Bos 50846 MCQP 4

FINAL COURSE
PAPER : 4
Corporate and
Economic Laws
BOOKLET ON MCQS &

CASE SCENARIOS
BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
© The Institute of Chartered Accountants of India

This booklet has been prepared by the faculty of the Board of Studies. The
objective of the booklet is to provide teaching material to the students to enable
them to obtain knowledge in the subject. In case students need any clarifications
or have any suggestions to make for further improvement of the material
contained herein, they may write to the Director of Studies.
All care has been taken to provide interpretations and discussions in a manner
useful for the students. However, the booklet has not been specifically discussed
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herein may not be taken to necessarily represent the views of the Council or any
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Edition : January, 2021
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Preface
In certain core papers at the Intermediate and Final levels, the question paper
has a dedicated section for 30 marks for objective type questions in the form
of MCQs, comprising of both independent MCQs and case scenario based MCQs.
These MCQs for 30 marks would be compulsory and there would be no internal
or external choice available in respect of such questions. Each MCQ would have
four options out of which you have to choose the one correct option.
The Board of Studies, in its endeavour to assist students in their learning
process, has come out with a MCQ booklet in the above core papers. This
booklet on Final (New) Paper4 : Corporate and Economic Laws comprises of
100 independent MCQs and 30 case scenarios.
Case-scenario based MCQs are all application-oriented and arise from the facts
of the case. You need to apply the relevant provisions of laws to the facts of
the case to choose the correct option. The independent MCQs may be
application-oriented or knowledge-based. Since Final (New) Paper 4 –
Corporate and Economic Laws is largely application-oriented, the independent
MCQs in this subject would be mostly application-oriented.
The independent MCQs and case scenario based MCQs in this subject have to
be answered on the basis of the provisions of Corporate and Economic Laws,
as amended time to time vide the significant notifications and circulars issued
upto 31.10.2020.
This booklet relating to Final (New) Paper 4: Corporate and Economic Laws is
relevant for May 2021 and November 2021 examinations. Students appearing
in November 2021 examinations need to consider the relevant amendments
(containing significant notifications, circulars and other legislative amendments
between 01.11.2020 and 30.04.2021), which would be web-hosted at the BoS
Knowledge Portal.
Please note that before working out the independent MCQs and case scenarios
based MCQs in this booklet, you have to be thorough with the concepts and
provisions of Corporate and Economic Laws discussed in the November, 2020
edition of the Study Material. Further, the students appearing in November
2021 examinations also need to go through the relevant amendments which
will be web-hosted at the BoS Knowledge Portal.

After attaining conceptual clarity by reading the Study Material, you are
expected to apply the concepts and provisions learnt in answering the
independent and case scenario based MCQs given in this booklet. You have to
read the case scenario and MCQs, identify the provisions of Corporate and
Economic Laws involved, apply the provisions correctly in addressing the issue
raised/making the computation required in the MCQ, and finally, choose the
correct answer. This process of learning concepts and provisions of Corporate
and Economic Laws and solving independent and case scenario based MCQs
based thereon will help you attain conceptual clarity and hone your application
and analytical skills so that you are able to write the examination with
confidence and a positive attitude.
W ishing you happy reading!

MULTIPLE CHOICE QUESTIONS
1. In compliance to the Companies Act, 2013, at least one woman Director

shall be on Board of such class or classes of companies as may be
prescribed. Ms. Riya is keen to hold the office of woman Director in a
company. She has selected some companies in which there is a vacancy
for the woman Director. Advice Ms. Riya in selecting the companies
which are mandatorily required to appoint a woman Director:
(a) PQR Limited which is an unlisted company and having paid up
share capital of 150 crore rupees as per the last date of latest
audited financial statements.
(b) ABC Limited which is a listed company and having a turnover of
150 crore rupees as per the last date of latest audited financial
statements.
(c) XYZ Limited which is an unlisted company and having turnover
of 350 crore rupees as per the last date of latest audited financial
statements.
(d) All of the above
2. KDS Agro Pvt. Ltd., a newly incorporated company has not mentioned
the names of first Directors of the company in its Articles of Association.
Referring the provisions of the Companies Act, 2013, who shall be
deemed to be the first Directors of the company?
(a) The members of the company shall be deemed to be the first
Directors of the company.
(b) The subscribers to memorandum of the company shall be deemed
to be the first Directors.
(c) The share holders shall appoint first Directors in the General
Meeting.
(d) None shall be deemed to be the first Directors of the company.
3. The turnover of XYZ Ltd. as on the last date of latest audited financial
statements is 400 crore rupees. An Intermittent vacancy of the women
Director arises on 15th June, 2018 in the company. The immediate

2 CORPORATE AND ECONOMIC LAWS
Board Meeting was held on 14th October, 2018. The vacancy of the
women Director shall be filled up by-------:
(a) Appointment of women Director is not mandatory
(b) 14th August,2018
(c) 14th September, 2018
(d) 14th October, 2018
4. Amar Textiles Limited, a listed company, engaged in the production of
furniture and fittings in Pune. The company is having 50,000 small
shareholders. The small shareholders wanted to elect a small
shareholders Directors amongst themselves so that the issues are
resolved during the Board Meetings at the earliest. 500 small
shareholders served a notice for appointment of a small shareholder in
the Board. Decide the validity of the notice by the small shareholders:
(a) Notice by 500 small shareholders is valid and company may
appoint a small shareholder Director.
(b) Notice by 500 small shareholders is not valid and company may
appoint a small shareholders ‘Director on the requisition of 1000
small shareholders.
(c) Notice by 500 small shareholders is not valid and company may
appoint a small shareholder Director on the requisition of 5000
small shareholders.
(d) Small shareholders Director cannot be appointed in the company
as the company doesn’t fulfil the condition for appointment of
small shareholders’ Director.
5. Mr. Q, a Director of PQR Limited proceeding on a foreign tour for six
months, appointed Mr. Y as an alternate Director to act for him during
his absence. The articles of the company provide for appointment of
alternate Directors. Mr. Q claims that he has a right to appoint alternate
Director. Examine the validity of Mr. Q’s claim.
(a) Claim by Mr. Q is valid as the Articles provide for appointment of
alternate Directors

MCQs & CASE SCENARIOS 3
(b) Claim by Mr. Q is not valid as the authority to appoint alternate

Director has been vested in the board of Directors only and that
too subject to empowerment by the articles.
(c) Mr. Y cannot be appointed as alternate Director as Mr. Q proceeds
on a foreign tour for six months only.
(d) None of the above
6. Mr. Nagarjuna decided to resign from MGT Private Limited due to pre
occupation. He sent his resignation letter dated 12thJune, 2017 to the
Company stating that he will resign w.e.f.15thJune, 2017. Due to non
receipt of any communication from the Company he dropped a mail on
17th June, 2017, to confirm whether Company has received his letter.
Finally, company received his letter on 25thJune, 2017. In this case, from
which date his resignation will be effective?
(a) 12thJune,2017
(b) 15thJune,2017
(c) 17thJune,2017
(d) 25thJune,2017
7. HCQ Pharma Ltd. a company listed with the Bombay Stock Exchange
incorporated on January 20, 2002. The Directors of the company want
to appoint Mr. Sanjay who is a Managing Partner of Sanjay and
Associates LLP, firm of Lawyers, as an Independent Director of the
company at the AGM to be held on April 25, 2020. Mr. Sanjay is acting
as a legal advisor to Genesis Laboratory Ltd, Associate Company of HCQ
Pharma Ltd. Adv. Sanjay charged consultation fees as given below.
Year Fees Gross turnover of Sanjay and
Associates
2017-18 2,00,00,000 40,00,00,000
2018-19 10,00,00,000 50,00,00,000
2019-20 0 45,00,00,000

Identify the correct statement from the following:

(a) HCQ Pharma Ltd. can appoint Mr. Sanjay as an Independent
Director irrespective of the fact that he is Legal Advisor to its
Associate Company.
(b) HCQ Pharma Ltd. cannot appoint Mr. Sanjay as an Independent
Director as he is Managing Partner of the firm which is legal
advisor to its Associate Company irrespective of the amount of
fees charged by the firm to its Associate company.
(c) HCQ Pharma Ltd. cannot appoint Mr. Sanjay as an Independent
Director as he is Managing Partner of the firm which is legal
advisor to its Associate Company and the fees charged by the
firm exceeds the percentage as specified in the act during one
out of the three immediately preceding financial year.
(d) HCQ Pharma Ltd. can appoint Mr. Sanjay as an Independent
Director even though he is the Managing Partner of the firm which
is legal advisor to its Associate Company as the firm did not charge
any fees during immediately preceding financial year.
8. The Board of Directors of MNO Ltd is willing to appoint Mr. R as the
Additional Director of the company. The Articles of Association of the
company is silent about the appointment of the Additional Director. The
Managing Director of the company is of the view that the Board does
not have the power to appoint the Additional Director. Validate the
above situation in the lights of the legal provision of the Companies Act
2013.
(a) An ordinary resolution in general meeting needs to be passed for
appointment of Additional Director.
(b) A special resolution in general meeting needs to be passed for
appointment of Additional Director.
(c) A provision in Articles of Association is needed conferring the
power to Board of Directors.
(d) The Board has the power to appoint the Additional Director.

9. Mr. Z is proposed to be appointed as the Director in a public company

RLP Ltd. Mr. Z is already a Director in one dormant company, in two
section eight company, in eight public limited company and in nine
private limited companies. Two out of nine private limited companies
are subsidiaries of public limited companies. Determine whether Mr. Z
can accept the new Directorship in RLP Ltd.
(a) No, as Mr. T is already a Director in twenty companies.
(b) No, as Mr. T is already a Director in ten public limited companies.
(c) Yes, as Section eight companies and dormant companies are
excluded in the limit of twenty companies.
(d) Yes, as there is no limit on permissible Directorship.
10. ABC Ltd is a government company with fourteen Directors. They are
willing to appoint two more Directors in the company to enable the
effective management of the company. Mr. X, the Managing Director of
the company is of the view that appointment of two more Directors
would be a violation of the Companies Act. Examine the above situation
in lights of the legal provision.
(a) Appointment of more than fifteen Directors is violation of
Companies Act.
(b) Appointment of more than fifteen Directors can be done by
passing a special resolution.
(c) The Companies Act is silent about the maximum number of
Directors in a company.
(d) Government companies are exempted from the provision of
maximum number of Directors needed.
11. Due to non-compliance of certain requirements under the Companies
Act, 2013 not amounting to fraud, a company was required to re-state
its financial statements for the financial year 2016-17 during the current
year. After the financial statements were re-stated it was found that the
Managing Director (MD) of that period, who is now retired, was paid

excess remuneration to the extent of rupees 5,00,000. State whether

such excess amount is recoverable.
(a) Nothing can be recovered from the ex-MD
(b) Excess amount shall be recovered irrespective of whether at
present he is MD or not
(c) Only 50% of excess amount is recoverable because no fraud is
involved
(d) Only 25% of excess amount is recoverable because no fraud is
involved
12. Capable Limited appoints Mr. Vikas as the Managing Director of the
company. The Board of Directors entrusted him with some powers. Mr.
Vikas is not ready to do administrative acts authorised by the Board of
Directors keeping in view that he shall been entrusted with substantial
powers of the management. Decide the acts which Mr. Vikas can
undertake:
(a) To draw and endorse any cheque on the account of the company
in any bank
(b) To sign the financial statements of the company
(c) To draw and endorse any negotiable instrument
(d) To sign any certificate of share
13. You are a Whole Time Director of Choco-chips Private Limited and wishes
to appoint Mr. Vanilla Sequera as its Managing Director who has attained
the age of 72 years. However, the Board has got to know about the fact
that no company shall appoint or continue the employment of any person
as Managing Director, Whole-Time Director or Manager who is below the
age of twenty-one years or has attained the age of seventy years. You
are requested by the board to evaluate the situation and suggest
whether he can be appointed as Managing Director?
(a) Yes, he can be appointed as MD by the Board of Directors;
(b) No, he cannot be appointed as MD at all;

(c) Yes, he can be appointed as MD by shareholders through Special

Resolution;
(d) Yes, he can be appointed as MD by making an application to the
NCLT.
14. Mr. A was appointed as a Manager of PQR Ltd for the period of five years
on 20thJune, 2015. Considering his performance and dedication, before
completion of his tenure, management decided to re-appoint him as a
Manager. On which date his re-appointment will be considered valid?
(a) 24th June, 2019
(b) 1st February, 2019
(c) 12th March, 2018
(d) 10th September, 2018
15. Lockworth Safety Gears Private Limited pays remuneration to its
Directors on yearly basis. Company has a Whole Time Director on Board.
Currently they appointed Mr. X as a Managing Director of the Company.
Now Company has to keep in mind that overall remuneration to the
Directors including Managing Director, Whole Time Director and
Manager shall not exceed maximum limit mentioned under the Act. If
there is more than one Managing Director/ Whole Time Director/
Manager, how much maximum remuneration is allowed in a financial
year.
(a) 3 % of net profits;
(b) 5 % of net profits;
(c) 10 % of net profits;
(d) 11 % of net profits;
16. Amarco Company Limited, a company incorporated under the
Companies Act, 2013, wants to appoint Mr. Ashwin as a Whole Time
Director of the Company. Mr. Ashwin travels to abroad for other
business commitments and usually resides outside India for a period of
12 months. Now Mr. Ashwin wants to know the eligibility conditions,
with respect to the condition of resident in India, for the appointment

of Whole Time Director. You as a qualified Chartered Accountant and a

dear friend to Mr. Ashwin is required to help him out considering the
provisions of the Companies Act, 2013 ∗
(a) Mr. Ashwin should be a resident in India i.e. staying in India for
a continuous period of not less than twelve months immediately
preceeding the calendar year in which he is to be appointed as a
Whole Time Director.
(b) Mr. Ashwin is not required to comply with the condition of
resident in India, as the condition of staying in India for a
continuous period of not less than twelve months immediately
preceding the calendar year, does not applies to a company
established in the Special Economic Zone.
(c) Mr. Ashwin should be a resident in India i.e. staying in India for
a continuous period of not less than twelve months immediately
preceding the date of his appointment as a Whole Time Director.
(d) Mr. Ashwin is not required to comply with the condition of
resident in India, as the condition of staying in India for a
continuous period of not less than twelve months immediately
preceding the date of his appointment, does not applies to a
company established in the Special Economic Zone.
17. F&I Limited, a listed company under the Companies Act, 2013 has
Mr. Abhishek as Chief Financial Officer of the Company. Mr. Abhishek
has been in full time employment at F&I Ltd.. Now Mr. Abhishek has
been offered to be a Whole Time Director at M&N Limited, in which more
than 51% of the paid up share capital is held by F&I Limited ∗. Mr.
Abhishek seeks your advice whether he can proceed with the offer of
Whole Time Director considering the provisions of the Companies Act,
2013.
(a) Mr. Abhishek may proceed with the offer of Whole Time Director
at M&N Ltd., as Key Managerial personnel shall not be disentitled
∗
(Note: Amarco Company Limited is a company established in special economic
zone)
∗
Note: Mr. Abhishek continues to hold the office of Chief Financial Officer at F&I
Limited

from being a Whole Time Director in any company after obtaining

the permission of Board of Directors of F&I Company.
(b) Mr. Abhishek shall not be able to proceed with the offer of Whole
Time Director at M&N Ltd., as a whole time Key Managerial
Personnel shall not hold office in more than one company at the
same time.
(c) Mr. Abhishek may proceed with offer of Whole Time Director at
M&N Company, as that company is a subsidiary of F&I Company.
(d) Mr. Abhishek shall not be able to proceed with the offer of Whole
Time Director at M&N Ltd., as a whole time Key Managerial
Personnel shall not hold office in more than one company at the
same time including its subsidiary company.
18. Hasmukh Limited, incorporated under the Companies Act, 2013 have a
whole-Time Director (WTD) Mr. Ram who has been re-appointed in the
Annual General Meeting (AGM) held on 28th August 2019. Mr. Ram has
served as WTD of the company for nearly 4 years and his tenure of
office would expire on 24th December 2020. Further, the Company’s
upcoming AGM is scheduled to take place on 25th October 2019. In the
said AGM, Mr. Ram has been re-appointed as the WTD for his last
tenure. You are required to comment about the validity of the re-
appointment of Mr. Ram by the company?
(a) The re-appointment of Mr. Ram is valid in law as re-appointment
can be made for a period not exceeding 5 years at a time
provided the articles of the company provides for such
appointment before one year to the expiry of his term.
(b) The re-appointment of Mr. Ram is invalid in law as re-
appointment cannot be made earlier than one year before the
expiry of his term.
(c) The re-appointment of Mr. Ram is valid in law provided the
resolution for the appointment has been passed with the consent
of all the Directors present at the Board Meeting for approving
the appointment at the AGM.

(d) The re-appointment of Mr. Ram is invalid in law as no special

resolution for re-appointment has been passed at the AGM for
approving the same.
19. M.D.H. Masala Enterprises Limited, a public company incorporated
under the Companies Act, 2013 is into the business of trading of various
chat masalas used in daily food items. Mr. Vinayak, was appointed as
the Chief Financial Officer of the company on 2nd July, 2017 by the
board of Directors. In the upcoming Board Meeting scheduled on 30th
April 2020, Mr. Rinkesh aged 55 years was appointed as Managing
Director of the company. The Board of Directors also made a re-
appointment for another term of 3 years in the said meeting. Further in
the Annual General Meeting of the company held on 30th June 2020,
the appointment of Mr. Rinkesh was approved by the company and the
members also noted the reappointment of Mr. Vinayak as Chief Financial
Officer for another term of 3 years. You are required to state whether
the reappointment of Mr. Vinayak is valid in law?
(a) Yes, the reappointment of Mr. Vinayak is valid in law as the Board
of Director may appoint him for such term as it thinks fit.
(b) No, the reappointment of Mr. Vinayak is not valid in law as no
Key Managerial Person shall be reappointed earlier than one year
before the expiry of his term.
(c) No, the reappointment of Mr. Vinayak is not valid in law as the
reappointment has not been subsequently approved by the
company in the General Meeting.
(d) Both (b) and (c)
20. Go Dairy Company Limited, a public company incorporated under the
Companies Act, 2013 is into the business of selling dairy products
through online mode. Mr. Dhaval is holding the position of the Whole
Time Director in the Company. During the financial year ended March
2020, the office of Mr. Dhaval got vacated on attracting disqualifications
under section 164 of the Companies Act, 2013. You are required to

advise how shall the board of Directors fill the vacancy of Mr. Dhaval
considering the provisions of the Companies Act, 2013?
(a) The vacancy shall be filled by the Board at a meeting of the Board
within a period of three months from the date of such vacancy.
(b) The vacancy shall be filled by the Board at a meeting of the Board
within a period of six months from the date of such vacancy.
(c) The vacancy shall be filled by the Board at a meeting of the Board
within a period of two months from the date of such vacancy.
(d) The vacancy shall be filled by the Board at a meeting of the Board
within a period of one month from the date of such vacancy.
21. CK Limited was incorporated on 25th June, 2018. CK Limited wants to
make donations to a political party. It wants to know when can it make
such donations to political party?
(a) After one year from the date of its incorporation.
(b) After two years from the date of its incorporation.
(c) After three years from the date of its incorporation.
(d) After five years from the date of its incorporation.
22. Where at any time the number of interested Directors exceeds or is
equal to --------- of the total strength of the Board of Directors, the
quorum shall be the number of non-interested Directors who are present
at the meeting and not less than two.
(a) 1/2
(b) 2/3
(c) 1/3
23. In case of a company where minimum ------------------ per cent members
(in number) are relatives of promoters or are related parties, they are
not precluded from voting on a resolution for approving any related
party transaction.
(a) 80

(b) 85
(c) 90
(d) 95
24. Out of the total strength of six Directors of SQ Ltd, five are attending a
Board Meeting to consider the investment of funds of the company. The
resolution relating to investment shall be taken as passed in which of
the following cases:
(a) When all the five Directors attending the meeting consent to it
(b) When any four Directors out of five consent to it

(c) When any three Directors out of five consent to it
(d) Investment proposal must be consented to by the total strength
of Directors (six Directors in this case)
25. In case of a Board Meeting which is conducted through the means of
video conferencing, the draft minutes shall be circulated among all the
Directors within-----------------------days of the meeting either in writing
or in electronic mode as may be decided by the Board.
(a) 5
(b) 10
(c) 15
(d) 20
26. Audit Committee may make omnibus approval for:

(a) Making of investment in other companies
(b) Related party transactions proposed to be entered into by the
company
(c) Transferring of non-functional undertaking
(d) All of the above

27. Firothi Limited, incorporated under the Companies Act, 2013, has 7
directors on its Board of Directors (BOD). One of the director Mr.
Avinash, got expired and a casual vacancy is created in its office. Now
the Board of Directors wants to appoint another person Mr. Rakesh to
fill the vacancy so created. Now the Board of Directors have consulted
you, a qualified Chartered Accountant, to advise them within how much
time period, Mr. Rakesh can be appointed to fill the vacancy considering
the provisions of the Companies Act, 2013.
(a) The casual vacancy shall be filled by the BOD at the earliest but
not later than immediate next board meeting or three months from
the date of creation of such vacancy, whichever is later.
(b) The casual vacancy shall be filled by the BOD by passing a
resolution at the meeting of the BOD and such appointment shall
be subsequently approved by the members in the immediate next
general meeting.
(c) The casual vacancy shall be filled by the BOD at the earliest but
not later than immediate next board meeting mandatorily.
(d) The casual vacancy shall be filled by the company at the earliest
but not later than three months from the date of creation of such
vacancy.
28. State which statement is correct as regards the preservation of books
and papers of amalgamated company:
(a) It can be disposed any time after 1 year with permission of Board
of Directors of Transferee Company.
(b) It can be disposed with permission of Central Government after 5
years
(c) Not be disposed of without prior permission of the Central
Government
(d) It cannot be disposed.

29. Seafood Limited, incorporated on 1st April, 2016. The company has
conducted four Board Meetings during the financial year 2016-17 i.e. on
6thApril, 2016, 28th August, 2016, 30thSeptember, 2016 and 30th March,
2017. Decide the validity of the frequency of the Board Meeting:
(a) There is no contravention of the provision related to holding of
Board Meeting as 4 Board Meetings has been held during the
year.
(b) There is no contravention of the provision related to holding of
Board Meeting as the first Board Meeting was held within 30 days
of incorporation.
(c) There is a contravention in respect of the conduct of the Board
Meetings as gap between two consecutive Board Meetings (6th
April and 28th August) is 143 days and gap between two
consecutive Board Meetings (30th September and 30th March) is
181days.
(d) There is a contravention in respect of the conduct of the Board
Meetings as gap between two consecutive Board Meetings (6th
April and 28th August) is 123 days and gap between two
consecutive Board Meetings (30th September and 30th March) is
141days.
30. The Board of Directors of Very Well Ltd. wants to contribute ` 60,000 to
a charitable organization during the financial year 2017-2018. During
the financial year 2015-2016, the company suffered losses. The
Directors are contemplating to contribute the said amount inspite of the
losses. In this connection, state whether the Board of Directors can
contribute to charitable organisation?
(a) No, Very Well Ltd. cannot contribute ` 60,000 in 2017-2018 as
the company suffered losses in 2015-2016.
(b) No, the Board of Directors is not authorized to contribute to
bonafide charitable and other funds.
(c) No, permission of the company in general meeting shall be
required for contribution to bonafide charitable and other funds.

(d) Yes, Very Well Ltd. can contribute ` 60,000 to a charitable

organization inspite of losses in 2015-2016 provided it is to a
bonafide charitable fund.
31. Mayur Textiles Private limited was incorporated on 23rd October, 2017.
As per the compliance requirement, Company shall hold its annual
general meeting(AGM) within 9 months from the date of closure of
financial year and file financial statements with MCA within due date.
What is the due date for holding a Board Meeting for approval of
financial statements?
(a) Latest by 30th September, 2018;
(b) Latest by 30th December, 2018;
(c) Latest by 31st December, 2018;
(d) Latest by 31st March, 2019
32. ABC, a Private Ltd., with 10 Board of Directors was served notice of the
Board Meeting 7 days prior to said meeting on their postal addresses.
Mr. M is hospitalized due to some severe illness. Mr. Y is going to London
before the Board Meeting. Mr. X and Mr. B went to Australia for some
company business. Mr. A is busy with his daughter’s marriage and
unable to attend the meeting. Mr. E’s mother is hospitalized so he is
busy taking care of his mother but he assures to attend the meeting via
video conferencing. Mr. D and Mr. P were scheduled to arrive for the
meeting at 2 pm on the same day; however, the flight got delayed by 8
hours. Mr. G and Mr. H are in the town and available for the scheduled
Board Meeting. Could the Board Meeting be held?
(a) The meeting can be held in the evening and Director D & Director
P can join later on
(b) The meeting cannot be held because quorum is incomplete
(c) The quorum is complete and the Directors can proceed with the
meeting
(d) Meeting is cancelled.
33. Rameshwaram Pvt. Ltd. was incorporated on January 12, 2018. The
company needs to pass a resolution for the purchase of raw material.

The copy of the resolution along with all the necessary documents were
circulated to all the Directors. The company has 10 Directors Mr. Ram,
Mr. Kamal, Mr. Raj, Mr. Firoz, Mrs. Nupur, Mr. Bharat, Mr. Vinod, Mrs.
Rekha, Mr. Kapoor and Mr. Jeevan. Mr. Raj and Mr. Ram were abroad
at the time of passing the resolution. Mr. Firoz, Mr. Bharat, Mrs. Nupur
and Mr. Kamal took objection before the chairman against the passing
of the resolution and want to discuss it further in the meeting. Find out
the correct statement?
(a) Since the resolution is passed by majority of the members there
is no need for further discussion on it as it was duly circulated to
all the Directors.
(b) Mr. Ram and Mr. Raj cannot raise any objection as they were out
of India while passing the resolution.
(c) The objection is sustainable as it is made by one third of the
members of the board and the meeting is held for further
discussion
(d) The objection is sustainable as it is made by two third of the
members of the board and the meeting is held for further
discussion
34. Jupiter Shopping Mall Limited was incorporated on 3rdDecember, 2016.
As on 31stMarch 2018, it had free reserves of ` 50.00 lacs and its
Securities Premium Account showed a balance of ` 7.50 lacs. One of its
Directors Raha has a leaning towards a particular political party in which
his other family members are actively involved. Raha convinced the
other two Directors of the company i.e. Promila and Rana to contribute
a sum of ` 10.00 lacs to this political party. Accordingly, the Board of
Directors held a meeting on 16 December, 2018 and passed a resolution
th
to contribute the decided amount. Advise the company as to how much

amount they can contribute to a political party in the FY 2018-19.
(a) The company cannot contribute any amount to a political party
in the FY 2018 -19.
(b) The company can contribute maximum` 2.50 lacs in the
FY 2018-19.

(c) The company can contribute maximum `3.75 lacs in the

FY 2018-19.
(d) The company can contribute maximum `5.00 lacs in the FY 2018-19.
35. What is the circumstance in which notice can be served for inspection
of books etc. under section 206(3) of Companies Act, 2013
(a) If no information or explanation is furnished to the Registrar
which in the time specified under section 206(1)
(b) If the Registrar on an examination of the documents furnished is
of the opinion that the information or explanation furnished is
inadequate
(c) If the Registrar is satisfied on a scrutiny of the documents
furnished, that an unsatisfactory state of affairs exists in the
company and the company and the information or documents do
not disclose a full and fair statement of the information required.
(d) All of the above.

36. The shareholders of Ravi Ltd. passed a special resolution that the affairs
of the company ought to be investigated. The company submitted the
special resolution to the Central Government.
(a) Power of the Central Government to order an investigation is
discretionary.
(b) Power of the Central Government to order an investigation is
mandatory.
(c) Central Government is not empowered to pass order of
investigation in case of non-government companies.
(d) None of the above.
37. In a company there is a serious apprehension of cornering the share of
the company by a group of unscrupulous persons likely to result in
change in the Board of Directors which may be prejudicial to the public
interest. The company seeks your advice as to how it can impose

restrictions on the transfer of shares of the company under the

provisions of the Companies Act, 2013.
(a) Application can be made to Tribunal under section 222 for
imposition of restriction on securities.
(b) Application can be made to Central Government under section
222 for imposition of restriction on securities.
(c) Application can be made to Tribunal under section 216 for
investigation into ownership of company.
(d) Application can be made to Central Government under section
216 for investigation into ownership of company.
38. After perusal of the inspector’s report it appears to the Central
Government that a company is liable to be wound up under this Act, it
may cause to be presented to the Tribunal,
(a) A petition for the winding up of the Company on the ground that
it is just and equitable that it should be wound up
(b) A petition for the restructuring of the Company on the ground
that it is just and equitable that it should be restructured
(c) A petition for the merger of the Company on the ground that it
is just and equitable that it should be merged
39. Registrar issue a written notice to Miss Neha who is an ex-employee of
Himalya Ltd. demanding information and explanation and production of
documents. She ignored the notice considering that she is no more an
employee of the company. Choose the right option in the light of the
Companies Act, 2013.
(a) She is liable to provide such information.
(b) Officer in place of Miss Neha is liable to provide such information.
(c) Company is liable to provide such information.

40. Offences covered under section 447 of this Act shall be cognizable and
no person accused of any such offence shall be released on bail.
However, on the direction of Special court, following person may be
released on bail.
(a) under the age of 16 years
(b) a women
(c) sick or infirm person
(d) any of the above
41. Mr. Sharma who was a Key Managerial Personnel (Manager) of XYZ Ltd.
retired on 12th May 2018. An examination of the final accounts of the
company for the year ended on 31st March 2018, the Registrar of
Companies found some serious irregularities in writing off of the huge
amounts of bad debts and no satisfactory explanation was provided for
the same from the company. In such a situation the Registrar of
Companies wants some explanation from the company and Mr. Sharma.
Can the ROC seek explanation from Mr. Sharma? Advice –
(a) No, Mr. Sharma can’t be called upon, as he does not hold the
position in the company any more.
(b) Mr. Sharma can be called upon within a period of one year from
the date of completion of his service.
(c) Mr. Sharma can be called upon for necessary explanation within
a period of 180 days from the date of leaving his office through
a written notice served upon him.
(d) Mr. Sharma can be called upon by the Registrar through a written
notice served on him without any time period limit.
42. A group of creditors of X Limited makes a complaint to the Registrar of
Companies. They asserted that the management of the company is
indulged in destruction and falsification of the accounting records of the
company. The complainants request the Registrar to take immediate
steps to stop the management to tamper with the records. The
complaint was received in the morning on 1st January 2019 and the ROC

entered the premises within half an hour for the search. The course of
action that can be taken by Registrar are:
(a) Registrar may enter and search the place where such books or
papers are kept and seize them.
(b) Registrar may enter and search the place where such books or
papers are kept and can seize only after obtaining an order from
the special court.
(c) Registrar may enter and search the place where such books or
papers are kept only on the order of the NCLT.
(d) Registrar may enter and search the place where such books or
papers are kept and give an opportunity to the company to
represent why such documents may not be seized.
43. Mr. Raman, an Inspector under section 212 of the Companies Act, 2013
investigates into the affairs of X Ltd. During the process of investigation,
Mr. Raman evidenced relevant facts and information regarding the
transactions made by Company X Ltd. with its subsidiary Y Ltd. During
the course of investigation, Mr. Raman required to investigate the affairs
of Y Ltd. Examine whether Mr. Raman can proceed with the investigation
of the affairs of subsidiary company in the light of provisions of the
(a) Mr. Raman shall be able to proceed with the investigation into
the affairs of subsidiary company after obtaining the prior
approval of the Director, Serious Fraud Investigation Office.
(b) Mr. Raman shall not be able to proceed with the investigation
into the affairs of subsidiary company as it is not within its
powers under section 219 of the Companies Act, 2013.
(c) Mr. Raman shall be able to proceed with the investigation into
approval of the Tribunal in whose jurisdiction the registered
office of the subsidiary company is located.
(d) Mr. Raman shall be able to proceed with the investigation into
approval of the Central Government.

44. Ultra Ltd., a public company was incorporated on 13th May 2019. After
one year of its incorporation the shareholders of company came to know
that some transaction inside the company was not in accordance with
the provision of the Companies Act and also prejudicial in the interest
of company and its members, so some shareholder decided to make
application to this Central Government to conduct investigation into
affairs of the company by appointing inspector under the provision of
the Companies Act, 2013.
Does application of shareholder can be acceptable under the provision
of Companies Act, 2013.
(a) No, shareholder didn’t have right to make application under
Section 210 of Companies Act, 2013.
(b) Yes, shareholder after passing special resolution can make
application to Central government to conduct the investigation
under section 210 of Companies Act, 2013.
(c) Yes, shareholder can make application without special resolution
as company business is not in interest of company and member.
(d) No, shareholder even after passing special resolution cannot
make application under Section 210 of Companies Act, 2013.
45. Central Government has appointed Mr. Rishikesh as an inspector to
conduct investigation in the affairs of company of Overtake Ltd. in
accordance with provision of the Companies Act, 2013. During
investigation it was found that company has reduced the position of Mr.
Gopal (who was senior employee of company earlier), within few days
after start of investigation. Company didn’t try to obtain order from
tribunal before taking this action. Mr. Gopal wants to know whether
company have right to reduce rank of employee during investigation.
(a) Yes, reduction of rank is internal matter of company, so no court
should interfere in this matter.
(b) Yes, Company if found employee is not suitable for position then
can reduced the rank of employee.

(c) No, Company cannot reduce the rank of employee during

investigation without approval of tribunal within 30 days from
date of application.
(d) Yes, Company can reduce rank without approval from tribunal
within 30 days from date of application .
46. While conducting an inspection under section 207 of the Companies Act,
2013, the inspector noticed various irregularities. The inspector seeks
necessary explanations from the Directors concerned regarding those
irregularities. The Director furnished necessary explanations and
accordingly the inspector prepared the inspection Report under section
208 of the Act. You are required to state that to whom the inspection
report shall be submitted and whether an inspector has the right to
make recommendations for further investigation?
(a) The inspection report shall be submitted to the Tribunal and the
Inspector has a right to make recommendations for further
investigation provided he has given his reasons in support for
such recommendations.
(b) The inspection report shall be submitted to the Registrar of
Companies and the Inspector has a right to make
recommendation for further investigation provided he has given
his reasons in support for such recommendations.
(c) The inspection report shall be submitted to the Central
Government and the Inspector has a right to make
recommendations for further investigation provided he has given
his reasons in support for such recommendation.
(d) The inspection report shall be submitted to the Serious Fraud
Investigation Office (SFIO) and the Inspector has a right to make
recommendations for further investigation provided he has given
his reasons in support for such recommendation.
47. A Ltd. was amalgamated into AB Ltd. AB Ltd had held 100 % shares in
AC Ltd. Both AB Ltd and AC Ltd held 10000 shares in A Ltd. before the
amalgamation took place. A Ltd had 100000 issued shares in total before
amalgamation and 70000 shares therein were held by B Ltd who also
later became shareholder in AB Ltd under amalgamation. But the

shareholders apart from B Ltd. (and excluding AB Ltd., and AC Ltd)

holding 10000 shares did not become shareholders in the new AB Ltd.
Assuming all other conditions for Amalgamation in the nature of merger
are fulfilled, would this be:
(a) Amalgamation in Nature of Merger
(b) Amalgamation in Nature of Purchase
(c) Both of these
(d) None of these
48. B Limited was demerged to B Reality Limited and B Limited. What type
of demerger is this?
(a) Total demerger
(b) Partial demerger
(c) Internal reconstruction
(d) Demerger in the nature of purchase
49. The time limit within which the representation if any, of Sectoral
regulators shall be made within _________ from the date of receipt of
Notice of the meeting to be called, held and conducted by the Tribunal
(a) 45 days
(b) 30 days
(c) 60 days
(d) 90 days
50. The scheme of compromise or arrangement should be approved by the
members or class of members or creditors or class of creditors. What is
the minimum requirement for the same:
(a) It shall be approved by more than 50% majority in number of
members, class of members, creditors and class of creditors who
are present and voting at the meeting.
(b) It shall be approved by more than 75% majority in value of
members, class of members, creditors or class of creditors who

(c) It shall be approved by more than 75% majority in number of

members, class of members, creditors and class of creditors who
(d) Both (a) and (b) together
51. Mr. Anand who was a minority shareholder, was offered a price for
purchase of his shares by the majority. The same was disbursed within
the stipulated time as per the Act. However, Mr. Anand was out of town,
and returned only after 2 months of the stipulated deadline. Will he be
able to receive the amount. If yes, upto what period?
(a) Yes, upto 6 months
(b) Yes, upto 9 months
(c) Yes, upto 1 year
(d) No, it’s time barred
52. Under what circumstances the meeting of the creditors or class of
creditors to the scheme of compromise or arrangement may be
dispensed by the NCLT ?
(a) if 70% of the creditors in value agree and confirm to the scheme
by way of affidavit
(b) if 80% of the creditors in value agree and confirm to the scheme
by way of affidavit
(c) if 90% of the creditors in value agree and confirm to the scheme
by way of affidavit
53 PQR Limited and LMN Limited have proposed Scheme of Amalgamation
between them under Section 232 of the Companies Act 2013. They are
seeking your advice on which of the following approvals can be asked
for in the petition to be filed before NCLT for the proposed scheme.
(a) Change in Main Object Clause of Memorandum of Association;

(b) Reduction of Share Capital;

(c) Dissolution of the Transferor Company without winding up;

(d) All of the above.
54. With whom will the Central Government file an application if it is of the
opinion that such a scheme is not in public interest or in the interest of
the creditors?
(a) Cannot move an application
(b) it may file an application before the Tribunal
(c) it may file an application before the Parliament
(d) it may be through special leave filed before Supreme Court
55. ABHI Limited is a wholly owned subsidiary company of ETERNAL
Limited. ETERNAL Ltd., makes an application for merger of Holding and
Subsidiary Companies under the section 232 of the Companies Act,
2013. The Company Secretary of the ETERNAL Ltd., states that company
cannot apply for merger under section 232 of the said Act. He further
stated that the company shall have to apply for merger as per section
233 i.e. Fast Track Merger. State the correct statement in terms of the
validity of the difference in the opinion of the Company Secretary-
(a) Opinion of the Company Secretary of the ETERNAL Ltd. is valid
holding that merger shall be as per section 233.
(b) Opinion of the Company Secretary of the ETERNAL Ltd. is invalid
as merger shall be possible only as per section 232.
(c) Opinion of the Company Secretary of the ETERNAL Ltd. is invalid
as the provisions given for fast track merger in the section 233
are of the optional nature.
(d) Opinion of the Company Secretary of the ETERNAL Ltd. is invalid
as the provisions given for fast track merger in the section 233
can be made between only small companies.
56. The NCLT has passed a order approving the merger of RGL Pvt. Ltd and
RVGL Limited. The order has been passed by the NCLT on 25th January,
2020. The order is effective from 1st March, 2020 and has been received
by RGL Pvt.Limited on 27th January, 2020. Which of the following

statements is most appropriate as regards submitting order to the

Registrar of Companies?
(a) RGL Pvt. Ltd has to submit the order to the ROC by 24th
February, 2020, being 1 month from the date of passing of order
by the NCLT.
(b) RGL Pvt.Ltd has to submit the order to the ROC by 26th February,
2020, being 30 days from the date of receipt of order passed by
the NCLT.
(c) RGL Pvt. Ltd has to submit the order to the ROC by 1st April,
2020, being 30 days from the date of receipt of order passed by
the NCLT being effective.
(d) RGL Pvt.Ltd has to submit the order to the ROC by 26th April,
2020, being 3 months from the date of receipt of order passed
by the NCLT.
57. Court passes the order to Pento Laboroties Ltd. for conducting meeting
of the member for considering the scheme of compromise and
arrangement. Company sent notice of meting to all of its 1000 members
holding total 30 lakh shares. On the date of meeting only 580 members
holding 18 lakh shares attend the meeting and 400 members holding 14
lakh voted in favour of the scheme of compromise and arrangement and
remaining voted against the scheme. With reference to the provision of
Companies Act, 2013, state whether scheme get proper required
approval of members or not.
(a) Yes scheme of compromise and arrangement get proper approval
of 3/4th of value of members or class or members.
(b) No, scheme of compromise and arrangement didn’t get proper
approval of 3/4th of value of members or class or members.
(c) Yes scheme of compromise and arrangement get proper approval
of 50% of value of members or class or members.
(d) No, scheme of compromise and arrangement didn’t get proper
approval of 50% of value of members or class or members.

58. The profits of Keep Growing Limited for the financial year 2018-2019
goes down considerably due to recession. Therefore Board of Directors
bonafide didn’t recommend any dividend for the year. At the annual
general meeting of the company, a group of members objected to the
Board’s decision. On refusal by the Baoard, the menbers who feel
oppressed move to the Tribunal and complain against the Board. In the
given scenario examine which of the following(s) is/are true?
(a) Contention of the members shall be tenable.
(b) The act of Board of Directors, not to recommend any dividend
shall amount to oppression and mismanagement.
(c) The act of Board of Directors who acted bona fide, not to
recommend any dividend shall not amount to oppression and
mismanagement.
(d) (a) and (b)
59 The majority of the shareholders of Vegan Industries Limited passed a
resolution to alter its Article of Association and give the Director a power
to transfer the shares of any shareholder who compete with the
company’s business. Mr. Akshat who is a shareholder of Vegan
Industries Limited also carried on a competing business, challenged the
validity of the alteration and claimed it as oppression against minority.
State the validity of contention of Mr. Akshat?
(a) Not valid, because alteration of Article of Association is done as
per the provisions of the Act.
(b) Not Valid, because it was done in the interest of the company.
(c) Valid, because the act complained of are oppressive and
prejudicial to the interest of the company
(d) (a) and (b)
60. Monster Private Limited is a company in which there are 9 shareholders.
The issued and paid up share capital of the said company is 1 Crore
Consisting of 1 Lakhs Shares of ` 100 each. They want to file an
application before the National Company Law Tribunal alleging various
acts of fraud and mismanagement. State who can apply to the National

Company Law Tribunal for relief against oppression and

mismanagement under section 244 of the Companies Act, 2013?
(a) Atleast hundred member
(b) Atleast two members
(c) Atleast ten members
(d) At least one member
61. Astistav Private Limited is a company with ten shareholders. A member
holding less than one-tenth of the share capital of the company apply
to the Tribunal for relief against oppression and mismanagement? State
whether a member have a right to apply to the tribunal in above
situation:
(a) A single Member cannot apply to the Tribunal for relief against
oppression and mismanagement
(b) A member cannot apply as he is holding less than one-tenth of
the share capital of the company
(c) A member can apply being one-tenth of the total number of
members.
(d) A member cannot apply as the requirement of atleast hundred
members is not complied with.
62. Ram who was holding 500 shares of Delta Ltd. having issued share
capital of 5,00,000 comprises of 50,000 share of ` 10 each. Ram came
to know that some material changes has been taken place in company
which is prejudicial in interest of members and also towards company.
He want to make application to tribunal under section 241 of the
Companies Act, 2013. Due to death of Ram, petition is filled by his legal
heir to tribunal who was in the position minority.
Choose the correct option whether the petition filled is in accordance of
provision of the Companies Act, 2013.
(a) No, as Ram was not eligible under section 244 of the Companies
Act, 2013 to make application to tribunal nor legal heir being
minority can make application.

(b) Yes, Since Ram was eligible under section 244 of the Companies
Act, 2013 to make application to tribunal.
(c) No, as Ram was eligible to make application, his legal heir who
is minority cannot apply to tribunal under section 241 of the
(d) No, as Ram was not eligible under section 244 of the Companies
Act, 2013 to make application to tribunal, but for any case legal
heir being minority can make application to tribunal.
63. The members of Shukla Ltd. filed a class action suit to restrain the
company from taking action contrary to a resolution passed by the
members. After following due process the NCLT passed an order
restraining the company from taking action. Despite this, the company
took action contrary to resolution passed by members. What can be the
penal consequences of the same on the company?
(a) The company is punishable with fine which shall not be less than
five lakh rupees but which may extend to twenty-five lakh
rupees.
(b) The company is punishable with fine which shall not be less than
one lakh rupees but which may extend to five lakh rupees.
(c) The company is punishable with fine which shall not be less than
ten thousand rupees but which may extend to one lakh rupees.
(d) The NCLT is not the appropriate body for ruling on this case, as
it falls under the jurisdiction of special courts. Hence action taken
by Shukla Limited will not attract penal liability.
64. Mr Derek, a majority shareholder represented himself to be Managing
Director of Floyd Ltd., and discharged the functions of the Managing
Director. However, he was not appointed as Managing Director of the
Company. A group of 7 members, holding 1/12th of issued share capital,
which amounted to 1/10th of paid up capital of the company filed an
application with the NCLT claiming that such an act of Mr Derek was an

act of oppression. The total no of members of Floyd Ltd are 72. Which
of the following statement is most appropriate?
(a) The members cannot file a application with NCLT as the strength
of members is less than 1/10th of total no of members of the
company. However, on filing application to NCLT, the NCLT may
allow the application to be filed even with fewer number of
members.
(b) The members cannot file an application with NCLT since the
members hold less than 1/10th of the issued share capital of the
Company.
(c) The members cannot file an application with the NCLT since the
given fact pattern does not comprise oppression.
(d) The members hold more than 1/10th of the paidup share capital
of the company. Hence they can file an application with the
NCLT.
65. Videshi Ltd., a foreign company established a principal place of business
at Kolkata, West Bengal and seeks to deliver various documents to
Registrar of Companies. State the number of days and place where the
said company shall deliver such documents:
(a) Within 15 days of the establishment of office in India to the
Central Government.
(b) Within 15 days of the establishment of office in India to the
Registrar having jurisdiction over New Delhi.
(c) Within 30 days of the establishment of office in India to the
Registrar having jurisdiction over West Bengal.
(d) Within 30 days of the establishment of office in India to the
Registrar having jurisdiction over New Delhi.
66. Aster Limited, a foreign company with a place of business in India was
established to conduct the business online of data interchange and other
digital supply transactions. The said company failed to deliver within the
prescribed time period, some prescribed documents to the Registrar of

Companies in compliance to the Companies Act, 2013. State the penalty

cost on Aster Limited for the cause of its failure.
(a) Aster Ltd. shall be punishable with fine upto 3,00,000 rupees +
additional fine upto 50,000 rupees in case of continuing offence.
(b) Aster Ltd. shall be punishable with fine extending upto 25,000
rupees + additional fine upto 50,000 rupees in case of continuing
offence.
(c) Aster Ltd. shall be punishable with fine extending upto 5,00,000
rupees + additional fine upto 50,000 rupees in case of continuing
offence.
(d) Aster Ltd. shall be punishable with fine for an amount not less
than 1,00,000 rupees extending upto 3,00,000 rupees +
additional fine upto 50,000 rupees in case of continuing offence.
67. Radix Ltd. is a company registered in Thailand. Although, it has no place
of business established in India, yet it is engaged in online business
through remote delivery of healthcare services in India. State the
incorrect statement as to the nature of the Radix Ltd. in the light of the
Companies Act, 2013-
(a) It is not a foreign company as it has no place of business
established in India.
(b) It is a foreign company being involved in business activity
through telemedicine.
(c) It is a foreign company for conducting business through
electronic mode.
(d) It is a foreign company as it conducts business activity in India.
68. Fam Company LLC, a company incorporated outside India, proposes to
establish a place of business in India. The list of the Directors includes
Mr. Arjun – Managing Director, Mr. Ranveer – Director and Ms. Lavina –
Secretary of Fam Company LLC. Mr. Malik and Mr. Arbaaz, resident in
India, are the persons who has been authorised by Fam Company LLC
to accept on behalf of the company service of process, notices or other
documents required to be served to Fam Company LLC. In relation to

the company’s establishment, you are asked by the Fam Company LLC
with respect to whose declaration will be required to submit to the
Registrar by the Company for not being convicted or debarred from
formation of companies in or outside India.
(a) Mr. Arjun, Mr. Ranveer, Ms. Lavina Mr. Malik and Mr. Arbaaz.
(b) Mr. Arjun, Ms. Lavina, Mr. Malik and Mr. Arbaaz.
(c) Mr. Malik and Mr. Arbaaz.
(d) Mr. Arjun, Mr. Ranveer, Mr. Malik and Mr. Arbaaz
69. Emaar Company LLC, a company incorporated outside India has a place
of business in India. All the financial decision of Emaar Company LLC is
taken by Abudala Company LLC, holding company of Emaar Company
LLC. One of the key raw materials required by Emaar Company is
procured through its subsidiary Company Fizi Company. Abudala and
Fizi Company are required to follow a different year for the preparation
of financial statements on a consolidated basis. You as a qualified
Chartered Accountant and a liaison officer to Emaar Company LLC is
required to bring to the notice of Emaar Company LLC the circumstances
in which case the financial year of Emaar Company shall change to that
of its Holding Company?
(a) On application made by Emaar Company to the Central
Government for following a different financial year.
(b) On application made by Abdula Company to the Central
(c) On application made by Abdula or Fizi Company to the Central
(d) Either (a) or (b)
70. A foreign company incorporated outside India is involved in digital
supply services through electronic mode, the server of which is located
outside India. The company follows year ending December as its
financial year. Every year the company is required to prepare a balance
sheet and profit and loss account. You are required to state the timelines

within which such documents shall be filed with the Registrar

considering the provisions of Chapter XXII of the Companies Act, 2013.
(a) Within a period of 30 days of the close of the financial year of
the foreign company.
(b) Within a period of 3 months of the close of the financial year of
(c) Within a period of 60 days of the close of the financial year of
(d) Within a period of 6 months of the close of the financial year of
71. Mannat Company LLC, a company incorporated outside India, proposes
to establish a place of business in India through electronic mode.
Mannat Company LLC issued prospectus to the citizens of India for
subscription of Mannat Company’s securities. Mannat Company LLC has
been into business for more than 2 years since the company received
the commencement of business certificate. The prospectus was duly
dated and signed but did not contain the particulars relating to the
enactments under which Mannat Company was incorporated and does
not provided with any details relating to any establishment in India. You
as a pursuing Chartered Accountant are required to examine the validity
of the prospectus issued by Mannat Company LLC?
(a) Yes, the prospectus issued is valid in law as it is duly dated and
signed.
(b) No, the prospectus issued is invalid in law as it does not contain
the particulars relating to the enactments under which the
Mannat Company was incorporated.
(c) No, the prospectus issued is invalid in law as Mannat Company
LLC does not have a place of business in India.
(d) No, the prospectus issued is invalid in law as it does not contain
the particulars with respect to any establishment of a place of
business in India.

72. Aakaar Solar Energy Private Limited was allowed the status of a
‘dormant company’ after a certificate to this effect was issued on 1st July
2018 by the Registrar of Companies, Delhi and Haryana. Mention the
latest date after which the Registrar is empowered to initiate the process
of striking off the name of the company if Aakaar Solar Energy continues
to remain as a dormant company.
(a) After 30th June, 2019.
(b) After 30th June, 2020.
(c) After 30th June, 2021.
(d) After 30th June, 2023.
73. Nanny Marcons Private Limited was incorporated on 9th June, 2017. For
the financial year 2017-2018, it did not file its financial statements and
annual returns. For the time being the company desires to be treated as
‘inactive company’ since it does not intend to carry on any business
permitted by its Memorandum. As to when ROC can issue certificate of
status of dormant company to ‘Nanny Marcons’ on the basis of non-
submission of financial statements if the company makes an application
to the Registrar in this respect.
(a) After non-submission of financial statements for the two financial
years i.e. 2018-19 and 2019-20.
(b) After non-submission of financial statements for the next
financial year i.e. 2018-19.
(c) After non-submission of financial statements for the three
financial years i.e. 2018-19, 2019-20 and 2020-21.
(d) After non-submission of financial statements for the four
financial years i.e. 2018-19, 2019-20, 2020-21 and 2021-22.
74. Mr. Rudra, an employee of the company filed a complaint against the
company for the illegal issue and transfer of securities before the special
court. State the correct basis for rejection of the said complaint:
(a) This is a non-cognizable offence, so out of the jurisdiction of the
special court.

(b) The court is barred to entertain such complaint as is out of the

jurisdiction of the special court.
(c) Employee is not a competent person to file a complaint against
the company for an offence relating to issue and transfer of
securities
(d) Complaint can be filed by the Registrar, a shareholder or a
member of the company, or of a person authorised by the Central
Government in respect to the same.
75. Mr. A, Mr. B, Mr. C, Mr. D, Mr. E are the Directors of the Elite Ltd. The
Board of Directors of Elite Ltd conducted 5 Board Meetings in the FY 19-
20 wherein Mr. A, Mr. C and Mr. D have attended all the Board Meetings.
Mr. B has attended 4 meetings out of 5 meetings whereas Mr. E failed
to attend all the Board Meetings. Mr. E has not vacated the office of the
Director of Elite Ltd. You are required to choose the correct option as to
consequences, Mr. E is liable for:
(1) Mr. E shall be punishable with imprisonment up to one year or
with minimum fine of ` 1,00,000 extendable upto ` 5,00,000, or
with both.
(2) Mr. E shall be punishable with imprisonment up to one year or
with minimum fine of ` 25,000 extendable upto ` 5,00,000.
(3) Mr. E is punishable with trial if the Special Court thinks fit, to
conduct the trial in a summary way of such an offence.
(4) Mr. E is punishable only with imprisonment up to one year
Choose the correct options-
(a) (1)
(b) (1) and (3)
(c) (2) and (3)
(d) (2)
76. The Registrar of Companies (RoC), Mumbai has moved an application
under section 272 of the Companies Act, 2013 to the Tribunal for
winding up of the Yoddha Company Limited. The application has been

pending before the Tribunal. The Tribunal considering the best interest
of the parties to the application, has referred the matter of the
proceeding pending before it to the Mediation and Conciliation Panel
formed under section 422 of the Companies Act, 2013. You are required
to state whether Tribunal can refer the proceeding pending before it to
the Mediation and Conciliation Panel considering the provisions of the
(a) The Tribunal can Suo moto refer any matter pertaining to such
proceedings to the Mediation and Conciliation Panel.
(b) The Tribunal cannot Suo moto refer any matter pertaining to
such proceedings to the Mediation and Conciliation Panel as only
Central Government has the authority do so.
(c) The Tribunal cannot Suo moto refer any matter pertaining to
such proceedings to the Mediation and Conciliation Panel without
the consent of the parties to the proceeding before it.
(d) The Tribunal can Suo moto refer any matter pertaining to such
proceedings to the Mediation and Conciliation Panel only after
obtaining prior approval from the Central Government in this
regard.
77. Rhea Company Limited, incorporated under the Companies Act, 2013,
has made political contributions amounting to ` 1,00,000 to a political
party registered under section 29A of the Representation of the People
Act, 1951. The statutory auditor of the company, while reviewing the
area of donations made to political party, came across this transaction
and found that no proper board resolution authorizing the donation was
made. Accordingly, the Directors of the company will face punishment
of imprisonment upto six months and with fine up to five times the
amount of contribution so made. You are required to examine that under
which of the following category the offence conducted by the Directors
will fall considering the provisions of the Companies Act, 2013.
(a) Compoundable offence

(b) Non Compoundable offence

(c) Compoundable and cognizable offence
(d) Non Compoundable and non-cognizable offence
78. The Tribunal (NCLT) has passed an order on 18th December 2019 (with
the consent of parties involved) for application filed before it. Mr. Rama
aggrieved by the order filed an appeal before Appellate Tribunal
(NCLAT) on 31st March 2020 showing sufficient cause of delay for not
filling appeal upto 45 days from the date of order. Mention the correct
answer whether the appeal is admissible before Appellate Tribunal after
showing cause of delay.
(a) No, as even after sufficient cause of delay, Mr. Rama’s appeal
can be accepted only upto next 45 Days which has already
expired on 16th March 2020.
(b) No, as Mr. Rama has already made delay of 45 days further delay
is not permissible.
(c) Yes, after sufficient cause of delay appeal can be accepted even
after 45 days.
(d) No, appeal cannot be admissible as earlier order was passed with
the consent of parties.
79. The shareholders of Vimaan Company Limited, incorporated under the
Companies Act, 2013 have filed an application to the Tribunal under
section 241 of the Act in relation to the mismanagement in the conduct
of the affairs of the Company. Accordingly, the Tribunal has passed an
order under section 420 of the Act providing relief to the shareholders
of the Company on 28th April 2019. The Tribunal seeks to amend the
said order passed by it. In what circumstances the Tribunal would be
able to amend the order and within what maximum period the order
shall be amended?
(a) The order passed by the Tribunal shall be amended to rectify
mistakes apparent from the record at any time within a period of
60 days from date of such order provided no appeal has been
made against the said order.

(b) The order passed by the Tribunal shall be amended when there
are mistakes apparent from the record at any time within a
period of 1 years from date of such order provided no appeal has
been made against the said order.
(c) The order passed by the Tribunal shall be amended when there
period of 2 years from date of such order provided no appeal has
(d) The order passed by the Tribunal shall be amended when there
period of 90 days from date of such order provided no appeal
has been made against the said order.
80. An application under section 9 of the Insolvency and Bankruptcy Code,
2016 was filed by the Raheja Housing Finance Limited (Operational
Creditor) against Makhija Developers Limited (Corporate Debtor). The
application got admitted by the order of National Company Law Tribunal
– Mumbai (NCLT Mumbai) after giving a reasonable opportunity of being
heard to Makhija Developers Limited. Mr. Ram was appointed as Interim
Resolution Professional. Makhija Developers Limited wants to make an
appeal against the order of the NCLT Mumbai. You, as a legal advisor
to Makhija Developers Limited, are required to provide them with the
best course of action available considering the provisions of the
Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016.
(a) Makhija Developers Limited cannot prefer an appeal against an
order passed by NCLT Mumbai under section 9 of the Insolvency
and Bankruptcy Code as Interim Resolution Professional is
already appointed.
(b) Makhija Developers Limited may be able to prefer an appeal
against the order passed by NCLT Mumbai within a period of 45
days from the date of order of copy made available to Makhija
Developers Limited.
(c) Makhija Developers Limited cannot prefer an appeal against an
order passed by NCLT Mumbai under section 9 of the Insolvency

and Bankruptcy Code as reasonable opportunity of being heard

was given to Makhija Developers Limited.
(d) Makhija Developers Limited may be able to prefer an appeal
against the order passed by NCLT Mumbai within a period of 60
days from the date of order of copy made available to Makhija
Developers Limited.
81. P Ltd. was holding 35% of the paid up equity capital of X Stock
Exchange. The company appoints M Ltd. as its proxy who is not a
member of the X Stock Exchange, to attend and vote at the meeting of
the stock exchange. State the correct statement as to the appointment
of M Ltd. as a proxy for P Ltd. and on the voting rights of P Ltd. in the
X Stock Exchange:
(a) X Stock Exchange can restrict the appointment of M Ltd., as
proxy, and voting rights of P Ltd. in the Stock Exchange.
(b) Central Government can restrict appointment of proxies and
voting rights of P Ltd. in the X Stock Exchange.
(c) Both (a) & (b)
(d) X Stock Exchange can also restrict the voting rights of P Ltd. if
rules of the exchange so provides. Otherwise can restrict the
voting rights of P Ltd. & appointment of proxies through
amendment in rules.
82. M/s Rati and Company, a member of recognised stock exchange, wants
to buy shares of some company on the behalf of investor as well as on
their own, but Hari who is professional consultant of M/s Rati and
Company suggests not to do such transaction as it will be against the
provision of Securities Contracts (Regulation) Act, 1956 as it restricts in
such buying and selling of shares by member of recognised stock
exchange. Choose the correct answer from available option below.
(a) Yes, Mr. Hari was right. M/s Rati cannot buy and sell share.
(b) Yes, there is strict restriction on buying and selling share by
member of recognised stock exchange.

(c) Yes, M/s Rati and company after complying with the provision of
Securities Contracts (Regulation) Act, 1956 can buy such share.
(d) Yes, M/s Rati and company can always, without any fear, buy
such share as there is no restriction.
83. ABC & Co., Chartered Accountants, is a partnership firm, who is auditor
of one of the listed company Z ltd. for the financial year 2018-19. Mr. B
is engaging partner of that audit with a team of 15 members. While
doing audit of the financial statement of the company, two members of
the team, who are Chartered Accountant, passed the information to
their friends and relatives that this year company’s profit is increasing
by 25% as compared to last audited financial year, before this
information came in to public domain through the company. They made
profit from this information by purchase at low price and after financial
statements were declared in public domain and an increase in share
prices, they sold shares at enhanced price. Please state whether it is a
case of insider trading. If yes, then how much penalty for this act, under
SEBI Act, 1992.
(a) No, it is not insider trading, because these persons are not
restricted to use the information to benefit themselves.
(b) No, it is not insider trading, because it is not price sensitive
information.
(c) Yes, it is insider trading and penalty under section 15G would be
minimum ` 10 lacs which may extend upto ` 25 crore or 3 times
of profit derived, whichever is higher.
(d) Yes, it is insider trading and penalty under section 12A would be
` 25 crore or 3 times of profit derived, whichever is lower.
84. A Ltd., a listed company, wants to revise the rate of interest of its
existing 12% bond by 1% i.e. 13% bond from 14th August 2019, the
said proposal is to be laid before Board Meeting to be held on 14th July
2019. Upto which of the following date, A Ltd., has to intimate to stock
exchange as per regulation 29 of SEBI (LODR), 2015:
(a) 3rd July 2019.
(b) 3rd August 2019.

(c) 5th July 2019.

(d) 5th August 2019.
85. In September 2016, Mr. P, went to USA, London and Germany on a
month long business trip. For this trip he got foreign exchange of US $
50,000 from an authorized dealer. In December 2016 he remitted US$
50,000 to his son in Canada, who was studying there. In January 2017
he sent his mother and wife to America for his mother’s treatment and
for the purpose he remitted US$ 75,000 to his younger brother, who
was living there. In March 2017 his daughter got engaged and she opted
for a destination marriage to be held in May 2017, in Switzerland. While
on trip to Dubai in the March end, 2017, he spent US $ 35,000 for his
daughter’s shopping in Dubai. Later, the event manager gave an
estimate of US $ 250,000 for the wedding. As per the provisions of
FEMA, for how much remittance does he need to take prior approval of
the Reserve bank of India.
(a) He does not need any prior approval at all
(b) For US $ 210000
(c) For US $ 250000
(d) For US $ 15000
86. M/s Kedhar Sports Academy, a private coaching club provides coaching
for cricket, football and other similar sports. It coaches sports aspirants
all over India. It also conducts various sports events and campaigns,
across the country. In 2019, to mark the 25th year of operation, a cricket
tournament was organized in Lancashire, England. The prize money for
the winning team is USD 40,000. For the runners up, it is USD 11,000.
Now, M/s Kedhar Sports Academy wants to know what steps it should
take for the remittance of the prize money of USD 51,000 to England
from India. Decide, which of the following is correct in view of relevant
provisions of FEMA, 1999:
(a) Prior permission is required to be taken from the Ministry of
Human Resource Development (Department of Youth Affairs and
Sports).

(b) Prior permission is required to be taken from the Reserve Bank

of India.
(c) No permission is required – M/s Kedhar Sports Academy can
proceed to make the remittance.
(d) Prior permission is required to be taken from the Ministry of
Finance (Department of Economic Affairs).
87. A Limited, an Indian company holds a commercial plot in Chennai, India.
It intends to sell the same. M/s Super Seller is a real estate broker with
Head Office in the USA. M/s Super Seller is appointed to find buyers for
the land. A company, Glory Inc., based out of USA is identified as a
buyer. Glory Inc., is controlled from India and is hence a Person
Resident in India under FEMA provisions. Glory Inc., agrees to buy the
land for USD 600,000 (assume 1 USD = `70). M/s Super Seller is to be
paid commission at the rate of 7% of the sale proceeds. The commission
is to paid to the H.O of M/s Super Seller in USA. Decide, in light of the
relevant provisions of FEMA, 1999, which of the following is correct
(Ignoring TDS implications arising under The Income Tax Act, 1961):
(a) Prior permission is not required for remittance of commission
upto USD 25,000. For balance commission of USD 17,000,
permission of RBI is to be sought by A Limited.
(b) Prior permission is not required for remittance of commission
upto USD 30,000. For balance commission of USD 12,000,
permission of RBI is to be sought by A Limited.
(c) Prior permission is not at all required for remittance of the entire
commission.
(d) Prior permission is required to be taken from the Reserve Bank
of India for the entire amount of commission.
88. Mr. Raman, a non-resident, has a Systematic Investment Plan (SIP) with
a mutual fund in India. Mr. Raman, due to some financial problems,
requested his brother Mr. Raghav who is an Indian resident, to make
the payment of few subsequent instalments of SIP on his behalf. You
are required to advise Mr. Raghav whether such transaction is permitted

considering the provisions of the Foreign Exchange Management Act

(FEMA), 1999
(a) Such transaction is not permitted as it amounts to payment for
the credit of non-resident.
(b) Such transaction is permitted as Mr. Raghav can enter into such
transaction on behalf of his non-resident brother.
(c) Such transaction is not permitted as Mr. Raghav cannot enter
into such transactions on behalf of his non-resident brother.
(d) Such transaction is permitted if Mr. Raghav obtains prior
permission of the Reserve Bank of India.
89. Milap Limited, a company incorporated in India, has obtained
consultancy services from an entity based in France for setting up the
software programme in their company. The consideration for such
services is required to be paid in foreign currency. The compliance
officer of Milap Limited requires your advice regarding threshold limit of
remittance that can be made without prior approval of RBI. You as a
qualified Chartered Accountant are required to advise the compliance
officer considering the provisions of the Foreign Exchange Management
Act, 1999 and regulations thereunder:
(a) USD 50,000,000
(b) USD 10,000,000
(c) USD 5,000,000
(d) USD 1,000,000
90. Mr. Umesh arrived in India in the financial year 2019 – 2020 from USA
on 2nd October 2019 after 5 years for the purpose of conducting
business in India. Mr. Umesh started proprietary business of trading
insulated handles and established a branch of his business in Minnesota,
USA. In this regard, choose the appropriate option with respect to
residential status for 2020-21 as per FEMA, 1999–
(a) Mr. Umesh and the Branch in USA are persons resident outside
India

(b) Mr. Umesh is a resident in India and the Branch is a person

resident outside India
(c) Mr. Umesh and the Branch are both persons resident in India
(d) Mr. Umesh is a person resident outside India and the Branch is
a person resident in India
91. B Limited issued 8 % debentures on 01/04/2018 (interest payable half
yearly on 30th of September and 31st of March) for ` 50,00,000. Mr. DT
was duly appointed as Debenture Trustee to the issue and security
interest was created in his favour. The company failed to pay interest
for two consecutive times (i.e. on 31/03/2019 and on 30/09/2019).
Mr. DT issued a notice to the company to make payment of the
outstanding interest. No response was heard from the company even
after 3 months. The debenture holders decided to enforce security
interest as per SARFAESI Act, 2002. Another notice was hence issued
by Mr. DT under section 13 demanding full payment of interest within
60 days from the date of issue of the notice. B Limited replied to the
second notice within 15 days stating that it was facing a “Cash crunch
situation”. But the debenture holders opine that the default is wilful and
good amount of cash profits are being made by the company in its
operations. Mr. DT communicates back that the reasons given by the
company were not acceptable and that the company’s representation is
rejected by him. Advise, in light of the provisions contained in the
SARFAESI Act, 2002 the steps that B Limited can take:
(a) To prefer appeal under section 17 to the Debts Recovery Tribunal
against the rejection by Mr. DT of the company’s representation.
(b) To ignore the notice sent by Mr. DT, since it is not legally binding
on B Limited at all.
(c) First communicate back to Mr. DT that the representation of B
Limited cannot be legally rejected and doing so will enable B
Limited to file an appeal with Debts Recovery Tribunal. After so
communicating, if the representation is still rejected by Mr. DT,
appeal is to be filed.
(d) None of the above is correct.

92. ABC Ltd incorporated in India want to register as an ARC to commence

the business of asset reconstruction. The company made all the
arrangement required for the realisation of the financial assets acquired
for the purpose of reconstruction of the assets and shall be able to pay
periodical returns on respective due dates on the investments made in
the company. The Directors are well qualified and had nearly 25 years
of experience in finance, 10 years of experience in reconstruction and
securitisation of assets. The company has also complied with all the
requirement of regulations and guidelines issued by Reserve Bank of
India. The details of the profits made during the past 3 years are 2016-
17 ` 200 Crore (Loss), 2017-2018 ` 500 Crore (Profit), 2018-2019
` 700 Corer (Profit).
(a) The ARC can be registered and certificate be issued by RBI, but
RBI may not prescribe any further conditions.
(b) The ARC can be registered and certificate be issued by RBI, but
RBI may prescribe any further conditions.
(c) The ARC registration cannot be made.
(d) RBI has no power to register ARC, as ARC’s are governed by
SARFAESI Act, 2002.
93. Mr. Ram gave two of his friends’ cash amount of two lakh each in case
of dire necessity for their business purposes. Later at the time of return,
he asked both of them, in lieu of the same, to buy his product via credit
card and online transfers in installments through next couple of months’
time for which he issued bills to adjust the amount in his account books.
Does this payment system through credit card and online transfer mode
are covered under money laundering act?
(a) No, payment are made through credit cards & online transfers
hence all the transaction are genuine
(b) Yes, money laundering transactions done via credit card and
online payments comes under the Prevention of Money
Laundering Act

(c) No, it is not money laundering as none of Mr. Ram friends are
benefiting from this transaction.
(d) No, because the transactions are not done with shell companies.
94. Anna, a foreign citizen has made donations in kind to various individuals
of Indian residence for their personal use. When shall such donation in
kind be excluded from the definition of Foreign Contribution considering
the provisions of Foreign Contribution (Regulation) Act, 2010.
(a) If the market value, in India, of such article, on the date of such
gift, is more than ` 1,00,000 but less than 5,00,000.
(b) If the market value, in India, of such article, on the date of such
gift, is more than ` 5,00,000 but less than 10,00,000.
(c) Any donation in kind given for personal use is always excluded.
(d) If the market value, in India, of such article given for personal
use, on the date of such gift, is not more than ` 1,00,000.
95. Mrs. Komal and Mr. Rajesh, entered into arbitration agreement for the
disputes that arise, if any in their business transactions. Due to certain
fault on the part of Mr. Rajesh, the dispute came before the arbitration
for settlement. In the meantime, Mrs. Komal dies. Mr. Rajesh shed of
their liabilities on the plea that arbitration agreement has come to an
end with the death of the other party. Decide the affirmative statement
in the given situation-
(a) Arbitration agreement gets terminated due to death of the party.
(b) It shall remain enforceable by or against the legal
representatives of the deceased.
(c) Since it is a private law between the parties, it will be terminated
with the death of the party.
(d) Both (a) & (c)
96. Mr. A. Mr. B and Mr. C are partners in XYZ partnership firm. The firm
made an agreement in writing to refer a dispute between them in
business to an arbitrator. Inspite of this agreement Mr. B files a suit
against Mr. A and Mr. C relating to the dispute in a magistrate court.

Examine on the admission of the suit filed by Mr. B in the court in the
light of the Arbitration and Conciliation Act, 1996.
(a) Yes, it can be admitted by the Magistrate court, as the said court
has jurisdiction over the matter and it overpowers arbitration
agreement.
(b) Yes, it can be admitted by the Magistrate court, only in the case
of challenge to the arbitral award in appeal.
(c) Yes, it can be admitted by the court, if Mr. A and Mr. C mutually
agrees.
(d) No it cannot be admitted by the court, as the jurisdiction of court
is ousted because of existence of a valid arbitration agreement.
97. New Era Financial Services Limited is registered with Reserve Bank of
India. It defaulted in the payment of dues to its catering contractor. Is
it possible for the contractor as an operational creditor to initiate
insolvency process against the company:
(a) Yes, the catering contractor as operational creditor is entitled to
initiate insolvency process.
(b) No, because financial service providers are excluded and
therefore, catering contractor as operational creditor is not
entitled to initiate insolvency process.
(c) Yes, because financial service providers are not excluded and
therefore, catering contractor as operational creditor is entitled
to initiate insolvency process.
(d) No, because catering service provider is an excluded service.

98. Ruby Petals Limited, a small company, files an application with the NCLT
stating that the fast track corporate insolvency resolution process
against it cannot be completed within the prescribed period of 90 days.
On being satisfied, NCLT orders to extend the period of such process by
30 days. However, Ruby Petals Limited again initiates an application for

further extension of time period of insolvency process by another 10

days. Which of the following option is applicable to such a situation:
(a) NCLT can extend the period by another 10 days because total
extension does not exceed 45 days.
(b) NCLT is empowered to grant another extension of 10 days if Ruby
Petals deposits ` 50,000 as penalty.
(c) NCLT is empowered to grant another extension of 10 days if Ruby
Petals deposits ` 100,000 as penalty.
(d) NCLT cannot extend the period by another 10 days because such
extension shall not be granted more than once.
99. MX Limited was admitted in the Corporate Insolvency Resolution Process
(CIRP) under section 7 of the Insolvency and Bankruptcy Code. The
Resolution Professional (RP) of the MX Limited (Corporate Debtor)
conducted the Committee of Creditors (CoC) meeting but the same was
adjourned due to lack of quorum. Accordingly, in the adjourned meeting,
a resolution was passed by the CoC members present, representing 51%
of the voting rights, for liquidation of the Corporate Debtor before the
expiry of the Corporate Insolvency Resolution Process (CIRP). You as a
qualified Chartered Accountant in the team of RP is required to advise
RP whether the resolution of liquidation passed is valid in law
considering the provisions of the Insolvency and Bankruptcy Code.
(a) The resolution passed for liquidation is not valid in law as it has
not been approved by minimum of 90% of the voting shares of
the financial creditors.
(b) The resolution passed for liquidation is not valid in law as it has
not been approved by minimum of 66% of the voting shares of
the financial creditors.
(c) The resolution passed for liquidation is not valid in law as it
cannot be passed before the expiry of the CIRP.
(d) The resolution passed for liquidation is valid in law as it has been
passed by 51% of the voting shares of the financial creditors.

100. Shivdeep submitted his claim as an operational creditor to the liquidator

of Chiranjeevi Food Products Limited, a company under liquidation. If
Shivdeep wants to alter his claim, state the time period within which he
can do so after its submission.
(a) Five days
(b) Ten days
(c) Fourteen days
(d) Fifteen days
Answer Key
Question Answer
No.
1. (d) All of the above
2 (b) The subscribers to memorandum of the company
shall be deemed to be the first Directors.
3 (d) 14th October, 2018
4 (b) Notice by 500 small shareholders is not valid and
company may appoint a small shareholders
‘Director on the requisition of 1000 small
shareholders.
5 (b) Claim by Mr. Q is not valid as the authority to
appoint alternate Director has been vested in the
board of Directors only and that too subject to
empowerment by the articles.
6 (d) 25thJune,2017
7 (c) HCQ Pharma Ltd. cannot appoint Mr. Sanjay as an
Independent Director as he is Managing Partner
of the firm which is legal advisor to its Associate
Company and the fees charged by the firm
exceeds the percentage as specified in the Act
during one out of the three immediately preceding
financial year.
8 (c) A provision in Articles of Association is needed
conferring the power to Board of Directors.

9 (b) No, as Mr. T is already a Director in ten public

companies.
10 (d) Government companies are exempted from the
provision of maximum number of Directors
needed.
11 (b) Excess amount shall be recovered irrespective of
whether at present he is MD or not
12 (b) To sign the financial statements of the company
13 (c) Yes, he can be appointed as MD by shareholders
through Special Resolution;
14 (a) 24th June, 2019
15 (c) 10 % of net profits;
16 (d) Mr. Ashwin is not required to comply with the
condition of resident in India, as the condition of
staying in India for a continuous period of not less
than twelve months immediately preceding the
date of his appointment, does not applies to a
company established in the Special Economic
Zone.
17 (c) Mr. Abhishek may proceed with offer of Whole
Time Director at M&N Company, as that company
is a subsidiary of F&I Company.
18 (b) The re-appointment of Mr. Ram is invalid in law as
re-appointment cannot be made earlier than one
year before the expiry of his term.
19 (a) Yes, the reappointment of Mr. Vinayak is valid in
law as the Board of Director may appoint him for
such term as it thinks fit.
20 (b) The vacancy shall be filled by the Board at a
meeting of the Board within a period of six months
from the date of such vacancy.
21 (c) After three years from the date of its
incorporation.
22 (b) 2/3
23 (c) 90

24 (a) When all the five Directors attending the meeting

consent to it
25 (c) 15
26 (b) Related party transactions proposed to be entered
into by the company
27 (b) The casual vacancy shall be filled by the BOD by
passing a resolution at the meeting of the BOD
and such appointment shall be subsequently
approved by the members in the immediate next
general meeting.
28 (c) Not be disposed of without prior permission of the
Central Government
29 (c) There is a contravention in respect of the conduct
of the Board Meetings as gap between two
consecutive Board Meetings (6th April and 28th
August) is 143 days and gap between two
consecutive Board Meetings (30th September and
30th March) is 181days.
30 (d) Yes, Very Well Ltd. can contribute ` 60,000 to a
charitable organization inspite of losses in 2015-
2016 provided it is to a bonafide charitable fund.
31 (c) Latest by 31st December, 2018;
32 (c) The quorum is complete and the Directors can
proceed with the meeting
33 (c) The objection is sustainable as it is made by one
third of the members of the board and the
meeting is held for further discussion
34 (a) The company cannot contribute any amount to a
political party in the FY 2018 -19.
35 (d) All of the above.
36 (a) Power of the Central Government to order an
investigation is discretionary.
37 (a) Application can be made to Tribunal under section
222 for imposition of restriction on securities.

38 (a) A petition for the winding up of the Company on

the ground that it is just and equitable that it
should be wound up.
39 (a) She is liable to provide such information.
40 (d) any of the above
41 (d) Mr. Sharma can be called upon by the Registrar
through a written notice served on him without
any time period limit.
42 (b) Registrar may enter and search the place where
such books or papers are kept and can seize only
after obtaining an order from the special court.
43 (d) Mr. Raman shall be able to proceed with the
investigation into the affairs of subsidiary
company after obtaining the prior approval of the
Central Government.
44 (b) Yes, shareholder after passing special resolution
can make application to Central government to
conduct the investigation under section 210 of
45 (c) No, Company cannot reduce the rank of employee
during investigation without approval of tribunal
within 30 days from date of application.
46 (c) The inspection report shall be submitted to the
Central Government and the Inspector has a right
to make recommendations for further
investigation provided he has given his reasons in
support for such recommendation.
47 (b) Amalgamation in Nature of Purchase
48 (b) Partial demerger
49 (b) 30 days
50 (d) Both a and b together
51 (c) Yes, upto 1 year
52 (c) if 90% of the creditors in value agree and confirm
to the scheme by way of affidavit
53 (d) All of the above.

54 (b) it may file an application before the Tribunal

55 (c) Opinion of the Company Secretary of the ETERNAL
Ltd. is invalid as the provisions given for fast track
merger in the section 233 are of the optional
nature.
56 (b) RGL Ltd has to submit the order to the ROC by
26th February, 2020, being 30 days from the date
of receipt of order passed by the NCLT.
57 (a) Yes scheme of compromise and arrangement get
proper approval of 3/4th of value of members or
class or members.
58 (c) The act of Board of Directors who acted bona fide,
not to recommend any dividend shall not amount to
oppression and mismanagement.
59 (d) (a) and (b)
60 (d) At least one member
61 (c) A member can apply being one-tenth of the total
number of members
62 (d) No, as Ram was not eligible under section 244 of
the Companies Act, 2013 to make application to
tribunal, but for any case legal heir being minority
can make application to tribunal.
63 (a) The company is punishable with fine which shall
not be less than five lakh rupees but which may
extend to twenty-five lakh rupees.
64 (c) The members cannot file an application with the
NCLT since the given fact pattern does not
comprise oppression.
65 (d) Within 30 days of the establishment of office in
India to the Registrar having jurisdiction over New
Delhi.
66 (d) Aster Ltd. shall be punishable with fine for an
amount not less than 1,00,000 rupees extending
upto 3,00,000 rupees + additional fine upto
50,000 rupees in case of continuing offence.

67 (a) It is not a foreign company as it has no place of

business established in India.
68 (d) Mr. Arjun, Mr. Ranveer, Mr. Malik and Mr. Arbaaz
69 (c) On application made by Abdula or Fizi Company to
the Central Government for following a different
financial year.
70 (d) Within a period of 6 months of the close of the
financial year of the foreign company.
71 (d) No, the prospectus issued is invalid in law as it
does not contain the particulars with respect to
any establishment of a place of business in India,
if any.
72 (d) After 30th June, 2023.
73 (b) After non-submission of financial statements for
the next financial year i.e. 2018-19.
74 (c) Employee is not a competent person to file a
complaint against the company for an offence
relating to issue and transfer of securities
75 (b) (1) and (3)
76 (a) The Tribunal can Suo moto refer any matter
pertaining to such proceedings to the Mediation
and Conciliation Panel.
77 (d) Non Compoundable and non-cognizable offence
78 (d) No, appeal cannot be admissible as earlier order
was passed with the consent of parties.
79 (c) The order passed by the Tribunal shall be
amended when there are mistakes apparent from
the record at any time within a period of 2 years
from date of such order provided no appeal has
80 (b) Makhija Developers Limited may be able to prefer
an appeal against the order passed by NCLT
Mumbai within a period of 45 days from the date
of order of copy made available to Makhija
Developers Limited.

81 (d) X Stock Exchange can also restrict the voting

rights of P Ltd. if rules of the exchange so
provides. Otherwise can restrict the voting rights
of P Ltd. & appointment of proxies through
amendment in rules.
82 (c) Yes, M/s Rati and company after complying with
the provision of Securities Contracts (Regulation)
Act, 1956 can buy such share.
83 (c) Yes, it is insider trading and penalty under section
15G would be minimum ` 10 lacs which may
extend upto ` 25 cr. or 3 times of profit derived,
whichever is higher.
84 (a) 3rd July 2019.
85 (a) He does not need any prior approval at all
86 (c) No permission is required – M/s Kedhar Sports
Academy can proceed to make the remittance.
87 (d) Prior permission is required to be taken from the
Reserve Bank of India for the entire amount of
commission.
88 (a) Such transaction is not permitted as it amounts to
payment for the credit of non-resident.
89 (d) USD 1,000,000
90 (c) Mr. Umesh and the Branch are both persons
resident in India
91 (d) None of the above is correct.
92 (c) The ARC registration cannot be made.
93 (b) Yes, money laundering transactions done via
credit card and online payments comes under the
Prevention of Money Laundering Act
94 (d) If the market value, in India, of such article given
for personal use, on the date of such gift, is not
more than ` 100,000.
95 (b) It shall remain enforceable by or against the legal
representatives of the deceased.

96 (d) No it cannot be admitted by the court, as the

jurisdiction of court is ousted because of existence
of a valid arbitration agreement.
97 (b) No, because financial service providers are
excluded and therefore, catering contractor as
operational creditor is not entitled to initiate
insolvency process.
98 (d) NCLT cannot extend the period by another 10
days because such extension shall not be granted
more than once.
99 (b) The resolution passed for liquidation is not valid
in law as it has not been approved by minimum of
66% of the voting shares of the financial creditors.
100 (c) Fourteen days

CASE SCENARIOS
1. WRPC Limited (WRPC) is a Mumbai-based company, in which the Central

Government holds 35% of share capital while the Governments of
Maharashtra and Karnataka hold 15% and 10% of share capital
respectively. WRPC manufactures corrosion resistant overhead
transmission and distribution products.
The internal auditors of the company had raised serious concerns in
respect of certain internal control irregularities. During the year 2017-
18, WRPC also defaulted in complying with statutory requirements
pertaining to filing of its financial statements under Section 137 and
Annual Return under Section 92. Consequently, the company received a
notice from the Registrar of Companies, Mumbai-Maharashtra to rectify
the default.
The Company was also served Show Cause Notices (SCN) by the
Revenue Officials on certain GST and Income-tax related issues.
The Board of Directors of WRPC consisted of 14 Directors. Due to the
increased volume of business, alleged internal control irregularities and
lack of professional skills needed for the statutory compliances, the
company felt the necessity of inclusion of some senior professionals on
its Board. Accordingly, it was thought of inducting Rajan, a Chartered
Accountant and Sanjay, a Company Secretary, as the Executive
Directors.
Circuit Board Private Limited (CBPL), a Delhi-based company and PISCO
Electronics Limited (PISCO Electronics), a Pune-based company, are the
two major component suppliers to WRPC. CBPL is a family managed
business with fifty-seven shareholders and PISCO Electronics is yet to
be a listed company but in near future it intends to get listed.
As per the audited financial statements, the paid-up capital and turnover
of CBPL and PISCO Electronics were as under:

Paid-up Capital (` in Crore) Turnover (` in Crore)

(as on (as on (F.Y. (F.Y.
31.03.2018) 31.03.2019) 2017-18) 2018-19)
CBPL 100 100 315 350
PISCO 50 50 275 305
Electronics
CBPL had 4 Directors as on 31.03.2018 and 5 as on 31.03.2019. In case

of PISCO Electronics, there were 7 Directors as on 31.03.2018 and 6 as
on 31.03.2019. However, none of the companies had appointed any
woman Director during these two years.
Ajay Prakash is the Chairman and Managing Director of CBPL.
Considering his old age and other health related issues, he wants to
retire from the company. Accordingly, he discussed the matter in a
Board Meeting and also proposed to explore the possibilities of
appointing his eldest son Pranav Prakash (MBA from FMS, University of
Delhi) as the Managing Director of the company for a period of 10 years
from 1.1.2020 onwards.
The Board Meetings of PISCO Electronics were convened five times
during the calendar year 2018. No Board Meeting was held in January
or February 2019 but thereafter, six Board Meetings were held during
the calendar year 2019.
Vasuki is one of the executive Directors appointed by the PISCO
Electronics. He had taken a loan of ` one crore from the company on
1.1.2018 after fulfilling the required formalities. The terms and
conditions on which the loan was granted specified that Vasuki shall
repay the principal amount in 5 years (i.e. 20 quarterly installments of
equal amount) and the interest @10% per annum (to be charged at
monthly rests on the reducing balance) shall also be paid as and when
due.
However, due to the changed economic scenario during 2019, there was
a drastic reduction in the normal borrowing rates. Accordingly, Vasuki
requested the company for change in his borrowing terms i.e. to reduce
the interest rate to 8% per annum from the existing 10% per annum

and to increase the period of repayment from the present 20

installments to 30 installments.
Multiple Choice Questions
1. 1 From the case scenario, it is observed that WRPC had 14
Directors but due to increased volume of business, alleged
internal control irregularities and professional skills, etc.,
required for the statutory compliances, the company intended to
induct Rajan, a Chartered Accountant and Sanjay, a Company
Secretary, as the Executive Directors. Which of the following
options is best suited to such a situation:
(a) WRPC could appoint either Rajan or Sanjay as Executive
Director because in no case the statutory limit of 15
Directors was to be crossed.
(b) WRPC increased the total number of Directors to 16 by
passing an Ordinary Resolution in a General Meeting of
shareholders with a view to appoint both Rajan and Sanjay.
(c) WRPC increased the total number of Directors to 16 by
passing a Special Resolution in a General Meeting of
shareholders with a view to appoint both Rajan and
Sanjay.
(d) Being a Government company, since WRPC is exempt
from passing the Special Resolution in a General Meeting
of shareholders for increasing the number of Directors to
16, it increased the total number of Directors to 16 from
the existing 14 without passing a Special Resolution and
appointed both Rajan and Sanjay.
1.2 From the case scenario, it is noticed that none of the companies
had appointed any woman Director though CBPL had 4 Directors
as on 31.03.2018 and 5 as on 31.03.2019 and PISCO had 7
Directors as on 31.03.2018 and 6 as on 31.03.2019. Which of the
following option is applicable in the given situation:
(a) CBPL should appoint at least one woman Director based
on audited financial statements as on 31.03.2018.

(b) PISCO Electronics should appoint at least one woman

Director based on audited financial statements as on
31.03.2018.
(c) PISCO Electronics should appoint at least one woman
Director based on audited financial statements as on
31.03.2019.
(d) CBPL should appoint at least one woman Director based
on audited financial statements as on 31.03.2019.
1.3 Which of the following Whole-time Key-Managerial Personnel
(KMP), both CBPL and PISCO Electronics are mandatorily
required to appoint:
(a) A Whole-time Chief Financial Officer.
(b) A Whole-time Company Secretary.
(c) Both the Whole-time Chief Financial Officer and Whole-
time Company Secretary.
(d) All the Whole-time Key Managerial Personnel as
prescribed by the Companies Act, 2013.
1.4 In view of the changed economic scenario in the country, Vasuki,
one of the Executive Directors of PISCO Electronics, requested
the company for change in his borrowing terms i.e. to reduce the
interest rate to 8% per annum from the existing 10% per annum
and to increase the period of repayment from the present 20
installments to 30 installments. Which of the following options is
applicable in such a situation:
(a) The company is permitted to alter the existing terms and
conditions relating to outstanding loan of Vasuki in a duly
convened Board Meeting where all the Directors present
except Vasuki must consent to the proposal.
(b) The company is permitted to alter the terms and
convened Board Meeting where majority of the Directors
present except Vasuki must consent to the proposal.

(c) The company is permitted to alter the terms and

convened General Meeting by passing a Special
Resolution.
(d) The company is permitted to alter the terms and
convened General Meeting by passing an Ordinary
Resolution.
1.5 Ajay Prakash, the Chairman and Managing Director of CBPL,
desiring to retire due to his old age and health related issues,
wants to appoint his eldest son Pranav Prakash as the Managing
Director of the CBPL for a period of 10 years from 1.1.2020
onwards. From the following options choose the correct one:
(a) Pranav Prakash can be appointed as the Managing
Director for a term not exceeding 5 years at a time.
(b) Pranav Prakash can be appointed as the Managing
Director for maximum upto 10 years without any
restrictions.
(c) Pranav Prakash can be appointed as the Managing
Director for maximum upto 15 years without any
restrictions.
(d) Pranav Prakash can be appointed as the Managing
Director for any period without any restrictions since CBPL
is a private company.
Answer Key
Question Answer
No.
1.1. (c) WRPC increased the total number of Directors to
16 by passing a Special Resolution in a General
Meeting of shareholders with a view to appoint
both Rajan and Sanjay.

1.2. (c) PISCO Electronics should appoint at least one

woman Director based on audited financial
statements as on 31.03.2019.
1.3. (b) A Whole-time Company Secretary.
1.4. (c) The company is permitted to alter the terms and
conditions relating to outstanding loan of Vasuki
in a duly convened General Meeting by passing a
Special Resolution.
1.5. (a) Pranav Prakash can be appointed as the Managing
Director for a term not exceeding 5 years at a
time.
2. Ullal Pharma Limited (UPL) is an unlisted company, with its Registered

Office at Baidebettu, District Udupi, Karnataka. In addition to being the
market leader in semi-synthetic penicillin, UPL has a presence in key
therapeutic segments such as neurosciences, cardiovascular, anti-
retroviral, anti-diabetics, gastroenterology and anti-biotics, among
others. UPL also has three group companies.
From time to time, UPL had duly filed its Annual Accounts, Annual
Returns and other documents, if required to be filed, with the
jurisdictional Registrar of Companies (ROC).
The ROC had the whistle-blower information that the business of UPL is
being carried on for fraudulent and unlawful purposes. There was also
an allegation that some illegal secret drug dealings were being carried
out by the UPL in the disguise of pharma business. Year-wise
comparison of data extracted from the Annual Accounts and Annual
Returns filed by UPL indicated the possibilities of huge diversion of funds
to the related parties and related entities. Questions were also raised
within the company on the correctness of the accounts maintained by
UPL.
Consequently, UPL received a written notice from the ROC on
10.06.2019 asking for the following information/explanations/papers.
The notice required the UPL to produce the following documents before
the Registrar in his office at Bengaluru within 30 days from the date of
receiving the notice.

(a) Hard and soft copies of ‘Books of Accounts’ from the years 2016-
17 onwards up to date.
(b) Ledger abstracts of all Inter-Company Accounts.
(c) All the documents relating to sales.
(d) All the ‘Bank Statements’ and ‘Cash Books’.
The Registrar duly followed all other processes to call for the
information, inspection of books and papers and conduct enquiries
relating to UPL as specified under the Companies Act 2013.
It is to be noted that Rajeev, Director (Finance) had the exclusive
responsibilities to supervise both ‘sales accounts’ and ‘inter-company
transactions’. The information which Rajeev shared with ROC could not,
to his dismay, convince the Registrar. He was also found to be evasive
and willfully disobeying the directions given by the ROC.
The ROC also issued separate notices to Venkatesh, ex-Whole-time
Director and Lokesh, ex-Chief Financial Officer (CFO) of the company.
Both Venkatesh and Lokesh were in the employment of the UPL only up
to 15.12.2017. Both of them through their separate representatives
informed the ROC that the notice served on them was not valid since
they are no longer associated with the company and while in service
they had acted only in their capacity as the officers of the company. It
was argued by both of them that they were independent of any
obligations relating to the company and hence, not bound to furnish any
information/explanations to the ROC.
The accounts of UPL were outsourced and maintained by a Chartered
Accountant firm M/s. Ajay Jyotsana & Co. The accounts were maintained
in Tally system by three staff members under the supervision of Ajay.
The ‘Reports’ were periodically submitted to Rajeev in the required
formats. Rajeev, in turn, submitted the requisite information to the
Board of Directors of UPL.
Based on the information in his possession, the Registrar had reasonable
ground to believe that the books and papers relating to UPL were likely
to be either destroyed, mutilated, altered, falsified or secreted.

Accordingly, the ROC decided to enter into the premises of M/s. Ajay
Jyotsana & Co. with the required assistance and seized the books and
papers which he considered necessary for inspection. However, before
seizure, ROC allowed the CA firm to take copies of such books and
papers.
The Registrar retained all the required books and papers for a period of
110 days from the date of seizure and ensured the necessary inspection.
Before returning the said books and papers, ROC took copies of them
and placed necessary identification marks on some of the papers.
After the inspection of the books of accounts and other books and
papers of UPL and after the requisite inquiries, ROC submitted a report
in writing to the Central Government along with the necessary
documents and recommendations.
Consequently, the necessary actions were taken. Rajeev, Director
(Finance) was convicted and punished with imprisonment for a period
of six months and also with fine of ` 70,000 under Section 207 (4) (i).
It may be noted that Rajeev was also holding Directorships in two more
companies as on that date.
2.1 From the case scenario, it is noticed that the concerned Registrar
of Companies (ROC) issued separate notices to Venkatesh, ex-
Whole-Time Director and Lokesh, ex-Chief Financial Officer
(CFO) of UPL. Both Venkatesh and Lokesh through their separate
representatives presented that they were in employment of UPL
only up to 15.12.2017 and therefore, the notice issued to them
was not valid since they are no longer associated with UPL and
while in service they had acted only in their capacity as the
officers of the Company. It was argued by both of them that they
were independent of any obligations relating to the Company and
hence, not bound to furnish any information/explanation to the
ROC.
(a) Contention of both Venkatesh and Lokesh is valid since
both of them are no longer associated with UPL.
(b) Venkatesh and Lokesh can only voluntarily furnish

information/explanations to the ROC, but they are under

no legal obligation to do so.
(c) Venkatesh and Lokesh are under legal obligation to
furnish to the best of their knowledge the required
information or explanation as asked by the ROC through
respective notices.
(d) Venkatesh and Lokesh being the past employees of UPL
shall furnish information or explanation only through UPL
after obtaining written consent of the Company to
respond to the Registrar and not directly to the ROC.
2.2 According to the case scenario, Rajeev, the Director (Finance) of
UPL, was convicted and punished with imprisonment for a period
of six months and with fine of ` 70,000 under 207(4) (i). It is
further informed that Rajeev was also holding Directorships in
two more other companies as on that date. From the following
options, choose the correct one which suitably applies to the
given situation:
(a) Rajeev can continue to hold the office of Director
(Finance) of UPL, since he has acted as per the
instructions of the company and he can also continue
Directorships in other two companies of which he is
currently Director.
(b) Rajeev shall be deemed to have vacated the office of
Director (Finance) of UPL from the date he is so
convicted, but can continue as a Director in the other two
companies.
(c) Rajeev can continue to hold the office of Director
(Finance) of UPL, but shall be disqualified from holding
Directorship in any other company.
(d) Rajeev shall be deemed to have vacated the office of
Directorship of UPL from the date he is so convicted and
on such vacation of office, shall also be disqualified from
holding an office in any other company.

2.3 From the case scenario, it is revealed that the Registrar, on the
basis of information in his possession, had reasonable ground to
believe that the books and papers relating to UPL were likely to
be either destroyed, mutilated, altered, falsified or secreted.
Accordingly, ROC entered the premises of M/s Ajay Jyotsana &
Co. with the required assistance and seized such books and
papers as he considered necessary. Which of the following
options best suits the given situation:
(a) The Registrar had obtained an order from the Central
Government before seizure of the books and papers.
(b) The Registrar had obtained an order from the Special
Court before seizure of the books and papers.
(c) The Registrar had suo motu proceeded with search and
seizure of the books and papers.
(d) The Registrar had obtained an order of a Civil Court
before seizure of the books and papers.
2.4 From the case scenario, it is observed that the Registrar seized
the books and papers of UPL from the premises of M/s Ajay
Jyotsana & Co. and retained them for a period of 110 days from
the date of seizure and returned them thereafter. What is the
maximum time limit within which the Registrar is required to
return the seized books and papers.
(a) The Registrar is required to return the seized books and
papers maximum within 120 days from the date of seizure.
(b) The Registrar is required to return the seized books and
papers maximum within 150 days from the date of
seizure.
(c) The Registrar is required to return the seized books and
seizure.
(d) The Registrar is required to return the seized books and
seizure.

2.5 The above case scenario states that the Registrar, after the
inspection of the books of accounts and other books and papers
of UPL and after the requisite inquiries, submitted a report in
writing to the Central Government along with the necessary
documents and recommendations. What action is contemplated
under Section 210 of the Companies Act, 2013, that the Central
Government may initiate in such a situation:
(a) On receipt of a report of the Registrar, the Central
Government may order an investigation into the affairs of
the company by the Serious Fraud Investigation Office
(SFIO).
(b) On receipt of a report of the Registrar, the Central
the company by the Inspectors appointed by it.
(c) On receipt of a report of the Registrar, the Central
the Company by a Criminal Court.
(d) On receipt of a report of the Registrar, the Central
the Company by the jurisdictional Tribunal.
2.6 The case scenario states that the Registrar retained all the required
accounts and papers for a period of 110 days from the date of
seizure, ensured the necessary inspection and returned them to the
UPL. After so return, if the Registrar again calls for the books and
papers, then for maximum how many days he can retain them.
(a) The Registrar cannot call for the books and papers once
again since he has already returned them after seizure.
(b) If the Registrar again calls for the books and papers, then
he can retain them maximum for a period of 120 days.
(c) If the Registrar again calls for the books and papers, then
(d) If the Registrar again calls for the books and papers, then

Answer Key
Question Answer
No.
2.1. (c) Venkatesh and Lokesh are under legal obligation
to furnish to the best of their knowledge the
required information or explanation as asked by
the ROC through respective notices.
2.2. (d) Rajeev shall be deemed to have vacated the office
of Directorship of UPL from the date he is so
convicted and on such vacation of office, shall also
be disqualified from holding an office in any other
company.
2.3. (b) The Registrar had obtained an order from the
Special Court before seizure of the books and
papers.
2.4. (c) The Registrar is required to return the seized
books and papers maximum within 180 days from
the date of seizure.
2.5. (b) On receipt of a report of the Registrar, the Central
Government may order an investigation into the
affairs of the company by the Inspectors
appointed by it.
2.6 (c) If the Registrar again calls for the books and
papers, then he can retain them maximum for a
period of 180 days.
3. Based at Shivamogga, Karnataka, Lotus Switchgears Limited (LSL) is a

noted manufacturer, exporter and supplier of electrical products like
Miniature Circuit Breakers (MCBs), Molded Case Circuit Breakers
(MCCBs), Residual Current Circuit Breakers (RCCBs), Electric Leakage
Circuit Breakers (ELCBs), Solar water Pumping Systems, Wires and
Cables, etc. and has a good network of factories and distribution
channels. The business grew by leaps and bounds due to the sincere
and dedicated efforts of founding Directors, Arjun, Ramakrishnan, Ravi
Bhatt, Ramesh and Ripudaman. However, the company is facing some
difficult times for the past four years or so. Arjun is the Managing
Director while Ramesh and Ripudaman are the Whole-time Directors.

In a quest to overcome the difficulties faced by the company, Raghuram,

a visionary, was appointed as the Executive Director at the EGM held on
12th January, 2017.
Shruthi Components Private Limited (SCPL) is one of the subsidiaries of
LSL. The Board of Directors of LSL wished to exercise the power to
dispose of its whole investment in SCPL. Accordingly, Mahadevan,
whole-time Company Secretary of the company was directed to
ascertain the procedure for disposing of company’s investment in SCPL.
Following data was extracted from the Audited Financial Statements of
LSL for the year ending 31.03.2020:
S. No Description Amount
(` in Crore)
1 Paid -up Capital 50
2 General Reserves 54
3 Securities Premium Account 5
4 Accumulated Losses 7
5 Revaluation Reserves created out of 30
revaluation of assets
6 Deferred Revenue Expenditure & 2
Miscellaneous Expenditure not written off
7 Investment in SCPL 25
Based on the above data and considering Section 2 (57) 1 of the Companies
Act, 2013, Mahadevan calculated the ‘net worth’ of LSL as under:
Particulars Amount (` in
Crores)
Paid-up Capital 50
1
According to Section 2 (57) of the Companies Act, 2013, ‘Net Worth’ means the aggregate
value of the paid-up share capital and all reserves created out of the profits, securities
premium account and debit or credit balance of profit and loss account, after deducting
the aggregate value of the accumulated losses, deferred expenditure and miscellaneous
expenditure not written off, as per the audited balance sheet, but does not include
reserves created out of revaluation of assets, write-back of depreciation and
amalgamation.

Add: General Reserves 54

Add: Securities Premium Account 5
Less: Accumulated Losses 7
Less: Deferred Revenue Expenditure & 2
Miscellaneous Expenditure not written off
Net Worth 100
In view of the ‘net worth’ of ` 100 crore, Mahadevan informed the Board
that as per the relevant provisions SCPL was an undertaking of LSL.
Earlier during April, 2019, in the course of normal business, LSL entered
into a contract for the continuous supply of some consumables and
components with Swastik Supplies Private Limited (SSPL) for a period of
3 years to be renewed with mutual consent thereafter. Ramesh, the
Whole-time Director of LSL, was not an interested party at the time of
entering into this Supply Contract with SSPL. However, during the
second year of the Supply Contract, Rajesh, son of Ramesh, purchased
about 30% of the equity shares of SSPL through one of his family owned
business entities and also lent ` 25 lakh as unsecured loan to SSPL.
Ramesh did not inform LSL or the Board of Directors regarding the new
developments since he was of the opinion that there was no need for
such disclosure. However, the Company Secretary and the Board had
their own reservations, after the matter came to their knowledge from
a third party.
During the statutory audit for the F.Y. 2019-20, while verifying the
earlier years’ documents in connection with certain matter, the newly
appointed auditors observed that the appointment of Raghuram as an
Executive Director was invalid by reason of certain defects and also
disqualification. During the month of August, 2020, the statutory
auditors discussed the issue of irregular appointment with the Board of
Directors of LSL.
The Board apprised the auditors that since his appointment as Executive
Director of the company, Raghuram had participated in several Board
Meetings and assented to various decisions, which had both pecuniary
and operational impact. In addition, the Board had also passed several
resolutions during that period. Accordingly, the Board, in one of its

meetings, decided by passing a resolution that the wrongfully appointed

Director Raghuram shall make good the losses, if any, for the period he
remained Executive Director but all the resolutions passed during his
period shall be valid and stand good.
One of the investors, Raman had invested substantially in the equity
shares of Lotus Switchgears Limited. However, he was quite worried
about his investment after going through the latest audited financial
statements of 2019-20, for he found that there was continuous
downward trend in earning per share (EPS). He was of the opinion that
the Directors of LSL have been getting exorbitant remuneration,
resulting in lesser profits for the company.
Accordingly, he approached the Registered Office of the company at
Shivamogga and requested for inspection of the copies of the recent
Service Contracts of Arjun, the Managing Director as well as Ramesh
and Ripudaman, the Whole-time Directors of the company. He was
utterly surprised when he was informed by the official concerned that
the Service Contracts with Arjun, Ramesh and Ripudaman were not in
writing and therefore, could not be produced for inspection. However,
he was also informed that only copies of the written Memorandum
setting out the terms and conditions of the service could be provided for
inspection. Raman was not convinced and thought it to be a fraudulent
practice for which the company and every defaulting officer of the
company must be punished.
LSL, after complying with the required legal formalities, had made some
political contributions and had incurred certain expenses during the
financial year 2019-20. The details are as under:
(a) Payment of ` 10,00,000 as contributions to LMS party.
(b) Donation of ` 2,00,000 for a public function and a dance program
of Ravi Shankar, a film star and it can be reasonably presumed
that his activities support Janta Welfare Party.
(c) Publication cost of ` 1,00,000 incurred for inserting an
advertisement in the Souvenir published on behalf of Janta
Welfare Party.

(d) Publication of pamphlets costing ` 1,00,000 though not meant

for any political party but incurred for promoting a candidate for
the next state elections.
LSL disclosed in its financial statements ` 11,00,000 as political
contributions and ` 3,00,000 as ‘Advertisement and Business Promotion
Expenses’.
3.1 Raman, who had invested substantially in LSL, was informed that
only copies of the written Memorandum setting out the terms
and conditions of the service could be provided for inspection as
no written Service Contracts with Arjun (Managing Director) as
well as Ramesh and Ripudaman (Whole-time Directors) were
available. Raman was not convinced and thought it to be a
fraudulent practice for which the company and every defaulting
officer of the company must be punished. From the following
options, choose the most appropriate one:
(a) The Company shall be liable to a penalty of ` 25,000 and
every officer of the Company, who is in default, shall be
liable to a penalty of ` 5000 for each default for non-
production of Service Contracts for inspection.
(b) It shall be in order, if the Company provides copies of the
written Memorandum setting out the terms and
conditions of the services for inspection.
(c) The Company shall be liable to a penalty of ` 50,000 and
every officer of the Company, who is in default, shall be
liable to a penalty of ` 10,000 for each default for non-
(d) The Company shall be liable to a penalty of ` 1,00,000
and every officer of the Company, who is in default, shall
be liable to a penalty of ` 25,000 for each default for non-
3.2 According to Mahadevan, whole-time Company Secretary, SCPL
was an undertaking of LSL. If the Board of Directors of LSL

decides to dispose of its investment in SCPL, considering SCPL

as an undertaking of LSL, which of the following options shall be
applicable:
(a) The Board of Directors of LSL shall exercise the power of
disposing of its investment in SCPL, considering SCPL as
an undertaking of LSL, by means of a Board Resolution
assented to by all the Directors present at a duly
convened Board Meeting.
(b) The Board of Directors of LSL shall exercise the power of
an undertaking of LSL, only with the consent of the
company by an Ordinary Resolution.
(c) The Board of Directors of LSL shall exercise the power of
company by a Special Resolution and thereafter, by
seeking approval of the jurisdictional Registrar of
Companies.
(d) The Board of Directors of LSL shall exercise the power of
company by a Special Resolution.
3.3 From the case scenario, it is observed that during the second
year of the Supply Contract, Rajesh, son of Ramesh, purchased
about 30% of the equity shares of SSPL through one of his family
owned business entities and also lent ` 25 lakh as unsecured
loan to SSPL. Ramesh did not inform LSL or the Board of
Directors regarding the new developments since he was of the
opinion that there was no need for such disclosure. Choose the
correct option which is most appropriate in the given situation:
(a) The contention of Ramesh is correct since it is his son
Rajesh, who is directly interested in SSPL because of his
direct dealings and not he personally.

(b) The contention of Ramesh is correct since at the time of

entering into the Supply contract, he was not at all
interested or concerned in the SSPL.
(c) The contention of Ramesh is not correct since he is
required to disclose his direct or indirect concern or
interest in SSPL at the first meeting of the Board of
Directors held after he becomes so concerned or
interested.
(d) The contention of Ramesh is not correct since he is
required to disclose his direct or indirect concern or
interest in SSPL during the renewal of the Supply
Contract, if any, after 3 years.
3.4 According to the case scenario, the Board of Directors of LSL
stated that since January, 2017 Raghuram had participated in
several Board Meetings and assented to various decisions, which
had both pecuniary and operational impact. In addition, the Board
had passed several resolutions during that period. Accordingly, the
Board, in one of its meetings, decided by passing a resolution that
the wrongfully appointed Director Raghuram shall make good the
losses, if any, over the period he remained Executive Director and
all the resolutions passed during his period and assented to by
him shall be valid and stand good.
(a) The decision of the Board is correct because no act done
by a person as a Director shall be deemed to be invalid if
it was subsequently noticed that his appointment was
invalid by reason of any defect or disqualification, etc.
(b) The Board is required to get all the resolutions passed
during the tenure of Raghuram and assented by him,
ratified by an Ordinary Resolution at a General Meeting of
the shareholders.
(c) The Board is required to get all the resolutions passed
during the tenure of Raghuram and assented by him,
ratified by a Special Resolution at a General Meeting of
the shareholders.

(d) The Board is required to cancel all the resolutions passed

during the tenure of Raghuram and assented by him since
they were void and inoperative ab-initio.
3.5 The case scenario states that LSL, after complying with the
required legal formalities, made some political contributions
and incurred some expenses during the financial year 2018-19.
LSL showed in its financial statements ` 11,00,000 as political
contributions and ` 3,00,000 as ‘Advertisement and Business
Promotion Expenses’. From the following options choose the
correct one:
(a) The disclosure made by LSL in its financial statements
showing ` 11,00,000 as political contributions and
` 3,00,000 as ‘Advertisement and Business Promotion
Expenses’ is correct.
(b) LSL was required to disclose ` 10,00,000 as political
contributions and `4,00,000 as ‘Advertisement and
Business Promotion Expenses’.
(c) LSL was required to disclose all the sums totalling
` 14,00,000 as political contributions.
(d) LSL was required to disclose `12,00,000 as political
contributions and ` 2, 00,000 as ‘Advertisement and
Business Promotion Expenses’.
Answer Key
Question Answer
No.
3.1 (b) It shall be in order, if the Company provides
copies of the written Memorandum setting out
the terms and conditions of the services for
inspection.
3.2 (d) The Board of Directors of LSL shall exercise the
power of disposing of its investment in SCPL,
considering SCPL as an undertaking of LSL, only
with the consent of the company by a Special
Resolution.

3.3 (a) The contention of Ramesh is correct since it is his

son Rajesh, who is directly interested in SSPL
because of his direct dealings and not he
personally.
3.4 (a) The decision of the Board is correct because no
act done by a person as a Director shall be
deemed to be invalid if it was subsequently
noticed that his appointment was invalid by
reason of any defect or disqualification, etc.
3.5 (c) LSL was required to disclose all the sums totalling
` 14,00,000 as political contributions.
4. Kumar Beverages Limited (KBL), a 10-year old listed company, is a

leading beverage manufacturer and trader whose all the brands are
popular household names in India, Middle East, Europe and Africa. Being
a fast-growing company, the turnover of KBL was ` 300 crore during
the financial year 2018-19. The Registered Office and manufacturing
plants of KBL are situated at Kolluru, Karnataka.
Akshay Beverages Limited (ABL), an 18-year old unlisted company, is
one among the leading competitors of KBL and has market presence
mainly in South Asia, South East Asia, Japan as well as Australia. It had
turnover of ` 700 crore during the financial year 2018-19. The
Registered Office of ABL is in Kundapura and manufacturing units are in
Hattiangadi, Karnataka.
Considering various factors like elimination of competition, scaling up of
operations for competitive advantages, economies of large-scale
business, increase in market share, cost reduction by reducing
overheads, increasing the efficiencies of operations, tax benefits, access
to foreign markets etc., both the companies have been in negotiation
for the last several months and a proposal to merge KBL with ABL is in
the waiting.
It is proposed that KBL shall transfer all of its assets and liabilities to
ABL. It is estimated that around 95% of equity shareholders of KBL shall
become shareholders of ABL Further, purchase consideration shall be
discharged wholly by issuing equity shares of ABL. The beverage
business shall continue as earlier. The assets and liabilities taken over

from KBL shall be recorded at existing carrying amounts except where

adjustment is required to ensure uniformity of Accounting Policies.
The ‘object clauses’ contained in the Memorandums of Association of
ABL and KBL empower both the companies to undergo merger. All the
required Institutional and statutory approvals were taken for merger. A
Draft Scheme of merger was approved in the Board Meetings of both
the companies.
Both ABL and KBL filed an Application for merger in the form of petition
along with the necessary documents and information as required under
the Companies Act 2013 read with the relevant Rules, with the
jurisdictional National Company Law Tribunal (NCLT) [in short ‘Tribunal’]
for the purpose of sanctioning the Scheme of Merger.
The Tribunal ordered for the required meeting and gave such directions
as it felt necessary for conducting the meeting. For the purposes of the
meeting, merging companies also circulated some additional
documents/information, as required under the Companies Act 2013.
The Tribunal satisfied itself with the procedure followed including filing
of the Auditor’s Certificate on accounting treatment proposed in the
Scheme of Merger certifying that it was in conformity with the prescribed
Accounting Standards.
The Tribunal by Order sanctioned the arrangement leading to merger
and made provisions for all the required matters which, inter-alia,
included valuation of shares and payment to such shareholders of KBL,
who decided to opt out of the transferee company ABL.
A certified copy of the Order was also filed with the Registrar of
Companies for registration within the due date. One of the earlier
Directors of KBL, contended that the Scheme shall be effective from the
date the certified copy is registered by the Registrar of Companies.
However, the Scheme had indicated an ‘appointed date’ being the
completion of 15 days from the date of receipt of the certified copy of
the Order of the Tribunal, from which the merger shall be effective.
It is expected that the actual implementation of the Scheme of merger
is going to take some time. The Board of Directors of ABL wanted to

understand the implementation monitoring procedure by the authorities

and the Company Secretary was directed to explain the same.
It was decided that once the required implementation procedure of
merger is completed, the manner of disposing of the books and papers
of KBL shall be discussed.
It came to light that Neelesh, one of the Directors of KBL, had committed
various offences by contravening different provisions of the Companies
Act, 2013. On merger with ABL, it was contended by Neelesh that the
wrongful acts were committed before the merger and therefore, he
should be relieved from all the liabilities, punishments and penalties for
the offences earlier committed.
4.1 From the case scenario, it is observed that KBL, a listed company
is being merged with ABL which an unlisted company and under
the scheme of merger, the KBL shall transfer all of its assets and
liabilities to ABL. Decide as to when the ABL shall become a listed
company after KBL is merged with it.
(a) ABL shall remain an unlisted company until it becomes a
listed company.
(b) ABL shall immediately become a listed company after
merger since KBL, a listed company is being merged with
it.
(c) ABL shall become a listed company after merger of KBL,
a listed company, with it once the certified copy of the
merger is registered with ROC.
(d) ABL shall become a listed company once the application
for sanctioning the merger is filed with the Tribunal since
the merger is proposed with KBL, a listed company.
4.2 According to the case scenario, the Tribunal by Order sanctioned
the arrangement leading to merger and made provisions for all
the required matters which, inter-alia, included valuation of
shares and payment to such shareholders of KBL, who decided

to opt out of the transferee company ABL. From the following

options choose the appropriate one:
(a) Amount of payment or valuation for any share shall not
be less than what has been specified by the Registrar of
Companies.
(b) Amount of payment or valuation for any share shall not
be less than what has been specified by the Reserve Bank
of India (RBI).
(c) Amount of payment or valuation for any share shall not
be less than what has been specified by the Securities
and Exchange Board of India (SEBI).
(d) Amount of payment or valuation for any share shall not
be less than what has been specified in the Valuation
Report of the Registered Valuer.
4.3 According to the contention of one of the earlier Directors of KBL,
the Merger Scheme shall be effective from the date the certified
copy is registered by the Registrar of Companies. From the
following options you are required to choose the one which
indicates the correct ‘effective date’:
(a) The Merger Scheme shall be deemed to be effective from
the date of passing of an Order by the Tribunal.
(b) The Merger Scheme shall be deemed to be effective from
the date of receipt by ABL the certified copy of the Order
as passed by the Tribunal.
(c) The Merger Scheme, as contended by an earlier Director
of KBL, shall be deemed to effective from the date the
certified copy is registered by the Registrar of Companies.
(d) The scheme shall be deemed to be effective from the
‘appointed date’ being the completion of 15 days from the
date of receipt of the certified copy of the Order of the
Tribunal.

4.4 It is expected that the actual implementation of the Scheme of

merger is going to take some time. The Board of Directors of
ABL wanted to understand the implementation monitoring
procedure by the authorities and the Company Secretary was
directed to explain the same. Which of the following options, do
you think, the Company Secretary might have suggested:
(a) ABL shall, until the completion of the scheme, file a
statement in such form and within such time as may be
prescribed, with the Tribunal every year, duly certified by
a Chartered Accountant or a Cost Accountant or a
Company Secretary in practice indicating whether the
scheme is being complied with in accordance with the
orders of the Tribunal or not
(b) ABL shall, until the completion of the scheme, file a
statement in such form and within such time as may be
prescribed, with the Registrar every year duly certified by
a Chartered Accountant or a Cost Accountant or a
Company Secretary in practice indicating whether the
scheme is being complied with in accordance with the
orders of the Tribunal or not
(c) ABL shall, only on completion of the implementation of
the scheme, file a statement in such form and within such
time as may be prescribed, with the Registrar, duly
certified by a Chartered Accountant or a Cost
Accountant or a Company Secretary in practice indicating
whether the implementation of the scheme is complied
with in accordance with the orders of the Tribunal or not
(d) ABL shall, only on completion of the implementation of
the scheme, file a statement in such form and within such
time as may be prescribed, with the Tribunal, duly
certified by a Chartered Accountant or a Cost
Accountant or a Company Secretary in practice indicating
whether the implementation of the scheme is complied
with in accordance with the orders of the Tribunal or not.

4.5 According to the case scenario, Neelesh, one of the Directors of

KBL, had committed various offences by contravening different
provisions of the Companies Act, 2013. On merger with ABL, it
was contended by Neelesh that the wrongful acts were
committed before the merger and therefore, he should be
relieved from all the liabilities, punishments and penalties for the
offences earlier committed. From the following options choose
the correct one:
(a) The contention of Neelesh is not correct since the liability
in respect of offences committed under the Companies
Act 2013 by the officers in default, of the transferor
company prior to its merger, amalgamation or acquisition
shall continue after such merger, amalgamation or
acquisition.
(b) The contention of Neelesh is correct since the liability in
respect of offences committed under the Companies Act
2013 by the officers in default, of the transferor company
prior to its merger, amalgamation or acquisition shall not
be continued after such merger, amalgamation or
acquisition.
(c) The contention of Neelesh is partially correct since he is
liable only for the wrongful acts which have a bearing on
the merger.
(d) The Board of Directors of ABL are permitted to relieve
Neelesh from the liabilities in respect of offences
committed earlier in KBL by passing a Board Resolution
with the consent of all the Directors present at a duly
convened Board Meeting.
4.6 According to the case scenario, once the required
implementation procedure of merger is complete, the manner of
disposing of the books and papers of KBL shall be discussed.
From the given options, choose the appropriate one:
(a) The books and papers of KBL can be disposed of
immediately on merger of KBL with ABL.

(b) The books and papers of KBL can be disposed of not

earlier than 8 years from the financial year to which they
relate.
(c) The books and papers of KBL can be disposed of only
after obtaining permission from the Central Government.
(d) The books and papers of KBL can be disposed of only
after obtaining permission from the Tribunal, which had
sanctioned the merger.
Answer Key
Question Answer
No.
4.1 (a) ABL shall remain an unlisted company until it
becomes a listed company.
4.2 (c) Amount of payment or valuation for any share
shall not be less than what has been specified by
the Securities and Exchange Board of India
(SEBI).
4.3. (d) The scheme shall be deemed to be effective from
the ‘appointed date’ being the completion of 15
days from the date of receipt of the certified copy
of the Order of the Tribunal.
4.4 (b) ABL shall, until the completion of the scheme, file
a statement in such form and within such time as
may be prescribed, with the Registrar every year
duly certified by a Chartered Accountant or a Cost
Accountant or a Company Secretary in practice
indicating whether the scheme is being complied
with in accordance with the orders of the Tribunal
or not
4.5 (a) The contention of Neelesh is not correct since the
liability in respect of offences committed under
the Companies Act 2013 by the officers in default,
of the transferor company prior to its merger,
amalgamation or acquisition shall continue after
such merger, amalgamation or acquisition.

4.6 (c) The books and papers of KBL can be disposed of

only after obtaining permission from the
Central Government.
5. Lagus Transport Services Limited (LTSL) is operating in the domain of

logistics and public transport. The company has pan-India presence. As
per its Articles of Association, the company can appoint a maximum of
15 Directors and all of them shall be rotational Directors. Presently, the
company has a strength of 14 Directors, of which 9 are executive
Directors and the remaining 5 are non-executive Directors.
Following information was extracted from the audited financial
statements as on 31st March, 2019:
S. Particulars Amount (`
No. in Crores)
1. Authorised Share Capital (15,00,00,000 15.00
Equity Shares of ` 1 each)
2. Paid-up Share Capital 8.42
3. Turnover 84.00
4. Outstanding Loans, Debentures and Deposits 42.00
(in aggregate)
In the Annual General Meeting (AGM), held on 20th August, 2019, Anil,
Badal, Chanchal and Damodar were appointed as Directors in place of
Mohan, Navin, Om and Prasad by passing a single resolution with simple
majority. It is to be noted that earlier, a motion authorising the
appointment of Anil, Badal, Chanchal and Damodar by a single
resolution was passed in the meeting and not a single vote was cast
against such motion.
Based on the audited financial statements as on 31st March, 2020,
following information emerged:

S. Particulars Amount
No. (` in Crores)
1. Authorised Share Capital (15,00,00,000 15.00
Equity Shares of ` 1 each)
2. Paid-up Share Capital 8.42
3. Turnover 120.52
4. Outstanding Loans, Debentures and 40.00
Deposits (in aggregate)
It is noteworthy that due to the increased turnover there arose the

requirement of appointing two independent Directors.
Since the company was required to appoint two independent Directors,
the total strength of the Board with such appointments would go up to
16 Directors from the present 14 whereas according to the Articles, the
company can have a maximum of 15 Directors. Accordingly, the Articles
were altered and the total strength was increased to 20 Directors.
After altering the Articles, the company proceeded to appoint four
independent Directors instead of the mandatorily required two since it
was felt that such step would strengthen the corporate governance to
the maximum extent. The independent Directors were:
(i) Mrs. Eekam, who is considered ‘influencer’ on supply chain
management and has a lot of expertise in the logistics field;
(ii) Mrs. Prajna who is a marketing expert;
(iii) Mrs. Ruchita, who is MBA (Finance and Accounting) from IIM,
Ahmedabad; and
(iv) Mr. Amit, who is skilled in developing customised software.
Subsequent to the above developments, the time to hold Annual General
Meeting (AGM) approached and it was conducted on 12th August, 2020
through video conferencing after complying with applicable provisions
of the Companies Act, 2013 read with General Circular 20/2020, dated
05-05-2020, issued by MCA.


5.1 In this case scenario, Anil, Badal, Chanchal and Damodar were
appointed as Directors by passing a single resolution at the AGM.
Is such appointment valid?
(a) The appointment of Anil, Badal, Chanchal and Damodar
by a single resolution is valid because beforehand, a
motion authorising their appointment by a single
resolution was passed in the meeting and not a single
vote was cast against such motion.
(b) The appointment of Anil, Badal, Chanchal and Damodar
by a single resolution is not valid because passing of
resolution by simple majority indicates that it was not
passed unanimously.
(c) The appointment of Anil, Badal, Chanchal and Damodar
by a single resolution with simple majority is not valid
because such resolution is required to be passed as a
special resolution.
(d) The appointment of Anil, Badal, Chanchal and Damodar
by a single resolution is not valid because in no case more
than one Director can be appointed by passing a single
resolution.
5.2 In the given case scenario, according to the Articles all the
Directors are rotational. Had this been not the case, how many
Directors were required to retire at the AGM which was held on
20th August, 2019?
(a) Five Directors
(b) Four Directors
(c) Three Directors
(d) Two Directors
5.3 In the given case scenario, if it is presumed that as on 31st March,
2020, the turnover of the company is ` 87.00 crores and the

paid-up share capital is ` 12.00 crores, would the company be

still mandatorily required to appoint two independent Directors?
(a) There is no need to appoint two independent Directors
since the aggregate of turnover and paid-up share capital
has not crossed the threshold of ` 100 crore.
(b) Instead of appointing two independent Directors, the
company is required to appoint only one independent
Director since the aggregate of turnover and paid-up
share capital is above ` 90 crores but less than ` 100
crores.
(c) The company is required to appoint minimum two
independent Directors since the paid-up share capital is
` 12 crore.
(d) The company is required to appoint only one independent
Director since the paid-up share capital is below ` 15
crore.
5.4 According to the case scenario, the company altered its Articles
of Association so as to increase the total strength of Directors up
to 20 from the present 15 Directors. Which of the following
options is applicable in such a case of alteration:
(a) The articles were altered by passing an ordinary
resolution.
(b) The articles were altered by passing an ordinary
resolution followed by approval sought from the
jurisdictional Registrar of Companies.
(c) The articles were altered by passing a Board Resolution
with more than seventy-five percent majority.
(d) The articles were altered by passing a special resolution.
5.5 As on 12th August, 2020, when the AGM of LTSL was held, the
total strength of Directors reached to 18 due to the appointment
of four independent Directors. When all the Directors are

rotational, how many Directors would have got retired at this

AGM?
(a) Six Directors
(b) Five Directors
(c) Four Directors
(d) Two Directors
Answer Key
Question Answer
No.
5.1 (a) The appointment of Anil, Badal, Chanchal and
Damodar by a single resolution is valid because
beforehand, a motion authorising their
appointment by a single resolution was passed in
the meeting and not a single vote was cast against
such motion.
5.2 (c) Three Directors
5.3 (c) The company is required to appoint minimum two
independent Directors since the paid-up share
capital is ` 12 crores.
5.4 (d) The articles were altered by passing a special
resolution.
5.5 (b) Five Directors
6. M/s. Sheetal Chemicals Limited (SCL) is a listed company dealing in

petrochemicals which are used in numerous household products like
wax, detergents, dyes, carpeting, safety glasses, etc. As per the latest
audited balance sheet as at 31st March, 2020, its paid-up capital stood
at ` 40.00 crores against its Authorised Capital of ` 50.00 crore. The
turnover for the FY 2019-20 was to the tune of ` 300.00 crore.
The company has thirteen Directors on its Board namely, A1, B2, C3,
D4, E5, F6, G7, H8, I9, J10, K11, L12 and M13 of which A1, B2, C3, D4

and E5 are the independent Directors. The Articles of Association of the

company restrict the maximum number of Directors to fifteen.
SCL remains ever-conscious to corporate governance and ensures
compliance to legal provisions in both letter and spirit. L12 is the
Managing Director of the company whereas M13 is the only woman
Director. The company has constituted requisite committees as per the
requirements of law. The Audit Committee consists of eight Directors as
members i.e. A1, B2, C3, D4, E5, I9, J10 and K11.
Earlier, for the financial year ending 31st March, 2019, the company
successfully convened and held Annual General Meeting (AGM) on 25th
September, 2019 at its registered office at Pune. On the fateful day of
AGM, while returning to Mumbai from Pune by road after her re-
appointment at AGM, a fatal accident claimed the life of M13 thus
snatching an efficient and trustworthy Director from the hands of the
company. Later on, a Board Meeting was held on 09-01-2020 and N14,
a finance professional and daughter of deceased woman Director M13
was appointed as Director to fill the vacancy of woman Director so
created due to the death of M13. It may be noted that before 09-01-
2020, a Board Meeting was held on 15-09-2019.
SCL is a growing company which wants to diversify its business into the
sphere of agrochemicals also and therefore, desires to bring on its Board
O15 who is a chemical engineer with hands-on experience of about
twenty years post his qualification in the field of agrochemicals and
other petroleum products. Besides production, he is well versed in
marketing of agrochemicals both in India and abroad. It is hoped that
he shall prove to be a valuable asset to the company. Accordingly, a
Board Meeting was held on 6th March, 2020 to appoint O15 as additional
Director. As the total strength of Directors was well within the limit
prescribed by the Articles, there was no need to alter the Articles.
6.1 After the appointment of O15 as additional Director on 06-03-
2020, another Board Meeting of SCL was held on 17-07-2020

through video conferencing 2. From the given options, choose

the correct one which indicates the quorum for the current Board
Meeting.
(a) Nine Directors
(b) Five Directors
(c) Four Directors
(d) Two Directors
6.2 For the purpose of meeting of the Audit Committee of SCL, how
many members should be present at such meeting in order to
constitute the quorum.
(a) All the seven members.
(b) Only five members of which minimum two should be
independent members.
(c) Only three members of which minimum two should be
independent members.
(d) Only two members of which minimum one should be
independent member.
6.3 From the case scenario, it is observed that after the death of
M13, her daughter N14 was appointed at a Board Meeting held
on 09-01-2020 to fill the vacancy of woman Director. Is the
appointment of N14 on 09-01-2020 justified?
(a) No. The appointment of N14 should have been made
within three months from 25-09-2019.
(b) No. The appointment of N14 should have been made
within two months from 25-09-2019.
2
In view of COVID-19 outbreak, one of the special measures announced by MCA
vide General Circular 11/2020, dated 24-03-2020 states that as a one-time
relaxation the gap between two consecutive meetings of the Board may extend to
180 days till the next two quarters ( i.e. till 30 th September, 2020), instead of 120
days as required by the Companies Act, 2013. This amendment is given to make
you understand the given situation in a realistic manner under practical scenario.

(c) No. The appointment of N14 should have been made

within one month from 25-09-2019.
(d) Yes. The appointment of N14 made at the Board Meeting
held on 09-01-2020 is justified.
6.4 In the above case scenario, L12 is the Managing Director of SCL. If
it is assumed that there is no managing or Whole-Time Director,
then in such a situation, how much remuneration the company can
pay to all the Directors for the Financial Year 2019-20.
(a) 11% of the net profits available for the Financial
Year 2019-20
(b) 5% of the net profits available for the Financial
Year 2019-20
(c) 3% of the net profits available for the Financial
Year 2019-20
(d) 1% of the net profits available for the Financial
Year 2019-20
6.5 In this case scenario, the Audit Committee formed by SCL
contains seven members. If there are only six members in the
Audit Committee then out of such six members, minimum how
many shall be the independent members?
(a) Five
(b) Four
(c) Three
(d) Two
Answer Key
Question Answer
No.
6.1 (b) Five Directors
6.2 (c) Only three members of which minimum two
should be independent members.

6.3 (d) Yes. The appointment of N14 made at the Board

Meeting held on 09-01-2020 is justified.
6.4 (c) 3% of the net profits available for the Financial
Year 2019-20
6.5 (b) Four
7. Global Trade and Securities (India) Limited (GTSIL) is a listed company

having been listed at BSE and NSE. It was incorporated around four and
a half years back in June, 2016 and has its registered office at
Connaught Place, New Delhi. The authorised and paid-up share capital
of the company is ` 25.00 crore.
GTSIL is duly registered with the Securities and Exchange Board of India
(SEBI) for providing merchant banking services. The company offers a
varied range of services including issue management, handling of buy-
back of shares, debt and equity syndication, mergers and acquisitions,
listing and delisting, etc. GTSIL is a well-established and reputed name
among the regulatory authorities, Government Agencies, law firms,
share-brokers, mutual funds, banks and other prominent organisations.
The company is being managed by nine Directors out of which three are
independent Directors. Of the other non-independent six Directors, two
are non-executive. The four executive Directors i.e. Skand, Srishti, Rina
and Rohan are energetic, young and dynamic professionals with vast
experience in the field of merchant banking. In the current Financial
Year 2020-21, a chance scrutiny of accounts revealed that during the
last financial year, by oversight, Rohan, who heads the new issue
division of the company, had drawn remuneration in excess of the limit
provided by the relevant provisions of law.
The shareholding base of the company is quite wide and therefore, the
number of small shareholders having stake in the company is
substantial. It so happened that some of them wished to appoint
Mukund, a seasoned finance professional, as small shareholders’
Director on the Board of the company. After due process, Mukund was
appointed by the company as Director to represent small shareholders.
During the financial year 2019-20, the profits of the company rose by
around 7.00 crore in comparison to the previous year and therefore, a

rise in the dividend per share was expected to be approved in the AGM.
Accordingly, a dividend of ` 6 per share was declared as against ` 4 per
share in the preceding year and the same was approved at the AGM
held on 25-09-2020 through video conferencing as permitted by MCA
General Circular 20/2020 dated 05-05-2020.
It is a proven fact that PESTEL analysis 3 (i.e. analysis of political,
economic, social, technological, environmental and legal factors
affecting organisations) has always been a critical aspect for the success
of any organisation. Keeping this crucial fact in view, the Directors of
the company desiring to improve political understanding, after following
the due procedure of law in this respect, made one-time political
contribution of certain amount in the current Financial Year to Public
Vikassheel Dal which is one of the prominent political parties of the
country duly registered under Section 29A of the Representation of the
People Act, 1951.
7.1 According to the case scenario, small shareholders got appointed
Mukund as small shareholders’ Director on the Board of the
company. By choosing the correct option, state as to the minimum
number of small shareholders who might have assembled together
to get Mukund appointed as Director to represent them.
(a) The minimum number of small shareholders must have
been not less than one thousand or one-tenth of the total
number of such shareholders whichever is lower.
(b) The minimum number of small shareholders must have
been not less than one thousand or one-tenth of the total
number of such shareholders whichever is higher.
(c) The minimum number of small shareholders must have
been not less than one thousand or one-fifth of the total
number of such shareholders whichever is lower.
3
It is a marketing tool gainfully used by the marketing department of an
organisation and involves analysis and monitoring of macro-environmental factors
that impact the organisations.

(d) The minimum number of small shareholders must have

been not less than one thousand or one-fifth of the total
number of such shareholders whichever is higher.
7.2 From the case scenario it is evident that the company made
political contributions of certain amount to Public Vikassheel
Dal, a prominent political party of the country. As the company
is in existence for less than five years, how much amount it
might have contributed to the political party in question.
(a) Any amount as approved by the Directors.
(b) Any amount within the limit of 5% of the average net
profits of the last three years.
(c) Any amount within the limit of 7.5% of the average net
profits of the last three years.
(d) Political contribution made by the company is invalid as it
is yet to complete five years of its existence.
7.3 The above case scenario states that Mukund was appointed as
small shareholders’ Director on the Board of the company. To be
a Director of the small shareholders, what is the nominal
value of shares which such Director is required to own:
(a) Such Director is required to own shares of the nominal
value of ` 20,000 in the company prior to his appointment
as small shareholders’ Director.
(b) Such Director is required to own shares of the nominal
value of at least `10,000 in the company prior to his
appointment as small shareholders’ Director.
(c) Such Director is required to own shares of the nominal
value of at least ` 5,000 prior to his appointment as small
shareholders’ Director.
(d) Such Director is not required to own shares of any
nominal value in the company prior to his appointment
as small shareholders’ Director.

7.4 In this case scenario, the name of the company includes the word
‘India’. In case a company is desirous of including the words
‘British India’ in its name, which of the following options is
applicable:
(a) For including ‘British India’ in its name, such company
must be incorporated with minimum Authorised Capital of
` 50,00,000.
(b) For including ‘British India’ in its name, such company
` 75,00,000.
(c) For including ‘British India’ in its name, such company
` 100,00,000.
7.5 The above case scenario reveals that Rohan, one of the
Directors, had drawn remuneration in excess of the limit
prescribed by the relevant provisions. As regards recovery of the
excess remuneration drawn by him, which of the following
options is applicable:
(a) The company shall not waive recovery of excess
remuneration paid unless approved by a special resolution
within one year from the date the sum becomes refundable.
(b) The company shall not waive recovery of excess
within two years from the date the sum becomes
refundable.
(c) The company shall not waive recovery of excess
remuneration paid unless approved by the Central
Government.
(d) The company shall not waive recovery of excess
within three years from the date the sum becomes
refundable.

Answer Key
Question Answer
No.
7.1 (a) The minimum number of small shareholders must
have been not less than one thousand or one-
tenth of the total number of such shareholders
whichever is lower.
7.2 (a) Any amount as approved by the Directors.
7.3 (d) Such Director is not required to own shares of any
nominal value in the company prior to his
appointment as small shareholders’ Director.
7.4 (d) None of the above.
7.5 (b) The company shall not waive recovery of excess
remuneration paid unless approved by a special
resolution within two years from the date the sum
becomes refundable.
8. Hibiscus Powergear Limited (HPL), an unlisted company, is “One Stop

Shop” for all the custom built electrical switchboards, battery chargers
and bus ducts. It manufactures comprehensive range of products from
small industrial distribution boards to the large state-of-the-art
intelligent motor and power control centers. The Registered Office of
the company is located in Belthangadi and two manufacturing plants are
situated at Dabaspet Industrial Area near Bengaluru.
HPL has been incurring huge losses for the last three years. There were
accumulated losses to the extent of ` 19 Crores as on 31.03.2019. The
Board of Directors had been evaluating all the possible options to bring
the company back on the track. One of the options considered was
Corporate Debt Restructuring (CDR) with the creditors, through
Compromise.
Following data was extracted from the latest Audited Financial
Statements of HPL as on 31.03.2019:

S. Particulars Amount (` in
No. Crores)
1. Secured Creditors
(a) 8%Debentures (Secured by 20.00
creating Charge on Freehold
Property)
(b) Accrued Interest on 8%Debentures 1.60
(c) Cash Credit (availed from National 15.00
Commercial Bank against
hypothecation of stocks and book
debts)
2. Unsecured Creditors
Loans from Directors @8% p.a. 30.00
Trade Payables 18.00
Other creditors 0.40
Total Outstanding Debt payable by HPL 85.00
Consequently, a Scheme of Corporate Debt Restructuring was consented

by 78% of the secured creditors and all other stake holders. Brief
outlines of the Scheme are given below:
(a) 8%Debenture-holders were to take over the Freehold Property
at the current valuation of ` 12 Crores (book value ` 8 Crores)
in part payment of their dues and to provide additional `10
Crores @9% p.a. secured by a floating charge on the assets of
HPL. Interest accrued on Debentures was to be paid
immediately.
(b) National Commercial Bank agreed to reduce interest rate from
11% p.a. to 8% p.a. on Cash Credit till next one year. It also in-
principle agreed to provide ` 3 Crores as non-fund based limits
for a period of two years.
(c) Directors were to waive off all the outstanding interest payable
to them upto 31.3.2019 and also had no objection if interest rate
on their loans was reduced to 6% p.a.
(d) Suppliers and other creditors consented to waiving off their debts
to the extent of all the amounts outstanding for a period beyond

2 years as on 31.03.2019. In essence, HPL was required to pay

only for the last 2 years to the suppliers and other creditors.
(e) Patents and goodwill were to be written off to the extent of `
0.50 Crores. Value of obsolete items in the inventory was
quantified to ` 0.80 Crores and was to be written off.
(f) Bad debts identified to the extent of ` 0.75 Crores were to be
written off.
(g) Remaining Freehold property worth ` 15 Crores was revalued at
` 23 crore.
After the above exercise, an application for the Compromise was filed
by HPL with the jurisdictional National Company Law Tribunal (in short
‘Tribunal’) and made the necessary disclosures by filing an Affidavit. The
disclosures contained all the material facts in respect of HPL, a copy of
the Scheme of Corporate Debt Structuring as consented to by the
creditors, methodology on the basis of which creditors had been
identified, creditors’ responsibility statement in the prescribed form,
safeguards for the protection of other secured and unsecured creditors,
Auditor’s Report, Valuation Report, etc.
After hearing the Application, the Tribunal gave necessary directions in
respect of conducting of the meeting of the creditors, fixed the date and
place of the meeting, gave directions for the appointment of the
Chairperson and scrutinizer, fixed the quorum, stated the procedure to
be followed at the meeting including methodology of voting which could
be either in person or by proxy or by postal ballot or by voting through
electronic means, the time within which the Chairperson was required
to report the result of the meeting to the Tribunal, etc.
To ensure transparency that may facilitate all the stakeholders to take
proper decisions, extensive disclosures were made by HPL along with
the Notice for the Meeting and then the company, as per the directions
of the Tribunal, sent Notices to all the creditors and to all those who
were entitled to receive it. Further, it was also sent to all the relevant
Regulators seeking their representations. In addition, the Notice was
advertised in English in Times of India and in the local Kannada

Newspaper Udayavani in Kannada language. The company also

published the Notice on its website.
It is worth noting that United Belts Private Limited (UBPL), supplying
some of the components to HPL, had raised objections to the proposed
Scheme of Compromise after receiving the Notice. As on 31.03.2019,
HPL was required to pay ` 0.80 Crores to UBPL for the supply of various
components.
The Meeting was duly convened and the majority representing 78% of
the value of creditors agreed to the Scheme of Compromise. The
Tribunal provided for the protection of minority creditors and by an
Order sanctioned the Scheme of Compromise relating to Corporate Debt
Structuring (CDR), after considering the Certificate issued by the Auditor
of HPL. The order of the Tribunal was filed with the Registrar by HPL
within the specified period of the receipt of the order.
However, in the due course of time, HPL faced many practical hurdles
in the implementation of the Scheme of Compromise sanctioned by the
Tribunal.
8.1. The case scenario states that an Application for Compromise was
filed by HPL with the jurisdictional National Company Law
Tribunal (NCLT) along with all the necessary documents
including Auditor’s Report. From the following options, choose
the one which the auditor must include in the Auditor’s Report
when the Application for Compromise relates to the Scheme of
Corporate Debt Restructuring (CDR):
(a) That all the Fixed Assets of HPL have been properly
revalued by the Registered Valuer for the purpose of
Compromise and the Valuation Report being submitted to
the Tribunal is true and correct;
(b) That the total value of creditors shown in the financial
statements of HPL as on 31.03.2019 is true and correct
and there are no material discrepancies.

(c) That the fund requirements of HPL after the corporate

debt restructuring as approved shall conform to the
liquidity test, based upon the estimates provided to the
auditor by the Board of HPL.
(d) That all the contents of the Application and other
documents submitted to the Tribunal are true and correct
to the best of his knowledge and belief and reflect a true
and fair position of HPL as on the date of submission of
Application to the Tribunal.
8.2 According to the case scenario, with a view to ensure
transparency that might facilitate all the stakeholders to take
proper decisions, extensive disclosures were made by HPL along
with the Notice for the Meeting and the notices were sent to all
the creditors and all those who were entitled to receive it. As
regards the adoption of the Compromise, the Notice needs to
provide that the persons to whom the notice is sent may vote in
the meeting either themselves or through proxies or by postal
ballot:
(a) Within 21 days from the date of receipt of such Notice.
(b) Within one month from the date of receipt of such Notice.
(c) Within 14 days from the date of receipt of such Notice.
(d) Within 7 days from the date of receipt of such Notice.
8.3 It is stated in the case scenario that United Belts Private Limited
(UBPL), supplying some of the components to HPL, had raised
objections to the proposed Scheme of Compromise. For raising
any objection to the Scheme of Compromise, the value of UBPL
as trade creditor in the books of HPL must be:
(a) Not less than 5% of the total outstanding debt as per the
audited financial statements as on 31.03.2019 of HPL.
(b) Not less than 10% of the total outstanding debt as per
the audited financial statements as on 31.03.2019 of HPL.

(c) Not less than ` 1 Crore as per the audited financial

statements as on 31.03.2019 of HPL.
(d) Not less than 25% of the total outstanding debt as per
the audited financial statements as on 31.03.2019 of HPL.
8.4 The Notice was also sent to all the relevant Regulators seeking
their representations which was to be made within the specified
period from the date of receipt of such notice. From the following
options, choose the one which specifies the correct time period
for making representations:
(a) Representation needs to be made within 10 days from the
date of receipt of notice.
(b) Representation needs to be made within 15 days from the
(c) Representation needs to be made within 30 days from the
(d) Representation needs to be made within 45 days from the
8.5 According to the case scenario, the Tribunal while providing for the
protection of minority creditors, sanctioned by an order the Scheme
of Compromise relating to Corporate Debt Structuring (CDR), after
considering the Certificate issued by the Auditor of HPL. The Auditor’s
Certificate at the Sanctioning stage shall be to the effect that:
(a) HPL has duly followed all the procedure required for the
Compromise as required under the Companies Act 2013
and the relevant Rules thereunder.
(b) All the documents submitted by HPL to the Tribunal for
the purpose of Compromise are true and correct and the
Auditors have duly verified them.
(c) The accounting treatment, if any, proposed in the Scheme
of Compromise by HPL is in conformity with the
prescribed accounting standards.

(d) The Auditors have reasonable grounds to believe that HPL

will continue its business as a going concern after the
implementation of Compromise.
8.6 The given case scenario states that in due course of time, HPL
faced many practical hurdles in the implementation of the
Scheme of Compromise sanctioned by the Tribunal. Which of the
following options is applicable, if the Tribunal is satisfied that the
sanctioned Compromise cannot be implemented satisfactorily
with or without modifications, and the company is unable to pay
its debts as per the Scheme:
(a) HPL and every officer of HPL who was in default shall be
liable for fine of minimum ` one lac and maximum of `
ten lacs.
(b) The Tribunal may make an order for winding up of HPL.
(c) The company shall be liable to pay fine of ` twenty-five
lacs and every Director and the defaulting officers of HPL
shall be liable for imprisonment ranging between one year
and 5 years and also fine not exceeding ` five lacs.
(d) The Tribunal may order for confiscation and sale of
properties of HPL to settle the debts to the creditors.
Answer Key
Question Answer
No.
8.1 (c) That the fund requirements of HPL after the
corporate debt restructuring as approved shall
conform to the liquidity test, based upon the
estimates provided to the auditor by the Board of
HPL.
8.2 (b) Within one month from the date of receipt of such
Notice.
8.3 (a) Not less than 5% of the total outstanding debt as
per the audited financial statements as on
31.03.2019 of HPL

8.4 (c) Representation needs to be made within 30 days

from the date of receipt of notice.
8.5 (c) The accounting treatment, if any, proposed in the
Scheme of Compromise by HPL is in conformity
with the prescribed accounting standards.
8.6 (b) The Tribunal may make an order for winding up of
HPL.
9. Blessed with both artistic and business approach, Deb, Debosmita and
Divyanshi, putting their best foot forward entered India’s ` 2,000 crore
fragrance market by floating Daffodils Perfumes and Scent Limited
(DPSL) in the year 2008 with an Authorised Capital of ` 30.00 crore.
Along with them, there were ten other family members who became
subscribers to the Memorandum of Association. It goes without saying
that the trio were the first Directors of the company. Having Registered
Office at Kannauj, the perfume capital of India, Uttar Pradesh, DPSL
focussed on natural fragrances and made perfumes from flowers,
camphor, saffron and other aromatic substances.
In the very next year, during April, 2009, Anirudh, a qualified Chartered
Accountant and financial advisor was appointed to head the Finance
Department of the company. After the promulgation of the Companies
Act, 2013, his appointment was regularised as Chief Financial Officer
(CFO) under the relevant provisions requiring appointment of Key
Managerial Personnel (KMP).
Knowing the fact that perfumes have emerged as an essential product,
driven by growing trend of personal care and forming part of everyone’s
pride as well as confidence, they roped in Devpriya, a smart market
analyst, and Divya, an IT Professional, as Directors at the time of
conducting Annual General Meeting (AGM) on 25th September, 2010.
The company was doing well and its yearly turnover was increasing
gradually.
As on 31-03-2019, DPSL, yet to be listed, had paid-up share capital of
` 15.00 crore with 355 shareholders and its free reserves as on that
date were ` 12.00 crore. DPSL also had secured and unsecured debts
aggregating to ` 2.00 crore. Its turnover for the financial year 2018-19
was ` 85.00 crore. Based on the audited financial statements as on 31-

03-2019 when paid-up capital exceeded the threshold limit, four

independent Directors, namely, Rajan, Rahul, Ranjit and Raima were
appointed in April, 2019.
Prior to the above development, Anirudh, the CFO of the company took
early retirement in December, 2018. However, in one of the Board
Meetings held on 25th June, 2019, Deb expressed his desire to again
engage Anirudh by appointing him as independent Director during the
current year 2019, in addition to the already appointed four independent
Directors. As of now, the Articles of Association provide for the payment
of sitting fee of ` 40,000 to each of the non-independent Directors of
the company for attending every Board or Committee Meeting.
The Audited financial results as on 31-03-2019 also required constitution
of an Audit Committee. Accordingly, in April, 2019, an Audit Committee
was constituted which comprised Deb and Debosmita as non-
independent Directors besides certain independent Directors.
It came to light that the company was sitting on crore of rupees in terms
of cash and bank balance. Due to the pandemic COVID-19 and
subsequent lockdown in the country, the production almost came to a
standstill the demand dived southwards. As there was not much to
invest in terms of any new projects, the Board of Directors thought to
provide investors an opportunity to exit from their investment in the
company. Accordingly, in a duly convened Board Meeting which was
held on 25-08-2020, the Directors proposed buy-back of equity shares
keeping in view the relevant clause of the Articles providing for the said
buy-back.
Multiple Choice questions
9.1 According to the case scenario, Deb expressed his desire to again
engage Anirudh by appointing him as independent Director
during the current year 2019. Which of the following options is
applicable with respect to the appointment of Anirudh as an
independent Director of DPSL in the year 2019:
(a) Anirudh can be appointed as an independent Director of
DPSL at a Board Meeting where all the Directors present
at the meeting agree to such appointment.

(b) Anirudh cannot be appointed as an independent Director

of DPSL.
(c) Anirudh can be appointed as an independent Director of
DPSL by passing an ordinary resolution at a meeting of
the shareholders.
(d) Anirudh can be appointed as an independent Director of
DPSL by passing a special resolution at a meeting of the
shareholders.
9.2 It is observed from the case scenario that the non-independent
Directors are being paid sitting fee of ` 40,000 for attending
every Board/Committee Meeting. From the following options,
choose the one which indicates the sitting fee payable to the
independent Directors for attending a Board or Committee
Meeting:
(a) Sitting fees payable to independent Directors per meeting
shall not be less than ` 40,000.
(b) Sitting fees payable to independent Directors per meeting
shall not be less than 75% of ` 40,000.
(c) Sitting fees payable to independent Directors per meeting
(d) Sitting fees payable to independent Directors per meeting
9.3 The case scenario states that in a duly convened Board Meeting
which was held on 25-08-2020, the Directors of DPSL proposed
buy-back of equity shares keeping in view the relevant clause of
the Articles providing for the said buy-back. In case the Articles
of the company did not contain any clause providing for buy-
back, then which of the following options is applicable in such a
situation:
(a) The Articles of DPSL are required to be altered for
including a clause which authorises buy-back.

(b) There is no need to alter the Articles to provide for buy-

back if any two Directors attending the related Board
Meeting vote in favour of buy-back.
(c) There is no need to alter the Articles to provide for buy-
back if any three Directors attending the related Board
(d) There is no need to alter the Articles to provide for buy-
back if all the Directors attending the related Board
9.4 According to the case scenario, the Audit Committee constituted
at DPSL comprises Deb and Debosmita as non-independent
Directors besides certain independent Directors. Minimum how
many independent Directors might have been included in the
Audit Committee if there were two non-independent Directors in
it.
(a) One independent Director.
(b) Two independent Directors.
(c) Three independent Directors.
(d) Four independent Directors.
9.5 Suppose DPSL resorts to buy-back of its equity shares after
fulfilling all the legal formalities. Post buy-back, what ratio the
DPSL shall be required to maintain between the aggregate of
secured and unsecured debts owed by it and its paid-up capital
and free reserves?
(a) Post buy-back, the DPSL shall be required to maintain a
ratio of 2:1 between the aggregate of secured and
unsecured debts owed by it and its paid-up capital and
free reserves.
(b) Post buy-back, the DPSL shall be required to maintain a
free reserves.

(c) Post buy-back, the DPSL shall be required to maintain a

free reserves.
(d) Post buy-back, the DPSL shall be required to maintain a
free reserves.
Answer Key
Question Answer
No.
9.1 (b) Anirudh cannot be appointed as an independent
Director of DPSL.
9.2 (a) Sitting fees payable to independent Directors per
meeting shall not be less than ` 40,000.
9.3 (a) The Articles of DPSL are required to be altered for
including a clause which authorises buy-back.
9.4 (c) Three independent Directors.
9.5 (a) Post buy-back, the DPSL shall be required to
maintain a ratio of 2:1 between the aggregate of
secured and unsecured debts owed by it and its
paid-up capital and free reserves.
10. XYZ Auto Limited, an unlisted Company is engaged in the manufacturing

of auto components and spare parts. Its Registered Office is situated in
Chennai, Tamil Nadu and its branches are located in Metropolitan cities
i.e. Delhi, Mumbai and Kolkata. Following information is available from
its audited financial statements:
Particulars FY 2017-18 FY 2018-19 FY 2019-20
(` in Lakhs) (` in Lakhs) (` in Lakhs)
Paid-up Share 1,500 1,500 1,500
Capital
Turnover 8,000 9,000 9,500
Outstanding Loans 1,500 1,300 1,100
Debentures 1,200 1,100 1,000

ABC Limited, an unlisted company, is engaged in the business of

transport and logistics and has its Registered Office in Mumbai. ABC
Limited purchased all the shares of XYZ Limited in April, 2019 and
became its holding company. There are 900 shareholders and 400
debenture-holders. Following information is available from the audited
financial statements of ABC Limited:
Particulars FY 2017-18 FY 2018-19 FY 2019-20
(` in Lakhs) (` in Lakhs) (` in Lakhs)
Paid-up Share 5,000 5,000 5,000
Capital
Turnover 35,000 40,000 45,000
Secured Loans from 3,500 4,000 4,500
Super Commercial
Bank and Other
Unsecured Loans
Debentures 1,000 1,000 1,000
Sumit and Sumedh, the Directors of ABC Limited also happened to be

the Directors of EFG Limited, an unlisted company. However, in April,
2019, they exited from EFG Limited as Directors. The turnover of EFG
Limited amounted to ` 110 crore, ` 99 Crores, ` 95 Crores and ` 91
Crores respectively in FY 2016-17, FY 2017-18, FY 2018-19 and FY 2019-
20. The gradual decline in turnover is on account of inadequate
marketing of the products and improper campaigning. Employees’
unrest from time to time is also responsible for falling turnover. The
total paid- up share capital of the EFG Limited is ` 9.50 crore throughout
the period. EFG Limited is continuing with an Audit Committee which
was constituted earlier.
10.1 In respect of constitution of Audit Committee by XYZ Limited, out
of the following options, which one is applicable?
(a) XYZ Limited, being not a private company, is required to
constitute an Audit Committee.
(b) Having paid-up share capital above the threshold limit,
XYZ Limited is required to constitute an Audit committee.

(c) Based on the threshold limits, since ABC Limited has

constituted its Audit Committee, XYZ Limited, being
wholly owned subsidiary of ABC Limited, is not required
to constitute an Audit Committee.
(d) In view of the average turnover and paid-up share capital
of last three financial years exceeding the threshold limit,
XYZ Limited is required to constitute an Audit committee.
10.2 Is it permissible for EFG Limited to discontinue its Audit
Committee in the FY 2020-21?
(a) Yes. EFG Limited can discontinue its Audit Committee in
the FY 2020-21, since both the Directors of ABC Limited
have left the Directorship in EFG Limited.
(b) Yes. EFG Limited can discontinue its Audit Committee in
the FY 2020-21, since its turnover did not exceed ` 100
crore or more in the consecutive three financial years.
(c) No. EFG Limited cannot discontinue its Audit Committee
in the FY 2020-21, since its aggregate turnover in the last
three financial years exceeds ` 100 crore.
(d) No. EFG Limited cannot discontinue its Audit Committee
in the FY 2020-21, since its paid-up share capital is more
than ` 5.00 crore.
10.3 Suppose ABC Limited did not constitute Vigil Mechanism as
required by Section 177 (9) of the Companies Act, 2013. Which
one of the following penalties is leviable on the company for
contravening this provision:
(a) The company is liable to pay minimum fine of ` 50,000
and maximum of ` 1,00,000.
(b) The company is liable to pay minimum fine of ` 10,00,000
(c) The company is liable to pay minimum fine of ` 5,00,000

(d) The company is liable to pay minimum fine of ` 1,00,000

10.4 As regards Stakeholders Relationship Committee, whether ABC
Limited is required to form such a Committee as per the
relevant provisions of the Companies Act, 2013:
(a) No. ABC Limited is not required to form a Stakeholders
Relationship Committee since its shareholders are limited
to 900.
(b) No. ABC Limited is not required to form a Stakeholders
Relationship Committee since its debenture-holders are
limited to 400.
(c) Yes. ABC Limited is required to form a Stakeholders
Relationship Committee since its shareholders and
debenture-holders total upto 1300.
(d) No. ABC Limited is not required to form a Stakeholders
Relationship Committee since the combined strength of its
shareholders and debenture-holders does not exceed 1500.
Answer Key
Question Answer
No.
10.1 (c) Based on the threshold limits, since ABC Limited
has constituted its Audit Committee, XYZ Limited,
being wholly owned subsidiary of ABC Limited, is
not required to constitute an Audit Committee.
10.2 (b) Yes. EFG Limited can discontinue its Audit
Committee in the FY 2020-21, since its turnover
did not exceed ` 100 crore or more in the
consecutive three financial years.
10.3 (d) The company is liable to pay minimum fine of
` 1,00,000 and maximum of ` 5,00,000.
10.4 (c) Yes. ABC Limited is required to form a
Stakeholders Relationship Committee since its
shareholders and debenture-holders total upto
1300.

11. Shri Hari Textiles Limited was incorporated in the year 2010. Its
Registered Office is situated in Connaught Place, New Delhi. It filed its
audited annual financial statements for the financial year 2019-20 well
within time with the jurisdictional Registrar of Companies. The Registrar
inspected the statements and after reviewing them, felt the need to seek
clarifications on certain matters. Accordingly, a written notice was sent
by the Registrar to the company and its officials directing them to
comply with the notice within thirty days of its receipt. However, the
company and its officials failed to reply within the time specified in the
notice.
The Registrar initiated the inquiry and proceeded further for inspecting
all the documents of the company. While conducting the inquiry, the
Registrar on prudent grounds believed that some of the documents and
other vital information in relation to the company would be destroyed
or altered by the official of the company. With a view to safeguard the
documents, the Registrar obtained an order from the Special Court and
thereafter, seized all such material.
While inspecting some of the documents the Registrar came to know
that the Board of Directors had passed a resolution in a Board Meeting
held on 10-04-2019 and thereby, increased the remuneration payable
to the Directors including two whole-time Directors and Managing
Director to 12℅ of the net profits of the company which was a sharp
increase of 5% from the preceding financial year.
Prior to the inquiry, two Directors of the company, namely, Mr. X and
Mr. D got retired. The Registrar found from the inspection of the
documents that they were involved in certain dealings which included
selling of the assets of the company. On the basis of such information
gathered from the inspected documents, the Registrar sought some
clarifications from both of them regarding the dubious transactions.
However, both Mr. X and Mr. D refused to appear before him showing
their non-availability in the town and also represented through a
common representative that they were no more a part of the Board of
Directors of Shri Hari Textiles Limited.
After the completion of inspection and inquiry, the Registrar submitted
a written report to the Central Government in respect of his findings

against the company. The reports mentioned that there were major
discrepancies in the assets and liabilities as well as profit and loss
statements filed by the company.
On receipt of report from the Registrar, the Central Government
considered it necessary to investigate the affairs of the company by the
Serious Fraud Investigation Office (SFIO). Accordingly, by an order SFIO
was directed to conduct the investigation of Shri Hari Textiles Limited
and submit its report within the stipulated time. As instructed by the
Central Government, SFIO authorised some of its inspectors to
investigate the affairs of the company. The team deputed by the SFIO
included experts in the field of cost accounting, financial accounting,
taxation, law and forensic auditing.
While inspecting the company, the team of SFIO came to know that the
Income-tax authorities had already initiated investigation against Shri
Hari Textiles Limited.
11.1 Shri Hari Textiles Limited and its officials failed to submit any
reply to the written notice issued by the Registrar within the time
specified in the notice. How much fine can be imposed for such
failure?
(a) The Company and every defaulting officer shall be
punishable with a fine up to ` 1,00,000 and in case of
continuing failure, with an additional fine up to ` 500 for
every day after the first during which the failure
continues.
(b) The Company and every defaulting officer shall be
continuing failure, with an additional fine up to ` 1,000 for
every day after the first during which the failure continues.
(c) The Company and every defaulting officer shall be
continuing failure, with an additional fine up to ` 5,000
for every day after the first during which the failure
continues.

(d) The Company and every defaulting officer shall be

continuing failure, with an additional fine up to ` 5,000
for every day after the first during which the failure
continues.
11.2 From the case scenario, it is observed that the Registrar seized
certain important documents in the course of inquiry. After
inspection what procedure is to followed pertaining to such
documents?
(a) The Registrar is required to submit such documents in the
Special Court which permitted seizure.
(b) The Registrar is required to forward all such documents
along with the inquiry report to the Central Government.
(c) The Registrar is required to return such documents back
to the company after making, if considered necessary, the
copies of them.
(d) The Registrar is required to retain such documents until
further instruction is received from the Special Court.
11.3 What is the requisite requirement for increasing the
remuneration of Directors including Whole-Time Directors and
Managing Director to 12% so that it shall be in accordance with
the relevant provisions of the Companies, Act, 2013?
(a) Board Resolution increasing the remuneration to 12%
needs to be authorised at the General Meeting and
thereafter, duly sanctioned by the ROC.
(b) Board Resolution increasing the remuneration to 12%
thereafter, duly sanctioned by the Tribunal.
(c) Board Resolution increasing the remuneration to 12%
needs to be authorised at the General Meeting subject to
Schedule V.

(d) Board Resolution increasing the remuneration to 12%

thereafter, duly sanctioned by the Central Government
through Regional Director.
11.4 The case scenario states that the Registrar of Companies had
called ex-Directors of the company for examining them during
the inquiry. Is the Registrar empowered to call the ex-Directors:
(a) The Registrar cannot call ex-Directors of the company,
without the order of the court.
(b) The Registrar may, by issuing a written notice, call the
ex-Directors for seeking the requisite information.
(c) In case the Registrar is appointed by the Central
Government to conduct investigation, then only he can
call ex-Directors of the company.
(d) Except the Tribunal, no other authority is empowered to
call ex-Directors of a company for any examination.
11.5 According to the case scenario, while inspecting the company,
the team of SFIO came to know that the Income-tax authorities
had already initiated investigation against the company. From
the given options, choose the correct one that indicates as to
how amidst such a situation SFIO will be continuing with the
investigation.
(a) SFIO has to put its investigation on hold so long as the
company is being investigated by Income-tax authorities.
(b) SFIO will proceed with its investigation on the basis of
report submitted by Income-tax authorities.
(c) SFIO will proceed with its investigation while Income-tax
authorities shall keep on hold its investigation.
(d) SFIO will simultaneously continue its investigation along
with the Income-tax authorities.

Answer Key
Question Answer
No.
11.1 (a) The Company and every defaulting officer shall be
punishable with a fine up to ` 1,00,000 and in
case of continuing failure, with an additional fine
up to ` 500 for every day after the first during
which the failure continues.
11.2 (c) The Registrar is required to return such
documents back to the company after making, if
considered necessary, the copies of them.
11. 3 (c) Board Resolution increasing the remuneration to
12% needs to be authorised at the General
Meeting subject to Schedule V.
11.4 (b) The Registrar may, by issuing a written notice, call
the ex-Directors for seeking the requisite
information.
11.5 (c) SFIO will proceed with its investigation while
Income-tax authorities shall keep on hold its
investigation.
12. Sunshine Software Private Limited having its Registered Office at

Hyderabad was incorporated on 28th May, 2017 with Authorised Capital
of ` 10,00,000 divided into 1,00,000 equity shares of ` 10 each. The
main object of the company is to develop customised business software
and provide software consulting services to various business houses.
Mr. Sumit, Mr. Samadhan, Mr. Saumitra and Mr. Aniket, the subscribers
to the Memorandum of Association are also the Directors of the
company. The company allotted the shares to the subscribers within the
stipulated time. It is worth noting that the Directors are part of the core
team for development of the software. However, due to some internal
misunderstanding among all the Directors, more particularly serious
disagreement in relation to working schedules, the company could not
start its working since incorporation and therefore, no revenue was
generated from operations. In fact, the Directors were busy pursuing
their own business interests and seemingly, had no intention to devote
any time for the company.

Following information has been extracted from the financial statements

of the Sunshine Software Private Limited from the date of its
incorporation:
Particulars 2017-18 2018-19
(Amount in `) (Amount in `)
Paid-up Share Capital 10,00,000 10,00,000
Revenue from Operations Nil Nil
Expenses incurred towards 55,000 65,000
fulfilment of various legal
obligations
The company did not recruit even a single employee and therefore, no
expenses on account of salary or on other material transactions were
incurred. However, the company has complied with all the filing
requirements under the Companies Act, 2013 and the Income Tax Act,
1961 since its incorporation. It incurred the following expenses:
(a) Payment of fees to the Registrar.
(b) Payments made to fulfil the requirements of the Companies Act,
2013 and any other applicable laws.
(c) Some payments were made for maintenance of office and
records.
Mr. Saumitra also holds Directorship in Surya Energy Private Limited
against which National Company Law Tribunal had passed an order
under Section 420 of the Companies Act, 2013. After receipt of the order
of Tribunal, Surya Energy is contemplating to file an appeal with
National Company Law Appellate Tribunal (NCLAT).
12.1 On the basis of the facts mentioned in the case scenario,
determine the status of the Sunshine Software Private Limited.
(a) It is an inactive company since no significant accounting
transactions have been undertaken for the last two
financial years.

(b) It is a defunct company since no significant accounting

transactions have been undertaken for the last two
financial years.
(c) It is an active company since it makes regular payments
to ROC.
12.2 Which Form needs to be used by a ‘Dormant Company’ for
obtaining the status of an ‘active company’.
(a) MSC- 1
(b) MSC- 2
(c) MSC- 3
(d) MSC- 4
12.3 Choose from the following options the number of minimum
Directors which a dormant company shall have, if it is a public
limited company.
(a) Seven
(b) Two
(c) Three
(d) One
12.4 Assuming that the ROC issued a certificate to Sunshine Software
Private Limited allowing it the status of a ‘dormant company’
w.e.f. 1st October, 2019, then what will be the date after which
ROC is empowered to initiate the process of striking off the name
of the company if it continues to remain as a dormant company.
(a) After 30th September, 2020.
(b) After 30th September, 2021.
(c) After 30th September, 2023.
(d) After 30th September, 2024.

12.5 From the case scenario, it is observed that Surya Energy Private
Limited, aggrieved by the order of the Tribunal, wants to file an
appeal with NCLAT. Within how much time from the date of
receipt of the order of Tribunal it can file such appeal with
NCLAT:
(a) Surya Energy Private Limited can file an appeal with
NCLAT within a period of 15 days from the date of the
receipt of the order of Tribunal.
(b) Surya Energy Private Limited can file an appeal with
(c) Surya Energy Private Limited can file an appeal with
(d) Surya Energy Private Limited can file an appeal with
Answer Key
Question Answer
No.
12.1 (a) It is an inactive company since no significant
accounting transactions have been undertaken for
the last two financial years.
12.2 (d) MSC- 4
12.3 (c) Three
12.4 (d) After 30th September, 2024.
12.5 (c) Surya Energy Private Limited can file an appeal
with NCLAT within a period of 45 days from the
date of the receipt of the order of Tribunal.
13. Paavan Nidhi Limited having its Registered Office at Karol Bagh, New
Delhi, has been declared as Nidhi by notification published in the Official
Gazette. The company is incorporated with the object of cultivating the

habit of thrift and savings among its members, receiving deposit from,
and lending to, its members only, for their mutual benefit.
Paavan Nidhi Limited has six Directors, namely, Padam, Prakash,
Puneet, Pratima, Poorva and Piyush and two hundred fifty members. All
the Directors are shrewd businessmen having full dedication to the
cause of the company. They are committed to run the company in
accordance with the Nidhi Rules, 2014 and being law-abiding persons
shall not do anything which is not permitted in case of a Nidhi like
carrying on the business of chit fund or hire-purchase finance or leasing
finance or insurance, etc. Padam is the senior-most Director with vast
experience in the field of finance and therefore, he has been honoured
by the company to hold Directorship for a term up to ten consecutive
years.
The company offers following services for the benefit of its members:
1. Fixed Deposit Plans of different maturities;
2. Recurring Deposit Plans for members who do not wish to deposit
lump-sum;
3. Opening of Savings Accounts in the name of members;
4. Gold Loans to the needy members on easy terms;
5. Mortgage Loans, etc.
PQR Private Limited, having its Registered Office at Munirka, New Delhi,
was incorporated last year. It had a chance to go through the operations
of Paavan Nidhi Limited and finding them to be on sound footing, it
applied for becoming its member.
Further, Mr. Tom, a resident of Switzerland and one of the Directors of
PQR Private Limited, is also interested in investing his funds in Paavan
Nidhi Limited. The Nidhi company is analysing the proposals received
from both the investors.
During the current year, Mr. Kshitij, a member of Paavan Nidhi Limited
deposited ` 1,00,000 in the name of his minor son Rudra who is of 12
years of age. Mr. Kshitij also desires that Rudra becomes a member of
Paavan Nidhi and for that purpose he is negotiating with the company.

As regards the validity of this matter, Piyush, one of the Directors has
raised some objections. The company wants to sort out the issue
amicably.
13.1 From the case scenario, it is observed that PQR Private Limited
has applied for becoming a member of Paavan Nidhi Limited.
From the following options, choose the one which is applicable
in such a situation:
(a) PQR Private Limited cannot become a member of Paavan
Nidhi Limited.
(b) PQR Private Limited can become a member of Paavan
Nidhi Limited by investing minimum ` 5,00,000 as capital.
(c) PQR Private Limited can become a member of Paavan
Nidhi Limited by including a clause in its Articles of
Association which permits it to become a member of a
Nidhi company.
(d) PQR Private Limited must be in existence for a minimum
period of three years to be eligible for becoming member
of a Nidhi company.
13.2 Piyush, one of the Directors of Paavan Nidhi Limited has raised
objection on acceptance of deposit amounting to ` 1,00,000 in
the name of Rudra, a minor, and negotiations initiated by his
father Mr. Kshitij to make him a member of the Paavan Nidhi.
From the following options choose the one which is applicable in
the given situation:
(a) Paavan Nidhi Limited can neither accept deposit in the
name of Rudra, a minor, nor can make him a member.
(b) Paavan Nidhi Limited may accept deposit in the name of
Rudra, a minor, since it is made by Mr. Kshitij, a member
and the father of Rudra but being minor, he cannot be
made a member.

(c) Paavan Nidhi Limited cannot accept deposit in the name

of Rudra exceeding ` 25,000 but he can become a
member by contributing minimum amount.
(d) Paavan Nidhi Limited can accept deposit in the name of
Rudra up to ` 2,00,000 and he can become a member of
the company.
13. 3 From the case scenario, it is evident that Padam, the senior-most
Director, has been honoured by Paavan Nidhi Limited to hold
Directorship for a term up to ten consecutive years. After
relinquishing his office as Director at the expiry of ten years,
when can Padam be re-appointed as Director of the company.
(a) Padam shall be eligible for re-appointment only after the
expiry of two years of ceasing to be a Director.
(b) Padam shall be eligible for re-appointment only after the
expiry of one year of ceasing to be a Director.
(c) Padam shall be eligible for re-appointment only after the
expiry of six months of ceasing to be a Director.
(d) Padam shall not be eligible for re-appointment once he
ceases to be a Director.
13.4 If M/s. A & A Associates, a firm of auditors, has been appointed
as auditors of Paavan Nidhi Limited for a term of five years
commencing from FY 2015-16 to FY 2019-20 and if the company
is desirous of re-appointing the said firm of auditors for another
term of five years commencing from FY 2020-21, then which of
the following options is applicable in such an eventuality:
(a) M/s A & A Associates cannot be re-appointed as auditors
for another term of five years since no Nidhi company
shall appoint or reappoint any auditing firm for two terms
of five consecutive years.
(b) M/s A & A Associates can be re-appointed as auditors for
another term of five years since a Nidhi company is
permitted to appoint or reappoint any auditing firm for
two terms of five consecutive years.

(c) M/s A & A Associates cannot be re-appointed as auditors

for another term of five years since no Nidhi company is
permitted to re-appoint any auditing firm before the
expiry of two years if an auditing firm ceases to be its
auditors after completion of the term of five years.
(d) M/s A & A Associates cannot be re-appointed as auditors
for another term of five years since no Nidhi company is
permitted to re-appoint any auditing firm before the
expiry of one year if an auditing firm ceases to be its
auditors after completion of the term of five years.
13.5 The above case scenario states that Mr. Tom, a resident of
Switzerland and one of the Directors of PQR Private Limited is
interested in investing his funds in Paavan Nidhi Limited. From
the options given below, choose the one which is applicable in
such a situation:
(a) Paavan Nidhi Limited can accept investment proposal of
Mr. Tom with the approval of Reserve Bank of India (RBI).
(b) Paavan Nidhi Limited can accept the investment proposal
of Mr. Tom with the approval of Reserve Bank of India
(RBI) for receipt of foreign exchange if the Registrar of
Companies (ROC) has given his consent for such
acceptance.
(c) Paavan Nidhi Limited can accept the investment proposal
of Mr. Tom with the approval of Reserve Bank of India
(RBI) for receipt of foreign exchange if the Central
Government through jurisdictional Regional Director has
consented to such proposal.
(d) Paavan Nidhi Limited cannot accept the investment
proposal of Mr. Tom since a person resident outside India
is prohibited from making investments in a Nidhi
company.

Answer Key
Question Answer
No.
13.1 (a) PQR Private Limited cannot become a member of
Paavan Nidhi Limited
13.2 (b) Paavan Nidhi Limited may accept deposit in the
name of Rudra, a minor, since it is made by Mr.
Kshitij, a member and the father of Rudra but
being minor, he cannot be made a member.
13.3 (a) Padam shall be eligible for re-appointment only
after the expiry of two years of ceasing to be a
Director.
13.4 (b) M/s A & A Associates can be re-appointed as
auditors for another term of five years since a
Nidhi company is permitted to appoint or
reappoint any auditing firm for two terms of five
consecutive years.
13.5 (d) Paavan Nidhi Limited cannot accept the
investment proposal of Mr. Tom since a person
resident outside India is prohibited from making
investments in a Nidhi company.
14. Yash, Yuvraj, Yatharth and Yatin are the Directors of Yukta Developers
Limited (YDL), an Agra based unlisted company having significant
insight in constructing apartments, residencies and malls in Agra,
Kanpur and Bareilly for the last ten years. Its latest project was to
develop Sky Snow Residency at a prominent place in Dehradun,
Uttarakhand. The blue print of the project contained construction of
luxurious 3/4 BHK villas with the latest amenities.
As on 31st March, 2020, YDL had paid-up share capital of ` 60.00 crore
and free reserves of ` 25.00 crore. Its turnover for the F.Y. 2019-20 was
` 450.00 crore and the borrowings aggregated to ` 45.00 crore.
Included in the list of total assets of the company were investments
made in other companies and loans advanced to the extent of ` 40.00
crore. The proposal to advance a loan of ` 15.00 crore to Srilekha
Engineering Private Limited is under the active consideration of YDL.

YDL, with a view to expand its network decided to show its presence in
New Delhi, the capital city of the country. Keeping in mind the influx of
challenging responsibilities, Vikalp Kumar was appointed as Director at
the extra-ordinary general meeting (EGM) held on 07-08-2019.
As regards holding of Board Meetings by the Directors of YDL, there
were six such meetings held from 01-08-2019 to 31-03-2020. Yash, due
to some extraneous reasons, took leave of absence for the first three
meetings and in case of next three meetings he did not even inform the
Board regarding his absence.
Yatharth thought of assigning his office of Directorship to Janeesh, Vice
President (Operations) for his absence for a period of four months
starting from 01-09-2019 as he was to go to Singapore to acquire higher
technical expertise in connection with the upcoming Sky Snow Residency
project in Dehradoon.
Yuvraj, on his personal front purchased one 4 BHK apartment worth
` 50 lakhs in Sky Snow Residency for his daughter who was to get
married soon. For this transaction, he made payment of ` 40 lakhs
immediately and offered to pay the remaining amount of ` 10 lakhs in
four equal installments. YDL accepted the proposal of its Director Yuvraj
and he was allowed to repay the remaining cost of flat amounting to `
10 lakhs in four equal installments.
14.1 From the case scenario, it is observed that YDL has not appointed any
woman Director. Is it necessary for YDL to appoint a woman Director?
(a) YDL is not required to appoint a woman Director because
it is an unlisted company.
(b) YDL is required to appoint a woman Director since its
paid-up share capital is ` 60 crore.
(c) YDL is required to appoint a woman Director since its
turnover is ` 450 crore.
(d) YDL is required to appoint a woman Director since its
combined paid-up share capital and turnover is more than
` 500 crore.

14.2 According to the case scenario, Yatharth thought of assigning his

office of Directorship to Janeesh, Vice President (Operations) for
his absence for a period of four months starting from 1.09.2019
as he was to go to Singapore to acquire higher technical
expertise in connection with the upcoming Sky Snow residency
project in Dehradoon. From the following options, choose the
correct one:
(a) Yatharth is authorised to assign his office of Directorship
to Janeesh, Vice President (Operations) for his absence
for a period of four months starting from 01.09.2019.
(b) Yatharth is not authorised to assign his office of
Directorship to Janeesh, Vice President (Operations) for
his absence for a period of four months starting from
01.09.2019.
(c) Yatharth himself can appoint an alternate Director for his
absence for a period of four months starting from
01.09.2019.
(d) Yatharth can instruct Yatin, another Director who is junior
to him in age, to attend Board Meetings on his behalf
besides himself whenever a meeting is held during his
absence starting from 01.09.2019.
14.3 As per the case scenario, Yash did not attend six Board Meetings
consecutively which were held from 01-08-2019 to 31-03-2020.
He took leave of absence for the first three meetings and in case
of next three meetings he did not even inform the Board
regarding his absence. Which of the following options given
below is applicable in such a situation:
(a) Yash is required to vacate his office as Director since without
seeking leave of absence from the Board he absented
himself from the last three Board Meetings consecutively.
(b) Yash is required to vacate his office as Director since he
did not attend six Board Meetings consecutively and it is
immaterial whether he took leave of absence or not from
the Board.

(c) Yash is not required to vacate his office as Director since

he has not absented himself from the Board Meetings for
a continuous period of twelve months yet.
(d) Yash is required to vacate his office as Director since he
did not attend Board Meetings consecutively for more
than six months.
14.4 The case scenario states that a proposal to advance a loan of `
15.00 crore to Srilekha Engineering Private Limited is under the
active consideration of YDL. In this respect, which of the
following options is best applicable:
(a) YDL can advance a loan of ` 15.00 crore to Srilekha
Engineering Private Limited by passing a board resolution.
(b) YDL can advance a loan of ` 15.00 crore to Srilekha
Engineering Private Limited but only after passing an
ordinary resolution.
(c) YDL can advance a loan of ` 15.00 crore to Srilekha
Engineering Private Limited but only after passing a
special resolution.
(d) YDL cannot advance a loan of ` 15.00 crore to Srilekha
Engineering Private Limited since it has already made
investments in other companies and has advanced loans
to the extent of ` 40.00 crore.
14.5 The case scenario states that Yuvraj purchased a Sky Snow 4 BHK
apartment worth ` 50 lakhs for his daughter from YDL and paid `
40 lakhs immediately and offered to pay remaining cost of flat of `
10 lakhs in four equal installments. From the options given below,
choose the one which is applicable in the given situation:
(a) ` 10 lakhs being the remaining cost of flat to be repaid in
four equal installments shall be considered as loan to
Yuvraj.
(b) ` 10 lakhs being the remaining cost of flat to be repaid in
four equal installments shall not be considered as loan to
Yuvraj.

(c) ` 10 lakhs being the remaining cost of flat to be repaid in

four equal installments by Yuvraj shall be considered as a
void transaction since no company is permitted to give
advance credit to its Director, even if the same
advanced in the normal course of business.
(d) ` 10 lakhs being the remaining cost of flat to be repaid in
four equal installments by Yuvraj shall become a ground
for vacation of office of Director by Yuvraj.
Answer Key
Question Answer
No.
14.1 (c) YDL is required to appoint a woman Director since
its turnover is ` 450 crore.
14.2 (b) Yatharth is not authorised to assign his office of
Directorship to Janeesh, Vice President
(Operations) for his absence for a period of four
months starting from 01.09.2019.
14.3 (c) Yash is not required to vacate his office as Director
since he has not absented himself from the Board
Meetings for a continuous period of twelve months
yet.
14.4 (c) YDL can advance a loan of ` 15.00 crore to
Srilekha Engineering Private Limited but only after
passing a special resolution.
14.5 (b) ` 10 lakhs being the remaining cost of flat to be
repaid in four equal installments shall not be
considered as loan to Yuvraj.
15. Shree Ram Company Ltd. is a listed public company incorporated in the
year 2001. At present, the company has 13 Directors which includes,
Mr. Anil, Mr. Sunil, Mr. Rohit, Mr. Amit, Mr. Anuj, Ms. Anisha, Mr. Pritam,
Mr. Bharat, Mr. Shudanshu, Mr. Kapil, Mr. Anup , Mr. Farhan and Mr.
Rohan. Mr. Rohit is the Whole Time Director of the company where as
Ms. Anisha is a women Director of the company. Mr. Anil, Mr. Pritam
and Mr. Anuj are independent Directors of the company. Mr. Sunil is
recently appointed as independent Director of the company.

The Articles of Association of the company provided that the maximum

number of Directors in the company shall not be more than 15.
Presently, the company is having 13 Directors. The board of Directors
of the said company wanted to increase the number of Directors to 17.
The board of Directors meeting was held to discuss the same.
The company, at present, is having 1000 shareholders. The small
shareholders of the company wanted to appoint Mr. Zafar as their
Director and as their representative on the Board of Directors of the said
company. Mr. Zafar is holding 500 equity shares of 20 each in the said
company. So according to the provisions of the Companies Act, 2013, a
listed company may have one Director elected by such small
shareholders in such manner and with such terms and conditions as may
be prescribed. Hence, Mr. Zafar was appointed as a small shareholder
Director by the company.
An urgent meeting was called on 2nd December, 2019 by the company,
to discuss some issues pertaining to buying machineries. A 3 days prior
notice was issued to each Director to attend the meeting. Mr. Anil, Mr.
Anuj and Mr. Pritam were unable to attend the meeting. Mr. Anil, due
to his surgery was suggested to rest by the doctor and even via video
conferencing he was not allowed to attend the meeting. Mr. Shudanshu
was also on leave and busy in his son's marriage. Rest all the Directors,
gave their consent for the meeting. Mr. Sunil, while on the way to attend
the meeting met an accident and was taken to the hospital. The meeting
could not be held and was postponed.
A Board Meeting was held on 12th January, 2020. The agenda of the
Board Meeting was to increase the sitting fees of Directors and secondly
to sale one of the undertakings of the company. The Board of Directors
of the company have decided to raise the payment of sitting fees for
each meeting of Board of Directors to a maximum of ` 36,000 through
its articles. In view of the board, since, last one year there has been an
increase in the work responsibilities of both women and independent
Directors of the company. It was also held that both the women Director
as well as independent Directors are working full time for this company.
They are not serving as a Director of any other company. Hence, the

company proposed to increase the sitting fees of both this category of

Directors to ` 40,000 per meeting in its articles.
The memorandum of the company empower it's board of Directors to
sell its undertaking to another company having similar objects. The
articles of the company contained a provision by which Directors were
empowered to sell or otherwise deal with the property of the company.
The board was of view that whatever amount, the company will get after
selling the plot will be used to clear off the existing loans. Mr. Rohit and
Mr. Anil objected against selling of the company's plot located in
outskirts of Jaipur. But the majority of board members were in favour
to sell the property.
Multiple Choice Questions:
15.1 Mr. Sunil is recently appointed as independent Director of the
company. Do you think he needs to give declaration as to his
independence under the provisions of this Act, after assuming
his position as an independent Director?
(a) On the first day of attending his office.
(b) At the first Board Meeting in which he participates as a
Director.
(c) At the first Annual General Meeting of the company.
(d) At the first meeting of Audit Committee in which he
participates as a Director.
15.2 The company, at present, is having 13 Directors. The Board of
Directors of the said company wanted to increase its number of
Directors to 17. Suggest in what manner, the said number of
Directors can be increased?
(a) By passing ordinary resolution by members at General
Meeting.
(b) By passing special resolution by members at General
Meeting.
(c) By passing board resolution by 2/3rd majority of Board of
Directors.

(d) By passing board resolution by majority of Directors and

then approval by 2/3rd members at General Meeting.
15.3 The small shareholders want to appoint Mr. Zafar as their
Director. What is the required strength of small shareholders for
appointment of their Director and also state the time period of
giving notice to the company before the meeting to propose an
appointment of small shareholders Director?
(a) 100 small shareholders with a 14 days’ notice to the
company.
(b) 200 small shareholders with a 15 days’ notice to the
company.
(c) 250 small shareholders with a 20 days’ notice to the
company.
(d) 200 small shareholders with a 30 days’ notice to the
company.
15.4 The Board of Directors of the company have decided to raise the
payment of sitting fees for each meeting of the Board of
Directors. State whether the company can accept such a proposal
to increase sitting fees for both independent and women
Directors and to what extent?
(a) Yes, such proposal can be accepted but it cannot exceed
the limit of ` 50,000 per meeting.
(b) No, such proposal cannot be accepted as all the Directors
of the company are eligible for equal remuneration for the
meeting upto ` 50,000.
(c) Yes, such proposal can be accepted but it cannot exceed
the limit of ` 100,000 per meeting.
(d) No, women Directors unlike other Directors are not
eligible for higher remuneration, only independent
Directors are eligible upto ` 1,00,000.

15.5 The Board of Directors decided to sell one of the undertakings of

the company. What procedure is required to be followed before
selling the undertaking?
(a) The Board of Directors can sale the undertaking with the
consent of all the Directors present at the Board Meeting.
(b) At the General Meeting, the proposal needs to be
approved by a special resolution.
(c) A board resolution needs to be passed by Board of
Directors with unanimous consent and then special
resolution by members at the General Meeting.
(d) With prior approval of the Registrar, a special resolution
needs to be passed by the company.
Answer Key
Question Answer
No.
15.1 (b) At the first Board Meeting in which he participates
as a Director.
15.2 (b) By passing special resolution by members at
General Meeting.
15.3 (a) 100 small shareholders with a 14 days’ notice to
the company.
15.4 (c) Yes, such proposal can be accepted but it cannot
exceed the limit of ` 100,000 per meeting.
15.5 (b) At the General Meeting, the proposal needs to be
approved by a special resolution.
16. RATA Motors is a leading global automobile manufacturing company
listed on Bombay Stock Exchange. Its diverse portfolio includes an
extensive range of cars, sports utility vehicles, trucks, buses and
defense vehicles. Rata Motors is one of India's largest OEMs offering an
extensive range of integrated, smart and e-mobility solutions.

RATA Motors is planning for expansion in India and overseas. It made a

proposal with Jupiter Mauritius LLP, registered under the provisions of
LLP Act of Mauritius and Pluto LLP, registered under per the provisions
of Limited Liability Partnership Act, 2008, for merger with RATA Motors.
It also proposed to Mars Ltd., listed on Kolkata Stock Exchange, having
a paid up share capital of ` 8 crore, engaged in the business of tyres
manufacturing and distribution, for merging with it. RATA Motors called
a Board Meeting to draft the agreement for merger of the aforesaid LLPs
and Mars Ltd.
During the Board Meeting, Mr. Rakesh, the Director of RATA Motors
pointed out that Mr. Bhaskar, the Director of RATA Motors, is holding
Directorship in 21 companies, out of which 11 are private companies,
including Bright Pvt. Ltd., a subsidiary of Mars Ltd. and 10 public
companies. The Board asked Mr. Bhaskar to resign his office in the
company or in other company in which he is a Director, as per section
168 of the Companies Act, 2013. Mr. Bhaskar averted that he has not
violated the provisions of section 165 as out of 11 private companies,
Boost Pvt. Ltd. is a dormant company and out of 10 public companies,
in Dull Ltd., he has been appointed as an alternate Director. As per
section 165 of the Companies Act 2013, dormant company is not
included within the limit of holding of Directorship in companies. He
further added that, in no way, he has violated the provisions of section
165 and in fact he is eligible to be appointed in one more public
company, as the alternate Directorship is not included in the threshold
of 20 companies. He told the Board that, still if, RATA Motors wants to
remove him from his Directorship, it can do so, but he is not going to
give resignation in any other company as a Director. The Board of
Directors agreed with Mr. Bhaskar’s averments and dropped the plan of
asking him to resign under section 168 of the Companies Act, 2013 or
moving a resolution for his removal under section 169 of the Companies
Act, 2013.
The paid up share capital of RATA Motors is ` 9 crore consisting of 900
members. It called the meeting of the members for the merger of Mars
Ltd. The meeting was attended by 440 members in person, 60 members
appointed proxies to attend and remaining 400 members holding ` 1.50
crore shares were absent. 320 members representing shares of ` 5.35

crore and 60 proxies representing shares of ` 2.1 crore, present in the

meeting voted in favor of the scheme. The company Mars Ltd. was
successfully amalgamated with RATA Motors as per the relevant laws
applicable. Many officers, Directors and employees of the transferee
company, Mars Ltd., lost their office after the amalgamation. Mr. Ram,
the Managing Director, Mr. Laxman the Whole Time Director and Mr.
Bharat, the part time Director of Mars Ltd. approached the company for
compensation due to loss of office. However, Mr. Laxman on the basis
of his merits was appointed as manager in RATA Motors. The company
denied the compensation as they were not eligible for compensation as
per section 202 of the Companies Act 2013. Few members of Mars. Ltd
believed that transfer of funds and assets of the company will be
affecting their interest. So, 120 members out of 1500 members decided
to file an application before NCLT.
16.1 Whether the decision of Board of not moving the resolution for
removal of Mr. Bhaskar is valid?
(a) Yes, because as per the provisions of section 165,
alternate Directorship is not included in 20 companies.
(b) Yes, because Directorship in dormant company shall be
excluded while calculating the limit of 20 companies as
per section 165 of the Companies Act 2013.
(c) No, because he can hold Directorship in maximum 10
public companies.
(d) Yes, because he holds Directorship in 20 companies
whether it being public or private company.
16.2 Whether Mars Ltd is correct, for not giving compensation for loss
of office to its aforesaid Directors?
(a) Yes, compensation for loss of office is not available in
case of amalgamation or reconstruction.
(b) No, Mr. Ram and Mr. Laxman are eligible for
compensation as per section 202 of the Companies Act,
2013.

(c) No, only Mr. Ram is eligible for compensation as per

section 202 of the Companies Act, 2013.
(d) No, Mr. Ram and Mr. Bharat are eligible for compensation.
16.3 Choose the correct statement :-
(a) Jupiter Mauritius LLP can amalgamate with Rata Motors.
because section 234 of the Companies Act permits foreign
LLP to merge with the company.
(b) Pluto LLP and Jupiter Mauritius LLP can amalgamate with
Rata Motors. because they do not come under the
definition of company.
(c) Pluto LLP can amalgamate with Rata Motors even after
registered as a company under section 366 of the
(d) Jupiter Mauritius LLP can amalgamate with Rata Motors
because as per section 366 companies capable of being
registered do not include foreign limited liability
partnership.
16. 4 Whether the approval of the members for the merger of Mars
Ltd. is valid or not?
(a) Yes, as the majority of persons representing required
value of shares was present and voted in the meeting has
approved the arrangement.
(b) No, as the majority of the members did not vote in favor
because proxies will not be included while calculating the
votes.
(c) No, the majority who voted in the meeting should
represent more than 90% of the total value of shares as
per the requirements of the Companies Act 2013.
(d) No, the majority of the members have not voted in the
meeting because out of 900 members only 380 members
have voted in favor.

16.5 Whether the petition filed by the members of Mars Ltd. to NCLT
will be maintainable assuming the proposal made by RATA
Motors to Mars Ltd. was a takeover offer and not merger offer?
(a) Yes, because more than 100 members can apply for
oppression and mismanagement
(b) No, because less than 1/10th of total number of members
have applied
(c) Yes, because 100 members or 1/10th of total number of
members, whichever is lower has applied
(d) No, because members of Mars Ld. cannot file a case for
redressal of their grievances to NCLT in case of takeover
offer
Answer Key
Question Answer
No.
16.1 (c) No, because he can hold Directorship in maximum
10 public companies.
16.2 (c) No, only Mr. Ram is eligible for compensation as
per section 202 of the Companies Act, 2013.
16.3 (a) Jupiter Mauritius LLP can amalgamate with Rata
Motors. because section 234 of the Companies Act
permits foreign LLP to merge with the company.
16.4 (a) Yes, as the majority of persons representing
required value of shares was present and voted in
the meeting has approved the arrangement.
16.5 (d) No, because members of Mars Ld. cannot file a
case for redressal of their grievances to NCLT in
case of takeover offer
17. ABC Limited was incorporated under the Indian Companies Act, 1913,
on 21st March, 1918 as a public limited (non-government Company)
company.
The issued, subscribed and paid-up equity share capital of the company
as on 31st March, 2020 is ` 25 crore, consisting of 25 crore equity shares

of ` 1 each, which are listed on BSE Limited and National Stock

Exchange of India Limited.
The company filed a scheme of arrangement before NCLT for issue of
secured non-convertible redeemable fully paid-up debentures by way of
bonus to its members as on record date out of the accumulated profits
lying to the credit of Profit & Loss Account under sections 230 to 232
and other applicable provisions of the Companies Act, 2013.
The scheme of arrangement is formulated for issue and allotment by
way of bonus, one fully paid-up debenture of the face value of ` 30/-
each, by utilizing its accumulated profits, for every one fully paid-up
equity share of face value of ` 1/- each held by total 1,25,000 members
as on the record date.
Pursuant to the order dated 10th April, 2020, passed by the Hon’ble
National Company Law Tribunal, a Meeting of the equity shareholders
of the company was convened at Bhasha Bhawan Auditorium, National
Library, Belvedere Road, Alipore, Kolkata – 700 027 on Monday, 27th
May, 2020, at 1:00 P.M.
In accordance with the provisions of Sections 230 to 232 of the
Companies Act, 2013, the scheme was agreed to by a majority of
persons representing three fourth in value of the equity shareholders of
the company, voting through (i) postal ballot or remote e-voting and (ii)
ballot or polling paper at the venue of the meeting.
17.1 What is the amount, which the company intends to utilise out of
accumulated profits for issue of bonus debentures?
(a) 30 Crore
(b) 50 Crore
(c) 25 Crore
(d) 750 Crore
17.2 The scheme of arrangement is to be agreed by members of the
company
(a) By way of ordinary resolution.
(b) By way of special resolution.

(c) By majority of members representing three-fourths in

value of the members voting in person or by proxy or by
postal ballot / e-voting.
(d) By majority of members voting in person or by proxy or
by postal ballot / e-voting.
17.3 How many equity shares are required to be held by members
voting in favour of the scheme for approving the scheme?
(a) More than 12.5 crore equity shares.
(b) 12.5 crore equity shares or more.
(c) More than 18.75 crore equity shares.
(d) 18.75 crore equity shares or more.
17.4 How many members must agree to the scheme of arrangement,
if 40% of total members attend and 30% of the total members
vote at the meeting?
(a) 18,751
(b) 37,501
(c) 18750
(d) 62,501
Answer Key
Question Answer
No.
17.1 (d) 750 crore.
17.2 (c) By majority of persons representing three-fourth
in value of the members voting in person or by
proxy or by postal ballot / e- voting.
17.3 (d) 18.75 crore equity shares or more.
17.4 (a) 18751.
18. DEF Limited was incorporated under the Companies Act, 2013 on 21st
June, 2013 as a public limited company.

The issued, subscribed and paid-up equity share capital of the company
as on 31st March, 2020, is ` 30 crore consisting of 30 crore equity shares
of ` 1 each, which are listed on BSE Limited and National Stock
Exchange of India Limited.
secured non-convertible redeemable fully paid-up debentures by way of
bonus to its members as on the record date out of the accumulated
profits lying to the credit of Profit & Loss Account under sections 230 to
232 and other applicable provisions of the Companies Act, 2013.
equity share of face value of ` 1/- each held by total 50,000 members
In respect of the said scheme, there is no arrangement with the
creditors of the company. No compromise is offered under the Scheme
to any of the creditors of the company. The liability of the creditors
under the Scheme, is neither being reduced nor being extinguished.
Pursuant to the Order passed by the Hon’ble National Company Law
Tribunal, a meeting of the equity shareholders of the company was
convened at the registered office of the company. In accordance with
the provisions of Sections 230 to 232 of the Companies Act, 2013, the
scheme was agreed to by the requisite members.
The order of the NCLT for approving the scheme of arrangement dated
2nd August 2020, received on 6th August 2020 was filed with the Registrar
by the company.
18.1 How many debentures are required to be issued by the company
in pursuance of the scheme of arrangement?
(a) 25 crore
(b) 30 crore

(c) 50 crore
(d) 50,000
18.2 What is the amount which the company intends to utilise out of
(a) 30 crore
(b) 50 crore
(c) 25 crore
(d) 600 crore
18.3 What is the last date for filing the order of NCLT with the
registrar?
(a) 1st September,2020
(b) 5th September,2020
(c) 21st August,2020
(d) 17th August,2020
voting in favour of the scheme for approving the scheme, if all
the members attend and vote at the meeting?
(a) More than 15 crore equity shares.
(b) 15 crore equity shares or more.
if 50% of total members of the company attend and 40% of the
total members vote at the meeting?
(a) 10,001
(b) 37,500
(c) 25,001
(d) 37,501

Answer Key
Question Answer
No.
18. 1 (b) 30 crore
18. 2 (d) 600 crore
18. 3 (b) 5th September,2020
18.5 (a) 10,001
19. GHI Limited was incorporated under the Companies Act, 2013 on 27th
July, 2013 as a public limited company. The issued, subscribed and paid-
up equity share capital of the Company as on 31 March, 2020 is ` 50
crore consisting of 50 crore equity shares of ` 1 each, which are listed
on BSE Limited and National Stock Exchange of India Limited.
secured, non-convertible, redeemable, fully paid-up debentures by way
of bonus to its members as on record date out of the accumulated profits
lying to the credit of Profit & Loss Account, under Sections 230 to 232
and other applicable provisions of the Companies Act, 2013.
equity share of face value of ` 1/- each held by total 60,000 members
Pursuant to the order passed by the Hon’ble National Company Law
Tribunal, a meeting of the equity shareholders of the company was
convened at the registered office of the company. In accordance with
the provisions of Sections 230 to 232 of the Companies Act, 2013, the
scheme was agreed to by the requisite members.
The certificate furnished by BLR & Co, LLP, Statutory Auditors, as
regards to the accounting treatment, proposed in the scheme was in
conformity with the accounting standards prescribed under Section 133
of the Act and was filed with the NCLT and was kept open for inspection
by the equity shareholders of the Company at its registered office

between 10.00 a.m. to 2.00 p.m. on all days (except Saturdays, Sundays
and public holidays) up to the date of the meeting.
19.1 How many debentures are required to be issued by the company
in pursuance of the scheme of arrangement?
(a) 50 crore
(b) 30 crore
(c) 5 crore
(d) 60,000
19.2 What is the amount, which the company, intends to utilize out of
(a) 50 crore
(b) 500 crore
(c) 25 crore
(d) 600 crore
19.3 Was it incumbent upon the company to obtain and file with NCLT,
the certificate as regards to the conformity of accounting
treatment with the Accounting Standards prescribed under
Section 133 of the Act, proposed in the scheme from statutory
auditors?
(a) No, it is better, if obtained.
(b) Yes, from the point of view of good corporate governance.
(c) Yes, from any practicing Chartered Accountant not
necessarily from statutory auditors.
(d) Yes, from statutory auditors only.
voting in favour of the scheme for approving the scheme, if all
the members attend and vote at the meeting?
(a) More than 25 crore equity shares.

(b) 25 crore equity shares or more.

if 30% of total members of the company attend and 20% of the
total members vote at the meeting?
(a) 6,001
(b) 9,001
(c) 45,000
(d) 30,001
Answer Key
Question Answer
No.
19.1 (a) 50 crore
19. 2 (b) 500 crore
19.3 (d) Yes, from statutory auditors only
19.5 (a) 6,001
20. XYZ Private Limited was incorporated on 25.04.2003 as a private

company limited by shares under the provisions of the Companies Act,
1956 as a wholly owned subsidiary of JKL Industries Limited and is
currently engaged in the business of manufacturing, retailing and
institutional sales of regular breads as well as a wide range of premium
gourmet bakery products.
The issued, subscribed and paid-up capital is ` 10 crore divided into 1
crore equity shares of ` 10/- each fully paid up as at 31.03.2020
JKL Industries Limited was incorporated on 25.04.2000 as a public
company limited by shares under the provisions of the Companies Act,
1956 and is a leading food company in India. Its issued, subscribed and
paid up share capital is 50 crore divided into 5 crore equity shares of `
10/- each as at 31.03.2020.

The scheme of arrangement is presented pursuant to sections 230 to

232 and other applicable provisions of the Companies Act, 2013, for
demerger of the Manufacturing Business division and Retail Sales
Business division of XYZ Private Limited into JKL Industries Limited.
The Institutional sales business shall continue to belong to and be
vested in and be continued to be owned and managed by XYZ Private
Limited.
The appointed date of the scheme set out in its present form with any
modification(s) approved or imposed or directed by NCLT shall be
01.04.2020.
Pursuant to the order passed by the Hon’ble National Company Law
Tribunal, meetings of the equity shareholders of the both companies
were called and held at the registered offices of the companies and the
requisite members agreed to the scheme of arrangement on
30.04.2020.
NCLT passed the order approving the scheme of arrangement between
the companies on 05.07.2020, and the copy of the order was filed with
registrar of companies on 11.07.2020 which shall be the date on which
the scheme of arrangement comes into effect.
20.1 In accordance with the scheme of arrangement, XYZ Private
Limited is?
(a) a transferee company.
(b) a transferor company.
(c) neither transferee nor transferor company.
(d) both transferee and transferor company.
20.2 In accordance with the scheme of arrangement, JKL Industries
Limited is?
(a) a transferee company.
(b) a transferor company.

(c) neither transferee nor transferor company.

(d) both transferee and transferor company.
20.3 Whether any consideration is payable by JKL Industries Limited
to XYZ Private Limited for transfer of its manufacturing and retail
business?
(a) Yes, the no. of shares equal to the value of net assets
transferred.
(b) Yes, in cash or its equivalent for the value of net assets
transferred.
(c) Yes, the no. of shares equal to the value of gross assets
transferred.
(d) No, as XYZ Private Limited is wholly owned subsidiary of
JKL Industries Limited.
20.4 From which date, the scheme of arrangement, shall be effective?
(a) 30.04.2020
(b) 01.04.2020
(c) 05.07.2020
(d) 11.07.2020
20.5 Whether XYZ Private Limited shall be dissolved without winding
up by virtue of approval of scheme of arrangement by NCLT?
(a) Yes, as it will get demerged into JKL Industries Limited.
(b) No, as its institutional sales business will continue to be
owned and done by it.
(c) Yes, as its manufacturing and retail sales undertakings
are transferred.
(d) Yes, as it is a wholly owned subsidiary of JKL Industries
Limited.

Answer Key
Question Answer
No.
20.1 (b) a transferor company.
20. 2 (a) a transferee company.
20.3 (d) No, XYZ Private Limited is wholly owned subsidiary
company of JKL Industries Limited.
20.4 (b) 01.04.2020.
20.5 (b) No, as its institutional sales business will continue
to be owned and done by it.
21. AAA Private Limited is wholly owned subsidiary of BBB Industries Limited
and is currently engaged in the business of manufacture, retail and
institutional sales of steel furniture.
BBB Industries Limited was incorporated as a public company limited by
shares under the provisions of the Companies Act, 1956 and is a leading
furniture company in India.The equity shares of BBB Industries Limited
are listed on BSE Limited and National Stock Exchange of India Limited.
The Scheme of Arrangement is formulated pursuant to Sections 230 to
232 and other applicable provisions of the Companies Act, 2013, for
demerger of the Manufacturing Business division and Retail Sales
Business division of AAA Private Limited into BBB Industries Limited.
The Institutional sales business shall continue to belong to and be
vested in and be continued to be owned and carried out by AAA Private
Limited.
The Hon’ble National Company Law Tribunal directed to hold the
meetings of the equity shareholders of the both companies which were
called and held at the registered offices of the companies and their
respective requisite members agreed to the scheme of arrangement on
31/05/2020.
The notice of the meeting along with concerned documents was sent to
the Income Tax department on 05/04/2020, requiring their
representation, if any, on the scheme of arrangement, which was
received by the department on 09/04/2020.

The appointed date of the scheme set out in its present form with any
modification(s) approved or imposed or directed by the Hon’ble National
Company Law Tribunal shall be 01/07/2020 whereas it approved the
said scheme of arrangement between the companies by order dated
04/07/2020. The copy of the order was filed with registrar of companies
on 12/07/2020 which shall be the date on which the scheme of
arrangement comes into effect.
21.1 In accordance with the scheme of arrangement, AAA Private
Limited is?
(a) a Transferee company
(b) a Transferor company
(c) neither transferee nor transferor company
(d) both transferee and transferor company
21.2 In accordance with the scheme of arrangement, BBB Industries
Limited is?
(a) a Transferee company
(b) a Transferor company
(c) neither transferee nor transferor company
(d) both transferee and transferor company
21.3 Whether any consideration is payable by BBB Industries Limited
to AAA Private Limited for transfer of its manufacturing and retail
business?
(a) Yes, the no. of shares equal to the value of net assets
transferred.
(b) Yes, in cash or its equivalent for the value of net assets
transferred.
(c) Yes, the no .of shares equal to the value of gross assets
transferred
(d) No, as AAA Private Limited is wholly owned subsidiary of
BBB Industries Limited.

21.4 From which date the scheme of arrangement shall be effective?

(a) 31.05.2020
(b) 01.07.2020
(c) 04.07.2020
(d) 12.07.2020
21.5. Within how many days is the Income Tax Department required
to make representation on the scheme of arrangement sent by
the companies?
(a) Within 30 days from the date of notice to the Income Tax
Department
(b) Within 30 days from the date of receipt of notice by the
Income Tax Department.
(c) Within 45 days from the date of receipt of notice by the
(d) Within 60 days from the date of receipt of notice by the
Answer Key
Question Answer
No.
21.1 (b) a transferor company.
21. 2 (a) a transferee company.
21.3 (d) No, AAA Private Limited is wholly owned
subsidiary of BBB Industries Limited.
21.4 (b) 01.07.2020.
21.5 (b) within 30 days from the date of receipt of notice
by the Income Tax Department
22. Oak Tree Software Limited, incorporated in Singapore, deals in

development and distribution of software and related services. On
establishing a place of business in India at Chennai, Tamil Nadu, the
company prepared the following documents for submission to the
Registrar having appropriate jurisdiction:

1 A certified true copy of the company’s constitution originally

framed in English.
2. Full address of the registered office of the company.
3. A list of the Directors and Secretary of the company containing
the prescribed particulars.
4. The names and addresses of three persons resident in India
authorised to accept on behalf of the company service of process
and any notices or other documents required to be served on the
company.
5. Full address of the office of the company in Chennai, Tamil Nadu.
This office is deemed to be its principal place of business in India.
6. A signed declaration that none of the Directors of the company
had ever been convicted or debarred from formation of
companies and management in India or abroad.
7. A declaration that OakTree Software Limited was establishing a
place of business in India for the first time and therefore, no
particulars were available as regards opening and closing of a
place of business in India on earlier occasions.
Following are the names of Directors and Company Secretary:
Directors Company Secretary
1. Mr. Bob Mr. Vipul Shah
2. Mr. Thomas
3. Mr. Sumedh Soni
4. Mr. Anuj Subhash
5. Mrs. Alka Rege
6. Mrs. Vandana Vinit
7. Mr. Anvay Harshe
8. Mr. Ashok Tripathi
9. Mr. Ashish Tyagi
Mr. Sumedh Soni had business interests in London. He left India for
London on 1st September, 2019 for the purpose of looking after his

business. He came back to India on 2nd December, 2019 to spend some time
with his parents and left India on 5th February, 2020 and went back to
London for carrying on his business on a large scale. He again visited India
on 5th March, 2020 for attending certain meetings relating to his business
and exploring other business opportunities which would enhance his
marketing business in London and stayed in India till 15thNovember, 2020.
In fact, Mr. Sumedh Soni was not at all interested in the software
business of OakTree Software Limited and due to his non-availability he
had serious management disputes. Accordingly, he was prevailed upon
by the other Directors to resign from his Directorship in OakTree and in
his place Mr. Somnath was appointed as Director.
Later on, Mr. Somnath was designated as Managing Director of OakTree.
Accordingly, the documents sent earlier to the office of the Registrar of
Companies were altered.
Mr. Somnath is responsible for gathering business opportunities so that
software business of OakTree get flourished. He often travels abroad for
business purpose.
The entire team of OakTree is putting its best efforts to scale up the
business operations in Singapore, India and other prominent countries.
22.1 Which one of the following options specifies the applicable Form
and time period within which the OakTree Software Limited is
required to submit the prescribed documents to the Jurisdictional
Registrar of Companies on establishment of its place of business
in Chennai, Tamil Nadu:
(a) OakTree Software Limited is required to submit Form
GNL-1 within 30 days of establishment of its place of
business in Chennai, Tamil Nadu to the ROC having
jurisdiction over Kolkata.
(b) OakTree Software Limited is required to submit Form FC-
1 within 30 days of establishment of its place of business
in Chennai, Tamil Nadu to the ROC having jurisdiction
over New Delhi.

(c) OakTree Software Limited is required to submit Form FC-

in Chennai, Tamil Nadu to ROC having jurisdiction over
Mumbai.
(d) OakTree Software Limited is required to submit Form FC-
in Chennai, Tamil Nadu to ROC having jurisdiction over
Chennai.
22.2 Suppose OakTree Software Limited after establishment of a place
of business in Chennai, Tamil Nadu fails to deliver the required
documents to the jurisdictional Registrar of Companies within the
prescribed time. From the following options, choose the one
which is applicable in the given situation:
(a) OakTree Software Limited shall be punishable with
minimum fine of ` 3,00,000 and maximum of ` 5,00,000
and in case of continuing offence with an additional fine
up to ` 50,000 for every day after the first during which
the contravention continues.
(b) OakTree Software Limited shall be punishable with
minimum fine of ` 50,000 and maximum of ` 5,00,000
up to ` 25,000 for every day after the first during
which the contravention continues.
(c) OakTree Software Limited shall be punishable with
minimum fine of ` 2,00,000 and maximum of
` 5,00,000 and in case of continuing offence with an
additional fine up to ` 50,000 for every day after the first
during which the contravention continues.
(d) OakTree Software Limited shall be punishable with
minimum fine of ` 1,00,000 and maximum of ` 3,00,000
up to ` 50,000 for every day after the first during which
the contravention continues.

22.3 The case scenario states that there was change in Directorship
with the appointment of Mr. Somnath in place of Mr. Sumedh
Soni. Which one of the following options correctly specifies the
Form and time period within which OakTree Software Limited is
required to intimate to the jurisdictional Registrar in respect of
such alteration in the documents filed earlier:
(a) OakTree Software Limited is required to intimate to the
jurisdictional Registrar in respect of alteration in the
documents filed earlier in Form FC-2 within 30 days of
alteration.
(b) OakTree Software Limited is required to intimate to the
alteration.
(c) OakTree Software Limited is required to intimate to the
jurisdictional Registrar in respect of such alteration in the
alteration.
(d) OakTree Software Limited is required to intimate to the
alteration.
22.4 Mr. Somnath, Managing Director of OakTree Software Limited is
desirous of remitting USD 1,00,000 to his son Abhishek who is
studying at OHIO University to meet expenses relating to his studies
and maintenance at Athens, USA. From the following options,
choose the one which is applicable in the current situation:
(a) Mr. Somnath being a resident Indian is permitted to remit
USD 50,000 immediately and thereafter remaining USD
50,000 in two installments of USD 25,000 each in the
second and third month.
(b) Mr. Somnath being a resident Indian is permitted to remit
50,000 in the next quarter.

(c) Mr. Somnath being a resident Indian is permitted to remit

USD 1,00,000 immediately in one installment.
(d) Mr. Somnath being a resident Indian is permitted to remit
50,000 after the expiry of six months.
22.5 Considering the relevant provisions of the Foreign Exchange
Management Act, 1999, which of the following options correctly
determines the residential status of Mr. Sumedh Soni for the FY
2021-22.
(a) Mr. Sumedh Soni is to be treated as resident Indian since
he was in India for more than 182 days in the
FY 2020-21.
(b) Mr. Sumedh Soni is to be treated as non-resident since he
left India for the purpose of carrying on his business
outside India in London.
(c) Mr. Sumedh Soni is to be treated as resident but not
ordinarily resident since he occasionally visited India.
(d) The information provided in the case scenario is not
sufficient to determine his residential status.
Answer Key
Question Answer
No.
22.1 (b) OakTree Software Limited is required to submit
Form FC-1 within 30 days of establishment of its
place of business in Chennai, Tamil Nadu to the
ROC having jurisdiction over New Delhi.
22.2 (d) OakTree Software Limited shall be punishable with
minimum fine of ` 1,00,000 and maximum of
` 3,00,000 and in case of continuing offence with
an additional fine up to ` 50,000 for every day
after the first during which the contravention
continues.
22.3 (a) OakTree Software Limited is required to intimate
to the jurisdictional Registrar in respect of

alteration in the documents filed earlier in Form

FC-2 within 30 days of alteration
22.4 (c) Mr. Somnath being a resident Indian is permitted
to remit USD 1,00,000 immediately in one
installment
22.5 (b) Mr. Sumedh Soni is to be treated as non-resident
since he left India for the purpose of carrying on
his business outside India in London.
23. Mr. Shyam was removed from A Ltd. by the Board in which he was
serving as a Managing Director, a Whole-Time Key Managerial
personnel, with the condition that he will get compensation for his early
vacation of office. The office of Mr. Shyam was vacated on 31.05.2020
and his original tenure of appointment with A Ltd. was upto 31.12.2022.
The remuneration drawn by Mr. Shyam since the date of his joining the
office is as follows:
F.Y. Remuneration (` in lakhs)

2018-19 55
2019-20 62
2020-21 (upto 31-05-2020) 13
The data collected from the balance sheet of A Ltd. as on 31.03.2020 is
as follows:
Particulars (` in lakhs)
Paid-up Share Capital 1000
Share Application Money 200
General Reserve 500
Revaluation Reserve 250
Securities Premium A/c 300
Long term loan 400
Funded Interest Term Loan (Payable after 1 year) 100
Working capital loan 200
Mutual Fund Investments 350
Miscellaneous Expenditure not written off 50

Mr. Tushar was appointed as the new Managing Director of A Ltd. on

31.07.2020 as a replacement of Mr. Shyam. The company decided to
pay remuneration to Mr. Tushar as per Section 197(4) of the Companies
Act, 2013. It was also decided to pay him following additional
perquisites/ remuneration for F.Y. 2020-21:
Particulars (` in lakhs)
Dearness allowance 7
House Rent Allowance 5
Contribution to annuity fund 6
Reimbursement of direct taxes 4
Additional Remuneration per month* 2
Sitting fees payable for a Board Meeting # 1
*Remuneration for service to be provided by him in capacity of

Consultant. Also he possesses requisite qualification for the same as
opined by the Nomination and Remuneration Committee.
# Mr. Tushar had attended 4 Board Meetings till 31.03.2021.
One of the members of A Ltd., Mr. Jay wanted to inspect contract of
service entered into by A Ltd. with Mr. Tushar but Mr. Jay was denied
to have such inspection on the grounds that the contract with Mr. Tushar
was not in writing.
Based on the above case scenario, answer the following
questions:
23.1 The maximum amount of compensation to which Mr. Shyam is
entitled for premature termination of his office shall be -
(a) ` 1.1194 crore
(b) ` 1.51125 crore
(c) ` 1.80 crore
(d) ` 1.55 crore
23.2 The ‘effective capital’ of A Ltd. shall be -
(a) ` 18 crore

(b) ` 21 crore
(c) ` 19 crore
(d) ` 16 crore
23.3 The maximum amount that can be paid to Mr. Tushar as per the
provisions of the Companies Act, 2013 for F.Y. 2020-21 shall be -
(a) ` 98 lakhs
(b) ` 86 lakhs
(c) ` 82 lakhs
(d) ` 62 lakhs
23.4 For removal of Mr. Shyam, which type of resolution was required
to be passed and what was the last date till which Mr. Tushar
should have been appointed, in case he was not appointed on
31.07.2020?
(a) Special Resolution and 30.11.2020 respectively
(b) Board Resolution and 30.11.2020 respectively
(c) Ordinary Resolution and 30.11.2020 respectively
(d) Board Resolution and 31.08.2020 respectively
23.5 Whether company’s contention for denying inspection to Mr. Jay
was correct and if not, what are the consequences of the same?
(a) Not correct, as contract of service with a Managing
Director should have been made in writing and kept at
registered office of the company. A Ltd. liable to pay
` 25,000 and every officer in default liable to pay ` 5,000
for each default, as a penalty.
(b) Partially correct, the member has no right to inspect copy
of contract of service entered into with Managing Director
but the company has defaulted in not making the contract
in writing and accordingly liable to pay ` 25,000 and every
officer in default liable to pay ` 5,000 for each default, as
a penalty.

(c) Not correct, if contract of service is not in writing then a

written memorandum should have been prepared
depicting terms of contract of service with Mr. Tushar and
kept at registered office of the company. A Ltd. liable to
pay ` 25,000 and every officer in default liable to pay `
5,000 for each default, as a penalty.
(d) Correct, if contract is not in writing then member cannot
ask for inspection of the same and accordingly there are
no consequences on the company for such denial.
Answer Key
Question Answer
No.
23.1 (d) ` 1.55 crore
23. 2 (c) ` 19 crore
23.3 (c) ` 82 lakhs
23.4 (b) Board Resolution and 30.11.2020 respectively
23.5 (c) Not correct, if contract of service is not in writing
then a written memorandum should have been
prepared depicting terms of contract of service
with Mr. Tushar and kept at registered office of
the company. A Ltd. liable to pay ` 25,000 and
every officer in default liable to pay ` 5,000 for
each default, as a penalty.
24. Energy Food and Beverages Limited (EFBL), having its Registered Office
at Bhikaji Cama Place, New Delhi, is a reputed manufacturer and
exporter of different kinds of energy food, drinks and beverages. The
market base of its products in India is much wider in comparison to so
many other competitors. It is exploring more and more export markets
all over the world.
The Board of Directors of EFBL comprises following Directors:
Functional Directors Independent Directors
Mr. Praveen Kumar, Managing Director Mrs. Hruta Varad
Ms. Ananya Vibor Mrs. Vartika Soni

Mr. Jay Doshi Mr. Shashi Vidur

Ms. Geetika Devi Mr. Aniruddha
Mr. Amol Udit
Mr. Abhimanyu
Mr. Fernandis
Mr. Robert
Mr. Anil Kumar, well versed in legal and regulatory matters, is the
Company Secretary of the company.
The information relating to foreign exchange earnings of EFBL in the
previous four financial years is as under are:
Financial Year Foreign Exchange Earnings (in USD)
2016-17 2,400,000
2017-18 2,500,000
2018-19 3,600,000
2019-20 4,000,000
With a view to enhance the production of beverages, EFBL imported a

machinery costing ` 60,00,000 from a reputed manufacturer of
Singapore. In accordance with the terms of payment, EFBL was required
to repay the cost of machinery in five equal monthly installments which
the company did satisfactorily. The machinery was delivered and
thereafter, installed at the new factory site at Noida, UP.
The company is proposing to incur an amount of USD 7,500 on
advertisement in foreign print media for the purpose of promotion of its
beverages business globally. The company is also planning to donate
USD 200,000 to a technical institution established in Chicago at USA for
conducting advanced research in the field of beverages.
Mr. Jay Doshi along with his family had gone to Bhutan on a private
visit. While returning to India, he brought with him Reserve Bank of
India notes amounting to ` 75,000 in denomination of ` 100.
Ms. Geetika Devi often visits her son Swapnil who is settled in Michigan,
USA. She came back to India from Michigan on July 02, 2018, spent

some time with her younger son Kartik and her mother in New Delhi and
left India again on September 05, 2018. She came back to India on
November 30, 2018 but left for Michigan with her mother on December,
04, 2018 to get her medically treated. After her mother recovered from
the ailment she was suffering, Ms. Geetika Devi came back to India on
April 25, 2019 and remained with her family in New Delhi till date.
24.1 From the case scenario, it is evident that EFBL imported a
machinery costing ` 60,00,000 from a reputed manufacturer of
Singapore and repaid the cost of imported machinery in five
equal monthly installments. From the following options, choose
the one which will apply in the given circumstances:
(a) Import of machinery is a ‘Capital Account Transaction’
since the imported machinery is a fixed asset and shall be
used for a long period by EFBL.
(b) Import of machinery is a ‘Current Account Transaction’
since machinery shall be used in the production of
saleable items like beverages, etc. by EFBL.
(c) Import of machinery is a ‘Current Account Transaction’
since a short term credit facility in the ordinary course of
business was availed by EFBL.
(d) Import of machinery is a ‘Capital Account Transaction’
since a long term credit facility was availed by EFBL and
the payment was made in more than three months.
24.2 According to the case scenario, Mr. Jay Doshi while returning to
India, brought with him Reserve Bank of India notes amounting
to ` 75,000 in denomination of ` 100. Which one of the following
options is applicable in the given circumstances.
(a) Mr. Jay Doshi is permitted to bring into India from Bhutan,
Reserve Bank of India notes amounting to ` 75,000 in
denomination of ` 100.

(b) Mr. Jay Doshi is not permitted to bring into India from
Bhutan, Reserve Bank of India notes exceeding ` 25,000
in denomination of ` 100.
(c) Mr. Jay Doshi is permitted to bring into India from Bhutan,
Reserve Bank of India notes of any amount without limit
but only in denomination of ` 500.
(d) Mr. Jay Doshi is not permitted to bring into India from
Bhutan, Reserve Bank of India notes exceeding ` 10,000
in denomination of ` 100.
24.3 It is noticed from the case scenario that Ms. Geetika Devi, one
of the Directors of EFBL, remained in India and also outside India
on various dates. Which of the following options correctly
determines her residential status in terms of the relevant
provisions of the Foreign Exchange Management Act, 1999:
(a) Ms. Geetika Devi is a person resident outside India for FY
2019-20 and a person resident in India for the
FY 2020-21.
(b) Ms. Geetika Devi is a person resident outside India for the
FY 2019-20 and also for the FY 2020-21.
(c) Ms. Geetika Devi is a person resident in India for the FY
2019-20 and also for the FY 2020-21.
(d) Ms. Geetika Devi is a person resident in India for FY 2019-
20 and a person resident outside India for the
FY 2020-21.
24.4. Suppose EFBL is a Public Sector Undertaking and it desires to
spend USD 7,500 for advertisement in foreign print media so that
it may promote its beverages business globally. In such a
situation, which one of the following options is applicable:
(a) EFBL is permitted to spend USD 7,500 for advertisement
in foreign print media relating to the stated purpose but
only with the prior approval of the Reserve Bank of India.

(b) EFBL is permitted to spend USD 7,500 for advertisement

in foreign print media relating to the stated purpose
without seeking any approval.
(c) EFBL is permitted to spend USD 7,500 for advertisement
in foreign print media relating to the stated purpose with
the prior approval of the Ministry of Finance, Department
of Economic Affairs.
(d) EFBL is permitted to spend USD 7,500 for advertisement
in foreign print media relating to the stated purpose with
the prior approval of the Central Government through
Regional Director.
24.5 From the case scenario, it is evident that EFBL is planning to
donate USD 200,000 to a technical institution established in
Chicago at USA for conducting advanced research in the field of
beverages. From the following options, choose the one which is
applicable in the given situation:
(a) EFBL, not being a Government Company, is not permitted
to donate any amount outside India.
(b) EFBL is not permitted to donate more than USD 50,000 in
a financial year even after seeking approval of the
Reserve Bank of India.
(c) EFBL is permitted to donate USD 200,000 but only with
the prior approval of the Reserve Bank of India.
(d) EFBL is not permitted to donate more than USD 75,000 in
a financial year even after seeking approval of the
Reserve Bank of India.
Answer Key
Question Answer
No.
24.1 (c) Import of machinery is a ‘Current Account
Transaction’ since a short term credit facility in the
ordinary course of business was availed by EFBL.

24.2 (a) Mr. Jay Doshi is permitted to bring into India from
Bhutan, Reserve Bank of India notes amounting to
` 75,000 in denomination of ` 100
24.3 (a) Ms. Geetika Devi is a person resident outside India
for FY 2019-20 and a person resident in India for
the FY 2020-21.
24.5 (b) EFBL is permitted to spend USD 7,500 for
advertisement in foreign print media relating to
the stated purpose without seeking any approval.
24.5 (c) EFBL is permitted to donate USD 200,000 but only
with the prior approval of the Reserve Bank of
India
25. Simran Software Solutions Ltd. is a subsidiary of Hardik Tech India

Limited. Simran Software Solutions Ltd. is a listed company where as
Hardik Tech India Ltd. is an unlisted public company. Simran Software
Solutions Ltd. has a paid up share capital of ` 100 crore while Hardik
Tech India Ltd.,has a paid up share capital of ` 150 crore.
An application is made to the tribunal for the amalgamation of the
subsidiary (transferor) company into its holding (transferee) company.
The scheme of arrangement has been proposed for the amalgamation
of the both the companies.
Application to the tribunal for amalgamation was submitted in form no.
NCLT-1, along with following documents:
(a) A notice of admission in Form No. NCLT-2
(b) An affidavit in form no. NCLT-6
(c) A copy of Scheme of M&A (Merger & Amalgamation)
(d) A disclosure of all the material facts relating to the company.
(e) It was also disclosed to the Tribunal in the application, that each
class of members or creditors has been identified for the
purposes of approval of the scheme.
A meeting was called in pursuance of the order of the tribunal. The
notice of such meeting was sent to all the creditors or class of creditors
and to all the members or class of members and the debenture holders

of the company, individually, at the addresses registered with the

company accompanied by a statement disclosing the details of the
scheme of amalgamation, a copy of valuation report and explaining the
effect of such arrangement on creditors, Key Managerial personnel,
promoters, the debenture holders and Directors of the company.
Mr. Manjit is a Managing Director of Simran Software Solutions Ltd.
whereas is Mr. Ram is a Whole Time Director of the said company. Due
to amalgamation of Simran Software Solutions limited into Hardik Tech
India Limited, Mr. Manjit lost his job. Mr. Ram was to be appointed as
Director in Hardik Tech India Limited but he was not happy with such
amalgamation and as a result he resigned from his office. Mr. Manjit
was appointed for five years as a Managing Director of the company on
21st April, 2019. Mr. Ram was appointed Whole Time Director on 4th
May, 2018. So due to loss of job, the company decided to compensate
both Mr. Manjit as well as Mr. Ram. At the meeting, the company
decided to pay, both of them the average compensation in proportion
to their last three years remuneration.
5% shareholders of Simran Software Solutions Ltd. decided to opt out
of the company. They were not satisfied with the scheme of
amalgamation of Simran Software Solutions Ltd. with Hardik Tech India
Ltd. So, according to value of their shares, the tribunal ordered to pay
them, according to the pre-determined price formula based on the
valuation of shares.
Simran Software Solutions Ltd. submitted to the tribunal details about a
pending legal case against one of the Directors of the company, Mr.
Mohan. Company has sued Mr. Mohan and has suspended him from the
Directorship of the company. Mr. Mohan at present is being prosecuted
for an offence under section 447 and section 452, respectively, of the
Companies Act, 2013. Mr. Mohan has caused a loss of ` 20 lakh to the
company through various bogus transactions due to which the company
registered a case against Mr. Mohan and the case is still pending with
the tribunal. The transferor company has communicated the same to
the transferee company.
The Tribunal, after satisfying itself that the procedure specified in the
Act has been followed, sanctioned the scheme of amalgamation. It was

decided that 22nd January, 2021, shall be the effective date for
amalgamation. The completion process will take one year from the
effective date. The tribunal ordered the transferee company to transfer
the whole of the undertaking, property and its liabilities to the transferor
company, till the aforementioned date, as determined by the parties.
It was also held by the tribunal that when the transferor company gets
dissolved, the fees, if any, paid by the transferor company on its
authorized capital shall be set-off against any fees payable by the
transferee company on its authorized capital, subsequent to the
amalgamation. Both the companies, in relation to such order shall
submit a certified copy of the order as prescribed, with the Registrar for
registration within thirty days of the receipt of certified copy of the
order.
25.1. The tribunal decided that Simran Software Solutions Ltd should
pay its 5% dissenting shareholders based on the predetermined
formula on the valuation of shares. According to the provisions
of the Companies Act, 2013, what is the basic criteria which
should be considered while deciding the valuation of the shares?
(a) The valuation of the shares should not be less than the
market price of the shares.
(b) The valuation of the shares should not be less than what
has been specified by the Security and Exchange Board
of India.
(c) The valuation of the shares, in any case, should not be
less than that of the value of shares of Hardik Tech India
Limited.
(d) The market price of the share on the day of amalgamation
of the companies will be taken into consideration.
25.2. What will be the consequences of amalgamation of Simran
Software Solutions Ltd (listed company) into Hardik tech India
Ltd(unlisted company)?
(a) Amalgamation of a listed company into an unlisted

company would itself convert the transferor company into

a listed company.
(b) Amalgamation of a listed company into an unlisted
company, does not by itself, convert the transferor
company into a listed company.
(c) Irrespective of the status of the company, whenever
amalgamation is done between a listed and unlisted
company, it becomes a listed company.
(d) According to the provisions of the Act, in case of
amalgamation of a listed subsidiary company into an
unlisted holding company, then subsidiary company has
to become an unlisted company, after buy-back of shares
from public.
25.3. According to the provisions of this Companies Act, 2013, what is
the legal obligation imposed on the company which it has to
follow until the completion of the scheme?
(a) to file a statement in a prescribed form, with the registrar,
certified by auditors of the companies, that the scheme is
complied as per the tribunal directions.
(b) to file a statement in a prescribed form, with the registrar,
certified by Chartered Accountant/ Cost Accountant/
Company Secretary, that the scheme is complied as per
the tribunal directions.
(c) the annual financial statements along with a statement in
a prescribed form with the registrar, certified by
Chartered Accountant/ Cost Accountant/Company
Secretary, that the scheme is complied as per the tribunal
directions.
(d) to file a statement along with the report of Board of
Directors in a prescribed form with the registrar, certified
by Chartered Accountant/ Cost Accountant that the
scheme is complied as per the tribunal directions.

25.4. According to the provisions of the Companies Act, 2013, do you

think that Mr. Manjit and Mr. Mohan, both are eligible for
receiving the compensation for the loss of their respective jobs?
(a) Only Mr. Ram is eligible, as he was a Whole Time Director
of the company.
(b) Only Mr. Manjit is eligible is for compensation by the
company.
(c) Both Mr. Manjit and Mr. Ram are eligible for compensation
by the company.
(d) Neither Mr. Ram nor Mr. Manjit are eligible for
compensation by the company.
25.5. Mr. Mohan was suspended as a Director of Simran Software
Solution Ltd. for the alleged fraud under the Companies Act,
2013. How will the ongoing amalgamation of the companies,
impact the pending legal proceedings against Mr. Mohan?
I. The case will be continued as before, between Mr. Mohan
and transferor company
II. The case will be continued as before, against Mr. Mohan,
but not with transferor company but with transferee
company, after amalgamation.
III. As Mr. Mohan was a Director in transferor company, so
by the time the case is not finally decided, the process of
amalgamation cannot be completed.
IV. The ongoing prosecution of Mr. Mohan would not affect
the amalgamation of the companies.
(a) I& III
(b) II & III
(c) II & IV
(d) I & IV

Answer Key
Question Answer
No.
25.1 (b) The valuation of the shares should not be less than
what has been specified by the Security and
Exchange Board of India.
25.2 (b) Amalgamation of a listed company into an unlisted
company, does not by itself, convert the transferor
company into a listed company.
25.3 (b) to file a statement in a prescribed form, with the
registrar, certified by Chartered Accountant/ Cost
Accountant/Company Secretary, that the scheme
is complied as per the tribunal directions
25.4 (b) Only Mr. Manjit is eligible is for compensation by
the company.
25.5 (c) II & IV
26. For a takeover of control of Swati International Ltd. (the ‘transferor

company’) by XYZ Ltd. (the ‘transferee company’), XYZ Ltd. (the
‘transferee company’), made an offer to the shareholders of Swati
International Ltd. open for a period of four months. Both the companies
deal in manufacturing of garments. The companies were of view that
such a merger will help to address the growing demand and to meet the
expectations for high quality products in the country.
The said offer was approved by the shareholders holding not less than
nine-tenth in value of the shares. Thereafter, a notice was issued to the
dissenting shareholders by XYZ Ltd.
The dissenting shareholders within one month from the date on which
the notice was served to them, made an application to the Tribunal
against the scheme, so finalized. After considering the application, the
Tribunal disposed off the application giving order in favour of XYZ Ltd.
As per the order, the shares of the dissenting shareholders were to be
transferred to the transferee company.
XYZ Ltd. again send a copy of the notice to the Swati International Ltd.
together with an instrument of transfer, to be executed on behalf of the

dissenting shareholder by a person appointed by the transferor company

on its own behalf. XYZ Company Ltd. paid to Swati International Ltd.,
the consideration representing the price payable by it, for the shares of
the dissenting shareholders which it was entitled to acquire.
Swati International Ltd. thereupon registered the XYZ Company Ltd as
the holder of those shares and informed the dissenting shareholders
about such registration and of the receipt of the amount or other
consideration representing the price payable to them by XYZ Ltd.
The sum received by XYZ Ltd. was paid into a separate bank account,
and the consideration so received was held by Swati International Ltd.
as a trustee for the dissenting shareholders and was disbursed to them
within the prescribed time limit.
Mr. Manoj was a Managing Director in Swati International Ltd.
Mr. Manoj was appointed as a Managing Director on 15th April, 2015.
Due to expertise in finance and better track records, the company had
re-appointed Mr. Manoj on 2nd April, 2020, for the next five years with
a condition that he will get compensation in case of early vacation from
his job in case of merger or amalgamation. So due to merger of
companies, Mr. Manoj lost his job. The company wanted to compensate
him as per the agreement.
Mr. Manoj got following remuneration during the last five financial years.
F.Y. `
• 2015-16 20 lakh
• 2016-17 25 lakh
• 2017-18 30 lakh
• 2018-19 35 lakh
• 2019-20 40 lakh
Mr. Manoj is also a Director in Top Electricals Limited. It is an unlisted
public company with a turnover of ` 150 crore. The present Managing
Director of Top Electricals Limited is going to retire within next two
months. So, as of now, as Mr. Manoj is no more a Managing Director in
Swati International Ltd., so the Board of Directors of Top Electricals Ltd.

decided to appoint Mr. Manoj as a Managing Director of the company.

The terms and conditions as well as the remuneration payable with
respect to Mr. Manoj’s appointment got approval of the Board subject
to approval at the next General Meeting of the company. Mr. Manoj was
finally appointed as the Managing Director of Top Electricals Limited.
Including Mr. Manoj, now the total number of Directors in Top Electricals
Limited is 14 with two independent Directors. After some time, the
company felt the need and decided to raise funds. The company raised
funds of ` 10 crore by issuing its equity shares to public after listing its
stock with BSE. Hence-forth, the company will be considered as a listed
company, after it gets listed in the stock exchange.
26.1 After the scheme is approved by majority shareholders, the
dissenting shareholders reply is awaited. As per the provisions
of the Companies Act, 2013, within how much time, the company
shall communicate to the dissenting shareholders of its intent to
acquire their shares?
(a) At anytime within two months after the expiry of the four
months period open for offer, Swati International Ltd.
shall give notice to the dissenting shareholders about its
desire to acquire their shares.
(b) At anytime within two months after the expiry of the four
months period open for offer, XYZ Ltd. shall give notice
to the dissenting shareholders about its desire to acquire
their shares .
(c) At anytime within four months after the expiry of the two
months period open for offer, XYZ Ltd. shall give notice
to the dissenting shareholders about its desire to acquire
their shares.
(d) At anytime within three months after the expiry of the
two months period open for offer, Swati International Ltd.
shall give notice to the dissenting shareholders about its
desire to acquire their shares.

26.2 Swati International Ltd. need to park the funds received from
XYZ Ltd. in a separate bank account, to which the dissenting
shareholders are entitled to. According to the provisions of the
Companies Act, 2013, within how many days, the said funds
should be dispersed to the dissenting shareholders?
(a) 30 days
(b) 40 days
(c) 60 days
(d) 90 days
26.3 Due to merger in the company Mr. Manoj lost his job. The
company wants to compensate Mr. Manoj for the loss of job.
According to the provision of this Act how much compensation
the company should pay to Mr. Manoj?
(a) 75 lakh
(b) 105 lakh
(c) 120 lakh
(d) 130 lakh
26.4 Mr. Manoj’s appointment as a Managing Director of the company
is subjected to the approval of passing a resolution at the General
Meeting of the company. According to the provisions of the Act,
within how many days, the return needs to be filed with the
Registrar in the prescribed form?
(a) 30 days
(b) 45 days
(c) 60 days
(d) 90 days
26.5 Top Electrical Ltd., has listed its stock with BSE. After becoming
a listed company what changes the company needs to make in
its Board of Directors?

(a) The company, now needs to appoint 1 more Independent

Director.
(b) The company, now needs to appoint 2 more Independent
Directors.
(c) The company, now needs to appoint 3 more Independent
Directors.
(d) There is need to appoint any new Independent
Director/(s).
Answer Key
Question Answer
No.
26.1 (b) At anytime within two months after the expiry of
the four months period open for offer, XYZ
Company Ltd. shall give notice to the dissenting
shareholders about its desire to acquire their
shares .
26.2 (c) 60 days
26.3 (b) 105 lakh
26.4 (c) 60 days
26.5 (c) The company, now needs to appoint 3 more
independent Directors.
27. GenTech Engineering and Consultancy Limited (GECL), having its

Registered Office in Kolkata, West Bengal, was incorporated way back
in January, 2011. The Central Government holds 21% of its paid-up
share capital while the State Government of Gujarat and Navyug
Engineering Limited, a government company, hold 23% and 10%
respectively.
As GECL was interested in ascertaining the market value of its assets, it
invited tenders and after thorough scrutiny it shortlisted the following
Registered Valuers:
(1) Mr. Anant: He has set up his valuation practice in London for
the last 5 years. He came to visit India on 25th November, 2019
for a short span of around one month during which, in terms of

the tender submitted by him, he was proposed by GECL to

undertake the assignment relating to valuation of its assets.
(2) Mr. Aloknath: He is a valuer member of a registered valuers’
organisation and is one of the partners of M/s ALP & Associates,
a Kolkata based valuation firm. Mr. Aloknath was given second
preference by GECL if Mr. Anant refused the assignment relating
to the valuation of assets.
(3) M/s MNC Valuers & Associates, LLP: It is a Limited Liability
Partnership, based at Kolkata, and all the partners of the firm
are valuer members of a registered valuers’ organisation. It was
given third preference by GECL for undertaking of valuation of
assets.
GECL holds 15% paid-up share capital of Prayas Marketing Limited
(PML). However, the Registrar, having reasonable cause to believe that
the PML was not carrying on any business or operations, ordered a
physical verification of the Registered Office of PML.
After physical verification of the Registered Office of PML, the Registrar
formed an opinion that the company, in actuality, was not carrying on
any business or operations and therefore, he issued a notice to the
company and all of its Directors indicating his intention to remove the
name of the company from the Register of Companies, if no explanation
along with copies of relevant documents were filed within a period of 30
days from the date of the notice. Since no cause to the contrary was
shown by the company and its Directors, the Registrar, after following
the requisite procedure, removed the name of the PML from the
Register of Companies and a notice dated 30.10.2020 to this effect was
published in the Official Gazette. On publication of this notice in the
Official Gazette and also its placement on the official website of the
Ministry of Corporate affairs, PML was dissolved.
After dissolution as above of the PML effective from 30.10.2020 under
Section 248 of the Companies Act, 2013, it ceased to operate as a
company and Certificate of Incorporation was deemed to have been
cancelled from such date.


27.1 From the case scenario, it is observed that the share of the
Central Government in the paid-up share capital of GECL is 21%
while the State Government of Gujarat and Navyug Engineering
Limited, a government company, respectively hold 23% and 10%
of its paid-up capital. Which one of the following options is
applicable in such a situation:
(a) GECL is a Government Company since both the Central
Government and the State Government of Gujarat hold
more than 25% of its paid-up share capital.
(b) GECL is not a Government Company since the Central
Government, the State Government of Gujarat and
Navyug Engineering Limited, a Government Company,
hold only 54% of its paid-up share capital which is less
than the threshold limit of 55%.
(c) GECL is a Government Company since the Central
Government, the State Government of Gujarat and
Navyug Engineering Limited, a Government Company,
hold 54% of its paid-up share capital which is more than
the threshold limit of 51%.
(d) GECL is not a Government Company since the Central
Government and the State Government of Gujarat
together hold 44% of its paid-up share capital which is
less than the threshold limit of 51%.
27.2 Which one of the following options is applicable in case Mr. Anant
was preferred to be given the valuation assignment of valuing
the assets of GECL.
(a) Mr. Anant cannot act as a valuer being a person not
resident in India.
(b) Mr. Anant cannot act as a valuer since process of
valuation of goodwill is a tedious and time-consuming
task.

(c) Mr. Anant can act as a valuer being a valuer member of

a registered valuers’ organisation in London and is more
knowledgeable than others.
(d) Mr. Anant can act as a valuer being a valuer member of
a registered valuers’ organisation in London and is out of
India for less than seven years.
27.3 In case PML is aggrieved by the order dated 30-10-2020 of the
Registrar that led to the removal of its name from the Register
of Companies and its dissolution and therefore, it desires to file
an appeal to the Tribunal, which one of the following options
shall be applicable in such a situation:
(a) PML is permitted to file an appeal to the Tribunal within
a period of one year from the date of the order of the
Registrar.
(b) PML is permitted to file an appeal to the Tribunal within
a period of two years from the date of the order of the
Registrar.
(c) PML is permitted to file an appeal to the Tribunal within
a period of three years from the date of the order of the
Registrar.
(d) PML is permitted to file an appeal to the Tribunal within
a period of five years from the date of the order of the
Registrar.
27.4 Which one of the following options is applicable in case PML
denies to discharge its liabilities and other obligations contending
that after dissolution it has ceased to operate.
(a) The contention of the PML is valid since after dissolution
it cannot enter into any contract.
(b) The contention of the PML is valid since once the company
stands dissolved, the shareholders of the company are
liable to discharge all its liabilities and obligations.
(c) The contention of the PML is invalid since the dissolution

shall not affect the realisation of amount due to it and for

the discharge of its liabilities or obligations.
(d) The contention of the PML is valid since once the company
stands dissolved, it is not liable to discharge any of its
liabilities and obligations because the shareholders of the
company are to be given back the money invested by
them as shareholders.
27.5 Suppose PML, on its own, decides to file an application to the
Registrar for removal of its name from the Register of
Companies. From the given options, choose the one which shall
be applicable in such a situation:
(a) PML is not permitted to file an application to the Registrar
for removal of its name from the Register of Companies.
(b) All the Directors of PML at the Board Meeting can pass a
resolution to file an application to the Registrar for
removal of name of PML from the Register of Companies
but only after extinguishing all the liabilities of PML.
(c) PML after extinguishing all its liabilities and by passing an
ordinary resolution or by obtaining consent of 51% of its
members in terms of paid-up share capital may file an
application to the Registrar for removal of its name from
the Register of Companies.
(d) PML after extinguishing all its liabilities and by passing a
special resolution or by obtaining consent of 75% of its
members in terms of paid-up share capital may file an
application to the Registrar for removal of its name from
the Register of Companies.
Answer Key
Question Answer
No.
27.1 (d) GECL is not a Government Company since the
Central Government and the State Government
of Gujarat together hold 44% of its paid-up share

capital which is less than the threshold limit of

51%.
27.2 (a) Mr. Anant cannot act as a valuer being a person
not resident in India.
27.3 (c) PML is permitted to file an appeal to the Tribunal
within a period of three years from the date of the
order of the Registrar.
27.4 (c) The contention of the PML is invalid since the
dissolution shall not affect the realisation of
amount due to it and for the discharge of its
liabilities or obligations.
27.5 (d) PML after extinguishing all its liabilities and by
passing a special resolution or by obtaining
consent of 75% of its members in terms of paid-
up share capital may file an application to the
Registrar for removal of its name from the
Register of Companies.
28. Binny Textiles is a company incorporated in the year 2010. It is a

company limited by shares. The company has in total twelve Directors
including Mr. Singh, who is a Managing Director of the company.
The petition for winding up was presented by the contributories to the
tribunal on the grounds of mismanagement and fraud committed by two
of its Directors in the company. Mr. Rohan and Mr. Sharad are sons of
late Mr. Ram who died three months ago. Mr. Ram held 500 shares of
the company for the past 4 years. The value of each share is ` 2000.
They both inherited equal amount of shares after his father's death. So,
as being shareholders of the company, they have also signed the
petition for winding up of the company. On being satisfied, the Tribunal
passed the order for winding up of the company.
Due to the winding up of the company, the company decided to
compensate Mr. Singh for loss of his office, as otherwise he would have
retired in 2022, had the company not wound up. The company decided
to pay one year remuneration, which he would have earned if he had
been in the office for the remainder of his term. So, finally the company
decided to pay Mr. Singh, after settlement of all the debts.

As per the provisions of the Companies Act, 2013, the tribunal need to
send an intimation of winding up to the liquidator and the registrar
within a stipulated time mentioned in the Act. So, for the purposes of
winding up of a company, the Tribunal appointed a Company Liquidator,
Mr. Dilip, on 21st December, 2020. But Mr. Dilip had conflict of interest
with the company. So, as per the provisions of the said Act, on
appointment as a Liquidator, he filed a declaration from the date of his
appointment in the prescribed form disclosing the conflict of interest in
respect of his appointment, with the Tribunal.
As per Section 281 of the Companies Act, 2013, the Liquidator of the
company, submitted to the Tribunal, a report containing the following
particulars, namely:—
Contents of Liquidator's Report
• The nature and details of the assets of the company including
their location and value, stating separately the cash balance in
hand and in the bank, if any, and the negotiable securities, if
any, held by the company. The valuation of the assets shall be
obtained from registered valuers for this purpose. The nature
and details of the assets of the company including their location
and value, stating separately the cash balance in hand and in the
bank, if any, and the negotiable securities, if any, held by the
company.
• Amount of capital issued, subscribed and paid-up.
• The existing and contingent liabilities of the company including
names, addresses and occupations of its creditors, stating
separately the amount of secured and unsecured debts.
• All the details of secured debts including their value and the
dates on which they were given.
• The debts due to the any company or persons from whom they
are due and the amount likely to be realised on account thereof.
• Guarantees, extended by the company.
• List of contributories and dues, if any, payable by them and
details of the unpaid call.

• Details of subsisting contracts.

• Details of legal cases filed by or against the company. The
Liquidator finally submitted all the documents to the Tribunal.
The Tribunal settled a list of contributories and cause rectification
of register of members in all cases where rectification is required
in pursuance of this act. The Tribunal reviewed all the assets of
the company to be applied for the discharge of this winding up
liability.
While settling the list of contributories, the Tribunal included every
person, who is or has been a member and who shall be liable to
contribute to the assets of the company an amount sufficient for
payment of the debts and liabilities and the costs, charges and expenses
of winding up, and for the adjustment of the rights of the contributories
among themselves, subject to the provisions of the Act.
Out of total 1000 members, 500 members have paid only 50% of the
amount of their shares. The company can clear its entire debt, if the
unpaid amount is received from these 500 shareholders.
2/3rd of such share-holders paid their remaining contributions towards
their share consequent to which the remaining 1/3rd share holders
decided for not paying the unpaid amount on the shares held by them.
28.1 Mr. Rohan and Mr. Sharad both signed the petition of winding
up, as the contributories of the company. According to the
provisions of the Companies Act, 2013, whether they were
eligible to sign the petition?
(a) After becoming contributories of the company (i.e. they
inherited from Mr. Ram), they were legally eligible to sign
the petition, only if the shares held by them were fully
paid up.
(b) From the first day itself, when their names were
registered as contributories, they have all the rights to be
part of company’s business.

(c) Mr. Rohan and Mr. Sharad were only eligible to sign the
petition if they had held the shares in their name for at
least six months.
(d) Mr. Rohan and Mr. Sharad were eligible to sign the
petition as the shares of which they are contributories
have devolved upon them upon the death of a former
holder i.e. Mr. Ram.
28.2 Do you think the amount paid by 2/3rd of the 500 shareholders
will absolve the remaining 1/3rd shareholders from their
liabilities?
(a) If the amount needed to settle the debts of the company
is collected from the 2/3rd shareholders than the
remaining shareholders need not pay.
(b) All the shareholders need to respond individually to the
notice whether they wish to pay the unpaid amount or
not.
(c) The Tribunal has the discretion to decide that whether the
1/3rd shareholders need to contribute or not.
(d) Every shareholder being a contributory is liable to pay to
the extent of unpaid amount on his shares, irrespective
of his shareholding,
28.3 The company decided to compensate the loss which Mr. Singh
has to bear for the loss of his job as the Managing Director of
the company. Is the company justified in giving compensation to
Mr. Singh?
(a) The company, as per the provision of the Companies Act,
2013, may make payment to its Managing or Whole-Time
Director or Manager.
(b) The company cannot give compensation to Mr. Singh as
it is wound up by an order of tribunal.
(c) The company can give compensation to Mr. Singh after
the shareholders pass a special resolution.

(d) The company can pay the compensation to Mr. Singh only
if he was involved in any fraud or mismanagement.
28.4 Mr. Dilip had some conflict of interest with the company. So, by
what date he should file declaration with the tribunal.
(a) 28th December, 2020
(b) 31st December, 2020
(c) 5th January, 2021
(d) 10th January, 2021
28.5 What is the role of registrar on receipt of intimation order from
the tribunal for winding up of the company?
(a) The registrar will keep the vigilance over the winding up
process.
(b) The registrar will assist the Liquidator in the winding up
process of the company.
(c) The registrar shall make an endorsement to that effect in
his records relating to the company and notify it in the
Official Gazette.
(d) The registrar will strike off the company’s name from the
register of companies.
Answer Key
Question Answer
No.
28.1 (d) Mr. Rohan and Mr. Sharad were eligible to sign the
petition as the shares of which they are
contributories have devolved upon them upon the
death of a former holder i.e. Mr. Ram.
28.2 (d) Every shareholder being a contributory is liable to
pay to the extent of unpaid amount on his shares,
irrespective of his shareholding,
28.3 (b) The company cannot give compensation to Mr.
Singh as it is wound up by an order of tribunal.

28.4 (a) 28th December, 2020

28.5 (c) The registrar shall make an endorsement to that
effect in his records relating to the company and
notify it in the Official Gazette.
29. Mr. Singh, Mr. Khurana and Mr. Dhillon are best friends. Mr. Singh has
been working as bank manager since last 15 years. He took VRS from
the bank, as he wanted to start his own company. Mr. Khurana has been
working as a financial adviser, since last so many years so he has a good
experience and knowledge in finance. Mr. Dhillon is an engineer in an
auto company for last 14 years. Mr. Dhillon also took VRS to join Mr.
Singh in the formation of the company. So, finally in 2014, the three
best friends, incorporated a company, called Mehta Auto India Pvt. Ltd.
After two years of the formation of the company, Mr. Rawat showed
interest in the company. Mr. Rawat was one of the esteemed customers
of the bank in which Mr. Singh was working, who bought 5% shares of
the company. Mr. Khurana, Mr. Singh and Mr. Dhillon were holding in
total 95% shares of the Mehta Auto India Pvt. Ltd, whereas Mr. Rawat
held 5% shares of the company.
Thereafter in the year 2019, a company called Jagat Electric Limited
(JEL) acquired 70% stake in Mehta Auto India Pvt. Ltd. by way of a
shareholder’s agreement with it. As per the agreement, the remaining
30% shares were to be held jointly by Mr. Khurana, Mr. Singh, Mr. Rawat
and Mr. Dhillon.
Mr. Rawat had some serious kidney issues and doctor had adviced him
for kidney transplant. Mr. Rawat wanted to go to USA, as his son was
also living there. So, Mr. Rawat sold his 5% stake to Jagat Electric
Limted and after buying such shares, JEL’s total holding in the company
increased to 75%.
Gradually, the shareholding of JEL in Mehta Auto India Pvt. Ltd.
increased to 92% by way of various agreements between them and the
three friends were left with 8% shareholding in the company. As a
result, JEL had a upper hand in running the affairs of the company due
to which, the day to day affairs of the company got affected to a great
extent.

Mr. Khurana, Mr. Singh and Mr. Dhillon decided to file an application for
oppression and mismanagement in the company.
Later on, JEL wanted to execute an agreement with Mr. Khurana, Mr.
Singh and Mr. Dhillon for buying their remaining shares. Pursuant to
this, JEL had sent a notice to Mr. Khurana, Mr. Singh and Mr. Dhillon to
sell their shares on a sale consideration rather than an agreed price. As
there was no response, JEL sent another notice to the petitioners
invoking the previous one, calling upon them to sell at an agreed price
which was to be decided in accordance with the valuation done by a
Chartered Accountant.
Thereafter, JEL issued a notice to Mehta Auto Pvt. Ltd. for purchasing
the minority shareholding as per section 236 of the Companies Act,
2013. Mehta Auto India Pvt. Ltd. gave notice to Mr. Khurana, Mr. Singh
and Mr. Dhillon asking them to deliver their shares within 21 days.
However, Mr. Khurana, Mr. Singh and Mr. Dhillon refused to transfer
their shares.
Mehta Auto Pvt. Ltd., cancelled the shares held by Mr. Khurana, Mr.
Singh and Mr. Dhillon under section 236 of the Companies Act and
communicated the same to them.
Mr. Singh’s wife, Mrs. Usha Singh, owes a finance company called Singh
Finance Company. The turnover of the company is ` 5 crore. Mr. Singh
is also a Director in Mrs. Singh’s company. The sole purpose of the
company is to give loans to other companies and corporate houses for
business purpose. A company called M/s Charansingh & Son’s took ` 5
lakhs from Singh Finance Company. Out of the said loan of ` 5 lakhs,
` 3 lakhs has been repaid to Singh Finance Company. The outstanding
dues of the company is ` 2 lakhs.
An investigation was conducted into the affairs of Charan singh & Son's,
as it came to the knowledge of Central Government that the business
of the company was being done in a fraudulent or unfair manner. Singh
Finance Company and one other company called Arpita traders decided
to file an application in the tribunal to impose restriction on the company
which is likely to transfer its assets in a manner that will prejudicially
affect their interests. Singh finance company is a secured creditor where

as Arpita traders is an unsecured creditor who holds a debt of ` 75,000

against Charan Singh and Son’s.
Mr. Khurana’s son, Mr. Hritik, is working as a CFO in XYZ Company for
last two years. The Central Government has appointed inspectors to
investigate into the affairs of XYZ Company, on intimation of a special
resolution passed by a company that the affairs of the company ought
to be investigated under section 210. The main aim of the investigation
is to obtain any evidence or facts regarding any malpractice in the
course of business and also to identify the profits and losses in the
business. During the ongoing investigation, XYZ Company decided to
discharge Mr. Hrithik from his duty.
29.1 Mr. Khurana, Mr. Singh and Mr. Dhillon had filed an application
for oppression & mismanagement under section 244 of the
Companies Act, 2013, against Jagat Electric limited to NCLT? Do
you think NCLT will entertain such application?
(a) JEL acquired share under section 236, so they were no
longer shareholders in Mehta Auto India and hence such
a petition cannot be maintained.
(b) The application is maintainable as they had fulfilled the
criteria under Section 244.
(c) NCLT will finally decide, if it wants to entertain the
application or not.
(d) Application for oppression and mismanagement cannot be
maintained, as the three of them holds less than 10%
shares.
29.2 JEL sent notice under section 236(1) of the Companies Act, 2013,
to Mr. Khurana, Mr. Singh and Mr. Dhillon, respectively, to sell
their shares at an agreed price decided by a Chartered
Accountant. Do you think the minority shareholders, in such a
case, are liable to do so?
(a) Yes, because a Chartered Accountant has both legal as
well financial knowledge.

(b) No, because its optional for them and also the price
should be determined on the basis of valuation done by a
registered valuer
(c) Yes, because JEL is buying the shares by mutual
understanding on an agreed price.
(d) Yes, because they don’t have any choice but to sell it to
the majority shareholder.
29.3 Mehta Auto Pvt. Ltd. cancelled the shares held by minority
holders under section 236 of the Companies Act, 2013. Whether
such cancellation of shares by Mehta Auto Pvt. Ltd. can be
considered as valid?
(a) Yes, in case any person or group of persons becomes
90% majority or holds 90% of the issued equity share
capital of a company, then such person or group of
persons is eligible and can acquire the remaining shares
irrespective of the response of the minority shareholders.
(b) No, as the minority shareholders may agree to sell their
shares and cancellation of shares by Mehta Auto Pvt. Ltd.
cannot be considered as valid.
(c) Yes, for the benefit and efficient running of the company,
Mehta Auto Pvt. Ltd. can cancel the shares of minority
shareholders
(d) Yes, because within the time specified by the company,
the share certificates shall be deemed to be cancelled,
and the transferor company shall be authorised to issue
shares in lieu of the cancelled shares.
29.4 Singh Finance Company and Arpita traders were of view that
Charan Singh & Son’s is likely to transfer its assets in a manner
that will prejudicially affect their interests. As being the creditors
of the company, whether they are eligible to file such an
application to the Tribunal?
(a) Both Singh Finance Company and Arpita Traders are
eligible to file the application.

(b) Only Singh Finance Company is eligible to file the

application.
(c) Only Arpita Traders is eligible to file the application.
(d) All the creditors of the company jointly need to file such
an application.
29.5 The investigation being pending, XYZ Company wants to
discharge Mr. Hritik from his duty. According to the provisions of
the Companies Act, 2013, whether the company can do so?
(a) The company cannot discharge Mr. Hrithik till the ongoing
investigation.
(b) The company shall seek approval of the tribunal before
discharging Mr Hritik.
(c) The investigation officer shall inform the tribunal and only
after that the company can discharge Mr Hritik
(d) Mr Hritik is the Key Managerial Personnel of the company
and so, the company cannot discharge him while the
investigation is going on.
Answer Key
Question Answer
No.
29.1 (b) The application is maintainable as they had
fulfilled the criteria under Section 244.
29.2 (b) No, because its optional for them and also the
price should be determined on the basis of
valuation done by a registered valuer
29.3 (b) No, as the minority shareholders may agree to sell
their shares and cancellation of shares by Mehta
Auto Pvt. Ltd. cannot be considered as valid.
29.4 (b) Only Singh Finance Company is eligible to file the
application.
29.5 (b) The company shall seek approval of the tribunal
before discharging Mr Hritik

30. Mumbai based Vishakha Tours and Travels Limited (VTTL) is a part of a
new generation of tour operators which specialises in unique, instant
and exceptional tours in Maharashtra. The mission of the Directors
Vallabh, Vibhor and Sapna is to provide a hassle-free experience to their
customers. There are four more Directors (closely related to the first
three Directors) who look after internal departments of the company.
The first three Directors i.e. Vallabh, Vibhor and Sapna had twelve years
of experience and during this period they arranged various categories
of tours like sightseeing tours, luxury tours, walking tours, sports and
games, rock climbing, horse riding and the like. To name a few, the
places often visited included Pawna Lake Camping, Alibaugh,
Bhandardara, Lohagad Valley, camping and rafting at Koland, etc. They
had provided the touring services to approximately 3.5 lacs persons on
annual basis. Travelling with them, the travellers would enjoy in-depth
experience, wisest guides, the closest wilderness encounters to ensure
best moments of their lives. The USP of the company is “Best Price
Guaranteed”.
According to the audited financial statements, the paid-up share capital
of VTTL as on 31st March, 2020 was ` 6.00 crore (60,00,000 equity
shares of ` 10 each) and the reserves and surplus amounted to ` 2.50
crore. The turnover of the company for the Financial Year 2019-20 was
` 55.00 crore.
As the company had surplus funds, Vallabh thought of investing ` 50.00
lacs in equity shares of reputed companies as a part of investment plan.
A Board Meeting was called which was attended by five Directors.
However, only three Directors out of five agreed to the investment plan.
Vallabh and Vibhor were keen to diversify the activities of the company
into certain other areas as well. They were of the opinion to buy a big
plot of land in Lonavala and construct a theme park for fun and frolic on
weekend getaways. It was supposed to provide all amenities and
comfort including 5 acres of water park, 2 roller coasters and 50 other
attractions. Their aim was to ensure that their guests enjoy exclusive
privileges, novel experience with most competitive prices. To deliberate
on the issue, VTTL called a Board Meeting on 10th September, 2020 at
3:00 p.m. at its Registered Office at Worli, Mumbai. However, no

business could be undertaken for want of quorum and the meeting was
adjourned.
30.1 In the above case scenario, one of the Directors Vallabh wanted
to invest surplus funds of the company amounting to ` 50.00
lakhs in equity shares of reputed companies as a part of
investment plan. It is noticed that five Directors out of total
seven Directors attended the Board Meeting in which this
proposal was discussed and only three Directors consented to
the proposal. Which one of the following options is applicable in
the given situation:
(a) VTTL can go ahead with such investment plan since
majority of the Directors present at the Board Meeting
agreed to the proposal of investing funds amounting
to ` 50.00 lakhs in equity shares of reputed companies.
(b) VTTL cannot invest funds amounting to ` 50.00 lakhs in
equity shares of reputed companies since all the five
Directors present at the meeting did not agree to such
investment plan.
(c) VTTL cannot invest funds amounting to ` 50.00 lakhs in
equity shares of reputed companies since the total
strength of seven Directors must attend the Board
Meeting and all must consent to such investment plan.
(d) VTTL cannot invest funds amounting to ` 50.00 lakhs in
equity shares of reputed companies since the investment
plan did not receive the consent of 3/4th majority of the
Directors present (i.e. four out of five present).
30.2 From the case scenario it is evident that VTTL called a Board
Meeting on 10th September, 2020 3:00 p.m. at its Registered
Office at Worli, Mumbai to deliberate on the issue of expanding
its activities into certain other areas as well. However, no
business could be undertaken for want of quorum and the
meeting was adjourned. From the following options, choose the
one which indicates the correct date, time and place for holding

such adjourned meeting if no contrary provisions are contained

in the Articles of Association of VTTL.
(a) The adjourned Board Meeting needs to be held on 13th
September, at 3:00 p.m. at the Registered Office of VTTL
at Worli, Mumbai.
(b) The adjourned Board Meeting needs to be held on 15th
September, at 3:00 p.m. at the Registered Office of VTTL
at Worli, Mumbai.
(c) The adjourned Board Meeting needs to be held on 17th
September, at 3:00 p.m. at the Registered Office of
VTTL at Worli, Mumbai.
(d) The adjourned Board Meeting needs to be held on 20th
September, at 3:00 p.m. at the Registered Office of
VTTL at Worli, Mumbai.
30.3 The case scenario does not speak about the appointment of any
Independent Director. Which one of the following options indicate
the number of Independent Directors which VTTL is required to
appoint based on the financial results as on 31-03-2020:
(a) VTTL is required to appoint minimum one Independent
Director.
(b) VTTL is required to appoint minimum two Independent
Directors.
(c) VTTL is not required to appoint an Independent Director.
(d) VTTL is required to appoint minimum three Independent
Directors.
30.4 From the options given below, choose the one which indicates
the maximum amount which VTTL can invest for acquiring by
way of purchase the securities of any other body corporate
without passing a special resolution in a General Meeting:
(a) VTTL can invest maximum up to ` 6.00 crore for acquiring by
way of purchase the securities of any other body corporate.

(b) VTTL can invest maximum up to ` 5.95 crore for acquiring

by way of purchase the securities of any other body
corporate.
(c) VTTL can invest maximum up to ` 3.60 crore for acquiring
corporate.
(d) VTTL can invest maximum up to ` 5.10 crore for acquiring
corporate.
Answer Key
Question Answer
No.
30.1 (b) VTTL cannot invest funds amounting to ` 50.00
lakhs in equity shares of reputed companies since
all the five Directors present at the meeting did
not agree to such investment plan.
30.2 (c) The adjourned Board Meeting needs to be held on
17th September, at 3:00 p.m. at the Registered
Office of VTTL at Worli, Mumbai.
30.3 (c) VTTL is not required to appoint an Independent
Director.
30.4 (d) VTTL can invest maximum up to ` 5.10 crore for
acquiring by way of purchase the securities of any
other body corporate.

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FINAL COURSE

BOOKLET ON MCQS &

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W ishing you happy reading!

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1. In compliance to the Companies Act, 2013, at least one woman Director

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(b) Claim by Mr. Q is not valid as the authority to appoint alternate

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Identify the correct statement from the following:

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9. Mr. Z is proposed to be appointed as the Director in a public company

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excess remuneration to the extent of rupees 5,00,000. State whether

(b) No, he cannot be appointed as MD at all;

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(c) Yes, he can be appointed as MD by shareholders through Special

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of Whole Time Director. You as a qualified Chartered Accountant and a

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from being a Whole Time Director in any company after obtaining

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(d) The re-appointment of Mr. Ram is invalid in law as no special

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(b) When any four Directors out of five consent to it

26. Audit Committee may make omnibus approval for:

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(d) Yes, Very Well Ltd. can contribute ` 60,000 to a charitable

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to contribute the decided amount. Advise the company as to how much

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(c) The company can contribute maximum `3.75 lacs in the

(d) All of the above.

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restrictions on the transfer of shares of the company under the

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(c) No, Company cannot reduce the rank of employee during

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shareholders apart from B Ltd. (and excluding AB Ltd., and AC Ltd)

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(c) It shall be approved by more than 75% majority in number of

(a) Change in Main Object Clause of Memorandum of Association;

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(c) Dissolution of the Transferor Company without winding up;

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statements is most appropriate as regards submitting order to the