CA Intermediate September 2024 Suggested Answers Paper 2 Corporate and Other Laws

FOR CA INTERMEDIATE EXAM PREPARATION

CA Intermediate 2024
Suggested Answers ·
Paper 2 Corporate and
Other Laws
EXAM YEAR TYPE

CA Intermediate 2024 Suggested Answers
SUBJECT DATE

Paper 2 Corporate and Other Laws September 2024

Notes · Sample Papers · Previous Year Papers · Mock Tests

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PAPER – 2: CORPORATE AND OTHER LAWS
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Case Scenario

a Limited accepted deposits from the public to the tune of ` 70 Lakhag
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ong1 May 2021, for a period of 36 months at an interest rate of 10% per annum.
ABC Publications
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repayment would be made on 30 April, 2024. It has complied with all the
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statutory requirements for the acceptance of deposits by a Public Limited Company.
One of the depositors Mr. Y was in urgent need of money as his son wanted to
pursue his higher education abroad. His total deposit with ABC Publications Limited
was `10 lakh. On 1st June 2022, he sent his request to the company asking for
premature repayment of his deposit along with interest.

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Another depositor, Mr. U had deposited ` 6 lakh in his name. On 18th September

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2022, he sent an application to the company to change the name on his deposit

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and make it a joint holding in the names of himself, his wife and two children. The
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company is contemplating the requests received from its depositors.
g form the public, the company had also raised
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In addition to the deposits received
funds by amount received from a Public Sector Bank, by issue of bonds and
debentures and amounts against issue of commercial papers which were issued
according to the guidelines issued by the Reserve Bank of India.
On the basis of the given facts, and by applying the applicable provisions of the
Companies Act, 2013 and the Rules therein, choose the correct answer of the
following questions: (Q.No.1 to Q.No.3)

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1. Advise ABC Publications Limited regarding the amount and the interest that

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(A) The company cannot make premature repayment of the deposits.

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(B) The company can prematurely repay the deposit lalong
tog31 May 2022)
gla @ 10% for a period of 13 months (1 May 2021a st th

a (C) The company can prematurely repay the deposit along with interest
@ 9% for a period of 13 months (1st May 2021 to 31st May 2022)

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

(D) The company can prematurely repay the deposit along with interest
@ 9% for a period of 11 months (1st May 2021 to 31st March 2022)
2. Advise ABC Publications Limited regarding the request of Mr. U:
(A) Mr. U cannot change his deposit to joint holding.
(B) The deposits can be held jointly only by Mr. U and his wife.
(C) The deposits can be held jointly by Mr. U, his wife and two children.
(D) The deposits can be held jointly by Mr. U and any two members only.
3. The Banker of ABC Publications Limited wanted a list of deposits accepted by
the company. Advise the company on what among the following constitute
deposit:
(A) Amount raised through bonds and debentures
(B) Any non-interest bearing amount received and held in trust
(C) Amount received from Public
(D) Amount raised through the issue of commercial paper as per the
Reserve Bank of India guidelines and amount raised through bonds
and debentures
Case Scenario II
Combat Gaming Limited is a company incorporated outside India with a place of
business in Rajasthan. To improve its gaming software, the company wanted to
apply Artificial Intelligence technology. In order to raise more funds to meet out the
investment cost, the company decided to issue shares. It issued prospectus of the
company which was properly dated and signed according to the provisions of the
Companies Act, 2013 and delivered them to the Registrar of Companies on
16th August 2023. The Registrar on verification of the documents found that the
particulars in the prospectus was incomplete and issued a notice to the company
saying that the prospectus is invalid. Hence, the directors scrutinized the documents
and during the scrutiny it was observed by the CFO that there was a mistake in one
of the documents delivered to the Registrar and hence altered that on 29th
September 2023. Analyse, based on the above scenario and answer the following
questions: (Q. No. 4 to Q. No. 6)

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4. According to the Companies (Registration of Foreign Companies) Rules, 2014,
of the Companies Act, 2013, which of the following documents shall not be
annexed to the prospectus?
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(A) Any consent to the issue of the prospectus required from any person as

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an expert;
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e Statement of preliminary expenses; l a
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(B)

la(C) A copy of contracts for appointment of Managing Director or Managera g
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giving full particulars thereof
(D) A copy of underwriting agreement
5. Combat Gaming Limited has made alteration in documents delivered to the
Registrar, they shall intimate to Registrar of Companies by ______
(A) 29th October

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(B) 13th November
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(C) 28th November
(D) 9th October
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Combat Gaming Limited g
6.
the appropriate fees to:
a has to deliver the required documents along with

(A) The Registrar of Companies, Rajasthan
(B) The Comptroller and Auditor General Office, New Delhi
(c) The Registrar of Companies. New Delhi
(D) The Company Law Board, New Delhi
Case Scenario III
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m Mr. S is a well experienced technocrat in the field of manufacturingmof.tocomputer
c. o hard discs and motherboard. He resigned from his job and wished s e
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form a

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Limited Liability Partnership (LLP) with the object of manufacturing and trading of

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computer hardware. He wanted to include his close friends Mr.
who are very familiar in the same field and worked in the foreign companies also.
All three friends had accepted the invitation of Mr. S to be partners of the LLP. Mr. S
wanted to ensure whether all the three friends are resident of India and requested

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

them to provide the details of their stay in India. During the previous financial year,
Mr. A has stayed in India for a period of 170 days, Mr. B stayed in India for 110
days and Mr. C stayed in India for 100 days. All the partners had given their
consent to act as designated partners. He applied for the reservation of desired
name to the Registrar and also paid the prescribed fees.
Based on the above facts, answer the following questions: (Q. No. 7 to Q. No. 9)
7. The name applied for has been approved by the Registrar. The approved
name of LLP shall be valid for a period of _____________ from the date of
intimation by the Registrar.
(A) 2 months
(B) 1 month
(C) 3 months
(D) 6 months
8. Which of the following combinations of partners, if appointed as designated
partners, will not be in accordance with the provisions laid down by Limited
Liability Partnership Act, 2008?
(A) Mr. A, Mr. B and Mr. C
(B) Mr. B and Mr. C
(C) Mr. A and Mr. C
(D) Mr. A and Mr. B
9. In how many days, a Limited Liability Partnership shall file with the Registrar,
the particulars of every individual who has given his consent to act as
designated partner?
(A) Within thirty days of incorporation of LLP
(B) Within thirty days of his appointment
(C) After forty five days of incorporation of LLP
(D) After sixty days of his appointment
Case Scenario IV
Progressive Management College have introduced a Global Management Diploma
Course which is of 12 months duration. Out of 12 months, 11 months studies are

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held in India and rest of 1 month is earmarked for foreign tour. Rudra Pratap is the
Principal of the college. After taking requisite permission from the competent
Ministry, the cultural tour programme was chalked out and the team visited
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Malaysia, Singapore, Australia and New Zealand.
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Rudra Pratap's daughter Payal got admission in a medical college situated in
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California, United States of America. For fee and other expenses, Payal needs

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USD 2,25,000. Rudra Pratap contacted his banker to know the procedure for
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availing of foreign exchange and the authority to whom he shall apply. His banker
properly guided all the relevant procedures for availing of the foreign exchange.
Rudra Pratap's brother Sourya Pratap went to UK some years ago, where he joined
a company in managerial position. He intermittently visits to India and maintains a
Non-Resident Special Rupee Scheme Account (NRSR) in Mumbai. He wanted to
make remittance of interest earned in the NRSR Account and asked his bankers for
the required formalities.

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Based on the above facts, answer the following questions: (Q. No. 10 to Q. No. 12)
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For the purpose of cultural tours, approval of which Ministry is required to be

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obtained ?
(A)
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Ministry of Human Resources Development

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(B) Ministry of External
(C) Ministry of Home Affairs
(D) Ministry of Commerce and Industry
11. For availing foreign exchange for studying abroad, which of the following
option is correct:
(A) The transaction of withdrawal of foreign exchange of USD 2,25,000 for

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studying abroad is prohibited.

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(B) The transaction of withdrawal of foreign exchange of USD 2,25,000 for

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studying abroad requires prior approval of Government of India.

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The transaction of withdrawal of foreign exchange of USD 2,25,000 for
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studying abroad requires prior approval of RBI.
The transaction of withdrawal of foreign exchange of USD 2,25,000 for
studying abroad do not require prior approval of RBI.

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

12. The remittance of foreign exchange for arranging of cultural tour for the
students is an example of:
(A) Capital Account Transactions
(B) Current Account Transactions
(C) Hybrid Transactions
(D) Amortised Transactions
13. Super Brain Coaching Limited was engaged in offline coaching of students for
various competitive examinations. It was one of the pioneer in its field. It
suffered losses due to various social and government restrictions imposed on
study centers. On account of this, it defaulted in the repayment of term loan
for the first two quarters of the financial year 2023-24. However, Super Brain
Coaching Limited adapted itself to the changing circumstances and shifted to
online mode of coaching and revived its financial conditions. On
31st December 2023, it cleared all the dues and regularized the term loan.
Super Brain Coaching Limited wants to issue equity shares with differential
rights. When can the issue be made?
(A) On or after January 1st 2029
(B) On or after April 1st 2029
(C) On or after April 1st 2027
(D) On or after January 1st2027
14. An Act has been passed by the government and though sufficient time has
elapsed since the Act was passed, it has not been brought into force by the
Government.
Which of the following is correct in the light of the provisions of the General
Clauses Act, 1897?
(A) The court can issue a mandamus with a view to compel the
government to bring the Act into operation on a particular day.
(B) The court can through a writ direct the Government to consider the
question as to when the Act should begin to operate.
(C) The court can publish a date in Official Gazette as an effective date for
enforcement of the Act.

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(D) The court cannot direct the government to consider the question as to
when Act should begin to operate.

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15. With reference to the provisions of the General Clauses Act, 1897, in all
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Legislations and Regulations, unless there is anything repugnant in the

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subject or context, words importing the masculine gender shall be taken:
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(A)

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(D) To include females
Answer Key
MCQ No. Correct Option
1. (C)

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2. (D)

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3. (C)
4. (B)
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6. (C)
7. (C)
8. (B)
9. (B)
10. (A)
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14. (B)
15. (D)

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PAPER – 2: CORPORATE AND OTHER LAWS

PART II
Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.

Question 1
(a) SAB Health Products Limited issued equity shares worth ` 5,00,00,000
(5,00,000 equity shares of ` 100 each) and it was fully subscribed and partly
paid at ` 50 each. The company made a call to all its subscribers to pay a
sum of ` 30 for each share held by them. Mr. GH, a subscriber to the shares
of a company, holding 10,000 shares, paid all the money due on the shares
held by him in advance. Later, Mr. GH claimed interest on the money
advanced by him and also dividend in respect of the advance money paid.
Is his claim justified? Another shareholder Mr. LK holding 15,000 shares did
not pay the first call. So, the directors called upon him to pay the entire
amount due by him in respect of the shares held by him. Referring to the
provisions of the Companies Act, 2013 and Rules made there under,
examine whether the directors of SAB Health Products Limited permitted to
do so? (5 Marks)
(b) (i) Right Trading Limited is a company engaged in trading of automobile
spare parts. During the current financial year 2024-25,
Mr. J the CFO retired due to bad health. The company appointed Mr. C
as the new CFO. On verification of the financial statements and
statutory returns of the company, Mr. C advised the Board of Right
Trading Limited to revise the financial statements for the year
2021-22.
Examine, with reference to the applicable provisions of the Companies
Act, 2013, whether M/s Right Trading Limited can do so? (3 Marks)
(ii) M/s DEF is conducting the audit of Right Trading Limited for the past 9
years. Now due to the requirement of rotation of auditors, M/s DEF is
going to retire at the upcoming Annual General Meeting and in its
place M/s XYZ will be appointed as the Auditor of Right Trading

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Limited. One of the partner Mr. F, who was in charge of the certification
of the financial statements of the company retired from the firm of
M/s DEF and joined the firm of M/s XYZ.
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Examine, considering the provisions of the Companies Act, 2013 about

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the validity of the appointment of M/s XYZ. (2 Marks)

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(c) Ms. Rose was an Indian citizen who got a job in a software company in
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USA. She went to USA and stayed there for 12 years. During her stay, she
purchased a house in USA for her residence. Then due to some personal
issues she moved back to India and joined a software company in India. As
she had moved back to India, she let out her house in USA and deposited
the rent in her account in USA. Out of that amount, she purchased another
house in USA.
Based on the above facts, answer the following referring to the provisions of
the Foreign Exchange Management Act, 1999.
(i)
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Whether Ms. Rose can purchase the house in USA and continue to

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retain it even after returning to India?

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(ii) Whether Ms. Rose can purchase
to India?
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Answer ag
(a) As per section 50 of the Companies Act, 2013, (the Act) a company may, if
so authorized by its Articles, accept from any member the whole or a part
of the amount remaining unpaid on any shares held by him, although no
part of that amount has been called up.
As per section 51 of the Act, a company may, if so authorized by its
Articles, pay dividends in proportion to the amount paid-up on each
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share. The Board of Directors of a company may decide to pay dividends
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on pro-rata basis if all the equity shares of the company are not equally

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paid-up.

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Interest can be paid on such advance, if permitted by Articles. Here it is

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worth noting that, where the rate of interest is permitted by the Articlesa
a on such advance payment, same could be varied by shareholders in
general meeting.

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

Further, section 49 of the Act, specifies that calls shall be made on a
uniform basis on all shares that are falling under the same class. A
shareholder on whom a regular call for payment has been served may
choose to pay only a part of the sum due.
Hence, in the light of the stated provisions, SAB Health Products Limited
is permitted to do the following acts:
Is Mr. GH’s claim justified?
Mr. GH is entitled to claim interest on money advanced by him and also
dividend in proportion to the amount paid-up on each share, if so
authorized by the Articles of the company.
In the matter of Mr. LK
Whereas, with respect to Mr. LK, calls shall be made on a uniform basis by
the directors, on all shares that are falling under the same class as per
section 49 of the Act. A call cannot be made on some of the members
only, unless they constitute a separate class of shareholders.
Therefore, the action of the Board of Directors of SAB Health Products
Limited towards Mr. LK for calling to pay the entire amount due by him in
respect of the shares held by Mr. LK is invalid and not permissible.
(b) (i) Voluntary Revision of Financial Statements or Board’s Report on
the Approval of the Tribunal
As per section 131 of the Companies Act, 2013, if it appears to the
directors of a company that:
a. the financial statement of the company does not comply with the
provisions of section 129; or
b. the report of the Board does not comply with the provisions of
section 134
they may prepare revised financial statement or board’s report in
respect of any of the 3 preceding financial years after obtaining the
approval of the Tribunal on an application made by the company
within fourteen days of the decision taken by the Board.
A certified copy of the order of the Tribunal shall be filed with the
Registrar of Companies within 30 days of the date of receipt of the
certified copy.
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In the given question, Mr. C has advised the Board of Right Trading
Limited to revise the financial statements for the year 2021-22. The
Board of Directors can do so as the said financial statements are
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pertaining to not later than three preceding financial years (from
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2024- 2025) and by obtaining the approval of the Tribunal within
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fourteen days of the decision taken by the Board.
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(ii) As per section 139(2) of the Companies Act, 2013, listed companies and
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such class of companies as prescribed, shall not appoint or re- appoint
an audit firm as auditor for more than two terms of five consecutive
years.
Further, on the date of appointment, an audit firm shall not have any
partner or partners who are/were also the partner/s to the other audit
firm, whose tenure has been expired in a company immediately
preceding the financial year.

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It means, if a partner (common partner), who is in charge of an audit

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firm and also certifies the financial statements of the company, retires

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from the said firm and joins another firm of Chartered Accountants, such

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other firm shall also be ineligible to be appointed as succeeding auditor

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of same company after two terms of five consecutive years. i.e. cooling
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period. [Rule 6(3) of Companies (Audit and Auditors) Rules, 2014]
The audit of Right Trading Limited was conducted by M/s DEF and
after expiry of two consecutive terms, it is proposed to appoint
M/s XYZ. Mr. F is the common partner in M/s DEF and M/s XYZ,
hence, the appointment of M/s XYZ is not valid.
Assumption: In this question, nothing is specified about the nature of
the company. Hence, drawing a positive assumption that Right

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Trading Limited is a company on which the provisions related to

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rotation of auditors [as specified under section 139(2)], are applicable.

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to retain it

s e even after returning to India?
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According to section 6(4) of the Foreign Exchange
1999, (the Act) a person resident in India may hold, own, transfer or
invest in foreign currency, foreign security or any immovable property
situated outside India if such currency, security or property was
acquired, held or owned by such person when he was resident
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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

outside India or inherited from a person who was resident outside
India.
Ms. Rose stayed in USA for 12 years, hence she must have become a
non–resident for those years. She purchased a house during this time.
As per the above provisions, Ms. Rose can rightfully purchase the
house in USA and continue to retain it after returning to India.
(ii) Can Ms. Rose purchase another house in USA after returning to
India?
Ms. Rose deposited the amount of rent from the house to her
account in USA. Out of that amount she purchased another house in
USA after returning to India. Ms. Rose is a person resident in India
due to joining an employment in India.
As per section 6(4)(iv) of the Foreign Exchange Management Act,
1999 (FEMA), a person resident in India may freely utilize all their
eligible assets abroad as well as income on such assets or sale
proceeds thereof received after their return to India for making any
payments or to make any fresh investments abroad without approval
of Reserve Bank, provided the cost of such investments and/or any
subsequent payments received therefor are met exclusively out of
funds forming part of eligible assets held by her and the transactions
is not in contravention to extant FEMA provisions.
In view of the above, Ms. Rose can rightfully purchase another house
in USA after returning to India.
Question 2
(a) Stuti Ceramic Pvt. Ltd. (SCPL) manufactures crockery items which are
predominantly used only by the domestic household customers. Now the
company wants to expand its area of operation to manufacture all types of
crockery items and cutlery for the use of big hotels. For this expansion plan,
the company needs funds of around ` 500 lakh. The company does not
want to convert itself from private company to public company since the
promoters do not want to dilute their equity stake otherwise the public
company have the option to raise the funds through public issue. The
company explored the other avenue of raising funds by issue of right shares
to the existing shareholders, however only ` 100 lakh could be generated.

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SUGGESTED ANSWER CORPORATE AND OTHER LAWS

The banks and financial institutions are also reluctant to increase their
exposure in the company.

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Referring to the provisions of the Companies Act, 2013, advise the SCPL,
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whether the company can raise further funds through private placement

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issue. If so, are there any limit for fresh offer and time limit of allotment of

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securities? (5 Marks)

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(b) Dolls Toys Limited is having a net- worth of ` 310 crore, paid up share
capital of ` 200 crore, free reserves and security premium of ` 110 crore
and turnover of ` 300 crore. Dolls Toys Limited wants to accept deposits
form public other than its members.
(i) Referring to the provisions of the Companies Act, 2013, state whether
Dolls Toys Limited is permitted to accept the deposits from public other
than its members.
(ii) It is further mentioned that Dolls Toys Limited is in urgent need of

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funds as one of its contract is on the verge of completion and it is

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promising to repay the deposits within a period of four months. Is Dolls

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Toys Limited permitted to accept deposits with repayment period of
4 months?
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ag of the General Clauses Act, 1897, answer the
(c) Referring to the provisions
following questions:
(i) Whenever a new law is enacted by the Government of India, what shall
be its date of coming into force?
(ii) Whenever a new law is enacted to replace the existing law, it repeals
the old enactment. Describe the points which shall not have any effect
of repeal of the old enactment. (4 Marks)
Answer
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m (a) Whether c
. Private
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Stuti Ceramic Pvt Ltd (SCPL) can raise funds through

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Placement?
Yes, SCPL can raise funds through the private placementla
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of shares.

ag Section 23(2)(b) of the Companies Act, 2013 (the Act)
private company may issue securities through private placement by
complying with the provisions specified in section 42 of the Act in

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

supplement with those stated under Rule 14 of the Companies
(Prospectus and Allotment of Securities) Rules, 2014.
Meaning of Private Placement
According to the Explanation I to section 42(3) of the Act, “private
placement" means any offer or invitation to subscribe or issue of
securities to a select group of persons by a company (other than by way
of public offer) through private placement offer- cum-application, which
satisfies the conditions specified in this section.
Offer to be made only to a select group of persons
A private placement shall be made only to a select group of not more
than two hundred (200) persons (referred to as “identified persons”) in a
financial year who have been identified by the Board after passing a
special resolution [Section 42(2) read with Rule 14(1) of the Companies
(Prospectus and Allotment of Securities), Rules 2014].
Limit on Fresh Offer
As per section 42(5) of the Act, no fresh offer or invitation under this
section shall be made unless the allotments with respect to any offer or
invitation made earlier have been completed or that offer or invitation has
been withdrawn or abandoned by the company.
Thus, Stuti Ceramic Pvt. Ltd. can raise further funds through private
placement issue after the allotments with respect to right issue for ` 100
lakh have been completed and subject to the maximum number of 200
persons (identified persons) under section 42(2) and by complying with
the procedures stated in Rule 14 of the Companies (Prospectus and
Allotment of Securities) Rules, 2014.
Time Limit for Allotment of Securities
As per section 42(6) of the Companies Act, 2013, a company making an
offer or invitation under this section shall allot its securities within 60 days
from the date of receipt of the application money for such securities and
if the company is not able to allot the securities within that period, it shall
repay the application money to the subscribers within 15 days from the
expiry of 60 days and if the company fails to repay the application money
within the aforesaid period, it shall be liable to repay that money with
interest at the rate of 12% per annum from the expiry of the sixtieth day.

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(b) (i) Whether Dolls Toys Limited is permitted to accept deposits from
Public other than its members?

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Section 76 of the Companies Act, 2013 read with Companies

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(Acceptance of Deposits) Rules, 2014 deal with acceptance of

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deposits from public other than its members by ‘eligible companies’.
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eAccordingly, l a
l a s ` 100 crore or turnover of not less than ` 500 crore, and which has g
a public company, having net worth of not less than
a
g
a Registrar of Companies before making any invitation to the Public for
obtained the prior consent by a special resolution and filed it with the

acceptance of deposit can accept deposits from persons other than
its members.
Eligible Company: As per Rule 2(1)(e) of the Companies (Acceptance
of Deposits) Rules, 2014, a public company, having net worth of not
less than one hundred crore rupees or a turnover of not less than five

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hundred crore rupees, may accept deposits from persons other than

c. o
its members. Such type of public company is known as ‘eligible

emToys Limited has a net-worth of ` 310
company’.

s
a crore.
In the given question, Dollys
crore and turnover of `l300
a g
Since at least one condition is satisfied that is net worth is ` 310 crore
which is more than the prescribed limit, and assuming it has obtained
the prior consent by a special resolution and filed it with the Registrar
of Companies, it is permitted to accept deposits from public other
than its members.
Thus, Dollys Toys Limited is an eligible company and hence can
accept deposits from public other than its members.
m
m c. o
(ii) Whether Dolls Toys Limited permitted to accept deposits with

c. o repayment period of 4 months?

s em Rules,
s em larenew deposits
As per Rule 3(1) of the Companies (Acceptance of Deposits)
g
la a on demand or in
2014, a company is not permitted to accept or

ag (whether secured or unsecured) which is repayable
less than six months. Further, the maximum period of acceptance of
deposits cannot exceed thirty- six months.

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

Exception to the rule of tenure of six months: For the purpose of
meeting any of its short-term requirements of funds, a company may
accept or renew deposits for repayment earlier than six months subject
to the condition that:
(i) such deposits shall not exceed ten per cent of the aggregate of
the paid-up share capital, free reserves and securities premium
account of the company; and
(ii) such deposits are repayable only on or after three months from
the date of such deposits or renewal.
Conclusion:
Hence, Dolly Toys Limited is permitted to accept deposits with
repayment period of 4 months in compliance to the stated provisions.
However, by virtue of exception to the rule of tenure of six months as
stated above, since the company cannot accept the deposit
exceeding 10% of the aggregate of the paid up share capital, free
reserves and security premium account which is ` 310 crore therefore
the company can accept the deposits to the extent of ` 31 crore only.
(c) (i) As per section 5 of the General Clauses Act, 1897, where any Central
Act has not specifically mentioned a particular date to come into
force, it shall be implemented on the day on which it receives the
assent of the Governor General in case of a Central Act made before
the commencement of the Indian Constitution and/or, of the
President, in case of an Act of Parliament.
Where, if any specific date of enforcement is prescribed in the Official
Gazette, the Act shall into enforcement from such date.
(ii) According to section 6 of the General Clauses Act, 1897, where any
Central legislation or any regulation made after the commencement
of this Act repeals any Act made or yet to be made, unless another
purpose exists, the repeal shall not:
• Revive anything not enforced or prevailed during the period at
which repeal is effected or;
• Affect the previous operation of any enactment so repealed or
anything duly done or suffered thereunder; or

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• Affect any right, privilege, obligation or liability acquired, accrued
or incurred under any enactment so repealed; or

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Affect any penalty, forfeiture or punishment incurred in respect
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•

c o of any offence committed against any enactment so repealed; or
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• .Affect any inquiry, litigation or remedy with regard to such claim, e
s em privilege, debt or responsibility or any inquiry, litigation or glas
g la remedy may be initiated, continued or insisted. a
aQuestion 3
(a) The paid up share capital of Star Furnishing Limited is ` 1,00,00,000 divided
into 10,00,000 equity shares of ` 10 each as at 31stMarch, 2024. Out of this,
Home Decor Limited is holding 6,00,000 equity shares and the remaining
equity shares of 4,00,000 held by others. Simultaneously, Star Furnishing
Limited is holding 7% equity shares of Home Decor Limited out of which 2%

m
equity shares are held as a legal representative of a deceased member of

. co
Home Decor Limited. On the basis of the given information, examine and

em
answer the following queries with reference to the provisions of the
Companies Act, 2013:
l a s
(i)
a g
Can Star Furnishing Limited make further investment in equity shares
of Home Decor Limited during 2024-25?
(ii) Can Star Furnishing Limited exercise voting rights at the Annual
General Meeting of Home Decor Limited? (5 Marks)
(b) Naveen Tools Ltd (NTL) mortgaged its factory land and building (by
equitable mortgage) on 1st March, 2023 to Goodwill Bank and availed a
credit limit of ` 200 lakh. Although the credit limit was sanctioned by the
Bank, but the NTL actually availed such credit facility only in the month of
m
c. o
August, 2023, when it issued a cheque in favour of a creditor towards the
m
c. o embefore the
payment of raw material purchased from it.

em s
a registration of
During the course of statutory audit, the auditor pointed out
management of the NTL about the non-compliance lof
las g
charge with the Registrar within the stipulated time.aThe company officials
ag informed that although the mortgaged backed credit limit was sanctioned
in March 2023, but the company had not availed the facility till the month
of August, 2023.

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

So, the liability of registration of charge arises from the date of availment
only when the company issued a cheque from the mortgaged backed credit
limit account and not when the loan was sanctioned and credit limit was
assigned.
Further, the company management pleaded that it is the responsibility of
the financier i.e. Goodwill Bank to get the charges registered with the
Registrar since the registration of charge is to be effected in favour of the
Bank and for Bank's own benefit, so the NTL is in no way responsible for
getting registration or for delayed registration.
In the light of above facts, referring to the provisions of the Companies Act,
2013, discuss:
(i) When trigger point for the registration of charge shall arise,
(a) at the time of credit limit sanctioned by the Bank; or
(b) at the time of availing of credit limit when cheque was issued by
the company?
(ii) What are the consequences for non-registration of charge on the
Naveen Tools Ltd? (5 Marks)
(c) Explain the rule which suggests that the 'Plain word requires no
explanation' and 'Technical words be understood in technical sense only’.
(4 Marks)
Answer

(a) (i) Can Star Furnishing Limited, make further investments in equity
shares of Home décor Limited during 2024-25?
According to section 19 of the Companies Act, 2013, a subsidiary
company is not allowed to hold shares of its holding company. The
prohibition also extends up to the nominees of the subsidiary company.
Also, a holding company shall not allot or transfer its shares to any of its
subsidiary companies and any such allotment or transfer of shares of a
company to its subsidiary company shall be void.
The prohibition does not apply to the following cases:
(a) Where the subsidiary company holds such shares as the legal
representative of a deceased member of the holding company; or

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(b) Where the subsidiary company holds such shares as a trustee; or
(c) Where the subsidiary company is a shareholder even before it
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became a subsidiary company of the holding company, but in

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this case, it will not have a right to vote in the meeting of holding

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company.
Itm a
s evote at a meeting of the holding company only in respect of the g
is also provided that the subsidiary company shall have a right to
l
g l a a
a In the given question Star Furnishing Limited is a subsidiary of Home
shares held by it as a legal representative or as a trustee.

Décor Limited as it holds 60% (6,00,000/10,00,000 shares) shares of
Star Furnishing Limited. Simultaneously, Star Furnishings Limited is
holding 7% equity shares in Home Décor Limited out of which 2% are
held as a legal representative of a deceased member of Home Décor
Limited.

m
These shares are held by Star Furnishings Limited before Home Décor

. co
Limited became its holding company. However, after becoming its

em
subsidiary, Star Furnishings Limited cannot make further investment
in Home Décor Limited.
l a s
a g
(ii) As per second proviso to section 19, a subsidiary company shall have
a right to vote at a meeting of the holding company only in respect
of the shares held by it as a legal representative or as a trustee.
Accordingly, Star Furnishings Limited can exercise voting rights at the
Annual General Meeting of Home Décor Limited only in respect of 2%
shares held in the capacity of legal representative and not for other
5% shares.

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(b) (i) According to section 77(1) of the Companies Act, 2013, it shall be the

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duty of a company creating a charge to register it with the Registrar
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of Companies within 30 days from the date of creation of the charge.

em la
The obligation to register a charge arises not merely at the time of
se
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sanctioning the credit limit but when the charge is created.
Whenever a company borrows money by way ofaloans including term
ag loans or working capital loans from financial institutions or banks or
any other persons, by offering its property or assets, as security a
charge is created on such property or assets in favor of the lender.

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

The Trigger point for registration of charge arises when the Bank has
sanctioned the mortgaged backed credit limit, documentation was
done, papers of the property for creation of the mortgage was
tendered by the company for creation of fixation of the credit limits.
Here, the words ‘creating a charge’ refers to the accepting of the
property papers for the purpose of creation of charge. Thus, it is the
date when the credit limits were sanctioned as assigned to the
company and not the date when the company had actually drawn a
cheque from such credit limit.
(ii) Consequence of non-registration of charge [Section 77 (3) & (4)]
No charge created by a company shall be taken into account by the
liquidator appointed under the Companies Act, 2013 or the
Insolvency and Bankruptcy Code, 2016 or any other creditor unless it
is duly registered and a certificate of registration of such charge is
given by the Registrar.
This means that the charge will become void against the liquidator
and other creditors of the company. That is to say, at the time of
winding up, the creditor whose charge has not been registered will be
reduced to the level of an unsecured creditor. Neither the liquidator
nor any other creditor will give legal recognition to a charge that is
not registered.
Another important consequence of non-registration is that the
charge-holder loses priority. Any subsequent registration of a charge
(i.e. even if it is registered within the extended period instead of
original thirty days) shall not prejudice any right acquired in respect
of any property before the charge is actually registered.
(c) Rule that suggests ‘Plain Word requires no explanation’
This Rule is called “Rule of Literal Construction”.
It is a cardinal rule of construction that a statute must be construed
literally and grammatically giving the words their ordinary and natural
meaning. Therefore, the language used in the statute must be construed
in its grammatical sense. The correct course is to take the words
themselves and arrive if possible, at their meaning without reference to
cases, in the first instance.

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If the phraseology of a statute is clear and unambiguous and capable of
one and only one interpretation, then it would not be correct to
extrapolate these words out of their natural and ordinary sense. When the
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language of a statute is plain and unambiguous it is not open to the
c. o
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courts to adopt any other hypothetical construction simply with a view to
s e m
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carrying out the supposed intention of the legislature.
la
l a s
This principle is contained in the Latin maxim “absoluta sententia
a g
ag
expositore non indiget” which literally means “an absolute sentence or
preposition needs not an expositor”. In other words, plain words require
no explanation.
Sometimes, occasions may arise when a choice has to be made between
two interpretations– one narrower and the other wider or bolder. In such
a situation, if the narrower interpretation would fail to achieve the
manifest purpose of the legislation, one should rather adopt the wider
one.

o m
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. technical words are understood in
Technical words are to be understood in a Technical sense only

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This point of literal construction is that
the technical sense only. s
la in the Supreme Court Advocates Act,
g
a practice of law generally involves the exercise
In construing the word ‘practice’
1951, it was observed that
of both the functions of acting and pleading on behalf of a litigant party.
When legislature confers upon an advocate the right to practice in a
court, it is legitimate to understand that expression as authorizing him to
appear and plead as well as to act on behalf of suitors in that court.
(Ashwini Kumar Ghose v. Arabinda Bose AIR 1952 SC 369).
Question 4
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(a) XYZ Limited is a company having a paid up equity share capital of ` 75
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c. o crore. Though it was performing well in the recent years it suffered losses in
se
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the first and second quarter of the financial year 2023-2024. In order to

las sustain its image, the Board of Directors declared an interim dividend at the
a g
ag rate of 30 percent on the paid-up equity share capital on 4/10/2023. The
following are the additional information extracted from the books of
account for the past 5 Financial Years:

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Financial year ending 31st March Rate of Dividend declared
2019 20%
2020 15%
2021 15%
2022 15%
2023 30%

Examining the provisions of the Companies Act, 2013, decide the validity of
the Board's declaration of 30% interim dividend. (5 Marks)
(b) M/s Strong Steels Limited Liability Partnership firm was incorporated on
01st April 2010 with ten partners. The LLP had very good business and made
considerable profits during the past years. Recently due to obsolete
practices, M/s Strong Steels Limited LLP started making loss. Also,
M/s Strong Steels LLP did not file its annual returns from 2020-21. Three
partners decided that the LLP be wound up by the Tribunal. The remaining
partners objected to it. Referring to section 64 of the Limited Liability
Partnership Act, 2008, can the Tribunal pass an order to wound up
M/s Strong Steels LLP? Also state the provisions and penalty for not filling
annual return with the Registrar. (5 Marks)
(c) (i) What is the purpose of inclusion of ‘definitions’ of certain words and
expressions in the body of any statute?
(ii) The definition sometimes includes the words 'mean', 'include', 'means
and include' and 'to apply to and include'. What is the meaning of such
words? (4 Marks)
Answer
(a) As per section 123(3) of the Companies Act, 2013, the Board of Directors
of a company may declare interim dividend during any financial year out
of the surplus in the profit and loss account and out of profits of the
financial year in which such interim dividend is sought to be declared.
Provided that in case the company has incurred loss during the current
financial year up to the end of the quarter immediately preceding the
date of declaration of interim dividend, such interim dividend shall not be
declared at a rate higher than the average dividends declared by the
company during the immediately preceding three financial years.

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According to the given facts, XYZ Ltd. is facing losses in business during
the first and second quarter of financial year 2023-2024. In the
immediately preceding three financial years, the company declared
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dividend at the rate of 15%, 15% and 30% respectively. Accordingly, the
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rate of dividend declared shall not exceed 20%, the average of the rates
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(15+15+30=60/3) at which dividend was declared by it during the
la
a s
immediately preceding three financial years.
g
lTherefore, the act of the Board of Directors as to declaration of interima
ag dividend at the rate of 30% during the F.Y. 2023-2024 is not valid.
(b) According to section 63 of the Limited Liability Partnership Act, 2008, the
winding up of a LLP may be either voluntary or by the Tribunal and LLP,
so wound up, may be dissolved.
As per section 64 of the Limited Liability Partnership Act, 2008, a LLP may
be wound up by the Tribunal, if the LLP has made a default in filing with

m
the Registrar the Statement of Account and Solvency or Annual Return for
any 5 consecutive financial years.
c o
. LLP did not file its Annual Returns
m
e 2024-25, the default in filing of annual
In the present case, M/s Strong Steels
from 2020-21. In the financial s
la5 consecutive years. In view of the facts of
year

g
a of the Act, the Tribunal cannot pass an order
return has not continued for
the question and provisions
to wind up M/s Strong Steels LLP.
The objection of remaining partners is correct.
Annual Return [Section 35]
(1) Every LLP shall file an annual return duly authenticated with the
Registrar within 60 days of closure of its financial year in such form

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and manner and accompanied by such fee as may be prescribed.

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c. o
(2) Penalty for non-filing of annual return:
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LLP– ` 100 per day subject to maximum ` 1,00,000

la se
las Every Designated Partners – ` 100 per day subject to maximum
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ag ` 50,000.

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

(c) (i) Purpose of inclusion of ‘definition’ of certain words and
expressions in the body of any statute
The legislature has the power to embody in a statute itself the
definitions of its language and it is quite common to find in the
Statutes ‘definitions’ of certain words and expressions used in the
body of the statute.
When a word or phrase is defined as having a particular meaning in
the enactment, it is that meaning alone which must be given to it in
interpreting a Section of the Act unless there be anything repugnant
in the context. This is called an exhaustive definition. The Court
cannot ignore an exhaustive statutory definition and try and extract
what it considers to be the true meaning of the expression
independently of it.
The purpose of a definition clause is two-fold: (i) to provide a key to
the proper interpretation of the enactment, and (ii) to shorten the
language of the enacting part by avoiding repetition of the same
words contained in the definition part every time the legislature
wants to refer to the expressions contained in the definition.
(ii) Restrictive and extensive definitions: The definition of a word or
expression in the definition section may either be restricting of its
ordinary meaning or may be extensive of the same.
When a word is defined to ‘mean’ such and such, the definition is
‘prima facie’ restrictive and exhaustive, we must restrict the meaning
of the word to that given in the definition section.
But where the word is defined to ‘include’ such and such, the
definition is ‘prima facie’ extensive: here the word defined is not
restricted to the meaning assigned to it but has extensive meaning
which also includes the meaning assigned to it in the definition
section.
We may also find a word being defined as ‘means and includes’ such
and such. In this case, the definition would be exhaustive.
On the other hand, if the word is defined ‘to apply to and include’,
the definition is understood as extensive.

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Question 5
(a) Sanjana joined a company named as Designers Cloths Ltd. as an
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Independent Director. In order to know more about the company, she
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wanted to inspect the books of account and minutes books of the Board

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Meetings held during the previous three years.

em la
a s
The company is keeping the books of account and other records at its
l a g
ag
Registered Office, which is at Mumbai whereas Sanjana resides in Kolkata.
Therefore, through power of attorney, Sanjana authorised her friend
Avantika, who is a Chartered Accountant and does practice in Mumbai, to
make an inspection of the books of accounts and minutes books of the
meetings of the Board.
Giving the relevant provisions of the Companies Act, 2013 and its Rules
made thereunder, examine, whether Avantika can make inspection on
behalf of Sanjana. (5 Marks)

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(b) A, B, C and D are the partners of Alpha LLP and have equal share in the
.
profits and losses of the LLP. A has made an agreement to transfer 70% of

s em
his share in the profits of Alpha LLP to his daughter X.

g l a
X wanted to access information about the trading transactions of Alpha LLP
a
claiming that she is entitled to the information as she receives a percentage
of profits from the LLP. The partners refused to grant her access. Does X
have any remedy against the denial according to the provisions of the
Limited Liability Partnership Act, 2008? Are the partners correct in denying
access to X? (5 Marks)
(c) (i) In a contract of sale, Mr. A fraudulently sold certain unmarketable
goods to Mr. B. Now Mr. A is liable for the fraudulent activity under

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both the Indian Contract Act, 1872 and the Sale of Goods Act, 1930.

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State the provision as per the General Clauses Act, 1897 as to whether
his offence is punishable under the both the Acts?
em
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s ag be said to be
(ii) Mr. P bought a car from Mr. G who was his friend. Mr. P did not check

gla the car or test drive it. Whether the purchase made could

a made in good faith? Explain with reference to the provisions of the
General Clauses Act, 1897. (4 Marks)

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

Answer
(a) In terms of section 128(3) of the Companies Act, 2013 the books of
account and other books and papers maintained by the company within
India shall be open for inspection at the registered office of the company
or at such other place in India by any director during business hours and
in the case of financial information, if any, maintained outside the
country, copies of such financial information shall be maintained and
produced for inspection by any director subject to such conditions as
prescribed in Rule 4 of the Companies (Accounts) Rules, 2014.
The financial information shall be sought for by the director himself and
not by or through his power of attorney holder or agent or representative.
As per the facts of the question, the books of accounts and other records
including minutes books are maintained at the registered office of
Designer’s Cloths Ltd. in Mumbai i.e. within India. Sanjana as the director
of the company can inspect the books of accounts and minutes books.
But she cannot authorize Avantika to make an inspection on behalf of her.
(b) Whether X has any remedy against the denial?
According to section 42 of the Limited Liability Partnership Act, 2008, the
rights of a partner to a share of the profits and losses of the limited
liability partnership and to receive distributions in accordance with the
limited liability partnership agreement are transferable either wholly or in
part.
The transfer of right pursuant to this section does not, by itself, entitle the
transferee or assignee to participate in the management or conduct of the
activities of the limited liability partnership, or access information
concerning the transactions of the limited liability partnership.
In the given question, the partners of Alpha LLP are correct in denying
access of information about trading transactions to X (daughter of A).
X does not have any remedy against the denial by the partners of Alpha
LLP.
(c) (i) Whether offence is punishable under both the Acts?
According to section 26 of the General Clauses Act, 1897, where an
act or omission constitutes an offence under two or more

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enactments, then the offender shall be liable to be prosecuted and
punished under either or any of those enactments, but shall not be
punished twice for the same offence.
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Thus, Mr. A who is liable for the fraudulent activity under both the

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s
Indian Contract Act, 1872 and the Sale of Goods Act, 1930, will be

em la
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prosecuted and punished under either or both the enactments but

l a shall not be liable to be punished twice for the same offence.
a g
ag (ii) Whether
Faith?
Purchases made could be said to be made in Good

According to section 3(22) of the General Clauses Act, 1897, a thing shall
be deemed to be done in ‘good faith’ where it is in fact done honestly,
whether it is done negligently or not.
The question of good faith under the General Clauses Act, 1897 is
one of fact in Maung Aung Pu v. Maung Si Maung, it was pointed out

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that the expression ‘good faith’ is not defined in the Indian Contract

.
Act, 1872 and the definition given here in the General Clauses Act,

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1897 does not expressly apply the term on the Indian Contract Act.

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The definition of good faith as is generally understood in the civil law

a g
and which may be taken as a practical guide in understanding the
expression in the Contract Act is that nothing is said to be done in
good faith which is done without due care and attention as is
expected with a man of ordinary prudence. An honest purchase made
carelessly without making proper enquiries cannot be said to have
been made in good faith so as to convey good title.
Hence, in the given case, the purchase of car by Mr. P cannot be said to
be made in good faith.

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Question 6
m Textile Limited is a company which is incorporated in India. It.holds two
c. o (a) Silk s emand Stitch
em aare incorporated
subsidiaries- Print Limited (in which it holds 80% of shares)

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Limited (a wholly owned subsidiary). Both the subsidiaries
outside India. The Board of Directors of Silk Textile a
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Limited intends to call
a an Extraordinary General Meeting (EGM) of Silk Textile Limited. During the
same time, the Board of Print Limited also wanted to hold an EGM on
urgent basis at Dubai. The Chairman with the consent of his Board wanted

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to hold the EGM of Silk Textile Limited at Dubai so that he can attend both
the EGM. But the Company Secretary advised the Chairman that he cannot
hold the EGM outside India.
Referring to the provisions of the Companies Act, 2013, advise the Board of
Directors on the following:
(i) Whether the Board of Silk Textile Limited can hold its EGM at Dubai?
(ii) Whether the EGM of Print Limited can be held at Dubai? (5 Marks)
OR
(a) Creative Textiles Ltd. is an unlisted public company. The company's paid-up
share capital is ` 50 lakh consisting of 5 lakh shares having face value of
` 10 each.
Raman is having 50,000 shares in the company. He is not happy with
Somnath, who is a director in the company. He believed that Somnath is
acting against the interest of the company. Raman wanted to remove
Somnath from the directorship. Removal of a person from the directorship
requires the approval of the shareholders in the general meeting. The
Annual General Meeting (AGM) of the company has recently been
concluded and the next AGM will be held in the next year. Considering the
case and referring to the provisions of the Companies Act, 2013, advise:
(i) Can Raman as an individual shareholder make a requisition to the
company for calling of the Extra-ordinary General Meeting for putting
such resolution?
(ii) If the company does not call the EGM on the requisition of Raman,
whether Raman can himself call the EGM? (5 Marks)
(b) Beauty Cosmetics, a company incorporated in Korea has established its
branch office in Chennai for conducting its business in India. The structure
of paid-up share capital of Beauty Cosmetics as at 31st March 2024 is as
below:
The company does not have any Preference Share Capital.
Equity share capital held by Mr. L, an Indian citizen: 10%
Equity share capital held by Mr. R, an Indian Citizen: 20%

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Equity share capital held by Fairness Cosmetics Limited, an Indian
company: 20%

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You being a Chartered Accountant are asked to explain with reference to
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the provisions of the Companies Act, 2013:

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(i)
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Whether Beauty Cosmetics shall be deemed to be a Foreign Company
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or an Indian Company for the business carried on by it in India, and

l(ii)a for the business carried on by it in India, will it be required to complya g
ag with the relevant provisions of the Companies Act, 2013 as if it is an
Indian Company? (5 Marks)
(c) Mitali Diamonds Limited is a company engaged in the business of cutting,
polishing and trading of diamonds in and outside India. The company
exports the diamonds to USA. For the last five financial years, the foreign
exchange earned by the company in exporting diamonds is as under:
FY 2023-24 USD 1,25,000
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FY 2022-23 USD 1,10,000
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FY 2021-22 USD 95,000
USD 98,000as
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FY 2020-21
FY 2019-20 USD 93,000
The company wants to give donation of USD 10,000 to an institution
situated in USA which provides technical support and training in the field of
cutting and polishing of raw diamonds. This will help the company in
guiding its own employees, posted in USA to get the requisite training.
Referring to the provisions of the Foreign Exchange Management Act, 1999,
state whether the company can give donation to such institution in USA?

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c. o Answer s
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e at Dubai?
em (a) (i) Can the Board of Silk Textile Limited can hold its a
l the Board may,
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EGM

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As per section 100 of the Companies Act, 2013,
whenever it deems fit, call an extraordinary general meeting of the
company.

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

Provided that an extraordinary general meeting of the company,
other than of the wholly owned subsidiary of a company incorporated
outside India, shall be held at a place within India.
As per the facts given in the question, Silk Textile Limited is a
Company incorporated in India and has two subsidiaries incorporated
outside India. In Print Limited, it holds 80% of the shares and Stitch
Limited is its wholly owned subsidiary. As Silk Textile Limited is
incorporated in India the Company can call the EGM anywhere only in
India. Hence, it cannot hold its EGM at Dubai (outside India).
(ii) Whether the EGM of Print Limited can be held in Dubai?
Print Limited is incorporated outside India and its 80% shares are
held by Silk Limited (incorporated in India).
Hence, it is not a wholly owned subsidiary of Silk Limited. Only a
wholly owned subsidiary of a company incorporated outside India,
can hold its EGM outside India. In view of the above, Print Limited
cannot hold its EGM in Dubai.
OR
(a) (i) Can Raman, as an individual shareholder make a requisition for
calling an EGM?
According to section 100 of the Companies Act, 2013, in the case of
company having a share capital, EGM may be called by the Board of
Directors at the requisition of such number of members who hold, on
the date of receipt of requisition, at least 1/10th of such paid-up
share capital of the company as on that date carries the right of
voting.
If the Board does not, within 21 days from the date of receipt of a
valid requisition in regard to any matter, proceed to call a meeting for
the consideration of that matter on a day not later than 45 days from
the date of receipt of such requisition, the meeting may be called and
held by the requisitionists themselves within a period of three months
from the date of the requisition.
In the given question, Raman is holding 1/10th [5,00,000/50,00,000]
of the paid up share capital. Hence, he can, even as a single

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shareholder (holding 1/10th of the paid up share capital), make a
requisition to the company for calling the EGM.

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(ii) If the company does not call the EGM on the requisition of
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Raman

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If the company does not within 21 days from the date of receipt of a
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l a svalid requisition from Raman, proceed to call the EGM for the
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consideration of the matter of removal of Somnath, on a day not later
than 45 days from the date of receipt of such requisition, the meeting
may be called by Raman himself within a period of 3 months from the
date of the requisition.[Section 100(4)].
In this regard, Rule 17 of the Companies (Management and
Administration) Rules, 2014 containing the provisions with regard to
calling of EGM by requisitionists shall be followed.
Further, section 100 (5) of the Act provides that a meeting under sub-

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section (4) by the requisitionists shall be called and held in the same
manner in which the meeting is called and held by the Board.
(b) (i) Whether Beauty Cosmeticsmshall be deemed to be a foreign
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company or an Indian company?
As per section 2(42)aof Companies Act, 2013, a ‘foreign company’
means any company or a body corporate incorporated outside India
which has:
(a) a place of business in India whether by itself or through an agent
physically or through electronic mode and
(b) conducts any business activity in India in any other manner.
In the given question, Beauty Cosmetics, a Korean company has
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established a place of business in India (branch office in Chennai) and
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also carries on the business in India. Hence, Beauty Cosmetics shall be

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deemed to be a foreign company under the Companies Act, 2013 for

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the business carried on by it in India.
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Further, according to section 379(2) of the Companies Act, 2013,
a where not less than 50% of the paid-up share capital, whether equity
or preference or partly equity and partly preference, of a foreign
company incorporated outside India is held by:

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: SEPTEMBER 2024

(i) one or more citizens of India; or
(ii) by one or more companies or bodies corporate incorporated in
India; or
(iii) by one or more citizens of India and one or more companies or
bodies corporate incorporated in India,

whether singly or in the aggregate, such foreign company shall also
comply with the provisions of Chapter XXII and other prescribed
provisions of the Companies Act, 2013, with regard to the business
carried on by it in India as if it were a company incorporated in India.
In the given question, 50% (10% + 20% + 20%) of the share capital of
Beauty Cosmetics (incorporated in Korea) is held by Mr. L (Indian
Citizen), Mr. R (Indian Citizen) and Fairness Cosmetics Limited (Indian
Company) respectively.
Hence, Beauty Cosmetics shall be deemed to an Indian company for
the business carried on by it in India.
(ii) Whether Beauty Cosmetics, for the business carried on by it in
India, be required to comply with the provisions of the Act?

Since, Beauty Cosmetics shall be deemed to an Indian company for
the business carried on by it in India, it is required to comply with the
relevant provisions of the Companies Act, 2013, as if it is an Indian
company.
(c) As per Schedule III to the Foreign Exchange Management Act, 1999,
remittances by persons other than individuals shall require prior approval
of the Reserve Bank of India, for donations exceeding 1% of their foreign
exchange earnings during the previous three financial years or
USD 5,000,000, whichever is less, for:

a. Creation of Chairs in reputed Educational Institutes,
b. Contribution to Funds (not being an investment fund) promoted by
Educational Institutes; and

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c. Contribution to a Technical Institution or Body or Association in the
field of activity of the Donor Company.

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In the given question, Mitali Diamonds Limited can donate lower of

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USD 3,300 [1% of (1,25,000 + 1,10,000 + 95,000)] or USD 5,000,000.

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RBIseapproval and for USD 10,000 it shall require prior approval of the l
Thus, Mitali Diamonds Limited can give a donation of USD 3,300 without
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ag Technical Institution or Body or Association in the field of activity of the
Reserve Bank of India to the said institution as this institution is a

Donor Company.

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