Customers use to cross cheques by drawing two parallel lines on the face of the cheques when issuing them $(1)$ to third parties. State what you understand by crossing a cheque and explain briefly the types and effects of crossing.

$(05$ marks$)$

$($ii$)$ Nihal an account holder of your bank issued a cross cheque to Nimal, who endorsalit and kept it inside his office drawer. Wimal who is an employee at his office stole the cheque and cashed it at Rukmal's shop after placing his endorsement. Rukmal deposited the cheque to his account at Lanka Bank, Your bank on presentation of the cheque, made payment to Lanka Bank. Considering the above, discuss the position of your bank, Nihal, Nimal, Rukmal and Lanka Bank.

$(10$ marks$)$

$(05$ marks$)$

$2(1)$ Discuss the characteristics of a negotiable instrument.

$($ii$)$ Under what circumstances will such an instrument lose its negotiability? Explain.

$(10$ marks$)$

What is the legal effect of a cheque crossed 'Not Negotiable"?

$(05$ marks$)$

$($ii$)$ Ramesh issued a cheque crossed 'Not Negotiable' for Rs$.150000$ to Dinesh as advance payment for the goods to be supplied by him. Dinesh failed to supply the goods but endorsed the cheque in favour of Suresh. Ramesh stopped payment of the cheque. When Suresh deposited the cheque to his account, payment was refused by Ramesh's bank.

Examine the position of Ramesh and Suresh in relation to the cheque.

$(10$ marks$)$

$.$ "The legal relationship between a banker and a customer differs according to the type of transaction." State the $4$ different types of Banker $-$ Customer relationship and discuss the above statement.

$(15$ marks$)$

Part II$-$Various Customers Accounts and Bank's other services

Mr$.$ James who maintained an individual savings account in his name at your bank dies intestate. At the time of

his death the credit balance in his account was Rs$.400000.$ He had no other assets. His family consists of his

parents, one brother, one sister, wife and two children who are minors and all of them are living.

$($i$)$ State with reasons how the balance monies in the savings account will be distributed to his legal heirs.

$(06$ marks$)$

$($ii$)$ What would be the position of devolvement if the account is a joint account with his sister? $(04$ marks$)$

$($ii$)$ Would the position be different if Mr$.$ James had made one of his children a nominee? Give reasons.