.
service.

Example X Ltd. employs Mr. Ram, a X Ltd. appoints Mr. Ram as a

Company Secretary. This is Secretarial Auditor. This is contract
contract of service. for service.

Nature of work In contract of service the In contract for service, a person

employee is bound to work executes his work as per his own
under the supervision and skill and experience.
directions given by the
employer.

Distinction between: Seizure of an essential commodity & confiscation of an

essential commodity under the Essential Commodities Act, 1955

Points Seizure Confiscation

Meaning ‘Seizure’ means to take posse- Confiscation means to take possession

ssion contrary to the wishes of the & ownership contrary to the wishes of
owner of the property. the owner of the property.

Stage Seizure is first stage Confiscation is followed by seizure.

Confiscation is second stage

Property in Property in goods remains with Property in goods does not remain with

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goods owner. owner.

Disposal of Seized goods cannot be disposed Confiscated goods can be disposed by

goods of by the Government. the Government.

Section Commodity can be seized as per Confiscation is as per circumstances

Section 3. mentioned in Section 6A.

Distinguish between: Vested & Contingent Interest

Points Vested Interest Contingent Interest

Section Vested Interest is provided in Contingent Interest is provided in

Section 19 Section 21 of Transfer of Property
Act

Meaning It is a present right to future A contingent interest depends upon

possession. the fulfilment of some conditions
which may or may not happen.

Right of This right is created as soon as There is mere chance to be having the
ownership the interest is vested ownership rights

Takes effect A vested interest takes effect A contingent interest in order to

from the date of transfer. become vested is conditioned by a
contingency which may not occur.

Death of A vested interest cannot be A contingent interest may fail in case

transferee defeated by the death of the of death of transferee before the
transferee before he obtains fulfilment of condition.
possession.

Example If a land is given to Kalyani for A gift to Aakash on the marriage of

life with a remainder to Piyusha, Mahesh creates a contingent interest,
Kalyani’s right is vested in for Mahesh may never marry at all.
possession, Piyusha’s right is
vested in interest.

Distinguish between: Movable Property & Immovable Property

Points Movable Property Immovable Property

Definition in “Movable Property” shall “Immovable Property” shall include land,

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General Clauses mean property of every benefits to arise out of land, and things
Act, 1897 description, except attached to the earth, or permanently
immovable property. fastened to anything attached to the earth.
[Section 3(36)] [Section 3(26)]

Definition in TP The expression ‘movable Section 3 of the Transfer of Property Act,

Act, 1882 property’ is not defined by 1882 defines the term ‘immovable
the Transfer of Property property’ negatively; it says that
Act, 1882. immovable property does not include
standing timber, growing crops or grass.

Contract It can be oral or written It is generally written contract

contract

Registration Generally, registration is Registration is compulsory

optional

Shifted / It can be shifted or moved It cannot be shifted or transported without

Movable without loss/ damage any loss or damage and if transported, it
will lose its original shape, capacity,
quality or quantity

Example Following have been held Following have been held to be

to be movable property. immovable property.
 Government  Right to collect rents of im-
promissory notes movable property
 Royalty  Right to way
 Right to recover  Right to collect dues from fair on a
maintenance piece of land
allowance  Hereditary offices
 Copyright  Equity of redemption
 Decree for sale on a  Interest of mortgagee
mortgage-deed  Right to collect lac from trees
 Decree for arrears of  Right of ferry
rent
 Right of fishery
 Machinery which is
 Right to receive future rents and
not permanently
profits of land
attached to earth
 Reversion in property
 Standing timber,
leased a factory
growing crop and grass

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Distinguish between: Conditions restraining alienation and condition restraining

Points Conditions restraining alienation Condition restraining enjoyment

Meaning Conditions restraining alienation Condition restraining enjoyment

means transferor restrains transferee means transferor restrains transferee
from parting with or disposing the from enjoyment of property.
property.

Validity Where property is transferred subject Restraint on the enjoyment of the

of to a condition absolutely restraining the property is invalid. Where land is
transfer transferee from parting with or transferred by one to another, the
disposing the property, the transfer is transferor should not impose
valid but condition is void. Though conditions as to how and in what
absolute restraints are bad in law, manner the transferee should enjoy
partial restraints are valid if conditions the property.
imposed are reasonable.

Section This is dealt by Section 10 of the This is dealt by Section 11 of the

Transfer of Property Act, 1882. Transfer of Property Act, 1882.

Example Ram gives property to Shyam (his Aalia sells her house to Babita and
heirs) adding a condition that if the adds a condition that only Babita
property is alienated it should revert to should reside in that house. Here
Ram. The transfer is valid and takes again transfer is valid but the
effect but the condition not to alienate condition is invalid. Aalia cannot put
the property is void. The transferee can such condition on Babita regarding
ignore such condition. enjoyment of property. Babita can
ignore such condition.

Distinguish between: Lease & License

Points Lease License

Meaning Lease of immovable A license is a right to do or continue to do

property is a transfer of a in or upon the immovable property of the
right to enjoy property. grantor, something which would, in the
absence of such a right, be unlawful.

Possession A lease involves a transfer of In case of license, the legal possession

interest followed by continues to be with the owner of the
possession of the property property, but the licensee is permitted to

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for a specified period. make use of the premises for a particular

purpose.

Enjoyment of In the case of a lease, there is In the case of a license there is something
property a transfer of a right to enjoy less than a right to enjoy the property in
the property. the licensee.

Transfer of Lease would amount to A mere license does not create interest in
property transfer of property. the property to which it relates.

Transfer The lease is both transferable License is personal to the grantee. It is

and heritable. neither transferable nor heritable.

Termination Lease comes to an end only License can be withdrawn at any time at
in accordance with the terms the pleasure of the grantor.
and conditions stipulated in
the contract.

Distinguish between: Sale and Contract for sale

Answer:-

a) Sale:-
i) “Sale” has been defined as a transfer of ownership in exchange for a price paid or
promised or part paid and part-promised.
ii) Essential of Valid sale-
 Owner must be competent to contract
 Subject matter must be immovable property
 There is transfer of ownership
 It is for consideration which is in price
 It is between two or more persons
b) Contract of Sale “ i) Contract for sale” includes both a present sale and a contract to
sell at a future time.
ii) A contract for the sale of immovable property is a contract that a sale of such
property shall take place on terms settled between the parties.
iii) A contract for the sale of immovable property differs from a contract for the sale of goods
in that the Court will grant specific performance of it unless special reasons to the contrary
are shown.

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Distinguish between: Sale and Exchange

Points Sale Exchange

Meaning “Sale” has been defined as a When two persons mutually transfer
transfer of ownership in exchange the ownership of one thing for the
for a price paid or promised or ownership of another, neither thing nor
partly paid and partly promised. both things being money only, the
transaction is called an “exchange”.

Money In sale whole or part conside- Money consideration is not involved in

consideratio ration should be money. exchange.
n

Section Section 54 of the Transfer of Sections 118 to 121 of the Transfer of

Property Act, 1882 deals with the Property Act, 1882 deals with the
‘sale’. ‘exchange’.

Distinguish between: Actionable Claim and mere right to sue

Points Actionable Claim Mere right to sue

Section Referred in Section 3 of the Referred in Section 6 of the Transfer

Transfer of Property Act,1882 of Property Act,1882

Meaning Actionable claim is a claim to an The ‘right to sue’ is a personal right

unsecured debt, which the civil available to the party to contract in
court recognizes as affording case of breach of contract by other
grounds for relief of the person who party.
claims it.

Transfer Actionable claim which can be A mere right to sue cannot be

validly transferred. transferred.

Example Aman agrees on 1.2.2019 to deliver (1) Ram commits assault on Balu,
1,000 gunny bags to Balu on Balu can file a suit to obtain
1.3.2019. On 1.2.2019 Balu assigns damages; but Balu cannot assign
interest in the contract to Chirag. the right to Chandan and allow
Aman fails to deliver the bags on him to obtain damages.
1.3.2019. Chirag can sue Aman (2) If A breaks a contract which he

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because a beneficial interest in a has entered into with B, B can

subsisting contract which relates to bring action for damages, but B
movable property is an actionable cannot transfer this right to C to
claim which can be validly recover damages.
transferred.

Distinguish between: Mortgage & Charge

Points Mortgage Charge

Meaning A mortgage is the transfer of an Although in a charge, the property is

interest in specific immovable made a security for the payment of
property for the purpose of securing the loan, yet the transaction does not
payment of money advanced. amount to mortgage.

Transfer of In mortgage there is transfer of In charge there is no transfer of any

interest interest in the property. interest in the property.

Created A mortgage can only be created by A charge may be created by act of

act of parties. parties or by operation of law.

Registratio A mortgage deed must be registered A charge need not be made in

n and attested by two witnesses. writing, and if reduced to writing, it
need not be attested or registered.

Foreclosur In certain types of mortgage the The charge-holder cannot foreclose

e mortgagee can foreclose the though he can get the property sold as
mortgaged property. in a simple mortgage.

Personal In a mortgage, there can be security In a charge the remedy of the charge-
liability as well as personal liability. holder is against the property only.

Distinguish between: English mortgage and mortgage by conditional sale

Points English Mortgage Mortgage by Conditional Sale

Meaning Where the mortgagor binds In this type of mortgage, the property is
himself to repay the mortgage mortgaged with a condition super
money on a certain date, and added that in the event of failure by the

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transfers the mortgaged property debtor to repay the debt at the

absolutely to the mortgagee, but stipulated time, the transaction should
subject to a proviso that he will be regarded as a sale. In case the loan is
retransfer it to the mortgagor repaid within the stipulated time, the
upon payment of the money as sale shall be invalid, or on condition
agreed, the transaction is called that on such payment being made, the
an “English Mortgage”. buyer shall transfer the property to the
seller.

Sale of In English mortgage the property In mortgage by conditional sale, the

property is absolutely sold to the mortgaged property is conditionally
mortgagee. sold.

Personal The mortgagor has personal The mortgagor has no personal liability
liability liability to pay the debt. to pay the debt.

Right of The mortgagee has no right of The mortgagee has right of fore-
foreclosure foreclosure. closure.

Mesne profits The ownership is transferred to If mortgagor commits defaults title of

mortgagee and the mortgagee property can be transferred to
enjoys the mesne profits. mortgagee.

Possession The mortgagor has right to The mortgagor has no such right.
possession.

Distinguish between- 'Reversion' & 'Remainder' under the Transfer of Property Act,
Answer:-

(a) Reversion: Reversion means any future interest kept by a person who transfers property
to another.

A reversion occurs when owner of a property makes an effective transfer of property to

another but retains some future right to the property.

Example: If Ram transfers a piece of property to Shyam for life, Shyam has the use of the
property for the rest of his life. Upon his death, the property goes back to Ram or if Ram has
died, it goes to his heirs.

Shyam's interest in the property is a life estate. Ram's ownership interest during Shyam's life,
and his right or the right of his heirs to take back the property upon Shyam's death, is called
reversionary interest.

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(b) Remainder: A remainder is a future interest that is created in some person other than the
grantor or transferor. Example: If Ram's transfers property "to Shyam for life, then to Kiran,"
Kiran's interest would be a remainder.

Difference between - Reversion & Remainder:

◆ A reversion differs from a remainder because a reversion arises through the operation of
law rather than by act of the parties.

◆ A remainder is a future interest created in some person other than the grantor whereas a
reversion creates a future interest in the grantor or his heirs.

Distinguish between: Sub-mortgage and Puisne mortgage

Points Sub-Mortgage Puisne Mortgage

Meaning Where the mortgagee transfers by Where the mortgagor, having

mortgage his interest in the mortgaged his property, mortgages it to
mortgaged property, or creates a another person to secure another loan,
mortgage of a mortgage the the second mortgage is called a puisne
transaction is known as a sub- mortgage.
mortgage.

Example Where A mortgages his house to B Where A mortgages his house worth ₹
for 10,000 and B mortgage his 1,00,000 to B for ₹ 40,000 and
mortgagee right to C for 8,000. B mortgages the same house to C for a
creates a sub-mortgage. further sum of 30,000, the mortgage to
B is first mortgage and that to C the
second or puisne mortgage C is the
puisne mortgagee, and can recover the
debt subject to the right of B, the first
mortgagee, to recover his debt of
40,000 plus interest.

Distinguish between: Completion Certificate & Occupancy Certificate

Points Completion Certificate Occupancy Certificate

Meaning Completion certificate means a Occupancy certificate means a

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certificate issued by the competent certificate issued by the competent

authority certifying that the real estate authority permitting occupation of
project has been developed according any building which has provision
to the sanctioned plan and for civic infrastructure such as
specifications approved by the water, sanitation and electricity.
competent authority.

What it Completion certificate shows that the Occupancy certificate shows that
shows building construction is done as per building is ready to occupy as
approved plan. necessary facilities like water, lift,
sanitation and electricity etc. are
made available by the builder.

Dependence Completion certificate is issued first, After issuance of completion

once the construction of property is certificate and getting confir-mation
completed. that necessary facilities are made
available for occupancy by people
occupancy certificate is issued.

Section It is defined in Section 2(q) of the Act. It is defined in Section 2(zf) of the
Act.

Distinguish between: Carpet Area & Common Areas.

Answer:

Carpet Area [Section 2(k)]: Carpet Area means the net usable floor area of an apartment.

Carpet Area does not include -

◆ Area covered by the external walls,

◆ Areas under services shafts,

◆ Balcony or verandah area

◆ Open terrace area

However, carpet area includes the area covered by the internal partition walls of the
apartment.

Common Areas [Section 2(k)]: Common areas mean -

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(a) The entire land for the real estate project or where the project is devel- oped in phases and
registration is sought for a phase, the entire land for that phase.

(b) The stair cases, lifts, staircase and lift lobbies, fire escapes, and common entrances and
exits of buildings.

(c) The common basements, terraces, parks, play areas, open parking areas and common
storage spaces.

(d) The premises for the lodging of persons employed for the management of the property
including accommodation for watch and ward staffs or for the lodging of community service
personnel.

(e) Installations of central services such as electricity, gas, water and sani- tation, air-
conditioning and incinerating, system for water conservation and renewable energy.

(f) The water tanks, sumps, motors, fans, compressors, ducts and all ap- paratus connected
with installations for common use.

(g) All community and commercial facilities as provided in the real estate project.

(h) All other portion of the project necessary or convenient for its main- tenance, safety, etc.
and in common use.

Distinguish between: Offer & An invitation to offer

Points Offer An invitation to offer

Meaning A person is said to have made a Something by which a person is invited

proposal, when he signifies to to make an offer is known as invitation
another his willingness to do or to to make an offer.
abstain from doing anything, with
a view to obtaining the assent of
that other to such act or
abstinence.

Defined ‘Offer’ is defined in section 2(a) ‘An invitation to offer’ is not defined in
of the Contract Act, 1872. the Contract Act, 1872.

Effect Offer when accepted become An invitation to offer when responded

agreement. results into offer.

Example Kiran say to Gopal, “Will you Display of goods by a shopkeeper in his
purchase my motor bike for window, with prices marked on them, is
` 15,000”. In this case Kiran is not offer but merely an invitation to the
making offer to Gopal as Kiran

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signifies his willingness to Gopal public to make an offer.

to sell his motor bike for ` 15,000.

Distinguish between: Misrepresentation and Fraud

Points Fraud Misrepresentation

Meaning Fraud means and includes any act Misrepresentation is a false

committed by a party to a contract with statement which the person
intent to deceive other party or induce making it honestly believes to be
him to enter into the contract. true.

Intention to Fraud is deliberate or wilful. There is It is an innocent wrong, without

deceive clear intention to deceive the other any intention to deceive.
party.

Belief The person making the false statement The person making the statement
does not believe it to be true. believes it to be true or does not
know that it is false.

Remedy It entitles the aggrieved party to claim It only gives a right to avoid the
damages in addition to the right of contract without any claim for
rescinding the contract. damages.

Punishment In certain cases, it may lead to It is not a criminal act, and hence
prosecution for an offence of cheating not punishable.
under the Indian Penal Code, 1860.

Distinguish between: Void Contract and Voidable Contract

Points Void Contract Voidable Contract

Meaning When a contract ceases to be A contract which is enforceable by law at

enforceable at law, it becomes the option of one party, but not at the
a void contract. option of the other is known as voidable
contract.

Status A void contract cannot create A voidable contract takes its full and
any legal rights. It is a total proper legal effect unless it is disputed

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nullity. and set aside by the person entitled to do

so.

Nature A void contact is valid when it A contract may be voidable since very
is made. But subsequently it beginning or may subsequently become
becomes void due to one voidable.
reason or the other.

Rights A void contract does not A voidable contract gives right to the
provide any legal right to the aggrieved party to rescind the contract
parties to the contract. and claim the damages, etc. in certain
cases.

Effect When a contract is void A voidable contract does not affect the
because of illegality its collateral transactions.
collateral transactions also
becomes void.

Distinguish between: Illegal Agreement and Void Agreement

Points Illegal Agreement Void Agreement

Meaning An agreement, which involves A void agreement is one, which is

the transgression of, some rule not enforceable by law. Such
of basic public policy and is agreement does not give rise to any
criminal in nature or immoral. legal consequences and is void ab
initio.

Collateral Collateral transactions to an Collateral transactions to void

transaction illegal agreement are not agreement are enforceable.
enforceable.

Punishment Parties may be punished for Being void does not make a contract
making illegal agreement. punishable.

Distinguish between - Quantum Meruit & Anticipatory Breach

Answer:-

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Quantum Meruit: Quantum meruit literally means 'as much earned' i.e. in proportion to the
extent of work done. Sometime contract cannot be completed; in that case if one party has
already executed some work, then he is entitled to get a proportional amount to extent of
work done. In case of breach of contract aggrieved party can claim 'Quantum Meruit' plus
damages. Quantum meruit is available only if original contract has discharged.

Anticipatory Breach: When a party to executory contract declares his intention of not
performing the contract, it is known as anticipatory breach of contract.

Following remedies are available to aggrieved party in case of anticipatory breach of

contract.

◆ The aggrieved party may decide not to wait till the due date. It may rescind the contract
immediately and claim damages for breach.

◆ The aggrieved party may decide not to immediately rescind the contract. He can treat the
contract alive and wait for the due date of performance.

Consequences of treating the contract alive are as follows:

 The promisor may perform his promise when the time for its performance comes and
the promisee will be bound to accept the performance.
 If aggrieved party decides not to immediately rescind the contract and wait for the due
date of performance and meanwhile if government imposes a ban, then contract
becomes void and aggrieved party cannot claim damages.

Distinguish between: Contract of indemnity & contract of guarantee

Points Contract of Indemnity Contract of Guarantee

Meaning A contract by which one party A contract of guarantee is a contract to

promises to save the other from loss perform the promise made or
caused to him by the conduct of the discharge liability incurred by a third
promisor himself, or the conduct of person in case of his default.
any other person is called a contract
of indemnity. It is contingent
contract.

Parties There are two parties to the contract There are three parties to the contract
of indemnity viz. of guarantee viz.
- Indemnifier - Principal debtor,
- Indemnity holder - Surety,

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- Creditor
No. of There is only one contract in case of There are three contracts in contract of
contracts indemnity. guarantee.

Liability The liability of indemnifier is The liability of surety is collateral or

primary and independent. secondary. Primary liability is that of
principal debtor.

Nature of The promise of the indemnifier is to The surety undertakes to discharge the
liability save the person indemnified from a liability of the principal debtor, which
contingent risk. is not contingent, but is subsisting.

Example A and B go into a shop. A says to A and B go into a shop. A says to the
the shopkeeper, “Let B have the shopkeeper, “Let B have the goods
goods, I will see you paid.” and if he does not pay, I will.”

Distinguish between: General Lien & Particular Lien

Points General Lien Particular Lien

Meaning It is a right to retain all the goods or It is a right to retain those goods in
any property of another until all the respect of which bailee have
claims of holder are satisfied. This rendered some service involving the
is a right to retain the property of exercise of labour or skill.
another for a general balance of
accounts.

Persons Right of general lien can be Right of particular lien can be

entitled exercised by bankers, factor, exercised by any bailee who has
wharfingers, attorneys of High rendered some service by exercise of
Court and policy brokers. his skill and labour in respect of the
goods bailed.

Condition Bailee is unpaid and Bailee need Bailee has worked upon the goods
not have worked upon the goods and remuneration remains unpaid.
bailed.

Write a short note on: Temporary and perpetual injunction

Points Temporary Injunction Perpetual Injunction

Meaning A temporary injunction is a Court A perpetual or permanent injunction

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Order prohibiting an action by a is a type of order issued by a Court

party to a lawsuit until there has after a full trial on the merits of a
been a trial or other Court action. case has been conducted.

Nature A temporary injunction is Perpetual injunction is permanent in

provisional in nature as it does not nature as it concludes or determines
and cannot conclude or determine rights upon the merits of the suit.
a right.

Governing Temporary injunctions also known Perpetual injunctions are granted

statue as interlocutory and are granted under Section 38 of the Specific
under the Civil Procedure Code Relief Act, 1963.
1908.

Stage of It is granted before plaintiff Perpetual injunction can be granted

granting establishing his case at the trial and after hearing the defendant and upon
continues up to a specified time. the merits of the suit.

Replacement Temporary injunction may be Perpetual injunction cannot be

replaced by perpetual injunction on replaced by temporary injunction.
merits of the case.

Distinguish between: ‘Remedies of specific per-formance’ and ‘remedies of injunction’.

Points Remedies of specific performance Remedies of injunction

Meaning Sometimes monetary compensation Where a party is in breach of a

may not be adequate remedy, in that negative term of a contract i.e. where
case the aggrieved may pray to he is doing something which he
Court and may get an order against promised not to do, the Court may by
other party to fulfil obligation it has issuing an order, restrain him from
undertaken. This is known as doing what he promised not do so.
specific relief. Such an order of the Court is known
as injunction.

Order Orders of specific performance are Orders of injunctions are issued from
issued to do specifically what party prohibiting a person from doing what
has agreed to do. he has promised not to do.

Coverage Specific performances are issued for Injunctions can be issued for
performance of contracts. contracts as well for torts.

Distinguish between – Rectification of Instrument and Cancellation of Instrument.

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Answer:-

When instrument may be rectified [Section 26]: Where a contract reduced into writing in
pursuance of a previous agreement, but fails to express the real intension of the parties, the
Court will rectify the instrument in accordance with their true intension.
The Court allows rectifying the instrument if following conditions are satisfied.
 There must a complete agreement and it must be in writing.
 There must be clear evidence of mutual mistake or of fraud.
 It does not show the real intention of the parties.
However, this section doesn’t apply to the Article of Association of company to which the
Companies Act, 2013 applies.
It should be noted that no relief for the rectification of an instrument shall be granted to any
party under this section unless it has been specifically claimed.
The only limitation placed on the Courts discretion is that the rectification can be done
without prejudice to the right acquired by third persons in good faith and for value.

When cancellation may be ordered [Section 31]: A written document which is void or
voidable against a person may cause him in some cases a serious injury, if it is left
outstanding. In such a case, if he has any such apprehension, he may file a suit to have the
document adjudged void or voidable.
Conditions for relief:
 The instrument sought to be cancelled is void or voidable against the plaintiff.
 He has reasonable apprehension of serious injury from the instrument if it is left
outstanding.
 That the apprehended injury is serious and in view of the circumstances of the case the
Court considers it reasonable and necessary to cancel the document.
If the instrument has been registered under the Registration Act, 1908 the Court shall also
send a copy of its decree to the officer in whose office the instrument has been registered.

Distinguish between: Future Goods & Contingent Goods

Points Future Goods Contingent Goods

Meaning Goods which are not possessed by When acquisition of the goods depends
seller at the time of contract of sale upon happening or non-happening of
but will be manufactured or future uncertain event such goods are
produced or acquired by the seller, known as contingent goods.
after the contract of sale are known

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as future goods.

Uncertainty There is no uncertainty in case of There is uncertainty in case of

acquisition of future goods. acquisition of contingent goods.

Scope Future goods do not include Contingent goods include future goods.
contingent goods.

Effect of In case of future goods, the contract In case of contingent goods, the
contract operates as an “agreement to sell’ contract operates as “contract for sale”
the goods. of goods.

Example X makes a contract with Y, a X, a fisherman agrees to sell fish to Y

farmer to purchase all wheat that may be caught in sea. Getting fish
produced in his field during a in sea is uncertain future event; hence
season. At the time of making fish in this case is contingent goods.
contract, Y was not in possession
of wheat, so it is future goods.

Distinguish between: Sale and agreement to sell

Points Sale Agreement to sell

Meaning If the property in the goods is If property in the goods is to take

immediately transferred from the seller place at a future time or subject to
to the buyer, it is called a sale. fulfilment of some condition it is
called an agreement to sell.

Type of It is executed contract. It is executory contract.

contract

Type of In ‘sale’ goods are specific & In ‘agreement to sell’ goods are future
goods ascertained. & contingent.

Right Sale creates a right in rem. Agreement to sell creates a right in

(right against whole word) personam.
(right against a specific person)

Risk In ‘sale’ property in goods transferred In ‘agreement to sell’ property in the

to buyer, so buyer bears the risk of goods is to take place at a future time
loss, even if. or subject to fulfilment of some
condition, so seller continues to bear
the risk.

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Example X agrees to sale 100 bags of wheat to X, a farmer makes a contract with Y
Y which are ready for delivery. This is to sell all wheat produced in his field
contract of ‘sale’. during a season. This is contract of
‘agreement to sell’.

Sales tax A ‘sale’ is liable to sales tax. An ‘agreement to sell’ is not liable to
sales tax.

Rights of In ‘sale’ if buyer has paid price, he can In ‘agreement to sell’ if buyer has
buyer sue the seller for non-delivery of paid price, he cannot sue the seller for
goods. non-delivery of goods. He can sue for
damages only.

Breach of In ‘sale’ if there is breach of contract In ‘agreement to sell’ if there is

contract by by buyer, seller can: breach of contract by buyer, seller can
buyer (a) Sue for price of goods even if sue only for damages and not for
goods are in his own possession price.
(b) Resell the goods
(c) Exercise right of lien
(d) Exercise right of stoppage in
transit.
Breach of In ‘sale’ if there is breach of contract In ‘agreement to sell’ if there is
contract by by seller, buyer can: breach of contract by seller, buyer can
seller (a) File a suit for damages against sue only for damages.
seller.
(b) File a suit for delivery of goods.
Insolvency In a ‘sale’ if buyer become insolvent In ‘agreement to sell’ if buyer
of buyer seller must give the goods to Official becomes insolvent, seller is not under
Assignee/Receiver. Seller can claim obligation to give the goods to
only rateable dividend for the price of Official Assignee/Receiver.
goods.

Insolvency In a ‘sale’ if seller become insolvent In ‘agreement to sell’ if seller

of seller Buyer can claim the goods from the becomes insolvent buyer can claim
Official Assignee/Receiver. only a rateable dividend for price paid
from the Official Assignee/Receiver.

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Distinguish between: Sale and contract for work and labour

Points Sale Contract for work and labour

Meaning If the property in the goods is It is a contract for executing certain

immediately transferred from the work and involves exercise of skill.
seller to the buyer, it is called a
sale.

Effect In ‘sale’ there is delivery and Contract for work and labour
transfer of ownership of goods by involves transfer of some material
seller to buyer. and exercise of skill and labour in
goods belonging to other person.

Examples (1) X agrees to sale 100 bags of (1) X gives his old car to Y for
wheat to Y which are ready repair and also request to
for delivery. This is contract replace some old parts. This is
of ‘sale’. contract for work and labour.
(2) A dentist agreed to supply a (2) X, an artist, agreed to paint a
set of artificial teeth to a picture of Y. Y supply canvas
patient. The entire material and other material. This is
found by dentist. It was held contract for work and labour.
that it contract of ‘sale’. (3) X gives gold biscuit to Y, a
(3) X contracted for sale of a fur goldsmith, to make ornaments
coat of special design and and deliver back to Y for
colour as per customer’s ` 2,000. This contract for work
requirement. This is contract and labour.
of ‘sale’.

Distinguish between: Sale & Hire purchase

Points Sale Hire Purchase

Meaning If the property in the goods is Hire purchase is a contract in which

immediately transferred from the goods are delivered and the price is
seller to the buyer, it is called a allowed to be paid in instalments on
sale. the condition that property
If price is allowed to be paid in (ownership) in goods will be passed
instalment, but property only on payment of all the
(ownership) in goods is transferred instalments.

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immediately, it is ‘sale’.

Act The Sale of Goods Act, 1930 The Hire Purchase Act, 1972
(Repealed)

Position In ‘sale’ buyer becomes owner of Hire purchaser is only a bailee until
the goods. pays all the instalments.

Termination Buyer cannot terminate contract. Hire purchaser has an option to

terminate the contract.

Resale If buyer had not paid full price and If hire purchaser had not paid all the
buyer/hire sells the goods to third party for a instalments sells the goods to third
purchaser value, who are acting in good faith, party contract, then the third party
will get good title. would not get a good title, since the
hirer himself had not title to goods.

Default by If buyer makes default seller can If hire purchaser makes default the
buyer/hire (a) Sue for the price of goods and seller can take repossession of the
purchaser goods.
(b) Exercise right of lien.

Distinguish between: Sale and Bailment

Points Sale Bailment

Meaning If the property in the goods is Bailment is the delivery of goods, by

immediately transferred from the one person to another, for some
seller to the buyer, it is called a sale. purpose, upon a contract that they
shall, when the purpose is
accomplished, be returned or
otherwise disposed of, according to
the instructions of the person
delivering them.

Considerati In contract of sale there is A contract of bailment may be

on consideration to both the parties. entered without consideration. This
happens in gratuitous bailment.

Return of In contract of sale buyer is not In contract of bailment, the bailee has
goods required to return the goods. to return the goods after the purpose
is over.

Risk Risk follows ownership and hence in In contract of goods ownership is

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case of contract of sale risk of goods with bailor as only possession is

with buyer. transferred to bailee and hence risk of
goods is with bailor.

Act Contract of sale is governed the Sale Contract of bailment is governed the
of Goods Act, 1930 Contract Act, 1872.

Distinguish between: Condition and warranty

Points Condition Warranty

Meaning A condition is a stipulation A warranty is a stipulation collateral

essential to the main purpose of to the main purpose of the contract.
the contract.

Effect of Breach of condition gives rise to Breach of which gives rise to a

breach right to claim damages as well as claim for damages but not to a right
to treat the contract as repudiated. to reject the goods and treat the
contract as repudiated.

Depth Condition goes directly to the root Warranty does not go directly to the
of the contract. root of the contract.

Inter- Breach of condition may be treated Breach of warranty cannot be treated

changeabi- as a breach of warranty in certain as a breach of condition.
lity situation.

Example X places an order to Y for some X sells car to Y and also promises to
Lorries to be used for heavy traffic replace or repair some part, if any
in a hilly area. The Lorries defect occur within 1 year.
supplied were unfit. There is Stipulation to replace or repair some
breach of condition and Y can part is a warranty.
repudiate the contract.

Distinguish between: Partnership and Hindu undivided family (HUF)

Points Partnership HUF

Meaning Partnership is the relation between The HUF can be defined as a

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persons who have agreed to share family that consists of a

the profits of a business carried on common ancestor and all his
by all or any of them acting for all. lineal male descendants and
their wives and unmarried
daughters.

Creation Partnership is created by Right in joint family is created

agreement. by status i.e. by birth of a male
child in the family.

Maximum no. of A partnership with objects of No restriction as to maximum

members acquisition for gains cannot be number of members.
formed beyond 50 numbers of
partners. [Section 464 read with
rule 10 of the Companies
(Miscellaneous) Rules, 2014]

Registration Registration of partnership is not Registration is not required.

compulsory but the Partnership
Act, 1932 had made it indirectly
essential to enjoy certain benefits.

Management All partners are equally entitled to Right of management of joint

a right of management of the family business generally vests
business. in Karta, the governing male
member of the family

Authority to bind Every partner binds the firm by Karta has the authority to
his acts and is bound by the act of contract for the family business.
firm.

Liability Liability of all partners is Only the liability of Karta is

unlimited. unlimited. Co-parceners liable
only to the extent of their share.

Right to verify A partner can bring a suit against On separation of joint family, a
accounts the firm for accounts, provided he member is not entitled to ask for
also seeks the dissolution of the accounts of the family business.
Firm.

Governed by Partnership is governed by the HUF is governed by Hindu

Partnership Act, 1932. Law.

Minor Minor cannot become a partner, Minor becomes a member by

but can be admitted to benefits of his birth.
partnership, with consent of all

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partners

Death Death of a partner leads to Death of a member in HUF does

dissolution of partnership. not lead to dissolution.

Distinguish between Partnership and Co-ownership

Points Partnership Co-ownership

Meaning Partnership is the relation between When two or more persons hold a
persons who have agreed to share property and agrees to share profit,
the profits of a business carried on their relationship is called co-
by all or any of them acting for all. ownership/joint ownership.

Business Agreement must be to carry on There is no necessity for any separate

business. business.

Number of A partnership with objects of There is no limit on the number of

members acquisition for gains cannot be persons being co-owners.
formed beyond 50 numbers of
partners. [Section 464 read with
rule 10 of the Companies
(Miscellaneous) Rules, 2014]

Creation Partnership arises from a contract. It may arise by contract and also by
status, e.g., A and B inherit a house
from their father.

Transfer of Partner cannot transfer his Co-owner may transfer his

interest interest/share without consent of all interest/share to a third party without
other partners. consent of other co-owners.

Agency Every partner is principal as well A co-owner is not the agent of other
as an agent of other partners. co-owners.

Sharing of Partnership involves sharing of It does not always involve sharing of

profit/loss profits and losses. profits or losses because it may exist
without any business.

Lien A partner has a lien on the firm A co-owner has no lien on the
property. property.

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Distinguish between Sale and Bailment

Points Sale Bailment

Meaning If the property in the goods is Bailment is the delivery of goods, by

immediately transferred from the one person to another, for some
seller to the buyer, it is called a sale. purpose, upon a contract that they
shall, when the purpose is
accomplished, be returned or
otherwise disposed of, according to
the instructions of the person
delivering them.

Considerati In contract of sale there is A contract of bailment may be

on consideration to both the parties. entered without consideration. This
happens in gratuitous bailment.

Return of In contract of sale buyer is not In contract of bailment, the bailee

goods required to return the goods. has to return the goods after the
purpose is over.

Risk Risk follows ownership and hence in In contract of goods ownership is

case of contract of sale risk of goods with bailor as only possession is
with buyer. transferred to bailee and hence risk
of goods is with bailor.

Act Contract of sale is governed the Sale Contract of bailment is governed the
of Goods Act, 1930 Contract Act, 1872.

Distinguish between: Dissolution of partnership & dissolution of firm

Points Dissolution of Partnership Dissolution of Firm

Meaning Any change in the relations of Dissolution of partnership between

partners is called dissolution of all the partners of a firm is called
partnership. This may happen due to dissolution of the firm.
admission, retirement or death of
partner.

Business Business of the firm continues as Business of the firm comes to an

before. end.

Relation Relation of partners continues to Relation of partners comes to an end.

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exist but in a changed form.

Account In case of dissolution of partnership In case of dissolution of partnership

‘Revaluation Account’ is opened. ‘Realization Account’ is opened.

Close of Books of account are not closed. Books of account are closed.
books

Distinguish between: Bill of exchange & promissory note

Points Bill of exchange Promissory note

Meaning A bill of exchange as an Promissory note is an instrument in

instrument in writing containing writing (not being a bank note or a
an unconditional order, signed by currency note) containing an
the maker, directing a certain unconditional undertaking, signed by
person to pay a certain sum of the maker, to pay a certain sum of
money only to or to the order of a money only to or to the order of a
certain person, or to the bearer of certain person or to the bearer of the
the instrument. instrument.

Liability of the The liability of the maker/drawer The liability of the maker/drawer is
maker is secondary & conditional upon primary and absolute.
non-payment by the drawee.

Order/Promise It contains an unconditional It contains an unconditional

order. promise.

Who draws It is drawn by the creditor. It is made by the debtor.

Acceptance Acceptance by the drawee is a Acceptance is not required.

must.

Payee Drawer of the bill may be payee The maker of the note cannot be
also. payee.

Parties There are three parties: drawer, There are two parties - maker &
drawee & payee. payee.

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Distinguish between: Electronic and Truncated Cheque

Points Electronic Cheque Truncated Cheque

Form The electronic cheque is never in The truncated cheque is initially a

paper form. regular cheque on paper. It is
submitted to bank as usual for
clearance.

Original The original writing itself is in The truncated cheque is duly written
writing electronic form. and signed on paper. It is
subsequently converted into
electronic form.

Signature Original signature is digital signature. Original signature is in ink.

Distinguish between: Holder & Holder in due course

Points Holder Holder in due course

Meaning The holder of negotiable Holder in due course means any

instrument means any person - person -
 entitled in his own name to  who for consideration became
the possession thereof and the possessor of a negotiable
 to receive or recover the instrument, before the amount
amount due thereon from the mentioned in it became
parties thereto. payable, and
 without having sufficient
cause to believe that any
defect existed in the title of the
person from whom he derived
his title.
Position A ‘holder’ may or may not be a A ‘holder in due course’ is
‘holder in due course’. obliviously holder.

Title Holder (who is not holder in due A holder in due course acquires a
course) cannot acquire a good good title even if title of prior party
title if the title of the prior party was defective.
was defective.

Mode Mere holder need not necessarily A person can become a ‘holder in

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be for consideration e.g. heir of due course’ only after paying or

deceased holder becoming transferring some consideration.
entitled to the bill is ‘holder’ not
‘holder in due course’. Similarly
assignee of bill is holder but not
holder in due course.

Acquisition of Holder may acquire instrument Holder in due course must

instrument even after maturity, but in such possess/acquire bill before
case he will not be ‘holder in due maturity.
course’.

Enforcement of A holder cannot enforce A holder in due course can enforce

instrument instrument which was previously instrument even if it was previously
obtained by unlawful means or obtained by unlawful means or
unlawful consideration. unlawful consideration.

Fictitious bill Holder (who is not holder in due A ‘holder in due course’ can claim
course) cannot claim payment on payment on fictitious bill.
fictitious bill.

Fraud & coercion Instrument initially issued or A ‘holder in due course’ can
obtained under fraud, coercion enforce instrument initially issued
without consideration cannot be or obtained under fraud, coercion
enforced by holder, is not ‘holder or without consideration.
in due course’.

Distinguish between: Inland bills & Foreign bills

Points Inland Bills Foreign Bills

Meaning Following types of bills are called An instrument which is not an inland
inland instrument: instrument is deemed to be a foreign
(a) The bills drawn in India and instrument.
payable in India.
(b) The bills drawn in India on
resident person whether
payable in India or outside
India.
(c) The bills drawn in India upon

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a person resident outside India

but payable in India.
Copies Inland bills are drawn in a single Foreign bills are drawn in triplicate.
copy.

Noting or In case of dishonour of inland bills In case of dishonour of foreign bills

protesting noting is required. protesting is required.

Distinguish between: Cheque and Bill of Exchange

Points Cheque Bill of Exchange

Meaning A ‘cheque’ is a bill of exchange A bill of exchange as an instrument in

drawn on a specified banker and writing containing an unconditional
not expressed to be payable order, signed by the maker, directing a
otherwise than on demand. 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.

Drawn on It must be drawn on a specified It may or may not be addressed to

banker. banker.

Payable to It can be made payable to bearer. It cannot be made payable to bearer

bearer on demand.

On demand It must be made payable on It cannot be made payable ‘on

demand. demand’.

Grace days There is no grace period. If it is not payable on demand, at sight

or on presentment; grace period of 3
days is available.

Crossing Cheque can be crossed. It cannot be crossed.

Presentation Presentation of for acceptance is Presentation for acceptance is

never required. required.

Stamping It is not required to be stamped. It is required to be stamped.

Due date There is no due date for It is required to be presented for

presentation of cheque. payment on due date.

Stop Bankers have to stop payment of There is not provision to stop payment

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payment cheque if drawer is dead or if party to instrument is dead or

insolvent and Bank has notice of insolvent or becomes insolvent after
the same signature.

Notice of Notice of dishonour is not Notice of dishonour is usually

dishonour required, unless holder intends to required.
take criminal action u/s 138

Noting & It cannot be noted and protested. It can be noted and protested.
protesting

Criminal Criminal liability gets attracted if There is no criminal liability for

liability cheque is dishonoured. dishonour of Bill of Exchange.

Distinction between: Accommodation Bill & Trade Bill

Points Accommodation Bill Trade Bill

Meaning A bill which is drawn, for mutual Bill drawn and accepted for a
finance is called an genuine trade transaction is
accommodation bill. termed as a trade bill.

Consideration It is drawn without any It is drawn for a consideration.

consideration.

Evidence This bill is for mutual financial This bill is evidence of debt.
help.

Acknowledgement These bills are not These bills are

of debts acknowledgement of debts. acknowledgement of debts.

Discounting with These bills are always discounted These bills may or may not be
banks. with banks. discounted with banks.

Loss by way of The loss by way of discounting The loss by way of discounting
discounting the bill has to be shared by the bill has to be borne by
drawer and drawee in the ratio in drawer
which they share the proceeds.

Legal action Legal action cannot be taken up Legal action can be taken up by
by drawer in case of dishonour of drawer in case of dishonour of
bill. bill.

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Distinguish between: Negotiation & Assignment

Points Negotiation Assignment

Meaning Negotiation means transfer of a Assignment means transfer of

negotiable instrument to another interest to another.
person, so that such another person
is entitled to possession of the
instrument and receive amount of
instrument on due date.

Title Holder in due course after Assignee cannot get title better than
negotiation can get better title than the assignor.
transferor.

Notice of Notice of endorsement is not Notice of assignment is required to

endorsement necessary in negotiation. be given to debtor in case of
assignment of debt.

Form Negotiation of bearer instrument Assignment must be in writing as per

can be simply by delivery. section 130 of the Transfer of
Property Act, 1872.

Consideration Consideration is presumed in Consideration is not presumed in

negotiation. assignment.

Further A negotiable instrument can be An assignee can further assign only if

Endorsement further endorsed without such right is specifically conferred on
& negotiation permission or even without him by assignment deed.
knowledge of transferor.

Stamp duty Once original instrument is Each assignment will require fresh
stamped, further negotiation does stamp duty.
not require payment of stamp duty.

Distinguish between: Acceptance for honour & Payment for honour

Points Acceptance for honour Payment for honour

Meaning If a bill is dishonoured by non- When payment is made by any person

acceptance, another person who was for the honour of any party liable to
not party to the bill, can accept the pay is known as payment for honour.
same for honour of drawer after bill is

CA MAYUR AGARWAL INSPIRE ACADEMY

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noted or protested which is known as

acceptance for honour.

When Acceptance for honour is given before Payment for honour is only after Bill
Bill is due. is due.

Consent of Consent of holder of Bill is necessary Consent of holder of Bill is not

holder in case of acceptance for honour. necessary in case of acceptance for
honour.

Rights Acceptor for honour is entitled to get Person paying the Bill gets all the
compensation for all loss and rights of holder of the Bill after
damages sustained by him. payment. He can recover interest and
expenses from party in whose honour
he made payment.

CA MAYUR AGARWAL INSPIRE ACADEMY