Foundation Test 2 - Business Laws - 50% syllabus

Time allowed: 2.30 hours 9.4.2025 Maximum marks: 80

Question no. 1 is compulsory.

Answer any 3 out of remaining 4 questions.
Wherever necessary, suitable assumptions may be made and shall be disclosed clearly.

Exam tips -
1. Avoid short forms and shortcuts in answers.
2. Start with question in which you are confident.
-x-x-x-x-x-

1. (a) Define partnership and name the essential elements for the existence of a partnership as per the (7)
Indian Partnership Act, 1932. Explain any two such elements in detail.

1. (b) Bholenath drew a cheque in favour of Surendar. After having issued the cheque; Bholenath (7)
requested Surendar not to present the cheque for payment and gave a stop payment request
to the bank in respect of the cheque issued to Surendar. Decide, under the provisions of the
Negotiable Instruments Act, 1881 whether the said acts of Bholenath constitute an offence?

1. (c) Sound Syndicate Ltd., a public company, its articles of association empowers the managing (6)
agents to borrow both short and long term loans on behalf of the company, Mr. Liddle, the
director of the company, approached Easy Finance Ltd., a non banking finance company for a
loan of 25,00,000 in name of the company.
The Lender agreed and provided the above said loan. Later on, Sound Syndicate Ltd. refused to
repay the money borrowed on the pretext that no resolution authorizing such loan have been
actually passed by the company and the lender should have enquired about the same prior
providing such loan hence company not liable to pay such loan.
Analyse the above situation in terms of the provisions of Doctrine of Indoor Management under
the Companies Act, 2013 and examine whether the contention of Sound Syndicate Ltd. is correct
or not?

2. (a) What do you mean by the term Capital? Describe its classification in the domain of Company Law. (6)

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2. (b) M/s XYZ & Associates, a partnership firm with X, Y, Z as senior partners were engaged in the (6)
business of carpet manufacturing and exporting to foreign countries. On 25th August, 2018,
they inducted Mr. G, an expert in the field of carpet manufacturing as their partner. On 10th
January 2020, Mr. G was blamed for unauthorized activities and thus expelled from the
partnership by united approval of rest of the partners.
(i) Examine whether action by the partners was justified or not.
(ii) What should have the factors to be kept in mind prior expelling a partner from the firm by
other partners according to the provisions of the Indian Partnership Act, 1932?

2. (c) A purchased a watch from B. He issued a promissory note to B which was payable on demand (4)
but no specific place for payment was mentioned on it. On maturity, B did not present the
promissory note for payment. As the promissory note was not duly presented for payment,
whether A would be discharged from liability under the provisions of the Negotiable
Instruments Act, 1881?

2. (d) Explain the provisions regarding registered office of LLP and change therein. (4)

3. (a)
1. ABC Limited has allotted equity shares with voting rights to XYZ Limited worth 15 crores and (4)
convertible preference shares worth 10 crores during the financial year 2022-23. After that the
total share capital of the company is 100 crores.
Comment on whether XYZ Limited would be called an Associate Company as per the provisions of
the Companies Act, 2013? Also define an Associate Company.

2. ABC Private Limited is a registered company under the Companies Act, 2013 with paid up capital (3)
of 35 lakhs and turnover of 2.5 crores. Whether the ABC Private Limited can avail the status of
a Small Company in accordance with the provisions of the Companies Act, 2013? Also discuss the
meaning of a Small Company.

3. (b)
1. State the distinction between Limited Liability Partnership and Limited Liability Company. (4)

2. “LLP is an alternative corporate business form that gives the benefits of limited liability of a company (3)
and the flexibility of a partnership”. Explain.

3. (c) (3+3)
i. X and Y were partners in a firm. The firm was dissolved on 12th June, 2022 but no public notice was
given. Thereafter, X purchased some goods in the firm’s name from Z. Z was ignorant of the fact of
dissolution of firm. X became insolvent and Z filed a suit against Y for recovery of his amount. State
with reasons whether Y would be liable under the provisions of the Indian Partnership Act, 1932?

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 ii. Are there any exceptions where even if notice of dissolution has not been given, there will be no
liability of partners for acts subsequent to dissolution?

4. (a) State the rules regarding compensation payable by any party liable to the holder or any endorse, (5)
in case of dishonour of promissory note, bill of exchange or cheque.

4. (b) There is an LLP by the name Ram Infra Development LLP which has 4 partners namely Mr. Rahul, (3)
Mr. Raheem, Mr. Kartar and Mr. Albert. Mr. Rahul and Mr. Albert are non – resident while other
two are resident. LLP wants to take Mr. Rahul and Mr. Raheem as Designated Partner. Explain
in the light of Limited Liability Partnership Act, 2008 whether LLP can do so.

4. (c) AK Private Limited has borrowed 36 crore from BK Finance Limited. However, as per (6)
memorandum of AK Private Limited, the maximum borrowing power of the company is 30 crore.
Examine whether AK Private Limited is liable to pay this debt? State the remedy, if any available
to BK Finance Limited.

4. (d) M/s ABC Associates is a partnership firm since 1990. Mr. A, Mr. B and Mr. C were partners in the (6)
firm since beginning. Mr. A, being a very senior partner of aged 78 years transfers his share in the
firm to his son Mr. Prateek, a Chartered Accountant. Mr. B and Mr. C were not interested that Mr.
Prateek join them as partner in M/s ABC Associates. After some time, Mr. Prateek felt that the books
of accounts were displaying only a small amount as profit despite a huge turnover. He wanted to
inspect the book of accounts of the firm arguing that it is his entitlement as a transferee. However,
the other partners believed that he cannot challenge the books of accounts. Can Mr. Prateek, be
introduced as a partner if his father wants to get a retirement? As an advisor, help them resolve the
issues applying the necessary provisions from the Indian Partnership Act, 1932.

5. (a) "Explain the following terms:- (7)

1. Government Company
2. Foreign Company
3. Dormant and Inactive Company"

5. (b) What are Negotiable Instruments? Explain its essential characteristics under the Negotiable (6)
Instruments Act, 1881.

5. (c) “Indian Partnership Act does not make the registration of firms compulsory nor does it impose (7)
any penalty for non-registration.” In light of the given statement, discuss the consequences of
non-registration of the partnership firms In India.

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