Certificate in Accounting and Finance Stage Examination
18 January 2024
55 minutes – 29 marks
Additional reading time – None.
BUSINESS LAW
Instructions to examinees:
(i) Answer all FIVE questions.
(ii) Answer in black pen only.
Test – 12
Q.1 Under the provisions of the Negotiable Instruments Act, 1881 identify the person(s) who may cross the
cheque after its issue and the manner in which it may be crossed. (05)
Q.2 Under the provisions of the Negotiable Instruments Act, 1881 what would be the effect(s) of the words ‘Not
negotiable’ on a cheque crossed generally? (03)
Q.3 A cheque is drawn payable to 'B or order'. It is stolen and B's endorsement is forged. The banker pays the
cheque in due course. Is the banker discharged from liability? Would it make any difference if the drawer's
signature were forged? (03)
Q.4 Mr. Tariq Ali, a respected client of the First National Bank of Pakistan, passed away unexpectedly on the 5th
of April. His nephew and legal heir, Mr. Ahmed Khan, notified the bank of Mr. Tariq’s demise on the 15th of
April.
(i) A cheque dated 10th March, issued by Mr. Tariq Ali, was presented and honored by the bank on the
3rd of April.
(ii) Another cheque, also dated in March, was presented for payment on the 10th of April and was
subsequently paid by the bank.
(iii) A third cheque, issued in early March, was presented to the bank on the 16th of April, a day after the
bank was notified of Mr. Tariq Ali’s death, and was paid out.
Required:
Assess the validity of the bank’s actions in the above cases. (06)
Q.5 Mr. Haris Ali, a customer of the United Bank of Pakistan (UBP), issues several cheques under different
circumstances. Subsequently, various instances of cheque fraud occur, calling into question the liability of the
banks involved.
Scenario (a): Haris issued a Rs. 15,000 cheque on UBP to Asif, with 'account payee only' crossing. A
different person, also named Asif (holding an account at Standard Bank), fraudulently obtained the
cheque and deposited it into his account. UBP honored the cheque in favor of Standard Bank, which then
credited the amount to the fraudulent Asif’s account. The fraudulent Asif withdrew the funds.
Scenario (b): Haris issued a Rs. 15,000 cheque on UBP to Bilal, with general crossing. The cheque was
stolen by Bashir, who presented it at the UBP counter. UBP paid the amount over the counter.
Business Law Page 2 of 2
Scenario (c): Haris issued a Rs. 15,000 cheque on UBP to Bilal, with 'account payee only' crossing. The
cheque was stolen by Bashir, who altered the crossing to make it appear uncrossed. Bashir then presented
the cheque at the UBP counter, and UBP paid the amount over the counter.
Scenario (d): Haris issued a Rs. 15,000 cheque on UBP to Asif, with 'account payee only' crossing. The
fraudulent Asif (having an account at Standard Bank) stole the cheque, deposited it into his account, and
withdrew the funds. Standard Bank then sent the cheque to UBP for collection. UBP paid Standard Bank
in due course.
Scenario (e): Haris issued a Rs. 15,000 cheque on UBP to Asif, with 'account payee only' crossing. The
fraudulent Asif deposited the cheque into his account at Standard Bank and withdrew the funds.
Standard Bank credited the amount in good faith and without negligence before sending the cheque to
UBP for collection. UBP paid Standard Bank in due course.
Scenario (f): Haris issued a Rs. 15,000 cheque on UBP to Bilal, with 'account payee only' crossing. Bashir
stole the cheque, altered the crossing to appear as a general crossing, and deposited it into his account at
Standard Bank. Standard Bank, acting in good faith and without negligence, collected the payment from
UBP and credited Bashir’s account, who then withdrew the amount.
Required:
Comment whether liability of any bank arises in above cases. (12)
(THE END)
