CA Inter Law Question Paper May 2018

CA Inter Law Question Paper May 2018 – CA Inter Law Study Material is designed strictly as per the latest syllabus and exam pattern.

CA Inter May 2018 Law Question Paper

Question 1(a).
MNP Private Ltd. is a company registered under the Companies Act, 2013 with a paid up share capital of ₹ 45 lakh and turnover of ₹ 3 crores. Explain the meaning of the ‘Small Company’ and examine the following in accordance with the provisions of the Companies Act, 2013:
(i) Whether the MNP Private Ltd. can avail the status of Small Company?
(ii) What will be your answer if the turnover of the company is ₹ 1.50 crore?
Answer:
As per section 2(85) of Companies Act, 2013, small company means company other than public company, which has:

• Paid up share capital not exceed than ₹ 50 lacs or such higher amount as may be prescribed which shall not be more than ₹ 10 crore; and
• Turnover not more than ₹ 2 crore or such higher amount not exceeding ₹ 100 crore as per profit and loss account of its immediately preceding financial year
  1. Accordingly, MNP Private Ltd. cannot avail status of small company as its turnover is more than ₹ 2 cr.
  2. Answer will be different, if it has turnover of ₹ 1.5 cr. Then, it will be treated as small company.

Question 1(b).
Rera Ltd. company incorporated under the Companies Act, 2013 having turnover of ₹ 100 crore. Net profit ₹ 3 crore. Accumulated loss of ₹ 50 crore and securities premium ₹ 300 crore as per the audited accounts of the company for the financial year 2016-17.

The CFO of the company informed the directors of the company that the Corporate Social Responsibility (CSR) committee is required to be constituted as per the Companies Act, 2013. The directors seek your advice as a professional regarding the criteria required to constitute CSR committee and whether it is applicable to Rera Ltd. or not.
Answer:
Company, which attracts provision of section 135 of Companies Act, 2013 regarding corporate social responsibility, required to constitute Corporate Social Responsibility Committee (CSR). If company attracts any one of following criteria, it is required to spend 2% of its average net profit on CSR activities and require to constitute CSR committee:

• A net worth of ₹ 500 crore or more
• A turnover of ₹ 1,000 crore or more
• Net profit of ₹ 5 crore or more

From the figures given in question, it can be said that company is not attracting any of criteria of section 135 and therefore it is not required to constitute CSR committee. CSR provisions are not applicable to Rera Ltd.

Question 1(c).
ABC Ltd. sells its products through some agents and it is not the custom in their business to sell the products on credit. Mr. Pintu, one of the agents sold goods of ABC Ltd. to M/s. Parul Pvt. Ltd. (on credit) which was insolvent at the time of such sale. ABC Ltd. sued Mr. Pintu for compensation towards the loss caused due to sale of products to M/s. Parul Pvt. Ltd. Will ABC Ltd. succeed on its claim?
Answer:
An agent is bound to conduct the business of his principal according to principal’s directions or the custom of trade (in absence of principal’s directions). When agent acts otherwise, and any loss is incurred, he must make it good to his principal. – Section 211 of Indian Contract Act, 1872. It is one of duty of agent.

When Pintu, one of agents sold goods to M/s. Parul Pvt. Ltd. on credit, he has committed breach of his duty. He has neither obtained direction from his principal nor followed custom. Moreover, Parul Pvt. Ltd. was insolvent at the time of sale. An agent should have exercise duty to act with reasonable care and skill. Accordingly, agent is liable to compensate loss to his principal. ABC Ltd. will succeed in its claim.

Question 1(d).
X owned a land with fifty tamarind trees. He sold his land and the timber (obtained after cutting the fifty trees) to Y. X wants to know whether the sale of timber tantamount to sale of immovable property. Advise him with reference to provisions of General Clauses Act, 1897.
Answer:
As per section 3(26) of General Clauses Act, 1897, immovable property includes:

• Land,
• Benefits to arise out of land,
• Things attached to the earth, or
• Permanently fastened to anything attached to the earth.

Accordingly, timber is not immovable property because they are not permanently attached to the earth. Sale of timber does not tantamount to sale of immovable property.

Question 2(a).
(i) PET Ltd. incurred loss in business up to current quarter of financial year 2017-18. The company has declared dividend at the rate of 12%, 15% and 18% respectively in the immediate preceding three years. In spite of the loss, the Board of Directors of the company has decided to declare interim dividend @ 15% for the current financial year. Examine the decision of PET Ltd. stating the provisions of declaration of interim dividend under the Companies Act, 2013.
(ii) Alpha Ltd. a section 8 company is planning to declare dividend in the Annual General Meeting for the financial year ended 31-3-2018. Mr. Chopra is holding 800 equity shares as on date. State whether the act of the company is according to the provisions of the Companies Act, 2013.
Answer:

1. Average rate of dividend declared by PET Ltd. during preceding three financial years is 15% (i.e., 12+15+18/3). Accordingly, Board can declare interim dividend of not more than 15%. – Declaration and Payment of Dividend.
2. Section 8 company has several benefits available and restrictions are imposed upon it. It cannot declare dividend or distribute its profit among member. Alpha Ltd. cannot declare dividend being section 8 company. Act of company to declare dividend is not as per provisions of Companies Act, 2013.

Question 2(b).
As per the provisions of the Companies Act, 2013, every company is required to file with the Registrar of Companies, the Annual Return as prescribed in section 92, in Form MGT-7. Explain the particulars required to be contained in it.

Question 2(c).
Mr. V draws a cheque of ₹ 11,000 and gives to Mr. B by way of gift. State with reason whether-

1. Mr. B is a holder in due course as per the Negotiable Instruments Act, 1881?
2. Mr. B is entitled to receive the amount of ₹ 11,000 from the bank?

Answer:
Negotiable Instruments Act, 1881 to understand theory part of ‘holder’ and ‘holder in due course’:

1. Person is called as holder in due course if he has received the instrument for consideration. There are no exceptions to this condition. Therefore, Mr. B cannot be treated as holder in due course. He is certainly a holder with good title thereto and hence he will have every right to claim payment upon instrument.
2. Holder has right to possession and right to receive amount due in his own name.

Question 2(d).
Bholenath drew a cheque in favour of Surendar. After having issued the cheque, Bholenath requested Surendar not to present the cheque for payment and gave a stop payment request to the bank in respect of the cheque issued to Surendar. Decide; under the provisions of the Negotiable Instruments Act, 1881 whether the said acts of Bholenath constitute an offence?

Question 3(a).
TDL Ltd. a public company is planning to bring a public issue of equity shares in June, 2018. The company has appointed underwrites for getting its shares subscribed. As a Chartered Accountant of the company appraise the board of TDL Ltd. about the provisions of payment of underwriter’s commission as per Companies Act, 2013.

Question 3(b).
(i) Rupa Limited, a listed company appointed M/s. VG & Associates an audit firm as company’s auditor in the Annual General Meeting held on 30-9-2017. Explain the provisions of the Companies Act, 2013 relating to the appointment or reappointment of an auditor in relation to the tenure of an auditor.
(ii) PKC Ltd. wants to appoint Mr. Praveen Kumar, a practicing Chartered Accountant as the statutory auditor of the company and asked proposed auditor to give a certificate in this regard. What are contents of the certif-icate to be issued in accordance with the Companies (Audit & Auditors) Rules, 2014?

Question 3(c).
Explain briefly any four effects by repeal of an existing Act by central legislature enumerated in section 6 of the General Clauses Act, 1897.

Question 3(d).
Differentiate Mandatory Provision from a Directory Provision. What factors decide whether a provision is directory or mandatory?

Question 4(a).
Bazaar Limited called its AGM in order to lay down the financial statements for shareholders’ approval. Due to want of quorum, the meeting was cancelled. The directors did not file the annual returns with the Registrar. The directors were of the idea that the time for filing of returns within 60 days from the date of AGM would not apply, as AGM was cancelled. Has the company contravened the provisions of Companies Act, 2013? If the company has contravened the provisions of the Act, how will it be penalized?
Answer:
Every company shall file Annual Return within 60 days from holding of AGM to ROC. If AGM is not held for a year, annual return should be filed within 60 days from the last day on which AGM should have been held. – Section 92

Accordingly, Bazaar Ltd. shall file its annual return within 60 days from holding of AGM. If meeting is cancelled for any reason, it shall file annual return within 60 days from last day on which AGM should have been held. Company has not filed annual return within stipulated time. It has contravene provision of section 92 of Companies Act, 2013.

If a company fails to file its annual return within specified time, it shall be punishable with fine of not less than ₹ 50,000 but which may extend to ₹ 5 lakhs and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 6 months or with fine which shall not be less than ₹ 50,000 but which may extend to ₹ 5 lakh rupees, or with both.

Question 4(b).
Benson Limited issued a notice with the agenda for nine businesses to be transacted in the Annual General Meeting (two businesses were regarding appointment of Mr. Sahu and Mr. Pranav as directors). The Chairman decided to move the resolutions for all the nine businesses together to save the time of the members present. Examine the validity of the resolutions.
Answer:
Businesses proposed to be transacted at meeting, and enlisted in agenda are moved separately at meeting. However, Chairman of meeting, if desires that two or more resolutions (Le., businesses) should be moved together, then it can be moved together unless Act require it to be moved separately.

Where notice has been given of several resolutions, each resolution must be put to vote separately. However, as per Companies Act, 2013, resolution regarding appointment of two or more directors cannot be passed as single resolution unless it has been unanimously approved earlier. Therefore, Benson Ltd. cannot take up all businesses together. Businesses regarding appointment of two directors should be taken separately.

Question 4(c).
State any four contents of a Directors Responsibility Statement as required under Section 134 of the Companies Act, 2013.

Question 4(d).

1. Define Grammatical Interpretation. What are the exceptions to grammatical interpretation?
2. What is a Document as per the Indian Evidence Act, 1872?

Answer:

1. When the Court applied only ordinary rules of speech for finding out the meaning of the words used in statute, it is called as grammatical inter-pretation. It is deals with verbal expression of the law.
2. Section 3 of Indian Evidence Act, 1872 states that document means any matter expressed or described upon any substance by means of letters, figures or marks or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter. Following are exceptions to grammatical interpretation:
   • Words or expression used in act is defective or creating ambiguity, Courts go beyond letter of laws and use other courses to find out true intention of legislature. If statutory expression is defective because of inconsistency, the Court must ascertain the spirit of law.
   • If by going through text leads to result, which is unreasonable, Court must resolve such issue logically.

Question 4(e).
What is the meaning of service by post as per provision of the General Clauses Act, 1897?

Question 5(a).
(i) Harsh purchased 1000 shares of Singhania Ltd. from Pratik and sent those shares to the company for transfer in his name. The company neither transferred the shares nor sent any notice of refusal of transfer to any party within the period stipulated in the Companies Act, 2013. What is the time frame in which the company is supposed to reply to transferee? Does Harsh, the transferee have any remedies against the company for not sending any intimation in relation to transfer of shares to him?
(ii) Xgen Limited has a paid-up equity capital and free reserves to the extent of ₹ 50,00,000. The company is planning to buy-back shares to the extent of ₹ 4,50,000. The company approaches you for advice with regard to the following:
(a) Is special resolution required to be passed?
(b) What is the time limit for completion of buy-back?
(c) What should be ratio of aggregate debts to the paid-up capital and free reserves after buy-back?
Answer:
(ii) (a) A company can buy-back shares upto 10% of its paid up capital and free reserves by passing Board Resolution. Here, Xgen Ltd. has paid up capital and free reserve of ₹ 50,00,000. Company can buy-back its 10% shares Le., ₹ 5,00,000 with Board Resolution. Company intend to buv-back shares of ₹ 4,50,000 which is less than 10% of its paid up capital and free reserve. Special Resolution is not required.

(b) Buy-back shall be completed within period of 12 months from date of passing resolution.

(c) The post debt equity ratio of company is not more than twice the capital and its free reserve after such buy-back.

Question 5(b).
M/s. Techno Ltd. maintains its Register of Members at its registered office in Mumbai. A group of members residing in Kolkata wants to keep the register of,members at Kolkata:
(i) Explain with provisions of Companies Act, 2013, whether the company can keep the Registers and Returns at Kolkata.
(ii) Does Mr. Ranjit, Director (but not a shareholder) of the company have the right to inspect the Register of Members?
Answer:
(i) Register of Members is kept at registered office of company. It can be kept at other place where at least 10% of members are residing, if approved by Special Resolution. – Section 88 Accordingly, if company comply it, Register of Members can be kept at Kolkata.

(ii) Register of Members shall be kept open for inspection at least 2 hours during business hours as decided by Board. It can be inspected by any member, debenture holder, other security holder or beneficial owner without payment of fee and by any other person on payment of fee as per Articles of Association. Hence, Mr. Ranjit has right to inspect Register of Members even if he is not shareholder.

Question 5(c).
Give four differences between Bailment and Pledge.

Question 5(d).
Mr. D was in urgent need of money amounting ₹ 5,00,000. He asked Mr. K for the money. Mr. K lent the money on the sureties of A, B and N without any contract between them in case of default in repayment of money by D to K. D makes default in payment. B refused to contribute, examine whether B can escape liability.
Answer:
Contract of guarantee is basically contract and therefore it should fulfil all elements of contract. A contract of guarantee may be created either by express or implied method. It may be either oral or written. It is not necessary to execute contract or reduce it in writing. Implied guarantee may be inferred from the conduct of parties.

In the given case, K lent money on sureties of A, B and N but it is not clear that whether they have agreed to be sureties for Mr. D. If they have not agreed to become surety, Mr. B can escape his liability. Alternative, if they have agreed to be sureties for Mr. D, Mr. B cannot escape from his liability, as executing formal contract is not necessary. Co-surety is liable to contribute his part of share when default has taken place by debtor.

Question 6(a).
Can equity share with differential voting rights be issued? If yes, state the conditions under which such shares may be issued.

Question 6(b).
Explain the term ‘charge’. State the circumstances under which necessity to crate arise. What is the time limit for registration of charge with the registrar?
Or
Explain provisions for ‘Appointment of Trustee for Depositors’ under the Companies Act, 2013.

Question 6(c).
Rahul, a transporter was entrusted with the duty of transporting tomatoes from a rural farm to a city by Aswin. Due to heavy rain, Rahul was stranded for more than two days. Rahul sold the tomatoes below the market rate in the nearby market where he was stranded fearing that the tomatoes may perish. Can Aswin recover the loss from Rahul on the ground that Rahul had acted beyond his authority?
Answer:
Aswin cannot recover the loss from Rahul on the ground that Rahul had acted beyond his authority. Because an agent has authority, in an emergency to do all such acts for the purpose of protecting his principal from loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances.

When the agent has acted beyond his authority in emergency, principal is bound by the act of an agent. In the given case, heavy rain for more than two days created situation of emergency. In this situation, transportation was not possible and if waited for longer period, tomato would be perished. Therefore, act of selling tomatoes below that market price in emergency was intended to protect his principal.

Question 6(d).
State the rule lay down by the Negotiable Instruments Act, 1881 for ascertaining the date of maturity of a bill of exchange.