Mr. B. J.

Ved
Guarantee & Indemnity (Sec 124 & 126 of Indian
Contract Act)
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Indemnity Guarantee

1. Defined in Sec 124 of Indian Contract
Act.
1. Defined in Sec 126 of Indian
Contract Act.

2. A contract by which one party
promises to save the other from loss
caused to him by the conduct of the
promisor himself or by the conduct of
any other person.
2. A contract to perform the
promise or discharge the liability
of a third person in case of his
default.

3. Two Parties Indemnifier &
Indemnified
3. Three Parties the debtor, the
creditor & Surety
Guarantee & Indemnity (Sec 126 & 124 of
Indian Contract Act) Contd




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Indemnity Guarantee

4. Contingent Risk
4. Subsisting Liability
5. Indemnifiers liability is primary
5. Guarantors liability is secondary.
Principal debtor is primary liable.
6. One contract Between Indemnifier
& Indemnified
6. Two contracts Between
i) Debtor and Creditor
ii) Creditor and Guarantor

7. No right of subrogation
7. Guarantor gets the right of
subrogation Guarantor steps
into the shoes of creditor after
payment to creditor.
Partnership Company
1. Not a distinct legal person 1. Distinct legal person
2. Creation by agreement 2. Creation Elaborate legal formalities
3. Every partner is an agent of other
partners
3. Shareholder is not agent of other
shareholder
4. Partner cannot contract with his firm 4. Shareholder can contract with his
company
5. Maximum no. of partners is 20 (& 10
in case of banking business)
5. No max. no. of shareholders for Public
Ltd. Co. Min. is seven
Private Ltd. Co. Min. two, Max. fifty
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Differences Between Partnership & Company
Differences Between Partnership & Company
(Contd)
Partnership Company
6. Partner cannot transfer his interest
without consent of other partners
6. Shares of a company are freely
transferable.
7. Partners liability for debts of firm is
unlimited
7. Shareholders liability is limited
8. Property is common property of
partners
8. Property belongs to company & not
to his members (Shareholders)
9. Death or retirement of partner
dissolves the firm
9. Death / Retirement of Shareholder
does not dissolve company
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Differences Between Private Ltd. Co. & Public Ltd.
Co.
Private Ltd. Co. Public Ltd. Co.
1. Min. no. of Shareholders 2 1. Min. no. of Shareholders 7
2. Max. no. of Shareholders 50 2. No limit on max. no.
3. Must have at least two directors 3. Must have at least three directors
4. Shares are not freely transferable 4. Shares are freely transferable
5. Can commence business as soon as
certificate of incorporation is
obtained
5. Cannot start business on getting
certificate of incorporation but can
start business only after obtaining
certificate of commencement of
business
6. Cannot invite public to subscribe the
shares or debentures
6. Approaches public for securing capital
by issuing prospectus
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Differences Between Private Ltd. Co. & Public Ltd.
Co. (Contd)
Private Ltd. Co. Public Ltd. Co.
7. Must have words Private Limited in its
name
7. Must have the word Limited as the
last word in its name
8. Must restrict transferability of shares
by Article
8. Cannot impose such restrictions
transferability of shares by article
9. Need not hold statutory meeting 9. Must hold a statutory meeting
10. No restrictions on remuneration of
directors
10. Legal restrictions on remuneration of
directors
11. No restrictions on allotment of shares 11. Number of legal restrictions on
allotment of shares
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Differences Between Cash Credit & Overdraft
Facilities
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Cash Credit Overdraft
1. Pre-existing current a/c is not
necessary
1. The borrower must have a current a/c
in his name to have this facility
2. Bank opens a new a/c with debit limit
decided (based) on projected sales &
other factors
2. The current a/c is converted into
overdraft a/c with debit limit based on
security offered & margin
requirements. The balance in a/c may
be debit (up to limit)
3. Useful for trade, industry & commerce 3. Useful for an individual or non-trader
also
Differences Between Cash Credit & Overdraft
Facilities (Contd)
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Cash Credit Overdraft
4. Given generally against hypothecation
of goods and book-debt or pledge of
goods
4. Given against security of FDR, UTI
units, LIC policy, Govt. securities like
NSC, IVP, KVP etc
5. Monitoring by way of obtaining
stock/book debt statements every
month from which drawing power
under the limit is calculated every
month. Borrower is allowed to
withdraw funds as per limit or
drawing power, whichever is less
5. No such monitoring is done except
when shares are pledged wherein
share prices are closely monitored by
banker & in case of big decrease in
share prices, limit is either reduced or
additional security is asked for
Difference Between Legal Mortgage & Equitable
Mortgage
Legal Mortgage Equitable Mortgage
1. Created by execution of a document
called Mortgage Deed. Borrower
binds himself to repay the advance in
addition to transfer of interest in
immovable property
1. Created by deposit with bank the title
deeds of property with the intention
of creating a security. A record by way
of Memorandum of Deposit is
maintained at bank branch
2. Requires compulsory registration with
the Registrar of Assurances within -4-
months of creation. If borrower is a
company charge is required to be
registered with Registrar of
Companies within -30-days of creation
2. No registration required with Registrar
of Assurances. However, when
company is a borrower charge is
required to be registered with
Registrar of Companies within -30-
days of creation
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Equitable Mortgage is also known as Mortgage by Deposit of Title Deeds
Difference Between Legal Mortgage & Equitable
Mortgage (Contd)
Legal Mortgage Equitable Mortgage
3. Attracts ad-valorem (according to
value) stamp duty
3. Stamp duty as per Stamp Act in the
state where mortgage is created. In
some states, there is no stamp duty
4. Created at any place in India 4. Created only at notified place
mentioned in the Official Gazette of
State Govt. where an equitable
mortgage can be created. Place of
advance & location of property can be
at a place other than the notified
place.
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Difference between Negotiation & Assignment
Negotiation Assignment
1. Does not require written document .
By delivery (bearer) or by
endorsement & delivery (order)
1. Requires written document signed by
transferor
2. Notice not necessary 2. Notice of assignment is a must
3. Consideration presumed 3. Consideration to be proved
4. Holder in due course obtains it free
from all defects
4. Assignee obtains it subject to all
previous defects
5. Defined in N.I. Act 1881 5. Defined in T.P. Act
6. Does not attract Stamp Duty 6. Attracts Stamps Duty
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Difference between Pledge & Mortgage
Pledge Mortgage
1. Defined in Indian Contract Act 1. Defined in Sec 56 of T.P. Act
2. Bailment of goods for securing an
advance. Possession of goods given to
pledgee.
2. Transfer of interest in immovable
property . Property is not transferred
3. Goods can be sold after giving
reasonable notice. No other process is
to be followed
3. Prior to SARFAESI Act 2002 it could not
be sold without order of court. After
SARFAESI Act, it can be sold following
due process of law
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