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CA FINAL NEW COURSE (Nov 2023)

GROUP I – PAPER 4
CORPORATE AND ECONOMIC LAWS
(Series 1)
Time Allowed: - 3 Hours Maximum Marks: 100

This question paper comprises two parts, Part I and Part II.
Part I comprises MCQ & Part II comprises questions which require descriptive answers.

PART – I (MCQs)
All MCQs are compulsory
Question no. 1-10 carry 2 marks each and Question no. 11-20 carry 1 mark each
The following scenario relates to questions 1–5
MELA Limited is an unlisted public company having a paid up capital of ₹ 100 crores as on 31st
March, 2023. The company made a turnover of ₹ 300 crores for the financial year ended 31st
March, 2023. The Articles of Association of the company provides for payment of sitting fee to
Directors for each Board Meeting/Committee thereof subject to a maximum of ₹ 40,000 per
meeting. The Board of Directors is comprised of Independent Directors and Women Directors
also. The Company is having 7 directors in its Audit Committee. Shri PADMABHUSHAN, working
as Financial Advisor of the company, was designated as Chief Financial Officer from 1 st April,
2019. It is proposed to appoint Shri PADMABHUSHAN as Independent Director of the Company.
The Board of Directors proposes to fix sitting fee of ₹ 50,000 per meeting to Independent
Director and ₹ 30,000 per meeting to Woman Director, taking into consideration their
experience and qualification.
In the light of the provisions of the Companies Act, 2013, advise the Board of Directors in the
following matters:
1. Appointment of Mr. PADMABHUSHAN as Independent Director
(a) Mr. PADMABHUSHAN shall be appointed as an Independent Director
(b) Mr. PADMABHUSHAN shall be appointed as an Independent Director only if he resign from
the position of CFO
(c) Mr. PADMABHUSHAN shall be appointed as an Independent Director only if he resign from
the position of Financial Advisor and CFO
(d) Mr. PADMABHUSHAN shall not be appointed as an Independent Director
2. Fixing sitting fee of ₹ 50,000 to Independent Director and ₹ 30,000 to Woman Director
(a) Both Independent Director and Woman Director to be paid sitting fee of ₹ 40,000
(b) Sitting fee of ₹ 50,000 to Independent Director and ₹ 30,000 to Woman Director is Valid
(c) Both Independent Director and Woman Director to be paid sitting fee of ₹ 1 lakh
(d) Sitting fee of ₹ 50,000 to Independent Director and ₹ 40,000 to Woman Director is to be

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 paid
3. Minimum number of Independent Directors
(a) 2
(b) 3
(c) 4
(d) 7
4. Maximum sitting fee to a Director
(a) 10,000
(b) 30,000
(c) 50,000
(d) 1,00,000
5. Assuming MELA Ltd. is a Government Company, what will be your advise in the matter of
appointment of Mr. PADMABHUSHAN as Independent Director
(a) Mr. PADMABHUSHAN shall be appointed as an Independent Director
(b) Mr. PADMABHUSHAN shall be appointed as an Independent Director only if he resign from
the position of CFO
(c) Mr. PADMABHUSHAN shall be appointed as an Independent Director only if he resign from
the position of Financial Advisor and CFO
(d) Mr. PADMABHUSHAN shall not be appointed as an Independent Director

The following scenario relates to questions 6-10

An investigation was ordered by the Central Government under Section 216 of the Companies
Act, 2016, against SRC Limited for determining the true membership of the Company. In
connection with this investigation, it appears to the Tribunal that there is good reason to find
out the relevant facts about 9% Redeemable Cumulative Preference Shares (RCPS) issued by the
Company on 15.10.2023 and the Tribunal is of the opinion that unless restriction is imposed on
further issue of such shares, the purpose cannot be solved. Accordingly, the Tribunal, by an
Order dated 15.08.2024, directed the Company that the further issue of RCPS shall be subject to
restrictions for a period of four years. Despite the Order of the Tribunal as above, SRC Limited
proceeded with further issue of RCPS on 20.08.2024 in order to fund the working capital
requirements for its expansion project.
Referring to the provisions of the Companies Act, 2013, examine the following:
6. Can the Tribunal restrict further issue of RCPS?
(a) Yes, Tribunal can restrict
(b) Yes, Tribunal can restrict with prior permission of Central Government
(c) Yes, Tribunal can restrict with prior permission of Registrar
(d) None of the above
7. Maximum period for which tribunal can restrict further issue of RCPS?
(a) 2 Years
(b) 5 Years
(c) 3 Years
(d) 1 Year

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8. What are the penal provisions in case of contravention to the above Order for the
Company?
(a) Fine 25,000 to 5 lakh
(b) Fine 1 lakh to 25 lakh
(c) Fine 1 lakh to 3 lakh
(d) Fine 25,000 to 3 lakh
9. What are the penal provisions in case of contravention to the above Order for the Officers-
in-default?
(a) Imprisonment of 6 months only
(b) Fine 25,000 to 5 Lakh Only
(c) Both (a) and (b)
(d) Either (a) or (b) or Both
10. Relevant Section applicable to the current scenario?
(a) Section 221
(b) Section 222
(c) Section 223
(d) Section 224

11. A and B were appointed as first directors on 8th April, 2023 in Sun Glass Ltd. Thereafter,
C, D and E were appointed as directors on 10th July 2023 and F, G and H were also
appointed as directors on 11th August 2023 in the company. In the next AGM of the
company, A and B were proposed to be retired by rotation and re-appointed as directors.
Is the proposal for retirement by rotation and re-appointment of A and B valid?
(a) No, they can retire but not be reappointed.
(b) A and B cannot be rotated as they were First Directors of the Company.
(c) A and B can both retire by rotation and be reappointed.
(d) None of the above
12. ABC Company filed annual return for 2023-2024. On scrutiny of documents filed by ABC
Company the Registrar is of the opinion that any further information or explanation
related to the company is necessary. By a written notice the Registrar required the
company to furnish in writing such explanation. The Registrar inspected the books of
account of ABC company under section 207. What is the duty of Registrar now?
(a) To seize the books of accounts and submit to the Central Government
(b) To submit a report in writing to the Central Government
(c) To submit a report in writing to the Income tax Department
(d) To seize the books and submit report to the Central Government
13. Transferee Company u/s 235 shall give notice to dissenting shareholders in Form
(a) CAA 4
(b) CAA 14
(c) CAA 5
(d) CAA 1

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14. Tribunal winds up company when company has made default in filing its financial
statements or annual returns with ROC for immediately preceding
(a) 5 Years
(b) 2 years
(c) 3 Years
(d) 1 year
15. JHU Ltd. a Foreign Company, contravened provisions of chapter “Company Incorporated
outside India”. What is the consequence of such contravention?
(a) Fine which shall not be less than ₹ 1 lakh but which may extend to ₹ 3 lakh;
(b) Fine which shall not be less than ₹ 1 lakh but which may extend to ₹ 5 lakh;
(c) Fine which shall not be less than ₹ 1 lakh but which may extend to ₹ 5 lakh; and for
continuing offence. Additional fine which may extend to ₹ 50 thousand for every day
(d) Fine which shall not be less than ₹ 1 lakh but which may extend to ₹ 3 lakh; and for
continuing offence. Additional fine which may extend to ₹ 50 thousand for every day
16. Which of the following shall not be considered as Collective Investment Scheme, any
scheme or arrangement under which:
(a) Contributions or payments made by investors are pooled and utilized for the purpose of
the Scheme
(b) Deposits are accepted by company under the Companies Act, 2013
(c) Property, contribution or scheme forming part of scheme is managed on behalf of
investors
(d) Investors do not have day to day control over the management and operation of scheme
17. Which of the following cannot file a petition of winding up under section 272 :
(a) Company (b) Registrar
(c) Contributory (d) Creditors
18. Central Government may order for summary procedure of winding up if assets of book
value not exceeding Rupees:
(a) 20,00,000 (b) 1 crore
(c) 50,00,000 (d) 5 crore
19. Aakaar Solar Energy Private Limited was allowed the status of a ‘dormant company’ after
a certificate to this effect was issued on 1st July 2023 by the Registrar of Companies,
Delhi and Haryana. Mention the latest date after which the Registrar is empowered to
initiate the process of striking off the name of the company if Aakaar Solar Energy
continues to remain as a dormant company.
(a) After 30th June, 2028
(b) After 30th June, 2024
(c) After 30th June, 2025
(d) After 30th June, 2026

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20. The office of a director shall become vacant in case-
(a) he incurs any of the disqualifications specified in section 164
(b) he absents himself from all the meetings of the Board of Directors held during a period of
12 months with or without seeking leave of absence of the Board
(c) he acts in contravention of the provisions of section 184 relating to entering into contracts
or arrangements in which he is directly or indirectly interested
(d) all of the above

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 PART – II (Descriptive Answers)
This part comprises 6 questions. Question No. 1 is compulsory. Attempt any
4 questions out of the remaining 5 questions.

Marks
1 (a) The Promoters of M/s Frontline Limited, a listed public company propose to have 8
the strength of the Board of Directors as eleven. They also propose to make the
Managing Director and Whole Time directors as directors not liable to retire by
rotation. Advise on the following matters as per the provisions of the Companies
Act, 2013:
(i) Maximum number of persons, who can be appointed as directors not liable
to retire by rotation.
(ii) How many of the remaining directors will have to retire by rotation every
year at the Annual General Meeting (AGM)?
(iii) For the purpose of increasing the strength, certain nominations were
received to nominate candidates for contesting elections. One of the
nominations was rejected by the directors as it was received after sending
the notice of AGM and that too after the working hours of the last day on
which nomination should have been received.
Can the Board of Directors increase the strength of companies' directors to 18
from 11 by appointing additional directors through passing single resolution?

1 (b) Galilio Ltd. is a foreign company in Germany and it established a place of business 6
in Mumbai. Explain the relevant provisions of the Companies Act, 2013 and rules
made thereunder relating to preparation and filing of financial statements, as also
the documents to be attached alongwith the financial statements by the foreign
company.

2 (a) The last three years’ Balance Sheet of PTL Ltd., contains the following information
and figures:
As at 31.03.2021 As at 31.03.2022 As at 31.03.2023
₹ ₹ ₹
Paid up capital 50,00,000 50,00,000 75,00,000
General Reserve 40,00,000 42,50,000 50,00,000
Credit Balance in 5,00,000 7,50,000 10,00,000
Profit & Loss Account
Debenture 15,00,000 20,00,000 25,00,000
Redemption Reserve
Securities Premium 2,00,000 2,00,000 2,00,000
Secured Loans 10,00,000 15,00,000 30,00,000

On going through other records of the Company, the following is also determined:

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 Net Profit for the year 12,50,000 19,00,000 34,50,000
(as calculated in
accordance with the
provisions of the
Companies Act, 2013)

In the ensuing Board Meeting scheduled to be held on 5th November, 2023, among
other items of agenda, following items are also appearing:
(i) To decide about borrowing from Financial institutions on long-term basis.
(ii) To decide about contributions to be made to Charitable funds.
Based on above information, you are required to find out as per the provisions of
the Companies Act, 2013, the amount upto which the Board can borrow from
Financial institution and the amount upto which the Board of Directors can
contribute to Charitable funds during the financial year 2023-24 without seeking
the approval in general meeting.

2 (b) Mr. Ramesh was partner in the Firm, Rajkumar & sons. The said firm was 6
established by Mr. Raj kumar, who is director of the Subh Labh Pvt. Limited which
is a one person company. Subh Labh Pvt. Ltd. have foreign income from the
clientele being of outside India. Companies generation of foreign income was
invested by the Mr. Rajkumar in its firm without being disclosed in its financial
records. Mr. Ramesh was not aware of such undisclosed flow of fund in the Firm.
Give the following answer considering the given facts -
(i) Liability of Mr. Ramesh being a partner of a firm which is involved in use of
income of Subh Labh Pvt. Ltd. obtained from their foreign clientele.
(ii) Liability of Mr. Rajkumar being a director of the Subh Labh Pvt. Ltd.

3 (a) Mr. Rajat is director in 9 public limited companies as on 30th July, 2023 and 4
continues to be so till 26th September, 2023. The following companies appoint Mr.
Rajat as a director at their respective Annual General Meetings held on dates
mentioned against their names:
(i) Makeshift Ltd. (AGM held on 27th September, 2023)
(ii) Patkara Private Ltd. (AGM held on 25th September, 2023)
(iii) Kalpesh Ltd. (AGM held on 29th September, 2023)
You are required to state with reference to the relevant provisions of the
Companies Act, 2013 the options available to Mr. Rajat in respect of accepting or
not accepting the appointment of the above companies.

3 (b) The Board of Directors of BIJI Private Limited made an application to the 4
Registrar of Companies under section 248(2) of the Companies Act, 2013 for
removal of name of the Company. The Board submitted an affidavit that Company
has no pending liabilities. However, it was later found that few amounts were still
payable to creditors.
What penalties can be levied under the Companies Act, 2013 for such an
application?
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3 (c) What kinds of persons are not eligible to become resolution applicant under the 6
provisions of IBC, 2016?

4 (a) The Board of Directors of APCO Limited a listed company for carrying out the 4
valuation of the immovable properties standing in the name of the company as
required under the provisions of the Companies Act, 2013 proposes to appoint
Mr. Mehta, an individual as the valuer. Referring to the provisions of the
Companies Act, 2013 read with the Companies (Registered Valuers and Valuation)
Rules, 2017, the Audit Committee is of the opinion that the Board of Directors
does not have the right to appoint the valuer. Decide.

4 (b) XYZ Limited is being would up by the tribunal. All the assets of the company have 4
been charged to the company’s bankers to whom the company owes ₹ 5 crores.
The company owes following amounts to others:
 Dues to workers – ₹ 1,25,00,000
 Taxes Payable to Government – ₹ 30,00,000
 Unsecured Creditors – ₹ 60,00,000
You are required to compute with the reference to the provision of the Companies
Act, 2013 the amount each kind of creditors is likely to get if the amount realized
by the official liquidator from the secured assets and available for distribution
among creditors is only ₹ 4,00,00,000

4 (c) M/s TAS Constructions Private Limited, an operational creditor on 2 nd April, 2023 6
being the default date issued a demand notice through speed post to M/s Dheeraj
Constructions Private Limited, an unpaid operational/corporate debtor
demanding payment of its invoice dated 19th March, 2023 for ₹ 5,60,000 (15 days
payment terms) towards supply of certain works contract services as per the
provisions of section 8(1) of the Insolvency and Bankruptcy Code, 2016 and rules
framed there under.
Dheeraj Constructions Private Limited on receipt of the demand notice informed
the operational creditor, that vide their e-mail dated 30th March, 2023, addressed
to the company and all its directors, they have disputed the invoice on the quality
of the services rendered and were withholding payment till the dispute is settled
but without initiating any legal proceedings under any law for the time being in
force. The operational creditor on expiry of the period of 10 days from the date of
delivery of the demand notice and non-payment of its dues approached the
Adjudicating Authority for the initiation of the corporate insolvency resolution
process under section 9(1) of the Insolvency and Bankruptcy Code, 2016. Will the
application of the operational creditor filed under section 9(1) read with section
8(2)(a) of the Insolvency and Bankruptcy Code, 2016 be permitted?

5 (a) State which kind of approval is required for the following transactions under the 4

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 Foreign Exchange Management Act, 1999:
(i) X, a Film Star, wants to perform alongwith associates in New York on the
occasion of Diwali for Indians residing at New York. Foreign Exchange drawal
to the extent of US dollars 20,000 is required for this purpose.
(ii) R wants to get his heart surgery done at United Kingdom. Up to what limit
Foreign Exchange can be drawn by him and what are the approvals required?

5 (b) Star Health Specialties Ltd. owns a Multi-Specialty Hospital in Chennai. Dr. 4
Hamilton, a practicing Heart Surgeon, has been appointed by the company as its
director and it wants to pay him fee, on case to case basis, for surgery performed
on the patients at the hospital. A question has arisen whether payment of such fee
to him would amount to payment of managerial remuneration to a director
subject to any restriction under the Companies Act, 2013.

5 (c) State the types, constitution and functions of the various committees constituted 6
under the SEBI (LODR) Regulations, 2015?

6 (a) Mr. AMIT is the Managing Director of ANJ Limited, which is a non-government 4
public company. The directors of CHH Limited decided to appoint Mr. AMIT as the
Managing Director of the company, even though Mr. AMIT decided not to vacate
his place of office of Managing Director of ANJ Limited. A notice for a Board
meeting specifying a resolution containing the proposal of appointment of Mr.
AMIT was served to all the eligible directors of CHH Limited. Out of eight directors
of the company, six directors attended the meeting and out of them four directors
gave consent to the resolution, one director voted against the said appointment
and another director abstained from voting. The Board of Directors seek your
opinion whether Mr. AMIT can be appointed as the Managing Director, of the
company in this situation. Referring to the applicable provisions of the Companies
Act, 2013, advise them.

6 (b) What are provisions related to constitution and working of the Mediation and 4
Conciliation Panel as per Section 442 of the Companies Act, 2013?

6 (c) Raghu, a clerical staff in the Power Board, was assigned with the task of inspection 3
of the file with the requisite documents of the applicants who have applied for the
new connections. Mr. Rajiv Shah, for his new flat, applied for the power
connection as per the required usage with all the supportive documents. Raghu,
conveyed Mr. Rajiv Shah, that his file has been rejected due to discrepancies in the
compliances. Indirectly he communicated that, if required, he may clear his file
and put into process. Mr. Rajiv Shah give him cash amount of ₹ 2 lacs to clear his
file. State in the light of the above situation, the liability of Raghu and Mr. Rajiv
Shah in the commission of an offence as per the Prevention of Money Laundering
Act, 2002.

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6 (d) Analyse and Advise with reference to the provisions of the Companies Act, 2013, 3
the following situations.
(1) There are 9 directors in a company and out of which 2 offices of the
directors have fallen vacant. What will be the quorum for the Board
Meeting?
(2) There are 15 directors in a company and during discussion of a particular
item, 13 of the directors are said to be ‘interested’ within the meaning of
section 184(2) of the Companies Act, 2013. What shall be quorum of the
meeting?

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