Banks collect deposits from
the public and lend the same to entrepreneurs. Being repositories of national
wealth, banks are responsible for ensuring that moneys lent in the form of
loans are properly secured, else they may find it difficult to recover the dues
and, in turn, service their obligations to depositors.
One of the legally
enforceable modes of recovering loans is to get the signatures of the
prospective borrowers on documents that record the nature of transaction,
rights and liabilities of creditor and debtor, and so on.
Such recording in the form
of documents enables banks to establish legal relationships and also helps them
in adducing evidence with all certainty. However, to make use of this in a
court of law, the documents must be executed properly and correctly as per the
prevailing laws of the land.
What follows is an
examination of the ways and means of obtaining certain documents properly and
keeping them enforceable till the loan is repaid.
1.
Document
Section 3 of the Indian
Evidence Act defines a document as:
“Any matter expressed or described upon any
substance by means of letters, figures or marks or by more than one of these
means, intended to be used or which may be used, for the purpose of recording
that matter.”
1.1.
Documentation
Documentation includes:
- Execution of documents in the
proper form and according to the law;
- Obtention of signatures of the
borrowers on the necessary documents that have been
properly stamped; and
- Registration of executed documents
wherever necessary.
1.2. The
Importance of Documentation
Documentation helps in:
- Identifying the borrower,
- Establishing relationship between
banker and customer,
- Identifying the security,
- Creating charge over a security,
- Producing evidence acceptable to a
court of law, and
- Eliminating ambiguities.
1.3.
Essentials of Proper Execution of Documents
Documents
must be filled neatly at one go.
- Date and place of execution must
be mentioned invariably.
- Where two or more borrowers are
signing a document from two different places, or on two different dates,
the fact of their doing so must be recorded by stating the correct date
and place by the borrowers in their own handwriting.
- Signatures must be on each page of
the document.
- The borrower must sign in full and
in the same style throughout in all the documents.
- Cuttings/Corrections in the
documents must be initialled.
- The document must be in accordance
with the resolution passed by a company at a properly convened Board
meeting.
- Resolutions are to be in
accordance with the Articles of Association.
- The document needs to be properly
stamped.
- Adhesive stamps must be cancelled
at the time of or before execution of the document by the proper officer.
- Wherever attestation is mandatory,
like in mortgages, the same shall be ensured.
- The document must be registered
wherever necessary.
- The charges must be registered
with the Registrar of Companies wherever necessary.
Box 1: Is the
Evidence of Handwriting Experts Admissible?
Umed Chand Ramola
Vs State Of Uttaranchal Criminal Revision No.585 of 2001 [2006 Crl.L.J.951]
Facts of the Case
The
Appellant/Revisionist Umed Chand Ramola was employed as a peon-cumchowkidar
in the District Co-operative Bank at Purola. On 7-4-1981 the Bank Manager of
Purola withdrew Rs.1,50,000/- from State Bank of India, Purola, in order to
send it to its head office at Uttarakashi. On 8-4-1981 at 7 a.m, the bank
manager along with the cashier of the bank entrusted Rs.1,50,000/- to the
appellant to be deposited at its head office at Uttarakashi and the appellant
acknowledged the same by affixing his signature on the entrustment receipt.
After a thorough enquiry by the Secretary of the said bank, it came to light
that the accused, instead of depositing the 1,50,000/-as directed by the bank
manager, had deposited Rs.1,45,000/- in Union Bank of India at Chham and obtained
two bank drafts for Rs.25,000/- each in his name and also had withdrawn an
amount of Rs.10,000/- in cash on 9-4-1981. The Secretary of the bank then
lodged an FIR at a police outpost at Purola and subsequently, the
investigating officer obtained the opinion of the Government Handwriting
Expert with regard to the signatures of the accused on the entrustment
receipt and filed a charge-sheet. The Court framed the charges against the
accused under Section 408 of IPC. The appellant denied that he had signed the
entrustment receipt, and that he had misappropriated the amount. The Chief
Judicial Magistrate after the appraisal of evidence on record, found the
accused guilty under Section 408 IPC and convicted the accused to undergo
rigorous imprisonment for a period of five years and to pay a fine of
Rs.10,000/- and on default to further undergo rigorous imprisonment for
eighteen months. The accused preferred a criminal appeal before the Sessions
Judge, Uttarakashi, who dismissed the appeal and confirmed the judgment and
order of the lower court. The appellant preferred the criminal revision
petition against the judgment and order of the Sessions Judge, Uttarakashi.
Contention of the
Appellant
The appellant
denied that the receipt contained his signature. He adduced the evidence of a
private handwriting expert who denied that the signature on the receipt was
that of the appellant. The counsel for the appellant further pointed out that
the entrustment receipt was not immediately taken into possession by the investigating
officer when the FIR was lodged when he saw the receipt on 16-4-1981, and
that it was taken into possession on 20-5-1981. It was recorded in the
statement of the investigating officer that though he had seen the receipt on
16-4-1981 he did not take it into his possession because the bank manager
assured him that the accused might confess his guilt. The appellant took the
plea before the trial court that the amount deposited in the Union Bank of
India at Chham was the money he had taken on loan from D-2 to D-7 and that he
had also sold his ornaments to raise the amount and deposited the same in the
bank as he wanted to purchase a truck. The appellant adduced the evidence of
D-2 to D-7 who stated that D-2 and D-3 had loaned Rs.15,000/- each to the appellant
without obtaining any document from him. D-4 and D-7 had loaned Rs.20,000/-
each and D-5 purchased ornaments worth Rs.11,480/- from the appellant on
17-3-1981. The counsel for the appellant also contended that the appellant
was a class IV employee and the money would not have been entrusted to him at
the District Co-operative Bank, as the money of the bank should not be sent
through class IV employees. The appellant also contended that he had been
falsely implicated in the case.
Contention of the
Respondents
The
respondent’s/prosecution’s contention was that the accused had taken
Rs.1,50,000/- and signed the entrustment receipt to be deposited in the head
office, but misappropriated the same. In support of their case, the
respondents examined nine witnesses out of whom the bank manager, cashier and
guard fully supported that Rs.1,50,000/- was entrusted to the appellant who
had signed the receipt to this effect in their presence. The Government
handwriting expert also submitted his report, which held that the said
receipt bore the signature of the appellant. The respondents further
contended that though the accused was a class IV employee and even if there
was an administrative direction that money should not be entrusted to class
IV employees, the employee who violated such directions would be liable for
negligence and the accused could not be absolved of the misappropriation
charge and he should be punished for the same.
Issues
Judgment
The High Court of
Uttaranchal observed that the prosecution witnesses had fully supported the
entrustment of Rs.1,50,000/- to the accused/revisionist and that a receipt to
this effect was signed by the accused in their presence. This corroborated
the factum of entrustment of the money to the accused, and since the defense
failed to elicit anything during the cross-examination and there were no
discrepancies, the evidence of prosecution was considered to be credible and
cogent.
With regard to the
evidence of the handwriting experts, the Court held that though both
appellant and prosecution had adduced the evidence of different handwriting
experts, after analyzing the documents, the lower court concluded that the
evidence of the Government handwriting expert was reliable and cogent and it
was a well settled position of law that the Court was the expert of experts and
since both the courts below had relied on the same evidence, the evidence of
the Government handwriting expert was cogent. The Court further held that the
evidence of the expert was not substantive evidence, but it is only a
corroborative piece of evidence. The prosecution witnesses proved that the
signature was made by the accused on the receipt in their presence, as such
the substantive evidence, which had been proved by the ocular testimony, was
credible and cogent.
The other
contention of the counsel for the revisionist was that the revisionist was a
Class IV employee and the money would not have been entrusted to the
revisionist as there were special instructions to this effect given by the
head office of the bank. If any violation was made by the employees, they
might be liable for the negligence and the revisionist could not be
acquitted.Uttaranchal High Court held that the prosecution had established
the guilt beyond reasonable doubt, dismissed the revision petition filed by
the appellant/revisionist and confirmed the judgment and order passed by the
trial court.
Case Notes
The Court is
entitled to have a final say on the admissibility of expert evidence as the
Court is an ‘expert of experts’.
Source: The Icfai
Journal of Banking Law, Vol. V, No. 1, 2007.
|
1.4. Who
can Execute the Documents?
The following can execute a
document:
- Persons having legal capacity can
execute the documents by putting their “signature”.
- “Signature” includes “mark” (for
example, thumb impression) by a person who is unable to write his name.
- Individuals borrowing singly
should execute the documents in their personal capacity.
- Individuals borrowing jointly with
others should sign “jointly and severally”.
- As for proprietorship concerns,
the proprietor should sign as “proprietor for”; he may just write in his
own handwriting the name of the concern.
- As for HUF, the Karta is empowered
to sign on behalf of the joint family, then Karta can execute the
documents; if Karta is not empowered to do so, all the adult male members
of the joint family should sign and if there are any minors, the
respective guardians must sign on their behalf.
- As for partnership firms, all
partners of the firm must sign in their twin capacities, i.e., in their
personal capacity as well as in the capacity of a partner.
- As for companies, the document
must be executed by duly authorised persons as per the Board resolution
with company seal.
- As for trusts, all the trustees
must sign the documents unless the Trust Deed authorises the trustees to
delegate their powers to a few of them. Secondly, the trustees must be
conferred with powers to borrow. Thirdly, they should come with a
resolution passed by the trustees to borrow.
...To continue
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