Based on Jan’22 Edition of ICAI MCQ Booklet

By CA Shubham Singhal Based on ICAI MCQ Booklet –

(AIR 4) Latest Edition
A small Note by Shubham Singhal (before your start):
A lot of effort has gone into making this book. Please use them to the maximum
and target to achieve nothing less than 30/30 marks in the Paper 4 MCQs section.

What is there in this compiler and how to use it?

1. This covers all the 40 MCQs from ICAI MCQ booklet – Latest Edition
2. Past papers RTP/MTP has not been covered in this booklet. Students are
advised to cover those if they have sufficient time.
3. All the questions have been ABC Categorised. This categorization is NOT on
the basis of importance in exam but on the basis of uniqueness or toughness. If
you have covered the Ultimate Solution Summary Notes thoroughly, then you
may consider only solving Category A questions.
4. At the top of each question, I have also mentioned whether you need to read
the case study to be able to solve the MCQs. This will save you a lot of time.
5. For Category B and C question, you may consider just going through the
summary.

All the best, Future CA! 😊

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 Index For All 40 Questions
Can you solve MCQs Can you solve MCQs
SN Category without reading full case SN Category without reading full case
study? study?
1 C Yes 21 C No
2 C Yes 22 A Yes
3 B Yes 23 A No
4 B Yes 24 B Yes
5 C Yes 25 A Yes
6 A No 26 A No
7 C Yes 27 A Yes
8 B Yes 28 A Yes
9 A Yes 29 A Yes
10 A No 30 A No
11 B Yes 31 C Yes
12 C Yes 32 C Yes
13 B Yes 33 A Yes
14 C Yes 34 B Yes
15 C Yes 35 A Yes
16 A No 36 B Yes
17 B No 37 C Yes
18 C Yes 38 C Yes
19 C Yes 39 B Yes
20 B No 40 A Yes

Upcoming Live Batch – Question Bank Summary Notes

 Corporate and Economic Law
Question 1: [Category C] [Can you solve the MCQs directly without reading the case? - Yes]
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 2018- 19, 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 CA and Sanjay, a Company Secretary, as the Executive Directors.
Circuit Board Private Limited (CBPL), a Delhi-based company and PISCO Electronics Limited (PI SCO 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 PI SCO Electronics were as
under:
Paid- up Capital (Rs. in Crore) Turnover ( R s . in Crore)
(as on (as on (F.Y. (F.Y.
31 .03 .2019) 31 .03 .2020) 2018 - 19) 2019 - 20)
CBPL 100 100 315 350
PI SCO Electronics 50 50 275 305

CBPL had 4 Directors as on 31.03.2019 and 5 as on 31.03.2020. In case of PISCO Electronics, there were 7
Directors as on 31.03.2019 and 6 as on 31.03.2020. However, none of the companies had appointed any woman
Director during these two years.
Ajay Prakash is the Chairman and Managing Director (CMD) 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 1.1.2021 onwards.
The Board Meetings of PI SCO Electronics were convened five times during the calendar year 2019. No Board
Meeting was held in January or February 2020 but thereafter, six Board Meetings were held during the remaining
part of the calendar year 2020.
Vasuki is one of the executive Directors appointed by the PI SCO Electronics. He had taken a loan of Rs 70 lacs
from the company on 1.1.2019 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 @9% 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 2020, 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 9% per annum and to increase the period of repayment from the present 20
installments to 30 installments.
Multiple Choice Questions
Question 1.1 [Section 149]
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 CA and Sanjay, a CS, 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.

Summary – As per Section 149, To appoint more than 15 directors, SR is required to be passed in the GM

Question 1.2 [Section 149]

From the case scenario, it is noticed that none of the companies had appointed any woman Director though CBPL
had 4 Directors as on 31.03.2019 and 5 as on 31.03.2020 and PI SCO had 7 Directors as on 31.03.2019 and 6 as on
31.03.2020. 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 31.03.2019.
b) PI SCO Electronics should appoint at least 1 woman Dir. based on audited financial statements as on 31.03.2019.
c) PI SCO Electronics should appoint at least one woman Director based on audited financial statements as on
31.03.2020.
d) CBPL should appoint at least one woman Director based on audited financial statements as on 31.03.2020.

Summary – As per section 149, provision of women director is not applicable to Private companies

Question 1.3 [Section 203]

Which of the following Whole-time Key-Managerial Personnel (KMP), both CBPL and PI SCO 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.

Summary – As per Section 203, every private co. having PUSC > = Rs. 10 crores shall have a whole time CS

Question 1.4: [Section 180]

In view of the changed economic scenario in the country, Vasuki, one of the Executive Directors of PI SCO
Electronics, requested the company for change in his borrowing terms i.e., to reduce the interest rate to 8% per
annum from the existing 9% 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 conditions relating to outstanding loan of Vasuki in a duly
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 conditions relating to outstanding loan of Vasuki in a duly
convened General Meeting by passing a Special Resolution.
d) The company is permitted to alter the terms and conditions relating to outstanding loan of Vasuki in a duly
convened General Meeting by passing an Ordinary Resolution.

Summary – As per section 180, a company is permitted to alter the terms and conditions relating to outstanding
loan of a director in a duly convened General Meeting by passing a Special Resolution

Question 1.5 [Section 196]

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 1.1.2021 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 can be appointed as the Managing Director for maximum up to 10 years without any restrictions.
c) Pranav can be appointed as the Managing Director for maximum up to 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.

Summary – As per section 196, no co. shall appoint/reappoint MD/WTD or Manager for a term > 5 years at a time

Answers
1(c) 2(c) 3(b) 4(c) 5(a)

Question 2: [Category C] [Can you solve the MCQs directly without reading the case? - Yes]
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 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 10.06.2020 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 2017-18 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-CFO of the company.
Both Venkatesh and Lokesh were in the employment of the UPL only up to 15.12.2018. 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 CA 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 Rs 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.
Multiple Choice Questions
Question 2.1 [Section 206]
From the case scenario, it is noticed that the concerned RoC issued separate notices to Venkatesh, ex- Whole-Time
Director and Lokesh, ex-CFO of UPL. Both Venkatesh and Lokesh through their separate representatives presented
that they were in employment of UPL only up to 15.12.2018 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.
 Summary – As per section 206, past employee shall be responsible for providing info/explanation related to past
period if written notice is served on him.

Question 2.2 [Section 167]

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 Rs 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.

Summary – Where a director is convicted, he shall vacate his office in all the companies in which he is a director.

Question 2.3 [Section 209]

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.

Summary – As per section 209, registrar can carry search and seizure subject to prior approval of Special Court

Question 2.4 [Section 209]

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 papers maximum within 180 days from the date of
seizure.
d) The Registrar is required to return the seized books and papers maximum within 270 days from the date of
seizure.
 Summary – As per section 209, the books seized during search and seizure can be retained for max 180 days.

Question 2.5 [Section 210]

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 Government may order an investigation into the affairs
of the company by the Inspectors appointed by it.
c) On receipt of a report of the Registrar, the Central Government may order an investigation into the affairs
of the Company by a Criminal Court.
d) On receipt of a report of the Registrar, the Central Government may order an investigation into the affairs
of the Company by the jurisdictional Tribunal.

Summary – On receipt of report u/s 208, CG may order investigation by Inspectors appointed by it.

Question 2.6 [Section 209]

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 Registrar again calls for the books and papers, then he can retain them maximum for a period of 120 days.
c) If Registrar again calls for the books and papers, then he can retain them maximum for a period of 180 days.
d) If Registrar again calls for the books and papers, then he can retain them maximum for a period of 210 days.

Summary – After returning the books and papers, Registrar can call for it again for 180 days.

Answers
1(c) 2(d) 3(b) 4(c) 5(b) 6(c)

Question 3: [Category B] [Can you solve the MCQs directly without reading the case? - Yes]
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, 2018.
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 CS 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 31.03.2021:
 Particulars Amount (Rs in Crores)
Paid-up Capital 50
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

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:
S. No Description Amount (Rs 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 revaluation of assets 30
6 Deferred Revenue Expenditure & Miscellaneous Expenditure not 2
written off
7 Investment in SCPL 25

In view of the ‘net worth’ of Rs 100 crore, Mahadevan informed the Board that as per the relevant provisions SCPL
was an undertaking of LSL.
Earlier during April, 2020, 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 Rs 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 CS 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. 2020-21, 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, 2021, 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 2020-21,
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 FY 2020-21. The details are as under:
a) Payment of Rs 10,00,000 as contributions to LMS party.
b) Donation of Rs 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 Rs 1,00,000 incurred for inserting an advertisement in the Souvenir published on behalf
of Janta Welfare Party.
d) Publication of pamphlets costing Rs 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 Rs 11,00,000 as political contributions and Rs 3,00,000 as ‘Advertisement
and Business Promotion Expenses’.

Multiple Choice Questions

Question 3.1 [Section 190]
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 Rs 25,000 and every officer of the Company, who is in default,
shall be liable to a penalty of Rs 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 Rs 50,000 and every officer of the Company, who is in default,
shall be liable to a penalty of Rs 10,000 for each default for non- production of Service Contracts for
inspection.
d) The Company shall be liable to a penalty of Rs 1,00,000 and every officer of the Company, who is in default,
shall be liable to a penalty of Rs 25,000 for each default for non- production of Service Contracts for
inspection.

Summary – As per section 190, a company can keep a written memorandum entered into with its manager at its
registered office. It will be very much in compliance of law.

Question 3.2 [Section 180]

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 disposing of its investment in SCPL, considering
SCPL as 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 disposing of its investment in SCPL, considering
SCPL as an undertaking of LSL, only with the consent of the company by a Special Resolution and
thereafter, by seeking approval of the jurisdictional RoC
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.

Summary – As per section 180, board can exercise power to sell its undertaking only with the consent of co. by
way of SR

Question 3.3 [Section 176]

According to the case scenario, the Board of Directors of LSL stated that since January, 2018 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.

Summary – As per section 176, acts of director shall not be deemed invalid merely on the grounds that it was
subsequently noticed that his appointment was invalid by reason of any “defect” or “disqualification

Question 3.4 [Section 182]

The case scenario states that LSL, after complying with the required legal formalities, made some political
contributions and incurred some expenses during the FY 2019-20. LSL showed in its financial statements Rs
11,00,000 as political contributions and Rs 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 Rs 11,00,000 as political contributions and
Rs 3,00,000 as ‘Advertisement and Business Promotion Expenses’ is correct.
b) LSL was required to disclose Rs 10,00,000 as political contributions and Rs 4,00,000 as ‘Advertisement and
Business Promotion Expenses’.
c) LSL was required to disclose all the sums totaling Rs 14,00,000 as political contributions.
d) LSL was required to disclose Rs 12,00,000 as political contributions and Rs 2,00,000 as ‘Advertisement and
Business Promotion Expenses
 Summary – As per section 182, Advertisement in any publication of political parties shall be deemed to be a
political contribution

Answers
1(b) 2(d) 3(a) 4(c)

Question 4: [Category B] [Can you solve the MCQs directly without reading the case? - Yes]
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 Rs 300 crore during the FY 2019-20. 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 Rs 700
crore during the FY 2019-20. 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 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 RoC 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 RoC 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 CS 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.

Multiple Choice Questions

Question 4.1 [Section 232]
From the case scenario, it is observed that KBL, a listed company is being merged with ABL which is an unlisted
company and under the scheme of merger, the KBL shall transfer all of its assets and liabilities to ABL. From the
following four options, choose the one which indicates 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 on its own 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.

Summary – As per section 232, Where a listed company is being merged with unlisted entity, the transferee
shall remain unlisted unless it gets listed

Question 4.2 [Section 232]

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 RoC
b) Amount of payment or valuation for any share shall not be less than what has been specified by the RBI
c) Amount of payment or valuation for any share shall not be less than what has been specified by the 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.

Summary – As per section 232, payment to shareholders who decide to opt-out shall be as per pre-determined
pricing formula but it shall not be less than amount as specified under SEBI Regulation

Question 4.3 [Section 232]

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 RoC 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 RoC
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.

Summary – As per section 232, scheme to clearly indicate an appointed date for the Scheme to be become
effective and such scheme shall be deemed to be effective from such date

Question 4.4 [Section 232]

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 CS was
directed to explain the same. Which of the following options, do you think, the CS 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 CA or a Cost Accountant or a CS 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 CA or a Cost Accountant or a CS 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 CA or a Cost Accountant or a CS 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 CA or a Cost Accountant or a CS in
practice indicating whether the implementation of the scheme is complied with in accordance with the
orders of the Tribunal or not.

Summary – As per section 232, Company shall file a statement with RoC → Every year until completion of scheme
→ Certified by CA/Cost Acc/CS showing compliance with the order of tribunal.

Question 4.5 [Section 240]

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.
 Summary – As per section 240, officers of the transferor companies shall continue to be liable after such
merger/amalgamation in respect of offences committed prior to merger/amalgamation

Question 4.6 [Section 239]

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 FY 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.

Summary – As per section 239, books and paper of the amalgamated co. (dissolved co.) shall not be disposed of
without prior permission of CG

Answers
1(a) 2(c) 3(d) 4(b) 5(a) 6(c)

Question 5: [Category C] [Can you solve the MCQs directly without reading the case? - Yes] [Can Skip]
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, 2020:
S. No. Particulars Amount (Rs in Crores)
1. Authorised Share Capital (15,00,00,000 Equity Shares 15.00
of Rs 1 each)

2. Paid-up Share Capital 8.42

3. Turnover 84.00
4. Outstanding Loans, Debentures and Deposits (in aggregate) 42.00
In the Annual General Meeting (AGM), held on 20th August, 2020, 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 authorizing 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, 2021, following information emerged:
S. Particulars Amount (Rs
No. in Crores)
1. Authorised Share Capital (15,00,00,000 15.00
Equity Shares of Rs 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:
a) Mrs. Eekam, who is considered ‘influencer’ on supply chain management and has a lot of expertise in the
logistics field;
b) Mrs. Prajna who is a marketing expert;
c) Mrs. Ruchita, who is MBA (Finance and Accounting) from IIM,Ahmedabad; and
d) 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, 2021 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.

Multiple Choice Questions

Question 5.1 [Section 162]
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.

Question 5.2 [Section 152(6)]

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, 2020?
a) Five Directors
b) Four Directors
c) Three Directors
d) Two Directors

Question 5.3 [Section 149(4)]

In the given case scenario, if it is presumed that as on 31st March, 2021, the turnover of the company is Rs 87.00
crores and the paid-up share capital is Rs 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 Rs 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 Rs 90 crores but less than Rs
100 crores.
c) The company is required to appoint minimum two independent Directors since the paid-up share capital is Rs
12 crore.
d) The company is required to appoint only one independent Director since the paid-up share capital is below Rs
15 crore.

Question 5.4 [Section related to Alteration of Article]

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 RoC
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.

Question 5.5 [Section 149]

As on 12th August, 2021, 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

Answers
1(a) 2(c) 3(c) 4(d) 5(b)

Question 6: [Category A] [Can you solve the MCQs directly without reading the case? - No]
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, 2021, its paid-up capital stood at Rs 40.00 crores against its Authorised Capital of Rs 50.00 crore. The
turnover for the FY 2020-21 was to the tune of Rs 300.00 crore.
The company has 13 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 15.
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 7 Directors as
members i.e. A1, B2, C3, D4, E5, I9 and J10.
Earlier, for the FY ending 31st March, 2020, the company successfully convened and held Annual General Meeting
(AGM) on 25th September, 2020 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 09-01-2021 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 her mother M13. It may be noted
that before 09-01-2021, a Board Meeting was held on 15-09-2020.
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 20 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 April, 2021 to appoint O15 as additional Director. As the
total strength of Directors was well within limit prescribed by the Articles, there was no need to alter the Articles.

Multiple Choice Questions

Question 6.1 [Section 174]
After the appointment of O15 as additional Director on 06-04-2021, another Board Meeting of SCL was held on 17-
08-2021 through video conferencing. 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

Question 6.2 [Section 177 + SEBI LODR]

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.

Question 6.3 [Section 149(1)+ Rule3]

From the case scenario, it is observed that after the death of M13, her daughter N14 was appointed at a Board
Meeting held on 09-01-2021 to fill the vacancy of woman Director. Is the appointment of N14 on 09-01-2021
justified?
a) No. The appointment of N14 should have been made within three months from 25-09-2020.
b) No. The appointment of N14 should have been made within two months from 25-09-2020.
c) No. The appointment of N14 should have been made within one month from 25-09-2020.
d) Yes. The appointment of N14 made at the Board Meeting held on 09-01-2021 is justified.

Question 6.4 [Section 197]

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 FY 2020-21
a) 11% of the net profits available for FY 2020-21.
b) 5% of the net profits available for FY 2020-21.
c) 3% of the net profits available for FY 2020-21.
d) 1% of the net profits available for FY 2020-21.

Question 6.5 [Section 177]

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

Answers
1(b) 2(c) 3(d) 4(c) 5(b)

Question 7: [Category C] [Can you solve the MCQs directly without reading the case? - Yes]
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, 2017 and has its registered office at Connaught Place, New
Delhi. The authorised and paid-up share capital of the company is Rs 30.00 crore.
GTSIL is duly registered with the 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 FY 2021-22, 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 statutory provisions.
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 FY 2020-21, 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
Rs 6 per share was declared as against 4 per share in the preceding year and the same was approved at the AGM
held on 24-09-2021 through video conferencing as permitted by MCA vide General Circular No. 20/2020, dated 05-
05-2020 read along with General Circular No. 02/2021, dated 13-01-2021.
It is a proven fact that PESTEL analysis3 (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 FY
to Janta 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.

Multiple Choice Questions

Question 7.1 [Section 151]
According to the case scenario, small shareholders got appointed Mukund as small shareholders’ Director on the
Board of the company. Out of the following four options, choose the one which correctly indicates the minimum
number of small shareholders who might have assembled together to get Mukund appointed as Director to
represent them.
a) Not less than one thousand or one-tenth of the total number of such shareholders whichever is lower.
b) Not less than one thousand or one-tenth of the total number of such shareholders whichever is higher.
c) Not less than one thousand or one-fifth of the total number of such shareholders whichever is lower.
d) Not less than one thousand or one-fifth of the total number of such shareholders whichever is higher.

Summary – As per sec 151, Notice shall be sent by small SHs not < Lower of 1,000 or 1/10th Small Shareholder

Question 7.2 [Section 182]

From the case scenario it is evident that the company made political contributions of certain amount to Janta
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.

Summary – As per section 182, a company (other than govt co. or co. in existence for less than 3 FY) is allowed to
contribute any amount directly or indirectly towards political contribution

Question 7.3 [Section 151]

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) At least Rs 20,000
b) At least Rs 10,000
c) At least Rs 5,000
d) Such Director is not required to own shares of any nominal value in the company prior to his appointment as
small shareholders’ Director.

Summary – As per section 151, a person proposed to appointed as SSD need not be a shareholder himself.

Question 7.4 [Unique]

In this case scenario, the name of the co. 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 for including ‘British India’ in its name:
a) Such co. must be incorporated with minimum Authorised Capital of Rs 50,00,000.
b) Such company must be incorporated with minimum Authorised Capital of Rs 75,00,000.
c) Such company must be incorporated with minimum Authorised Capital of Rs 100,00,000.
d) None of the above.

Summary – A company cannot include the word “British India” in its name. Name of company shall not be such
that it relates to any country or state or any other association of the government

Question 7.5 [Section 197]

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 – The Company shall not waive recovery of excess remuneration paid
a) Unless approved by a special resolution within one year from the date the sum becomes refundable.
b) Unless approved by a special resolution within two years from the date the sum becomes refundable.
c) Unless approved by the Central Government.
d) Unless approved by a special resolution within three years from the date the sum becomes refundable.

Summary – As per section 197, Co. can waive off excess remuneration drawn by any director only when approved
by co. by SR within 2 years from the date it becomes refundable

Answers
1(a) 2(a) 3(d) 4(d) 5(b)

Question 8: [Category B] [Can you solve the MCQs directly without reading the case? - Yes]
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 Rs 19
Crores as on 31.03.2020. 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 31.03.2020:
S. No. Particulars Amount (Rs in Crores)
1. Secured Creditors
(a) 8%Debentures (Secured by creating Charge on Freehold Property) 20.00
(b) Accrued Interest on 8% debentures 1.60
(c) Cash Credit (availed from National Commercial Bank against
15.00
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

After deliberations, 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 Rs 12 Crores (book
value Rs 8 Crores) in part payment of their dues and to provide additional Rs10 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 Rs 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 31.3.2020 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 31.03.2020. 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 Rs 0.50 Crores. Value of obsolete items in the
inventory was quantified to Rs 0.80 Crores and was to be written off.
f) Bad debts identified to the extent of Rs 0.75 Crores were to be written off.
g) Remaining Freehold property worth Rs 15 Crores was revalued at Rs 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
31.03.2020, HPL was required to pay Rs 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.

Multiple Choice Questions

Question 8.1 [Section 230(2)]
The case scenario states that an Application for Compromise was filed by HPL with the jurisdictional 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 31.03.2020 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.

Summary – As per section 230, Tribunal shall not pass order under Auditors certifies that funds required after
corporate debt restructuring shall confirm to liquidity test based on estimated provided by BOD

Question 8.2 [Section 230(4)]

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.

Summary – As per section 230, notice for meeting shall provide for voting either at the meeting in person or
proxy or by postal ballot (within 1 month of receipt of notice) for adoption of the scheme.

Question 8.3 [Section 230(4)]

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 total outstanding debt as per the audited financial statements as on 31.03.2020 of HPL.
b) Not less than 10% of total outstanding debt as per audited financial statements as on 31.03.2020 of HPL.
c) Not less than Rs 1 Crore as per the audited financial statements as on 31.03.2020 of HPL.
d) Not less than 25% of total outstanding debt as per audited financial statements as on 31.03.2020 of HPL.

Summary – As per section 230, objection to any scheme shall be made only by creditors having debt outstanding
not less than 5% of total debt

Question 8.4 [Section 230(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 date of receipt of notice.
c) Representation needs to be made within 30 days from the date of receipt of notice.
d) Representation needs to be made within 45 days from the date of receipt of notice.

Summary – As per section 230, relevant regulators are required to make representation within 30 days of
receipt of notice.

Question 8.5 [Section 230(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.

Summary – As per section 230, no scheme shall be sanctioned by Tribunal unless certificate from company’s
auditor is received stating that the proposed accounting treatment for scheme is in conformity with AS u/s 133

Question 8.6 [Section 230(7)]

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 Rs one lac and maximum
of Rs ten lacs.
b) The Tribunal may make an order for winding up of HPL.
c) The company shall be liable to pay fine of Rs 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 Rs five lacs.
d) The Tribunal may order for confiscation and sale of properties of HPL to settle the debts to the creditors.

Summary – As per section 230, where tribunal is satisfied that scheme cannot be implemented with or without
modification and co. is unable to pay debt as per the scheme, tribunal shall order WINDING UP of co.

Answers
1(c) 2(b) 3(a) 4(c) 5(c) 6(b)

Question 9: [Category A] [Can you solve the MCQs directly without reading the case? – Yes except for
Question (i)]
Blessed with both artistic and business approach, Deb, Debosmita and Divyanshi, putting their best foot forward
entered India’s Rs 2,000 crore fragrance market by floating Daffodils Perfumes and Scent Limited (DPSL) in the
year 2009 with an Authorised Capital of Rs 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, 2010, Anirudh, a qualified CA 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 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, 2011.
The company was doing well and its yearly turnover was increasing gradually.
As on 31-03-2020, DPSL, yet to be listed, had paid-up share capital of Rs 15.00 crore with 355 shareholders and its
free reserves as on that date were Rs 12.00 crore. DPSL also had secured and unsecured debts aggregating to Rs
2.00 crore. Its turnover for the FY 2019-20 was Rs 85.00 crore. Based on the audited financial statements as on
31-03-2020 when paid-up capital exceeded the threshold limit, four independent Directors, namely, Rajan, Rahul,
Ranjit and Raima were appointed in April, 2020.
Prior to the above development, Anirudh, the CFO of the company took early retirement in December, 2019.
However, in one of the Board Meetings held on 25th June, 2020, Deb expressed his desire to again engage Anirudh
by appointing him as independent Director during the current year 2020, in addition to the already appointed four
independent Directors. As of now, the Articles of Association provide for the payment of sitting fee of Rs 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 31-03-2020 also required constitution of an Audit Committee. Accordingly, 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 and 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 25-03-2021, 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

Question 9.1 [Section 149(6)(e)]
According to the case scenario, Deb expressed his desire to again engage Anirudh by appointing him as independent
Director during the current year 2020. Which of the following options is applicable with respect to the appointment
of Anirudh as an independent Director of DPSL in the year 2020:
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.

Summary – As per section 149(6), a person cannot be appointed as independent director if he himself or his
relative is or was KMP or employee of CASH in last 3FY.

Question 9.2 [Section 197(5)]

It is observed from the case scenario that the non-independent Directors are being paid sitting fee of Rs 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 Rs 40,000.
b) Sitting fees payable to independent Directors per meeting shall not be less than 75% of Rs 40,000.
c) Sitting fees payable to independent Directors per meeting shall not be less than 60% of Rs 40,000.
d) Sitting fees payable to independent Directors per meeting shall not be less than 50% of Rs 40,000.
 Summary – As per section 197(5), in no case shall the sitting fees of an ID and women director be less than that
of other directors. It can either be equal to or more than sitting fees to other directors.

Question 9.3 [Section 68]

The case scenario states that in a duly convened Board Meeting which was held on 25-03-2021, 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 Meeting vote in favour of buy-back.
d) There is no need to alter the Articles to provide for buy- back if all the Directors attending the related
Board Meeting vote in favour of buy-back.

Summary – As per section 68, a company shall only buy back its shares if it is authorised by AOA.

Question 9.4 [Section 177]

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.

Summary – As per section 177, majority of the directors shall be ID. So if there are 2 non-independent
directors, the audit committee is required to have 3 IDs.

Question 9.5 [Section 68] [Unique]

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) 2:1
b) 3:1
c) 4:1
d) 5:1

Summary – As per section 68, the ratio of aggregate of secured and unsecured debts owed by the company after
buyback should not be more than twice the paid up capital and free reserves

Answers
1(b) 2(a) 3(a) 4(c) 5(a)
Question 10: [Category A] [Can you solve the MCQs directly without reading the case? - No]
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 2018-19 FY 2019-20 FY 2020-21
(Rs in Lakhs) (Rs in Lakhs) (Rs in Lakhs)
Paid-up Share Capital 1,500 1,500 1,500
Turnover 8,000 9,000 9,500
Outstanding Loans 1,500 1,300 1,100
Debentures 1,200 1,100 1,000

ABC Transporters Limited, an unlisted company, is engaged in the business of transport and logistics and has its
Registered Office in Mumbai. ABC Transporters Limited purchased all the shares of XYZ Auto Limited in February,
2020 and became its holding company. It is to be noted that ABC Transporters Limited has 900 shareholders and
400 debenture-holders.
Following information is available from the audited financial statements of ABC Transporters Limited:
FY 2018-19 FY 2019-20 FY 2020-21
Particulars
(Rs in Lakhs) (Rs in Lakhs) (Rs in Lakhs)
Paid-up Share Capital 5,000 5,000 5,000
Turnover 35,000 40,000 45,000
Secured Loans from Super Commercial Bank
3,500 4,000 4,500
and Other Unsecured Loans
Debentures 1,000 1,000 1,000
Sumit and Sumedh, the Directors of ABC Transporters Limited also happened to be the Directors of EFG Lights
Limited, an unlisted company. However, in June, 2020, they exited from EFG Lights Limited as Directors. The
turnover of EFG Lights Limited amounted to Rs 110 crore, Rs 99 Crores, Rs 95 Crores and Rs 91 Crores respectively
in FY 2017- 18, FY 2018-19, FY 2019-20 and FY 2020-21. 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 Lights Limited is Rs 9.50 crore
throughout the period. EFG Lights Limited is continuing with an Audit Committee which was constituted earlier.

Multiple Choice Questions

Question 10.1 [Section 177]
In respect of constitution of Audit Committee by XYZ Auto Ltd, out of the following options, which is applicable?
a) XYZ Auto Limited, being not a private company, is required to constitute an Audit Committee.
b) Having paid-up share capital above threshold limit, XYZ Auto Limited is required to constitute Audit committee.
c) Based on the threshold limits, since ABC Transporters Limited has constituted its Audit Committee, XYZ Auto
Ltd, being wholly owned subsidiary of ABC Transporters Limited, is not required to constitute Audit Committee.
d) In view of the average turnover and paid-up share capital of last three financial years exceeding the threshold
limit, XYZ Auto Limited is required to constitute an Audit committee.

Summary – As per section 177, the provisions of Audit Committee is not applicable to JV/WOS/Dormant co.

Question 10.2 [Section 177]

Is it permissible for EFG Lights Limited to discontinue its Audit Committee in the FY 2021-22?
a) Yes. EFG Lights Limited can discontinue its Audit Committee in the FY 2021-22, since both the Directors of
ABC Limited have left the Directorship in EFG Limited.
b) Yes. EFG Lights Limited can discontinue its Audit Committee in the FY 2021-22, since its turnover did not
exceed Rs 100 crore or more in the consecutive three financial years.
c) No. EFG Lights Limited cannot discontinue its Audit Committee in the FY 2021-22, since its aggregate
turnover in the last three financial years exceeds Rs 100 crore.
d) No. EFG Lights Limited cannot discontinue its Audit Committee in the FY 2021-22, since its paid-up share
capital is more than Rs 5.00 crore.

Summary – As per section 177, if a company ceases to fulfill conditions for 3 consecutive years, then provisions
of 177 shall stop to apply.

Question 10.3 [Section 177(9)+178(8)]

Suppose ABC Transporters Limited did not constitute Vigil Mechanism as required by Section 177 (9) of the
Companies Act, 2013. Out of the following four options, which one correctly states the penalty that is leviable on
the company for contravening this provision:
a) The company is liable to pay minimum fine of Rs 50,000 and maximum of Rs 1,00,000.
b) The company is liable to pay minimum fine of Rs 10,00,000 and maximum of Rs 25,00,000.
c) The company is liable to pay minimum fine of Rs 5,00,000 and maximum of Rs 15,00,000.
d) The company is liable to pay minimum fine of Rs 1,00,000 and maximum of Rs 5,00,000.

Summary – As per section 178(8), penalty for contravention of provision of Vigil Mechanism shall be - Rs. 1 lakh
for OID and Rs. 5 lakhs for the company.

Question 10.4 [Section 178]

As regards Stakeholders Relationship Committee (SRC), whether ABC Transporters 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 SRC since its shareholders are limited to 900.
b) No. ABC Limited is not required to form a SRC since its debenture-holders are limited to 400.
c) Yes. ABC Limited is required to form a SRC since its shareholders and debenture-holders total up to 1300.
d) No. ABC Limited is not required to form a SRC since the combined strength of its shareholders and debenture-
holders does not exceed 1500.

Summary – As per section 178, co. having > 1000 shareholders, debenture-holders, deposit-holders or any other
security holder at any time during a FY will have to set up Stakeholder Relationship Committees.

Answers
1(c) 2(b) 3(d) 4(c)

Question 11: [Category B] [Can you solve the MCQs directly without reading the case? - Yes]
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 FY 2020-21 well within time with the
jurisdictional RoC 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 10-07-2020 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. Alex and Mr. Disouza 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. Alex and Mr.
Disouza 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.

Multiple Choice Questions

Question 11.1: [Section 206]
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 Co. and every defaulting officer shall be punishable with a fine up to Rs 1,00,000 and in case of continuing
failure, with an additional fine up to Rs 500 for every day after the first during which the failure continues.
b) The Co. and every defaulting officer shall be punishable with a fine up to Rs 1,50,000 and in case of continuing
failure, with an additional fine up to Rs 1,000 for every day after the first during which the failure continues.
c) The Co. and every defaulting officer shall be punishable with a fine up to Rs 1,00,000 and in case of continuing
failure, with an additional fine up to Rs 5,000 for every day after the first during which the failure continues.
d) The Co. and every defaulting officer shall be punishable with a fine up to Rs 2,00,000 and in case of continuing
failure, with an additional fine up to Rs 5,000 for every day after the first during which the failure continues.

Summary – As per section 206, Penalty for co. and OID for non-compliance of section 206 is Rs. 1 lakh and an
additional fine of Rs. 500 per day after the first default

Question 11.2: [Section 209] (Skip – Easy)

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 docs 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 till instructed further by the Special Court.

Summary – As per section 209, Registrar shall after a period of not more than 180 days return the books seized
to the company and may before returning take copies or extracts and place identification marks.

Question 11.3: [Section 197]

From the case scenario, it is noticed that the Board of Directors of Shri Hari Textiles Limited had passed a
resolution in a Board Meeting held on 10-07-2020 increasing the remuneration payable to the Directors including
two whole-time Directors and Managing Director to 12% of the net profits of the company. What is the
requirement for increasing the remuneration of Directors including Whole-Time Directors and Managing Director to
the extent of 12% so that the increased remuneration 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% needs to be authorised at the General Meeting and
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% needs to be authorised at the General Meeting and
thereafter, duly sanctioned by the Central Government through Regional Director.

Summary – As per section 197, remuneration payable to all the directors and managers beyond the limit of 11%
shall be approved at GM by way of OR and subject to schedule V and Public Financial Inst. approval (if any)

Question 11.4: [Section 206] (Skip – Easy)

The case scenario states that the RoC had called ex-Directors of Shri Hari Textiles Limited i.e. Mr. Alex and Mr.
Disouza for examining them during the inquiry. Is the Registrar empowered to call the ex-Directors:
a) The Registrar cannot call ex-Directors of Shri Hari Textiles Limited i.e. Mr. Alex and Mr. Disouza, without the
order of the court.
b) The Registrar may, by issuing a written notice, call the ex-Directors of Shri Hari Textiles Limited i.e. Mr. Alex
and Mr. Disouza 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 Shri Hari Textiles Limited.
d) Except the Tribunal, no other authority is empowered to call ex-Directors of a company for any examination.

Summary – As per section 206, the ex-officers shall also be liable to furnish information or explanation to the
best of their knowledge if called upon by ROC by a notice served in writing

Question 11.5: [Section 212]

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.

Summary – As per section 212, where the case is assigned to SFIO, no other invg. agency (CBI, etc.) shall initiate
invg. for offence under this Act. In case invg. had already been initiated - It shall not be proceeded with and all
relevant docs shall be transferred to SFIO.

Author’s Note – ICAI’s answer (c) seems incorrect. The correct answer should be (d).

Answers
1(a) 2(c) 3(c) 4(b) 5(c)

Question 12: [Category C] [Can you solve the MCQs directly without reading the case? – Yes, except for
12.1]
Sunshine Software Private Limited having its Registered Office at Hyderabad was incorporated on 28th May, 2018
with Authorised Capital of Rs 10,00,000 divided into 1,00,000 equity shares of Rs 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:
2018-19 2019-20
Particulars
(Amount in Rs) (Amount in Rs)
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:
Payment of fees to the Registrar
Payments made to fulfil the requirements of the Companies Act, 2013 and any other applicable laws.
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).

Multiple Choice Questions

Question 12.1: [Section 455]
Based on 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 FY.
b) It is a defunct company since no significant accounting transactions have been undertaken for the last two FY.
c) It is an active company since it makes regular payments to ROC.
d) None of the above.

Summary – As per section 455, inactive company means - (1) Not been carrying out business/operations AND
(2) Not made significant accounting transactions for last 2 FY AND (3) Not filed FS/AR for last 2 FY.
Significant accounting transaction means transaction other than compliance or maintenance related transactions.

Question 12.2: [Section 455]

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

Question 12.3: [Section 455+165]

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

Question 12.4: [Section 455]

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, 2020, 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, 2021.
b) After 30th September, 2022.
c) After 30th September, 2024.
d) After 30th September, 2025.

Summary – As per section 455, ROC shall initiate the process of strike off of name of vo. from register of co. if
co. remains DC for consecutive 5 years.

Question 12.5: [Section 421]

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 NCLAT within a period of 30 days from the date of the
receipt of the order of Tribunal.
 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.
d) Surya Energy Private Limited can file an appeal with NCLAT within a period of 60 days from the date of the
receipt of the order of Tribunal.

Summary – As per sec 421, appeal against order of NCLT shall be made with NCLAT within 45 days of order.

Answers
1(a) 2(d) 3(c) 4(d) 5(c)

Question 13: [Category B] [Can you solve the MCQs directly without reading the case? - Yes]
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 Traders 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 Traders 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 Rs 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 certain objections. The company wants to sort out the issue amicably.

Multiple Choice Questions

Question 13.1: [Section 406 Rule 8]
From the case scenario, it is observed that PQR Traders 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) It cannot become a member of Paavan Nidhi Limited.
b) It can become a member of Paavan Nidhi Limited by investing minimum Rs 5,00,000 as capital.
c) It 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) It must be in existence for a minimum period of 3 years to be eligible for becoming member of a Nidhi.

Summary – As per sec 406, a body corporate cannot be member of a Nidhi Company

Question 13.2: [Section 406 Rule 8]

Piyush, one of the Directors of Paavan Nidhi Limited has raised objection on acceptance of deposit amounting to Rs
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 Rs 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 Rs 2,00,000 and he can become a
member of the company.

Summary – As per sec 406, no minor shall be a member of Nidhi co. However, deposit may be accepted in name of
minor if made by legal guardian who is a member of Nidhi.

Question 13.3: [Section 406 Rule 17]

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.

Summary – As per sec 406, in case of Nidhi, director can be appointed for a term of consecutive 10 years but
reappointment can be made only after expiry of 2 years from ceasing to be a director.

Question 13.4: [Section 406 Rule 19]

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 2016-17 to FY 2020-21 and if the company is desirous of re-appointing the said
firm of auditors for another term of five years commencing from FY 2021-22, 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.
 Summary – As per sec 406, no Nidhi shall appoint or reappoint an individual as auditor for a period exceeding one
term of 5 consecutive years and an audit firm for a period exceeding 2 terms of 5 consecutive years.

Question 13.5: [Section 406]

The above case scenario states that Mr. Tom, a resident of Switzerland and one of the Directors of PQR Traders
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 RBI
b) Paavan Nidhi Limited can accept the investment proposal of Mr. Tom with the approval of RBI for receipt of
foreign exchange if the RoC has given his consent for such acceptance.
c) Paavan Nidhi Limited can accept the investment proposal of Mr. Tom with the approval of 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.

Summary – As per sec 406, Person resident outside Indian is prohibited to make investment in Nidhi Company

Answers
1(a) 2(b) 3(a) 4(b) 5(d)

Question 14: [Category C] [Can you solve the MCQs directly without reading the case? - Yes] (Can Skip)
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, 2021, YDL had paid-up share capital of Rs 60.00 crore and free reserves of Rs 25.00 crore. Its
turnover for the F.Y. 2020-21 was Rs 450.00 crore and the borrowings aggregated to Rs 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
Rs 40.00 crore. The proposal to advance a loan of Rs 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 07-08-2020.
As regards holding of Board Meetings by the Directors of YDL, there were six such meetings held from 01-08-
2020 to 31-03-2021. 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 01-09-2020 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 Rs 50 lakhs in Sky Snow Residency for his daughter who was to get married
soon. For this transaction, he made payment of Rs 40 lakhs immediately and offered to pay the remaining amount of
Rs 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 Rs. 10 lakhs in four equal installments.
Multiple Choice Questions
Question 14.1: [Section 149 Rule 3]
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 Rs 60 crore.
c) YDL is required to appoint a woman Director since its turnover is Rs 450 crore.
d) YDL is required to appoint a woman Director since its combined paid-up share capital and turnover is more
than Rs .500 crore.

Question 14.2: [Section 166]

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 1.09.2020 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 01.09.2020.
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 01.09.2020.
c) Yatharth himself can appoint an alternate Director for his absence for a period of four months starting
from 01.09.2020.
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 01.09.2020.

Question 14.3: [Section 167]

As per the case scenario, Yash did not attend six Board Meetings consecutively which were held from 01-08-2020
to 31-03-2021. 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. Out of the following four options, which one 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.

Question 14.4: [Section 186]

The case scenario states that a proposal to advance a loan of Rs 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 Rs 15.00 crore to Srilekha Engineering Private Limited by passing a board
resolution.
b) YDL can advance a loan of Rs 15.00 crore to Srilekha Engineering Private Limited but only after passing an
ordinary resolution.
 c) YDL can advance a loan of Rs 15.00 crore to Srilekha Engineering Private Limited but only after passing a
special resolution.
d) YDL cannot advance a loan of Rs 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 Rs 40.00 crore.

Question 14.5: [Section 185]

The case scenario states that Yuvraj purchased from YDL a Sky Snow 4 BHK apartment worth Rs 50 lakhs for his
daughter from YDL and paid Rs 40 lakhs immediately and offered to pay remaining cost of flat of Rs 10 lakhs in
four equal installments. From the options given below, choose the one which is applicable in the given situation:
a) Rs 10 lakhs being the remaining cost of flat to be repaid in four equal installments shall be considered as
loan to Yuvraj.
b) Rs 10 lakhs being the remaining cost of flat to be repaid in four equal installments shall not be considered as
loan to Yuvraj.
c) Rs 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 Directors, even
if the same is advanced in the normal course of business.
d) Rs 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.
Answers
1(c) 2(b) 3(c) 4(c) 5(b)

Question 15: [Category C] [Can you solve the MCQs directly without reading the case? - Yes] (Can Skip)
Shree Ram Garments Limited, a listed public company, was incorporated in the year 2001 under the Companies Act,
1956. Its Registered Office is situated in Statesman House at Connaught place, New Delhi. As on 31st March, 2021,
the company had 12 Directors as under:
1. Mr. Amit Managing Director
2. Mr. Rohan Whole-time Director
3. Mr. Rohit Whole-time Director
4. Mr. Sudarshan Director
5. Mr. Bharat Director
6. Mrs. Anisha Woman Director
7. Mr. Kapil Director
8. Mr. Anup Director
9. Mr. Farhan Director
10. Mr. Pritam Independent Director
11. Mr. Anuj Independent Director
12. Mr. Anil Independent Director
During the current year, Mr. Sunil was also appointed as the independent Director of the company.
The Articles of Association of Shree Ram Garments Limited provide that the maximum number of Directors in the
company shall not exceed twenty. After the appointment Mr. Sunil as Independent Director the total number of
directors in the company has increased to thirteen.
However, keeping in view the excessive workload, the Board of Directors is contemplating to increase the number of
Directors to seventeen. A meeting of the Board of Directors was held to discuss the same.
Shree Ram Garments Limited, at present, is having 1,000 small shareholders who are desirous of appointing Mr.
Parag as their Director on the Board of Directors. Mr. Parag held 500 equity shares of Rs. 10 each in the said
company. 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 on such terms and conditions as may be prescribed. Hence, Mr. Parag
was appointed as a small shareholders’ Director by the company.
An urgent meeting of the Board was called on 2nd December, 2021, by the company at its Registered Office at 4
P.M., to discuss certain matters pertaining to buying of sophisticated machineries. A three days’ prior notice was
issued to each Director for attending the meeting. Mr. Anil, due to his surgery, was advised full time rest by his
surgeon and even his attendance through video conferencing was not allowed. Accordingly, he informed the CS Mrs.
Shyamala beforehand. Mr. Anuj, Mr. Sudarshan and Mr. Pritam were out of station for the last one week and due to
poor connectivity at their respective places, they were unable to attend the meeting even through video
conferencing. Mr. Farhan was extremely busy due to his son's marriage. Mr. Anup was also held up because his
grandmother had suddenly developed respiratory problem and therefore, was to be hospitalised for further check-
up. In addition, her doctor wanted her to remain admitted in the hospital for next two days for thorough check-up.
On the day of the meeting, while coming to the meeting venue, Mr. Bharat met with an accident and was to be
hospitalised. Mr. Rohit and Mr. Kapil had gone to their native places and were sure of attending the meeting since
they expected to reach Delhi much before the time of meeting but their flight got delayed unexpectedly due to
which they were unable to come to Delhi at the scheduled time. Mrs. Anisha’s daughter Mehak called her to visit
her at Chandigarh urgently and therefore, she was also not available for attending the meeting. Since only three
directors Mr. Amit, Mr. Rohan and Mr. Sunil could reach the Registered Office for attending the meeting, it could
not be held for want of quorum and was to be adjourned. This adjourned Board Meeting was again held on 9th
December, 2021, at the Registered Office at 4 P.M. to discuss the pending issue of buying the sophisticated
machineries.
Another Board Meeting was held on 12th January, 2022, at the Registered Office at 3 P.M. The agenda of the
Board Meeting was to increase the sitting fees of Directors and sale of one of the undertakings of the company.
The Board of Directors of the company decided to raise the payment of sitting fees for each meeting of Board of
Directors to a maximum of Rs. 40,000 by altering its Articles of Association. In view of the Board, from the last
one year there had been an increase in the work responsibilities of all the directors including woman Director Ms.
Anisha and other four independent Directors. Hence, it was necessary to increase the sitting fees.
The Articles of Association of Shree Ram Garments Limited contain a provision by which Directors are empowered
to sell or otherwise deal with the property/undertaking of the company. The Board was of the view that the sale
consideration received from selling the undertaking would be used to clear off the part of existing term loan
availed from Super Commercial Bank Limited. However, except Mr. Rohit and Mr. Anil who objected to the selling of
company's undertaking, all other directors were in favour of said sale.

Multiple Choice Questions:

Question 15.1: [Section 149(7)]
Mr. Sunil was recently appointed as independent Director of Shree Ram Garments Limited. Select the correct
alternative from those given below regarding giving of declaration by Mr. Sunil as to his independence under the
applicable provisions of the Companies Act, 2013, after assuming his position as an independent Director?
a) Mr. Sunil is required to give declaration as to his independence on the first day of attending his office.
b) Mr. Sunil is required to give declaration as to his independence at the first Board Meeting in which he
participates as independent Director.
c) Mr. Sunil is required to give declaration as to his independence at the first Annual General Meeting of
Shree Ram Garments Limited.
d) Mr. Sunil is required to give declaration as to his independence at the first meeting of Audit Committee in
which he participates as independent Director.
Question 15.2: [Section 149(1)]
According to the case scenario, Shree Ram Garments Limited, at present, has 13 Directors on its Board. In case the
company desires to increase the strength of number of Directors from 13 to 17, what is the way out through which
number of Directors can be increased to the desired 17?
a) Passing an Ordinary Resolution at any General Meeting of the shareholders.
b) Passing a Special Resolution at a General Meeting of the shareholders.
c) Passing a board resolution by 2/3rd majority of Directors attending the meeting.
d) Passing a board resolution by 3/4th majority of Directors attending the meeting.

Question 15.3: [Section 151]

The small shareholders of Shree Ram Garments Limited want to appoint Mr. Parag as their Director. Choose the
correct option from those stated below as to minimum how many small shareholders are required to give notice to
the company for appointment of their Director and also what is the minimum time period of giving such notice
before the meeting where the issue of appointment of small shareholders’ Director shall be considered:
a) Minimum 100 small shareholders and such notice needs to be given minimum 14 days before the meeting
where the issue of appointment of small shareholders’ Director shall be considered.
b) Minimum 200 small shareholders and such notice needs to be given minimum 15 days before the meeting
where the issue of appointment of small shareholders’ Director shall be considered.
c) Minimum 150 small shareholders and such notice needs to be given minimum 21 days before the meeting
where the issue of appointment of small shareholders’ Director shall be considered.
d) Minimum 300 small shareholders and such notice needs to be given minimum 30 days before the meeting
where the issue of appointment of small shareholders’ Director shall be considered.

Question 15.4: [Section 197(5)]

The Board of Directors of Shree Ram Garments Limited decided to raise the sitting fees payable to the Directors
for each meeting of the Board of Directors upto Rs. 40,000. In case, the company desires to increase sitting fees
of independent Directors as well as woman Director from the existing Rs. 40,000 per meeting, whether it can do so.
Choose the correct answer from the following given options:
a) The proposal of giving sitting fees to independent Directors as well as woman Director in excess of Rs.
40,000 can be accepted by Shree Ram Garments Limited but such fees cannot exceed the maximum limit of
Rs. 50,000 per meeting for each such Director.
b) The proposal of giving sitting fees to independent Directors as well as woman Director in excess of Rs.
40,000 cannot be accepted by Shree Ram Garments Limited because all the Directors are eligible for equal
sitting fees per meeting and that too maximum upto Rs. 50,000.
c) The proposal of giving sitting fees to independent Directors as well as woman Director in excess of Rs.
40,000 can be accepted by Shree Ram Garments Limited but such fees cannot exceed the maximum limit of
Rs. 1,00,000 per meeting for each such Director.
d) Since women Directors unlike other independent Directors are not eligible for higher sitting fees per
meeting, only independent Directors are eligible to be paid sitting fees in excess of Rs. 40,000 but maximum
upto Rs. 50,000 per meeting.

Question 15.5: [Section 180]

The Board of Directors of Shree Ram Garments Limited decided to sell one of the undertakings of the company.
Choose the correct alternative from those stated below as to the procedure which is required to be followed
before selling the undertaking to some other interested party:
a) Consent of 3/4th majority of the Directors present at the Board Meeting.
b) Approved by a special resolution passed at a General Meeting of the company.
 c) Only with the unanimous consent of all the Directors of the company and thereafter, seeking the approval
of the shareholders through passing an ordinary resolution at a General Meeting.
d) Only after seeking the approval of the shareholders through passing an ordinary resolution at a General
Meeting and thereafter, obtaining the permission of the jurisdictional RoC

Question 15.6: [Section 174]

The case scenario states that an urgent Board Meeting was called on 2nd December, 2021, by Shree Ram Garments
Limited at its Registered Office at 4 P.M. to discuss certain matters pertaining to buying of sophisticated
machineries but the same could not held for want of quorum. What is the required quorum in this case:
a) The required quorum in this case is participation of minimum seven directors in the Board Meeting.
b) The required quorum in this case is participation of minimum six directors in the Board Meeting.
c) The required quorum in this case is participation of minimum five directors in the Board Meeting.
d) The required quorum in this case is participation of minimum four directors in the Board Meeting.

Answers
1(b) 2(b) 3(a) 4(c) 5(b) 6(c)

Question 16: [Category A] [Can you solve the MCQs directly without reading the case? - No]
Listed with BSE Limited and National Stock Exchange of India Limited, Superfast Motors Limited is a top player in
the category of car dealers. The company, established in 2016 at New Delhi, always endeavored to achieve highest
level of customer satisfaction and improving the buyers’ experience for its customers. The company not only sells
cars manufactured by Metro Motors Limited but also deals in used cars, insurance and finance. The company has
showrooms in ten major cities of India. In addition, Superfast Motors Limited is also a leading original equipment
manufacturer (OEM) offering an extensive range of integrated, smart and e-mobility solutions.
Superfast Motors Limited was planning for expansion in India and overseas. Accordingly, it negotiated with Jupiter
Mauritius Auto Limited, a company registered in Mauritius, for merger with itself. Further, it also proposed a
merger plan with Mars Ltd. of Kolkata, a company engaged in the business of manufacturing and distribution of
tyres and auto accessories. Mars Ltd. is listed with BSE Limited and National Stock Exchange of India Limited and
has a paid-up share capital of Rs. 40 crores. Superfast Motors Limited called a Board Meeting to draft the
agreements for the merger of the aforesaid Jupiter Mauritius Auto Limited and Mars Ltd.
The paid-up share capital of Superfast Motors Limited is Rs. 90 crores consisting of 9000 members. As per the
order of the NCLT, the company called the general meeting of the members for the merger of Mars Ltd. with
itself. The meeting was attended by 4400 members in person while 600 members appointed proxies in place of
themselves to attend the said general meeting. Remaining 3000 members holding Rs. 15.00 crores worth of shares
remained absent.
It is noteworthy that 3200 members representing shares of the value of Rs 50.40 crores and 600 proxies
representing shares of the value of Rs 7.00 crores who attended the meeting, voted in favor of the scheme of
merger. Thereafter, Mars Ltd. was successfully merged with Superfast Motors Limited as per the applicable laws.
However, 3,000 absentee members of Superfast Motors Limited wanted the merger to be annulled because it was
not valid. There was, however, not much resistance exerted by the members of Mars Ltd. against the merger and it
was approved by 93% of majority of members holding shares 94% in value.
A number of directors, officers and employees of Mars Ltd. lost their assignments after the merger of Mars Ltd.
with Superfast Motors Limited. Mr. Ramneek the Managing Director, Mr. Lokesh, the Whole- time Director, Mr.
Botham and Mr. Srikant, the other two non-executive directors of Mars Ltd. approached the company for
compensation due to the loss of their respective offices. However, the company denied compensation but in case of
Mr. Lokesh who, on the basis of his outstanding record, was given appointment as Manager in Superfast Motors
Limited. Certain members of Mars Ltd. were of the opinion that transfer of funds and assets of the company would
be affecting their interest. Accordingly, members numbering 110 out of 2000 members decided to file an
application before NCLT.
Mr. Rakesh, one of the Directors of Superfast Motors Limited, in a Board Meeting pointed out that Mr. Bhaskar,
another Director, was holding directorships in 21 companies, out of which 11 were private companies including Bright
Cycles Pvt. Ltd. which was subsidiary of Zeta Mechanical Products Limited and 10 other public companies. The Board
asked Mr. Bhaskar to resign from his office of directorship either in Superfast Motors Limited or any other
company of his choice since the number of directorships in his case was exceeding the maximum limit.
In response to the direction given by the Board to resign from directorship, Mr. Bhaskar averred that he had not
violated the provisions relating to holding of maximum number of directorships. In fact, out of 10 public companies
in which he was holding the office of directorships, one was a dormant company. Further, in one of the companies
out of 11 private companies, he was appointed as an alternate Director. So far as his knowledge was concerned,
directorship in dormant company as well as alternate directorship were not includible while counting the maximum
number of directorships. Rather, he was eligible to hold directorship in one more company because he held
effective directorships in only 19 companies. Therefore, in no way, he had violated the provisions relating to holding
of maximum number of 20 directorships in different companies. In view of the above facts, he stressed that he
would not tender resignation in any company including Superfast Motors Limited and if the Board still wanted him to
remove from the office of director, it was at liberty to do so. The Board of Directors of Superfast Motors Limited
agreed with the averments advanced by Mr. Bhaskar and dropped the idea of asking him to resign or moving a
resolution for his removal from holding the office of director.

Multiple Choice Questions

Question 16.1: [Section 165]
From the case scenario, it is noticed that the Board of Directors of Superfast Motors Limited agreed with the
averments advanced by Mr. Bhaskar and dropped the idea of asking him to resign or moving a resolution for his
removal from holding the office of director. Whether the decision of the Board is valid? Choose the correct option
from those stated hereunder:
a) Valid because alternate directorship is not includible while counting the number of 20 companies.
b) Valid because directorship in a dormant co. is not includible while counting the number of 20 companies.
c) Not Valid because while counting the number of 10 public companies, directorship in a private company which is
subsidiary of a public company is also includible.
d) Valid because he holds effective directorships in only 19 companies after excluding alternate directorship and
directorship in a dormant company.

Summary – As per sec 165, a director can hold directorship in maximum 20 companies provided max. no. of public
co. in which he can be director is 10 and the limit of 10 public cos includes those pvt. co. which are holding/subsy
of a public co.

Question 16.2: [Section 202]

In response to demand for compensation made by Mr. Ramneek, Mr. Lokesh, Mr. Botham and Mr. Srikant, Mars Ltd.
was not keen to compensate them. Whether such denial by Mars Ltd. is valid? Select the correct answer from the
following options:
a) Valid because compensation for loss of office is not available in case of merger or amalgamation.
b) Not valid because Mr. Ramneek and Mr. Lokesh are eligible for compensation for loss of office as Managing
Director and Whole-time director respectively.
c) Not valid in case of Mr. Ramneek since only he is eligible for compensation for loss of office as Managing
Director.
 d) Not valid because Mr. Ramneek, Mr. Botham and Mr. Srikant are eligible for compensation for loss of office
as Managing Director and non-executive directors respectively.

Summary – As per sec 202, co. can make CFLO to MD or WTD or manager but not to any other director

Question 16.3: [Section 234]

Choose the correct statement from those stated below:
a) Jupiter Mauritius Auto Limited can get merged with Superfast Motors Limited but only after obtaining
prior approval of RBI
b) Jupiter Mauritius Auto Limited can get merged with Superfast Motors Limited but only after obtaining
prior approval of Securities and Exchange Board of India (SEBI).
c) Jupiter Mauritius Auto Limited can get merged with Superfast Motors Limited but only after obtaining
prior approval of NCLT.
d) Jupiter Mauritius Auto Limited can get merged with Superfast Motors Limited but only obtaining prior
approval of Ministry of Finance.

Summary – As per sec 234, a foreign co. can merge with a co. registered under this act or vice versa only after
obtaining prior approval of RBI

Question 16.4: [Section 232]

The case scenario states that Mars Ltd. was merged with Superfast Motors Limited. However, 3,000 absentee
members of Superfast Motors Limited wanted the merger to be annulled because it was not valid. You are required
to advise these members whether the approval accorded by the members of Superfast Motors Limited for the
merger was valid or not. Select the correct alternative from those given hereunder:
a) Valid because majority of members representing requisite value of shareholding voted in favour of the
scheme of merger.
b) Not valid because the majority of the members who voted in favour of the scheme of merger must hold
80% or more worth of shares in value considering the total value of shares held by the members who
attended the general meeting.
c) Not valid because the majority of the members who voted in favour of the scheme of merger must hold
90% or more worth of shares in value considering the total value of shares held by the members who
attended the general meeting.
d) Not valid because only 3800 members out of total 9000 members voted in favour of the scheme of merger
and it was not a majority.

Summary – As per sec 232, a scheme is approved when majority of person representing 3/4th in value agree to
the scheme (present and voting shall be considered)

Question 16.5:
Whether the petition filed by 110 members of Mars Ltd. with NCLT would be maintainable assuming the proposal
made by Superfast Motors Limited to Mars Ltd. was a takeover offer and not a merger offer? Choose the correct
option from the following alternatives.
a) Petition filed by 110 members of Mars Ltd. with NCLT would be maintainable because more than 100
members can apply for relief against oppression and mismanagement prevailing in a company.
b) Petition filed by 110 members of Mars Ltd. with NCLT would not be maintainable because less than 1/10th of
total number of members have applied for relief against oppression and mismanagement.
c) Petition filed by 110 members of Mars Ltd. with NCLT would be maintainable because 100 members or
1/10th of total number of members, whichever is lower, can apply for relief against oppression and
 mismanagement.
d) Petition filed by 110 members of Mars Ltd. with NCLT would not be maintainable because these members
cannot file a case for redressal of their grievances to NCLT in case of takeover offer

Answers
1(c) 2(c) 3(a) 4(a) 5(d)

Question 17: [Category B] [Can you solve the MCQs directly without reading the case? - No]
SportsPoint Manufacturers and Traders Limited, having registered office at Meerut, Uttar Pradesh, was
incorporated under the Companies Act, 1956, in the month of August, 1990. The company manufactures sports
coaching equipment like bags, clipboards, pinnies, referee uniforms, whistles of different types, etc., and game
equipments like goals, posts, nets, etc., of the finest quality and sells its products to various schools, colleges, clubs
and other institutions pan India directly as well as through its dealers.
The issued, subscribed and paid-up equity share capital of SportsPoint Manufacturers and Traders Limited as on
31st March, 2021 is Rs. 25 crores, consisting of 2.50 crores equity shares of the face value of Rs. 10 each. These
shares are listed both on the BSE Limited and National Stock Exchange of India Limited.
The company planned to issue bonus debentures to its shareholders as a reward since it is a known fact that the
shareholders invariably welcome bonus debentures wholeheartedly simply because of the reason that they get
regular interest during the tenure of the debentures.
Accordingly, after following the due procedure, SportsPoint Manufacturers and Traders Limited filed a scheme of
arrangement before the jurisdictional NCLT for issue of secured, non-convertible and redeemable fully paid-up 9%
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.
The scheme of arrangement filed by SportsPoint Manufacturers and Traders Limited with the NCLT stipulates for
issue and allotment by way of bonus, one fully paid-up 9% Debenture of the face value of Rs. 150 each by utilizing
its accumulated profits, for every one fully paid-up equity share of face value of Rs. 10 each held by total 1,25,000
members as on the record date. The 9%Debentures shall be redeemed after 10 years from the date of allotment.
As regards payment of interest on debentures, the same shall be paid at intervals of 12 months from the date of
allotment.
Pursuant to the order, dated 14th July, 2021, passed by the Hon’ble NCLT, a meeting of the equity shareholders of
SportsPoint Manufacturers and Traders Limited was convened at the registered office of the company at Meerut,
on Monday, August 23, 2021, 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 requisite majority of shareholders who had required value of shareholding. The equity shareholders either voted
themselves or through proxies or by postal ballot or through electronic means.

Multiple Choice Questions

Question 17.1: [Unique]
What is the amount, which SportsPoint Manufacturers and Traders Limited intends to utilise out of accumulated
profits for issue of bonus debentures?
a) To the extent of Rs. 150 crores for issue of bonus debentures.
b) To the extent of Rs. 200 crores for issue of bonus debentures.
c) To the extent of Rs. 375 crores for issue of bonus debentures.
d) To the extent of Rs. 250 crores for issue of bonus debentures.

Summary – 2.5 crore eq. shareholders to be issued debentures valuing Rs. 150 each = Rs. 375 crores (2.5×150)
Question 17.2: [Section 230] (Can Skip)
The case scenario states that the scheme of arrangement envisaging issue of bonus debentures in a particular ratio
was agreed to by a requisite majority of shareholders who had required shareholding in value. Which kind of
majority is required for approving the scheme of arrangement as presented by SportsPoint Manufacturers and
Traders Limited in the meeting of the shareholders:
a) Ordinary resolution.
b) Special resolution.
c) Simple majority of members who had minimum shareholding of three-fourths in value.
d) Simple majority of members who had minimum shareholding of two-third in value.

Summary – As per sec 230, a scheme is approved when majority of person representing 3/4th in value agree to
the scheme (present and voting shall be considered)

Question 17.3: [Section 230]

Minimum how many equity shares are required to be held by the shareholders of SportsPoint Manufacturers and
Traders Limited voting in favour of the scheme of arrangement envisaging issue of bonus debentures in a particular
ratio for its approval?
a) Minimum 1.275 crore equity shares.
b) Minimum 1.50 crore equity shares
c) Minimum 1.75 crore equity shares
d) Minimum 1.875 crore equity shares

Question 17.4: [Section 230]

Minimum how many members of SportsPoint Manufacturers and Traders Limited must have agreed to the scheme of
arrangement envisaging issue of bonus debentures in a particular ratio, if 40% of the total members had attended
and 30% of the total members had voted at the meeting?
a) Minimum 18,751 members
b) Minimum 22,500 members
c) Minimum 20,625 members
d) Minimum 24,375 members

Summary – As per sec 230, a scheme is approved when majority of person representing 3/4th in value agree to
the scheme (present and voting shall be considered). Hence, majority in person ((125000×30%×1/2)+1)= 18751

Question 17.5: [Section 230]

Assuming that 40% of the total members of SportsPoint Manufacturers and Traders Limited had attended the
meeting to consider the scheme of arrangement envisaging issue of bonus debentures in a particular ratio and 30%
of the total members had voted at the meeting, then minimum how much shareholding in value was held by the
minimum members who voted in favour of the scheme in order that the scheme was considered as approved:
a) Rs. 4.5 crores.
b) Rs. 6.0 crores.
c) Rs. 5.25 crores.
d) Rs. 5.625 crores.

Summary – (25×30%×3/4)=5.625 crore

Answers
1(c) 2(c) 3(d) 4(a) 5(d)
Question 18: Question absolutely similar to Q17 and hence skipped.
(Learning – Order of tribunal u/s 230 is to be filed with ROC within 30 days of receipt of the approved scheme)

Question 19: Question absolutely similar to Q17 and hence skipped.

(Learning - No scheme shall be sanctioned by NCLT unless certificate from company's auditor that proposed
accounting treatment is in conformity with A/S u/s 133)

Question 20: [Category B] [Can you solve the MCQs directly without reading the case? - No]
Oriental Bakers Private Limited, having its Registered Office at Connaught Place, New Delhi, was incorporated on
25.04.2003 under the Companies Act, 1956. It is a Wholly-owned Subsidiary (WoS) 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.
As against the Authorised Capital of Rs 11.00 crores divided into 1.10 crore equity shares of Rs 10 each, the issued,
subscribed and paid-up capital of Oriental Bakers Private Limited is Rs 10 crores divided into one crore equity
shares of Rs 10 each as at 31.03.2021.
JKL Industries Limited, having its Registered Office at Bhikaji Cama Place, New Delhi, was incorporated on
25.04.2000 under the provisions of the Companies Act, 1956 and is a leading food company in India. Its Authorised
Capital is Rs 50 crores divided into 5 crore equity shares of Rs 10 each. As at 31.03.2021, the authorised share
capital is fully issued and subscribed by the shareholders.
As regards demerger of some of the divisions of Oriental Bakers Private Limited into JKL Industries Limited,
negotiations were going on for quite some time. The end result was that a scheme of arrangement was finally agreed
upon between both the companies. Accordingly, a scheme of arrangement was presented to the jurisdictional NCLT
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 Oriental Bakers Private Limited into JKL
Industries Limited.
The Institutional Sales business shall, as hitherto, continue to belong to and be vested in and be continued to be
owned and managed by Oriental Bakers Private Limited.
The appointed date of the scheme as set out in its present form with any modification or modifications and as
approved or imposed or directed by NCLT shall be 01.04.2021.
Pursuant to the Order passed by the NCLT, meetings of the equity shareholders of the both companies were called
and held at their respective Registered Offices and the requisite members agreed to the scheme of arrangement
on 30.04.2021.
NCLT passed the Order approving the scheme of arrangement between Oriental Bakers Private Limited and JKL
Industries Limited on 05.07.2021, and the copy of the order was filed with the jurisdictional RoC on 11.07.2021.
This is the date on which the presently approved scheme of arrangement shall come into effect.

Multiple Choice Questions

Question 20.1: [Section 232]
In accordance with the scheme of arrangement agreed upon between Oriental Bakers Private Limited and JKL
Industries Limited, which type of company Oriental Bakers Private Limited shall be:
a) A transferee company.
b) A transferor company.
c) Neither transferee nor transferor company.
d) Both transferee and transferor company.
 Summary – A co. whose undertaking or division is being transferred shall be considered as a transferor co.

Question 20.2: [Section 232]

In accordance with the scheme of arrangement agreed upon between Oriental Bakers Private Limited and JKL
Industries Limited, which type of company JKL Industries Limited shall be:
a) A transferee company.
b) A transferor company.
c) Neither transferee nor transferor company.
d) Both transferee and transferor company.

Summary – – A co. to whom such undertaking/division is being transferred shall be considered as a transferee co.

Question 20.3: [Section 232]

Taking cue from above case scenario, how shall the consideration be payable by JKL Industries Limited to Oriental
Bakers Private Limited for transfer of latter company’s Manufacturing Business and Retail Sales Business division?
a) Through issue of adequate number of shares to cover the value of net assets transferred.
b) In cash or its equivalent to be calculated in accordance with the value of net assets transferred.
c) Through issue of adequate number of shares to cover the value of gross assets transferred.
d) No consideration shall be payable by JKL Industries Limited since Oriental Bakers Private Limited is its
Wholly- owned Subsidiary.

Question 20.4: [Section 232]

Out of the following options, choose the correct date from which the scheme of arrangement agreed upon between
Oriental Bakers Private Limited and JKL Industries Limited shall be effective:
(a) 30.04.2021
(b) 01.04.2021
(c) 05.07.2021
(d) 11.07.2021

Summary – As per sec 232, appointed date shall be the date from which scheme will become effective

Question 20.5: [Section 232]

Choose the correct alternative from those stated below as to whether Oriental Bakers Private Limited shall be
dissolved without winding up by virtue of approval of scheme of arrangement by NCLT:
a) Since Oriental Bakers Private Limited is getting demerged into JKL Industries Limited, it shall be dissolved
without winding up.
b) Since Institutional Sales business of Oriental Bakers Private Limited is going to be owned and continued by
itself, it shall not be dissolved.
c) Since Manufacturing Business division and Retail Sales Business division of Oriental Bakers Private Limited
are going to be transferred it shall be dissolved without winding up.
d) Since Oriental Bakers Private Limited is a Wholly-owned Subsidiary of JKL Industries Limited, it shall be
dissolved without winding up.
Answers
1(b) 2(a) 3(d) 4(b) 5(b)
Question 21: Question absolutely similar to Q20 and hence skipped.
(Remember – As per 230(5), representations by relevant sectoral regulator shall be made within 30 days of
receipt of notice)

Question 22: [Category A] [Can you solve the MCQs directly without reading the case? – Yes, except Q
22.5]
OakTree 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, 2020 for the
purpose of looking after his business. He came back to India on 2nd December, 2020 to spend some time with his
parents and left India on 5th February, 2021 and went back to London for carrying on his business on a large scale.
He again visited India on 5th March, 2021 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, 2021.
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 RoC were altered.
Mr. Somnath is responsible for gathering business opportunities so that software business of OakTree gets
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.

Multiple Choice Questions

Question 22.1: [Section 380]
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 RoC on establishment of its
place of business in Chennai, Tamil Nadu:
a) Form GNL-1 within 30 days of establishment to the ROC having jurisdiction over Kolkata.
b) Form FC- 1 within 30 days of establishment to the ROC having jurisdiction over New Delhi.
c) Form FC- 2 within 60 days of establishment to ROC having jurisdiction over Mumbai.
d) Form FC- 1 within 30 days of establishment to ROC having jurisdiction over Chennai.

Summary – As per Section 380, every FC shall within 30days of est. of POB in India deliver the required details
to ROC - Delhi for registration

Question 22.2: [Section 392]

Just remember penalty of Sec 392:
If a FC contravenes prov. of this chapter:
Foreign Co. OID
Fine Rs. 1 lakh to Rs. 3 lakhs Rs. 25,000 to Rs. 5 lakhs
Additional Fine Rs. 50,000/day NA
Jail NA NA

Question 22.3: [Section 380]

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 the jurisdictional Registrar in respect of such alteration in the
documents filed earlier:
a) Form FC-2 within 30 days of alteration.
b) Form FC-2 within 60 days of alteration.
c) Form FC-3 within 30 days of alteration.
d) Form FC-3 within 60 days of alteration.

Summary – As per Section 380, any alteration to documents already submitted shall be delivered to ROC within
30 days in form FC-2

Question 22.4: [Section: schedule 3]

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 USD 50,000 immediately and thereafter
remaining USD 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 USD 50,000 immediately and thereafter
 remaining USD 50,000 after the expiry of six months.
Summary – As per Schedule III of Current Account Transaction – Liberalized Remittance Scheme permits any
individual to avail forex facility within the limit of USD 2,50,000 only

Question 22.5: [Section: FEMA 2(v) and 2(w)]

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 2022-23.
a) Mr. Sumedh is to be treated as resident Indian since he was in India for more than 182 days in the FY 2021-22.
b) Mr. Sumedh 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 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.

Summary – Where a person leaves India for any of 3 specified purposes (including employment), he shall be
considered Person Resident Outside India from the date of departure from India

Answers
1(b) 2(d) 3(a) 4(c) 5(b)

Question 23: [Category A] [Can you solve the MCQs directly without reading the case? – No]
Mr. Shyam, Managing Director (Whole-time Key Managerial Personnel) of Aloevera Products Ltd., was removed by
the Board of Directors of the company with the agreement that he shall be compensated for his early vacation of
his office. Mr. Shyam vacated the office of Managing Director on 31.05.2021 though his original tenure of
appointment with Aloevera Products Ltd. was to continue upto 31.12.2023.
The remuneration drawn by Mr. Shyam since the date of his joining the office is as follows:
Financial Year Remuneration (Rs in lakhs)
2019-20 55
2020-21 62
2021-22 (upto 31-05-2021) 13
The data collected from the Balance Sheet of Aloevera Products Ltd. as on 31.03.2021 is as follows:
Particulars (Rs in lakhs)
Paid-up Share Capital 1000
Share Application Money 200
General Reserve 500
Revaluation Reserve 250
Securities Premium 300
Long term loans 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 Aloevera Products Ltd. on 31.07.2021 in place 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 the F.Y. 2021-22:
Particulars (Rs in lakhs)
Dearness allowance 7
House Rent Allowance 5
Contribution to annuity fund 6
Reimbursement of direct taxes 4
Additional Remuneration per month 2
(to be provided to Mr. Tushar in the capacity as Consultant since he possesses requisite
qualification for the same as opined by the Nomination and Remuneration Committee.)
Sitting fees payable for a Board Meeting 1
Note: Mr. Tushar, as Managing Director of Aloevera Products Ltd. had attended 4 Board Meetings till 31.12.2021.
Mr. Jay, one of the members of Aloevera Products Ltd., wanted to inspect contract of service entered into by
Aloevera Products Ltd. with Mr. Tushar for assigning him the office of Managing Director but he was denied to
have such inspection on the grounds that the contract with Mr. Tushar was not in writing.

Multiple Choice questions:

Question 23.1: [Section 202]
The maximum amount of compensation to which Mr. Shyam is entitled for premature termination of his office as
Managing Director shall be -
a) Rs 1.1194 crores
b) Rs 1.51125 crores
c) Rs 1.80 crores
d) Rs 1.55 crores

Summary – As per Sec 202, compensation amount shall be - Average of last 3 years remuneration × Remaining
period of service or 3 months whichever is shorter i.e., (55+62+13)/26months × 31 months = 1.55crores

Question 23.2: [Section: Schedule V partII]

Choose from the following options, ‘effective capital’ of Aloevera Products Ltd. as on 31.03.2021:
a) Rs 18 crores
b) Rs 21 crores
c) Rs 19 crores
d) Rs 16 crores

Summary – Effective Capital = PUSC (excl. share application money/advances against share) + Credit of share
premium account + Reserves (except Revaluation Reserve) + Long Term loans (repayable after 1 year) –
Preliminary expenses - Investments. Hence, (1000+500+300+400+100)-(350+50)=1900

Question 23.3: [Section: Schedule V partII]

The maximum amount that can be paid to Mr. Tushar as Managing Director as per the provisions of the Companies
Act, 2013 for the F.Y. 2021-22 shall be:
a) Rs 98 lakhs
b) Rs 86 lakhs
c) Rs 82 lakhs
d) Rs 62 lakhs
 Summary – (120×8/12)= 80+(1×2)sitting fees=82lakhs

Question 23.4: [Section: 169+203]

For removal of Mr. Shyam as Managing Director, 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 31.07.2021?
a) Special Resolution and 31.08.2021 respectively.
b) Board Resolution and 30.11.2021 respectively.
c) Ordinary Resolution and 30.11.2021 respectively.
d) Board Resolution and 31.08.2021 respectively.

Summary – Where a person leaves India for any of 3 specified purposes (including employment), he shall be
considered Person Resident Outside India from the date of departure from India

Question 23.5: [Section 190]

Whether contention of Aloevera Products Ltd. 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. Aloevera Products Ltd. is liable to pay Rs 25,000 and every officer in
default is liable to pay Rs 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 Aloevera Products Ltd. has defaulted in not making the contract in writing and
accordingly is liable to pay Rs 25,000 and every officer in default is liable to pay Rs 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
by Aloevera Products Ltd. depicting the terms of contract of service with Mr. Tushar and kept at
Registered Office of the company. Aloevera Products Ltd. is liable to pay Rs 25,000 and every officer in
default is liable to pay Rs 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 Aloevera Products Ltd. for such denial.

Summary – Where a person leaves India for any of 3 specified purposes (including employment), he shall be
considered Person Resident Outside India from the date of departure from India

Answers
1(d) 2(c) 3(c) 4(b) 5(c)

Question 24 [FEMA]: [Category B] [Can you solve the MCQs directly without reading the case? - Yes]
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 CS 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)

2017-18 2,400,000
2018-19 2,500,000
2019-20 3,600,000-
2020-21 4,000,000

With a view to enhance the production of beverages, EFBL imported a machinery costing Rs 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 is desirous of
bringing with him RBI notes amounting to Rs 75,000 in denomination of Rs 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, 2019, spent some time with her younger son Kartik and her mother in New Delhi and left India
again on September 05, 2019. She came back to India on November 30, 2019 but left for Michigan with her mother
on December, 04, 2019 to get her medically treated. After her mother recovered from the ailment she was
suffering, Ms. Geetika Devi came back to India on August 30, 2020 and remained with her family in New Delhi till
date.

Multiple Choice Questions

Question 24.1: [Section:5 (FEMA)]
From the case scenario, it is evident that EFBL imported a machinery costing Rs 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.

Summary – Short-term banking & credit facility (up to 6 months) in ordinary course of business shall be
 considered as Current Account Transaction

Question 24.2: [Section: general guidelines]

According to the case scenario, Mr. Jay Doshi, while returning to India, is desirous of bringing with him RBI notes
amounting to Rs 75,000 in denomination of Rs 100. Out of the following four options, which one is applicable in the
given circumstances:
a) Jay is permitted to bring into India from Bhutan, RBI notes up to Rs 75,000 in denomination of Rs 100.
b) Jay is not permitted to bring from Bhutan, RBI notes exceeding Rs 25,000 in denomination of Rs 100.
c) Jay is permitted to bring from Bhutan, RBI notes of any amt without limit but only in denomination of Rs 500.
d) Jay is not permitted to bring into India from Bhutan, RBI notes exceeding Rs 10,000 in denomination of Rs 100.

Summary – A person may bring into India from Nepal or Bhutan - Currency notes of RBI for any amount in
denominations up to Rs. 100 (no maximum limit of Rs. 25,000)

Question 24.3: [Section : 2(v) +2(w)]

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 is a person resident outside India for FY 2020-21 and person resident in India for the FY 2021-22.
b) Ms. Geetika is a person resident outside India for the FY 2020-21 and also for the FY 2021-22.
c) Ms. Geetika is a person resident in India for the FY 2020-21 and also for the FY 2021-22.
d) Ms. Geetika is a person resident in India for FY 2020- 21 and person resident outside India for the FY 2021-22.

Summary – Basic question on definition of PRI and PROI

Question 24.4: [Section: ScheduleII]

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. Out of the following four options, which one is
applicable in the above- mentioned situation:
a) Permitted only with the prior approval of the RBI.
b) Permitted without seeking any approval.
c) Permitted with the prior approval of the Ministry of Finance, Department of Economic Affairs.
d) Permitted with the prior approval of the Central Government through Regional Director.

Summary – Advt. in foreign print media by a PSU upto $10,000 does not require any prior approval of CG.

Question 24.5: [Section: Schedule III Limit for other than individuals]
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 FY even after seeking approval of the RBI.
c) EFBL is permitted to donate USD 200,000 but only with the prior approval of the RBI.
d) EFBL is not permitted to donate more than USD 75,000 in a FY even after seeking approval of the RBI.

Summary – Donation to a technical institute > Lower of 1% of Forex Earnings during last 3 FY or$ 5mn requires
prior approval of RBI

Answers
 1(c) 2(a) 3(a) 4(b) 5(c)

Question 25: [Category A] [Can you solve the MCQs directly without reading the case? – Yes, almost]
Simran Software Solutions Ltd., a listed company, is subsidiary of Hardik Tech Limited which is an unlisted
company. As on 31st March, 2021, Simran Software Solutions Ltd. had paid-up share capital of Rs 100 crores while
Hardik Tech Ltd. had a paid-up share capital of Rs 150 crores.
Recently, it emerged that Hardik Tech Ltd. was interested in amalgamating Simran Software Solutions Ltd. in
itself. After various rounds of negotiations, it was decided between both the companies to go for this kind of
restructuring.
An application was made to the jurisdictional NCLT for the amalgamation of Simran Software Solutions Ltd. with
Hardik Tech Ltd. The scheme of arrangement as enunciated in the application proposed such amalgamation.
Application to the NCLT for amalgamation was submitted in Form No. NCLT-1 along with the 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 Merger and Amalgamation.
d) A disclosure of all the material facts relating to the company.

Note: It was also disclosed in the application filed with the NCLT that each class of members or creditors had been
identified for the purposes of approval of the scheme.
Consequently, a meeting was called in pursuance of the Order of the NCLT. The notice of such meeting was sent to
all the creditors including debenture holders and to all the members 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 including debenture holders,
Key Managerial Personnel, promoters and Directors.
It is worth noting that Mr. Manjit, who was appointed as Managing Director (MD) of Simran Software Solutions Ltd.
on 1st January, 2020, for a period of five years was going to lose his office due to the amalgamation of Simran
Software Solutions Limited with Hardik Tech Limited.
Similarly, Mr. Rhitam was appointed as a Whole-time Director (WTD) of Simran Software Solutions Ltd. on 1st
April, 2020 for a period of five years. In lieu of his current assignment as Whole-time Director of Simran Software
Solutions Ltd., he was offered to be appointed as Manager in Hardik Tech Limited, to which he sought some time to
ponder over the whole issue. After discussing matter with his family, he decided to join Hardik Tech Limited as
Manager after the completion of amalgamation.
Since both Mr. Manjit and Mr. Rhitam were to lose their assignments before completion of their terms, the
company decided to compensate them. At the meeting, it was decided to pay both of them the average
compensation for the remaining unexpired term based on the remuneration received by them till the effective date
of amalgamation between both the companies.
Some of the shareholders of Simran Software Solutions Ltd. equalling 5% of total members were not satisfied with
the scheme of amalgamation as finalised between their company and Hardik Tech Ltd. and accordingly, they decided
to opt out of their company. Consequently, NCLT ordered to pay such dissenting shareholders the value of shares
held by them and the valuation of such shares was to be arrived at as per the pre-determined price formula.
Simran Software Solutions Ltd. had submitted to the NCLT, full details about a pending legal case against Mr.
Mohan, one of the directors of the company, who was removed as director and was sued for having caused a loss of
over Rs 20 lakh to the company through various bogus transactions. Mr. Mohan was being prosecuted under Sections
447 and 452 of the Companies Act, 2013. These facts were also in the knowledge of Hardik Tech Limited.
The NCLT, after satisfying itself that the procedures specified in the Companies Act, 2013, were duly followed,
sanctioned the scheme of amalgamation. It was decided that 14th January, 2022, shall be the effective date for
amalgamation. The NCLT ordered Simran Software Solutions Ltd. to transfer the whole of the undertaking,
property and its liabilities to Hardik Tech Ltd. as per the terms of the amalgamation.
It was also held by the NCLT that after dissolution of Simran Software Solutions Ltd., the fees, if any, paid by it
on its authorised capital shall be set-off against any fees payable by Hardik Tech Ltd. on its authorised capital,
subsequent to the amalgamation. Both the companies, in relation to such order were required to submit a certified
copy of the order as prescribed, to the RoC for registration within thirty days of the receipt of a copy thereof.

Multiple Choice Questions

Question 25.1: [Section 232]
The NCLT ordered that Simran Software Solutions Ltd. would pay its 5% dissenting shareholders the value of
shares held by them and the valuation of such shares was to be arrived at as per the pre-determined price formula.
According to the provisions of the Companies Act, 2013, the valuation of the shares should not be less than ____:
a) the value calculated by a practicing CA having minimum 15 years of experience.
b) what has been specified by the Securities and Exchange Board of India.
c) that of the value of shares of Hardik Tech India Limited calculated by a practicing CA having minimum 15 years
of experience.
d) the market price prevailing on the date when the amalgamation process will commence.

Summary – As per section 232, the valuation of shares for Shareholders of listed entity deciding to opt out shall
not be less than as specified under SEBI regulation.

Question 25.2: [Section 232]

As regards listing, what will be the consequences of amalgamation of Simran Software Solutions Ltd., a listed
company with Hardik Tech Ltd., which is an unlisted company. Choose the correct answer from those stated below:
a) Such amalgamation would by itself convert Hardik Tech Ltd. into a listed company.
b) Such amalgamation would not by itself convert Hardik Tech Ltd. into a listed company.
c) Such amalgamation would convert Hardik Tech Ltd. into a listed company but only after the expiry of 15
days from the date of completion of amalgamation.
d) Such amalgamation would convert Hardik Tech Ltd. into a listed company but only after the expiry of 30
days from the date of completion of amalgamation.

Summary – As per section 232, where a listed company is being merged with unlisted entity, the transferee shall
remain unlisted unless it gets listed

Question 25.3: [Section 232]

According to the provisions of this Companies Act, 2013, what is the legal obligation imposed on the company which
it is required to fulfill until the completion of the scheme of amalgamation?
a) To file a prescribed statement within the prescribed time with the Registrar of Companies, certified by
auditors of the companies, that the scheme of amalgamation is complied with as per the directions of the NCLT.
b) To file a prescribed statement within the prescribed time with the Registrar of Companies, certified by a CA or
Cost Accountant or CS in practice, that the scheme is complied with as per the directions of the NCLT.
c) To file the quarterly audited annual financial statements along with a prescribed statement within the
prescribed time with the Registrar of Companies, certified by a CA or Cost Accountant or CS in practice that
the scheme of amalgamation is complied with as per the directions of the NCLT.
d) To file a prescribed statement within the prescribed time with the Registrar of Companies, certified by an
Advocate who is practicing in the High Court that the scheme is complied with as per directions of the NCLT.

Summary – As per Section 232, a co. shall file statement with RoC - Every year until completion of scheme –
 Such statement shall be certified by CA/Cost Acc/CS showing compliance with the order of tribunal

Question 25.4: [Section 202]

According to the provisions of the Companies Act, 2013, whether both Mr. Manjit and Mr. Rhitam are eligible for
receiving the compensation for the loss of their respective offices as Managing Director and Whole-time Director?
Select the correct statement from the following four options:
a) Only Mr. Rhitam is eligible for receiving the compensation for the loss of his office as Whole-time Director
of Simran Software Solutions Ltd.
b) Only Mr. Manjit is eligible for receiving the compensation for the loss of his office as Managing Director of
Simran Software Solutions Ltd.
c) Both Mr. Manjit and Mr. Rhitam are eligible for receiving the compensation for the loss of their respective
offices as Managing Director and Whole-time Director of Simran Software Solutions Ltd.
d) Neither Mr. Manjit nor Mr. Rhitam are eligible for receiving the compensation for the loss of their
respective offices as Managing Director and Whole-time Director of Simran Software Solutions Ltd.

Summary – As per Sec 202, Co. can make payment to MP for loss of office but no payment shall be made where
director resigns as a result of reconstruction or amalgamation and is appointed as MP /other officer in the
resultant company.

Question 25.5: [Section 240]

Mr. Mohan was removed as a Director of Simran Software Solution Ltd. for the alleged fraud committed while
holding the office of Director. How would the ongoing amalgamation process of the companies impact the pending
legal proceedings against Mr. Mohan?
I. The pending legal case will be continued as before between Mr. Mohan and Simran Software Solutions
Limited.
II. The pending legal case will be continued as before against Mr. Mohan though not with Simran Software
Solutions
III. Limited but with Hardik Tech Limited after amalgamation.
IV. Mr. Mohan was holding the office of Director in Simran Software Solutions Limited, the transferor
company and therefore, till the time the pending legal case is not finally decided, the process of
amalgamation cannot be completed between Simran Software Solutions Limited and Hardik Tech Limited.
V. The ongoing legal case against Mr. Mohan would not affect the amalgamation of Simran Software Solutions
Limited with Hardik Tech Limited.

a) I & III.
b) II & III.
c) II & IV.
d) I & IV.

Summary – As per section 240, officers shall continue to be liable after such merger or amalgamation

Answers
1(b) 2(b) 3(b) 4(b) 5(c)

Question 26: [Category A] [Can you solve the MCQs directly without reading the case? - No]
Minerva Fabrics Limited, incorporated by Padam Kishore in the year 1985 in Bombay (now Mumbai), Maharashtra,
under the Companies Act, 1956, has over 60% market share in suitings in India. It is also one of the biggest woollen
fabric makers having a distribution network of more than 2,000 outlets. Interested in increasing the growth rate
of the company and to diversify into new product line, Yuvraj Kishore, dynamic son of Padam Kishore, currently
designated as Chief Executive Officer (CEO), planned to takeover Swati Garments Limited. This company, having its
Registered Office in Gandhi Nagar, Gujarat, was run by Patel family since 2015 whose ‘He’ - a premium casual wear
brand - brought customers a range of semi-formal and casual clothes for men.
Initiating the move of taking over, the shareholders of Swati Garments Limited were given an offer by Minerva
Fabrics Limited to acquire their shares in exchange for issue of shares as well as cash.
The purchase offer was approved by the shareholders holding ninety one percent in value of the shares. After
approval, the said offer was remained open for a period of four months and was availed by the shareholders who
approved it. Thereafter, a notice for acquisition of the shares of dissenting shareholders of Swati Garments
Limited was issued to them by Minerva Fabrics Limited.
The dissenting shareholders within one month from the date on which the notice was served on them, made an
application to the NCLT against the acquisition of their shares by Minerva Fabrics Limited. After considering the
application, the NCLT disposed of the said application giving order in favour of Minerva Fabrics Limited. As per the
order, the shares of the dissenting shareholders were to be transferred to Minerva Fabrics Limited.
Minerva Fabrics Limited, thereupon, sent a copy of the notice to the Swati Garments Limited together with an
instrument of transfer, to be executed on behalf of the dissenting shareholders by a person appointed by Swati
Garments Limited. Minerva Fabrics Limited paid to Swati Garments Limited, the consideration representing the
price payable by it, for the shares of the dissenting shareholders which it was entitled to acquire.
On receipt of notice together with an instrument of transfer, Swati Garments Limited registered the name of
Minerva Fabrics Limited as the holder of those shares in its Register of Members and informed the dissenting
shareholders about such registration and of the receipt of the amount of consideration representing the price
payable to them by Minerva Fabrics Limited.
The amount of consideration so received by Swati Garments Limited from Minerva Fabrics Limited was parked in a
separate bank account and the said consideration was held by Swati Garments Limited as a trustee for the
dissenting shareholders and was disbursed to them within the prescribed time limit.
Mr. Manoj was holding the office of Managing Director in Swati Garments Limited after being appointed on 15th
April, 2016. Due to expertise in finance and better track records, the company had re- appointed Mr. Manoj on 1st
April, 2021, for the next five years with an understanding that he will be compensated due to early vacation of
office as Managing Director in case of merger or amalgamation or takeover. Because of such developments relating
to takeover, Mr. Manoj lost his office as Managing Director and therefore, Swati Garments Limited wanted to
compensate him as per the agreement.
Mr. Manoj had received following remuneration during the last five financial years.
Financial Years Amount of Remuneration (in Rs. )
2016-17 20,00,000
2017-18 25,00,000
2018-19 30,00,000
2019-20 35,00,000
2020-21 40,00,000

Mr. Rishabh, close friend of Mr. Manoj, is one of the Directors in TopGears Limited, an Indian automotive company
that manufactures motorcycles, scooters and three-wheelers. The company is headquartered in Chennai, Tamil Nadu
and owned by Ramachandran Swami. It is one of the leading motorcycle companies in India.
The retirement of Mr. Pranav, the current Managing Director of TopGears Limited, is on the cards and he will get
superannuated after two months. Since Mr. Manoj was no more holding the office of Managing Director in Swati
Garments Limited, Mr. Rishabh with the consent of his friend, discussed the matter of appointment of Mr. Manoj as
Managing Director with the Board of Directors of TopGears Limited. The terms and conditions as well as the
remuneration payable with respect to Mr. Manoj’s appointment were got approved by the Board subject to the
approval of shareholders of TopGears Limited at its next General Meeting. Mr. Manoj was finally appointed as the
Managing Director since shareholders of TopGears Limited approved his appointment by passing a resolution at the
General Meeting of the company.
With the inclusion Mr. Manoj, the total strength of Directors of TopGears Limited has reached 14 including two
independent Directors. After some time, TopGears Limited felt the need to raise funds from the market.
Accordingly, it floated its ‘share issue’ through issuing a prospectus and was able to raise funds to the tune of Rs
300 crores from the public at large. Its equity shares got listed on BSE Limited and National Stock Exchange of
India Ltd.

Multiple Choice Questions

Question 26.1: [Section 235]
According to the case scenario, the offer of acquisition of shares of Swati Garments Limited was approved by 91%
shareholders and the offer remained open for 4 months but the dissenting shareholders did not avail the said
offer. As per the provisions of the Companies Act, 2013, maximum within how much time, Minerva Fabrics Limited is
required to send a notice to the dissenting shareholders indicating its intention to acquire their shares? Select the
correct answer from the following options:
a) Within 1 month after the expiry of the 4 months
b) Maximum within 2 months after the expiry of first 4 months
c) Maximum within 3 months after the expiry of first 4 months
d) Maximum within 5 months after the expiry of first 4 months

Summary – As per section 235, the transferee company is required to give notice to dissenting SH signifying its
desire to acquire shares - within 2 months after the expiry of first 4 months.

Question 26.2: [Section 235]

Swati Garments Limited needs to park the funds received from Minerva Fabrics Limited on behalf of the dissenting
shareholders in a separate bank account. According to the provisions of the Companies Act, 2013, within how many
days, the said funds shall be disbursed to the dissenting shareholders?
a) 30 days
b) 40 days
c) 60 days
d) 90 days

Summary – As per section 235, funds received by the transferor co. shall be disbursed to entitled shareholders
within 60 days of its receipt

Question 26.3: [Section 202]

Due to the takeover of Swati Garments Limited by Minerva Fabrics Limited, Mr. Manoj lost his office as Managing
Director in Swati Garments Limited. Since Swati Garments Limited wants to compensate him, how much
compensation becomes payable to him:
a) Rs 75 lakhs.
b) Rs 105 lakhs.
c) Rs 120 lakhs.
d) Rs 130 lakhs.

Summary – As per section 202, compensation amount shall be - Average of last 3 years remuneration × Remaining
 period of service or 3 months whichever is shorter. [In this case, (30+35+40)/3*3 years]

Question 26.4: [Section 196(4)]

According to the case scenario, appointment of Mr. Manoj as Managing Director of TopGears Limited was approved
by the shareholders by passing a resolution at the General Meeting of the company. In such a situation, as per the
provisions of the Companies Act, 2013, maximum within how much time the prescribed return in MR-1 is required to
be filed with the Registrar of Companies? Choose the correct answer from the following options:
a) Maximum within 30 days.
b) Maximum within 45 days.
c) Maximum within 60 days.
d) Maximum within 90 days.

Summary – As per section 196, return in Form MR-1 shall be filed with RoC within 60 days of appointment of MD

Question 26.5: [Section 149(4)]

TopGears Limited got its shares listed on BSE Ltd. and National Stock Exchange of India Ltd. After becoming a
listed company what changes, if any, are required to be made by TopGears Limited so far as the strength of its
Board of Directors is concerned? Select the correct alternative from those given below:
a) Appoint one more Independent Director.
b) Appoint two more Independent Directors.
c) Appoint three more Independent Directors.
d) There is no need to appoint any new Indep. Director since TopGears already has two independent Directors.

Summary – As per section 149, in case of Listed co, 1/3rd of total director shall be independent directors

Answers
1(b) 2(c) 3(b) 4(c) 5(c)

Question 27: [Category A] [Can you solve the MCQs directly without reading the case? - Yes]
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:
Mr. Anant: He has set up his valuation practice in London for the last 5 years. He came to visit India on December
24, 2021, 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.
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.
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 the valuation of its assets.
GECL holds 15% paid-up share capital of Prayas Marketing Limited (PML). However, the jurisdictional RoC(RoC),
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
30.10.2021 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 30.10.2021 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.

Multiple Choice Questions

Question 27.1: [Section 2(45)]
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 CG and the SG hold more than 25% of its paid-up share capital.
b) GECL is not a Government Company since the CG, the SG 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 CG, the SG 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 CG and the SG together hold 44% of its paid-up share capital
which is less than the threshold limit of 51%.

Summary – As per section 2(45) In case where CG and SG hold less than 51% of Paid up capital – It shall not be
considered as a Govt. Company. For this purpose, shareholding of Government company shall not be considered.

Question 27.2: [Section 247]

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.

Summary – As per section 247, a non-resident cannot act as a registered valuer

Question 27.3: [Section 252]

In case PML is aggrieved by the order dated 30-10-2021 of the RoC 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 NCLT, which one of the
following options shall be applicable in such a situation:
a) PML is permitted to file an appeal to the NCLT within 1 year from the date of the order of the RoC
b) PML is permitted to file an appeal to the NCLT within 2 years from the date of the order of the RoC
c) PML is permitted to file an appeal to the NCLT within 3 years from the date of the order of the RoC
d) PML is permitted to file an appeal to the NCLT within 5 years from the date of the order of the RoC

Summary – As per section 252, Person aggrieved by order of ROC (notifying co. as dissolved) - Can file an appeal
to NCLT within 3 years.

Question 27.4: [Section 250]

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 is valid since after dissolution it cannot enter into any contract.
b) The contention 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 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 is valid because once the company stands dissolved, it is not liable to discharge any of its
liabilities & obligations because shareholders are to be given back the money invested by them as shareholders.

Summary – As per section 250, dissolution shall not affect- liabilities of person involved, realisation of asset,
discharge of liability

Question 27.5: [Section 248(2)]

Suppose PML, on its own, decides to file an application to the RoC 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 such an application
b) All the Directors of PML at the Board Meeting can pass a resolution to file such an application 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 such an application
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 such an application

Summary – As per section 248, a co may file application to RoC for removal of name - After extinguishing all
Liabilities & by SR or obtaining consent of 75% of members in Paid up share capital

Answers
1(d) 2(a) 3(c) 4(c) 5(d)

Question 28: [Category A] [Can you solve the MCQs directly without reading the case? - Yes]
The Board of Directors of Binjoy Textiles Limited, incorporated in the year 2010 under the Companies Act, 1956,
comprises of six Directors including Mr. Raman Singh functioning as Managing Director. Based in Maharashtra, the
company was in full swing with its different kinds of fabrics like cotton, polyester, nylon, etc., and was reaching the
farthest corners of the country.
The Authorised Capital of Binjoy Textiles Limited was Rs. 5,00,00,000 divided into 50,00,000 equity shares of Rs.
10 each. The issued and subscribed capital as at 31-03-2021 was Rs. 4,00,00,000 of which paid-up capital was Rs.
3,40,00,000. In fact, 500 shareholders out of total 1000 shareholders, had not paid the last call of Rs. 3 per share.
It is noteworthy that these 500 shareholders were holding 20,00,000 equity shares. Not known to others, two
directors of Binjoy Textiles Limited, Mr. Manav and Mr. Kundan, were involved in mismanagement of the company
bringing its downfall day-by-day. They were clandestinely withdrawing huge sums of money on regular basis on one
pretext or the other for their personal use. The company started incurring losses year-after- year. There was
unrest among the stakeholders. Mr. Raman, Managing Director, was also a silent party to such fraud since he did not
try to put a brake on the fraudulent deeds of Mr. Manav and Mr. Kundan, thus showing his gross negligence that led
the company to head sharply southwards.
In order to get rid of mismanagement, the contributories presented a petition for winding up to the NCLT on the
grounds of mismanagement and fraud committed by these two directors of the company.
The long list of contributories also contained the names of Mr. Rohan and Mr. Sharad who inherited 2,000 partly
paid-up shares whose paid- up value was Rs. 14,000 (Face Value Rs. 20,000) after the untimely death of their father
Mr. Mool Chand just three months ago. Mr. Mool Chand had held these shares for the past two years. After
inheriting 1000 shares each from their deceased father, Mr. Rohan and Mr. Sohan became the shareholders of
Binjoy Textiles Limited and therefore, they also signed the petition for winding up of the company.
On being satisfied, the NCLT passed an Order for winding up of Binjoy Textiles Limited.
Due to the impending winding up, Binjoy Textiles Limited was contemplating on the notion to compensate Mr. Raman
Singh for the loss of his office as Managing Director. Had there been no winding up as ordered by the NCLT, Mr.
Raman Singh would have retired in the year 2023. As per his retirement date, Mr. Raman Singh was supposed to
receive minimum one year’s remuneration, which he would have earned if he had been in the office for the
remainder of his term. Accordingly, Mr. Raman Singh was looking forward to receive his dues at the time of winding
up.
For the purposes of winding up of Binjoy Textiles Limited, the NCLT appointed a Company Liquidator, Mr. Dilip, on
21st December, 2021. However, Mr. Dilip had conflict of interest with the company. Therefore, as per the relevant
provisions of the Companies Act, 2013, on appointment as Company Liquidator, he filed a declaration in the
prescribed form with the NCLT, effective from the date of his appointment, disclosing the conflict of his interest
with the company. To take the matter ahead, following the provisions of the Companies Act, 2013, the NCLT duly
sent an intimation of winding up to Mr. Dilip and the RoC
As per Section 281 of the Companies Act, 2013, the Liquidator of the company Mr. Dilip submitted to the NCLT, a
report containing chiefly the following particulars:
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 and the negotiable securities held by the company. A report on the valuation of the
assets was obtained from the registered valuer, Mrs. Sapna Singh.
 Details of amount of share 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 any company or persons from whom they were due and the amount likely to be realised on
account thereof.
 Guarantees extended by the company.
 List of contributories and dues payable by them and details of the unpaid calls.
 Details of subsisting contracts.
 Details of legal cases filed by or against the company.
The NCLT, then settled the list of contributories and caused rectification of Register of Members in all cases
where rectification was required. The NCLT reviewed all the assets of the company to be applied for the discharge
of the winding up liability.
While settling the list of contributories, the NCLT included every person, who was or had been a member and who
would 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.
As noticed earlier, there were total 1000 members of which 500 members had paid 70% of the amount due on their
shares. A final call of Rs. 3 per was still due from them. It was estimated that the company could clear its entire
debt, if the unpaid amount was received from these 500 members. However, out of the 500 members who held
partly paid- up shares, 350 members paid their unpaid contributions but remaining 150 shareholders were yet to pay
the amount due from them.

Multiple Choice Questions

Question 28.1: [Section 272]
From the case scenario, it is evident that Mr. Rohan and Mr. Sharad inherited 2,000 shares after the death of
their father Mr. Mool Chand and irrespective of their eligibility, both had signed the winding up petition as the
contributories of Binjoy Textiles Limited. According to the provisions of the Companies Act, 2013, whether they
were eligible to sign the petition?
a) Mr. Rohan and Mr. Sharad, after becoming contributories due to inheriting of 2,000 shares from their father
Mr. Mool Chand, were legally eligible to sign the winding up petition, only if the shares held by them were fully
paid-up and not otherwise.
b) Mr. Rohan and Mr. Sharad were eligible to sign the winding up petition only if they had held the shares in their
names for at least 6 months after inheriting them from their deceased father, Mr. Mool Chand.
c) Mr. Rohan and Mr. Sharad were eligible to sign the winding up petition only if they had held the shares in their
names for at least 9 months after inheriting them from their deceased father, Mr. Mool Chand.
d) Mr. Rohan and Mr. Sharad were eligible to sign the winding up petition as the shares due to which they were
contributories had devolved upon them on the death of their father, Mr. Mool Chand, a former holder.

Summary – As per section 272, contributories can apply when the shares in respect of which he is a contributory
was devolved to him on death of formal holder.

Question 28.2: [Section 285]

From the case scenario it is noticed that out of the 500 members who held partly paid-up shares, only 350 members
paid their unpaid contributions and remaining 150 shareholders were yet to pay the amount due from them. Select
the correct option from those given below as to whether payment made by 350 members would absolve the
remaining 150 members from their liabilities:
a) In case the amount required to settle the debts of Binjoy Textiles Limited is collected from 350 members,
then the remaining 150 members are not required to pay their dues.
b) All the shareholders holding partly paid-up shares of Binjoy Textiles Limited are required to respond
individually to the demand notice whether they wish to pay the unpaid amount due from them or not.
c) It is within the discretion of National Company Law Tribunal to require the remaining 150 shareholders of
Binjoy Textiles Limited whether to pay or not to pay the unpaid amount due from them.
d) Every unpaid shareholder of Binjoy Textiles Limited, being a contributory, is liable to pay to the extent of
unpaid amount on his shares, irrespective of his shareholding.

Summary – As per sec 285, in case of a Co. limited by Shares – contributory shall be liable for unpaid amount on
shares held.

Question 28.3: [Section 202]

Binjoy Textiles Limited wanted to compensate Mr. Raman Singh since he had to lose office of Managing Director
before the completion of his term. Is it justified for the company to pay compensation to Mr. Raman Singh?
a) Binjoy Textiles Limited is permitted to compensate its Managing Director Mr. Raman Singh for the loss of
office before the completion of his term.
b) Binjoy Textiles Limited is not permitted to compensate its Managing Director Mr. Raman Singh for the loss of
office before the completion of his term since the company is being wound up by the National Company Law
Tribunal and the negligence of Mr. Raman Singh was involved.
c) Binjoy Textiles Limited is permitted to compensate its Managing Director Mr. Raman Singh for the loss of
office before the completion of his term after the shareholders passed an ordinary resolution.
d) Binjoy Textiles Limited is permitted to compensate its Managing Director Mr. Raman Singh for the loss of
office before the completion of his term after the shareholders passed a special resolution.

Summary – As per section 202, no payment of compensation for loss of office shall be made director is guilty of
fraud/breach of trust or gross negligence or management in conduct of affairs of Co., Subsidiary or Holding

Question 28.4: [Section 275]

The Company Liquidator Mr. Dilip, appointed by the National Company Law Tribunal, had some conflict of interest
with Binjoy Textiles Limited. Choose the correct date from the following options, by which Mr. Dilip was required to
file declaration with NCLT:
a) 28th December, 2021.
b) 31st December, 2021.
c) 5th January, 2022.
d) 10th January, 2022.

Summary – As per section 275, Within 7 days of appointment, liquidator to file declaration disclosing conflict of
interest (if any)

Question 28.5: [Section 277]

Out of the following four options, select the one which correctly indicates the role of RoC on receipt of intimation
of order from the National Company Law Tribunal for winding up of Binjoy Textiles Limited:
a) The RoC will keep a vigilance over the winding up process initiated against Binjoy Textiles Limited.
b) The RoC will assist the Company Liquidator Mr. Dilip in the winding up process initiated against Binjoy Limited.
c) The RoC shall make an endorsement to that effect in his records relating to Binjoy Textiles Limited and notify
it in the Official Gazette.
d) The RoC will strike off the name of Binjoy Textiles Limited from the Register of Companies.

Summary – As per section 277, on receipt of NCLT’s order, RoC shall make an endorsement to that effect in his
records and notify it in the Official Gazette.

Answers
1(d) 2(d) 3(b) 4(a) 5(c)

Question 29: [Category A] [Can you solve the MCQs directly without reading the case? - Yes]
Three close friends, Mr. Singh, Mr. Khurana and Mr. Dhillon, all residents of Delhi, wanted to start their own
venture and accordingly in the year 2014, after leaving their respective concerns, incorporated a company by the
name New Age Automobiles Private Limited. Prior to this venture, Mr. Singh worked in National Commercial Bank
Limited as Chief Manager and had gained rich experience of over twenty-two years dealing with different tough
situations and also with seasoned businessmen as well as customers coming from all walks of life. In the year 2014,
he took voluntary retirement under the ‘Voluntary Retirement Scheme’ announced by National Commercial Bank
Limited which was applicable to the officers who had to their credit twenty years of service or more as on 31st
December, 2013. Mr. Khurana is an experienced finance professional [MBA (Finance) from Faculty of Management
Studies, University of Delhi] and in the last fifteen years he has served a number of finance companies gaining
extensive knowledge of finance. Mr. Dhillon, an engineer, worked in a reputed auto company for the last fourteen
years.
After two years of the formation of New Age Automobiles Private Limited, Mr. Rawat, one of the esteemed
customers of National Commercial Bank Limited, who had an ‘Overdraft Account’ in the branch in which Mr. Singh
worked as Chief Manager, wanted to have some stake in the company. Accordingly, he purchased 6% equity shares
of New Age Automobiles Private Limited. After transferring 6% equity shares to Mr. Rawat, the original promoters
held remaining 94% of equity shares.
Thereafter, in the year 2019, Jagat Electricals Limited having its Registered Office at Rajendra Place, New Delhi
and having reputable presence pan-India for manufacturing quality products, acquired 60% stake in New Age
Automobiles Private Limited by way of shareholders’ agreement. As per the agreement, the remaining 34% shares
were to be held by Mr. Khurana, Mr. Singh, and Mr. Dhillon in the ratio in which they were held by them when the
company was incorporated in 2014 and other 6% by Mr. Rawat.
Mr. Rawat was a diabetic patient for the last seven years or so which had an adverse impact on both of his kidneys.
As his kidney problem became serious by and by leading to dialysis on weekly basis, his nephrologist advised him for
kidney transplant. In order to get kidney transplant done at a specialised hospital, Mr. Rawat decided to go to
Seattle, USA, where his son Saaransh Rawat, holder of Green Card, was serving a Multi-National Company (MNC) at
a senior position. Before going to Seattle, Mr. Rawat sold his 6% stake in New Age Automobiles Private Limited to
Jagat Electricals Limited which increased the aggregate shareholding of Jagat Electricals Limited to 66%.
Over a period of time, Jagat Electricals Limited gradually started increasing its stake in New Age Automobiles
Private Limited and ultimately it reached to a level of 92%. The stake of 92% was achieved by way of various
agreements made with Mr. Singh, Mr. Khurana and Mr. Dhillon and by now, these three friends were left with only
8% shareholding in New Age Automobiles Private Limited. Being the owner of 92% equity shares of New Age
Automobiles Private Limited, Jagat Electricals Limited was running the affairs of the company in the manner that
suited it; and Mr. Singh, Mr. Khurana and Mr. Dhillon, though minority shareholders, could not digest this
phenomenon.
As a consequence of ‘thought-to-be’ mismanagement in New Age Automobiles Private Limited, Mr. Khurana, Mr.
Singh and Mr. Dhillon decided to file an application with the jurisdictional NCLT against oppression and
mismanagement in the company.
Later on, Jagat Electricals Limited wanted to execute an agreement with Mr. Khurana, Mr. Singh and Mr. Dhillon for
purchasing their remaining shareholding of 8%. Pursuant to this, Jagat Electricals Limited had sent a notice to Mr.
Khurana, Mr. Singh and Mr. Dhillon to sell their shares based on a particular ‘sale consideration’ rather than on the
basis of an agreed price. As there was no response, Jagat Electricals Limited sent another notice to these friends
invoking the previous notice, offering them to sell their shareholdings at an agreed price which was to be decided in
accordance with the valuation done by a Practicing Chartered Accountant.
Thereafter, Jagat Electricals Limited issued a notice to New Age Automobiles Private Limited for purchasing the
minority shareholding as per Section 236 of the Companies Act, 2013. Accordingly, New Age Automobiles Private
Limited issued a notice to Mr. Khurana, Mr. Singh and Mr. Dhillon asking them to deliver their shares. However, Mr.
Khurana, Mr. Singh and Mr. Dhillon refused to transfer their shares.
Mrs. Usha Singh, wife of Mr. Singh, owns a finance company by the name Singh Finance Company Private Limited
whose turnover is Rs. 5 crore. In addition to Mrs. Usha Singh, Mr. Singh is also a Director in Singh Finance Company
Private Limited. The sole purpose of the company is to give loans to other companies and corporate houses for
business purposes.
Some three years before, Charan Singh Auto Parts Pvt. Limited took Rs. 10 lakhs as loan from Singh Finance
Company Private Limited of which Rs. 6 lakhs along with interest has been repaid. As on date, the outstanding dues
of Charan Singh Auto Parts Pvt. Limited towards Singh Finance Company Private Limited are Rs. 4 lakhs.
An investigation was conducted into the affairs of Charan Singh Auto Parts Pvt. Limited, for it came to the
knowledge of Central Government that the business of this company was being done in an unfair and fraudulent
manner. Singh Finance Company Private Limited and one other company called Arpita Traders Private Limited
decided to file an application with the jurisdictional NCLT to impose restrictions on Charan Singh Auto Parts Pvt.
Limited since it was likely to transfer its assets in a manner that would prejudicially affect their interests. It is
noteworthy that Singh Finance Company Private Limited is a secured creditor whereas Arpita Traders is an
unsecured creditor. Charan Singh Auto Parts Pvt. Limited is required to repay Rs. 75k to Arpita Traders Pvt. Ltd.
Mr. Hritik, son of Mr. Khurana, is working as CFO in Yatin Mechanical Apparatus Private Limited for the last two
years. The Central Government has appointed inspectors to investigate into the affairs of Yatin Mechanical
Apparatus Private Limited, after receiving an intimation through special resolution passed by the company that the
affairs of Yatin Mechanical Apparatus Private Limited ought to be investigated under Section 210 of the Companies
Act, 2013. The main aim of the investigation is to obtain any evidence or facts regarding any malpractice in the
course of conducting of business and also to identify its profits and losses correctly. During the ongoing
investigation, Yatin Mechanical Apparatus Private Limited desired to discharge Mr. Hritik from his job as CFO.

Multiple Choice Questions

Question 29.1: [Section 244]
Mr. Khurana, Mr. Singh and Mr. Dhillon had filed an application with the National Company Law Tribunal against
oppression and mismanagement prevailing in New Age Automobiles Private Limited in which Jagat Electric Limited is
the majority shareholder. Choose the correct option as to whether the said application is maintainable with NCLT:
a) Cannot be maintained, as Mr. Khurana, Mr. Singh and Mr. Dhillon together hold less than 10% shares.
b) Maintainable.
c) It is within the discretion of NCLT whether to entertain the application or not.
d) Cannot be maintained, as Mr. Khurana, Mr. Singh and Mr. Dhillon together hold less than 9% shares.

Summary – As per section 244, in case of a company having share capital, application shall be made by lower of
100 members or 1/10th of total members or 1/10th of the issued share capital. (Hence 1 member is also enough)

Question 29.2: [Section 236]

Jagat Electricals Limited sent again a notice after invoking the previous notice to Mr. Khurana, Mr. Singh and Mr.
Dhillon, respectively, offering them to sell their shares at an agreed price to be decided by a Practicing Chartered
Accountant. Do you think the minority shareholders are liable to sell their shares to the majority shareholders in
such a situation:
a) Since price is based on the valuation done by a Practicing CA who has both legal as well as financial knowledge,
minority shareholders are liable to sell their shares to the majority shareholders.
b) It is optional for the minority shareholders to sell their shares to the majority shareholders but the price
needs to be determined on the basis of valuation carried out by a Registered Valuer.
c) It is optional for the minority shareholders to sell their shares to the majority shareholders but the price
needs to be determined on the basis of valuation carried out by a Practicing Company Secretary.
d) In the given situation, the minority shareholders have no option but to sell their shares to the majority
shareholders irrespective of which professional carries out the valuation of shares.

Summary – As per section 236, where an offer is made by SH holding >90% of issues equity share capital, it is
optional for the minority shareholders to sell their shares to the majority shareholders but the price needs to be
determined on the basis of valuation carried out by a Registered Valuer

Question 29.3: [Section 236]

From the case scenario it is evident that Mr. Singh, Mr. Khurana and Mr. Dhillon being minority shareholders
refused to sell their shareholdings of 8% to Jagat Electricals Limited. In case the trio agrees to the proposal, then
maximum within how much time the amount of consideration shall be disbursed to them after it is deposited by
Jagat Electricals Limited in a separate bank account to be operated by New Age Automobiles Private Limited.
a) Max. within 15 days
b) Max. within 30 days
c) Max. within 60 days
d) Max. within 90 days

Summary – As per section 236, the amount payable to the entitled shareholders shall be disbursed within 60
days of receipt thereof.

Question 29.4: [Section 221]

Singh Finance Company Private Limited and Arpita Traders Private Limited were of the view that Charan Singh Auto
Parts Pvt. Limited is likely to transfer its assets in manner that will prejudicially affect their interests. In capacity
as creditors of Charan Singh Auto Parts Pvt. Ltd, whether they are eligible to file such an application with NCLT:
a) Both Singh Finance Company Private Limited and Arpita Traders Private Limited in their individual capacity as
creditors are eligible to file the application with NCLT against Charan Singh Auto Parts Pvt. Limited.
b) Only Singh Finance Company Private Limited in its capacity as creditor is eligible to file the application with
NCLT against Charan Singh Auto Parts Pvt. Limited.
c) Only Arpita Traders Private Limited in its capacity as creditor is eligible to file the application with NCLT
against Charan Singh Auto Parts Pvt. Limited.
d) Since Singh Finance Company Private Limited is a secured creditor and Arpita Traders Private Limited is not a
secured creditor, hence only Singh Finance Company Private Limited is eligible to file the application with NCLT
against Charan Singh Auto Parts Pvt. Limited.

Summary – As per section 221, on complaint made by crs having > Rs. 1 lakh outstanding, if it appear to NCLT that
such removal is prejudicial to interest of co/SH, it may pass an order freezing such asset.

Question 29.5: [Section 218]

The investigation being pending, Yatin Mechanical Apparatus Private Limited is desirous of discharging Mr. Hritik
from his from his job as CFO. Select the correct option from those given below whether Yatin Mechanical
Apparatus Private Limited can so discharge Mr. Hritik:
a) Cannot discharge Mr. Hritik from his job till the expiry of 15 days from the completion of ongoing investigation
because he falls in the category of Key Managerial Personnel.
b) Seek approval of the NCLT before discharging Mr. Hritik from his job as CFO.
c) Seek approval of the inspectors conducting investigation before discharging Mr. Hritik from his job as CFO.
d) Cannot discharge Mr. Hritik from his job as CFO till the expiry of thirty days from the completion of ongoing
investigation because he falls in the category of Key Managerial Personnel

Summary – As per section 218, company to obtain prior approval of Tribunal before it discharges or suspends an
employee.

Answers
1(b) 2(b) 3(c) 4(b) 5(b)

Question 30: [Category A] [Can you solve the MCQs directly without reading the case? - No]
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. While travelling with them, the tourists 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, 2021 was Rs.
6.00 crore (60,00,000 equity shares of Rs. 10 each) and the reserves and surplus amounted to Rs. 2.50 crore. The
turnover of the company for the FY 2020-21 was Rs. 55.00 crore.
As the company had surplus funds, Vallabh thought of investing Rs. 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 comforts 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, 2021 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.

Multiple Choice Questions

Question 30.1: [Section 186] (Important)
In the above case scenario, one of the Directors Vallabh wanted to invest surplus funds of VTTL amounting to Rs.
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 Rs. 50.00 lakhs in equity shares of reputed companies.
b) VTTL cannot invest funds amounting to Rs. 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 Rs. 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 Rs. 50.00 lakhs in equity shares of reputed companies since the
investment plan did not receive consent of 3/4th majority of Directors present (i.e. four out of five present).

Summary – As per section 186, any investment shall require a resolution passed at BoD meeting with consent of
all the directors present at the meeting (unanimous resolution)

Question 30.2: [Section 174]

From the case scenario, it is evident that VTTL called a Board Meeting on 10th September, 2021, at 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) 13th September, 2021, at 3:00 p.m. at the Registered Office.
b) 15th September, 2021, at 3:00 p.m. at the Registered Office
c) 17th September, 2021, at 3:00 p.m. at the Registered Office
d) 20th September, 2021, at 3:00 p.m. at the Registered Office

Summary – As per section 174, where a BoD meeting could not be held for the want of quorum - Automatic
 adjournment to next week, same day, same time & same place

Question 30.3: [Section 149(4)]

The case scenario does not speak about the appointment of any Independent Director. From the following four
options choose the one, which indicates the number of Independent Directors that VTTL is required to appoint
based on the financial results as on 31-03-2021:
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.

Summary – As per section 149, unlisted public company below prescribed limits are not required to appoint ID

Question 30.4: [Section 186(2)]

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) Maximum up to Rs.6.00 crore
b) Maximum up to Rs 5.95 crore
c) Maximum up to Rs. 3.60 crore
d) Maximum up to Rs. 5.10 crore

Summary – As per section 186, limits up to which investment can be made without obtaining special resolution is –
Higher of - 60% of (Paid up share capital + FR + SP) or 100% of (FR+SP)

Answers
1(b) 2(c) 3(c) 4(d)

Question 31: [Category C] [Can you solve the MCQs directly without reading the case? – Yes, almost]
Having keen interest in watching planets and stars, Ebhanan, Ilesh, Ina and Idhan thought of manufacturing optical
instruments like telescopes and binoculars and to achieve their objects, they formed Iris Engineering Limited (IEL)
way back in the year 1992 with some of their close relatives. Based in Mumbai, the products manufactured by IEL
allow the observers to delve deeper into the beauty of space with full range of comfortable view. In particular,
telescopes made by the company are light-weight, portable as well as elegant and are used by private observatories,
educational institutions, Government organisations, etc., both in India and abroad.
The products of IEL carry a pre-eminent reputation for crystal clear optics for every outdoor activity. They are
extremely popular for bird- watching, hiking, star-gazing, marine observation, astronomy and the like. The company
has made a good place for itself in the market giving a tough competition to its rivals.
From time to time, Ebhanan, Ilesh, Ina and Idhan have inducted certain other eminent persons as directors who
have in-depth knowledge and relevant experience in the field in which the company is engaged. Further, Ina was
given the responsibility to search talent from outside India also. Accordingly, she established contacts with two
USA based physicists Isa and Ivaan who had specialised knowledge in the field of optics and optic materials. To
extract as much of their expertise, she proposed to rope them in as directors in the company to which other
directors agreed without any resistance and thus, Isa and Ivaan were appointed as directors taking the count of
directors to 15 which is the maximum strength as per the Articles of the company. However, there occurred four
vacancies in the office of directorship in May, 2021 because of covid related deaths of four directors and such
vacancies are yet to be filled.
To make matter easier for Isa and Ivaan, an option was provided to all the directors to attend Board Meetings
through Video Conferencing. Further, the company started sending the notice of Board Meeting by e- mail though
no such provision was included in the Articles of Association.
The net profits/loss of the company for the last few financial years are as under:

FY 2017-18 (Rs ) FY 2018-19 (Rs ) FY 2019-20 (Rs ) FY 2020-21 (Rs )

Net Profit/(Loss) 1,92,00,000 2,55,00,000 2,85,00,000 (36,00,000)
Note: During the FY 2020-21, loss was incurred because of disturbance in operation due to continuing
pandemic.

The company was considering to import Optical Tube Assemblies (OTA), Mirrors and Lenses of fine quality for
improving the production capacity. In order to purchase these items, Isa started negotiations with one of the
reputed suppliers M/s John Optical Tubes & Glass Company, Inc., based at New York, USA and the deal was
finalised for US$ 200,000. Isa further negotiated with M/s John Optical Tubes & Glass Company, Inc., to supply
these items for a credit period of four months to which the exporter agreed.

Multiple Choice Questions (MCQs)

Question 31.1: [Section 173(3)]
The case scenario states that IEL started sending the notice of Board Meeting by e-mail though no such provision
was included in the Articles of Association. Whether action of IEL to opt for sending of Notice by e-mail is valid?
a) Not valid since its Articles of Association do not contain such provision.
b) Not valid since such notice is permitted to be sent by post only.
c) Not valid since such notice is permitted to be sent by post or conveyed through telephonic call.
d) Valid since such notice is permitted to be sent by hand delivery or by post or by electronic means.

Summary – As per section 173, notice of Board meeting can be sent via E-mail as well.

Question 31.2: [Section 174]

What shall be the quorum for the meeting of the Board of Directors if the directors of IEL including Isa and Ivaan
who are citizens of USA are given the option to attend the meeting through video conferencing:
a) Quorum for the Board Meeting shall be five directors.
b) Quorum for the Board Meeting shall be four directors.
c) Quorum for the Board Meeting shall be nine directors.
d) Quorum for the Board Meeting shall be two directors.

Summary – As per section 174, quorum is 1/3rd of total strength or 2 directors whichever is higher. In this case,
total strength is 11 and hence quorum will be 4 directors.

Question 31.3: [Section 181]

What shall be the maximum amount of contribution if IEL decides to contribute certain sum of money to a bona-
fide charitable trust with the approval of the Board during the FY 2021-22:
a) IEL can contribute maximum Rs. 8,70,000 to a bona-fide charitable trust with the approval of the Board.
b) IEL can contribute maximum Rs. 8,40,000 to a bona-fide charitable trust with the approval of the Board.
c) IEL can contribute maximum Rs. 6,22,500 to a bona-fide charitable trust with the approval of the Board.
d) IEL cannot contribute any amount to a bona-fide charitable trust with the approval of the Board since it has
incurred loss in the immediately preceding Financial Year.

Summary – As per section 181, charitable contribution upto 5% of average net profit of last 3 years can be made
 without any approval of Shareholders.

Question 31.4: [Section ]

According to the case scenario, IEL was considering to import Optical Tube Assemblies (OTA), Mirrors and Lenses
of fine quality for improving the production capacity and Isa finalised the import deal for US$ 2,00,000 with the
suppliers M/s John Glass Company, Inc., of New York, USA. Since M/s John Optical Tubes & Glass Company, Inc.
agreed to supply these items for credit period of 4 months, which of the following options is applicable here:
a) Such import is a current account nature since credit period involved is four months.
b) Such import is a capital account nature since items imported are assets whose worth is > US$ 100,000.
c) Such import is a capital account nature since the credit period involved is more than 3 months.
d) Such import is a current account nature since worth of items imported by IEL is less than US$ 500,000.

Summary – As per FEMA, short-term banking & credit facility in ordinary course of business (upto 6 months)
shall be considered as Current Account Transaction

Answers
1(d) 2(b) 3(b) 4(a)

Question 32: Repeat question on basic provision of Section 230.

Question 33 (Section 247): [Category A] [Can you solve the MCQs directly without reading the case? - Yes]
Roopak Leathers Limited offers quality leather products in the latest styles, catering to the choice of present
generation. Their portfolio includes leather shoes, leather bags, wallets, belts and accessories. Incorporated in the
year 2002 at Naubasta, Kanpur, the company with over 1000 showrooms in northern India, has maintained a stable
position catering to all kinds of income groups. It is a profit-making company and has paid-up share capital of Rs 70
crores (70,00,000 equity shares of Rs 10 each)
Ambuj, CMD and also one of the four promoters of Roopak Leathers Limited and his team of directors, is
interested in having their presence felt in Maharashtra and Gujarat as well. To accomplish their objective, they are
thinking of raising funds through public issue of its securities by issuing a prospectus. The equity shares are
proposed to be listed on the BSE Limited and National Stock Exchange of India Limited (popularly called NSE).
For the purpose of valuation of its equity shares, the name of Perfect Valuation Services, LLP, was suggested by
one of the directors Manu Kulkarni. In fact, Manu knew CA Promila, one of the partners in Perfect Valuation
Services, LLP through his cousin Tanishk who was her class- fellow in school. Ambuj liked the idea and accordingly,
Perfect Valuation Services, LLP was duly appointed by the Audit Committee of Roopak Leathers Limited.
IBBI registered Perfect Valuation Services, LLP, started by twins CA Promila and CA Prachi in the year 2019 and
supported by qualified and experienced staff, takes up valuation of ‘Securities and Financial Assets’ which includes
submission of valuation reports for issue of shares and securities, valuation of intangibles, related party
transactions, ESOP valuation, etc. The services provided by this firm help in determining the fair value of clients’
business through application of complex and in- depth models enabling them to maximise their economic potential
and helps them in making informed decision-makers.
Within the assigned time, Perfect Valuation Services, LLP, valued the equity shares of Roopak Leathers Limited and
submitted the valuation report to the company and charged pre-decided fees.
Based on the valuation report and other legal formalities, Roopak Leathers Limited floated the public issue which
was oversubscribed five times within three hours of opening. Thereafter, the company got its shares successfully
listed on BSE Limited and National Stock Exchange of India Limited.
Multiple Choice Questions:
Question 33.1: [Section 247]
While making an application to the Insolvency and Bankruptcy Board of India (IBBI) for registration as a registered
valuer in the year 2019, how much non-refundable application fee Perfect Valuation Services, LLP must have paid?
Choose the correct alternative from the following options:
a) Rs 5,000
b) Rs. 10,000
c) Rs. 15,000
d) Rs. 20,000

Summary – As per section 247, a partnership entity or company eligible for registration as a registered valuer,
make an application to the authority along with a non-refundable application fee of Rs. 10,000

Question 33.2: [Section 247]

After considering the application, had IBBI been of the prima facie opinion that the registration ought not to be
granted to Perfect Valuation Services, LLP, and the reasons for forming such an opinion were communicated to the
LLP, then after the receipt of such communication, maximum how much time would have been allowed to Perfect
Valuation Services, LLP for submission of an explanation as to why its application should be accepted:
a) 5 days
b) 15 days
c) 21 days
d) 30 days

Summary – As per section 247, the applicant shall submit an explanation as to why his/its application should be
accepted within 15 days of the receipt of the communication to enable the authority to form a final opinion.

Question 33.3: [Section 247]

The case scenario states that the Audit Committee of Roopak Leathers Limited appointed Perfect Valuation
Services, LLP, to value its equity shares. Had there been no Audit Committee constituted by Roopak Leathers
Limited, which other authority in the company would have appointed Perfect Valuation Services, LLP? Choose the
correct answer from the following options:
a) Ambuj, the Managing Director
b) Promoters of Roopak Leathers Limited
c) Board of Directors of Roopak Leathers Limited
d) Shareholders of Roopak Leathers Limited by passing a resolution in the General Meeting.

Summary – As per section 247, in absence of audit committee, the registered valuer shall be appointed by BoD

Question 33.4: [Section 247]

Suppose CA Promila, before becoming partner of Perfect Valuation Services, LLP, was levied a penalty under Section
271J of Income-tax Act, 1961 and such penalty had been confirmed by the Income-tax Appellate Tribunal, then in
such a situation, ____ years must be elapsed after levy of penalty under Section 271J of Income-tax Act, 1961,
before CA Promila becomes eligible to be a registered valuer
a) 2 years
b) 3 years
c) 5 years
d) 7 years

Summary – As per section 247, where penalty u/s 271J of Income Tax is levied, 5 years must be elapsed after
 levy of such penalty for the person to be eligible to be appointed as a registered valuer

Answers
1(b) 2(b) 3(c) 4(c)

Question 34: [Category B] [Can you solve the MCQs directly without reading the case? - Yes]
Having met each other while working for an IT organisation during 2014, Adarsh and Aadhav teamed up to enter
online grocery and vegetable delivery space and founded Harekrishna Daily Needs Limited with the Head Office in
Gurgaon (currently called Gurugram) in the beginning of the year 2016. Initially the company had ten subscribers
who were related to both Adarsh and Aadhav. They launched ‘Groceve - a Mobile App portmanteau of groceries and
vegetables’ through which the consumers could order their daily requirements against online payments and get quick
doorstep deliveries of various daily need items. By and by, the company started catering to the northern India. As
on 31st March, 2021, it had paid-up share capital of Rs. 200 lacs (20 lacs equity shares of Rs. 10 each) held by 500
shareholders.
As Harekrishna Daily Needs Limited was in need of a Managing Director, it appointed Gyanendra Singh as its MD in
April 2019. Earlier, Gyanendra Singh worked as General Manager of Vyom Financial Services Limited, a non-banking
financial company (NBFC). Habitual of working according to his own whims and caprices, he acted the same way in
this company also. He, in his own style, started ordering the employees to supply groceries to the retailers as well
as wholesalers at concessional rates which, in fact, was against the policy of the company, for the policy was to
supply goods directly to consumers after obtaining online payments. In addition, he offered two months’ and three
months’ debt collection period to the retailers and wholesalers respectively after receiving kickbacks from them.
Further, no cash security was deposited by the retailers and wholesalers to cover late payments. Most of the
retailers and also wholesalers did not clear their outstanding dues resulting in bad debts. At the end of the FY
2021-21, the company suffered heavy bad debts which had to be written off at the time of finanalising the annual
accounts.
Aggrieved by these wrongful and undesirable acts, 10 members of Harekrishna Daily Needs Limited made an
application before the jurisdictional NCLT praying that the affairs of the company were being conducted in a
manner prejudicial to the interests of the members as well as the company and requested NCLT for termination of
the service agreement of the Managing Director, Mr. Gyanendra Singh.
The NCLT, however, did not entertain the application filed by 10 members stating that the members making the
application were not eligible to apply.
When Dharmesh, one of the shareholders, came to know about rejection of the application by NCLT, he, on his own,
filed the application afresh with the NCLT on the similar grounds of mismanagement and making the company and
its Managing Director Gyanendra Singh as respondents. In fact, Dharmesh through his representative also brought
to the knowledge of NCLT that Gyanendra Singh, during his earlier assignment as General Manager with Vyom
Financial Services Limited, was involved in sanctioning big loans without insisting on adequate security to dubious
borrowers and therefore, many such loan accounts turned non-performing assets (NPA) and irrecoverable.
It is to be noted that the NCLT after accepting the application filed by Dharmesh and after hearing both the
parties, observed that Gyanendra Singh, the Managing Director of Harekrishna Daily Needs Limited was involved in
malpractices and mismanagement, on the basis of his past track record and the current handling of affairs of
Harekrishna Daily Needs Limited. The NCLT, therefore, ordered termination of the service agreement by which he
was appointed as Managing Director. Gyanendra Singh demanded compensation from the company for the remaining
period of his service since his term as Managing Director was yet to expire.

Multiple Choice Questions:

Question 34.1: [Section 244]
In the above case scenario, an application was filed by 10 members of Harekrishna Daily Needs Limited citing the
prevalence of mismanagement in the company but it was rejected by the NCLT stating that 10 shareholders were
ineligible to apply. In the given situation, how many members irrespective of shareholdings need to apply to NCLT:
a) Minimum 100 members
b) Minimum 75 members
c) Minimum 50 members
d) Minimum 25 members

Summary – As per section 244, in case of a company having share capital, application shall be made by lower of
100 members or 1/10th of total members or 1/10th of the issued share capital. (Hence 50 members)

Question 34.2: [Section 244]

After rejection of application filed by 10 members of Harekrishna Daily Needs Limited, Dharmesh, one of the
shareholders of the company, filed the application afresh on the similar grounds of mismanagement which was
accepted by NCLT. What could be the reason because of which such application was accepted by NCLT:
a) He must be the holder of minimum 1,00,000 shares of the face value of Rs 10 each amounting to Rs 10 lacs.
b) He must be the holder of minimum 2,00,000 shares of the face value of Rs 10 each amounting to Rs 20 lacs.
c) He must be the holder of minimum 2,50,000 shares of the face value of Rs 10 each amounting to Rs 25 lacs.
d) He must be the holder of minimum 3,00,000 shares of the face value of Rs 10 each amounting to Rs 30 lacs.

Summary – As per section 244, in case of a company having share capital, application shall be made by lower of
100 members or 1/10th of total members or 1/10th of the issued share capital. (Hence 20 lacs)

Question 34.3: [Section 243]

According to the case scenario, Gyanendra Singh demanded compensation from Harekrishna Daily Needs Limited
for the remaining period of his service since his term as Managing Director was yet to expire. Whether the
company is liable to pay him compensation in view of the fact that his service agreement was terminated by NCLT?
a) Irrespective of termination of his service agreement by the NCLT, the co. is required to compensate
Gyanendra Singh by paying him remuneration equal to the remaining period of his service but such
compensation must not exceed three years of remuneration.
b) Harekrishna Daily Needs Limited, irrespective of termination of his service agreement by the NCLT, is
required to compensate Gyanendra Singh by paying him remuneration equal to the remaining period of his
service but such compensation must not exceed two years of remuneration.
c) Harekrishna Daily Needs Limited, irrespective of termination of his service agreement by the NCLT, is
required to compensate Gyanendra Singh by paying him remuneration equal to the remaining period of his
service but such compensation must not exceed fifteen months of remuneration.
d) Harekrishna Daily Needs Limited is not required to compensate Gyanendra Singh, for his service agreement
was terminated by the NCLT.

Summary – As per section 243, where a contract is terminated by NCLT, such termination shall not give rise to
any claims by any person for damages/Compensation for loss of office.

Question 34.4: [Section ]

The case scenario mentions that NCLT ordered termination of the service agreement by which he was appointed as
Managing Director of Harekrishna Daily Needs Limited. Whether Gyanendra Singh, after being terminated, can be
offered the office of Managing Director or director or manager by the company?
a) No – Cannot be offered such office for 1 year from date of the order of NCLT without the leave of NCLT.
b) No – Cannot be offered such office for 3 years from date of the order of NCLT without the leave of NCLT.
c) No – Cannot be offered such office for 5 years from date of the order of NCLT without the leave of NCLT.
 d) No – Cannot be offered such office for 7 years from date of the order of NCLT without the leave of NCLT.

Summary – As per section 243, MD/Manager or other directors terminated by order of NCLT shall be
disqualified for 5 years, except with the leave of Tribunal

Answers
1(c) 2(b) 3(d) 4(c)

Question 35 (Sec 406): [Category A] [Can you solve the MCQs directly without reading the case? – Yes]
Belonging to the non-banking finance category, Purvi Savings and Investments Nidhi Ltd. was incorporated as a
Nidhi for the purpose of inculcating thrift and savings amongst its members, receiving deposits from, and lending
to, its members only, for their mutual benefit. It educates its members to use money in a wise manner and insists
upon that the money saved today will help them in facing adverse days, if any, tomorrow.
With its Registered Office situated at Mathura, Uttar Pradesh, it was incorporated on 6th April, 2021 by Krishna
Bihari, Brij Mohan, Ram Lal, Sunder, Sriniwas, Laxmi and Purab who were all residents of Mathura and also held the
directorships in the company. Being the senior most member, Krishna Bihari was appointed as Managing Director for
a period of five years. At the time of incorporation, the Authorised Share Capital of Purvi Savings and Investments
Nidhi Ltd. was Rs. 30 lacs divided into 3,00,000 equity shares of Rs. 10 each. Initially, it issued 1,30,000 shares and
therefore, its paid-up share capital was Rs. 13,00,000.
The Term Deposits Plans of Purvi Savings and Investments Nidhi Ltd. include Dhanlaxmi Fixed Deposit Scheme
where the enrolled members will get attractive and assured returns with impeccable services. In fact, the deposit
amount (minimum Rs. 1,000 and further in multiples of Rs. 100) will fetch maximum rate of interest @ 6.5% p.a. if
the tenure of deposit exceeds thirty-six months. The company also issues Kisan Nidhi Bonds of 12 months where
the rate of interest payable is 5% p.a.
Catering to the financial needs of its members, Purvi Savings and Investments Nidhi Ltd. Extends loans as per the
norms prescribed by Nidhi Rules, 2014. The lending is in the form of Purvi Nidhi Gold Loan, Purvi Nidhi Silver Loan,
Purvi Nidhi Mortgage Loan, Purvi Jewellery Loan and Purvi Kisan Crop Loan. Depending upon the tenure and amount
of the loan advanced to its members, Purvi Savings and Investments Nidhi Ltd. Charges applicable rate of interest.
The members are also fully aware about the fact that the repayment of loans must be made as per the repayment
schedule agreed at the time of sanctioning of loan because this is the only way by which the company will flourish
and prosper in future.
After nine months from the date of its incorporation, Purvi Savings and Investments Nidhi Ltd. Had 150 members.

Multiple Choice Questions:

Question 35.1: [Section 406]
The case scenario states that after 9 months from the date of incorporation, Purvi Savings and Investments Nidhi
Ltd. had 150 members. How many more members should be added by it so as to reach the required limit of minimum
members within 1 year from date of its incorporation? Select the correct alternative from following options:
a) Add minimum 50 members more
b) Add minimum 150 members more
c) Add minimum 250 members more
d) Add minimum 350 members more

Summary – As per section 406, a Nidhi company must have 200 members within a year of its incorporation

Question 35.2: [Section 406]

Suppose after 9 months from the date of incorporation, Purvi Savings and Investments Nidhi Ltd. had Net Owned
Funds (NOF) of Rs. 15 lacs and at the same time deposits mobilised from members were to the tune of Rs. 375 lacs,
which gave ratio of NOF to deposits as 1:25, then in order to reach the prescribed minimum ratio of NOF to
deposits within a period of one year from the date of its incorporation, how much more amount is required to be
added by the Nidhi to the current figure of NOF of Rs. 15 lacs, assuming that deposits would remain stagnant at Rs.
375 lacs:
a) Add Rs. 12.50 lacs
b) Add Rs. 10 lacs
c) Add Rs. 3.75 lacs
d) Not required to add any amount because the ratio of 1:25 is the prescribed minimum ratio which needs to be
reached within a period of one year from the date of its incorporation.

Summary – As per section 406, within 1 year of incorporation a Nidhi company must have ratio of NoF : Deposit
of not more than 1:20

Question 35.3: [Section 406]

According to the case scenario, Purvi Savings and Investments Nidhi Ltd. has issued 1,30,000 shares and therefore,
its paid-up share capital stood at Rs. 13,00,000. Minimum how many shares are required to be allotted to each
deposit holder? Choose the correct option from those given below:
a) Minimum 5 equity shares to each deposit holder.
b) Minimum 10 equity shares to each deposit holder.
c) Minimum 20 equity shares to each deposit holder.
d) Minimum 25 equity shares to each deposit holder.

Summary – As per section 406, Nidhi to allot each deposit holder Lower of - At least 10 shares or shares
equivalent to Rs. 100.

Question 35.4: [Section 406]

The case scenario mentions that the rate of interest of 6.5% p.a. is the highest which is being offered by Purvi
Savings and Investments Nidhi Ltd. on deposits of more than 3 years. What is the maximum rate of interest it can
charge on any loan advanced by it to its members? Select the correct alternative from the given options:
a) Maximum 10.0% p.a.
b) Maximum 12.0% p.a.
c) Maximum 14.0% p.a.
d) Maximum 16.0% p.a.

Summary – As per section 406, max rate of interest on loan by Nidhi shall not > (Highest rate of interest
offered on deposits + 7.5%). Hence, 6.5% + 7.5% = 14%

Answers
1(a) 2(c) 3(b) 4(c)

Question 36 (Foreign Co.): [Category B] [Can you solve the MCQs directly without reading the case? - Yes]
Parfum International SA, founded by Charlotte and Charles in Nice, France, is a key player in the perfume industry
since 1980. Dealing in perfumes, fragrances, colognes, incenses, etc., its products are considered as a scent of
energy, liveliness and happiness. The classic bottles containing the admirable products of the company signify
personal luxury and are a welcome addition to any dressing table. The fragrances comprise notes of bergamot,
lemon, jasmine, patchouli, vetiver, opoponax, sandalwood and ambergris.
Parfum International SA has an extensive distribution network consisting of subsidiaries and joint ventures. Its
products are sold world over occupying space in 25 countries. The perfumes are very successful in Europe, Asia,
Middle East and in North and South America.
A market survey conducted by Parfum International SA in India astonishingly revealed that the company was
missing a vital market of the world. In order to make its presence felt in India, Parfum
International SA decided to open its first business outlet in Bandra East, Mumbai, by investing around Rs. 5.00
crores. Ratnesh Shah was appointed as CS of the company to look after legal and secretarial matters.
Under the supervision of Ratnesh Shah, various documents were prepared for submission to the jurisdictional RoC
These documents included a certified copy of the Charter of the company defining its constitution, a list of the
directors and secretary of the company containing the prescribed particulars, names and addresses of two persons
resident in India who were authorised to accept on behalf of the company service of process and any notices or
other documents required to be served on the company, full address of its principal place of business in India, a
declaration which stated that none of the directors of the company or the authorised representative in India had
ever been convicted or debarred from formation of companies and management in India or abroad, etc. Since the
Charter of the company was in French language, it was translated into English for the purpose of filing. As regards
particulars of opening and closing of a place of business in India on earlier occasions, a ‘Nil’ statement was prepared
for submission since Parfum International SA was opening its very first outlet in Mumbai.
Further to this, a signboard exhibiting the name of the company i.e. Parfum International SA and the name of the
country of its incorporation i.e. France, in French and also in Marathi was prepared for hanging outside the business
outlet in Bandra East.
Various documents, as prepared under the guidance of Ratnesh Shah, were duly filed with the RoC
It is obligatory on the part of Parfum International SA to make out every calendar a balance sheet and profit and
loss account of its Indian business operations in the prescribed form containing prescribed particulars and annexing
thereto specified documents. The company is also required to prepare and file its Annual Return in the prescribed
form containing the particulars as they stood on the close of the financial year.
As per the plans of the company, during next three years, it will open at least 10 outlets in major cities of the
country like Delhi, Bangalore, Kolkata, Chandigarh, Lucknow, etc.

Multiple Choice Questions

Question 36.1: [Section 382]
According to the case scenario, Parfum International SA, incorporated in France, established its first business
outlet in Bandra East, Mumbai and exhibited on the signboard its name and the name of the country of its
incorporation in French and Marathi. From the following options, choose the one which indicates the correct
combination of languages to be used by the company to display its name and name of the country of its
incorporation:
a) Since Parfum Intl SA established its business outlet in Bandra East, Mumbai, it needs to use English and
Marathi languages on the signboard which displays its name and the name of the country of its incorporation.
b) Since Parfum Intl SA established its business outlet in Bandra East, Mumbai, it needs to use Hindi and Marathi
languages on the signboard which displays its name and the name of the country of its incorporation.
c) Since Parfum Intl SA is a French company, it has correctly used French and Marathi languages to display its
name and name of country of its incorporation on signboard hanging outside its business outlet in Bandra.
d) Since Parfum Intl SA established its business outlet in Bandra East, Mumbai, it needs to use French and Hindi
languages on the signboard which displays its name and the name of the country of its incorporation.

Summary – As per section 382, a foreign company shall exhibit outside of every office or place where it carries
on business in India, the name of the company and the country in which it is incorporated, in letters easily legible
in English characters, and also in the characters of the language or one of the languages in general use in the
locality in which the office or place is situate;
Question 36.2: [Section 380]
Max within how much time, Parfum International SA, after establishing its business outlet in Mumbai, is required to
file various documents with Registrar of Companies? Select the correct answer from the following options:
a) Maximum within 15 days of establishment of its business outlet in Mumbai.
b) Maximum within 30 days of establishment of its business outlet in Mumbai.
c) Maximum within 45 days of establishment of its business outlet in Mumbai.
d) Maximum within 60 days of establishment of its business outlet in Mumbai.

Summary – As per Sec 380, Every FC shall within 30 days of estb of Place of Business in INDIA, deliver various
documents to RoC, New Delhi

Question 36.3: [Section 381]

According to the case scenario, it is obligatory on the part of Parfum International SA to make out every calendar a
balance sheet and profit and loss account of its Indian business operations in the prescribed form containing
prescribed particulars and annexing thereto specified documents. Being a French company, Parfum International SA
is required to make out every calendar a balance sheet and profit and loss account of its Indian business operations
in accordance with _________
a) French Commercial Code.
b) Schedule III of the Companies Act, 2013.
c) International Accounting Standards.
d) French Generally Accepted Accounting Principles (French GAAP), called Plan Comptable Général (PCG).

Summary – As per section 381, Every FC shall in every calendar year prepare BS, P/L of its Indian Business
Operations as per Schedule III of Companies Act, 2013

Question 36.4: [Section 381]

Maximum within how much time, Parfum International SA is required to file its Annual Return with the jurisdictional
Registrar of Companies? Choose the correct option from those stated below:
a) Maximum within a period of 30 days from the last day of its financial year.
b) Maximum within a period of 60 days from the last day of its financial year.
c) Maximum within a period of 90 days from the last day of its financial year.
d) Maximum within a period of 120 days from the last day of its financial year.

Summary – As per section 381, Every FC shall prepare and file Annual Return in form FC-4 Within 60 days from
last day of F.Y to Jurisdictional ROC.

Answers
1(a) 2(b) 3(b) 4(b)

Question 37 (Sec 406): [Category C] [Can you solve the MCQs directly without reading the case? - Yes]
(RTP May’22)
Chiranjeev, equipped with MBA Finance, always dreamt of setting up a small finance business company with a vision
to contribute to the Indian economy to the maximum possible extent by using his limited efforts. After discussing
the matter with his relatives and friends he decided to start a Nidhi company as this was the most easy and
affordable way to start a loan business in India which required only seven members with easy documentation. No
approval, whatsoever, was also required from RBI as in the case of other finance companies. Further, the Nidhi
company would be able to accept deposits from members and lend to them as well besides earning periodical
interests on loans while its main expenditure would be to pay interests on deposits and establishment charges, etc.
In order to fulfil his dream, Chiranjeev along with his six other trusted friends and relatives incorporated a Nidhi
company under the name Shri Murugan Wealth Nidhi Limited, on 20th August, 2015 at Kanchipuram,
Tamil Nadu, which was duly notified as Nidhi in the Official Gazette. It was mentioned in the Memorandum that as
Nidhi, the company would cultivate the habit of thrift and savings amongst its members, receive deposits from and
lend to, its members only, for their mutual benefit and it shall comply with Nidhi Rules, 2014. The authorised capital
of the company was Rs. 1,00,00,000 divided into 10,00,000 equity shares of Rs. 10 each.
All the members of the Board of Shri Murugan Wealth Nidhi Limited possessed a very strong background in terms
of financial stability as also expertise in business. Chiranjeev was throughout supported by the extraneous efforts
of his younger brother, Chinnamani who was the executive president of Shri Murugan Wealth Nidhi Limited and
possessed administrative talent to govern the organisation without compromising ethical practices.
With a dedicated team of staff, the company was on its growth path with utmost courteous services rendered with
able management. The company encouraged rural savings habit and believed in rendering all financial assistance to
its members by receiving both short-term and long-term deposits.
The deposits raised by Shri Murugan Wealth Nidhi Limited were in the form of fixed deposits, recurring deposits
and savings deposits. While extending loans to its members, the Nidhi provided Shri Murugan Jewel Loan against
pledge of gold jewellery for productive and consumption purposes with minimum documentation and utmost safety
of their gold. It also provided mortgage loans and loans against deposits. In addition, it provided locker facilities to
its members.
As on 31st March 2021, the issued, subscribed and paid-up share capital of Shri Murugan Wealth Nidhi Limited was
Rs. 95,00,000 (9,50,000 equity shares of Rs. 10 each). Its deposits were to the extent of Rs. 315 crores with
12,000 members. The loans aggregated to Rs. 275 crores. Keeping in view the sufficiency of profits, the company
declared a dividend of Re. one per share.
In near future, Shri Murugan Wealth Nidhi Limited has plans to open more branches which proves the fact that
they are securing trust of more and more members as the years go by.
Multiple Choice Questions
Question 37.1: [Section 406]
It is evident from the case scenario that Shri Murugan Wealth Nidhi Limited started with paid-up share capital of
Rs. 95,00,000. Keeping in view the minimum paid-up share capital with which a Nidhi can be started, how much is the
excess paid-up share capital Shri Murugan Wealth Nidhi Limited had when it started its operations with effect
from 20th August, 2015:
a) Rs. 75,00,000
b) Rs. 80,00,000
c) Rs. 90,00,000
d) Rs. 93,00,000

Summary – As per section 406, minimum PUSC required in case of Nidhi co during incorporation is Rs 5,00,000

Question 37.2: [Section 406]

For the FY 2021-22, Shri Murugan Wealth Nidhi Limited declared a dividend of Re. 1 per share. What is the
maximum amount of dividend it is permitted to declare without seeking approval from the jurisdictional Regional
Director? Choose the correct option from those given below:
a) Re. 1 /share. Dividend in excess of Re. 1 per share shall require approval from jurisdictional Regional Director.
b) Rs. 2 /share. Dividend in excess of Rs. 2 per share shall require approval from jurisdictional Regional Director.
c) Re. 2.5 /share. Dividend in excess of Re. 2.5 per share shall require approval of jurisdictional Regional Director.
d) Re. 3 /share. Dividend in excess of Re. 3 per share shall require approval from jurisdictional Regional Director.
 Summary – As per Nidhi Rules, dividend upto 25% can be declared. Above 25%, prior approval of Regional
Director is required

Question 37.3: [Section 406]

The case scenario states that Shri Murugan Wealth Nidhi Limited also provided locker facilities to its members.
What is the maximum rental income that the company can generate from locker facilities provided to its members.
a) Maximum upto ten per cent of its gross income at any point of time during a financial year.
b) Maximum upto twenty per cent of its gross income at any point of time during a financial year.
c) Maximum upto twenty-five per cent of its gross income at any point of time during a financial year.
d) Maximum upto thirty per cent of its gross income at any point of time during a financial year.

Summary – As per Nidhi Rules, a Nidhi company shall have no other object in MOA encouraged except cultivating
saving attitude. Exception: rental income from locker facility – Upto 20% of Gross income in a FY

Question 37.4: [Section 406]

By declaring dividend of Re. one per share, Shri Murugan Wealth Nidhi Limited is required to pay Rs. 9,50,000 as
dividend amount to its members. How much amount it is required to transfer to General Reserve when it declares
dividend of Rs. 9,50,000? Select the correct alternative from the following options:
a) Not required to transfer any amount to General Reserve
b) Transfer minimum Rs. 9,50,000 (i.e. 100% of Rs. 9,50,000) to General Reserve
c) Transfer minimum Rs. 4,75,000 (i.e. 50% of Rs. 9,50,000) to General Reserve
d) Transfer minimum Rs. 14,25,000 (i.e. 150% of Rs. 9,50,000) to General Reserve

Summary – As per Nidhi Rules, an amount equal to amount of dividend shall be transferred to general reserve -
When Nidhi co declares dividend.

Answers
1(c) 2(c) 3(b) 4(b)

Question 38: [Category C] [Can you solve MCQs directly w/o reading the case? – Yes (just read underlined)]
Marigold Stationers Limited, incorporated in April 2014 by Pratham and Utkarsh as well as their close friends, has
its Registered Office situated in Rajendra Place, New Delhi. Its manufacturing units are located in Chandigarh and
Sangrur. The Company, in its infancy, manufactured smorgasbord of paper stationery like, Note Books of different
sizes, Long Books, Note Pads, Registers, Account Books, etc., but moved on to add certain non-paper stationery
products like Calculators, Rubber Stamp Kits, Gel-Pens, HB Pencils, Geometry Boxes, Drawing Colours, etc., in
another five years’ time. The company had a tie-up with stationery wholesalers for selling and distribution of its
products.
As per the latest audited financial statements i.e. as on 31st March, 2021, the paid-up share capital of Marigold
Stationers Limited was Rs. 300 crores and its turnover was Rs. 500 crores.
As regards the number of directors, there are 12 directors in this stationery manufacturing company. Out of these,
Vishesh and Vinayak are independent directors whereas Pallavi and Bhavasrija are women directors. Further, leaving
independent and women directors, out of remaining 8 directors, 6 are executive directors. The Articles of
Association of the company are silent on the issue of retirement of the directors at every Annual General Meeting.
Vallabh, one of the executive directors of Marigold Stationers Limited, recently shifted to his newly constructed
house in Greater Kailash-I after vacating rented accommodation in Punjabi Bagh. He got his Aadhar card changed to
accommodate new residential address. Since, DIR-3, earlier filed by him, contains his old residential address, he is
desirous of changing his address in the records of RoC
In the immediate previous financial year, Marigold Stationers Limited had contributed a total Rs. 25,00,000 to two
prominent political parties of the country, namely Nitya Vikas Party and Nav Bhor Party. In the current financial
year, it is contemplating to contribute Rs. 50,00,000 to both the parties in the same proportion as was done in the
FY just gone by.
Lotus Stationery Limited, incorporated in June, 2015 by Kabir and Vishvender and their close relatives, has its
Registered Office in Thane, Mumbai and is a subsidiary of Marigold Stationers Limited. It is into the manufacturing
of computer stationery, computer paper, inkjet cartridges, Pen Drives of different capacities and the like. It is
managed by seven directors of which two are independent directors. Its issued and paid-up capital is Rs. 30 crores.
In the immediate previous financial year, its turnover reached Rs. 90 crores.
Due to imminent expansion plans, Lotus Stationery Limited is desirous of appointing Anirudh, a well-qualified and
experienced personality, as a director to strengthen its Board. It is noteworthy that Anirudh is already holding
directorships in Marigold Stationers Limited, seven other public companies, six private limited companies of which
two are subsidiaries of public limited companies and alternate directorship in Kitab Literacy Publishers Private
Limited.
Multiple Choice Questions
Question 38.1: [Section 152(6)]
There are 12 directors in Marigold Stationers Limited. Considering the applicable provisions, choose the correct
answer from the following options that indicates the number of directors who are liable for retirement by rotation
and the actual number of directors who shall get retired:
a) 7 are liable for retirement by rotation whereas actual number of directors to be retired shall be 2.
b) 6 are liable for retirement by rotation whereas actual number of directors to be retired shall be 2.
c) 8 are liable for retirement by rotation whereas actual number of directors to be retired shall be 3.
d) 8 are liable for retirement by rotation whereas actual number of directors to be retired shall be 2.

Summary – As per Sec 152(6), Independent director shall not be included in total number of directors. At least
2/3rd of total director shall be liable for retirement by rotation and 1/3 rd shall actually retire.

Question 38.2: [ DIR 6]

It is stated in the case scenario that Vallabh, one of the directors of Marigold Stationers Limited, recently
changed his residence from Punjabi Bagh to Greater Kailash-I. In order to change his residential particulars already
filled in DIR-3, through which Form Vallabh shall intimate the Registrar of Companies:
a) Vallabh is required to fill Form DIR-3A and file the same with the RoC
b) Vallabh is required to fill Form DIR-12 and file the same with the RoC
c) Vallabh is required to fill Form DIR-6 and file the same with the RoC
d) Vallabh is required to fill Form DIR-11 and file the same with the RoC

Summary – Any changes in the information submitted in DIR 3 shall be intimated to RoC in Form DIR 6

Question 38.3: [Section 165]

Lotus Stationery Limited is desirous of appointing Anirudh as a director to strengthen its Board. Anirudh is already
holding directorships in Marigold Stationers Limited, 7 other public companies, 6 private limited companies of which
two are subsidiaries of public limited companies and alternate directorship in Kitab Literacy Publishers Private
Limited. Select the correct option from those stated below whether Anirudh, keeping in view his directorships in
other companies, can be appointed as a director in Lotus Stationery Limited:
a) Anirudh can be appointed as a director in Lotus Stationery Limited since he is permitted to hold
directorships in maximum 20 companies whereas currently he is holding directorships in only 15 companies.
b) Anirudh cannot be appointed as a director in Lotus Stationery Limited since he is holding directorships in
eight public companies and two private limited companies which are subsidiaries of public limited companies.
 c) Anirudh cannot be appointed as a director in Lotus Stationery Limited since he is already holding
directorships in maximum permitted 15 companies.
d) Anirudh can be appointed as a director in Lotus Stationery Limited since he is holding directorships only in
eight public companies as against maximum permitted ten public companies.

Summary – As per sec 165, No person shall hold the office of director in more than 20 companies at the same
time - Provided maximum no of public co (incl private company that is holding or subsidiary of public co) in which a
person can be a director shall not exceed 10.

Question 38.4: [Section 182]

In the current financial year, Marigold Stationers Limited is contemplating to contribute Rs. 50,00,000 to two
political parties whom they contributed Rs. 25,00,000 in the previous financial year. Is it possible for Marigold
Stationers Limited to make such contribution of Rs. 50,00,00? Choose the correct answer from following options:
a) Marigold Stationers Limited can contribute to both the political parties maximum upto 125% of Rs.
25,00,000 which was contributed in the immediate previous FY and such amount works out to Rs. 31,25,000.
b) Marigold Stationers Limited can contribute to both the political parties maximum upto 150% of Rs.
25,00,000 which was contributed in the immediate previous FY and such amount works out to Rs. 37,50,000.
c) Marigold Stationers Limited can contribute to both the political parties maximum upto 175% of Rs.
25,00,000 which was contributed in the immediate previous FY and such amount works out to Rs. 43,75,000.
d) Marigold Stationers Limited can contribute any amount to both the political parties irrespective of what
was contributed in the immediate previous financial year.

Summary – As per section 182, a company (other than govt co. or co. in existence for less than 3 FY) is allowed to
contribute any amount directly or indirectly towards political contribution

Answers
1(a) 2(c) 3(b) 4(d)

Question 39: [Category B] [Can you solve the MCQs directly without reading the case? - Yes]
Sitting over the fence, Shelly opted to face dynamism of consumer preferences, razor-cut competition and
changing Government policies to fulfill her inherent passion for exotic make-up brands by launching a beauty
product company in Bombay (now Mumbai), supported by her advocate father Bhimsen, elder brother Ashutosh and
younger brother Soumit as well as ten close friends, way back in 1984 under the then Companies Act, 1956, much
before the air of liberalisation, privatisation and globalisation touched the soil of our country.
The company M/s Beauty Products Limited with an Authorised Capital of Rs. 30,00,000 divided into 3,00,000
shares of Rs. 10 each (paid-up capital Rs. 25,00,000) and under the brand ‘Angelic’ began manufacturing cosmetic
products like Nail-enamel, Foundation Cream, Compact, Mascara, Eye-pencil, etc. Its products had an international
touch and captured the Indian market at a time when the elite class was splurging on imported cosmetics.
This unlisted company, under the strong and able leadership of Shelly, Ashutosh and Soumit, had not only observed
a growth trend in terms of its turnover and profitability but had also earned name and fame in the hearts of
consumers as well as cosmetic industry. Ashutosh directed the company in the capacity as Managing Director up to
the satisfaction of all.
In 2015, M/s Beauty Products Limited felt the need, decided and raised its Authorised Capital to Rs. 20,00,00,000.
Through private placements from time to time, it pumped in more capital and its paid-up capital reached to a level
of Rs. 19,50,00,000 as on 31st March, 2021. At this juncture, its turnover was Rs. 850 crores.
The secretarial audit of M/s Beauty Products Limited was started in the year 2018 as the company had crossed the
threshold limit relating to turnover as per the audited financial statements as on 31st March, 2017. M/s Keshav and
Kaustubh & Associates, a firm of practicing company secretaries, was engaged to carry out the secretarial audit.
In the beginning of the current financial year, the total strength of directors of M/s Beauty Products Limited had
reached eleven which included two independent directors. Some of the directors of the company were desirous of
appointing Mr. Soumit as Managing Director of the company in place of Mr. Ashutosh, who wanted to leave the
office of Managing Director due to intense family pressure. It is to be noted that Mr. Soumit was also holding the
office of Managing Director in M/s Glow and Glow Cosmetics Limited which was run by his father-in-law along with
his relatives. For the appointment of Mr. Soumit as Managing Director of M/s Beauty Products Limited, a Board
Meeting was convened by giving a specific notice of such meeting and of the resolution to be moved thereat, to all
the directors then in India. At the Board Meeting, five out of nine directors present in the meeting consented to
Mr. Soumit becoming as Managing Director.
By now, M/s Beauty Products Limited had over 150 products catering to every kind of consumer. Included in its
diverse portfolio were moisturisers, aloe-vera gels, lip balms, deodorants and a variety of nail- paints to meet the
demand of teenagers.
After some time, keeping in view the future expansion, M/s Beauty Products Limited wanted to appoint Mr. Amba
Prasad, 74 years of age, as a Whole-time director with the approval of the Board. He had sharp business acumen
and wide experience by working at a very senior position in Rich Bank Limited from where he superannuated 14
years back. At a Board Meeting, the proposal to appoint Mr. Amba Prasad as Whole-time director was approved with
full majority of eight directors attending the Meeting. No further action was taken in this regard.
Multiple Choice Questions
Question 39.1: [Section 203]
As per the case scenario, some of the directors of M/s Beauty Products Limited were desirous of appointing Mr.
Soumit as Managing Director of the company, who was also acting as Managing Director in M/s Glow and Glow
Limited. At the Board Meeting convened in this respect, five out of 9 directors present in the meeting consented to
his becoming as Managing Director. Considering the applicable provisions, choose the correct alternative from those
given below as to whether or not Mr. Soumit was appointed as Managing Director of M/s Beauty Products Limited?
a) Since more than half directors attending the Board Meeting consented to Mr. Soumit becoming the
Managing Director, he must have been appointed as the Managing Director of M/s Beauty Products Limited.
b) Since minimum two-third directors attending the Board Meeting must consent to Mr. Soumit becoming the
Managing Director, he could not have been appointed as Managing Director of M/s Beauty Products Limited.
c) Since minimum three-fourth directors attending the Board Meeting must consent to Mr. Soumit becoming
Managing Director, he could not have been appointed as Managing Director of M/s Beauty Products Limited.
d) Since all the directors attending the Board Meeting must consent to Mr. Soumit becoming the Managing
Director, he could not have been appointed as the Managing Director of M/s Beauty Products Limited.

Summary – As per section 203, where a person who is MD in another company is being appointed as MD in a
company, such appointment shall require unanimous consent of all the directors present in the meeting.

Question 39.2: [Section 196]

It is evident from the case scenario that the proposal to appoint Mr. Amba Prasad, aged 74 years, as Whole-time
Director was approved by the Board of Directors of M/s Beauty Products Limited. Select the correct alternative
from the following options that indicates the validity or invalidity of appointment of Mr. Amba Prasad as a Whole-
time Director of the company after approval of proposal by the Board:
a) Valid only when an ordinary resolution is passed and thereafter, sanction of NCLT is sought.
b) Valid since it was approved by all the 8 directors who attended the Board Meeting.
c) Not be considered as valid since it was not approved by all the 11 directors.
d) Valid only when a special resolution is passed and if no such special resolution is passed, but the votes cast
in favour of motion exceed the votes, if any, cast against the motion and the Central Government approves
such appointment.
 Summary – As per section 196, To appoint person of age > 70 years as an MD/WTD or manager, either pass SR
and ES annexed to notice to include justification.
If no SR could be passed but votes cast in favor > against (i.e., OR) and CG, on application, is satisfied that such
appt. is beneficial to co., appointment can be made.

Question 39.3: [Section 196]

Suppose Mr. Amba Prasad, after due formalities, is appointed as Whole-time Director of M/s Beauty Products
Limited, then what would be the maximum term for which he can be so appointed:
a) 3 years.
b) 5 years.
c) 7 years.
d) 10 years.

Summary – As per section 196, No co. shall appoint/reappoint MD/WTD or Manager for a term > 5 years at a
time.

Question 39.4: [Section 204]

The case scenario mentions that in the year 2018, secretarial audit of M/s Beauty Products Limited was started as
the company had crossed the threshold limit relating to turnover. At that time, what could be the threshold limit
relating to turnover which necessitated starting of secretarial audit:
a) Rs. 300 crores or more.
b) Rs. 250 crores or more.
c) Rs. 150 crores or more.
d) Rs. 100 crores or more.

Summary – As per section 204, Secretarial audit is applicable to public co. having T/O >= Rs. 250 crores

Answers
1(d) 2(d) 3(b) 4(b)

Question 40 (Sec 406): [Category A] [Can you solve the MCQs directly without reading the case? - Yes]
To provide banking services to the people living in Emakulam, Kerala, which still was a far off location and devoid of
accessing finance from nationalised banks and Non-Banking Financial Companies (NBFCs), Nagarajan, his close
friends Krishnamurti, Raghunath, Govindam, Radhakrishnan, Vijay Krishnan and Chaitanya, who were experienced and
dedicated persons from the field of business, trade and industry, thought of opening a Nidhi company which would
act as the safest and cheapest way of inviting deposits from them and granting them loans.
Vinayak Strotram Nidhi Limited was thus incorporated by Nagarajan along with this group of close friends on 10th
July, 2014 in Emakulam District of Kerala.
The Authorised Capital of this Nidhi, which wanted to nurture the habit of caution and savings among the members
by receiving deposits from them and lending money to them only for their mutual benefit, was Rs. 70,00,000 divided
into 7,00,000 equity shares of Rs. 10 each while issued and paid-up capital stood at a figure of Rs. 60,00,000 with
just eight employees.
Through this Nidhi, savings could be deposited in the form of Savings Account, Recurring Deposit Account, Fixed
Deposit Account and Daily Deposit Accounts while Vinayak Strotram Nidhi Limited granted loans to the members
only against securities of immovable properties and movables such as gold, silver, jewellery, deposits, National
Saving Certificates, life insurance policies and other Government securities as per the prescribed rules for Nidhi
companies.
Customer centricity was at the core of Managing Director Nagarajan and three executive directors Krishnamurti,
Raghunath and Govindam and it was this belief that had led the business to build long term relationships.
Since its inception, the Nidhi was earning profits year by year. In anticipation of growing and rendering better
services to their members and stabilizing it as a profit centre, Nagarajan and his dedicated team felt that there
was a demand for opening some branches in the district itself. Thus, Vinayak Strotram Nidhi Limited opened 3 more
branches at Aluva, Kanayannur and Kothamanglam in Emakulam district of Kerala. These branches were inaugurated
with more focus on deposit mobilization and lending which was a core business of this Nidhi.
The Nidhi brought within its fold experienced persons like retired senior executives from national and multi-
national banks to seek guidance and build it as the pioneer in rendering best services by adopting latest technology.
By the end of March, 2021, Vinayak Strotram Nidhi Limited had 11,000 members and 200 employees.
In the track of fast growth and with foresightedness in mind, Nagarajan desired to open a new branch in another
district of Kerala. He chose Kannaur district since he had a special bonding with this place because he was an
alumnus of Kannaur University, having graduated in commerce from this famous University. But instead of doing
that way, he opened another Nidhi company by the name Vinayak Strotram Kannaur Nidhi Limited in Kannaur
district of Kerala.

Multiple Choice Questions

Question 40.1: [Section 406]
Kartikay, a resident of Aluva, is desirous of opening a Savings Account with Vinayak Strotram Nidhi Limited but
before opening such account he must be a member of this Nidhi. How many minimum shares must be issued to him so
that he becomes a member?
a) Minimum 1 share
b) Minimum 3 shares
c) Minimum 5 shares
d) Minimum 10 shares

Summary – As per section 406, in case of a Nidhi company, a saving A/C holder & recurring deposit A/C holder to
hold at least 1 share of Rs. 10 each.

Question 40.2: [Section 406]

Suppose Krishnamurti, one of the directors of Vinayak Strotram Nidhi Limited, were to hold office of director for
a term upto ten consecutive years, then when shall he be eligible for re- appointment as director? Choose the
correct alternative from those stated below:
a) After expiry of 6 months of ceasing to be such director
b) After expiry of 1 year of ceasing to be such director
c) After expiry of 2 years of ceasing to be such director
d) After expiry of 3 years of ceasing to be such director

Summary – As per section 406, in case of Nidhi Company - Term of director shall be upto 10 consecutive years,
Reappointment only after expiry of 2 years from ceasing to be a director.

Question 40.3: [Section 406]

Maximum how much interest Vinayak Strotram Nidhi Limited can offer on fixed and recurring deposits accepted
from its members? Select the correct option from those mentioned below:
a) Rate not exceeding the maximum rate of interest that a NBFC can pay on its public deposits.
b) Rate not exceeding the maximum rate of interest that a nationalised bank can pay on its public deposits.
c) Rate not exceeding the maximum rate of interest that a Rural Regional Bank can pay on its public deposits.
 d) Rate not exceeding the maximum rate of interest that a Co- operative Bank can pay on its public deposits.

Summary – As per section 406, a Nidhi can offer interest on fixed & recurring deposit at a rate - Not exceeding
max rate of interest that NBFC can pay on its public deposits.

Question 40.4: [Section 406] (Out of syllabus)

In which year at the earliest, Vinayak Strotram Nidhi Limited would have got the approval to open branches at
Aluva, Kanayannur and Kothamanglam in Emakulam district of Kerala.
a) At the earliest, after 9th July, 2015.
b) At the earliest, after 9th July, 2016
c) At the earliest, after 9th July, 2017
d) At the earliest, after 9th July, 2018

Summary – As per Nidhi Rules, A Nidhi may open branches, only if it has earned net profits after tax
continuously during the preceding 3 FYs. In this case, company was incorporated on 10 th July 2014. Hence, it can
inaugurate branches at the earliest after 9th July, 2017

Question 40.5: [Section 406] (Out of syllabus)

Nagarajan, Managing Director of Vinayak Strotram Nidhi Limited, desired to open a branch in Kannaur district but
changed his plan and rather opened a new Nidhi by the name Vinayak Strotram Kannaur Nidhi Limited. What could
be the reason for change of his mind? Choose the appropriate option from those given below:
a) Because he did not get permission from the RoC
b) Because he did not get permission from the Regional Director.
c) Because he did not get permission from the State Government.
d) Because he did not get permission from the RBI.

Summary – As per Nidhi Rules, If a Nidhi proposes to open > 3 branches within a district or any branch outside
the district, it shall obtain prior permission of Regional Director and intimate to RoC about opening of every
branch within 30 days of such opening.

Answers
1(a) 2(c) 3(a) 4(c) 5(b)