CA Inter Jan 25 Suggested Answers | Corporate and Other Laws
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CA Inter Jan 25 Suggested Answer Other Subjects Blogs :
Question 1 (A) :
1,00,000 Equity shares of ₹100 each were issued at a premium of ₹2 per share by PQR Limited after offer for the same was received from the shareholders in terms of the prospectus issued by the Company on 1st April, 2022. The prospectus specified that the amount received from the issue will be exclusively used for manufacturing and distributing some life-saving drugs. In August 2024, the Company after proper market survey found that there is ample demand for Artificial Intelligence based software and therefore decided to go forward for development of such type of software. They also wanted to divert a small amount for investment in the equity shares of a large successful company. Since there was surplus money from the above issue of equity shares, the Board of Directors passed two resolutions for the above purpose; the first for investing ₹60,00,000 for development of Artificial Intelligence based software and the second for investing ₹5,00,000 in the Equity Shares in X Limited, which is a listed company.
In order to avoid any unwarranted situation from the shareholders, the Directors called for an extraordinary general meeting in which votes cast in favour of the proposal was in excess of the votes cast against it. Some shareholders objected to the above action of the Board on the following grounds:
(i) that the resolution passed in the extra-ordinary general meeting was not proper since the required majority did not approve the same;
(ii) that the prescribed details of the notice which was given to the shareholders should also have been published in newspapers (one in English and one in vernacular language) circulating in the city where the registered office of the Company is situated indicating clearly the justification for such variation in the use of the funds; and
(iii) that the resolution passed for investing ₹5,00,000 in the Equity Shares in X Limited is illegal.
Referring to the applicable provisions of the Companies Act, 2013, decide, whether the contentions of the shareholders are tenable.
Answer:
Analysis of the Case under Section 27 of the Companies Act, 2013:
(i) Resolution Approval for Variation of Objects:
Provision: As per Section 27(1), the terms of a contract or the objects stated in the prospectus can be varied, but only with the authority of the company in a general meeting by passing a special resolution.
Application: In this case, PQR Limited called an extraordinary general meeting (EGM) and secured approval for the variation. For this approval to be valid:
(ii) Notice and Newspaper Publication Requirements:
Provision: The first proviso to Section 27(1) mandates that details of the variation notice must:
Application: If PQR Limited did not meet this requirement, the shareholders' objection regarding non-publication of the notice in newspapers is valid. Non-compliance with this procedural requirement renders the variation process defective.
(iii) Prohibition on Using Funds to Buy Equity Shares:
Provision: The second proviso to Section 27(1) explicitly prohibits using funds raised through a prospectus for:
Application: The Board of PQR Limited resolved to invest ₹5,00,000 in the equity shares of X Limited, a listed company. This is a direct violation of the law. Hence, this objection by shareholders is valid, and the proposed investment is illegal.
(iv) Exit Offer to Dissenting Shareholders:
Provision: As per Section 27(2), dissenting shareholders must be provided an exit offer by the promoters or controlling shareholders at an exit price determined under SEBI regulations.
Application: The case does not mention whether such an exit offer was extended. If it wasn’t, PQR Limited would be in violation of this subsection.
(v) Doctrine of Ultra Vires:
Explanation: The doctrine of ultra vires requires funds raised through a prospectus to be utilized strictly for the stated purposes. Any deviation must follow the process under Section 27, ensuring shareholder and regulatory compliance.
Application: The company's action of diverting funds to unapproved purposes (AI-based software and equity shares) without proper adherence to the prescribed process breaches this principle.
Question 1 (B) :
Sohan Lal was appointed as the satutory auditor of RST Ltd., a non-government company at the Annual General Meeting held on 30th September, 2023. He has resigned after two months as he wanted to discontinue the practice and surrendered his Cenificate of Practice and joined a multinational company. Explain how the new auditor will be appointed by RST Ltd. and the conditions to be complied with in this regard.
Answer:
Under Section 139(8) of the Companies Act, 2013, any casual vacancy in the office of an auditor shall in the case of a company other than a company whose accounts are subject to audit by an auditor appointed by the Comptroller and Auditor General of India, be filled by the Board of Directors within thirty days, but if such casual vacancy is as a result of the resignation of an auditor, such appointment shall also be approved by the company at a general meeting convened within three months of the recommendation of the Board and he shall hold the office till the conclusion of the next annual general meeting.
Therefore, in the present case, as the auditor has resigned, the casual vacancy so created can be filled up by the Board within thirty days. However, the appointment must be approved by the company by passing of an ordinary resolution at a general meeting of the company which must be convened by the Board within 3 months of recommendation of the Board. The newly appointed auditor will be entitled to hold office till the conclusion of the next Annual General Meeting.
Question 1 (C) :
Murari Lal, a person resident outside India, has invested in four residential immovable properties under construction in Kolkata. Each property is negotiated at ₹2 crore, with the companies owned by builders. This amount is to be paid in two installments as 60% on immediate basis on booking and the balance on possession of the properties.
The above transaction is done by the companies owned by builders through two brokers from USA on commission basis. Mr. Murari Lal as per the terms and conditions remitted 60% of the amount of all four immovable properties directly to the company.
Answer:
Question 2 (A) :
Silk Segment Private Ltd. (SSPL) is a wholly owned subsidiary of Silk 3+2 Block Ltd. (SBL) a listed public limited company. The Board of Directors of Silk Segment Private Ltd. have collectively decided upon the proposal to grant loans of ₹15,00,000 and ₹20,00,000 to Mr. Sohan and Ms. Subarna respectively for the purchase of fully-paid-up shares in Silk Segment Private Ltd.
Mr. Sohan is the Deputy Marketing Manager of Silk Segment Private Ltd. with a monthly salary of ₹1,00,000, whereas Ms. Subarna, a qualified Chartered Accountant, is the Chief Financial Officer of Silk Segment Private Ltd. with a monthly salary of ₹2,00,000.
In view of provisions of the Companies Act, 2013, decide:
(i) Whether the proposed loans to Mr. Sohan as well as Ms. Subarna can be disbursed by the company keeping in view that Silk Segment Private Ltd. is a private limited company?
(ii) Whether the answer would be different in case only 25% shares of SSPL are held by SBL?
Answer:
Question 2 (B) :
The following are the extracts from the financial statements of BUI Private Limited, which is neither a start-up nor it is an associate or subsidiary company of any other company.
|
Particulars |
Amount ₹ |
|
Authorised Capital: 10,00,000 Equity Shares of ₹ 100 each |
10,00,00,000 |
|
Paid-up Share Capital: 8,00,000 Equity Shares of ₹ 100 each |
8,00,00,000 |
|
Securities Premium Reserve Account |
2,00,00,000 |
|
General Reserves |
5,00,00,000 |
|
Term Loan from LMR Bank Limited |
12,00,00,000 |
|
Cash Credit Loan (For Working Capital) |
5,00,00,000 |
The Company has never failed to file the Annual Return and Financial Statements with the Registrar. The Company has already successfully repaid all the monies which were accepted earlier in the form of deposits along with due interest. Since the Company was successful in the implementation of its housing project by utilizing the money accepted in the form of deposits, the Board was interested in accepting deposits once more and take up another housing project in NOIDA since the members of the Company were having sufficient surplus money which they wanted to invest in the Company to start the project. However, their condition was that the same will be provided by them if the Company accepts them in the form of deposits and the applicable provisions of the Companies Act, 2013 and Rules made thereunder are strictly complied with. But, the Board of Directors of BUI Private Limited were not in support of depositing any amount in any Deposit Repayment Reserve Account for the purpose of repayment of the said deposits, since the repayment was to be made out of the amount received from the customers who were going to book for the flats in the housing project. Two proposals came for review to the Board, out of which only one proposal was to be selected. The Board wanted you to advise them in choosing the appropriate deposit scheme.
Proposal 1 – Acceptance of Deposits of ₹20,00,00,000, to be repaid with interest @ 7% per annum;
Proposal 2 – Acceptance of Deposits of ₹14,00,00,000, to be repaid with interest @ 8% per annum;
Referring to the applicable provisions of the Companies Act, 2013, the Rules made thereunder and the notifications issued in this respect, advise the Board stating the justification in support of your advice.
Answer:
Question 2 (C) :
State what do you understand by the term ‘document’ as per the General Clauses Act, 1897? Discuss which of the following will be treated as a document:
Answer:
Question 3 (A) :
UINA Infra Projects Private Limited was incorporated on 1st June, 2022. Mr. X had already registered the trade name of “UINA Infra projects” on 1st April, 2018 under the Trade Marks Act, 1999. Mr. X was suffering from a prolonged disease since 1st April, 2021. When Mr. X recovered from illness on 20th May, 2024 and joined his own office on 5th July, 2024, he came to know from his staff members that a company has been incorporated with the name UINA Infra Projects Private Limited. He lodged a complaint with the Regional Director on 10th July, 2024 requesting him to order the Company to change its name. The Regional Director examined the application of Mr. X and on 11th July, 2024, issued a direction to UINA Infra Projects Private Limited to change its name.
Mr. D, a director of UINA Infra Projects Private Limited contended that the above direction of the Regional Director was bad in law and therefore not proper on the following grounds:
Referring to the applicable provisions of the Companies Act, 2013, decide, whether the contention of Mr. D is tenable.
Also advise UINA Infra Projects Private Limited the time period within which the Company will be required to change its name in case the direction of the Regional Director was valid.
Answer:
Question 3 (B) :
(i) Members of World One Limited, holding more than 2% of the total voting power, wants the company to give a special notice to move a resolution for appointment of an auditor other than the retiring auditor. Explain whether members can do so as per the provisions of the Companies Act, 2013.
Answer:
Question 3 (B) :
(ii) If a member of a listed company who has cast his vote through electronic voting, can attend the general meeting of the company and change his vote subsequently?
Answer:
Question 3 (C) :
Explain the Latin term "Absoluta sententia expositori non indiget" and how would the same help in correctly interpreting a definition given in a legislation or statute?
Answer:
Question 4 (A) :
Based on the applicable provisions of the Companies Act, 2013, define the term "foreign company" and identify which among the following companies can be categorized as a foreign company:
|
Sl. No. |
Place of Incorporation |
Registered |
Additional Information |
|
1 |
Singapore |
Singapore |
Developed patient’s database for a hospital in Mumbai, India, server in Singapore. |
|
2 |
UAE |
UAE |
No place of business in India but employs agents in India. |
|
3 |
Cape Town |
Cape Town |
Board Meeting held in Leh, India. |
|
4 |
Germany |
Germany |
49% of the shares held by an Indian company. |
Answer:
Question 4 (B) :
NS & Associates LLP was formed in the year 2020 and it was engaged in the business of manufacturing of plastic parts for automobiles. It constituted of Mr. Naveen and Mr. Suresh as designated partners who were responsible for obtaining contracts from various automobile manufacturers across the country for supply of spare parts for vehicles.
In the year 2021 an investigation was ordered by the Tribunal against the LLP in connection with a financial fraud worth ₹50,25,000. Mr. J, one of the Accounts Manager and employee of the LLP was accused by the complainant, as one of the perpetrators to the fraud.
The Tribunal levied a penalty of ₹1,25,000 to be paid by Mr. J on his conviction. Mr. J approached the Tribunal and provided vital information about the other black sheep involved in the fraud thus aiding in the investigation process. The Tribunal is considering of providing some relief in the penal action taken against him, while the LLP is planning to suspend Mr. J from service for this act.
Considering the provisions of Limited Liability Partnership Act, 2008:
Answer:
Question 4 (C) :
What do you mean by the rule Ejusdem Generis? State any three situations when the Rule of Ejusdem Generis is not applied by the courts.
Answer:
Question 5 (A) :
Quick Money Limited attracts the provisions of Section 135 of the Companies Act, 2013 and it has minimum average obligation to spend Corporate Social Responsibility (CSR) amount of ₹15 crores during each of the preceding five years. In this connection, the Board of Directors of the company needs your expert views on the following matters:
Answer:
Question 5 (B) :
State the circumstances under which the winding up of an LLP may be ordered by the Tribunal.
Answer:
Question 5 (C) :
Define the term "person" as per the General Clauses Act, 1897. Discuss which of the following will be treated as a person:
Answer:
Question 6 (A) :
Top Spinners Foundation is a company registered under section 8 of the Companies Act, 2013 with a view to promote young and talented people towards becoming world-class cricketers. The foundation selects young boys and girls from different parts of the country via talent hunt competitions and other references from its members, thereby giving them proper training with residential facilities at the designated clubs opened for the purpose. The Foundation had been incorporated as a charitable institution in 2016. Currently, it is having 1200 members. The Annual General Meeting of the company is usually held at the club cum registered office of the company at Jaipur.
The members in one of the general meetings have strongly suggested that the next Annual General Meeting of the company be held at a hotel in the vicinity of the Registered Office at Jaipur instead of the Club as the same has a congested sitting area.
It was decided by the foundation itself that a 15 days' notice prior to the Annual General Meeting be given with the facility of only physical voting and no E-Voting to be provided to the members.
Referring to the relevant rules and provisions of the Companies Act, 2013, decide on the following:
Answer:
OR
Question 6 (A) :
Srinivas Iron and Steel Ltd. is a public sector listed company engaged in the manufacture of high-end steel sheets to be supplied to various other entities country-wide. M/S CVB & Associates, Chartered Accountants, had been appointed as the statutory auditors of the company for the term F.Y. 2023-24. Later in the year a financial fraud has come to the fore, not reported by the current auditors in their report, leading to dissatisfaction amongst a group of learned members of the company.
The Next Annual General Meeting is scheduled on 28.09.2024. The members comprising of Mr. H, Mr. J, Mr. K holding paid up share capital ₹1,50,000; ₹1,00,000; ₹2,50,000 respectively have collectively decided to send a special notice to the company regarding passing of the resolution at the next Annual General Meeting for appointment of an auditor other than M/S CVB & Associates as the auditor for the next term.
Referring to the provisions of Companies Act, 2013 elaborate:
Answer:
Question 6 (B) :
Manish, a shareholder of a company has not claimed his dividends from the company for the last 10 years due to different reasons. He wants to know whether he will be able to recover the dividends declared by the company for all these years. Explain to him, the relevant legal provisions.
Answer:
Question 6 (C) :
Referring to the provisions of the Foreign Exchange Management Act, 1999, state the meaning of the term “current account transaction”.
Answer:
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