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

FOR CA INTERMEDIATE EXAM PREPARATION

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

CA Intermediate 2024 Suggested Answers
SUBJECT DATE

Paper 2 Corporate and Other Laws May 2024

Notes · Sample Papers · Previous Year Papers · Mock Tests

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PAPER – 2: CORPORATE AND OTHER LAWS
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. any four questions from the remaining five questions. e m
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Attempt

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a(a) MNO limited has the following equity share capital –
Question 1

Class-1: Equity Share Capital – 3,00,000 equity shares of ` 30,00,000
` 10 each.
(1 voting right for every 1 share)
Class-2: Equity share Capital – 50,000 equity shares of ` 10 ` 5,00,000
each.
(1 voting right for every 5 shares)
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. fulfilled all the conditions related to
the issue of equity share capital. em
At the time of issue, the company had

The company wants to vary lthea svoting rights of class 2 equity share capital–
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1 voting right for every 5ashares to 1 voting right for every 10 shares.
The Company’s Memorandum and Articles of Association have given the
company the power to make the variation. The holders of 40,000 equity
shares have their consent in writing for this variation.
Out of dissenting shareholders, the holders of 4,500 equity shares want to
apply to the Tribunal against the company’s action.

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Examine, with reference to the relevant provisions of the Companies Act,

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2013-

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(i) Whether a company can change the rights of its shareholders?
(ii) Whether the dissenting shareholders can apply to the a
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Tribunal?

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(5 Marks)
(b) BBQ Ltd., with its registered office in Hyderabad, has two branch offices,
one located in Delhi and the other in London. The accounting transactions
of the branches are recorded and all books of account are maintained in

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

the branches. The branch accountant of the Delhi branch sent monthly and
the branch accountant of London sent quarterly summarized trial balan ce,
profits and loss account and balance sheet to the Hyderabad office. One of
the assistants of the audit team, Mr. Naveen, raised the issue that the
branches of the company maintain its books and records at branches, so it
defaults on not maintaining the proper books of account at the registered
office. Mr. Naveen further objected to the fact that the London branch sent
their summarised returns on a quarterly basis instead of a monthly basis.
You are requested to analyse and decide the validity of both the objections
of Mr. Naveen relating to the place of maintaining the books of account
and sending summarised returns thereof to the registered office by the
branch offices of the company referring to the provisions of the Companies
Act, 2013. (5 Marks)
(c) Mr. L was employed as a fashion designer in Elegant Textile Ltd., a public
limited company in Gurugram, India during the financial year 2023-24. He
had efficiently provided his services for 183 days during the above said
period. On 01.04.2024, Mr. H. the Human Resource Manager of Jeff Fashion
Ltd., Paris (a foreign country) offered him a better employment opportunity
in such company.
On 02.04.2024, Mr. L. left India for taking up employment as a production
controller at Jeff Fashion Ltd. in Paris. On 30.04.2024 he flew back to India
for a 10 day family function in Manali, India.
In light of the provisions of the Foreign Exchange Management Act, 1999,
elucidate: The residential status of Mr. L-
(i) On his return for attending the family function on 30.04.2024.
(ii) In case, instead of vacation, he joins an employment in an Indian
company after arriving on 30.04.2024. (4 Marks)
Answer
(a) Section 48 of the Companies Act, 2013, allows the variation of
shareholders’ rights, if three conditions have been met.
First - There should be a provision in the memorandum or articles of the
company entitling it to vary such class rights, in absence of same; the
terms of issue of the shares of that class not prohibiting such a variation.

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SUGGESTED ANSWER CORPORATE AND OTHER LAWS

Second - The holders of at-least 75% of the issued shares of that class
must have given their consent in writing or pass a special resolution

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sanctioning the variation at a separate class meeting.

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Proviso to sub-section 1, provides if variation by one class of shareholders

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affects the rights of any other class of shareholders, the consent of three-
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fourths of such other class of shareholders shall also be obtained and the

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provisions of this section shall apply to such variation.
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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.
(i) In the given question, 40,000 equity shareholders of Class 2 have
given their consent in writing for the variation.

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Since, 80% (40,000/ 50,000) of the shareholders have given the

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consent, the company can change the rights of Class 2 shareholders

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provided such change in the rights of Class 2 shareholders is not

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affecting the rights of any other class of shareholders i.e. Class 1
shareholders in this case.
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(ii) Total number of dissenting shareholders= 50,000- 40,000= 10,000.
Minimum number of shareholders who may apply to the Tribunal and
then variation shall not take effect unless and until it is confirmed by
the Tribunal= 10% of 50,000=5,000.
In the given question, since less than 5,000 (here 4,500) shareholders
are intending to apply to Tribunal, hence, they cannot apply.

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(b) 1. Provisions of section 128 of the Companies Act, 2013, requires every

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company to prepare and keep the books of account and other

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relevant books and papers and financial statements at its registered

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It also provides that all or any of the books of account may be kept at

a such other place in India as the Board of directors may decide. Where
such a decision is taken by the Board, the company shall within seven
days thereof file with the registrar a notice in writing as per rule 2A of

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

the Companies (Accounts) Rules, 2014 in form AOC-5 giving full
address of that other place.
Thus, in the given case, the books of accounts of BBQ Ltd. should be
prepared and maintained at registered office in Hyderabad. However,
the same can be maintained at the respective branches if the Board
of directors have decided so and intimated the registrar a notice in
writing within 7 days thereof giving full address of that other place
(i.e. other than the registered office).
Hence, objection of Mr. Naveen is valid as intimation to registrar is
not specified in the question.
2. Where a company has a branch office in or outside India, it shall be
deemed to have complied with the requisite provisions of section
128(1) if-
a. Proper books of account relating to the transactions effected at
the branch office are kept at that office, and
b. Proper summarised returns are sent on periodical basis by branch
office to the company at its registered office or other place.
As per Rule 4(1) of the Companies (Accounts) Rules, 2014, the
summarized returns of the books of account of the company kept
and maintained outside India shall be sent to the registered office at
quarterly intervals, which shall be kept and maintained at the
registered office of the company and kept open to directors for
inspection.
Since, London office was sending summarized returns to the
registered office in Hyderabad on quarterly basis, which is as per the
requirement of law, hence, the objection of Mr. Naveen is invalid.
(c) According to section 2(v) of the Foreign Exchange Management Act, 1999,
“Person resident in India” means a person residing in India for more than
182 days during the course of the preceding financial year but does not
include a person who has gone out of India or who stays outside India, for
or on taking up employment besides with the other specified purposes,
outside India.
(i) In the given question, Mr. L will be treated as a person resident
outside from 2.4.2024 till the time he works in Jeff Fashion Ltd. in

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Paris, as he has gone out of India for or on taking up employment
outside India.

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His return to India for 10 days to attend a family function, will not
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alter his residential status.

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(ii) Mr. L will be treated as a person resident in India from the day he

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joins employment in India (after arriving on 30.4.2024).

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a(a) Referring to the provisions of the Companies Act, 2013, answer the
Question

following queries:
(i) What is the type of resolution to be passed and maximum number of
persons to whom an offer by private placement in a financial year be
made?
(ii) Explain the consequences of non-allotment of shares within the

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stipulated timeline.

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(iii) In case the shares were allotted within the requisite allowed time, when

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can the company start utilizing the funds received by it from such
private placement?
(b) (i) In the circumstance g
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a where Mr. M and Mr. P, joint shareholders of
Primal Private Limited holding 500 equity shares, have conflicting
views on one special business (related to proposed changes in the
Articles of Association) at the extra-ordinary general meeting, Mr. M is
endorsing the resolution, and Mr. P is dissenting. Determine the
procedure for casting the vote in the event of such a situation, as per
the guidelines outlined in the Companies Act, 2013. (3 Marks)

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(ii) Okara Limited, a company. having a net worth of `110 crore and a

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turnover of `450 crore, wants to accept deposits from the public.

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Referring to the provisions of the Companies Act, 2013, decide, whether

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the above company can accept the deposits from the public.

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g (c) (i) The Board of Directors of Cool Private Limited,athrough a resolution
a passed in the board meeting, granted authorization to Mr. Sharad, the
CEO of the company to appoint two employees for the procurement
department. Subsequently, Mr. Sharad selected Mr. Suresh and

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

Mr. Hemant for the positions. However, after one month, Mr. Sharad,
noticing unsatisfactory performance and lack of honesty in their duties,
issued dismissal orders for both employees, citing proper reasons. Mr.
Suresh contested his dismissal in the court, arguing that the Board had
only empowered Mr. Sharad for appointments and not for dismissals
and hence the dismissal order is invalid.
Assess the validity of Mr. Suresh's argument under the provisions of the
General Clauses Act, 1897. (2 Marks)
(ii) Mr. M issued a cheque of ` 3,00,00 dated 31.12.2023 at 10 a.m. to Mr.
N as a consideration towards the medical services provided by the
later. Mr. N presented the above cheque on 31.03.2024 during the
banking business hours. The cheque was dishonoured taking the plea
that it was not presented within the requisite time of 3 months as
provided under section 138 of the Negotiable Instruments Act 1881.
Referring to the provisions of the General Clauses Act, 1897 decide,
whether the plea for dishonouring the cheque was valid. (2 Marks)
Answer
(a) (i) Rule 14 (1) of the Companies (Prospectus and Allotment of Securities)
Rules, 2014, requires prior approval of the shareholders of the
company, by a special resolution for each of the private placement
offers or invitations.
Provided further that this sub-rule shall not apply in case of offer or
invitation for non-convertible debentures, where the proposed
amount to be raised through such offer or invitation does not exceed
the limit as specified in clause (c) of sub-section (1) of section 180 in
such cases relevant Board resolution under clause (c) of sub-section
(3) of section 179 would be adequate.
Provided also that in case of offer or invitation for non-convertible
debentures, where the proposed amount to be raised through such
offer or invitation exceeds the limit as specified in clause (c) of sub-
section (1) of section 180, it shall be sufficient if the company passes
a previous special resolution only once in a year for all the offers or
invitations for such debentures during the year.
Thus, based on above, the resolution will be passed.

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As per section 42(2) of the Companies Act, 2013, a private placement
shall be made only to a select group of persons who have been

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identified by the Board, whose number shall not exceed 50 or such

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higher number as may be prescribed, in a financial year.

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Rule 14 (2) of the Companies (Prospectus and Allotment of Securities)

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Rules, 2014 has prescribed ‘an offer or invitation to subscribe

l a securities under private placement shall not be made to persons
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more than two hundred (200) in the aggregate in a financial year’.
Provided that any offer or invitation made to Qualified Institutional
Buyers and Employees of the company being offered under a scheme
of ESOP under section 62(1)(b) shall not be considered while
calculating the limit of two hundred persons.
As per rule 14(7), NBFCs which are registered with the RBI and
Housing Finance Companies which are registered with the National

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Housing Bank; if they are complying with any regulations made by

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the RBI or National Housing Bank in respect of offer or invitation to

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be issued on private placement basis, then need not to comply with
the rule 14(2) above.

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Thus, based on above, the maximum number of persons to whom an
offer by private placement in a financial year will be determined.
(ii) As per section 42(6) of the Companies Act, 2013 provides that a
company making an offer or invitation under private placement shall
allot its securities within sixty days from the date of receipt of the
application money.
If company fails to make allotment within 60 days, then repayment of

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the application money to the subscribers shall be made within fifteen

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days from the expiry of sixty days and if the company fails to repay

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the application money within the aforesaid period, it shall be liable to

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repay that money with interest at the rate of twelve per cent per

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annum from the expiry of the sixtieth day.
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(iii) Company shall not utilise monies raised through
unless allotment is made and the return of allotment is filed with the
Registrar in accordance with section 42(8). The return of allotment

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

shall be filed with the Registrar within 15 days from the date of the
allotment under section 42.
Hence, it can utilize the money thus received once the return has
been filled with the Registrar.
(b) (i) As per the Companies Act, 2013, in case of joint shareholders, they
must concur in voting unless the articles provide to the contrary.
As per Regulation 52 of Table F, the voting in case of joint
shareholders is done in the order of seniority, which is determined on
the basis of the order in which their names appear in the register of
members. The joint-holders have a right to instruct the company as
to the order in which their names shall appear in the register of
members.
Accordingly, in case of Mr. M and Mr. P, it is to be seen as to whose
name appears first in the register of members; and then to decide
whether the vote is cast in favour of resolution or against it.
(ii) According to section 76 (1) of the Companies Act, 2013, an “eligible
company” means a public company, having a net worth of not less
than one hundred crore rupees or a turnover of not less than five
hundred crore rupees and which has obtained the prior consent of
the company in general meeting by means of a special resolution and
also filed the said resolution with the Registrar of Companies before
making any invitation to the public for acceptance of deposits.
Okara Limited is having net worth of ` 110 crore. Hence, it falls in the
category of ‘eligible company’ and thus can accept the deposits from
public.
(c) (i) According to section 16 of the General Clauses Act, 1897, the
authority having for the time being power to make the appointment
shall also have power to suspend or dismiss any person appointed
whether by itself or any other authority in exercise of that power.
In the given question, Mr. Sharad was granted authorization to
appoint the said employees. This implies (in terms of the General
Clauses Act, 1897) that he also had the power to dismiss or suspend
these employees. Hence, Mr. Suresh’s argument is not valid.

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(c) (ii) As per the section 9 of the General Clauses Act, 1897, in case any
legislation or Regulation, it shall be sufficient, for the purpose of

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excluding the first in a series of days or any other period of time, to

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use the word “from”, and, for the purpose of including the last in a

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The .first day in series is 31.12.2023 and last day is 31.03.2024. Hence, e
series of days or any other period of time, to use the word “to”.

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l a s 31.03.2024 is to be included in calculation as per the General Clausesa
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Since, the cheque has been presented within 3 months i.e. on
31.03.2024, it is eligible for honor and payment.
Hence, the plea of dishonouring the cheque is not valid.
Question 3

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(a) "A Bonus share is a distribution of capitalized undivided profit having an

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identity and value capable of being bought and sold." in reference to the
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above line elaborate the pre-requisites for issue of bonus shares as enlisted

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in the Companies Act, 2013. (5 Marks)

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(b) Q L Ltd. is a public limited company incorporated in Surat, Gujarat with
1200 members. On 10.12.2023 a general meeting was convened in which
14 members were present in person. Mr. Mohan was acting as an
authorized representative of two body corporates who are members of Q L
Ltd. Shyam one of the important members was absent. The Chairman Mr.
Rahi adjourned the meeting, taking plea of absence of Mr. Shyam, to same
day and place next week. The members present at the meeting venue
waiting to attend, opposed the decision submitting that the majority of

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them present now shall be unavailable next week. Referring to the

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provisions of Companies Act, 2013 elaborate:
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(i) Whether the requisite quorum to hold meeting as required .in case of
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public limited companies is present in this case?

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(ii) Whether Mr. Rahi could adjourn the meeting in the current

ag (5 Marks)

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

(c) What are the differences between interpretation and construction in the
legal context, and how do these two concepts relate to each other as per
Interpretation of Statute? (4 Marks)
Answer
(a) Pre-requisites for issue of bonus shares
As per section 63(2) of the Companies Act, 2013, no company shall
capitalise its profits or reserves for the purpose of issuing fully paid-up
bonus shares, unless:
a. it is authorised by its Articles,
b. it has on the recommendation of the Board, been authorised in the
general meeting of the company.
c. it has not defaulted in payment of interest or principal in respect of
fixed deposits or debt securities issued by it.
d. it has not defaulted in respect of the payment of statutory dues of
the employees, such as, contribution to provident fund, gratuity and
bonus.
e. the partly paid-up shares, if any outstanding on the date of allotment,
are made fully paid-up.
f. it complies with such conditions as prescribed by Rule 14 of the
Companies (Share capital and debenture) Rules, 2014, that a company
which has once announced the decision of its Board recommending a
bonus issue, shall not subsequently withdraw the same.
(b) According to section 103 of the Companies Act, 2013, in case of a public
company, unless the articles of the company provide for a larger number,
if the number of members is more than 1000 but upto 5000, then the
quorum shall be 15 members personally present.
As per Secretarial Standard– 2, one person can be an authorised
representative of more than one body corporate. In such a case, he is
treated as more than one Member present in person for the purpose of
Quorum.
Here, the term ‘members personally present’ refers to the members
entitled to vote in respect of the items of business on the agenda of the
meeting.
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(i) Q Ltd. is a public company, having 1200 members hence, the quorum
shall be 15 members personally present.

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Mr. Mohan shall be treated as 2 members as he is the authorized
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representative of two body corporates.

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Hence, total 15 members were present at the meeting held on

a s 10.12.2023.

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Mr. Mohan.
(ii) In the given scenario, even if Mr. Shyam was absent, Mr. Rahi could
not adjourn the meeting, as the requisite quorum was present.
(c) Difference and Relationship between Interpretation and Construction
The two terms- ‘Interpretation’ and ‘Construction’, are used
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interchangeably to denote a process adopted by the courts to ascertain

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the meaning of the legislature from the words with which it is expressed,

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these two terms have different connotations.

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Interpretation is the art of ascertaining the meaning of words and the true
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sense in which the author intended that they should be understood.
Thus, where the Court adheres to the plain meaning of the language used
by the legislature, it would be ‘interpretation’ of the words, but where the
meaning is not plain, the court has to decide whether the wording was
meant to cover the situation before the court. Here, the court would be
resorting to ‘construction’. Conclusions drawn by means of construction
are within the spirit though not necessarily within the letter of the law.

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In practice construction includes interpretation and the terms are

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c. o Question 4
frequently used synonymously.
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aBoard ofmode
(a) Long Boots Ltd. a listed company is engaged in the manufacturing of shoes

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and related accessories. The Business is set on a recovery by the
induction of the new Production Manager, Mr. A. The Directors of
the company has recommended the declaration of a dividend of ` 50 lakh
after a gap of eight years during which profits were inadequate to distribute
the same.
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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

The dividend thus proposed is to be met partially out of the current year
profit of ` 16 lakh. Accumulated profits during the past eight years were
` 170 lakh which is 25% of the total share capital of the company. Referring
to the provisions of the Companies Act, 2013 decide, whether the conditions
with regard to declaration of dividend in case of inadequate profit are met?
You are requested to support your answer with requisite calculations.
(5 Marks)
(b) A dispute among the partners of Limited Liability Partnership (the LLP)
jeopardized the stability of the business. Out of two partners, one due to a
quarrel, left the LLP. The other partner alone continued the business of the
LLP. You are being an expert in law is requested to explain the provisions
governing the LLP being operated by a single partner and its winding up by
the Tribunal as per the provisions of the Limited Liability Partnership Act,
2008. (5 Marks)
(c) Explain the term “Generalia specialibus non derogant”, in connection with
Interpretation of Statues. (4 Marks)
Answer
(a) According to second proviso to section 123, where in any year there are
no adequate profits for declaring dividend, the company may declare
dividend out of the accumulated profits earned by it in previous years and
transferred by it to the free reserves only in accordance with the
procedure laid down in Rule 3 of the Companies (Declaration and
Payment of Dividend) Rules, 2014.
Free Reserves means such reserves which, as per the latest audited
balance sheet of a company, are available for distribution as dividend.
Under Rule 3 such declaration shall be subject to the following conditions:
CONDITION I
The rate of dividend declared shall not exceed the average of the rates at
which dividend was declared by the company in the immediately
preceding three years.
However, this condition shall not apply if the company has not declared
any dividend in each of the three preceding financial year.

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CONDITION II
The total amount to be drawn from such accumulated profits shall not
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exceed 10% of its paid-up share capital and free reserves as appearing in
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the latest audited financial statement.

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CONDITION III

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The amount so drawn shall first be utilised to set off the losses incurred in
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the financial year in which dividend is declared and only thereafter, any
dividend in respect of equity shares shall be declared.
CONDITION IV
The balance of reserves after such withdrawal shall not fall below 15% of
its paid- up share capital as appearing in the latest audited financial
statement.
In the given question, since Long Boots Ltd. current year profits of

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` 16 lakh are insufficient to meet the dividend requirement of ` 50 lakh,

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hence the company has to fulfil the conditions as prescribed under Rule 3

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(mentioned above).

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Particulars Amount

Amount of dividend declared (A)
a (in `)
50 lakh
Current year profits (B) 16 lakh
Amount to be withdrawn accumulated profits [(A)- (B)] 34 lakh
Accumulated profits during the past 8 years 170 lakh
Total share capital of the company [170/25%] 680 lakh

Fulfilment of Conditions mentioned in Rule 3

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Conditions Calculation
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Met/

c. o This condition is not applicable the company s
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three

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preceding financial year.
Paid-up share capital and free 680+ 170 Met
reserves
= 850 lakh (C)

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

10% of (C) 85 lakh
Amount to be withdrawn
accumulated profits i.e. 34 lakhs
is less than (C)
III The company has since made Met
profit in the financial year in
which dividend is declared.
IV Free Reserves (D) 170 lakh Met
Amount drawn for payment of 34 lakh
dividend (E)
Balance of reserves after such 136 lakh
withdrawal (F) =(D)- (E)
15% of its paid up share capital 102 lakh
(G)
(F) more than (G)
In the given question, since all the conditions are met, hence Long Boots
Ltd. has validly declared dividend.
(b) According to section 6 of the Limited Liability Partnership Act, 2008,
(i) Every LLP shall have at least two partners.
(ii) If at any time the number of partners of a LLP is reduced below two
and the LLP carries on business for more than six months while the
number is so reduced, the person, who is the only partner of the LLP
during the time that it so carries on business after those six months
and has the knowledge of the fact that it is carrying on business with
him alone, shall be liable personally for the obligations of the LLP
incurred during that period.
In the given situation, the alone partner should consider the above
provisions of the Limited Liability Partnership Act, 2008, governing the
LLP being operated by a single partner.
As per section 64 of the Limited Liability Partnership Act, 2008, the
circumstances in which LLP may be wound up by Tribunal are:
(a) if the LLP decides that LLP be wound up by the Tribunal;

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(b) if, for a period of more than 6 months, the number of partners of
the LLP is reduced below two;

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(c) if the LLP has acted against the interests of the sovereignty and
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integrity of India, the security of the state or public order;

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(d) if the LLP has made a default in filling with the Registrar the

l a s Statement of Account and Solvency or annual return for any 5
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consecutive financial years; or
(e) if the Tribunal is of the opinion that it is just and equitable that the
LLP be wound up.
(c) It is a basic rule of interpretation that if it is possible to avoid a conflict
between two provisions on a proper construction thereof, then it is the
duty of the court to so construe them that they are in harmony with each
other. But where it is not possible to give effect to both the provisions
harmoniously, collision may be avoided by holding that one section which

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is in conflict with another merely provides for an exception or a specific

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rule different from the general rule contained in the other. A specific rule

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will override a general rule. This principle is usually expressed by the

l a
maxim, “generalia specialibus non derogant”.

ag between
However, this rule can be
merely apparent conflict
adopted only when there is a real and not
provisions, where the words of a
statute, on a reasonable construction thereof, admit of one meaning only
then such natural meaning will prevail. The court shall not attempt an
interpretation based on equity and harmonious construction.
Question 5
(a) Stallworth Ltd., a listed company having a paid up share capital of

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` 11 crore with a turnover of ` 100 crore had appointed an Audit

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Committee which recommended M/s ANC & Associates, a firm of Chartered

c. o Accountants having such qualifications and experience as is required for
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appointment as the auditor of the company. The next Annual General

las Meeting (the AGM) was due on 30.09.2023. The Board disagreed with the
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ag said recommendation of the committee and refer back to it for
reconsideration. The Audit Committee was adamant on appointing the
above firm of the chartered accountants.
Discuss in the light of the Companies Act, 2013:

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

(i) The course of action for Board of Directors to resolve the above
deadlock. What would be your answer, if above situation was that of
filling the casual vacancy of auditors?
(ii) The steps to be taken by the Board of Directors for appointment of
auditors in case there was no requirement of Audit Committee in the
company? (5 Marks)
(b) (i) Explain the protection available for the "whistleblowers" in the context
of the Limited Liability Partnership Act, 2008. (3 Marks)
(ii) Describe the consequences of making a false statement in any return,
statement or other document under section 37 of the Limited Liability
Partnership Act, 2008. (2 Marks)
(c) State the provisions of the General Clauses Act, 1897 relating to ‘gender
and number’. (4 Marks)
Answer
(a) According to section 177 of the Companies Act, 2013 read with the
Companies (Meetings of Board and its Powers) Rules, 2014, in every listed
public company- an Audit Committee shall be constituted by Board of
directors.
Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014,
provides that in case of a company that is required to constitute an Audit
Committee under section 177, the committee, and, in cases where such a
committee is not required to be constituted, the Board, shall take into
consideration the qualifications and experience of the individual or the
firm proposed to be considered for appointment as auditor and whether
such qualifications and experience are commensurate with the size and
requirements of the company.
The audit committee shall recommend the name of an individual or a firm
as auditor to the Board for consideration; the Board shall consider and
recommend an individual or a firm as auditor to the members in the
Annual General Meeting (AGM) for appointment.
If the Board disagrees with the recommendation of the Audit Committee-
It shall refer back the recommendation to the committee for
reconsideration citing reasons for such disagreement.

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(i) In the given question, the Board shall record reasons for its
disagreement with the committee and send its own recommendation

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for consideration of the members in the AGM.

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Section 139(8) provides that the Board may fill any casual vacancy in

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the office of an auditor within 30 days.
s e
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139(11) prescribes that where a company is required to
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constitute an Audit Committee under section 177, all appointments,
including the filling of a casual vacancy of an auditor under this
section shall be made after taking into account the recommendations
of such committee.
Hence, the position will remain same even in case of casual vacancy.
(ii) In case there was no requirement of appointment of an audit
committee then the BOD shall recommend to the members in the
AGM, the name of an individual or a firm which can be appointed as

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auditor after considering qualifications and experience of such
individual or firm and other matter as laid therein.

s emLimited Liability Partnership Act, 2008,
(b) (i) According to section 31 of the

g l a may reduce or waive any penalty leviable
a or employee of a LLP, if it is satisfied that:
(1) The Court or Tribunal
against any partner
• such partner or employee of an LLP has provided useful
information during investigation of such LLP; or
• when any information given by any partner or employee
(whether or not during investigation) leads to LLP or any
partner or employee of such LLP being convicted under this
Act or any other Act.

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(2) No partner or employee of any LLP may be discharged, demoted,

c. o m
suspended, threatened, harassed or in any other manner

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discriminated against the terms and conditions of his LLP or

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employment merely because of his providing information or

gla a
causing information to be provided pursuant to sub-section (1).

a (ii) According to section 37 of the Limited Liability Partnership Act, 2008,

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

If in any return, statement or other document required by or for the
purposes of any of the provisions of this Act, any person makes a
statement:
(a) which is false in any material particular, knowing it to be false; or
(b) which omits any material fact knowing it to be material,
he shall, save as otherwise expressly provided in this Act, be
punishable with imprisonment for a term which may extend to 2
years, and shall also be liable to fine which may extend to 5 lakh
rupees but which shall not be less than 1 lakh rupees.
(c) Gender and number
According to section 13 of the General Clauses Act, 1897, in all
legislations and regulations, unless there is anything repugnant in the
subject or context:
(1) Words importing the masculine gender shall be taken to include
females, and
(2) Words in singular shall include the plural and vice versa.
In accordance with the rule that the words importing the masculine
gender are to be taken to include females, the word men may be properly
held to include women, and the pronoun ‘he’ and its derivatives may be
construed to refer to any person whether male or female. So, the words
‘his father and mother’ as they occur in section 125(1)(d) of the CrPC,
1973 have been construed to include ‘her father and mother’ and a
daughter has been held to be liable to maintain her father unable to
maintain himself.
Where a word connoting a common gender is available but the word
used conveys a specific gender, there is a presumption that the provisions
of General Clauses Act, 1897 do not apply.
Question 6
(a) LKJ Ltd. is a company having paid up share capital of ` 12.50 crore with
total number of members being 3500. The board of directors have called a
general meeting (the meeting) to be conducted on 06.05.2023 at 2.00 pm.
On the date of the meeting the required quorum was not present within
half an hour and hence was adjourned to the next week on 13.05.2023 on

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same day at same venue. In reference to the above scenario in light of the
relevant provisions of the Companies Act, 2013 elucidate upon the

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following queries of the company.

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(i) What will be the fate of the meeting in case two members, in person,
were present at the adjourned meeting held on 13.05.2023?
(ii) eInmcase, on 06.05.2023 a total of 16 members were present but the s e
s chairman owing to the unruly behaviour of some members during the g
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a meeting only 3 members, in person, are present. What will be the fate
meeting had adjourned the same to 13.05.2023 and at the adjourned

of such adjourned meeting?
(iii) In case, where such meeting was called by the requisitionists under
section 100 of the Act and at such meeting the quorum was not
present, what will be the fate of such meeting?
OR

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(a) The Income Tax Authority (the statutory body) has gathered some
.
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information and is of the view that there has been a manipulation of

s
accounts of FGH Ltd. reflecting an incorrect financial position of the

g l a
company. The statutory body intends to get the accounts reopened to

a
reflect correct financial position of the company. In light of the Companies
Act, 2013 elucidate.
(i) the statutory provisions governing the issue of re-opening of accounts
by the Income Tax Authority.
(ii) the voluntary revision of financial statements or board's report by th e
directors.
(iii) For how many preceding financial years the board of directors may
revise the financial statements?
o m
(5 Marks)

m (b) (i) Who c
. reportor
c. o m
will sign the audit report in case of a proprietorship concern

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a
the firm of the auditors and how the qualification/s in the audit

s e g l2013?
will be dealt with by the auditor at the annual general meeting of the

l a a
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company as per the provisions of the Companies Act,
(3 Marks)

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

(ii) Explain the provisions relating to expert's consent included in the
prospectus to be issued in India by the companies incorporated outside
India as per the provisions of the Companies Act, 2013. (2 Marks)
(c) Explain the rules relating to the remittances made by persons other than
individuals requiring approval of RBI as provided in Schedule III to the
Foreign Exchange Management (Current Account Transactions) Rules, 2000
issued under the Foreign Exchange Management Act, 1999 in respect of the
following:
(i) Commission to the agents abroad for sale of residential flats or
commercial plots in India.
(ii) Remittances for consultancy services procured from outside India.
(iii) Remittances by way of reimbursement of pre-incorporation expenses.
(4 Marks)

Answer
(a) (i) According to section 103 of the Companies Act, 2013, in case of a
public company, unless the articles of the company provide for a
larger number, if the number of members is more than 1000 but upto
5000, then the quorum shall be 15 members personally present.
If the quorum is not present within half-an-hour from the time
appointed for holding a meeting of the company:
(a) the meeting shall stand adjourned to the same day in the next
week at the same time and place, or to such other date and such
other time and place as the Board may determine; or
(b) the meeting, if called by requisitionists under section 100, shall
stand cancelled:
Provided that in case of an adjourned meeting or of a change of day,
time or place of meeting under clause (a), the company shall give not
less than three days’ notice to the members either individually or by
publishing an advertisement in the newspapers (one in English and
one in vernacular language) which is in circulation at the place where
the registered office of the company is situated.

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Quorum not present at the adjourned meeting also: Where
quorum is not present in the adjourned meeting also within half an

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hour, then the members present shall form the quorum.

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In the given question, the quorum for the given company having

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3500 members shall be 15 members personally present.
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quorum is not present in the adjourned meeting (i.e.
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13.05.2023) also within half an hour, then the two members present
shall form the quorum.
(ii) The meeting held on 6.05.2023 had 16 members present. Hence, the
quorum was present. However, the meeting was adjourned due to
unruly behaviour of some members and not for want of quorum. In
the said meeting (13.05.2023), only 3 members in person were
present. In such a case, these 3 members shall not constitute the
quorum and hence, shall stand further adjourned.

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(iii) If the quorum is not present within half-an-hour from the time

.
appointed for holding a meeting of the company, the meeting, if

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s OR
called by requisitionists under section 100, shall stand cancelled.

g l a
Answer a
(a) (i) According to section 130 of the Companies Act, 2013, a company
shall not:
a. re-open its books of account and
b. recast its financial statements,

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unless an application in this regard is made by:

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a. the Central Government,
.c o
c. o b. the Income-tax authorities,
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c. the Securities and Exchange Board of India (SEBI),

g a or
a
d. any other statutory regulatory body or authority
e. any person concerned.

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

& an order is made by a court of competent jurisdiction or tribunal to
the effect
a. That the relevant earlier accounts were prepared in a fraudulent
manner; or
b. The affairs of the company were mismanaged during the relevant
period, casting a doubt on the reliability of financial statements.
No order shall be made in respect of re-opening of books of account
relating to a period earlier than 8 financial years immediately
preceding the current financial year. However, where a direction has
been issued by the Central Government under the proviso to section
128(5) for keeping of books of account for a period longer than 8
years, the books of account may be ordered to be re-opened within
such longer period.
(ii) According to section 131 of the Companies Act, 2013, if it appears to
the directors of a company that:
a. the financial statement of the company does not comply with the
provisions of section 129; or
b. the report of the Board does not comply with the provisions of
section 134.
They may prepare revised financial statement or board’s report in
respect of any of the three preceding financial years.
Such revised financial statement or report shall not be prepared or
filed more than once in a financial year.
(iii) The board of directors may revise financial statements in respect of
any of the three preceding financial years.
(b) (i) As per section 145 of the Companies Act, 2013,
The person appointed as an auditor of the company shall sign the
auditor’s report or sign or certify any other document of the company
in accordance with the provisions of section 141(2) (i.e. in case of firm
including LLP is appointed as an auditor of a company, only the
partner who are Chartered Accountants shall be authorized to act and
sign on behalf of the firm).

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The qualifications, observations or comments on financial
transactions or matters, which have any adverse effect on the

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functioning of the company mentioned in the auditor’s report shall

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be read before the company in general meeting and shall be open to

. c o
inspection by any member of the company.
e m
s e(i)m No person shall issue, circulate or distribute in India any glas
(ii) According to section 388 of the Companies Act, 2013,

g la prospectus offering for subscription in securities of a companya
a incorporated or to be incorporated outside India, whether the
company has or has not been established, or when formed will or
will not establish, a place of business in India,-
(a) if, where the prospectus includes a statement purporting to
be made by an expert, he has not given, or has before
delivery of the prospectus for registration withdrawn, his

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written consent to the issue of the prospectus with the

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statement included in the form and context in which it is

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included, or there does not appear in the prospectus a

a s
statement that he has given and has not withdrawn his

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g does not have the effect, where an
consent as aforesaid; or

a
(b) if the prospectus
application is made in pursuance thereof, of rendering all
persons concerned bound by all the provisions of section 33
(Issue of application forms for securities) and section 40
(Securities to be dealt with in stock exchanges), so far as
applicable.
(ii) For the purposes of this section, a statement shall be deemed to be

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included in a prospectus, if it is contained in any report or

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memorandum appearing on the face thereof or by reference

c. o (c) The following remittances by persons other than individuals
incorporated therein or issued therewith.
s
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e shall require
em a
lunder FEMA, 1999
l as g
a Transactions) Rules,
prior approval of the Reserve Bank of India as provided

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read with Schedule III of the FEM (Current Account
2000:

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SUGGESTED ANSWER INTERMEDIATE EXAMINATION: MAY 2024

(i) Commission, per transaction, to agents abroad for sale of residential
flats or commercial plots in India exceeding USD 25,000 or five
percent of the inward remittance whichever is more.
(ii) Remittances exceeding USD 10,000,000 per project for any
consultancy services in respect of infrastructure projects and USD
1,000,000 per project, for other consultancy services procured from
outside India.
Explanation—For the purposes of this sub-paragraph, the expression
“infrastructure’ shall mean as defined in explanation to para 1(iv)(A)(a)
of Schedule I of FEMA Notification 3/2000-RB, dated the May 3, 2000.
(iii) Remittances exceeding five per cent of investment brought into India
or USD 100,000 whichever is higher, by an entity in India by way of
reimbursement of pre-incorporation expenses.

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