ADL – 12

ASSIGNMENT – B

Q1: Explain the consequences and remedies for dishonor of a cheque.

Ans: Consequences of a Wrongful Dishonor

If a banker, with out justification, dishonors his customers check, he makes himself liable to
compensate the customer for any loss or damage. The words “Loss or Damage” used in section 31,
not only means the pecuniary loss but also loss of credit or injury to reputation of the customer.
Thus, if the customer is a trader or a businessman, damages may be substantial, but a non-trader is
not entitled to recover the substantial damages for the wrongful dishonor of his check. In Gibbs V.
Westminster Bank, A Mrs. Margaret Gibbons, A non-trader, was awarded only nominal damages
because of the absence of any special loss.
In assessing the damages for injury to credit, courts give due consideration to various
factors, such as financial positions and business reputation of the customer and customs of the trade
to which he may belong.

Dishonor of a Cheque on grounds of Insufficiency of Funds

Section 138 to 142 of the negotiable instrument act 1988 provides for criminal penalties in the
events of dishonor of cheques for insufficiency of funds. The drawer, under section 138, may be
punished with imprisonment up to 1 year or with a fine up to twice the amount of the cheque or
with both. However, in order to attract the aforesaid penalties, following must be satisfied:

A: The cheque has been dishonored due to insufficiency of funds in the account maintained by him
with a banker for payment of any amount of money to another person from out of that account. In
case of stop payment, it shall be deemed to have been so dishonored for insufficiency of funds
unless stop payment can be justified (ET & TD) Corp. Ltd. V. Indian Technologies Engrs. Pvt. Ltd.
Air 1996 as SC 2339. Again, Dishonored due to closure of account has also been held to be
dishonor for insufficiency of funds (N.E.P.C. Micon Ltd. V. Magma Leasing Ltd. (1999) 1996
Comp. Cas. 822) Similarly, directing the payee not to present will be deemed to have same affect
(Modi cement Ltd. V. Kuchil Kumar Nandi (1998) To clg 8.).
B: The payment for which the cheque was issued should have been in this discharge of a legally
enforceable debt or liability in whole or part of it.
C: The cheque should have been presented with in 6 months from the date on which it is drawn or
with in the period of validity, which ever is earlier.
D: The Payee or the holder in due course of the checque should have given notice demanding
payment with in 15 days from the drawer on receipt of information of dishonor of cheque from the
bank. It notices served with in the said 15 days, no fresh cause of action can be created by
presenting the checque again. Supreme Court in Sadanandan Bhadran V. Madhavan Sunil Kumar
(1998 And Clg 228). But, if notices not served as above, presentment again will create a fresh cause
of action (Supreme Court in unplex India Ltd. V. Govt. Of Nct of Delhi (2002) SC). It may be
noted that there is no compultion to issue notice on first default (Station shox Co. Pvt. Ltd. V. Auto
Tensions Pvt. Ltd. (1994) Delhi.).
E: The drawer is liable If he fails to make payment with in 15 days of such notice period.
F: The Payee or holder in due course. Of the cheque dishonored should have made a complaint with
in one month of cause of action arising out of section 138.

Q2: Give the kinds and characteristics of different insurance contracts.

Ans Contract of insurance

A contract of insurance is a contract by which a person, in consideration of a sum of money, under
takes to make good the loss of another against a specified risk e.g. fire, or to compensate him or his
estate on happening of a special event E.g. Accident or death.
There are a number of kinds of insurance, but the following kinds stand out as being of special
importance:
1: - Life Insurance
2: - Fire insurance
3: - Marine Insurance
4: - Personal Accident Insurance

1. Life Insurance
The contracts of life insurance in India are govern by the insurance act, 1938 and the life
insurance corporation act, 1956. And on September 1, the same year under section 3 of the life
insurance corporation, 1956, the life insurance corporation of India came into being. The
nationalization of life insurance is a vital link in the process of widening and deepening of
possible channels of public savings for the development of the country.
A contract of a life insurance is a contract by which the insurer in consideration of the
payment of certain sums, called premiums, undertakes to pay a certain some of money on death
of a person who’s life is insured, or on the expiry on the certain period, which ever is earlier.
The premium may be paid in LS or by periodical installments.

2. Fire insurance
The law relating to fire insurance in India is contained in the insurance act, 1938 and the
general insurance business nationalization act, 1972. Whenever the law is silent the English law
and the principles established by Indian decision apply. The general insurance business was
nationalized on 13th may 1971.
A contract of fire insurance is a contract where by the insurer undertakes, in consideration
of the premium paid, to make any good loss or damage cost by fire. During a specific period the
contract specifies the maximum amount, which the assured can claim in case of loss. The
parties fix this amount at the time of contract. It is, however, not the measure of the loss. The
loss can be ascertained only after the fire has occurred. The insurer is liable to make good the
actual amount of loss not exceeding the maximum amount by the party.
3. Characteristics:
1: - Its contract of indemnity the assured can, in event of loss, recovered the actual amount
of loss from the insurer. This is subject to the maximum amount for which the subject
Metter is insured.
2: - Its contract of uberrimae fidei. The assured and the insurer have to disclose every thing
which is in their knowledge and which will affect the contract of insurance.
3: - The assured must have in insurable interest in the subject matter both at time of
insurance and at the time of loss. The insurable interest must be capable of valuation in
terms of money.
4: - The risk covered by a fire insurance contract is the loss resulting from fire or some
cause which is the proximate cause of the loss.
5: - It is subject to the principles of subrogation and contribution.
6: - it is a contract from year to year. Its come to an end after the expiry of the year. It can,
however, be renewed if the assured page the premium during the days of grace.

4. Marine Insurance
Marine insurance is an integral part of the present day commerce. The law relating to it is
codified in the marine insurance act, 1963. It is based on the English marine insurance act,
1906. Which is itself based on the low merchant. Marine insurance are govern by the Indian
contract act, 1872, the insurance act, 1938, the general insurance business (nationalization) act
1972 and largely by the marine insurance act, 1963.
A contract of the marine insurance is a contract where by the insurer undertakes to
indemnify the assured against marine losses, that is to say losses incidental to marine adventure
(section 3). The contract may, by its express terms or by usage of trade, be extended so as to
protect the assured against losses on inland waters or any land risk, which may be incidental to
any sea voyage section 4.
 5. Personal Accident Insurance
In this case, the amount payable is a compensation for any personal injury cost to the
assured.

Q3: Enumerate the duties of an Arbitrator; Differentiate domestic and foreign awards.

Ans

The duties of an arbitrator are as follows:

1: - He shall, with all reasonable dispatch enter into the reference and make an award with in a
prescribe time.
2: - He shall act judicially an impartially. He shall not secretly communicate with any party or the
party who has appointed him. He shall give a fair hearing to the parties (section 18) and a
responsible time and opportunity to them to substantiate their respective claims.
3: - He shall stand indifferent between the parties and shall have no interest direct or remote in the
subject meter of the dispute or in the party. He shall, from the time of his appointment and through
out the arbitration proceedings. Disclose in writing any circumstances likely to give six to
justifiable doubts as to his independence or impartiality (section 12).
4: - He shall, from the time of his appointment and through out the arbitration proceedings.
Disclose in writing any circumstances likely to give six to justifiable doubts as to his independence
or impartiality (section 12).
5: - He shall not misconduct himself or the proceedings in any way, e.g by accepting improper
gratification or bribe from a party or by showing bies or partiality towards to party.
6: - He shall encourage settlement of the dispute by mediation or conciliation or other proceedings
(section 30).
7: - he shall not exceed his authority and shell act with in the scope of arbitration agreement thus,
where an arbitrator has to decide whether a buyer has the right to reject the goods as inferior in
quality, and the arbitrator awards that the buyer should take them with an allowance, or when an
arbitrator has to decide as to the boundaries of certain lands, any decide as to title, the arbitrator
acts in access of his authority.
8: - He shall observe the rules of nature justice. The chief rules of natural justice are:
A: - To act fairly, in good faith with out bias and in a judicial temper.
B: - To give each party the opportunity of adequately stating his case. And correcting or
contradicting any relevant statement pre judicial to his case.
C: - Not to here 1 party behind the back of the other party.
9: - He Shall give a final award (Section 31) on all the maters referred to him, unless he is
empowered to makes several awards he shall also sign and file the award with in due time.

Case Study

Answer1: Professional Medical Negligence.

Answer2: Consumer Production Act.

Answer3: No Direct Negligence.

Answer4: Yes.

Answer5:

Answer6:

Answer7: Nursing Home.

Answer8: Not able to walk.

Answer9: Yes.

Answer10:

Answer11: No.