CA Intermediate September 2026 Suggested Answers Paper 2 Corporate and Other Laws

FOR CA INTERMEDIATE EXAM PREPARATION

CA Intermediate 2026
Suggested Answers ·
Paper 2 Corporate and
Other Laws
EXAM YEAR TYPE

CA Intermediate 2026 Suggested Answers
SUBJECT DATE

Paper 2 Corporate and Other Laws September 2026

Notes · Sample Papers · Previous Year Papers · Mock Tests

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PAPER – 2: CORPORATE AND OTHER LAWS
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Case Scenario - I
Shirlya Packaging Limited is an unlisted public limited company having 850 g
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aits Annual General Meeting on 28 September, 2025 at its registered office. In
members. st

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the Board's Report, the Board of Directors recommended a final dividend of 12%
on equity shares of face value ` 10 each. During the AGM, some shareholders
argued that the company had good cash flows and unanimously passed a
resolution declaring dividend at 18% instead of 12%.
The company had recently allotted shares to Vandana, whose name was

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entered in the register of members. However, the consideration for those shares

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was actually provided by Bikash under a private family arrangement. Vandana
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did not file Form MGT-4 declaring that she was only the registered owner, and

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Bikash also did not file Form MGT-5 declaring his beneficial interest. Bikash

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later demanded that the dividend should be paid directly to him, claiming that
he was the real beneficial owner.
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The chartered accountant advised that dividend should be paid only to
registered shareholders or to their order/banker. The company therefore issued
dividend warrants in favour of registered members as per the register of
members. However, dividend warrants relating to 40 members remained unpaid
or unclaimed even after 30 days from the date of declaration. Due to internal
oversight, the company transferred the unpaid amount to a separate Unpaid
Dividend Account only after 15 days from the expiry of the said 30 days period.
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The Board now seeks legal advice on the validity of the shareholders' decision to
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company's obligations regarding unpaid dividend.

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Based on the facts given in above case scenario and by applying

ag provisions of the Companies Act, 2013, choose the correct
following Multiple Choice Questions: (MCQ No. 1 to MCQ No. 3)

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

1. Whether the shareholders' resolution declaring dividend at 18% is valid?
(A) Yes, because shareholders have final authority in AGM.
(B) Yes, because the resolution was passed unanimously.
(C) No, because shareholders cannot declare dividend exceeding the rate
recommended by the Board.
(D) No, because dividend can be declared only by the Board and not by
shareholders. (2 Marks)
2. Can Bikash compel the company to pay dividend directly to him as
beneficial owner?
(A) Yes, because he provided the consideration for the shares.
(B) No, because dividend is payable to the registered shareholder or to
his/her order or banker, and non-filing of beneficial interest declaration
makes Bikash's rights unenforceable.
(C) Yes, because beneficial owner always overrides registered owner.
(D) No, because beneficial ownership is prohibited under the Companies
Act, 2013. (2 Marks)
3. What should the company have done with the unpaid/unclaimed dividend
relating to 40 members?
(A) It should retain the amount in its general bank account until claimed.
(B) It should transfer the unpaid/unclaimed amount to the Unpaid
Dividend Account within 30 days from the expiry of 7 days from
declaration.
(C) It should immediately transfer the amount to the Investor Education
and Protection Fund.
(D) It should transfer the unpaid/unclaimed amount to the Unpaid
Dividend Account within 7 days from the expiry of 30 days from
declaration. (2 Marks)
Case Scenario - II
Mr. Nagrajan, a software engineer from Bangalore, has been working in a US-
based technology company in New York for the past 5 years. In April 2025, he
returned to India to establish a technology startup i.e. AI EXIM Pvt. Limited. He

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maintained his foreign currency accounts in the US, containing earnings from
his previous employment. His wife is still continuing to work in New York.

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During August 2025, he undertook several transactions from his foreign
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currency account:

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He withdraws USD 2,00,000 to invest in his Indian startup (AI EXIM Pvt.
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Ltd.).
a gifted USD 75,000 to his father for purchasing property in India.
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a• He imported specialized software equipment worth USD 1,50,000 from a
Singapore-based supplier on 3 months' credit.
• His wife remits USD 40,000 for her parents' medical treatment in India.
AI EXIM also set up a branch office in Singapore in October 2025, fully controlled
and managed from its Bangalore headquarter. The company plans to raise
foreign currency loans and explore various overseas investment opportunities.

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On the basis of above facts and by applying applicable provisions of the Foreign
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Exchange Management Act, 1999, and the applicable Rules therein, choose the

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correct answer of the following Multiple-Choice Questions given hereunder:
(MCQ 4 to MCQ 6)
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approval?
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4. Which of the following transactions by Mr. Nagrajan requires prior RBI

(A) Withdrawal of USD 2,00,000 from his own foreign account
(B) Gift of USD 75,000 to his father
(C) Import of equipment on credit terms
(D) Setting up a branch office in Singapore (2 Marks)

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5. Mr. Nagrajan's wife remits USD 40,000 for her parents' medical treatment
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in India:
(A) Is a capital account transaction requiring RBI approval em
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(B) Is a current account transaction permitted without any limit.

ag (C) Is a prohibited transaction under FEMA
(D) Requires approval since it exceeds USD 25,000 (2 Marks)

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

6. For raising foreign currency loans for AI EXIM, which regulatory framework
would apply?
(A) Only RBI regulations for debt instruments
(B) Only Central Government regulations
(C) Both RBI and Central Government regulations based on the type of
instrument
(D) No regulations since it's a technology company (2 Marks)
Case Scenario - III
PNO Kinda Limited a leading manufacturer of automotive lighting, switches
and alloy wheels etc. was incorporated in April, 2015. To enhance its capital
base, the company proposed to issue new equity shares with differential rights
for the financial year 2019-20. As part of its broader capital raising strategy, the
board of directors decided to issue different kind of securities:
• a rights issue of equity shares to existing shareholders,
• a new class of preference shares offered exclusively to current equity
shareholders.
But, there was a non-compliance in the past. In 2016-17, the company had
issued redeemable preference shares but failed to pay dividends on them for
some time due to financial difficulties. In September 2018, the company fixed
this by clearing all its outstanding dividends to the preference shareholders.
Further, Mr. Raj, a shareholder, owned 1,500 partly paid equity shares in the
company. On 1st July, 2024, Mr. Raj applied to transfer 500 shares to his friend
Mr. Vikram. The company sent Mr. Vikram a notice on 5th July, 2024, which he
received on 7th July, 2024 and he saw the notice on 8th July, 2024. He came to
know that shares are partly paid and accordingly he sent an objection email on
20th July, 2024. However, the company transferred shares on 21th July, 2024.
According to the Company Secretary's opinion, the Board can approve the
transfer of partly paid shares, if they believe that the buyer can pay the
remaining amount in the future.
In another case, Mr. Vihan, legal representative of a deceased shareholder
(Mr. Ashim) wrote an application to the company, to transfer the shares (of
Mr. Ashim) in his name. But, he did not receive any reply from the company.
Thus, he went to the company's office to inquire about the same. The company

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refused to transfer the shares, as he was not the registered member of the
company.

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In the light of the above stated facts, answer the following Multiple-Choice
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Questions, as per the applicable provisions of the Companies Act, 2013: (MCQ 7

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to MCQ 9)

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The Company proposed to issue new equity shares with differential rights

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for the financial year 2019-20. Since the default was made good in
FY 2018-2019. According to the provisions of the Companies Act, 2013, do
you think the company is eligible to issue the shares with differential voting
rights in financial year 2019-20?
(A) Yes, the company is immediately eligible to issue new shares as it has
cleared all the dues by September 2018.
(B) No, the company is ineligible to issue the shares as the company needs
to wait three years till March 31, 2022.

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(C) Yes, the company is eligible to issue new shares in the next financial

emto issue the new shares as the company
year, as the default was made good in the previous FY 2018-19.

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(D) No, the company is ineligible

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needs to wait for five years (2 Marks)
a of the Companies Act, do you consider the
8. According to the provisions
company's action of transfer of partly paid shares to Mr. Vikram is valid?
(A) Yes, because the company waited for more than 15 days from the date
of dispatch of notice before registering the transfer.
(B) No, because the transferee did not give his explicit consent before the
transfer of partly paid shares.

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(C) No, because Mr. Vikram made objection within 2 weeks from the date
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of receipt of notice.

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before approving the transfer.

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9. According to the provisions of the Companies Act, 2013,
company can deny transferring shares in Mr. Vihan's name and what is the
company's obligation?

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

(A) Yes, the company can refuse the transfer if he is not a registered
shareholder.
(B) No, the legal representative has the right to transfer even if they are
not registered shareholder.
(C) Yes, the company can deny if the legal representative's name is not
registered with the company and the company needs approval from the
Registrar of Companies.
(D) Yes, the company needs the approval from the Tribunal before
transferring the shares. (2 Marks)
Case Scenario - IV
Bankebihari Ltd. is a listed public company having its registered office in
Mumbai. The company is presently engaged in the mining and processing of
aluminium and zinc ores. In order to diversify and capitalize on the increasing
global demand for critical minerals used in electric vehicles, batteries and
semiconductor manufacturing, the company has decided to expand into rare
earth mining, including extraction of neodymium, dysprosium and lithium-
bearing minerals.
The Board of Directors approved a large-scale expansion project involving
acquisition of mining leases, establishment of a mineral separation facility and
creation of a Metallurgical Research Centre. The estimated project cost is
` 3,200 crore.
To finance the expansion, Bankebihari Ltd. proposes to raise funds through:
(1) A public issue of equity shares;
(2) A secured issue of non-convertible debentures to institutional investors; and
(3) Acceptance of deposits from the public.
For the secured debenture issue, the company proposes to create a charge over
its stock of processed minerals, inventories, trade receivables and export
proceeds. The security will allow the company to deal with these assets in the
ordinary course of business until an event of default occurs, whereupon the
charge will crystallize and attach specifically to the assets then existing.
Since the debenture issue is to be secured, the Board has been advised that it
must appoint debenture trustee(s) and execute a debenture trust deed within

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the prescribed time in accordance with the applicable Rule of the Companies
(Share Capital and Debentures) Rules, 2014.

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The company also satisfies the eligibility criteria under Section 76 of the
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Companies Act, 2013 and intends to invite deposits from the public after

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obtaining the prescribed credit rating and complying with all other statutory

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conditions.

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Based on the above case scenario and as per the applicable provisions of the
Companies Act, 2013, answer the following Multiple-Choice Questions: (MCQ 10
& 11)
10. In relation to the proposed secured debenture issue, Bankebihari Ltd. is
required to appoint:
(A) One or more debenture trustees after issuing the prospectus or letter of
offer for subscription of debentures.
(B) The Registrar of Companies as trustee.

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.before issuing the prospectus or letter
(C) A trustee only after all debentures are allotted.

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(D) One or more debenture trustees

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of offer for subscription of debentures. (2 Marks)

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11. Which of the following statements is correct regarding Bankebihari Ltd.'s
proposal to accept deposits from the public ?
(A) Any public company can accept deposits from the public without
restrictions.
(B) Only an eligible public company meeting prescribed net worth or
turnover criteria and complying with statutory conditions may accept
deposits from the public.

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(C) Private companies alone may accept deposits from the public.
m (D) Approval of the National Company Law Tribunal is mandatory . before
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e (2 Marks)
em accepting deposits.
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ag M/s PAR LLP is a Limited Liability Partnership (LLP) carrying on legal advisory and
consultancy services in Mumbai. The LLP was incorporated by three partners,
Prabhas, Arjun and Ram Charan. The LLP Agreement provides that profits and
losses shall be shared among the partners in the ratio of 40: 35: 25 respectively.

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

During the financial year, several events took place. Prabhas transferred a
portion of his profit-sharing rights to his friend Rakesh. Subsequently, Arjun
suspected that Ram Charan had diverted certain LLP funds to a related concern
without obtaining approval from the other partners. Arjun and Prabhas jointly
approached the Central Government seeking an investigation into the affairs of
the LLP. The Central Government appointed an Inspector to investigate the
affairs of the LLP. During the investigation, the Inspector demanded production
of books of account, bank statements, agreements and correspondence records.
The Inspector also discovered that certain documents were likely to be destroyed
and therefore exercised statutory powers available under the LLP Act.
Earlier, the partners had decided to convert their existing private company, PAR
Legal Services Private Limited, into M/s PAR LLP. All prescribed documents were
filed with the Registrar and the conversion was duly registered. Upon registration,
questions arose regarding the vesting of assets and liabilities of the company.
Subsequently, the LLP faced liquidity issues and proposed a compromise
arrangement with its creditors. At a meeting convened under the directions of
the Tribunal, creditors representing 80% in value approved the arrangement,
which was thereafter sanctioned by the Tribunal.
Based on the above case scenario and as per the applicable provisions of the
Limited Liability Partnership Act, 2008, answer the following Multiple-Choice
Questions: (MCQ 12 & 13)
12. Prabhas transferred 50% of his right to receive profits from M/s PAR LLP to
Rakesh. After the transfer, Rakesh demanded participation in management
decisions, inspection of books of account and voting rights in partner
meetings.
Which of the following is correct?
(A) Rakesh automatically becomes a partner of the LLP and acquires all
rights of a partner including management rights.
(B) Rakesh acquires all rights of a partner including management rights.
(C) Rakesh is entitled only to the economic benefits transferred to him and
does not obtain management rights merely by such transfer.
(D) The transfer results in dissolution of the LLP. (2 Marks)

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13. Due to financial difficulties, M/s PAR LLP proposed a compromise
arrangement with its creditors. At a meeting directed by the Tribunal,
creditors approved the proposal with such majority as mentioned in the
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above case, and the Tribunal subsequently sanctioned it.
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m arrangement requires approval by 90% of the value before it can las
What is the legal consequence of such approval and sanction?
(A) eThe

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take effect.

sanctioned by the Tribunal.
(C) The arrangement requires approval by all partners before it can take effect.
(D) The arrangement remains merely recommendatory and is not legally
enforceable. (2 Marks)
Case Scenario - VI

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The State Government appointed Mr. Arjun Verma as the Commissioner of

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Trade Regulation and authorized him to issue licenses to traders. After six

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months, Mr. Verma retired and Ms. Kavya Sharma was appointed to the same

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office. Before retirement, Mr. Verma had initiated proceedings against certain
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traders but could not complete them. Ms. Sharma continued the pending
proceedings and issued final orders.
The Commissioner's office also had Mr. Rohan Singh, a Deputy Commissioner,
who was authorized by law to perform certain functions during the absence of
the Commissioner.
Separately, the law empowered the Chief Trade Officer to issue directions to
field officers. During a departmental reorganization, the designation of Chief

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Trade Officer was changed to Director of Trade Administration, while the field

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officers remained subordinate to that office.
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e Questions:
on the above case scenario and as per the applicable provisions
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General Clauses Act, 1897, answer the following Multiple-Choice

l as (MCQ No. 14 & 15)
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ag 14. After retirement of Mr. Verma, Ms. Sharma continued the pending
proceedings and issued final orders. Which statement is most appropriate?
(A) The proceedings lapse automatically on retirement of the original
officer.
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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

(B) Fresh proceedings must be initiated by Ms. Sharma.
(C) Ms. Sharma can continue and complete the proceedings as successor to
the office.
(D) Only the Government can complete the proceedings. (2 Marks)
15. During the Commissioner's absence, the Deputy Commissioner exercised a
statutory function that the law permitted him to perform. The validity of his
action will be determined on the basis that:
(A) A deputy can never exercise statutory powers.
(B) A deputy may exercise powers when the law authorizes performance by
the person acting for the office.
(C) The action is valid only if approved later by the retired Commissioner.
(D) The action is invalid because only the principal officer can act. (2 Marks)
Answer Key

MCQ. NO. CORRECT OPTION
1. (C)
2. (B)
3. (D)
4. No option is correct
5. (B)
6. (C)
7. (D)
8. (C)
9. (B)
10. (D)
11. (B)
12. (C)
13. (B)
14. (C)
15. (B)

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Part II – Descriptive Questions
Question No. 1 is compulsory.
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Attempt any four questions from the remaining five questions.
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Question 1
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(a) Bharat Uday Limited (BUL) is incorporated on 1-4-2026. The company has
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a paid-up share capital of ` 50 crores. Following are key shareholders of the
company:

Shareholders `
NMDC (Subsidiary of Central Government) 15 cr.
U.P.P.L. (Subsidiary of U.P. Government) 10 cr.
KGRL (Subsidiary of Gujarat Government) 10 cr.
Others 15 cr.

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The first auditor of the company has been appointed by the Board of
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Directors on 31-5-2026. The members of the company have objected to

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such an appointment by the Board of Directors. According to the members,

agthe validity of such appointment as per the
only the members can appoint the first auditor.
Advise the company on
provisions of the Companies Act, 2013. Also, advise whether the contention
of members of the company is correct? (5 Marks)
(b) ARTICA Web Solutions Private Ltd. was engaged in developing software
products primarily for small and medium-sized enterprises. The company
now plans to expand its operations to provide advanced enterprise software
solutions to large corporate clients. For this expansion, the company

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requires funds of approximately ` 50 crores. The promoters, however, prefer

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to retain control over the company and do not wish to convert it into a

c. o public company or raise funds through a public issue.
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The Company initially considered raising funds through asrights issue to
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` l5 crore.
existing shareholders but succeeded in generating only g
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a Thus, promoters decided to raise ` 45 crore through private placement from
a selected group of 50 identified persons. Out of them 5 were qualified
institutional buyers (QIBs).

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

The Company sent offer-cum-application letter to above identified 50
people after passing special resolution on 16th May, 2025. Application
money received within 30 days after that company allotted shares to above
stated 50 persons on 20th August, 2025.
With reference to the provisions of the Companies Act, 2013, advise with
justification:
(i) Whether ARTICA Web Solutions Pvt. Ltd. was justified in raising
additional funds through a private placement, when company already
received ` 5 crore from right issue?
(ii) Whether offer-cum-application letter sent to 50 identified person was
within the limit? (5 Marks)
(c) VISTA Chains Ltd., incorporated in 2012, is a large construction and
engineering conglomerate. They are involved in nearly all heavy civil
infrastructure. The Company wants to remit USD 8 million to a consultancy
firm based in Germany for advisory services related to a new highway
infrastructure project in India.
On the other hand, the company has taken consultancy services from
Germany for upgradation of software on a different project for which it
wants to remit USD 1.2 million. According to opinion of CFO, VISTA Chains
Ltd. can freely remit USD 9.2 million (8 million + 1.2 million) without any
kind of approval.
Decide with reference to provisions of the Foreign Exchange Management
Act, 1999, whether opinion of Mr. CFO is correct or not? (4 Marks)
Answer
(a) According to section 2(45) of the Companies Act, 2013, Government
company means any company in which not less than fifty-one per cent of
the paid-up share capital is held by the Central Government, or by any
State Government or Governments, or partly by the Central Government
and partly by one or more State Governments, and includes a company
which is a subsidiary company of such a Government company.
In the given question, since NMDC, UPPL and KGRL are themselves
Government companies (being subsidiaries of the Central Government
and State Governments respectively), their shareholding in BUL effectively
represents indirect holding of the Central and State Governments.
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Aggregating their holdings:
15 + 10 + 10 = 35 crore out of 50 crore = 70%, which is well above the
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51% threshold.
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Thus, BUL qualifies as a Government Company under section 2(45), since

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more than 51% of its paid-up capital is held, in aggregate, by the Central

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Government and State Governments (through their respective
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ag According to section 139(7), notwithstanding anything contained in sub-
Government company subsidiaries).

section (1) or sub-section (5), in the case of a Government company or
any other company owned or controlled, directly or indirectly, by the
Central Government, or by any State Government, or Governments, or
partly by the Central Government and partly by one or more State
Governments, the first auditor shall be appointed by the Comptroller and
Auditor-General of India (CAG) within sixty days from the date of

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registration of the company and in case the Comptroller and Auditor-

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General of India does not appoint such auditor within the said period, the

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Board of Directors of the company shall appoint such auditor within the

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next thirty days; and in the case of failure of the Board to appoint such

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auditor within the next thirty days, it shall inform the members of the
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company who shall appoint such auditor within the sixty days at an
extraordinary general meeting, who shall hold office till the conclusion of
the first annual general meeting.
Thus, as per facts of the question, CAG was required to appoint the first
auditor with 60 days from the date of registration of company i.e. 60 days
from 1.4.2026, which falls on 31.5.2026.
However, the Board of directors appointed the first auditors which is

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incorrect. Thus, the appointment of first auditor by the Board of directors

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is not valid.
The objection of members of the company is partially correct,m
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since Board
of Directors cannot validly appoint first auditor ofa a government
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company. However, their contention that only the members

a the first auditor is also not correct.
(b) Section 23(2)(b) of the Companies Act, 2013 provides that a private
company may issue securities through private placement by complying

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

with the provisions specified in section 42 of the Act along with 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
According to Rule 14(2) of the Companies (Prospectus and Allotment of
Securities) Rules, 2014, 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.
Provided that any offer or invitation made to qualified institutional
buyers, or to employees of the company under a scheme of employees’
stock option as per provisions of section 62(1)(b) shall not be considered
while calculating the limit of two hundred persons.
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.
(i) Yes, ARTICA Web Solutions Pvt. Ltd. can raise funds through the
private placement of shares after the allotments with respect to right
issue for ` 5 crore 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.
(ii) In the given question,
• Total identified persons = 50
• QIBs = 5
• Persons to be counted for the limit = 50 – 5 = 45
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Since 45 persons are within the prescribed limit of 200 persons, the
offer-cum-application letter sent to the identified persons is within
the permissible limit.
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(c) As per Schedule III of the Foreign Exchange Management (Current

. e m
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Account Transactions) Rules, 2000, remittances by persons other than

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individuals shall require prior approval of the Reserve Bank of India (RBI)

l a
in the following cases- Remittances exceeding USD 10,000,000 per project
a g
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for any consultancy services in respect of infrastructure projects and USD
1,000,000 per project, for other consultancy services procured from
outside India.
In this scenario:
The proposed remittance of USD 8 million for consultancy on a highway
infrastructure project is within the USD 10 million threshold. Therefore,
VISTA Chains Ltd. can remit this amount without prior approval from the

m
RBI.

. co
The remittance of 1.2 million for software consultancy on a different

em
project exceed USD 1 million threshold, so RBI approval is required for
this transaction.
l a s
g two remittances cannot be aggregated to
determine compliance awith the limits, because the prescribed limits
It is to be noted that the

operate per project and different limits apply depending upon whether
the consultancy relates to an infrastructure project or other consultancy
services. Thus, the CFO's view that the entire USD 9.2 million can be freely
remitted without approval is incorrect.
Question 2
(a) BM Networks Limited is a listed public company engaged in digital
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broadcasting and media services. The company has issued two classes of
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c. o shares, namely Equity Shares and Preference Shares carrying cumulative
se
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dividend rights. As per the Articles of Association, the rights attached to any

las class of shares may be varied in accordance with the provisions of the
a g
g
Companies Act, 2013.
a In 2026, the company entered into negotiations with an international
investment fund for infusion of capital. The investor insisted that the
company should suspend the cumulative dividend rights attached to the

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

existing preference shares for a period of four years so that profits could be
reinvested into expansion projects. In return, the investor proposed infusion
of substantial equity capital into the company.
The Board of Directors convened a separate meeting of preference
shareholders and proposed variation of their rights by postponing the
cumulative dividend entitlement for four years. In the meeting, preference
shareholders holding 81% of the issued preference share capital approved
the variation through a special resolution.
However, a group of dissenting preference shareholders holding 11% of the
issued preference shares objected to the proposal. They argued that the
suspension of cumulative dividend rights destroyed the commercial value of
their investment and amounted to unfair treatment in favour of the
incoming investor and promoter shareholders. They further alleged that the
explanatory statement accompanying the notice failed to disclose that the
promoters would receive additional managerial benefits under the
investment arrangement.
Within 14 days from the passing of the special resolution, the dissenting
shareholders jointly approached the National Company Law Tribunal
(NCLT) seeking cancellation of the variation of rights under Section 48 of
the Companies Act, 2013.
Despite pendency of the matter before the Tribunal, the company deferred
payment of cumulative dividend and implemented the revised
arrangement.
Based on the above facts and as per the relevant provisions of the
Companies Act, 2013, answer the following questions:
(i) Discuss whether the variation of cumulative dividend rights of
preference shareholders by BM Networks Limited is legally sustainable
under the Companies Act, 2013. (2 Marks)
(ii) Examine the remedies available to dissenting shareholders and
determine whether the company was justified in implementing the
variation during pendency of proceedings before the Tribunal.
(3 Marks)

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(b) Renovations and Innovations Ltd. (RI Ltd.) received share application money
of ` 60 Lakhs on 01-06-2025 but failed to allot shares within the prescribed
time limit. The share application money of ` 5 Lakh received from
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Mr. Khanna, a customer of the company, was refunded by way of book
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adjustment towards the dues payable by him to the company on
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30-07-2025.
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l a s
The Company Secretary of RI Ltd. reported to the Board that ` 55 Lakhs
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ag shall be deemed to be 'Deposits' as on 31-07-2025 as it was not refunded
within 30 days.
The Company is required to comply with the provisions of the Companies
Act, 2013 applicable to acceptance of deposits in relation to this amount.
You are required to examine:
(i) Whether reporting of Company Secretary regarding that ` 55 Lakhs
will be deemed to deposit is correct?

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(ii) Whether adjustment of ` 5 Lakhs towards the dues payable by

.
Mr. Khanna will be treated as refund within prescribed time limit?

s em (5 Marks)

g l a
(c) Under the Environment (Protection) Act, 1986, the Central Government
a
proposed draft environmental compliance rules affecting chemical
manufacturing industries. The parent Act required rules to be made after
previous publication.
Accordingly, draft rules were published in the Official Gazette inviting
objections and suggestions from stakeholders within 30 days. Several
industry associations submitted objections, but the Government finalized
the rules without discussing those objections in detail.

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Based on the above facts and as per the applicable provisions of the
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General Clauses Act, 1897, answer the following questions:

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(i) What procedure must be followed where rules are required

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ag received from
after previous publication? (2 Marks)

gla
a
(ii) Whether the authority is required to consider objections
stakeholders? (2 Marks)

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Answer
(a) According to section 48 of the Companies Act, 2013,
(1) Where a share capital of the company is divided into different classes
of shares, the rights attached to the shares of any class may be varied
with the consent in writing of the holders of not less than three-
fourths of the issued shares of that class or by means of a special
resolution passed at a separate meeting of the holders of the issued
shares of that class,-
(a) if provision with respect to such variation is contained in the
memorandum or articles of the company; or
(b) in the absence of any such provision in the memorandum or
articles, if such variation is not prohibited by the terms of issue of
the shares of that class:
Provided that if variation by one class of shareholders affects the
rights of any other class of shareholders, the consent of three-fourths
of such other class of shareholders shall also be obtained and the
provisions of this section shall apply to such variation.
(2) Where the holders of not less than ten per cent of the issued shares
of a class did not consent to such variation or vote in favour of the
special resolution for the variation, they may apply to the Tribunal to
have the variation cancelled, and where any such application is made,
the variation shall not have effect unless and until it is confirmed by
the Tribunal:
Provided that an application under this section shall be made within
twenty-one days after the date on which the consent was given or the
resolution was passed, as the case may be, and may be made on
behalf of the shareholders entitled to make the application by such
one or more of their number as they may appoint in writing for the
purpose.
(3) The decision of the Tribunal on any application under sub-section (2)
shall be binding on the shareholders.
(4) The company shall, within thirty days of the date of the order of the
Tribunal, file a copy thereof with the Registrar.

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(i) In the given question, the Articles of Association expressly provide
that the rights attached to a class of shares may be varied in
accordance with the Companies Act, 2013. Further, the variation was
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approved by a special resolution at a separate meeting of preference
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shareholders, with holders of 81% of the issued preference share
s e m
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eSince 81% is more than the three-fourths threshold, the statutory gla
capital voting in favour.

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requirement for approval under section 48(1) has been satisfied.
Further, it is provided in the question that a group of dissenting
preference shareholders holding 11% of the issued preference shares
objected to the proposal. Since the dissenting shareholders hold not
less than 10% of the issued shares of the class, they are entitled to
approach the Tribunal under section 48(2) of the Companies Act,
2013. Accordingly, despite the three-fourths threshold being met, the
variation of the cumulative dividend rights cannot take effect unless

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and until it is confirmed by the Tribunal.

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(ii) Section 48(2) as given above has provided the remedies available to

s
the dissenting shareholders.

g l a
In the given question, it is provided that the dissenting shareholders
a
(11%) have approached the National Company Law Tribunal (NCLT)
seeking cancellation of the variation of rights under Section 48, within
14 days from the passing of the special resolution (i.e. within the
specified time limit of 21 days).
Section 48 expressly provides that, where any such application is
made, the variation shall not have effect unless and until it is
confirmed by the Tribunal.

o m
Therefore, BM Networks Limited was not justified in implementing

m .c
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the variation or deferring the cumulative dividend during the
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e of Deposits)
s
pendency of the NCLT proceedings.

em l a
l as Rules, 2014, the following category of receipt is gnot considered as
(b) According to Rule 2(1)(c) of the Companies (Acceptance
a
ag deposit: Any amount received and held pursuant to an offer made in
accordance with the provisions of the Companies Act, 2013 towards
subscription to any securities, including share application money or
advance towards allotment of securities, pending allotment, so long as

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

such amount is appropriated only against the amount due on allotment of
the securities applied for. It is clarified by way of Explanation that if the
securities for which application money or advance for such securities was
received cannot be allotted within 60 days from the date of receipt of the
application money or advance for such, securities and such application
money or advance is not refunded to the subscribers within 15 days from
the date of completion of 60 days, such amount shall be treated as a
deposit under these rules.
Further, it is clarified that any adjustment of amount for any other
purpose shall not be treated as refund.
In the given question, RI Ltd. has received ` 60 Lakh as share application
money on 01.06.2025. It failed to allot shares within the prescribed limit.
Further, on 30.07.2025 the company adjusted the amount of ` 5 Lakh
received from Mr. Khanna (a customer of the company), by way of book
adjustment towards the dues payable by him to the company.
In the light of the facts of the question and provisions of Law:
(i) If such application money or advance is not refunded to the
subscribers within 15 days from the date of completion of 60 days,
such amount shall be treated as a deposit. In the question, the
prescribed limit of 60 days will end on 31.07.2025 and the company
has 15 more days to refund such application money to the
subscribers. Otherwise, after lapse of such 15 days, the amount not so
refunded will be treated as deposit.
Hence, the Company Secretary of RI Ltd. is not correct in treating the
entire amount of ` 55 Lakh as 'Deposits' on 31.07.2025.
(ii) The amount of ` 5 Lakhs received from Mr. Khanna was adjusted by
way of book adjustment towards the dues payable by him to the
company.
As per the Explanation to Rule 2(1)(c), any adjustment of the amount
for any other purpose shall not be treated as refund.
Thus, the amount of ` 5 Lakh adjusted against payment due to be
received from Mr. Khanna, cannot be treated as refund.

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(c) According to section 23 of the General Clauses Act, 1897, where, by any
Central Act or Regulation, a power to make rules or bye-laws is expressed
to be given subject to the condition of the rules or bye-laws being made
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after previous publication, then the following provisions shall apply,
o c. o
c
(1) The . authority having power to make the rules or bye-laws shall,
namely:-
e m
m making them, publish a draft of the proposed rules or bye- las
ebefore
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ag (2) The publication shall be made in such manner as that authority
laws for the information of persons likely to be affected thereby;

deems to be sufficient, or, if the condition with respect to previous
publication so requires, in such manner as the Government
concerned prescribes;
(3) There shall be published with the draft a notice specifying a date on
or after which the draft will be taken into consideration;

m
(4) The authority having power to make the rules or bye-laws, and, where

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the rules or bye-laws are to be made with the sanction, approval or

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concurrence of another authority, that authority also shall consider

a s
any objection or suggestion which may be received by the authority
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having power to make the rules or bye-laws from any person with
respect to the draft before the date so specified;
(5) The publication in the Official Gazette of a rule or bye-law purporting
to have been made in exercise of a power to make rules or bye-laws
after previous publication shall be conclusive proof that the rule or
bye-laws has been duly made.
Section 23(5) raises a conclusive presumption that after the publication of
the rules in the Official Gazette, it is to be inferred that the procedure for
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making the rules had been followed. Any irregularities in the publication
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c. o em to make
of the draft cannot therefore be questioned.

em the rules to make suitable changes in the draft beforela
s
It is also open to the authority publishing the draft and entitled

las a g
finally publishing

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them. It is not necessary for that authority to re-publish the rules in the
a amended form before their final issue so long as the changes made are
ancillary to the earlier draft and cannot be regarded as foreign to the
subject matter thereof.

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(i) In the given question, the Central Government published the draft
rules in the Official Gazette and invited objections and suggestions
within 30 days. Thus, the requirement of previous publication was
initiated in accordance with section 23.
(ii) As per section 23(4) of the General Clauses Act, 1897, the authority
having power to make the rules shall consider any objection or
suggestion received from any person with respect to the draft before
the specified date.
In the given question, several industry associations submitted their
objections within the prescribed period of 30 days. Therefore, the
Central Government was required to consider those objections and
suggestions before finalising the rules.
However, it is important to note that “consider” does not mean that
the authority is bound to accept the objections or suggestions. The
authority may make suitable changes in the draft or may decide not
to accept the suggestions, but the objections/suggestions received
within the prescribed period must be considered.
Yes, the authority is required to consider such objections and
suggestions.
Therefore, the Government’s failure to consider the objections before
finalising the rules would not be in accordance with the procedure
prescribed under section 23(4).
Question 3
(a) ABC Technologies Ltd. is a public company. According to its Articles of
Association, the company can borrow money only if a resolution is passed
by the Board of Directors. Mr. Raj, the Managing Director, approached
National Finance Ltd. and borrowed ` 50 lakh on behalf of the company.
He produced a copy of a Board Resolution authorizing the borrowing. Later,
it was discovered that, no Board Meeting had actually been held. The
resolution shown to the lender was forged by Mr. Raj.
The lender had no knowledge of the forgery and acted in good faith.
Separately, another transaction took place where the company's accountant
borrowed ` 10 lakh from a supplier in the company's name. The Articles did

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not authorize the accountant to borrow money, and the supplier did not
verify the accountant's authority.

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The company refused to repay both amounts.
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(i) Explain the Doctrine of Indoor Management and identify the exceptions

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applicable in the above situations.
s e
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a
(ii) Whether the company is liable to repay ` 50 lakh borrowed by the
l
ag (iii) Whether the company is liable to repay ` 10 lakh borrowed by the
Managing Director?

accountant? (5 Marks)
(b) PQR Limited, a manufacturing company, is in the process of expanding its
operations. To support this expansion, PQR Limited has acquired a plot of
land along with the buildings on it from ABC Limited, another company in
the same industry. The property, however, is subject to an existing charge,
created in favour of a bank as security for a loan of ` 50 Lakhs taken by
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ABC Limited. This charge had been registered by ABC Limited at that time.
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The directors of PQR Limited suggested that as the charge for the property

s
was already created, there is no further obligation to be fulfilled from the
side of PQR Limited.
l a
g contended that ABC Ltd. already paid ` 30
After negotiations, the a
bank
Lakh out of ` 50 Lakh and POR Ltd. wants to enhance the limit so there is a
need for modification of charge. Bank refused to continue with same
charge.
Advise with reference to provisions of registration of charge of the
Companies Act, 2013:
(i) Whether the contention of directors of PQR Limited is correct that the

o m
charge for the property was already created, there is no further

m (ii) What do you mean by modification of charge? Whether modification.c
c. o
obligation to be fulfilled from the side of PQR Limited?

em
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s g appointments to
applicable in above circumstance? (5 Marks)

l a (c) (i) One of the section under the University Act statesathat
ag teaching posts must be made through a Selection Committee. Another
section provides:

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

"Notwithstanding anything contained in this Act, the Chancellor may
make temporary appointments in cases of emergency."
The Chancellor appoints a professor without constituting a Selection
Committee during an academic crisis. The appointment is challenged.
What shall be your interpretation in this regard? (2 Marks)
(ii) A statute provides:
"Without prejudice to the penalty that may be imposed under Section
20, the licence of the defaulter may also be suspended."
A licensee contends that once penalty is imposed, suspension cannot be
ordered. Examine the validity of the contention raised by the licensee.
(2 Marks)
Answer
(a) (i) Doctrine of Indoor Management: The people who are dealing with
company are entitled to presume that internal proceedings and
requirements have been duly met.
The Doctrine of Indoor Management was first laid down in the case of
Royal British Bank v. Turquand.
The directors of a company were authorized by the articles to borrow
on bonds such sums of money as should from time to time, by a
resolution of the company in general meeting, be authorized to be
borrowed. The directors gave a bond to Turquand without the
authority of any such resolution. The question arose whether the
company was liable on the bond. Held, the company was liable on the
bond, as Turquand was entitled to assume that the resolution of the
company in general meeting had been passed.
Rationale of Doctrine of Indoor Management
What happens internally in a company is not a matter of public
knowledge. An outsider can only presume the intentions of a
company, but not know the information he/she is not privy to.
If not for the doctrine, the company could escape creditors by
denying the authority of officials to act on its behalf.

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Exceptions to Doctrine of Indoor Management
Relief on the ground of ‘indoor management’ cannot be claimed by
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an outsider dealing with the company in the following circumstances:
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a. Knowledge of irregularity: In case this ‘outsider’ has actual

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knowledge of irregularity within the company, the benefit under

s e the rule of indoor management would no longer be available. In
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fact, he/she may well be considered part of the irregularity.
b. Negligence: If with a minimum of effort, the irregularities within
a company could be discovered, the benefit of the rule of indoor
management would not apply. The protection of the rule is also
not available where the circumstances surrounding the contract
are so suspicious as to invite inquiry, and the outsider dealing
with the company does not make proper inquiry.
c. Forgery: The rule does not apply where a person relies upon a

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document that turns out to be forged since nothing can validate

.
forgery. A company can never be held bound for forgeries

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committed by its officers.
d.
l a s
Where the question is in regard to the very existence of an
agency.
a g
e. Where a pre-condition is required to be fulfilled before company
itself can exercise a particular power. In other words, the act
done is not merely ultra vires the directors/officers but ultra vires
the company itself.
In the given question, the exception of forgery is relevant to the `50
lakh transaction, whereas the exception of negligence is relevant to
the `10 lakh transaction.
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(ii) According to the Articles of Association of ABC Technologies Ltd.,
m
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borrowing by the company requires a resolution of the Board of

s em Directors. Although Mr. Raj, the Managing Director, produced a copy
g la
la a
of a Board resolution authorising the borrowing, no such Board

ag meeting was actually held and the resolution was forged by Mr. Raj.
The Doctrine of Indoor Management does not apply in case of
forgery, since nothing can validate a forged document and a

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

company can never be held bound for forgeries committed by its
officers.
Therefore, National Finance Ltd. cannot claim protection under the
Doctrine of Indoor Management on the basis of the forged Board
resolution. Accordingly, ABC Technologies Ltd. is not liable to repay
the `50 lakh borrowed on the basis of the forged resolution.
(iii) The Articles of Association did not authorize the accountant to
borrow money on behalf of the company. Further, the supplier did
not verify the authority of the accountant before advancing the
amount.
As per the exception relating to negligence, the benefit of the
Doctrine of Indoor Management is not available where the
circumstances surrounding the transaction require an outsider to
make an inquiry and the outsider fails to make such inquiry.
In the present question, the accountant had no authority under the
Articles to borrow money and the supplier failed to verify his
authority. Therefore, the supplier cannot claim the protection of the
Doctrine of Indoor Management.
Hence, ABC Technologies Ltd. is not liable to repay the `10 lakh
borrowed by the accountant.
(b) Section 79 provides, the provisions of section 77 relating to registration of
charges shall, so far as may be, apply to:
(a) a company acquiring any property subject to a charge within the
meaning of that section; or
(b) any modification in the terms or conditions or the extent or operation
of any charge registered under that section.
Thus, in case of a property where charge is already registered and if it is
sold with the permission of the holder of charge, it shall be the duty of
the company acquiring it to get the charge registered in accordance with
section 77.
(i) In the given question, PQR Limited has acquired the property subject
to an existing charge created by ABC Limited, with the permission of
the charge-holder. Therefore, it is the duty of PQR Limited, being the

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acquiring company, to get the charge registered in accordance with
section 77.

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Thus, PQR Limited cannot contend that since a charge had already
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been created on the property, it has no further obligation. PQR

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Limited is required to ensure registration of the charge in accordance

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with the provisions of the Act.

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(ii) Modification of charge: Means change in terms and conditions or
change in extent or operation of any charge, etc. ‘Modification’
includes variation in any of the terms and conditions of the
agreement including change in rate of interest which may be by
mutual agreement or by operation of law. Variation in extent or
operation of any charge is also a kind of modification. Even if the
rights of a charge holder are assigned to a third party, it will be
regarded as a modification.

m
In the given question, if the bank agrees to enhance the borrowing

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limit and consequently alters the terms, conditions or extent of the

em
existing charge, such alteration would amount to modification of

l a s
charge. The modified charge would also be required to be registered

g
in accordance with section 77, as made applicable by section 79(b).
a
PQR Limited is required to comply with the registration requirements
in respect of the charge on the property acquired by it. Further, any
alteration in the terms, conditions or extent of the registered charge
consequent to enhancement of the borrowing limit would constitute
a modification of charge, which is also required to be registered.
(c) (i) A clause that begins with the words “notwithstanding anything
contained” is called a non-obstante clause. When this term is used

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then the clause will prevail over the other provision(s) mentioned

m therein.

c. o ordinarily required to be made through a Selection s
em
In the given question, although appointments to teaching posts are

s em l a Committee, the

gla ag
Chancellor is empowered to make temporary appointments in cases

a
of emergency.
Since the appointment has been made during an academic crisis,
which constitutes an emergency, the Chancellor can make such
temporary appointment without constituting a Selection Committee.
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Thus, the appointment made by the Chancellor is valid, subject to the
conditions attached to the temporary/emergency appointment.
(ii) When certain particular provisions follow general provisions and
when it is stated that the particular provisions are without prejudice
to those general provisions the particular provisions would not
restrict or circumscribe the operation and generality of the preceding
general provisions. In other words, the particular provisions shall
operate in addition to and not in derogation of the general
provisions.
Therefore, the power to suspend the licence is in addition to and
independent of the penalty that may be imposed under section 20.
Hence, the contention of the licensee that suspension cannot be
ordered once a penalty is imposed is not valid. The authority may
impose the penalty and also suspend the licence, if otherwise
permissible under the statute.
Question 4
(a) Sunrise Infra Limited, an unlisted public company, maintained its books of
account at a branch office in Pune instead of its registered office in
Mumbai. The Board of Directors had approved the decision, but the
company failed to file Form AOC-5 with the Registrar within seven days.
The company also maintained its books in electronic mode using
accounting software that allowed editing of entries without preserving an
audit trail. During inspection, Director Mr. Karan requested financial
information relating to the company's Dubai branch. However, the finance
department delayed the submission for more than one month. Further, it
was found that the company had preserved vouchers and books of account
only for the previous five years.
Later, while preparing the financial statements for F.Y. 2024-25, the
auditors observed that the statements were not prepared in compliance
with Accounting Standards and certain deviations had not been disclosed.
The Board realised that the earlier year's financial statements also
contained errors and proposed revising them voluntarily. However, the
directors wanted to revise the statements for the previous four financial
years without approaching the Tribunal.

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The shareholders questioned whether the company had complied with the
provisions of the Companies Act, 2013 relating to maintenance of books of
account, preservation of records, disclosure requirements, and voluntary
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revision of financial statements.
c. o
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Based on the above facts, answer the following questions:
s e m
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eDiscuss l a
(i)

la s and evaluate whether Sunrise Infra Limited complied with the
a g
ag
provisions relating to maintenance and preservation of books of
account under the Companies Act, 2013. (2 Marks)
(ii) Examine whether the company could revise its earlier financial
statements without Tribunal approval and whether non-disclosure of
accounting standard deviations was proper. (3 Marks)
(b) ABC Professionals LLP was incorporated with three partners, Amit, Bharat,
and Charu. At the time of incorporation, Amit and Bharat were appointed
as designated partners. On 1st January, 2026, Bharat resigned as a

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designated partner. The LLP did not appoint a new designated partner until

.
20th February, 2026. During this period, the LLP failed to file its annual

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return with the Registrar. Amit argued that he should not be held

l a s
responsible because the filing work was assigned to the accounts manager.
Based on the above facts g
a and the
Partnership Act, 2008, answer
applicable provisions of the Limited Liability
following questions:
(i) Whether ABC Professionals LLP complied with the provisions relating to
designated partners?
(ii) Who is responsible for ensuring compliance with the LLP Act? (5Marks)
(c) The Central Government enacted the Industrial Regulation Act, 1985. One
of the provisions of the Act uses the term "processing unit", but the term is
not specifically defined in the statute.
o m
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. have
c. o m
For the last 30 years, licensing authorities across the country
e under the
Act. Several industries have been granted licenses onasthis basis. The
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consistently treated small packaging units as "processing units"

s l
Legislature has amended the Act multiple times overg the years, but has
gla a
a never altered this interpretation. Further, in one case, a High Court also
accepted this long-standing practice while deciding a dispute.

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Recently, a new regulatory authority has taken a different view and denied
license to a packaging unit, arguing that the term "processing unit" should
be interpreted strictly as per its dictionary meaning and not according to
past administrative practice.
The affected company challenges the decision and contends that long-
standing usage and practice should guide the interpretation of the statute.
While interpreting a statute, what is the effect of usage, customs and long-
standing practice? Explain with reference to relevant principles and Latin
maxims. (4 Marks)
Answer
(a) (i) According to section 128 of the Companies Act, 2013, every company
shall prepare and keep at its registered office books of account and
other relevant books and papers and financial statement for every
financial year which give a true and fair view of the state of the affairs
of the company, including that of its branch office or offices, if any,
and explain the transactions effected both at the registered office and
its branches and such books shall be kept on accrual basis and
according to the double entry system of accounting.
Provided that all or any of the books of account aforesaid and other
relevant papers may be kept at such other place in India as the Board
of Directors may decide and where such a decision is taken, the
company shall, within seven days thereof, file with the Registrar a
notice in writing giving the full address of that other place.
Provided further that the company may keep such books of account
or other relevant papers in electronic mode in such manner as may
be prescribed.
In the present question, although the Board of Directors of Sunrise
Infra Limited decided to maintain the books at its Pune office, the
company failed to file Form AOC-5 within seven days. Hence, the
company has not complied with requirement of section 128.
As per Rule 3(1) of the Companies (Accounts) Rules, 2014, for
financial years commencing on or after 1 April 2023, accounting
software used for maintaining books of account must have an audit

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trail/edit log facility and the audit trail should not be capable of
being disabled.

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Since the software used by the company does not preserve an audit
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trail, the company has also not complied with Rule 3(1) of the

. e m
s
Companies (Accounts) Rules, 2014.
m
eInbooks l a
la s addition, under section 128(3), the books of account and other
a g
ag
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 prescribed
conditions.
The company's failure to furnish the Dubai branch information for

m
more than one month indicates non-compliance with the applicable

c o
Further, section 128(5) requires .books of account relating to not less
requirement.

em
than eight financial yearssimmediately

g l a preceding the financial year,

Since the companyapreserved the books and vouchers only for five
together with relevant vouchers, to be kept in good order.

years, it has not complied with the prescribed retention period.
Thus, Sunrise Infra Limited has not complied with the provisions
relating to maintenance and preservation of books of account.
(ii) Voluntary Revision of Financial Statements [Section 131]: If it
appears to the directors of a company that the financial statement of
the company; or the report of the Board, do not comply with the
m
m
provisions of section 129 or section 134 they may prepare revised
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c. o financial statement or a revised report in respect of any of the three
se
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preceding financial years after obtaining approval of the Tribunal.

las Therefore, the directors' proposal to revise the accounts for the
a g
ag previous four financial years and without approaching the Tribunal is
incorrect and against the legal requirements.

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Non-Preparation of Financial statements in compliance with
Accounting Standards [Section 129(1)]: The Financial Statements
shall give a true and fair view of the state of affairs of the company or
companies, comply with the accounting standards notified under
section 133.
The non-preparation of the financial statements in compliance with
Accounting Standards a significant violation of legal requirement
under the Companies Act, 2013.
Non-Disclosure of Accounting Standard Deviations [Section
129(5)]: As per the law, if a company's financial statements deviate
from the prescribed accounting standards, it must explicitly disclose:
• The specific deviation
• The reasons behind such a deviation
• The financial effects (if any) arising out the such deviation
The non-disclosure of the accounting standard deviations by the
company is completely improper and constitutes a significant
violation of legal requirement under the Companies Act, 2013.
(b) (i) Compliance Regarding Designated Partners: According to section 7
and 9 of the Limited Liability Partnership Act, 2008, every limited
liability partnership shall have at least two designated partners who
are individuals and at least one of them shall be a resident in India.
According to section 9, a limited liability partnership may appoint a
designated partner within thirty days of a vacancy arising for any
reason and provisions of sub-section (4) and sub-section (5) of
section 7 shall apply in respect of such new designated partner.
Provided that if no designated partner is appointed, or if at any time
there is only one designated partner, each partner shall be deemed to
be a designated partner.
In the given question, the vacancy occurred on 1st January, 2026,
upon Bharat's resignation. The 30 days’ time period closed on
31st January, 2026. As the LLP delayed in filling this vacancy until 20th
February, 2026 (which is more than 30 days’ time period), it
contravened the legal timeline.

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Therefore, ABC Professionals LLP did not comply with the statutory
provisions regarding the appointment of designated partners.

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(ii) Responsibility for Ensuring Compliance: According to section 8 of the
m
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Limited Liability of Partnership Act, 2008, a designated partner shall

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s
be responsible for the doing of all acts, matters and things as are

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s
required to be done by the limited liability partnership in respect of

l a compliance of the provisions of this Act including filing of any
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document, return, statement and the like report pursuant to the
provisions of this Act and as may be specified in the limited liability
partnership agreement; and liable to all penalties imposed on
the limited liability partnership for any contravention of those
provisions.
Thus, in view of section 8 and provisio to section 9,
From 1st January to 31st January, Amit is fully liable as the remaining

m
designated partner.

. co
From 1st February to 20th February (after the 30 days’ time period

em
expired), both Amit and Charu are deemed designated partners and

l a s
are jointly responsible for the compliance failures during that period.

ag compliance
Therefore, the Designated
obligation for ensuring
Partners bear the primary statutory
and Amit's defence is legally
invalid.
(c) Effect of usage: Usage or practice developed under the statute is
indicative of the meaning recognized to its words by contemporary
opinion. A uniform notorious practice continued under an old statute and
inaction of the Legislature to amend the same are important factors to
show that the practice so followed was based on correct understanding of
m
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the law. When the usage or practice receives judicial or legislative
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c. o em
approval it gains additional weight.

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la is the best
In this connection, we have to bear in mind two Latin maxims:

las a g
(i) 'Optima Legum interpres est consuetude' (the custom

ag interpreter of the law); and
(ii) 'Contemporanea exposito est optima et fortissinia in lege' (the best
way to interpret a document is to read it as it would have been read
when made).
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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Therefore, the best interpretation/construction of a statute or any other
document is that which has been made by the contemporary authority.
Simply stated, old statutes and documents should be interpreted as they
would have been at the time when they were enacted/written.
Contemporary official statements throwing light on the construction of a
statute and statutory instruments made under it have been used as
contemporanea expositio to interpret not only ancient but even recent
statutes in India.
Therefore, in the given case, the long-standing and uniform
administrative practice, supported by legislative inaction and judicial
approval, would carry significant persuasive value in interpreting the term
“processing unit.”
Question 5
(a) ADR Tech Ltd., a company incorporated in Germany, has established a
place of business in India in the form of a liaison office. The shareholding
pattern of ADR Tech Ltd. is as follows:
40% of its paid-up share capital is held by Indian citizens and 15% is held
by an Indian incorporated company. The remaining shares are held by
foreign investors. The company is now planning to expand its operations in
India and is unsure about the applicability of the Companies Act, 2013.
(i) Determine whether Section 379(2) of the Companies Act, 2013 is
applicable to ADR Tech Ltd?

(ii) By what time all the requisite documents shall be filed? (5 Marks)
(b) Sunrise Consultants LLP was formed in 2018 by three partners to provide
management consultancy services. Over the years, the business expanded
successfully. However, in 2026, the partners faced serious disagreements
regarding future business strategies.
Two partners wanted to discontinue the business because they planned to
pursue other ventures. The third partner believed that the business should
continue but admitted that if the partners could not work together, closure
of the LLP would be practical.

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At the same time, a major creditor filed a petition before the National
Company Law Tribunal alleging that Sunrise Consultants LLP was unable to
pay its debts and requested that the LLP be wound up by the Tribunal.
m
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The partners sought legal advice on the modes by which an LLP may be

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wound up and whether dissolution would follow after winding up?
m
e l a
s (5 Marks)
a National Infrastructure Authority Act, 2005 (a Central Act enacted aftera
(c) lThe
g
g
a the commencement of the General Clauses Act, 1897) provides that:
"The Chairperson of the National Infrastructure Authority shall have the
power to grant licenses for strategic highway projects."
In 2024, the designation of "Chairperson" was replaced by "Managing
Director" through an amendment to the parent Act. The powers and
functions earlier exercised by the Chairperson were formally vested in the
Managing Director.
m
. co
A dispute arose when a company challenged the validity of a license

em
granted by the Managing Director on the ground that the original provision

a s
of the Act referred only to the "Chairperson" and not to the "Managing
l
Director".
a g
The company contends that since the Act specifically mentions
"Chairperson", only that office-holder could exercise the power and not any
successor authority.
With reference to the relevant provisions of the General Clauses Act, 1897
relating to "Successors", examine whether the license granted by the
Managing Director is valid? (4 Marks)

m
Answer

m c. o
c. o
(a) (i) According to section 379(2) of the Companies Act, 2013,

em equity
em s
Where not less than 50% of the paid-up share capital, whether

s company incorporated outside India is held by: gl
a of a foreign
or preference or partly equity and partly preference,

gla a
a (1) one or more citizens of India; or
(2) by one or more companies or bodies corporate incorporated in
India; or

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

(3) 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 such other provisions
of this Act as may be prescribed with regard to the business carried
on by it in India as if it were a company incorporated in India.
In the given question, 40% of paid-up share capital of ADR Tech Ltd.
is held by Indian citizens and 15% is held by an Indian incorporated
company. Thus, total 55% of share capital is held by Indian citizens
and an Indian company.
Therefore, section 379(2) is applicable to ADR Tech Ltd.
Thus, ADR Tech Ltd., being a foreign company having a place of
business in India, shall comply with the provisions of Chapter XXII of
the Companies Act, 2013 and such other provisions of the Act as may
be prescribed, in respect of its business carried on in India, as if it
were a company incorporated in India.
(ii) As per section 380(1), a foreign company having a place of business
in India is required to deliver the prescribed documents to the
Registrar within 30 days of establishment of its place of business in
India.
(b) As per 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.
In the given question, the fact that two partners want to discontinue the
business can provide the basis for voluntary winding up, subject to the
applicable LLP agreement and statutory procedure.
As per section 64, a LLP may be wound up by the Tribunal:
(a) if the LLP decides that LLP be wound up by the Tribunal;
(b) if, for a period of more than six months, the number of partners of
the LLP is reduced below two;
(c) if the LLP has acted against the interests of the sovereignty and
integrity of India, the security of the State or public order;

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(d) if the LLP has made a default in filing with the Registrar the
Statement of Account and Solvency or annual return for any five
consecutive financial years; or
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(e) if the Tribunal is of the opinion that it is just and equitable that the

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s
LLP be wound up.

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In the given facts, the disagreement among the partners may be relevant
a g
ag
to the ground that it is just and equitable to wind up the LLP, depending
upon the circumstances and evidence before the Tribunal.
Further, section 64 does not specifically provide for a winding-up petition
filed by a creditor on the ground of inability to pay debts, therefore the
creditor will not succeed in the given case.
Yes, as per section 63 dissolution would follow after winding up.
(c) According to section 17 of the General Clauses Act, 1897, in any Central
Act or Regulation made after the commencement of this Act, it shall be
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sufficient, for the purpose of indicating the application of a law to every
.
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person or number of persons for the time being executing the functions

s
of an office, to mention the official title of the officer at present executing

l a
the functions, or that of the officer by whom the functions are commonly
g
executed.
a
According to section 18 of the General Clauses Act, 1897, in any Central
Act or Regulation made after the commencement of this Act, it shall be
sufficient, for the purpose of indicating the relation of a law to the
successors of any functionaries or of corporations having perpetual
succession, to express its relation to the functionaries or corporations.
In the present case, the National Infrastructure Authority Act, 2005 is a
Central Act enacted after the commencement of the General Clauses
o m
m
Act, 1897.
.c
c. o em
the designation was changed to "Managing Director," sand the same
The Act originally conferred powers on the "Chairperson." Subsequently,

s em g l a
la a
powers were vested in the new office.

ag By virtue of provisions of the General Clauses Act, 1897, the reference to
"Chairperson" includes the successor office now designated as "Managing
Director."

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Therefore, the licence granted by the Managing Director is legally valid,
and the company's contention is untenable.
Question 6
(a) The Governments of Gujarat and Uttar Pradesh collectively hold 60% of the
paid-up Equity Share Capital of Paras Limited. The audited financial
statements of Paras Limited for the financial year 2024-25 were presented
at its Annual General Meeting convened on 17th August, 2025. However,
pending the comments of the Comptroller and Auditor General of India
(CAG) on the said accounts the meeting was adjourned without adoption of
the accounts. Therefore, the company did not file its financial statements
with the Registrar of Companies. Afterwards, on receipt of CAG comments
on the accounts, the adjourned annual general meeting was held on
20th September, 2025 whereat the accounts were adopted. Thereafter, Paras
Limited filed its financial statements relevant to the financial year 2024-25
with the Registrar of Companies on 29th September, 2025.
Examine, with reference to the applicable provisions of the Companies Act,
2013, whether Paras Limited has complied with the statutory requirements
regarding filing of accounts with the Registrar.
OR
(a) APAR Limited is an unlisted manufacturing company incorporated in 2015.
Financial statement of company as on 31-03-2026 disclosed following facts:

Particulars Amount (`)
Paid-up Share Capital 45 crore
Turnover 180 crore
Loan from HDFC Bank 90 crore (paid ` 30 crore during the year
25-26)
Outstanding Deposit 20 crore (refunded ` 10 crore in 25-26)

CFO of company insisted that they have to appoint Internal Auditor for
2026-27. But, Managing Director of company refused on the ground that
we have a statutory auditor and we need not any other outsider to involve
in audit of the company. CFO suggested the name of CA Aakash Gupta,
who was an ex-employee of the company. Managing Director contended
that only a firm of Chartered Accountants or Company Secretary can be

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appointed as internal auditor not an individual Chartered Accountant who
is even not in practice. On the other hand, we are not legally required to
appoint Internal Auditor. Decide with reference to provisions of Companies
m
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Act, 2013 including applicable rules:
c. o
(i)
.co
According to facts of financial statements of APAR Limited, whether the
s e m
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company is legally required to appoint internal auditor for the F.Y.
la
l a s 2026-27?
a g
ag (ii) ofWhether contention of Managing Director was correct that only a firm
Chartered Accountants or Company Secretary can be appointed as
internal auditor not an individual chartered accountant who is even
not in practice; and we are not legally required to appoint Internal
Auditor? (5 Marks)
(b) Parul Ltd. had created a charge on its factory building in favour of
XYZ Bank Ltd. for a term loan. Due to continuous default in repayment,

m
XYZ Bank exercised its rights under the loan agreement and appointed

co
Mr. Rajesh Mehta as Receiver of the charged property on 1st March, 2026.
.
em
The bank informed Parul Ltd. about the appointment on 10th April, 2026

l a s
and filed the notice with the Registrar of Companies on 15th April, 2026.

g
Mr. Rajesh Mehta ceased to act as Receiver on 30th September, 2026, but no

a
notice regarding cessation was filed with the Registrar.
Based on the above facts and applicable provisions of the Companies Act,
2013; answer the following questions:
(i) Whether XYZ Bank has complied with the relevant provisions regarding
intimation of appointment of Receiver?
(ii) Is there any compliance requirement upon cessation of the Receiver's
appointment? (5 Marks)
m
m
(c) Nirbhik Singh, an Indian citizen, was working in Mumbai with an Indian
.co
c. o m
software company till August 2025. During the financial year 2024-25, he

em
stayed in India for more than 250 days. In September 2025, he shifted to
la se
las Singapore after accepting a five-year employment contract with a
a g
g
multinational technology company. Before leaving India, he opened a
a foreign currency account in Singapore and also purchased shares of a
foreign company through overseas investment channels. Simultaneously, he
continued to hold a residential apartment in Pune and maintained savings
accounts with Indian banks.
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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Nirbhik Singh's wife, Namrata, accompanied him to Singapore but returned
to India within six months due to her independent business activities in
Jaipur. She established a textile export unit in India and intended to
continue operating the business permanently from India. Meanwhile,
Nirbhik Singh started supervising the Singapore branch office of an Indian
company which was controlled by its head office in Bengaluru.
During an internal compliance review, the authorized dealer bank raised
doubts regarding the residential status of both Nirbhik Singh and Namrata
under FEMA. The bank particularly questioned whether Nirbhik Singh could
still be regarded as a "Person Resident in India" merely because he owned
assets in India and whether Namrata's temporary stay in Singapore
affected her residential status under FEMA. The issue became relevant for
determining the permissibility of foreign exchange transactions, overseas
investments, and maintenance of foreign assets under Sections 3, 4 and 6 of
FEMA.
Based on the above facts, answer the following questions:
(i) Whether Nirbhik Singh shall be treated as a "Person Resident in India"
under Section 2(v) of FEMA, 1999? (2 Marks)
(ii) Whether Namrata can still be regarded as a "Person Resident in India"
despite accompanying her husband to Singapore for a temporary
period? (2 Marks)
Answer
(a) According to first proviso to section 137(1) of the Companies Act, 2013,
where the financial statements are not adopted at Annual General
Meeting (AGM) or adjourned AGM, such unadopted financial statements
along with the required documents shall be filed with the Registrar within
thirty days of the date of Annual General Meeting and the Registrar shall
take them in his records as provisional till the financial statements are
filed with him after their adoption in the adjourned Annual General
Meeting for that purpose.
According to second proviso to section 137(1) of the Companies Act,
2013, financial statements adopted in the adjourned AGM shall be filed
with the Registrar within thirty days of the date of such adjourned AGM
with such fees or such additional fees as may be prescribed.

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In the instant case, the accounts of Paras Limited were adopted at the
adjourned AGM held on 20th September, 2025 and filing of financial
statements with Registrar was done on 29th September, 2025 i.e. within
m
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30 days of the date of adjourned AGM.
c. o
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However, Paras Limited has not filed its unadopted financial statements
s e m
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s
within 30 days of the date of the Annual General Meeting held on

l a
17th August, 2025.
a g
ag Hence, Paras Limited has not complied with the statutory requirement
regarding filing of unadopted accounts with the Registrar, but has
certainly complied with the provisions by filing of adopted accounts
within the due date with the Registrar.
(a) Alternate
(i) Appointment of Internal Auditor: As per Rule 13 of the Companies
(Accounts) Rules, 2014, every unlisted public company having:

m
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• Paid-up Share Capital: `50 crore or more during the preceding

m during the preceding financial year;
financial year; or
• Turnover: `200 crore oremore
la s
g
or
a or Borrowings: From banks or public financial
• Outstanding Loans
institutions exceeding ` 100 crore at any point of time during the
preceding financial year; or
• Outstanding Deposits: ` 25 crore or more at any point of time
during the preceding financial year; and
shall be required to appoint an internal auditor which may be an

m
individual or a partnership or a body corporate.

m In the given question, APAR Limited's financial data as of 31-03-2026
.co
c. o is as follows:
se
m
s em • Paid up share capital: ` 45 crore
g la
gla Turnover: ` 180 crore a
a
•
• Outstanding Loan: ` 90 crore + ` 30 crore (paid in 25-26) reached
`120 crore (exceeding ` 100 crore threshold)

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INTERMEDIATE EXAMINATION: SEPTEMBER 2026

• Outstanding deposits: ` 20 crore + ` 10 crore (refunded in 25-26)
reached ` 30 crore (exceeding ` 25 crore threshold) at a point of
time during the financial year 2025-26.
Due to exceeding limits of Outstanding Loans or Borrowings and
deposits in 2025-26, APAR Limited is legally required to appoint an
Internal Auditor for the financial year 2026-27.
(ii) As per section 138(1), an internal auditor can be a Chartered
Accountant (whether engaged in practice or not), or a Cost
Accountant or such other professional as may be decided by the
Board.
Furthermore, the related rule 13 of the Companies (Accounts) Rules,
2014 explicitly states that the internal auditor may or may not be an
employee of the company.
In the given question, following shall the legal position w.r.t the
specific contentions raised by the Managing Director:
Contention 1: Only a firm can be appointed, not an individual- is
Incorrect. The Act explicitly allows an individual Chartered Accountant
to be appointed.
Contention 2: The person must be in practice- is Incorrect. The Act
clarifies that the CA may or may not be engaged in practice.
Contention 3: An ex-employee cannot be appointed- is Incorrect.
There is no restriction in section 138 regarding the appointment of a
former employee as an internal auditor.
Therefore, as per the law CA Aakash Gupta is fully eligible to be
appointed as the internal auditor of APAR Limited.
(b) According to section 84 of the Companies Act, 2013,
(1) if any person obtains an order for the appointment of a receiver of, or
of a person to manage, the property, subject to a charge, of a
company or if any person appoints such receiver or person under any
power contained in any instrument, he shall, within a period of thirty
days from the date of the passing of the order or of the making of
the appointment, give notice of such appointment to the company
and the Registrar along with a copy of the order or instrument and

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the Registrar shall, on payment of the fees, register particulars of the
receiver, person or instrument in the register of charges.

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(2) Any person appointed shall, on ceasing to hold such appointment,
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give to the company and the Registrar a notice to that effect and the

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Registrar shall register such notice.

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In the light of the given facts, following are the answers in the given
a g
ag (i) The Appointment Date is 1 March 2026.
question:
st

Statutory Timelines for intimation: The notice should have been given
to both Parul Ltd. and the ROC within 30 days, which was on or
before 31st March, 2026.
Actual information date: The bank informed Parul Ltd. on 10th April,
2026.

m
Actual filing date: The notice was filed with the ROC on 15th April,
2026.
c o
.delayed and were done after the
m
e i.e., after 31 March, 2026.
s
Here, both intimations were

la
mandatory 30 days’ time period st

XYZ Bank Ltd. has notgcomplied with the relevant statutory provisions
a
regarding the intimation of the appointment of the receiver.
Therefore, the XYZ Bank Ltd. is in default under section 84(1) of the
Companies Act, 2013.
(ii) Yes, there is a compliance requirement upon the cessation of the
receiver's appointment. As per section 84(2), Mr. Rajesh Mehta (the
Receiver) is required to give notice of his cessation to both Parul Ltd.

m
co
and the Registrar.

m .
c. o m
Since, Mr. Rajesh Mehta ceased to act as Receiver on 30th September,

em se
2026, but no notice regarding cessation was filed with Registrar, Mr.

s l a
Rajesh Mehta is in default under section 84 (2) of the Companies Act,
g
gla 2013.
a
a (c) As per section 2(v) of the Foreign Exchange Management Act (FEMA),
1999, a "Person Resident in India" (PRI) means a person residing in India
for more than 182 days during the course of the preceding financial year,
but does not include:
43

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ag For more Question Papers, Sample Papers, Notes & Syllabus visit Page 43 of 44

INTERMEDIATE EXAMINATION: SEPTEMBER 2026

A person who has gone out of India or stays outside India for:
• Taking up employment outside India, or carrying on a business or
vocation outside India, or
• Any other purpose indicating an intention to stay outside India for an
uncertain period.
In the light of the stated provision, following are the answers:
(i) As regards Residential Status of Nirbhik Singh: Nirbhik Singh shall not
be treated as a Person Resident in India. He is a Person Resident
Outside India (PROI) from the date of his departure.
Even though he stayed in India for more than 182 days in the
preceding financial year (2024-25), he left India in September 2025 to
take up a five-year employment contract abroad. This falls under the
exception of leaving India for employment.
Holding a residential property in Pune or maintaining Indian savings
accounts does not alter his status under the FEMA, as residential
status under FEMA is determined by the purpose of stay/departure
rather than asset ownership.
(ii) Status of Namrata: Namrata shall be regarded as a Person Resident in
India (PRI).
In this case, Namrata accompanied her husband to Singapore for a
temporary period and returned to India within six months. She did
not leave India for employment, business or with an intention to stay
abroad for an uncertain period.
Since she returned to set up a textile export unit and intends to stay
in India permanently, her temporary absence does not alter her status
to a non-resident.

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