BANK EXAMINATIONS - DIFFERENCES

DIFFERENCES
LIEN	SET OFF
It is the right of a creditor who holds the securities/goods of debtor to retain the same till the debt is cleared	It is a cross claim for liquidated amount
To have the right of lien, the creditor should have acquired possession of the goods in the ordinary course of business	Both the claim and set off must be mutual debts due from and to the same parties under same right
Lien is an indirect charge on the security	In case the account is stopped by death or insolvency of the customer, bank’s right of set off accrues automatically
Right of lien implied	To exercise the right of set off notice is a must
NOMINATION	DEATH CLAIM SETTLEMENT
Nomination is done by the depositor	Legal heirs get their rights by relationship
Nominee may be different for each deposit	Legal heirs are the same for all deposits
Nominee gets his right only on the death of the depositor	Legal heirs rights are based on devolution of property
Claim is settled only to one nominee	Claim is settled to one or more legal heirs
Discharge from nominee is adequate	Discharge from all legal heirs is necessary
PLEDGE	HYPOTHECATION
Means bailment or delivery of goods or documents by the borrower to the creditor with an intention to create a charge thereon as security for the debt	Hypothecation is an equitable charge in lender’s favour over goods
Ownership is with the borrower and possession is with the lender	Both ownership and possession is with the borrower
The right of sale of goods can be exercised by sending a notice to the borrower	Sale of goods can be made only with court intervention
Being contract of bailment, the banker has the right of duties of pledge	No such duties and responsibilities are thrust upon the lender
If the borrower is a limited company, the registration of charge is not necessary	Registration of charge is a must
GUARANTEE	SOLVENCY CERTIFICATE
Issued by the bank guaranteeing performance of a promise	It is a certificate which conveys the solvency of the customer
Contingent liability on the part of the bank	No such certificate
Protective clause is a must	No such clause is required
Issued in the format as required by the customer subject to approval by Legal section	Issued in the prescribed format designed by the bank by the branch where the application is submitted
GUARANTEE	INDEMNITY
It is a contract to perform the promise or discharged liability of a third person in case of his default	A contract by which one party promises to save another from the loss caused to him by the conduct of the promisor(indemnifier) by the conduct of any other person
The surety undertakes his obligation at the request of the principal debtor	No such request is required. Indemnifier agrees on his own
Three parties – Principal debtor, beneficiary(creditor) and the surety(guarantor)	Two parties – indemnifier and the beneficiary
The liability of the surety is dependant on the default of the third party	Depends on the possibility of risk or some loss
Surety on payment of debt to the creditor, can proceed on his own name against the principal debtor(right of subrogation)	Indemnifier cannot sue third parties his own
GARNISHEE ORDER	ATTACHMENT ORDER
Issued by the court on the application made by the judgment creditor in a situation where the judgment debtor refuses to pay debt payable to him	Attachment orders are issued by the assessing officer or tax recovery officer on the bank having any type of deposit in the name of the assessee from whom money is due or may become due
First order – NISI and then order absolute	Always in the absolute forms
Recovery of private dues	Recovery of dues as arrears of income tax
On clear balance available in the account at the time of receipt	Applicable on subsequent balance upto the time total amount is not recovered
SAFE CUSTODY OF ARTICLES	SAFE DEPOSIT LOCKERS
Bank is bailee and the customer is bailor	The bank is a lessor (landlord) and the customer is a lessee (tenant)
No space is leased out to the customer	A small locker in the lockers cabinet is leased out to the customer
There is no involvement of the customer with the operation of the vault where the valuables have been kept by the bank	The locker is opened jointly by the bank with master key and by the customer with hirer’s key
No requirement of password	Password must be asked before allowing the operation
The customer delivers the valuables/articles to the bank for keeping in safe custody	The customer himself keeps the articles in the locker
The customer can take charge according to the size of the articles	The customer operates the locker itself and may take out any article as per need