CMA Inter Law - Super 75 Subjective Questions

1. Arabic Designer Sarees ltd having 250 members has called a meeting of
shareholders on 17th August, 2024. However, only 6 members attended the
meeting and it was adjourned to a later date 25th August wherein resolution for
variation of the rights of a class of shareholders was passed. Answer the
following with reference to Companies Act, 2013:
a) What shall be the effective date for passing of resolution?
b) Was quorum present in the meeting?
c) Which resolutions are required to be filed with ROC and when?
d) The company doesn’t wish to provide remote e-voting facility or postal ballot. Is
it contravention of Law.
a) 25th August as the resolution passed at the adjourned meeting shall be treated as
having been passed on the date on which it was in fact passed, and shall not be
deemed to have been passed on any earlier date.

b) Yes, as in a public company, the required quorum is 5 members personally present if

the number of members as on the date of meeting is not more than 1000

c) A copy of every resolution or any agreement mentioned below together with the
explanatory statement, if any, annexed to the notice calling the meeting in which the
resolution is proposed, shall be filed with the Registrar within 30 days of the passing
or making thereof in Form No. MGT -14 with such fees as may be prescribed.
✓ special resolutions
✓ resolutions which have been agreed to by all the members of a company, but which, if
not so agreed to, would not have been effective for their purpose unless they had been
passed as special resolutions
✓ any resolution of the Board of Directors or agreement executed by a company,
relating to appointment, re-appointment or renewal of the appointment, or variation
of the terms of appointment, of a managing director
✓ resolutions or agreements which have been agreed to by any class of members but
which, if not so agreed to, would not have been effective for their purpose unless they
had been passed by a special majority or otherwise in some particular manner and all
resolutions or agreements which effectively bind such class of members though not
agreed to by all those members
✓ resolutions requiring a company to be wound up voluntarily passed in pursuance of
Section 59 of the IBC,
✓ resolutions passed in pursuance of sub-section (3) of section 179 provided that no
person shall be entitled under section 399 to inspect or obtain copies of such
resolutions
✓ any other resolution or agreement as may be prescribed and placed in the public
domain.

d) Yes, it amounts to contravention as Variation in the rights attached to a class of shares

or debentures or other securities shall be transacted only by means of voting through
a postal ballot.

2. Summarize the different types of ethics and importance of ethics.

Ethics may be divided into three types as follows:
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CMA Inter Super 30 Questions 1.2
(a) Meta ethics;
(b) Normative ethics;
(c) Applied ethics.
Meta ethics deal with the nature of moral judgment. It examines the origins and meanings of
ethical principles. Normative ethics is concerned with the content of moral judgments and the
criteria for what is right or wrong. Applied ethics addresses controversial topics like war,
animal rights and capital punishment.

Importance of ethics: -
Ethics is a requirement for human life. It is our means of deciding a course of action. Without
it, our actions would be random and aimless. There would be no way to work towards a goal
because there would be no way to pick between a limitless number of goals. Even with an
ethical standard, we may be unable to pursue our goals with the possibility of success. To the
degree which a rational ethical standard is taken, we are able to correctly organize our goals
and actions to accomplish our most important values. Any flaw in our ethics will reduce our
ability to be successful in our endeavours.
A proper foundation of ethics requires a standard of value to which all goals and actions can be
compared to. This standard is our own lives, and the happiness which makes them liveable.
This is our ultimate standard of value, the goal in which an ethical man must always aim. It is
arrived at by an examination of man’s nature and recognizing his peculiar needs. A system of
ethics must further consist of not only emergency situations, but the day-to-day choices we
make constantly. It must include our relations to others and recognize their importance not
only to our physical survival, but to our well- being and happiness. It must recognize that our
lives are an end in themselves, and that sacrifice is not only unnecessary, but also destructive.

3. Describe the role of management accounting in relation to the values and

attitudes of Professional Accountants.
The role of management accounting is also described as problem solving, score keeping and
attention directing.
(a) Problem solving: The role of accounting in problem solving is to provide information
that is useful for evaluating alternatives.
(b) Scorekeeping: Scorekeeping records the results of various managerial actions and
helps in assessing whether the results expected from the various actions are realized
or not.
(c) Attention directing: The scorekeeping function in combination with expected results,
and comparative analysis of scores of across various companies, divisions and
departments, as well as comparative analysis of present period scores with previous
periods, helps focus managerial attention on areas that require improvement.

Professional accountants take on a vast array of roles in businesses of all types, including the
public sector, not-for-profit sector, regulatory or professional bodies, and academia. Their
wide-ranging work and experience find commonality in one aspect – their knowledge of
accounting. These individuals employ an inquiring mind to their work, based on their
understanding of the company’s financials. Their training in accounting enables them to adopt
a pragmatic and objective approach to solving issues. This is a valuable asset to management,
particularly in small and medium enterprises where the professional accountants are often the
only professionally qualified members of staff. Cost management is an activity of managers
related to planning and control of costs. Managers have to take decisions regarding use of
materials, processes, product designs and have to plan costs or expenses to support the
operating plan for their department or section. All these activities come under cost
management. Information from accounting systems help managers in cost management

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CMA Inter Super 30 Questions 1.3
activities. Cost management is not cost reduction alone. It is much broader. Cost management
system has to ensure that a cost is incurred with the expectation of profit.

4. X offered to sell his house to Y for ₹50,000. Y accepted the offer by E-mail. On the
next day Y sent a fax revoking the acceptance which X reached X before the E-
mail. Examine the validity of revocation. Inspect whether would it make any
difference if both the E-mail of acceptance and the fax of revocation of acceptance
reach X at the same time.
The problem is related with the communication and time of acceptance and its revocation. As
per Section 4 of the Indian Contract Act, 1872, the communication of an acceptance is complete
as against the acceptor when it comes to the knowledge of the proposer.
An acceptance may be revoked at any time before the communication of the acceptance is
complete as against the acceptor, but not afterward. Referring to the above provisions
(i) Yes, the revocation of acceptance by Y (the acceptor) is valid.
(ii) If X reads the Fax first, the acceptance stands revoked. If he opens the email first and
reads it, revocation of acceptance is not possible as the contract has already been concluded.

5. Mr. Dilip Kumar, a director of ABC Co., resigns from his office on and with effect
from 15.04.2024 by tendering his resignation letter addressed to the Chairman
of the ABC Co. The letter reaches to the desk of the Chairman on 25.04.2024. Mr.
Dilip Kumar did not forward a copy of his resignation along with detailed reasons
for the resignation to the Registrar. The Board did not accept the resignation on
the ground that the same letter has not been forwarded to the Registrar. Mr. Dilip
Kumar argues that he need not to send the letter to the Registrar, hence, his
resignation be accepted with effect from 15.04.2024. Analyze the situation and
discuss.
A director may resign from his office by giving a notice in writing to the company as per Section
168 (1) of the Companies Act, 2013. On receipt of such notice, the Board shall take note of the
same and the company shall intimate the Registrar in such manner, within such time and in
such form as may be prescribed and shall also place the fact of
such resignation in the report of directors laid in the immediately following general meeting
by the company. Provided that a director may also forward a copy of his resignation along with
detailed reasons for the resignation to the Registrar within 30 days of resignation.
The resignation of a director shall take effect from the date on which the notice is received by
the company or the date, if any, specified by the director in the notice, whichever is later.
In the present case, resignation of Mr. Dilip Kumar, a director of ABC Co, may be accepted and
it cannot be rejected on mere the ground that the copy of the letter has not been forwarded to
the Registrar, It was held in Saumil Dilip Mehta vs. State of Maharashtra [2002], that a director
can resign just by sending in writing a letter informing either chairman or secretary of
company, his intention to resign from post of director of said company. He can tender his
resignation unilaterally and without sending a notice to Registrar of Companies. Therefore, the
resignation letter of Mr. Dilip Kumar may be accepted with effect from 25.04.2024 i.e. the date
of receiving the intimation of the resignation of the director by the Chairman and not with effect
from the date of sending the resignation letter.

6. Examine the provisions relation to the remuneration payable to a Directors

including any managing or whole time director under the Companies Act, 2013.
Answer:
The remuneration payable to the directors of a company, including any managing or whole-
time director, shall be determined, in accordance with the provisions of Companies Act either
by the articles of the company, or by a resolution (special resolution if the articles so require),
passed by the company in general meeting and the remuneration payable to any such director

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CMA Inter Super 30 Questions 1.4
determined as per the said provisions shall be inclusive of the remuneration payable to such
director for services rendered by him in any other capacity.
Section 198 lays down the overall maximum of managerial remuneration which can be paid by
public company or a subsidiary of a public company. The total managerial remuneration
payable to directors or manager in respect of a financial year shall not exceed eleven per cent
of the net profits of the company. But sometimes a company may make no or inadequate profits
in a financial year. This does not mean that its directors shall remain unpaid. In such a case, the
company may, with the previous approval of the Central Government, pay by way of minimum
remuneration any sum as may be authorized.
It may be noted that the remuneration of directors can be determined only by the articles of a
company or a resolution of the general body or a special resolution if the articles so require.
The directors cannot themselves fix the remuneration of all or any one of themselves. A
managing or whole-time director may be paid either on a monthly basis or a specified
percentage of the net profits of the company or partly by one way and partly by the other. But
a managing director or whole-time director is not entitled to draw more than five per cent or
where there is more than one such director, ten per cent of net profits by way of remuneration,
except subject to conditions specified in Schedule XIII or with the approval of the Central
Government.
As per Section 2(78) of the companies Act, 2013 ‘Remuneration’ defined as any money or its
equivalent given or passed to any person for services rendered by him and includes perquisites
as defined under income tax Act, 1961. As per Section 197 of the Act, the total managerial
remuneration payable by a public company, to its directors, including managing director,
whole time director and its manager, in respect of any financial year shall not exceed 11% of
the net profits of that company. Accordingly, a public company can pay remuneration to its
directors including executive directors and non-executive directors within the limits of 11% of
the net profits and this limits can only be exceeded with the prior approval of the members of
the company by an special resolution. The remuneration payable to a director shall be inclusive
of the remuneration payable to him for the services rendered by him in any other capacity.
So, even if a director is paid remuneration for special services apart from directorial services,
such amount must also be included in the total remuneration in order to ascertain the limits of
11% of net profits as prescribed under Section 197(1) of the Act. However, the only exception
is when remuneration paid for professional services rendered by a director to the company
without any limit is not included in the limit, if the following two conditions are satisfied: The
services rendered are of a professional nature and; In the opinion of the Nomination and
Remuneration Committee the director possesses the requisite qualification for the practice of
the profession. If the company does not require to have such a committee under section 178,
the board can form this opinion.

7. Demonstrate the duties of an auditor provided in section 143 of the Companies

Act, 2013.
Answer:
The duties of an auditor have been laid down by the Companies Act, 2013, provided in Section
143. The Act explains the duties in a simplified manner, although the list given is not exhaustive.
1) Every auditor of a company shall have a right of access at all times to the books of account
and vouchers of the company, whether kept at the registered office of the company or at
any other place and shall be entitled to require from the officers of the company.
2) The auditor shall make a report to the members of the company on the accounts examined
by him and on every financial statement or other document which are required by or under
this Act to be laid before the company in general meeting and the report shall after taking
into account the provisions of this Act, the accounting and auditing standards and matters
which are required to be included in the audit report under the provisions of this Act.
3) Where any of the matters required to be included in the audit report under this section is
answered in the negative or with a qualification, the report shall state the reasons therefor.
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CMA Inter Super 30 Questions 1.5
4) In the case of a Government company, or any other company owned or controlled, directly
or indirectly, by the Central Government, or by any State Government or Government, or
partly by the Central Government and partly by one or more State Government, the
Comptroller and Auditor-General of India shall appoint the auditor under sub-section (5)
or sub-section (7) of section 139 and direct such auditor the manner in which the accounts
of the Government company are required to be audited.
5) The Comptroller and Auditor-General of India shall within sixty days from the date of
receipt of the audit report under sub-section (5) have a right to—
(a) comment upon or supplement such audit report, and
(b) conduct any supplementary audit of the company’s accounts by himself or by such
person or persons as he may authorise in this behalf and such person or persons shall
have the same rights and obligations as the auditor who has submitted the report:
6) Without prejudice to the provisions of this Chapter, the Comptroller and Auditor-General
of India may, in case of any company covered under sub-section (2) of section 123, if he so
deems necessary, by an order, cause test audit to be conducted of the accounts of such
company.
7) Where a company has a branch office, the accounts of that office shall be audited either by
the auditor appointed for the company (hereafter in this section referred to as the
company’s auditor) under this Act or by any other person qualified for appointment as an
auditor of the company under this Act and appointed as such under section 139, or where
the branch office is situated in a country outside India, the accounts of the branch office
shall be audited either by the company’s auditor or by an accountant or by other person
duly qualified.
8) Every auditor shall comply with the auditing standards.
9) The Central Government may, after consultation with the National Advisory Committee on
Accounting and Auditing Standards, by notification, lay down auditing standards.
10) The Central Government may, after consultation with the National Financial Reporting
Authority, by general or special order, direct, in respect of such class or description of
companies, as may be specified in the order, that the auditor’s report shall also include a
statement on such matters as may be specified therein.
Provided that until the National Financial Reporting Authority is constituted under section
132, the Central Government may hold consultation required under this sub- section with
the Committee chaired by an officer of the rank of Joint Secretary or equivalent in the
Ministry of corporate Affairs and the committee shall have the representatives from the
Institute of Chartered Accountants of India and Industry Chambers and also special invitees
from the National Advisory Committee on Accounting Standards and the office of the
Comptroller and Auditor-General”
11) Notwithstanding anything contained in this section, if an auditor of a company in the course
of the performance of his duties as auditor, has reason to believe that an offence of fraud
involving such amount or amounts as may be prescribed, is being or has been committed
in the company by its officers or employees, the auditor shall report the matter to the
Central Government within such time and in such manner as may be prescribed:
Povided that in case of a fraud involving lesser than the specified amount, the auditor shall
report the matter to the audit committee constituted under section 177 or to the Board in
other cases within such time and in such manner as may be prescribed:
Provided further that the companies, whose auditors have reported frauds under this sub-
section to the audit committee or the Board but not reported to the Central Government,
shall disclose the details about such frauds in the Board's report in such manner as may be
prescribed.
12) No duty to which an auditor of a company may be subject to shall be regarded as having
been contravened by reason of his reporting the matter referred to in sub-section (12) if it
is done in good faith.
13) The provisions of this section shall mutatis mutandis apply to—

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12. if an auditor reports an issue as required by sub-section (12) of the relevant law or regulation,
they will not be considered to have breached their duties, as long as the report in good faith
CMA Inter Super 30 Questions 1.6
(a) the cost accountant conducting cost audit under section 148; or
(b) the company secretary in practice conducting secretarial audit under section 204.
14) If any auditor, cost accountant, or company secretary in practice does not comply with the
provisions of sub-section (12), he shall, –
(a) in case of a listed company, be liable to a penalty of five lakh rupees; and
(b) in case of any other company, be liable to a penalty of one lakh rupees.

8. Enumerate the duties of bailor and care to be taken by bailee in context of

bailment.
Answer:
Bailor's duty in context of Bailment:
Section 150 lays down three duties, namely-
(i) It is the duty of the bailor to disclose to the bailee faults in the goods bailed, of which the
bailor is aware, and which materially interfere with the use of them, or expose the bailee to
extraordinary risks;
(ii) If the bailor does not make such disclosure and some loss or damage results, he is
responsible for so much of it as arises to the bailee directly from such faults;
(iii) If the goods are bailed for hire, the bailor is responsible for damage arising to the bailee
directly from such faults, whether he was or was not aware of the existence of such faults
in the goods bailed.

Examples:
(i) A lends a horse, which he knows vicious, to B. He does not disclose the fact that the horse
is vicious. The horse runs away. B is thrown and injured. A is responsible to B for damages
sustained.
(ii) A hires a carriage of B. the carriage is unsafe, though B is not aware of it, and A is injured. B
is responsible to A for the injury.

Care to be taken by Bailee:

Section151 provides that in all cases of bailment the bailee is bound to take as much care of the
goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of
his own goods of the same bulk, quality and value as the goods bailed.

In 'Nagalinga Chettiyar V. Kayarohana Chettiyar AIR 1915 Mad. 80 it was held that where the
standard of care prescribed by Section 151 is not observed the bailee cannot be exonerated
from his liability simply because the bailee’s goods were also lost along with the goods bailed.

In ‘Sirmour Truck Operations Union V. National Insurance Co. Limited’ AIR 2011 (NOC)
389(HP) it was held that the carrier cannot be exempted from its own negligence or negligence
by his agent where goods carried at ‘owner’s risk’ and cannot escape from the liability to make
good loss.

9. Examine the grounds on which the Court may direct a dissolution of a firm in a
suit.
Answer:
Dissolution by the court
Section 44 of the Indian Partnership Act, 1932 prescribes the grounds on which the Court may
direct dissolution of a firm in a suit as discussed below:
(a) if a partner has become of unsound mind;
(b) if a partner has become permanently incapable of performing his duties as partner;
(c) if a partner is guilty of conduct which is likely to affect prejudicially the carrying on of
business, regarding being had to the nature of business;
(d) if a partner wilfully or persistently commits breach of agreements relating to-
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CMA Inter Super 30 Questions 1.7
(i) the management of the affairs of the firm or the conduct of its business; or
(ii) the conduct of its business; or
(iii) otherwise so conducts himself in matters relating to the business that it is not
reasonably practicable for the other partners to carry on the business in partnership
with him;
(e) If a partner has in any way-
(i) transferred the whole of his interest in the firm to a third party; or
(ii) has allowed his share to be charged; or
(iii) has allowed it to be sold in the recovery of the arrears of land revenue; or
(iv) of any dues recoverable as arrears of land revenue due by the partner;
(f) the business of the firm cannot be carried on save at a loss; or
(g) on any other ground which renders it just and equitable that the firm should be dissolved.

10. Raju is the holder of a bill of exchange made payable to the order of Ram. The bill
of exchange contains the following endorsements in blank:
i) First endorsement Ram
ii) Second endorsement Ganesh.
iii) Third endorsement Naresh and
iv) Fourth endorsement Bakul
Raju strikes out, without Bakul’s consent, the endorsements by Ganesh and Naresh.
Describe with reasons whether Raju is entitled to recover anything from Bakul
under the provisions of Negotiable Instruments Act, 1881.
Answer:
According to section 40 of the Negotiable Instruments Act, 1881, where the holder of a
negotiable instrument, without the consent of the endorser, destroys or impairs the endorser’s
remedy against a prior party, the endorser is discharged from liability to the holder to the same
extent as if the instrument had been paid at maturity. Any party liable on the instrument may
be discharged by the intentional cancellation of his signature by the holder. In the given
question, Raju is the holder of a bill of exchange of which Ram is the payee and it contains the
following endorsement in blank:
First endorsement = Ram
Second endorsement = Ganesh
Third endorsement = Naresh
Fourth endorsement = Bakul

Raju, the holder, may intentionally strike out the endorsement by Ganesh and Naresh, in that
case the liability of Ganesh and Naresh upon the bill will come to an end. But if the
endorsements of Ganesh and Naresh are struck out without the consent of Bakul, Raju will not
be entitled to recover anything from Bakul. The reason being that as between Naresh and Bakul,
Naresh is the principal debtor and Bakul is surety. If Naresh is released by the holder under
Section 39 of the Act, Bakul, being surety, will be discharged. Hence, when the holder without
the consent of the endorser impairs the endorser’s remedy against a prior party, the endorser
is discharged from liability to the holder.

Thus, if Raju strikes out, without Bakul’s consent, the endorsements by Ganesh and Naresh,
Bakul will also be discharged.

11. Discuss the different disqualifications for appointment of director as per the
Companies Act, 2013.
Answer:
Section 164 of the Companies Act, 2013 contains the disqualification of a person for the
appointment as a director. As per this Section a person shall not be eligible for appointment as
a Director of a company, if –
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 CMA Inter Super 30 Questions 1.8
1)He is of unsound mind and stands so declared by a competent court,
2)He is an undischarged insolvent,
3)He has applied to be adjudicated as an insolvent and his application is pending,
4)He has been convicted by a court of any offence, whether involving moral turpitude or
otherwise and sentenced to imprisonment for not less than 6 months and a period of 5
years has not elapsed from the date of expiry of the sentence,
5) A person has been convicted of any offence and sentenced in respect thereof to
imprisonment for a period of 7 years or more, he shall not be eligible to be appointed as a
director in any company,
6) An order disqualifying him for appointment as a director has been passed by the court or
tribunal and the order is in force,
7) He has not paid any calls in respect of any shares of the company held by him, whether
alone or jointly with others and six months have elapsed from the last day fixed for the
payment of the call
8) He has been convicted of the offence dealing with related party transactions under Section
188 at any time during the last preceding five years,
DIN 9) He has not complied with sub-section (3) of section 152.
10) He has not complied with the provisions of sub-section (1) of section 165.
maximum 20 companies
12. Demonstrate the different points to be stated in the auditor's report by the
auditor as per the Companies Act, 2013.
Answer:
The auditor’s report shall also state–
1) whether he has sought and obtained all the information and explanations which to the best
of his knowledge and belief were necessary for the purpose of his audit;
2) whether, in his opinion, proper books of account as required by law have been kept by the
company so far as appears from his examination of those books and proper returns
adequate for the purposes of his audit have been received from branches not visited by
him;
3) whether the report on the accounts of any branch office of the company audited under sub-
section (8) by a person other than the company auditor has been sent to him under the
proviso to that sub-section and the manner in which he has dealt with it in preparing his
report;
4) whether the company’s balance sheet and profit and loss account dealt with in the report
are in agreement with the books of account and returns;
5) whether, in his opinion, the financial statements comply with the accounting standards;
6) the observations or comments of the auditors on financial transactions or matters which
have any adverse effect on the functioning of the company
7) whether any director is disqualified from being appointed as a director under sub-section
(2) of section 164;
8) any qualification, reservation or adverse remark relating to the maintenance of accounts
and other matters connected therewith;
9) whether the company has adequate internal financial controls system with reference to
financial statements in place and the operating effectiveness of such controls;
10) such other matters as may be prescribed.

13. How would you evaluate the effects of emotional intelligence on your work,
physical health, mental health and relationship?
Answer:
Emotional intelligence affects
Your performance at school or work: High emotional intelligence can help you navigate the
social complexities of the workplace, lead and motivate others, and excel in your career. In fact,

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CMA Inter Super 30 Questions 1.9
when it comes to gauging important job candidates, many companies now rate emotional
intelligence as important as technical ability and employ EQ testing before hiring.
Your physical health: If you’re unable to manage your emotions, you are probably not
managing your stress either. This can lead to serious health problems. Uncontrolled stress
raises blood pressure, suppresses the immune system, increases the risk of heart attacks and
strokes, contributes to infertility, and speeds up the aging process. The first step to improving
emotional intelligence is to learn how to manage stress.
Your mental health: Uncontrolled emotions and stress can also impact your mental health,
making you vulnerable to anxiety and depression. If you are unable to understand, get
comfortable with, or manage your emotions, you’ll also struggle to form strong relationships.
This in turn can leave you feeling lonely and isolated and further exacerbate any mental health
problems.
Your relationships: By understanding your emotions and how to control them, you’re better
able to express how you feel and understand how others are feeling. This allows you to
communicate more effectively and forge stronger relationships, both at work and in your
personal life.

14. What are the documents to be submitted to Registrar of Companies for

incorporation of a company?
Answer:
Section 7 of the Companies Act, 2013 provides for the procedure to be followed for the
incorporations of a company. The promoter of the company shall submit the following
documents to the Registrar of companies within whose jurisdiction the registered office of the
company is proposed to be situated for registration.
a) Memorandum and articles of the company duly signed by all the subscribers to the
memorandum in such manner as may be prescribed;
b) A declaration in the prescribed form by an Advocate, a Chartered Accountant, Cost
Accountant or Company Secretary in practice, who is engaged in the formation of the
company and by a person named in the articles as a director, manager or secretary of the
company, that all the requirements of the Act and rules made there under in respect of
registration;
c) A declaration from each of the subscribers to the memorandum and from persons named
as the first directors, if any, in the articles stating that — (Form No. INC-9)
(i) he is not convicted of any offence in connection with the promotion, formation or
management of any company, or
(ii) he has not been found guilty of any fraud or misfeasance or of any breach of duty to
company under this Act or any previous company law during the last five years and
(iii) that all the documents filed with the Registrar for registration of the company contain
information that is correct and complete and true to the best of his knowledge and
belief;
d) The address for correspondence till registered office is established;
e) All particulars of every subscriber to the memorandum along with the proof of identity;
f) The particulars of the persons mentioned in the articles as the first directors of the
company;
g) The consent to act as directors of company in such form as may be prescribed.

15. Discuss the procedure for Alteration of Memorandum

Answer:
Section 13 of the Companies Act, 2013 provides the provisions that deal with the alteration of
the memorandum. These provisions are:-

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CMA Inter Super 30 Questions 1.10
(a) Alteration by special resolution: Company may alter the provisions of its memorandum
with the approval of the members by a special resolution

(b) Name Change of the company : Any change in the name of a company shall be effected only
with the approval of Central Government in writing. However, no such approval shall be
necessary where the change in the name of the company is only the deletion there from, or
addition thereto, of the word ―Private‖, consequent on the conversion of any one class of
companies to another class.

(c) Entry in register of companies: On any change in the name of a company, the Registrar shall
enter the new name in the register of companies in place of the old name and issue a fresh
certificate of incorporation with the new name and the change in the name shall be
complete and effective only on the issue of such a certificate.

(d) Change in the registered office: The alteration of the memorandum relating to the place of
the registered office from one State to another shall not have any effect unless it is approved
by the Central Government on an application in such form and manner as may be
prescribed.

(e) Disposal of the application of change of place of the registered office: The Central
Government shall dispose of the application of change of place of the registered office
within a period of sixty days. Before passing of order, the Central Government may satisfy
itself that-

1) The alteration has the consent of the creditors, debenture-holders and other persons
concerned with the company, or
2) That the sufficient provision has been made by the company either for the due
discharge of all its debts and obligations, or adequate security has been provided for
such discharge.

(i) Filing with Registrar: A company shall, in relation to any alteration of its
memorandum, file with the Registrar–
(a) the special resolution passed by the company under sub-section (1) of Section
13;
(b) the approval of the Central Government under sub-section (2), if the alteration
involves any change in the name of the company.

(ii) Issue of fresh certificate of incorporation: The Registrar of the State where the
registered office is being shifted to, shall issue a fresh certificate of incorporation
indicating the alteration.

(f) Change in the object of the company: A company, which has raised money from public
through prospectus and still has any unutilised amount out of the money so raised, shall
not change its objects for which it raised the money through prospectus unless a special
resolution through postal ballot is passed by the company and—
(i) the details, regarding such a resolution shall also be published in the newspapers (one
in English and one in vernacular language) which is in circulation at the place where
the registered office of the company is situated and shall also be placed on the website
of the company, if any, indicating therein the justification for such a change;
(ii) The dissenting shareholders shall be given an opportunity to exit by the promoters and
shareholders having control in accordance with regulations to be specified by the
Securities and Exchange Board.

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CMA Inter Super 30 Questions 1.11
(g) Only members have a right to participate in the divisible profits of the company: Any
alteration of the memorandum, in the case of a company limited by guarantee and not
having a share capital, intending to give any person a right to participate in the divisible
profits of the company otherwise than as a member, shall be void.

(h) Registrar to certify the registration on the alteration of the objects: The Registrar shall
register any alteration of the memorandum with respect to the objects of the company
remuneration payable to a Directors and certify the registration within a period of thirty
days from the date of filing of the special resolution.
(i) Alteration to be registered: No alteration made under this section shall have any effect until
it has been registered in accordance with the provisions of this section.

16. Explain the conditions and the manner in which a company may issue depository
receipts in a foreign country under the Companies (Issue of Global Receipts)
Rules, 2014.
OR
What are the conditions in issuing global depository receipt?
Answer:
Conditions and Manner for issue of Global Depository Receipts. The Companies (Issue of Global
Depository Receipts) Rules, 2014, provide the conditions and the manner in which a company
may issue depository receipts in a foreign country.

Conditions [Rule 4]:

(i) Company's Board of Directors shall pass a resolution authorising the company to issue
GDR. Company shall take prior approval of its shareholders by a special resolution be
passed at a general meeting. SR passed u/s 62 for further issue of shares shall be deemed
to be a SR for the purpose of this section.
(ii) DRS shall be issued by an overseas Depository Bank appointed by the company.
(iii) The underlying shares shall be kept in the custody of a Domestic Custodian Bank.
(iv) Company shall ensure that all applicable provisions of the scheme and rules or regulations
or guidelines issued by RBI are complied with before and after the issue of DRs.
(v) Company shall appoint a Merchant Banker or a practicing Chartered Accountant or a
Practicing Cost Accountant or a practicing Company Secretary to oversee all the
compliances relating to issue of DRs.
(vi) Compliance report from the professionals shall be placed at the Board Meeting or at a
Committee Meeting to be held immediately after closure of all formalities of the issue of
DRs. Provided that the committee of BOD referred to above shall have atleast one
independent director in case the company is required to have independent directors.

Manner and form of Depository Receipts [Rule 5] (Amendment Rules,2020):

(i) The depository receipts can be issued by way of public offering or private placement or in
any other manner prevalent in the concerned jurisdiction and may be listed or traded on
the listing or trading platform in the concerned jurisdiction.
(ii) It may be issued against issue of new shares or may be sponsored against shares held by
shareholders of the company in accordance conditions prescribed by Central Government
or RBI.
(iii) The underlying shares shall be allotted in the name of the overseas Depository Bank and
against such shares, DRS shall be issued by the overseas Depository Bank.

17. Indicate what are the particulars to be incorporated in the Annual Return?
Answer:
The Annual Return shall contain the following particulars as they stood at the end of the
financial year-
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CMA Inter Super 30 Questions 1.12
(i) its registered office, its principal business activities, particulars of its holding, subsidiary
and associate companies;
(ii) its shares, debentures and other securities and shareholding pattern;
(iii) its indebtedness;
(iv) its members and debenture holders along with changes therein since the close of the
previous financial year;
(v) its promoters, directors, key managerial personnel along with changes therein since the
close of the previous financial year;
(vi) meetings of members or a class thereof, Board and its various committees along with
attendance details;
(vii) remuneration paid to Directors and Key Managerial Personnel;
(viii) penalty and punishment imposed on the company, its directors or officers and details
of compounding of offences and appeals made against such penalty or punishment;
(ix) matters relating to certification of companies, disclosures as may be prescribed;
(x) details in respect of shares held by or on behalf of the Foreign Institutional Investors; and
(xi) such other matters as may be prescribed.

18. Discuss the concept of emotional intelligence

Answer:
Emotional intelligence also known as emotional quotient or EQ, is the ability to understand,
use, and manage your own emotions in positive ways to relieve stress, communicate effectively,
empathize with others, overcome challenges and defuse conflict. Emotional intelligence helps
you build stronger relationships, succeed at school and work, and achieve your career and
personal goals. It can also help you to connect with your feelings, turn intention into action, and
make informed decisions about what matters most to you.
It is commonly defined by four attributes-
(a) Self- Management
(b) Self- awareness
(c) Social awareness
(d) Relationship Management

Emotional intelligence is important -

As we know, it’s not the smartest people who are the most successful or the most fulfilled in
life. You probably know people who are academically brilliant and yet are socially inept and
unsuccessful at work or in their personal relationships. Intellectual ability or your intelligence
quotient (IQ) isn’t enough on its own to achieve success in life.

Business ethics is important to practice good ethical behavior. One of the most formidable
challenges is avoiding immoral management, and transitioning from an amoral to a moral
management mode of leadership, behavior, decision making, policies and practices. Moral
management requires ethical leadership. It entails more than just ‘not doing wrong’.
Moral management requires that managers search out of those vulnerable situations in which
amorality may reign if carful, thoughtful reflection is not given by management. Moral
management requires that managers understand, and be sensitive to, all the stakeholders of
the organization and their stakes. If the moral management model is to be achieved, managers
need to integrate ethical wisdom with their managerial wisdom and take steps to create and
sustain an ethical climate in their organizations.

19. XYZ Ltd. issued Notice for holding of its Annual General Meeting on 30th
September 2019. The notice was posted to the members on 7th September 2019.
Some members of the company allege that the company had not complied with
the provisions of the Companies Act. Referring to the provisions of the Act,
decide.
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CMA Inter Super 30 Questions 1.13
(i) Whether the meeting has been validly called?
(ii) If there is a shortfall, state and explain by how many days does the notice fall
short of the statutory requirement?
(iii) Can the delay in giving notice be condoned?
Answer:
According to the Section 101(1) of the Companies Act, 2013, annual general Meeting of a
company may be called by giving not less than clear twenty-one days notice either in writing
or through electronic mode in such manner as may be prescribed.
Also, it is to be noted that clear 21 days notice mean that date of which notice is served and the
date of meeting are excluded for sending the notice. Further, Rule 35(6) of the Company
(incorporation Rules,2014, provides that in case of delivery by post, such service shall be
deemed to have been effected - in the case of the notice of meeting, at the expiration of forty
eight hours after the letter containing the same is posted. Hence, in the given question:
(i) A 21 days clear notice must be given. In the given question, only 20 days notice is served
(after excluding 48 hours from the time of its posting and day of sending and date of
meeting).Therefore, the meeting was not validly called.
(ii) As explained in (i) above, notice falls short by 1 day.
(iii) The Companies Act, 2013 does not provide anything specific regarding the condonation of
delay in giving of notice. Hence the delay in giving the notice calling the meeting cannot be
condoned.

20. What is the time limit for payment for Bonus? Can it be extended?
Answer:
All amounts payable to an employee by way of bonus under this Code shall be paid by crediting
it in the bank account of the employee by his employer within a period of eight months from
the close of the accounting year.
Provided that the appropriate Government may, upon an application made to it by the
employer and for sufficient reasons, by order, extend the said period of eight months to such
further period or periods as it thinks fit.
However, that the total period so extended shall not in any case exceed two years.

However, where there is a dispute regarding payment of bonus pending before any authority,
such bonus shall be paid, within a period of one month from the date on which the award
becomes enforceable or the settlement comes into operation, in respect of such dispute.

21. Discuss the provisions of the Companies Act, 2013 regarding issue of bonus
shares
Answer:
Section 63 of the Companies Act, 2013 provides for the issue of bonus shares. Section 63(1)
provides that a company issue fully paid up bonus shares to its members out of its
(i) free reserves ;
(ii) the securities premium account ; or
(iii) the capital redemption reserve account

No bonus shares shall be made by capitalizing reserves created by revaluation of assets. Section
63(2) provides that no company shall capitalize its profits or reserves for the purpose of issuing
fully paid up shares unless –
(a) it is authorized by its articles ;
(b) it has, on the recommendation of the Board, been authorized in the general meeting of
the company ;
(c) it has no defaulted in payment of interest or principal in respect of fixed deposits or
debt securities issued by it ;

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CMA Inter Super 30 Questions 1.14
(d) it has not defaulted in respect of the payment of statutory dues of the employees, such
as, contribution to provident fund, gratuity and bonus ;
(e) the partly paid up shares, if any outstanding on the date of allotment are made fully
paid up ;
(f) it complies with such conditions as may be prescribed ;
Section 63(3) provides that the bonus shares shall not be issued in lieu of dividend. Rule 14
provides that the company which once announced the decision of the Board recommending a
Bonus issue shall not subsequently withdraw the same.

22. Describe the term, ‘Manufacturing Process’ as per Factories Act, 1948 and also
cite an example.
Answer:
Section 2(k) defines the expression manufacturing process‘ as any process for –
(a) making, altering, repairing, ornamenting, finishing, packing, oiling, washing,
(b) cleaning, breaking up, demolishing, or otherwise treating or adapting any article or
(c) substance with a view to its use, sale, transport, delivery or disposal, or
(d) pumping oil, water, sewage or any other substance; or
(e) generating, transforming or transmitting power; or
(f) composing types for printing, printing by letter press, lithography, photogravure or
(g) other similar process or book binding; or
(h) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or
(i) vessels; or
(j) preserving or storing any article in cold storage.

In M/s Qazi Noorul Hasan Hamid Hussain Petrol Pump V. Deputy Director, Employees‘ State
Insurance Corporation‘ – 2003 LLR 476 it was held that the definition manufacturing process‘
does not depend upon and is not correlated with any end product being manufactured out of a
manufacturing process. It includes even repair, finishing, oiling or cleaning process with view
to its use, sale, transport, delivery or disposal. It cannot be restricted an activity which may
result into manufacturing something or production of a commercially different article.The
manufacturing process‘ cannot be interpreted in a narrow sense in respect of an act which is
meant for the purpose connected with the social welfare.

23. Discuss the welfare measures to be taken in a factory for the workmen employed
therein as per the Factories Act, 1948.
Answer:
The following are the welfare measures prescribed in the Factories Act, 1948 to be
provided by the factory to their workmen:
Washing facilities:
Section 42 provides that in every factory adequate and suitable facilities for washing shall be
provided and maintained for the use of the workers. Separate and adequately screened
facilities shall be provided for the use of male and female workers. The washing facility shall
be conveniently accessible and shall be kept clean.

Facilities for storing and drying clothing:

Section 43 provides that the State Government may, in respect of any factory or class
or description of factories, make rules requiring the provision therein of suitable places
for keeping clothing not worn during working hours and for the drying of wet clothing.

Facilities for sitting:

Section 44 provides that suitable arrangements for sitting shall be provided and maintained
for all workers obliged to work in a standing position, in order that they make take advantage
of any opportunities for rest which may occur in the course of their work.
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CMA Inter Super 30 Questions 1.15

First aid appliances:

Section 45 provides that first aid appliances shall be provided and maintained so as to be
readily accessible during all working hours or cupboards equipped with the prescribed
contents and the number of such boxes or cupboards to be provided and maintained shall not
be less than for every 150 workers at any one time in the factory.
Each first aid box or cupboard shall be kept in charge of a separate reasonable person who
holds a certificate in the first aid treatment recognized by the State Government and he should
always be readily available during the working hours of the factor. In a factory where more
than 500 workers are employed an ambulance of the prescribed size containing the prescribed
equipment, nursing staff etc., shall be provided and made readily available at all times.

Canteens:
Section 46 provides that if more than 250 workers are employed in a factory a canteen or
canteens shall be provided and maintained by the occupier for the user of the workers. The
items of expenditure in the running of the canteen which are not to be taken into account in
fixing the cost of foodstuffs shall be borne by the employer.

Shelters, rest rooms and lunch rooms:

Section 47 provides that if more than 150 workers are employed adequate and suitable
shelters or rest rooms and a suitable lunch room with provision for drinking water shall be
provided and maintained for the use of the workers. The same shall be sufficiently lighted and
ventilated and shall be maintained in a cool and clean condition.
Creches:
Section 48 provides that if more than 30 women workers are employed there shall be
provided and maintained a suitable room for the use of children under the age of 6 years of
such women. The same shall be adequately ventilated and shall be maintained in clear and
sanitary conditions and under the charge of women trained in the care of children and infants.

Welfare Officers:
Section 49 provides that if 500 or more than workers are employed in a factory, the occupier
shall employ in the factory such number of welfare officers as may be prescribed. In 'Shyam
Vinyals Limited V. T. Prasad' - (1993) 83 FJR 18 (SC) it was held that an Assistant Personnel
Officer cannot be held that he was in fact appointed as a Labor Welfare Officer simply because
as a Assistant and Personnel Officer he was looking after the problems of the laborers and the
welfare of the laborers.

24. Critically examine the duties of certified surgeon under the Factories Act, 1948.
Answer:
The duties of certified surgeons are as follows:
1. the examination and certification of young person;
2. the examination of person engaged in factories in such dangerous occupations or processes;
3. the exercising of such medical supervision as may be prescribed for any factory or class or
description of factories, where-
(a) cases of illness have occurred which it is reasonable to believe are due to the nature of
the manufacturing process carried on, or other conditions of work prevailing, therein;
(b) by reason of any change in the manufacturing process carried on or in the substances
used therein or by reason of the adoption of any new manufacturing process or of any
new substance for use in a manufacturing process, there is a likelihood of injury to the
health of workers employed in that manufacturing process;
(c) young persons are, or are about to be, employed in any work which is likely to cause
injury to their health.

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CMA Inter Super 30 Questions 1.16
25. Critically examine the provisions for payment of commission in connection with
subscription to the securities, by a public limited company. What if Mr. X involved
in the issue of prospectus has fraudulently made mis-statements in the
prospectus. What liability does arise on behalf of Mr. X in this context?
Answer:
Section 40(6) of the Companies Act, 2013 provides that a company may pay commission to any
person in connection with the subscription to its securities subject to such conditions as may
be prescribed in the Rules.
Rule 13 provides that a company may pay commission to any person in connection with the
subscription or procurement of subscription to its securities, whether absolute or conditional,
subject to the following conditions:
(a) the payment of such commission shall be authorized in the company’s articles of
association;
(b) the commission may be paid out of proceeds of the issue or the profit of the company
or both;
(c) the rate of commission paid or agreed to be paid shall not exceed, in case of shares, 5%
of the price at which the shares are issued or a rate authorized by the articles,
whichever is less, and in the case of debentures, shall not exceed 2.5% of the price at
which the debentures are issued, or as specified in company’s articles, whichever is
less;
(d) the prospectus of the company shall disclose the name of the underwriters, the rate and
amount of the commission payable to the underwriter and the number of securities
which is to be underwritten or subscribed by the underwriter absolutely or
conditionally;
(e) commission shall not be paid to any underwriter on securities which are not offered to
the public for subscription;
(f) a copy of the contract for the payment of commission is delivered to the Registrar at
the time of delivery of the prospectus for registration.

Section 34 provides that where a prospectus includes any untrue statement or misleading in
form or context in which it is included or where any inclusion or omission of any matter is likely
to mislead, every person who authorize the issue of such prospectus shall be liable under
Section 447.
The criminal liability will not arise if he proves that such statement or omission was immaterial
or that he had reasonable grounds to believe, and did up to the time of the issue
of prospectus believe, that the statement was true or the inclusion or omission was necessary.

Section 35 provides that where a person has subscribed for securities of a company based
on the mis-statement in the prospectus and he has sustained any loss or damage as a
consequence thereof, the company and every person who-
(a) is a director of the company at the time of the issue of the prospectus;
(b) has authorized himself to be named and is named in the prospectus as a director of the
company, or has agreed to become to become such director, either immediately or after
an interval of time;
(c) is a promoter of the company;
(d) ha authorized the issue of the prospectus; and
(e) is an expert,
shall be liable to pay compensation to every person who has sustained such loss or damage.

No person shall be liable if he proves-

(a) that, having consented to become a director of the company, he withdrew his consent
(b) before the issue of the prospectus, and that it was issued without his authority or
consent; or

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CMA Inter Super 30 Questions 1.17
(c) that the prospectus was issued without his knowledge or consent and that on becoming
aware of this issue, he forthwith gave a reasonable public notice that it was issued
without his knowledge or consent.

26. Arun, Barun and Gautam jointly borrowed Rs. 500,000 from Prashant. The whole
amount was repaid to Prashant by Barun. Decide in the light of the Indian
Contract Act, 1872 whether:
(a) Barun can recover the contribution from Arun and Gautam,
(b) Legal representatives of Arun are liable in case of death of Arun,
(c) Barun can recover the contribution from the assets, in case Gautam becomes
insolvent.
Answer:
Section 42 of the Indian Contract Act, 1872 requires that when two or more persons have made
a joint promise, then, unless a contrary intention appears by the contract, all such persons
jointly must fulfill the promise. In the event of the death of any of them, his representative
jointly with the survivors and in case of the death of all promisees, the representatives of all
jointly must fulfill the promise. Section 43 allows the promisee to seek performance from any
of the joint promisors. The liability of the joint promisors has thus been made not only joint but
joint and several.

Section 43 provides that in the absence of express agreement to the contrary, the promisee
may compel anyone or more of the joint promisors to perform the whole of the promise. Section
43 deals with the contribution among joint promisors. The promisors may compel every joint
promisor to contribute equally to the performance of the promise (unless a contrary intention
appears from the contracts). If any one of the joint promisors makes default in such
contribution the remaining joint promisors must bear the loss arising from such default in
equal shares. As per the provisions of above sections,
(a) Barun can recover the contribution from Arun and Gautam because Arun, Barun, Gautam
are joint promisors.
(b) Legal representative of Arun are liable to pay the contribution to Barun. However, a legal
representative is liable only to the extent of property of the deceased received by him.
(c) Barun also can recover the contribution from Gautam‘s assets.

27. Mr. X was appointed as a partner of an LLP but after just 3 months he was
declared undischarged insolvent. Can he continue as a partner because he was
solvent when he was appointed as a partner? Justify your answer with reference
to the relevant provisions of the applicable Act.
Answer:
Section 5 of LLP Act 2008 provides that any individual or body corporate may be a partner in
a LLP.
An individual shall not be capable of becoming a partner of LLP, if-
(a) he has been found to be of unsound mind by a Court of competent jurisdiction and the
findings is in force.
(b) he is undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is pending.

So, Mr. X cannot continue as a partner because he is undischarged insolvent. As per act he is
not capable or eligible a partner of LLP,

28. Describe transfer of title by non owner of goods. State the exception to this
doctrine which seeks to protect the interest of bona fide buyers.
Answer:

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CMA Inter Super 30 Questions 1.18
As per section 27 of the Sale of Goods Act, where goods are sold by a person who is not the
owner thereof and who does not sell them under the authority or with the consent of the owner,
the buyer acquires no better title to the goods than the seller had, unless the owner of the goods
is by conduct precluded from denying the seller‘s authority to sell.
A buyer cannot get good title to the goods unless he purchased the goods from a person who is
the owner thereof and sell them under the authority or with the consent of real owner.
Moreover, If the title of the seller is defective, the buyer‘s title will also be subject to same
defect. If the seller has no title, the buyer does not acquire any title although he might have
acted honestly and might have acquired the goods after due payment. This rule is to protect the
real owner of the goods.

Accordingly the Act provides the following exceptions to this doctrine which seek to protect
the interest of bona fide buyers:
a) Sale by a mercantile agent: If a mercantile agent is authorized by the owner of the
goods to sell on his behalf, then such sale shall be valid. In such cases, the buyer can
acquire a good title of the goods. This exception will be implemented subject to
fulfilment of the following conditions:-
(i) The person must be in possession of goods or documents of title to the goods in
his capacity as a mercantile agent and with the consent of his owner
(ii) The person must sell the goods while acting in the ordinary course of business.
(iii) The buyer must act in good faith without having any notice, at the time of contract
that the mercantile agent has no authority to sell the goods.

b) Transfer of title by Estoppels: This exception is based on the principle of personal

estoppels. Sometime, the real owner may lead the buyers by virtue of his conduct or
words or by act to believe that the seller is the owner of the goods or has the authority
to sell them. In such case, he may not thereafter deny the seller‘s authority to sell.

c) Sale by a joint owner: As per Section 28, it there are several joint owners of goods, one
of them if has sole possession of the goods by permission of the co-owners, then the
property in goods is transferred to any person who buys them from such joint owner.
In order to apply this exception, following conditions must be fulfilled.

(i) One of the several owners must be in sole possession of the goods.
(ii) The joint owner must have permission of co-owners.
(iii) The buyer must purchase goods in good faith.
(iv) The buyer should not have notice regarding the matter that the seller has no
authority to sell.

d) Sale by person in possession under voidable contract: According to the Section 29 a

person in possession of goods under a voidable contract which is not rescinded, can
transfer a good title to the buyer. The buyer should purchase the goods in good faith
and without notice of the seller‘s defective title.

e) Sale by seller in possession after sale: Under Section 30 (1) it is laid down that where a
person has sold goods but he continues in possession of goods or of the documents of
title to the goods, he may sell them to a third person and if such person obtains delivery
thereof in good faith and without notice of the previous sale, the person can get a good
title to them. In order to apply this exception, the seller must be in possession after sale
of goods and there must be delivery or transfer of the goods or documents of title by
the seller.

29. Who is minor? Describe the position of minor’s agreement and effect.

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CMA Inter Super 30 Questions 1.19
Answer:
As per section 3 of the Indian Majority Act of 1875, every person in India is a minor if he has
not attained the age of 18 years of age. However in case of a minor of whose person or property
or both a guardian has been appointed under the Guardian and Wards Act, 1890 or whose
property is under the superintendence of any court of wards before he attains 18 years of age
is 21 years.

The position of Minor‘s agreement and effect thereof is as under:

(a) An agreement with a minor is void ab-initio.
(b) The law of estoppel does not apply against a minor. It means a minor can always plead his
minority despite earlier misrepresenting to be a major. In other words, he cannot be held
liable on an agreement on the ground that since earlier he had asserted that he had attained
majority.
(c) Doctrine of Restitution does not apply against a minor. In India, the rules of restitution by
minor are similar to those found in English laws. The scope of restitution of contract by
minor was examined by the Privy Council in Mohiri Bibi case when it has held that the
restitution of money under section 64 of the Indian Contract Act cannot be granted under
section 65 because a minor‘s agreement is not voidable but absolutely void ab-initio.
Similarly no relief can be granted under section 65 as this section is applicable where the
agreement is discovered to be void or the contract becomes void.
(d) No Ratification on Attaining Majority - Ratification means approval or confirmation. A
minor cannot confirm an agreement made by him during minority on attaining majority. If
he wants to ratify the agreement, a fresh agreement and fresh consideration for the new
agreement is required.
(e) Contract beneficial to Minor - A minor is entitled to enforce a contract which is of some
benefit to him. Minority is a personal privilege and a minor can take advantage of it and
bind other parties.
(f) Minor as an agent - A minor can be appointed an agent, but he is not personally liable for
any of his acts.
(g) Minor‘s liability for necessities - If somebody has supplied a minor or his dependents with
necessities, minor‘s property is liable but a minor cannot be held personally liable
(h) A minor cannot be adjudged insolvent as he is incapable of entering into a contract.
(i) Where a minor and an adult jointly enter into an agreement with another person, the minor
is not liable and the contract can be enforced against the major person.

30. Himadri sells 400 Kgs. of tea to Rahul and sends 200 Kgs. by lorry and 200 Kgs.
By Railway. Rahul receives delivery of 200 Kgs. sent by lorry, but before he
receives the delivery of the tea sent by railway, he becomes bankrupt. Himadri
being still unpaid, stops the goods in transit. The official receiver, on Rahul's
insolvency claims the goods. Decide the case with reference to the provisions of
the Sale of Goods Act, 1930. Also, Explain Himadri the concept of caveat Emptor.
Also, state the rights of the seller.
Answer:
Section 50, of Sale of Goods Act, states that, subject to the provisions of this Act, when the buyer
of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods
has the right of stopping them in transit, that is to say, he may resume possession of the goods
as long as they are in course of transit and retain them until payment of tender of the price.
Stoppage in transit (Sections 50-52) The right of stoppage in transit is a right of stopping the
goods while they are in transit, resuming possession of them and retaining possession until
payment or tender of the price. The right to stop goods is available to an unpaid seller
(i) when the buyer becomes insolvent; and
(ii) the goods are in transit.

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CMA Inter Super 30 Questions 1.20
The buyer is insolvent if he has ceased to pay his debts in the ordinary course of business, or
cannot pay his debts as they become due. It is not necessary that he has actually been declared
insolvent by the court.
The goods are in transit from the time they are delivered to a carrier or other bailee like a
wharfinger or warehouse keeper for the purpose of transmission to the buyer and until the
buyer takes delivery of them.
The transit comes to an end in the following cases:
(a) If the buyer obtains delivery before the arrival of the goods at their destination;
(b) If, after the arrival of the goods at their destination, the carrier acknowledges to the buyer
that he holds the goods on his behalf, even if further destination of the goods is indicated
by the buyer;
(c) If the carrier wrongfully refuses to deliver the goods to the buyer.
Applying the above provisions in the given case, we may conclude that Himadri being unpaid,
can stop the 200 Kgs. of tea sent by railway as these goods are still in transit and Rahul has
become insolvent.

The expression „Caveat Emptor‟ means let the buyer beware.‟ The doctrine of caveat emptor
has been given in the first para of Section 16 which reads as under:
“Subject to the provisions of this Act and any other law for the time being in force, there is no
implied warranty or condition as to the quality or fitness for any particular purpose of goods
supplied under a contract of sale”.
It is not part of the seller’s duty to point out defects of the goods which he offers for sale, rather
it is the duty of the buyer to satisfy himself about the quality as well as the suitability of the
goods.

Rights of Seller
Rights of the Seller as per the of the Sale of Goods Act, 1930:
(a) Right to Reserve Disposal of Goods:
(b) Right to Assume Buyer’s Acceptance:
(c) Right to Deliver Goods upon Buyer’s Application:
(d) Right to Exercise Lien and Retain Possession:
(e) Right to Stop Goods in Transit:
(f) Right to Resell Goods under Certain Circumstances:
(g) Right to Withhold Delivery when Property has not Passed:
(h) Right to Sue for Price:

31. State the difference between Contract of Sale and Agreement to sell
Answer:
Basis Sale Agreement to sell
Transfer of The property in the goods passes The transfer of property takes place at
property from buyer to seller a future time or subject to certain
conditions to be fulfilled
Type of It is an executed contract It is an executor contract
Contract
Type of goods Sales take place only for existing and It is for future and contingent goods
specific goods
Risk of Loss If the goods are destroyed, the loss If the goods are destroyed, the loss
falls on the buyer despite the goods falls on the seller despite the goods are
are in possession of the seller in possession of the buyer.
Breach of The seller can sue the buyer for the The seller can sue for damages only, in
contract price and for damages in case of case of breach by the buyer
breach by the buyer

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CMA Inter Super 30 Questions 1.21
General and It gives the buyer a right to enjoy the It gives a right to the buyer against
Particular goods as against the world at large seller to sue for damages
property including the seller.
Insolvency of In absence of lien over the goods the The seller is not bound to part with the
buyer seller is to return the goods to the goods until the price is paid to him.
official receiver or the assignee. He is
entitled to get the dividend declared
by the official receiver which will be
at the reduced rate.
Insolvency of The buyer becoming the owner is The buyer cannot claim the goods but
seller entitled to recover the same from the may receive the dividend declared by
official receiver or assignee. the official receiver or assignee.

32. Write a short note on ‘Cleanliness’ as per Factories Act, 1948.

OR
What are the measures to be taken to keep the factory clean?
Answer:
Section 11 of the Factories Act, 1948, provides every factory shall be kept clean and free from
effluvia arising from any drain, privy or other nuisance, and in particular-
(a) removal of accumulated dirt and refuse on floors, benches of workroom, stair cases and
passages and effective disposal of the same;
(b) cleaning of the floor of every workroom – once in every week by washing with disinfectant
or by some other effective method;
(c) providing effective drainage for removing water to the extent possible;
(d) to ensure that interior walls and roofs etc., are kept clean the following is to be complied
without white wash or colour wash should be carried out at least once in every period of
14 months;
(e) where surface has been painted or varnished, repair or revarnish should be carried out
once in every five years, if washable then once in every period of six months;
(f) where they are painted or varnished or where they have smooth impervious surface, it
should be cleaned once in e very period of 14 months by such method as may be prescribed.
(g) all doors, windows and other framework which are of wooden or metallic shall be kept
painted or varnished at least once in every period of five years.
(h) The dates on which such processes are carried out shall be entered in the prescribed
register.

33. Discuss the powers of an Inspector as per the provisions of the Factories Act.
Answer:
As per the provision of section 8 of the Factories Act, 1948 the state government may appoint
a person possessing the prescribed qualifications to be inspector for the purpose of this Act
and may also assign local limits as may be think fit by the said government.

Section 9 prescribes the powers of the Inspector as detailed below-

(a) to enter into any place which is used, or which he has reason to believe is used as a factory;
(b) make examination of the premises, plant, machinery, article or substance;
(c) inquire into any accident or dangerous occurrence, whether resulting in bodily injury,
disability or not and take on the sport statements of any person which he may consider
necessary for such inquiry;
(d) require the production of any document relating to factory;
(e) seize or take copies of any register, record or other documents of any portion thereof as he
may consider necessary
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CMA Inter Super 30 Questions 1.22
(f) to take possession of any article or substance or part thereof and detain it for so long as is
necessary for such examination;
(g) to exercise such other powers as may be prescribed.

34. What is employees’ state insurance fund and for what purposes the fund may be
expended?
Answer:
Section 26 of the Act provides for the creation of Employees‘ State Insurance Fund held and
administered by the Corporation. All contributions paid under this Act and all other moneys
received on behalf of the corporation shall be paid into this fund. The grants, donations and
gifts received from the Central Government or any State Government, local authority or any
individual or body whether incorporated or not, are also paid into this Fund.

Purposes for which the fund may be expended

Section 28 of the Act provides the Central Government may utilize the State Insurance Fund
only for the following purposes:
(a) payment of benefits and provision of medical treatment and attendance to insured
persons and, where the medical benefit is extended to their families, the provision of
such medical benefit to their families in accordance with the provisions of this Act and
defraying the charges and costs in connection therewith;
(b) payment of fees and allowances to members of the Corporation, the Standing
Committee and the Medical Benefit Council, the Regional Boards, Local Committees and
Regional and Local Medical Benefit Councils;
(c) payment of salaries, leave and joining time allowances, travelling and compensatory
allowances, gratuities and compassionate allowances, pensions, contributions to
provident or other benefit fund of officers and servants of the Corporation and meeting
the expenditure in respect of offices and other services set up for the purpose of giving
effect to the provisions of this Act;
(d) defraying the cost (including all expenses) of auditing the accounts of the Corporation
and of the valuation of its assets and liabilities;
(e) defraying the cost (including all expenses) of the Employees‘ Insurance Courts set up
under this Act;

35. Demonstrate the functions of audit committee are contained in Sec. 177 of the
Companies Act 2013.
OR
Write briefly about Audit Committee according to Section 177 of Companies Act,
2013?
Answer:
(a) The Board of Directors of [every listed public company] and such other class or classes
of companies, as may be prescribed, shall constitute an Audit Committee.
(b) The Audit Committee shall consist of a minimum of three directors with independent
directors forming a majority: Provided that majority of members of Audit Committee
including its Chairperson shall be persons with ability to read and understand, the
financial statement.
(c) Every Audit Committee of a company existing immediately before the commencement
of this Act shall, within one year of such commencement, be reconstituted in
accordance with sub section (2).
(d) Every Audit Committee shall act in accordance with the terms of reference specified in
writing by the Board which shall, inter alia, include, –
(i) the recommendation for appointment, remuneration and terms of appointment
of auditors of the company;
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CMA Inter Super 30 Questions 1.23
(ii) review and monitor the auditor’s independence and performance, and
effectiveness of audit process;
(iii) examination of the financial statement and the auditors’ report thereon;
(iv) approval or any subsequent modification of transactions of the company with
related parties;

(e) The Audit Committee may call for the comments of the auditors about internal control
systems, the scope of audit, including the observations of the auditors and review of
financial statement before their submission to the Board and may also discuss any
related issues with the internal and statutory auditors and the management of the
company.
(f) The Audit Committee shall have authority to investigate into any matter in relation to
the items specified in sub-section (4) or referred to it by the Board and for this purpose
shall have power to obtain professional advice from external sources and have full
access to information contained in the records of the company.
(g) The auditors of a company and the key managerial personnel shall have a right to be
heard in the meetings of the Audit Committee when it considers the auditor’s report
but shall not have the right to vote.
(h) The Board’s report under sub-section (3) of section 134 shall disclose the composition
of an Audit Committee and where the Board had not accepted any recommendation of
the Audit Committee, the same shall be disclosed in such report along with the reasons
therefor.
(i) Every listed company or such class or classes of companies, as may be prescribed, shall
establish a vigil mechanism for directors and employees to report genuine concerns in
such manner as may be prescribed.
(j) The vigil mechanism under sub-section (9) shall provide for adequate safeguards
against victimisation of persons who use such mechanism and make provision for
direct access to the chairperson of the Audit Committee in appropriate or exceptional
cases.

36. Explain what is internal code of ethics and its relevance in business
Answer:
All companies will have a different code of ethics with different areas of interest, based on the
industry they are involved in, but the five areas that companies typically focus on include
integrity, objectivity, professional competence, confidentiality, and professional behavior.
Many firms and organizations have adopted a Code of Ethics.
According to the CFAI’s website, Members of CFA Institute, including CFA, and candidates for
the CFA designation must adhere to the following Code of Ethics:
(i) Act with integrity, competence, diligence, respect, and in an ethical manner with the public,
clients, prospective clients, employers, employees, colleagues in the investment profession,
and other participants in the global capital markets.
(ii) Place the integrity of the investment profession and the interests of clients above their own
personal interests.
(iii) Use reasonable care and exercise independent professional judgment when conducting
investment analysis, making investment recommendations, taking investment actions, and
engaging in other professional activities.
(iv) Practice and encourage others to practice professionally and ethically that will reflect
credit on themselves and the profession.
(v) Promote the integrity and viability of the global capital markets for the ultimate benefit of
society.
(vi) Maintain and improve their professional competence and strive to maintain and improve
the competence of other investment professionals.
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CMA Inter Super 30 Questions 1.24

37. State the seven principles of public life.

Answer:
The seven principles of public life as amended up to and as on 2015 are as follows-
(i) Selflessness – Holders of public office should act solely in terms of the public interest.
(ii) Integrity - Holders of public office must avoid placing themselves under any obligation
to people or organizations that might try inappropriately to influence them in their
work. They should not act or take decisions in order to gain financial or other material
benefits for themselves, their family, or their friends. They must declare and resolve
any interests and relationships.
(iii) Objectivity - Holders of public office must act and take decisions impartially, fairly and
on merit, using the best evidence and without discrimination or bias.
(iv) Accountability - Holders of public office are accountable to the public for their
decisions and actions and must submit themselves to the scrutiny necessary to ensure
this.
(v) Openness - Holders of public office should act and take decisions in an open and
transparent manner. Information should not be withheld from the public unless there
are clear and lawful reasons for so doing.
(vi) Honesty - Holders of public office should be truthful
(vii) Leadership - Holders of public office should exhibit these principles in their
own behavior. They should actively promote and robustly support the principles and
be willing to challenge poor behavior wherever it occurs.

38. X, by inducing Y, obtains a Bill of Exchange from him fraudulently in his (X)
favour. Later, he enters Into a commercial deal and endorses the bill to Z towards
consideration to him (Z) for the deal. Z takes the Bill as a holder in due course. Z
subsequently endorses the bill to X for value, as consideration to X for some other
deal. On maturity, the bill is dishonored. X sues Y for recovery of money. With
reference to the provisions of Negotiable Instruments Act, decide whether X will
succeed in the case.
Answer:
Section 58 of Negotiable Instruments Act provides that when an instrument is obtained by
fraud, offence or for unlawful consideration, possessor or endorsee cannot receive the amount
of instrument. Hence, normally X would not be entitled to sue Y as X has obtained instrument
through fraud.
However, as per section 53, a holder who derives title from holder in due course has all rights
of a holder in due course. Since X derives his title from Z(who is a holder in due course0,X has
all rights of Z.
Second part of section 58 also makes it clear that even if a negotiable instrument is obtained by
means of an offence or fraud or for unlawful consideration, the possessor or endorsee is
entitled to receive the amount from the maker, if he is a holder in due course or claims through
a person who was a holder in due course. Hence, X can sue Y as he is deriving his right from
Z,who is holder in due course. Hence will succeed.

39. State the features of Section 8 Company. Also elaborate the cases of Revocation
of license under Section 8(6) of companies Act.
Answer:
The following are the features for Section 8 companies:
(i) has its objects the promotion of commerce, art, science, sports, education, research, social
welfare, religion, charity, protection of environment or any such other object;
(ii) intends to apply its profits, if any, or other income in promoting its objects; and
(iii) intends to prohibit the payment of any dividend to its members;

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CMA Inter Super 30 Questions 1.25
(iv) the company registered under this Section shall enjoy all the privileges and be subject to
all the obligations of the limited company;
(v) a firm may be a member of the company registered under this section;
(vi) a company registered under this Section shall not alter the provisions of its memorandum
and articles except with the previous approval of the Central Government.
(vii) a company registered under this section may convert itself into a company of any other
kind only after complying with such conditions as may be prescribed.

Section 8(6) provides that the Central Government may, by order, revoke the licence granted
to the company registered under this section-
(a) if the company contravenes any of the requirements of this section; or
(b) any of the conditions subject to which a licence is issued; or
(c) the affairs of the company are conducted fraudulently or in a manner violative of the
objects of the company or prejudicial to public interest.
The Central Government shall direct the company to convert its status and change its name to
add the words “Limited” or “Private Limited” to its name. No such order will not be passed
without giving opportunity to the company of being heard. A copy of such order shall be given
to the Registrar. The Registrar shall, without prejudice to any action taken, on application, in
the prescribed form, register the company accordingly.
Where a licence is revoked by the Central Government, it may direct that the company may be
wound up under this Act or amalgamated with another company registered under this section,
if it is satisfied that it is essential in the public interest. No such order shall be made unless the
company is given a reasonable opportunity of being heard. Where a licence is revoked by the
Central Government and where the Central Government is satisfied that it is essential in the
public interest that the company registered under this section should be amalgamated with
another company registered under this section and having similar objects, then the Central
Government may, by order, provide for such amalgamation to form a single company with such
constitution, properties, powers, rights, interest, authorities and privileges and with such
liabilities, duties and the obligations as may be specified in the order.

40. What are the responsibilities of an occupier in a factory?

Answer:
Responsibility of the occupier
The occupier has to follow the procedure-
(i) to lay down a detailed policy with respect to the health and safety of the workers;
(ii) to disclose all the information regarding dangers including health hazards and the
measures
(iii) to overcome such hazards arising from the exposure to or handling of the materials or
(iv) substances in the manufacture, transportation, storage and other processes to the workers
employed in the factory;
(v) to draw up an onsite emergency plan and detailed disaster control measures for the factory
and make known to the workers and to the general public living in the vicinity of the
factory, the safety measures required to be taken in the event of accident taking place.
(vi) to lay down measures for the handling usage, transportation and storage of hazardous
substances inside the factory premises and the disposal of such substances outside the
factory premises and publicize them in the manner prescribed among the workers and the
general public living in the vicinity.

Section 41C provides that the occupier is having specific responsibilities in relation to
hazardous processes. He has to maintain the health records of the employees. He is to appoint
experienced persons who possess specified qualifications in handling hazardous substances
and competent to supervise such handling within the factory.

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CMA Inter Super 30 Questions 1.26
41. What are the standards of ethical conduct for practitioners fixed by the ICMAI?
Answer:
The Institute has promulgated the following standards of ethical conduct for practitioners
(i) maintain at all times independence of thought and action;
(ii) not to express an opinion on cost / financial reports or statements without first
assessing her or his relationship with her or his client to determine whether such
Member might expect her or his opinion to be considered independent, objective and
unbiased by one who has knowledge of all the facts; and
(iii) when preparing cost / financial reports or statements or expressing an opinion on cost
/ financial reports or statements, disclose all material facts known to such Member in
order not to make such cost / financial reports or statements misleading, acquire
sufficient information to warrant an expression of opinion and report all material
misstatements or departures from generally accepted accounting principles.
(iv) not to disclose or use any confidential information concerning the affairs of such
Member’s employer or client unless acting in the course of his or her duties or except
when such information is required to be disclosed in the course of any defense of
himself or herself or any associate or employee in any lawsuit or other legal proceeding
or against alleged professional misconduct by order of lawful authority or any
committee of the Society in the proper exercise of their duties but only to the extent
necessary for such purpose;
(v) inform his or her employer or client of any business connections or interests of which
such Member’s employer or client would reasonably expect to be informed;
(vi) not, in the course of exercising his or her duties on behalf of such Member’s employer
or client, hold, receive, bargain for or acquire any fee, remuneration or benefit without
such employer’s or client’s knowledge and consent; and
(vii) take all reasonable steps, in arranging any engagement as a consultant, to
establish a clear understanding of the scope and objectives of the work before it is
commenced and will furnish the client with an estimate of cost, preferably before the
engagement is commenced, but in any event as soon as possible thereafter.
(viii) conduct himself or herself toward other Members with courtesy and good faith
(ix) not to accept any engagement to review the work of another Member for the same
employer except with the knowledge of that Member, or except where the connection
of that Member with the work has been terminated, unless the Member reviews the
work of others as a normal part of his or her responsibilities
(x) not to attempt to gain an advantage over other Members by paying or accepting a
commission in securing management accounting work
(xi) not to act maliciously or in any other way which may adversely reflect on the public or
professional reputation or business of another Member
(xii) at all times maintain the standards of competence expressed by the Institute
from time to time;
(xiii) undertake only such work as he or she is competent to perform by virtue of his
or her training
(xiv) And experience and will, where it would be in the best interests of an employer
or client, engage, or advise the employer or client to engage, other specialists;

42. Lokesh draws a bill of exchange payable to himself on Prachi, who accepts the bill
without consideration just to accommodate Lokesh. Lokesh transfers the bill to
Govind for good consideration. State the rights of Lokesh and Govind. Would your
answer be different if Lokesh transferred the bill to Govind after maturity?
Answer:
Section 43 of the Negotiable Instrument Act, 1881 states the following:-

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CMA Inter Super 30 Questions 1.27
(i) Liability of parties if there is no consideration - A negotiable instrument made, drawn,
accepted, endorsed or transferred without consideration, or for a consideration which
fails, creates no obligation of payment between the parties to the transaction.
(ii) Rights of holder for consideration - but if any such party has transferred the instrument
to a holder for consideration, such holder, and every subsequent holder deriving title
from him, may recover the amount due on such instrument from the transferor for
consideration or any prior party thereto.
(iii) No right of accommodating party to recover from accommodating party - No party for
whose accommodation a negotiable instrument has been made, drawn, accepted,
endorsed can, if he has paid the amount thereof, recover thereon such amount from any
person who became a party to such instrument for his accommodation.

In the given case, Lokesh is not entitled to sue Prachi, since there is no consideration between
Lokesh and Prachi and hence there is no obligation to pay. Again Govind is entitled to sue
Lokesh and Prachi, since Govind is a holder for consideration. Govind is entitled to sue the
transferor for consideration and every other party prior to him. According to Sec 59, in the case
of accommodation bills, a defect in the title of the transferor does not affect the title of the
holder acquiring after maturity. Hence, even if Govind has acquired the bill for consideration
after maturity, he is entitled to sue. lokesh
govind
43.
i. What are the conditions stipulated in the Act in formation of One Person
company?
ii. Can a Company registered as a Public Company be converted into a Private
Company with following details without change in number of members?
Directors and Relatives 50
Employees 15
Ex-employees (Shares were allotted when they were 10
employees)
5 couples holding shares jointly (5*2) 10
Others 145
Total Number of Members 230
Answer:
i.
The conditions stipulated in the Act in formation of One Person Company are:
The following are the conditions in formation of a OPC:
(a) Only a Natural person and Indian Citizen whether resident in India or not shall be
entitled to form an OPC.
(b) No natural person shall be eligible to incorporate more than a OPC or become nominee
in more than a OPC;
(c) Where a natural person, being a member of OPC in accordance with this rule becomes a
member in another such company by virtue of his being a nominee in that OPC, such
person shall meet the eligibility criteria within a period of 182 days;
(d) No minor shall become member or nominee of OPC or can hold share with beneficial
interest;
(e) Such company cannot be incorporated or converted into Section 8 company;
(f) Such company cannot carry out Non Banking Financial Investment activities including
investment activities in securities of anybody corporate;

ii. According to section 2(68) of the Companies Act, 2013, "Private company" means a
company having a minimum paid-up share capital as may be prescribed, and which
by its articles, except in case of One Person Company, limits the number of its

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CMA Inter Super 30 Questions 1.28
members to two hundred. However, where two or more persons hold one or more
shares in a company jointly, they shall, for the purposes of this clause, be treated as
a single member. It is further provided that - (A) persons who are in the
employment of the company; and (B) persons who, having been formerly in the
employment of the company, were members of the company while in that
employment and have continued to be members after the employment ceased shall
not be included in the number of members.

Following above stated provisions, Number of members for the above purpose shall
be – Directors (50)+ Couples(5)+ Others (145)= 200. Hence Company may convert
itself into Private Company without any change in number of members.

44. What is necessary for formation of Partnership? Also, Explain Partnership at will.
Is it different from Particular Partnership?
Answer:
For constituting a partnership, the following ingredients are necessary-
(i) There should be an agreement between the parties;
(ii) The agreement must be to share the profits of the business and the business must be
carried on by all or any of them acting for all;
(iii) The existing of an agency between the concerned persons inter-se.

Partnership at will Section 7 defines the expression ‘partnership at will’. According to this
section, where no provision is made by contract between the partners for the duration of their
partnership, or for the determination of their partnership, the partnership is ‘partnership at
will’. Such a partnership could be dissolved by any partner giving notice in writing to all other
partners, of his intention to dissolve the firm. On such notice being given, the firm is dissolved
from the date mentioned in the notice as the date of dissolution or if not date is so mentioned,
as from the date of communication of the notice.
The following are the essential ingredients of a ‘partnership-at-will’-
(i) deed of partnership should contain any provision, whether express of implied as to the
duration of partnership; and *not
(ii) for the determination of the partnership. If either of the above said provision exists, the
partnership would not be a partnership-at-will.

Yes, Particular partnership is different. Section 8 provides that a person may become a partner
with another person in particular adventures or undertakings.

45. Discuss the concept of implied authority of a partner.

Answer:
Section 22 provides that in order to bind a firm, an act or instrument, done or executed by a
partner or other person on behalf of the firm, shall be done or executed in the firm name, or in
any other manner expressing or implying an intention to bind the firm.
Section 19 provides that subject to the provisions of Section 22, the act of a partner, which is
done to carry on, in the usual way, business of the kind carried on by firm, binds the firm.
The authority of a partner to bind the firm, conferred by this section, is called his ‘implied
authority’. In the absence of any usage or custom of trade to the contrary, the implied authority
of a partner does not empower him to-
(a) submit a dispute relating to the business of the firm to arbitration;
(b) open a banking account on behalf of the firm in his own name;
(c) compromise or relinquish any claim or portion of a claim by the firm;
(d) withdraw a suit or proceeding filed on behalf of the firm;
(e) admit any liability in a suit or proceeding against the firm;
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CMA Inter Super 30 Questions 1.29
(f) acquire immovable property on behalf of the firm;
(g) transfer immovable property belonging to the firm; or
(h) enter into partnership on behalf of the firm.

Extension and restriction of implied authority

Section 20 provides that the partners may extend or restrict the implied authority of any
partner by contract between the partners. Despite such restrictions, any act done by a partner
on behalf of the firm, which falls within his implied authority, binds the firm unless the person,
with whom he is dealing, knows of the restriction or does not know or believe that partner to
be a partner.

46. Examine the provisions of the Payment of Gratuity Act related to determination
of eligible employees and mode of payments with relevant examples.
Answer:
An employee who is eligible for payment of gratuity under the Act, or any person authorized,
in writing, to act on his behalf, shall apply, ordinarily within thirty days from the date the
gratuity became payable, in Form ‘I’ to the employer. Where the date of superannuation or
retirement of an employee is known, the employee may apply to the employer before thirty
days of the date of superannuation or retirement.
Section 7 of the Payment of Gratuity Act prescribes the procedure for determination of the
amount of gratuity. As soon as the gratuity becomes payable, the employer shall, whether the
employee has made application or not, determine the amount of gratuity. Then he is to give
notice to the person to whom the gratuity is payable and also to the Controlling Authority,
specifying the amount of gratuity so determined.

Mode of Payment
Gratuity payable under the Act shall be paid in
(a) cash or, if so desired by the payee,
(b) in Demand Draft or
(c) bank Cheque
to the eligible employee, nominee or legal heir, as the case may be.

In case the eligible employee, nominee or legal heir, as the case may be, so desires and the
amount of gratuity payable is less than one thousand rupees, payment may be made by postal
money order after deducting the postal money order commission there for from the amount
payable.

47. Aswani who was an employee of Sun Televisions Limited, retired on 1st January,
2013 after 30 years of continuous service. The company did not pay the amount
of gratuity to Aswani till the end of December, 2013. Now, Aswani claims the
amount of gratuity along with interest. Decide, under the Payment of Gratuity
Act, 1972 whether Aswani will succeed in his claim?
Answer:
If the employer fails to pay the gratuity within the prescribed time (i.e., within 30 days of
termination of employment), the controlling authority is empowered to issue a certificate,
known as the recovery certificate to the collector to recover the amount of gratuity.
Before issue of such certificate, the controlling authority shall give the employer a reasonable
opportunity of being heard.
The employer shall also be liable to pay compound interest at such rate as may be notified by
CG from time to time. The interest shall be paid starting from the date of expiry of prescribed
period for payment of gratuity and ending with the actual date of payment of gratuity.
However, the interest payable shall not exceed the amount of gratuity payable. The gratuity
shall be recovered by the collector in the same manner as if it were arrears of land revenue.
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CMA Inter Super 30 Questions 1.30
The gratuity so recovered shall be paid to the person entitled to payment of gratuity. Hence
Aswani may follow the above rules for settlement of his claim.

48. A works for a certain political party and is notorious for making hate speeches
against a certain religious community which often leads to communal riots
pursuant to his inciting speeches. A was asked not to speak at a congregation
which was to be held publicly. Is A’s freedom to speech impeded?
Answer:
Article 19 provides for Freedom of speech and Expression. However, the right is not absolute,
and subject to reasonable restrictions which are as follows:-
(a) Security of the State
(b) Friendly relations with foreign states
(c) Public order
(d) Decency and Morality
(e) Contempt of Court
(f) Defamation
(g) Incitement to an offence
(h) Sovereignty and Integrity of India
Hence, A’s freedom to speech is not impeded.

49. Discuss the concept of impossibility of performance of contracts with suitable

examples and reference to the related legal provisions.
Answer:
(a) Impossibility of performance of Contracts
(i) Physical impossibility: An agreement is void, if it is identified to be non-feasible due to
physical factors, like time, distance, height, etc.
(ii) Legal impossibility: An agreement is void, if it provides that something shall be done
which as a matter of law cannot be done.

Examples:
(a) A agrees to sell to B a specific cargo of goods supposed to be on its way from England to
Bombay. It turns out that, before the day of the bargain, the ship conveying the cargo had
been cast away and the goods lost. Neither party was aware of the these facts. The
agreement is void.
(b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of
bargain, though neither party was aware of the fact. The agreement is void.
(c) A, being entitled to an estate for the life of B, agrees to sell it to C. B was dead at the time of
the agreement, but both parties were ignorant of the fact. The agreement is void.

Unilateral Mistake as to fact

As per section 22, a contract is not voidable merely because it was caused by one of the parties
to it being under a mistake as to a matter of fact. A unilateral mistake is not allowed as a defence
in avoiding a contract unless brought about by another party’s fraud or misrepresentation.

50. Define Debentures. Who may not be appointed as debenture trustee?

Answer:
Section 2(30) of the Act defines the term „debentures‟ as including debenture, stock, bonds or
any other instrument of a company evidencing a debt, whether constituting a charge on the
assets of a company or not. Section 44 provides that the debentures shall be the movable
property transferable in the manner provided in the articles of the company.

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 CMA Inter Super 30 Questions 1.31
Section71 (1) of the Act provides that a company may issue debentures with an option to
convert such debentures into shares, either wholly or partly at the time of redemption. The
issue of debentures with an option to convert such debentures into shares, wholly or partly,
shall be approved by a special resolution passed at a general meeting.
Section 71(2) provides that no company shall issue any debentures carrying any voting rights.

Rule 18 (2) (c) provides that a person shall not be appointed as a debenture trustee, if he:
(a) beneficially holds shares in the company;
(b) is a promoter, director or key managerial personnel or any other officer or an employee
of the company or its holding, subsidiary or associate company;
(c) is beneficially entitled to moneys which are to be paid by the company otherwise than
as remuneration payable to the debenture trustee;
(d) is indebted to the company, or its subsidiary or its holding or associate company or a
subsidiary of such holding company;
(e) has any pecuniary relationship with the company amounting to 2% or more of its gross
turnover or total income or Rs. 50 lakh or such higher amount as may be prescribed,
whichever is lower, during the two immediately preceding financial years or during the
current financial year;
(f) is relative of any promoter or any person who is in the employment of the company as
a director or key managerial personnel.

51. Examine the validity of the following decisions of the Board of Directors with
reference of the provisions of the Companies Act, 2013.
a) In an Annual General Meeting of a company having share capital, 80 members
present in person or by proxy holding more than 1/10th of the total voting
power, demanded for poll. The chairman of the meeting rejected the request
on the ground that only the members present in person can demand for poll.
b) In an annual general meeting, during the process of poll, the members who
earlier demanded for poll want to withdraw it. The chairman of the meeting
rejected the request on the ground that once poll started, it cannot be
withdrawn.
Answer:
Section 109 of the Companies Act, 2013 provides for the demand of poll before or on the
declaration of the result of the voting on any resolution on show of hands. Accordingly, law says
that:

Before or on the declaration of the result of the voting on any resolution on show of hands, a
poll may be ordered to be taken by the Chairman of the meeting on his own motion, and shall
be ordered to be taken by him on a demand made in that behalf:

In the case a company having a share capital, by the members present in person or by proxy,
where allowed, and having not less than one - tenth of the total voting power or holding shares
on which an aggregate sum of not less than five lakh rupees or such higher amount as may be
prescribed has been paid - up; and
In the case of any other company, by any member or members present in person or by proxy,
where allowed, and having not less than one tenth of the total voting power. Withdrawal of the
demand: The demand for a poll may be withdrawn at any time by the persons who made the
demand. Hence, on the basis on the above provisions of the Companies Act, 2013:
A) The chairman cannot reject the demand for poll subject to provision in the articles of
company.
B) The chairman cannot reject the request of the members for withdrawing the demand
of the Poll.

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The Companies Act, 2013 does not explicitly state that a poll, once demanded, cannot be withdrawn.
However, it is generally understood that once the process of polling has started, it should be completed to
maintain the integrity of the voting process. The chairman's decision to reject the request for withdrawal of
the poll is valid, as it ensures the proper conduct of the meeting and the voting process
CMA Inter Super 30 Questions 1.32
52. “LLP is an alternative corporate business form that gives the benefits of limited
liability of a company and the flexibility of a partnership and a body corporate.
Do you agree? Justify.
Answer:
LLP is an alternative corporate business form that gives the benefits of limited liability of a
company and the flexibility of a partnership Limited Liability: Every partner of a LLP is, for the
purpose of the business of LLP, the agent of the LLP, but not of other partners (Section 26 of
the LLP Act, 2008). The liability of the partners will be limited to their agreed contribution in
the LLP, while the LLP itself will be liable for the full extent of its assets. Flexibility of a
partnership: The LLP allows its members the flexibility of organizing their internal structure
as a partnership based on a mutually arrived agreement. The LLP form enables entrepreneurs,
professionals and enterprises providing services of any kind or engaged in scientific and
technical disciplines, to form commercially efficient vehicles suited to their requirements.
Owing to flexibility in its structure and operation, the LLP is a suitable vehicle for small
enterprises and for investment by venture capital.

Limited Liability Partnerships formed and registered under Limited Liability Partnership Act,
2008 are body corporate.
The definition of Body corporate includes a Company, a LLP registered under this Act, a LLP
incorporated outside India and a company incorporated outside India,
All LLPs have the following features:
(a) A Limited Liability Partnership is a body corporate formed and incorporated under this
Act and is legal entity separate from that of its partners.
(b) A limited liability partnership shall have perpetual succession.
(c) Any change in the partners of a limited liability partnership shall not affect the
existence, rights or liabilities of the limited liability partnership.
(d) Save as otherwise provided, the provisions of the Indian Partnership Act, 1932 shall
not apply to a limited liability partnership.
(e) Any individual or body corporate may be a partner in a limited liability partnership.

53. Enumerate Rights of shareholders under Companies Act, 2013.

Answer:
A person who is a shareholder of a company has many rights under the Act. Some of them are:
(a) The right to vote at all meetings [Sec.47]
(b) The right to requisition an extraordinary general meeting of the compay [Sec.100]
(c) The right to receive notice of a general meeting [Sec.101]
(d) The right to appoint proxy and inspect proxy register [Sec.105]
(e) In the case of a body corporate which is a member, the right to appoint a representative
to attend a general meeting on its behalf [Sec.113]; and
(f) The right to require the company to circulate resolution [Sec.111].
(g) To have certificate of share held ready for delivery to him within two months from the
date of allotment [Sec.56]
(h) To Transfer shares subject to the provisions of the Act and Article of Association
[Sec.44].
(i) To inspect the Register of members and Register of debenture-holders and get extracts
therefrom [Sec.94].
(j) To obtain, on request, minutes of proceedings at general meetings as also to inspect the
minutes [Sec.119].
(k) To apply to the Tribunal to have any variation of shareholders rights set aside [Sec.48].
(l) To participate in the removal of directors by passing an ordinary resolution [Sec.169]
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CMA Inter Super 30 Questions 1.33

54. What are the duties of Director in General?

Answer:
Section 166 of the Act prescribes the duties of a director under the provisions of this Act as
detailed below:
(a) A director of a company shall act in accordance with the articles of the company;
(b) A director of a company shall act in good faith in order to promote the objects of the
company for the benefit of its members as a whole, and in the best interests of the
company, its employees, the shareholders, the community and for the protection of
environment; powers
(c) A director of a company shall exercise his duties with due and reasonable care, skill and
diligence and shall exercise independent judgment;
(d) A director shall not involve in a situation in which he may have a direct or indirect
interest that conflicts, or possibly may conflict, with the interest of the company
(e) A director of a company shall not achieve or attempt to achieve any undue gain or
advantage either to himself or to his relatives, partners, or associates and if such
director is found guilty of making any undue gain, he shall be liable to pay an amount
equal to that gain to the company;
(f) A director of a company shall not assign his office and any assignment so made shall be
Void. If a director of the company contravenes the provisions of Section 166 such
director shall be punishable with fine which shall not be less than one lakh rupees but
which may extend to five lakh rupees.

55. State the distinction between Condition and Warranty. Also state when Condition
can be treated as Warranty?
Answer:
A condition can be distinguished from a warranty as under:
Basis of Condition Warranty
Distinction
Essential vs. It is a stipulation which is essential to It is a stipulation which is only
Collateral the main purpose of the contract. collateral to the main purpose of
the contract.
Right in case of The aggrieved party can terminate the The aggrieved party can claim
breach contract. damages but cannot terminate
contract.
Treatment A breach of condition can be treated A breach of warranty cannot be
as a breach of warranty. For example, treated as a breach of condition.
a buyer may like to retain the goods
and claim only damages.
In the following three cases, a breach of a condition is treated as a breach of a warranty
[Section 13]:
(a) where the buyer waives a condition; once the buyer waives a condition, he cannot insist
on its fulfillment e.g. accepting defective goods or beyond the stipulated time amounts to
waiving a condition.
(b) where the buyer elects to treat breach of the condition as a breach of warranty; e.g. where
he claims damages instead of repudiating the contract.
(c) where the contract is not severable and the buyer has accepted the goods or part thereof,
the breach of any condition by the seller can only be treated as a breach of warranty. It
cannot be treated as a ground for rejecting the goods unless otherwise specified in the
contract. Thus, where the buyer after purchasing the goods finds that some condition is
not fulfilled, he cannot reject the goods. He has to retain the goods entitling him to claim
damages.

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 1 Negotiation 3 Mediation
5 Lok Adalat

2 Conciliation 4 Arbitration

CMA Inter Super 30 Questions 1.34

56. Demonstrate the methods of alternate dispute resolution processes in India.

Answer:
There are many ways in which disputes can be resolved and grievances redressed. The most
common form of judicial dispute resolution is litigation. Litigation is initiated when one party
files suit against another. The proceedings are very formal and are governed by rules, such as
rules of evidence and procedure, which are established by the legislature. Outcomes are
decided by impartial judges, based on the factual questions of the case and the applicable law.
The verdict of the court is binding; however, both parties have the right to appeal the judgment
to a higher court.

Methods of dispute resolution that do not involve litigation through courts generally are
classified under alternative dispute resolution (ADR) methods.
These methods may include arbitration, mediation, conciliation, negotiation and others.

ADR generally depends on agreement by the parties to use ADR processes, either before or
after a dispute has arisen. ADR has experienced steadily increasing acceptance and utilization
because of a perception of greater flexibility and speedy resolution of disputes, among other
perceived advantages. Alternative Dispute Resolution is a term used to describe several
different modes of resolving legal disputes other than filing law suits and get timely justice. To
solve the problem of delayed justice ADR Mechanism has been developed in response thereof.
Its methods can help the parties to resolve their disputes at their own terms expeditiously.
Alternative dispute redressal techniques can be employed in several categories of disputes,
especially civil, commercial, industrial and family disputes.

The term “Alternative Disputes Resolution” takes in its fold, various modes of settlement
including, Lok Adalats, arbitration conciliation and Mediation It was suggested by the Law
Commission of India that the Court may require attendance of any party to the suit or
proceedings to appear in person with a view to arriving at an amicable settlement of dispute
between the parties and make attempts to settle the dispute between the parties amicably.

57. Discuss the concept of primary and secondary legislation.

Answer:
Primary Legislation
(a) It is an act that has been passed by the Parliament.
(b) When the laws are directly enacted by the sovereign, it is considered as supreme
legislation.
(c) The laws enacted by the British Parliament fall in this category, as the British
Parliament is considered as sovereign.
(d) The law by the Indian Parliament also falls in the same category.
(e) However in India, powers of the Parliament are regulated and controlled by the
Constitution, through the laws enacted by it are not under the control of any other
legislative body.

Subordinate legislation
(a) Subordinate legislation is the legislation made by an authority subordinate to the
legislature.
(b) It is made under the authority other than the sovereign power and is, therefore,
dependent for its continued existence and validity on some superior or supreme
authority. Most of the enactments provide for the powers for making rules, regulations,
bye-laws or other statutory instruments which are exercised by the specified
subordinate authorities.

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CMA Inter Super 30 Questions 1.35
(c) Delegated legislation under such delegated powers is ancillary and cannot, by its very
nature, replace or modify the parent law.
(d) It can hence be further classified into Local Laws and Laws made by the Executive.

58. Critically assess how the fundamental rights guarantee equality of citizens.
Answer:
“Equality is a dynamic concept with many aspects and dimensions and it cannot be described,
Cabined and confined” within traditional limits.
Article 15(1) provides that the state shall not discriminate against any citizen on grounds only
of :-
(a) Religion
(b) Race
(c) Caste
(d) Sex
(e) Place of birth or
(f) Any of them

Article 15 (2) provides that :- No citizen shall be on above grounds, subject to any disability,
liability, restriction or condition with regard to:
(a) access to shops, public restaurants, hotels and places of public entertainment; or
(b) the use of wells, tanks, bathing ghats, roads and places of public resort maintained
wholly or partly out of State funds or dedicated to the use of the general public.

However, Nothing in this article shall prevent the State from making any special provision for
women and children, socially and educationally backward classes of citizens or for the
Scheduled Castes.

Article-16 provides for Equality of opportunity in matters of public employment :-

(a) There shall be equality of opportunity for all citizens in matters relating to employment
or appointment to any office under the State.
(b) No citizen shall, on grounds only of: religion, race, caste, sex, descent, place of birth,
residence, or any of them, be ineligible for, or discriminated against in respect of, any
employment or office under the State.

Article-17: abolishes the practice of untouchability in any form, making it an offense punishable
by law.
Abolition of Untouchability “Untouchability” is abolished and its practice in any form is
forbidden. The enforcement of any disability arising out of “Untouchability” shall be an offence
punishable in accordance with law. The term “Untouchability” is not defined under the
Constitution. However, it refers to the
social disabilities imposed on certain class of person by reason of their birth in certain caste.
However, it does not cover social boycott of a few individuals.

Article-18: prohibits the State from conferring any titles other than military or academic
distinctions, and the citizens of India cannot accept titles from a foreign state. Thus, Indian
aristocratic titles and title of nobility conferred by the British have been abolished. However,
military and academic distinctions can be conferred on the citizens of India.
Abolition of Titles:
(a) No title, not being a military or academic distinction, shall be conferred by the State.
(b) No citizen of India shall accept any title from any foreign State.

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CMA Inter Super 30 Questions 1.36
(c) No person who is not a citizen of India shall, while he holds any office of profit or trust
under the State, accept without the consent of the President any title from any foreign
State.
(d) No person holding any office of profit or trust under the State shall, without the consent
of the President, accept any present, emolument, or office of any kind from or under any
foreign State.

Thus, we can establish from above mentioned provisions that The Constitution says that the
government shall not deny to any person in India equality before the law or the equal
protection of the laws. It means that the laws apply in the same manner to all, regardless of a
person's status.

59. Reconcile the time limit for payment of wages. Also, Define the term wages in
accordance with Code on Wages, 2019.
Answer:
The employer shall pay or cause to be paid wages to the employees, engaged on:
(a) daily basis, at the end of the shift;
(b) weekly basis, on the last working day of the week, that is to say, before the weekly holiday;
(c) fortnightly basis, before the end of the second day after the end of the fortnight;
(d) monthly basis, before the expiry of the seventh day of the succeeding month.

Where an employee has been:

(a) removed or dismissed from service; or
(b) retrenched or has resigned from service,
or became unemployed due to closure of the establishment,
the wages payable to him shall be paid within two working days of his removal, dismissal,
retrenchment or, as the case may be, his resignation.

“wages” means:
All remuneration whether by way of salaries, allowances or otherwise, expressed in terms of
money or capable of being so expressed which would, if the terms of employment, express or
implied, were fulfilled, be payable to a person employed in respect of his employment or of
work done in such employment, and includes:
a) basic pay;
b) dearness allowance; and
c) retaining allowance, if any, but does not include––
(i) any bonus payable under any law for the time being in force, which does not form
part of the remuneration payable under the terms of employment;
(ii) the value of any house-accommodation, or of the supply of light, water, medical
attendance or other amenity or of any service excluded from the computation of
wages by a general or special order of the appropriate Government;
d) any contribution paid by the employer to any pension or provident fund, and the
interest which may have accrued thereon
e) any conveyance allowance or the value of any travelling concession
f) any sum paid to the employed person to defray special expenses entailed on him by
the nature of his employment
g) house rent allowance
h) remuneration payable under any award or settlement between the parties or order of
a court or Tribunal
i) any overtime allowance
j) any commission payable to the employee
k) any gratuity payable on the termination of employment

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CMA Inter Super 30 Questions 1.37
l) any retrenchment compensation or other retirement benefit payable to the employee
or any ex gratia payment made to him on the termination of employment:

60. “An employee can be dismissed or punished during sickness”? Apply the related
provisions of the ESI Act with examples to substantiate your answer.
Answer:
Section 73 provides that no employee shall dismiss, discharge or reduce or otherwise punish
an employee during the period the employee is in receipt of sickness benefit or maternity
benefit, nor shall be, except as provided under the regulations, dismiss, discharge or reduce
or otherwise punish an employee during the period which he is in receipt of disablement
benefit for temporary disablement or is under medical treatment for sickness or is absent
from work as a result of illness duly certified in accordance with the regulars to arise out of
the pregnancy or confinement rendering the employee unfit for work.
Jurisdiction of Civil Court
Section 75(3) provides that no Civil Court have jurisdiction to decide or deal with any
question or dispute as aforesaid or to adjudicate on any liability which is to be decided by a
medical board or a medical appeal tribunal
or ESI Court. In ‘ESI Corporation V. Jalandhar Gymkhana Club’- 1972 LLR 733 (P&H) it was
held that a civil court cannot determine whether this Act is applicable to an establishment or
not.

61. State the procedure of passing of Money Bills.

Answer:
1. Introduction
(i) A Money Bill shall not be introduced in the Council of States. 2. Certification
(ii) After a Money Bill has been passed by the House of the People it shall be transmitted to
3. Passage in
the Council of States for its recommendations and the Council of States shall within a Lok Sabha
period of fourteen days from the date of its receipt of the Bill return the Bill to the House
of the People with its recommendations and the House of the People may thereupon 4.
either accept or reject all or any of the recommendations of the Council of States. Transmission
to Rajya Sabha
(iii) If the House of the People accepts any of the recommendations of the Council of States,
the Money Bill shall be deemed to have been passed by both Houses with the 5.
amendments recommended by the Council of States and accepted by the House of the Consideration
of
People. Recommendatio
(iv) If the House of the People does not accept any of the recommendations of the Council ns
of States, the Money Bill shall be deemed to have been passed by both Houses in the
6. Presidential
form in which it was passed by the House of the People without any of the amendments Assent
recommended by the Council of States.
(v) If a Money Bill passed by the House of the People and transmitted to the Council of 7. Becoming
Law
States for its recommendations is not returned to the House of the People within the
said period of fourteen days, it shall be deemed to have been passed by both Houses at
the expiration of the said period in the form in which it was passed by the House of the
People.

62. State the composition and functions of Central Advisory Board constituted under
Code on Wages, 2019.
Answer:
The Central Government shall constitute the Central Advisory Board which shall consist of
persons to be nominated by the Central Government:
(i) representing employers;
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CMA Inter Super 30 Questions 1.38
(ii) representing employees which shall be equal in number of the members specified in
clause (a);
(iii) independent persons, not exceeding one-third of the total members of the Board; and
(iv) five representatives of such State Governments as may be nominated by the Central
Government.

One-third of the members above shall be women and a member specified in clause (c) of the
said sub-section shall be appointed by the Central Government as the Chairperson of the Board.
The Central Advisory Board constituted under sub-section (1) shall from time to time advise
the Central Government on reference of issues relating to:
(i) fixation or revision of minimum wages and other connected matters;
(ii) providing increasing employment opportunities for women;
(iii) the extent to which women may be employed in such establishments or employments
as the Central Government may, by notification, specify in this behalf; and
(iv) any other matter relating to this Code, and on such advice, the Central Government may
issue directions to the State Government as it deems fit in respect of matters relating to
issues referred to the Board.

63. Discuss the different modes of terminating contractual relationship between the
parties.
Answer:
Modes of Terminating Contractual relationship between the parties:
When the rights and obligations created by a contract come to an end, the contract is said to be
discharged or terminated. In other words, discharge of contract means termination of
contractual relationship between the parties.

Modes of discharge:
1. Discharge by performance: Performance is the usual mode of discharge of a contract.
Performance may be:
a) actual performance
b) attempted performance.
Actual performance is the fulfillment of the obligations arising from a contract by the parties to
it, in accordance with the terms of the contract.
Offer of performance is also known as attempted performance or tender of performance. A
valid tender of performance is equivalent to performance.

2. Discharge by agreement:
The parties may agree to terminate the existence of the contract in any of the following ways:
a) Novation (Sec. 62)
b) Alteration (Sec. 62)
c) Rescission (Sec. 62)
d) Remission (Sec. 63)
e) Waiver (Sec. 63)
a. Novation: Substitution of a new contract in place of the existing contract is known as
“Novation of Contract”. It discharges the original contract. The new contract may be
between the same parties or between different parties. Novation can take place only
with the consent of all the parties.
b. Alteration: Alteration means change in one or more of the terms of the contract. In case
of novation there may be a change of the parties, while in the case of alteration, the
parties remain the same. But there is a change in the terms of the contract.

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CMA Inter Super 30 Questions 1.39
c. Rescission: Rescission means “cancellation”. All or some of the terms of a contract may
be cancelled. Rescission results in the discharge of the contract.
d. Remission: Remission means acceptance of a lesser performance that what is actually
due under the contract. There is no need of any consideration for remission.
e. Waiver: Waiver means giving up or foregoing certain rights. When a party agrees to
give up its rights, the contract is discharged.

3. Discharge by lapse of time: Every contract must be performed within a fixed or reasonable
period. Lapse of time discharges the contract. The Indian Limitation Act has prescribed the
period within which the existing rights can be enforced in courts of law.

4. Discharge by operation of law: A contract may be discharged by operation of law in the

following cases.
a) Death
b) Insolvency
c) Unauthorized material alteration.
d) Merger
a. Death: In contracts involving personal skill or ability, death terminates the contracts.
In other cases, the rights and liabilities of the deceased person will pass on to his legal
representatives.
b. Insolvency: The insolvency of the promisor discharges the contract. The promisor is
discharged from all liabilities incurred prior to his adjudication.
c. Unauthorized material alteration: Material alteration in the terms of the contract
without the consent of the other party discharges the contract. Change in the amount
of money to be paid, date of payment, place of payment etc. are examples of material
alteration.
d. Merger: When inferior rights of a person under a contract merge with superior rights
under a new contract, the contract with inferior rights will come to an end.

5. Discharge by breach of contract: Breach means failure of a party to perform his obligations
under a contract. Breach brings an end to the obligations created by a contract.

6. Discharge by impossibility of performance: Impossibility of performance results in the

discharge of the contract. An agreement which is impossible is void, because law does not
compel to do impossible things.

64. ‘A’ contracts with ‘B’ for a fixed price to construct a house for ‘B’ with in stipulated
time. ‘B’ would supply the necessary material to be used in the construction. ‘C’
guarantees A’s performance of the contract. ‘B’ does not supply the material as
per the agreement. Is ‘C’ discharged from his liability. Analyse the situation and
discuss.
Answer:
(i) In this case C is surety for A’s performance. Performance of A depends on the supply of
material by B. B does not supply the required material which makes A unable to
perform his part of contract.
(ii) According to Section 134 of the Indian Contract Act, 1872 the surety is discharged by
any contract between the creditor and the principal debtor, by which the principal
debtor is released or by any act or omission of the creditor, the legal consequence of
which is the discharge of the principal debtor.
(iii) In the given case, B omits to supply the necessary material.

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CMA Inter Super 30 Questions 1.40
(iv) Hence, C is discharged from his liability.

65. Analyze the legal provisions relating to competence of parties to enter into a
valid contract under “The Indian Contract Act 1872”.
Answer:
The law of Contract in India is contained in the Indian Contract Act,1872 and it is mainly based
on English common law consisting of judicial precedents. The Act ensures that the rights and
obligations arising out of the contract are honoured and the promises are kept. It provides for
the appropriate legal remedies to the aggrieved party in case of breach of the contract.
i. Proposal (Section 2 (a)): When one person signifies to another his willingness to do or
to abstain from doing anything to obtain the assent of that other to such act or
abstinence, he is said to make a proposal
ii. Agreement (Section 2(e)): Every promise and every set of promises forming
consideration for each other is called an agreement
iii. Contract (Section 2(h)) →An agreement enforceable by Law[iii]:
Offer + Acceptance = Promise
Promise + consideration = agreement
Agreement + enforceability = Contract
Every contract is an agreement, but every agreement is not a contract. An agreement becomes
a contract when the essentials mentioned in Section 10 and other sections of the Indian
Contract Act,1872 are fulfilled, as then only an agreement becomes enforceable by law and the
law will protect the parties to the contract against any breach of the terms and conditions of
such contract.

Essentials of a valid contract

Section 10 of the Act lays down the following essentials which are required to make an
agreement into a valid contract.
i. They are made with free consent
ii. Made between two or more competent parties.
iii. Made for lawful consideration.
iv. Made with a lawful object.
v. Not expressly declared to be void.

Some other essentials of a valid contract are:

1) Offer and acceptance: - The first essential for creating a contract is an offer. The person
making the proposal is called an offeror or promisor and the person accepting the offer is
called the offeree or promise
(i) Essentials of a valid offer:
(a) An offeror expresses his willingness to do or abstain from doing with a view to
obtain the assent of the offeree
(b) Intention to create a legal relation.
(c) A valid offer could be in expressed form i.e in words either written or spoken or
implied form i.e by conduct.
(d) The terms of the offer must be certain and not ambiguous.
(e) The offer must be clearly communicated to the other party
(f) When the proposal is accepted by the offeree it results in an agreement. Acceptance
is the assent given to the proposal.

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CMA Inter Super 30 Questions 1.41
(ii) Essentials of a valid acceptance: -
(a) The acceptance must be communicated to the offeror by the offeree -.
Communication of acceptance by post, Communication of acceptance by telephone
(b) The acceptance must be unconditional and absolute
The contract is completed when the offeror had heard the acceptance at his end rather than
when the acceptor has spoken the words of acceptance unlike the case when the letter of
acceptance is posted and it gets completed the moment is posted.

2) Intention to create a legal obligation: - Agreements made by the parties without an

intention to create a legal obligation are not enforceable by law. The law presumes that the
parties in case of domestic and social agreements do not have an intention to create a legal
obligation.

3) The terms contained in an agreement must not be vague or uncertain: - Lawful

Consideration, Lawful Object, Free consent, Two or more competent parties, Terms of the
agreement must be certain.

4) The agreement must be capable of performance: - According to Section 56 of the

Contract Act, any agreement made to do an impossible or unlawful act is itself a void
agreement.

When a contract is made and afterward, it becomes impossible or unlawful to perform due
to some reason which the promisor could not prevent, the contract becomes void. Here, the
section provides for the subsequent or supervening impossibility which made the
performance of the contract impossible. This is also known as the Doctrine of frustration.
5) Other legal formalities: - A contract can be in written form or can be entered orally. In
certain cases, it is given under the Act that the contract must be in writing, registered or
there must be witnesses, etc. All these legal formalities also decide the validity of a contract.

66. Examine the circumstances under which a surety in a contract of guarantee

stands discharged from the liability, by the conduct of the creditor and also by
invalidation of contract.
Answer:
A. By conduct of creditor –
i. By Variance in terms of contract (Section 133) - Any variance, made without surety’s
consent, in the terms of the contract between the principal (debtor) and the creditor,
discharges the surety as to transactions subsequent to the variance.

ii. By release or discharge of principal debtor (Section 134) - The surety is discharged by
any contract between the creditor and the principal debtor, by which the principal
debtor is released, or by any act or omission of the creditor, the legal consequence of
which is the discharge of the principal debtor.

iii. When creditor compounds with, gives time to, or agrees not to sue, principal debtor
(Section 135) - A contract between the creditor and the principal debtor, by which the
creditor makes a composition with, or promises to give time to, or not to sue, the
principal debtor, discharges the surety, unless the surety assents to such -contract.

iv. Discharge of Surety by Creditor’s Act or Omission Imparting Surety’s Eventual Remedy
(Section139) - If the creditor does any act which is inconsistent with the rights of the

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CMA Inter Super 30 Questions 1.42
surety, or omits to do any act which his duty to the surety requires him to do, and the
eventual remedy of the surety himself against the principal debtor is thereby impaired,
the surety is discharged.

B. By invalidation of contract:
i. Guarantee Obtained by Misrepresentation Invalid (Section 142) - Any guarantee which
has been obtained by means of misrepresentation made by the creditor, or with his
knowledge and assent, concerning a material part of the transaction, is invalid and thus
discharge the surety to that extent.

ii. Guarantee Obtained by Concealment Invalid (Section 143) - Any guarantee which the
creditor has obtained by means of keeping silence as to material circumstances is
invalid and thus discharge the surety to that extent.

iii. Guarantee on Contract that Creditor shall not Act on it until Co-Surety joins
(Section144) - Where a person gives a guarantee upon a contract that the creditor shall
not act upon it until another person has joined in it as co-surety, the guarantee is not
valid if that other person does not join.

iv. If there is failure of consideration between creditor and principal debtor.

67. Examine the validity of the acceptance by the term-

(i) “Acceptance by mere signature of the drawee without the addition of the
word ‘Accepted’ on the negotiable instrument”.
(ii) “An Oral Acceptance”.
Answer:
Following are the essentials of a valid acceptance
1) Acceptance may be oral or in writing;
2) It may be expressed or implied;
3) If a particular method of acceptance is prescribed, the offer must be accepted in the
prescribed manner;
4) It must be unqualified and absolute and must correspond with all terms of the offer;
5) The conditional acceptance will amount to rejection of offer;
6) A counter offer for acceptance will also amount to reject of offer but the counter offer
may be accepted or rejected by the other party;
7) It must be communicated to the offerer, since acceptance is completed the moment it
is communicated;
8) Mere silence on the part of the offeree does not amount to acceptance;
9) The acceptance should be given if there is a time limit is fixed or otherwise at a
reasonable time and before he offers lapses or is revoked.

The given problem is answered as follows:

(i) Although it is usual to accept the bill by writing the word ‘accepted’, yet it is not a
necessary condition to make the acceptance valid. In other words, signature made
by the drawee on the bill amounts valid acceptance even though such signature is
not accompanied by the word ‘Accepted’. Therefore, the acceptance in the given
case is valid.

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CMA Inter Super 30 Questions 1.43
(ii) An oral acceptance is not valid since the acceptance must be in writing and signed

68. Discuss the applicability of ‘Eligibility for Bonus’ under the act “The Code on
Wages, 2019”.
Answer:
Section 26 onwards the code talks about provisions relating to payment of bonus:
Eligibility for Bonus:
1. There shall be paid to every employee, drawing wages not exceeding such amount per
mensem, as determined by notification, by the appropriate Government, by his
employer, who has put in at least thirty days work in an accounting year, an annual
minimum bonus calculated at the rate of eight and one-third per cent. of the wages
earned by the employee or one hundred rupees, whichever is higher whether or not
the employer has any allocable surplus during the previous accounting year.

2. For the purpose of calculation of the bonus where the wages of the employee exceed
such amount per mensem, as determined by notification by the appropriate
Government, the bonus payable to such employee under sub-sections (1) and (3) shall
be calculated as if his wage were such amount, so determined by the appropriate
Government or the minimum wage fixed by the appropriate Government, whichever is
higher.

3. Where in respect of any accounting year referred to in sub-section (1), the allocable
surplus exceeds the amount of minimum bonus payable to the employees under that
sub-section, the employer shall, in lieu of such minimum bonus, be bound to pay to
every employee in respect of that accounting year, bonus which shall be an amount in
proportion to the wages earned by the employee during the accounting year, subject to
a maximum of twenty per cent. of such wages.

4. In computing the allocable surplus under this section, the amount set on or the amount
set off under the provisions of section 36 shall be taken into account in accordance with
the provisions of that section.

5. Any demand for bonus in excess of the bonus referred to in sub-section (1), either on
the basis of production or productivity in an accounting year for which the bonus is
payable shall be determined by an agreement or settlement between the employer and
the employees, subject to the condition that the total bonus including the annual
minimum bonus referred to in sub-section (1) shall not exceed twenty per cent. of the
wages earned by the employee in the accounting year.

6. In the first five accounting years following the accounting year in which the employer
sells the goods produced or manufactured by him or renders services, as the case may
be, from such establishment, bonus shall be payable only in respect of the accounting
year in which the employer derives profit from such establishment and such bonus
shall be calculated in accordance with the provisions of this Code in relation to that
year, but without applying the provisions of section 36.

7. For the sixth and seventh accounting years following the accounting year in which the
employer sells the goods produced or manufactured by him or renders services, as the
case may be, from such establishment, the provisions of section 36 shall apply subject
to the following modifications, namely:
a. for the sixth accounting year set on or set off, as the case may be, shall be made,
in the manner as may be prescribed by the Central Government, taking into

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CMA Inter Super 30 Questions 1.44
account the excess or deficiency, if any, as the case may be, of the allocable
surplus set on or set off in respect of the fifth and sixth accounting years;
b. for the seventh accounting year set on or set off, as the case may be, shall be
made, in the manner as may be prescribed by the Central Government, taking
into account the excess or deficiency, if any, as the case may be, of the allocable
surplus set on or set off in respect of the fifth, sixth and seventh accounting
years.

8. From the eighth accounting year following the accounting year in which the employer
sells the goods produced or manufactured by him or renders services, as the case may
be, from such establishment, the provisions of section 36 shall apply in relation to such
establishment as they apply in relation to any other establishment.
Explanation 1: For the purpose of sub-section (6), an employer shall not be deemed to
have derived profit in any accounting year, unless: (a) he has made provision for
depreciation of that year to which he is entitled under the Income-tax Act or, as the case
may be, under the agricultural income tax law; and (b) the arrears of such depreciation
and losses incurred by him in respect of the establishment for the previous accounting
years have been fully set off against his profits.
Explanation 2: For the purposes of sub-sections (6), (7) and (8), sale of the goods
produced or manufactured during the course of the trial running of any factory or of
the prospecting stage of any mine or an oil- field shall not be taken into consideration
and where any question arises with regard to such production or manufacture, the
appropriate Government may, after giving the parties a reasonable opportunity of
representing the case, decide upon the issue.

9. The provisions of sub-sections (6), (7) and (8) shall, so far as may be, apply to new
departments or undertakings or branches set up by existing establishments.

69. Analyze the provisions relating to exemption given to the employer from the
liability in certain cases from payment of gratuity under Gratuity Act 1972.
Answer:
Section 10 provides that where an employer is charged with an offence punishable under this
Act, he shall be entitled, upon complaint duly made by him and on giving to the complainant
not less than three clear days’ notice in writing of his intention to do so, to have any other
person whom he charges as the actual offender brought before the court at the time appointed
for hearing the charge; and if, after the commission of the offence has been proved, the
employer proves to the satisfaction of the court-
1) that he has used due diligence to enforce the execution of this Act, and
2) that the said other person committed the offence in question without his knowledge,
consent or connivance, that other person shall be convicted of the offence and shall be
liable to the like punishment as if he were the employer and the employer shall be
discharged from any liability under this Act in respect of such offence;

In seeking to prove as aforesaid, the employer may be examined on oath and his evidence and
that of any witness whom he calls in his support shall be subject to cross-examination on behalf
of the person he charges as the actual offender and by the prosecutor.

If the person charged as the actual offender by the employer cannot be brought before the court
at the time appointed for hearing the charge, the court shall adjourn the hearing from time to
time for a period not exceeding three months and if by the end of the said period the person
charged as the actual offender cannot still be brought before the court, the court shall proceed
to hear the charge against the employer and shall, if the offence be proved, convict the
employer.
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CMA Inter Super 30 Questions 1.45

70. “Two or more persons are said to be consent when they agree upon the same
thing in the same sense” – Discuss with reason the consequences of the absent of
consent and free consent.
Answer:
“Two or more persons are said to consent when they agree upon the same thing in the same
sense.” - [Sec 13]. There will be flaw in consent if it is not free consent. If the parties have not
agreed upon the same thing in the same sense, there is no real consent and hence no contract
is formed.
As per section 14 of the Indian Contract Act, 1872 consent is said to be free when it is not caused
by:
(i) Coercion (Sec 15): The term “Coercion” has been defined in Section 15 of the Act as the
committing or threatening to commit, any act forbidden by the Indian Penal Code, or the
unlawful detaining, or threatening to detain, any property, to the prejudice of any person
whatever, with the intention of causing any person to enter into an agreement.
(ii) Undue influence (Sec 16): Section 16 of the Indian Contract Act defines undue influence as
under:
A contract is said to be induced by “undue influence” where the relations subsisting between
the parties are such that one of the parties is in a position to dominate the will of the other and
uses that position to obtain an unfair advantage over the other. ii) In particular and without
prejudice to the generality of the foregoing principle, a person is deemed to be in a position to
dominate the will of another—
(a) Where he holds a real or apparent authority over the other, or where he stands in a
fiduciary relation to the other; or
(b) Where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.
(c) Where a person, who is in a position to dominate the will of another, enters into a contract
with him, and the transaction appears, on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that such contract was not induced by undue
influence shall lie upon the person in a position to dominate the will of the other.
Fraud (Sec 17): As per section 17 of the Indian Contract Act:
“Fraud” means and includes any of the following acts committed by a party to a contract, or
with his connivance, or by his agent, with intent to deceive another party thereto or his agent,
or to induce him to enter into the contract:
a. The suggestion, as a fact, of that which is not true by one who does not believe it to be true;
b. The active concealment of a fact by one having knowledge or belief of the fact;
c. A promise made without any intention of performing it;
d. Any other act fitted to deceive;
e. Any such act or omission as the law specially declares to be fraudulent.
Misrepresentation (Sec 18):
A statement of fact which one party makes in the course of negotiation with a view to induce
the other party to enter into a contract is known as misrepresentation. It must relate to some
fact which is material to the contract. It may be expressed by words spoken or written or
implied from the acts and conduct of the parties.
A representation when wrongly made either innocently or unintentionally is a
misrepresentation. When it is made innocently or unintentionally, it is misrepresentation and
when made intentionally or wilfully it is fraud.
Mistake, subject to the provisions of Sec 20, 21 and 22:
Mistake means an erroneous belief about something. It has not been defined in the Indian
Contract Act. Mistake can be –
A. Mistake of law, or (Section 21)
mistake of law of the country
mistake of law of a foreign country

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CMA Inter Super 30 Questions 1.46
B. Mistake of fact (Section 20)
Bilateral mistake, or
Unilateral mistake
Effect of absence of free consent
1. If consent to an agreement is caused by coercion, undue influence, fraud or
misrepresentation, the contract is voidable at the option of the party whose consent was
not free.
2. If both the parties to an agreement are under a mistake as to a matter of fact essential to
the agreement. (i.e., mistake of Indian law) (section 21), then the agreement is void.
3. A contract is not voidable merely because one of the parties was at mistake (i.e., unilateral
mistake) (section 22).

71. Discuss the contract at indemnity at the right of indemnity holder when it sued
Answer:
Section 124 of the Act defines the expression ‘contract of indemnity’ as a contract by which one
party promises to save the other from loss caused to him by the conduct of the promisor
himself, or by the conduct of any other person.
Example: A contracts to indemnify B against the consequences of the proceedings which C may
take against B in respect of a certain sum of ₹2 lakhs. This is a contract of indemnity.
This contract includes indemnifier and indemnity holder. A person who promises to indemnify
from losses is called as indemnifier and the person whose loss is made good is called as
indemnity holder. To indemnify does not merely means to reimburse in respect of moneys paid,
but to save from loss in respect of the liability for which the indemnity has been given.
Rights of indemnity holder when sued: -
Section 125 provides the rights of indemnity holder when sued. This section provides that the
promise, in a contract of indemnity, acting within the scope of his authority, is entitled to
recover from the promisor-
(a) all damages which he may be compelled to pay in any suit in respect of any matter to which
the promise to indemnify applies;
(b) all costs which he may be compelled to pay in any such suit if, in bringing or defending it,
he did not contravene the orders of the promisor, and acted as it would have been prudent
for him to act in the absence of any contract of indemnity, or if the promisor authorized him
to bring or defend the suit;
(c) all the sums which he was not contrary to the orders of the promisor, and was one which
it would have been prudent for the promise to make in the absence of any contract of
indemnity, or if the promisor authorized him to compromise the suit. This section is not
exhaustive and does not set out all the reliefs which an indemnity holder who has been
sued may get. It leaves untouched certain equitable reliefs which he may get. The rights of
the indemnity holder are not confined to those mentioned in this section. Even before
damage is incurred, it is open to him to sue for the specific performance of the contract of
indemnity, provided that it is show, that an absolute liability has been incurred by him and
that the contract of indemnity covers the said liability.
In ‘Pepin V. Chandra Seekur’, ILR 5 Cal. 811 it was held that in the case of contract of indemnity,
the liability of the party indemnified to a third person is not only contemplated at the time of
indemnity, but is the very moving cause of that contract and in case of such a nature, the costs
reasonably incurred in resisting or reducing or ascertaining the claim may be recovered.

72. Demonstrate the procedure relating to winding up of an LLP by the tribunal.

Answer:
Winding up of a Limited Liability Partnership (LLP) by a Tribunal can be initiated for
several reasons:
1. Voluntary Winding Up: The LLP decides to wind up and consents to the process.

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CMA Inter Super 30 Questions 1.47
2. Insufficient Number of Partners: The LLP has fewer than two partners for six months.
An LLP requires at least two partners to operate legally.
3. Inability to Pay Debts: The LLP is financially insolvent and cannot meet its debt
obligations or public order.
4. Activities against National Interest: The LLP engages in activities detrimental to the
sovereignty, integrity of India, the state's security.
5. Non-compliance with Statutory Filings: The LLP fails to file the Statement of Accounts
and Solvency or Annual Returns with the Registrar for five consecutive financial years,
indicating a lack of operational transparency and regulatory compliance.
6. Just and Equitable Grounds: The Tribunal determines that it is just an equitable for the
LLP to be wound up. This broad and subjective criterion can encompass various
situations the Tribunal deems as warranting winding up for fairness or other reasons.

When a Tribunal initiates the winding-up process for an LLP based on these grounds, it marks
the beginning of a formal procedure to dissolve the LLP.
Procedure for winding up of an LLP by a Tribunal:-
The procedure for winding up an LLP by a Tribunal involves several steps to ensure an orderly
and fair dissolution of the LLP. Here's an overview of the process:
✓ Step 1: Petition for Winding Up
The process begins with filing a petition for winding up to the Tribunal. This petition
can be filed by the LLP itself, creditors, partners, or, in certain cases, by the Registrar or
by a person authorized by the Central Government.
✓ Step 2: Tribunal's Decision to Wind Up
Upon receiving the petition, the Tribunal will consider the reasons for winding up. If
the Tribunal finds sufficient grounds per the LLP Act's provisions, it will pass a winding-
up order.
✓ Step 3: Appointment of Liquidator
Once the winding-up order is passed, the Tribunal will appoint a Liquidator. The role
of the Liquidator is crucial, as they are responsible for managing the entire winding-up
process, including the liquidation of assets.
✓ Step 4. Public Announcement:
The Liquidator must publicly announce the winding up, inviting claims from creditors
and instructing debtors to settle their dues.
✓ Step 5. Settlement of Claims:
The Liquidator will then proceed to settle the claims of creditors as prescribed by the
law. This includes verifying the claims and deciding the order for the debts to be paid.
✓ Step 6. Liquidation of Assets:
The Liquidator will liquidate the LLP's assets to generate funds to pay off the LLP's
debts. This could involve selling off property, machinery, intellectual property, etc.
✓ Step 7. Distribution of Assets:
After paying off the debts. If there are any remaining assets, they are distributed among
the partners of the LLP according to the agreement in the LLP deed or the LLP Act if the
deed does not specify the distribution.
✓ Step 8. Dissolution of LLP:
Once all debts have been paid, and the remaining assets have been distributed, the
Liquidator will apply to the Tribunal for the dissolution of LLP firm. After ensuring that
all procedures have been correctly followed, the Tribunal will pass an order to dissolve
the LLP.
✓ Step 9. Filing of Order with Registrar:
The order of dissolution issued by the Tribunal must be filed with the Registrar by the
Liquidator within a specified period. The Registrar will then publish a notice declaring
the LLP to be dissolved.

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CMA Inter Super 30 Questions 1.48
73. Discuss the circumstances when a Bill of Exchange is dishonored and the roll of a
notice in this regard.
Answer:
The dishonor may be due to the following reasons-
(a) non acceptance; and
(b) by non-payment
1. Section 91 provides that a bill of exchange is said to be dishonored by non- acceptance
when the drawee, or one of several drawees, not being partners, makes default in
acceptance upon being duly required to accept the bill, or where presentment is excused
and the bill is not accepted. When the drawee is incompetent to contract, or the acceptance
is qualified the bill may be treated as dishonored.
2. Section 92 provides that an instrument is said to be dishonored by non-payment when the
maker of the note, acceptor of the bill or drawee of the cheque makes default in payment
upon being duly required to pay the same.

Roll of a notice:
Section 93 provides that when an instrument is dishonored the holder must give notice that
the instrument has been dishonored.
Section 94 provides that the notice may be in writing or oral. If it is in written form it must be
sent by post and may be in any form but it must inform the party to whom it is given either in
express term or by reasonable intendment that the instrument has been dishonored and he
will be held liable thereon. It must be given within a reasonable time after dishonor at the place
of business or at the residence of the party for whom it is intended.
Section 95 provides that any party receiving notice of dishonor must, in order to render any
prior party liable to himself, give notice of dishonor to such party within a reasonable time,
unless such party otherwise receives due notice.
Section 96 provides that when the instrument is deposited with an agent for presentment, the
agent is to issue notice to his principal who is entitled to a further like period to give notice of
dishonor.

Section 97 provides that when the party, to whom a notice of dishonor is dispatched, is dead,
but the party is not aware of the death, the notice is sufficient.
Section 98 provides that in the following circumstances there is no requirement to issue notice
(a) When it is dispensed with by the party entitled thereto;
(b) In order to charge the drawer, when he has countermanded payment;
(c) When the party charged could not suffer damage for want of notice;
(d) When the party entitled to notice cannot after due search be found; or the party bound to
give notice is, for any other reason, unable without any fault of his own to give it;
(e) To charge the drawers, when the acceptor is also a drawer;
(f) In the case of a promissory note which is not negotiable;
(g) When the party entitled to notice, knowing the facts, promises unconditionally to pay the
amount due on the instrument.

74. Analyse the deductions , which are might be made from wages as per section 18
of the Code of Wages Act ,2019 .
Notwithstanding anything contained in any other law for the time being in force, there shall be
no deductions from the wages of the employee, except those as are authorized under this Code.
For the purposes of this sub-section,
1. any payment made by an employee to the employer or his agent shall be deemed to be a
deduction from his wages;
2. any loss of wages to an employee, for a good and sufficient cause, resulting from:
(i) the withholding of increment or promotion, including the stoppage of an increment; or
(ii) the reduction to a lower post or time-scale; or
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CMA Inter Super 30 Questions 1.49
(iii) the suspension, shall not be deemed to be a deduction from wages in a case where the
provisions made by the employer for such purposes are satisfying the requirements
specified in the notification issued by the appropriate Government in this behalf.
Deductions from the wages of an employee shall be made in accordance with the
provisions of this Code, and may be made only for the following purposes, namely: -
a) fines imposed on him;
b) deductions for his absence from duty;
c) deductions for damage to or loss of goods expressly entrusted to the employee for custody;
or for loss of money for which he is required to account, where such damage or loss is
directly attributable to his neglect or default;
d) deductions for house-accommodation supplied by the employer or by appropriate
Government or any housing board set up under any law for the time being in force, whether
the Government or such board is the employer or not, or any other authority engaged in
the business of subsidizing house- accommodation which may be specified in this behalf by
the appropriate Government by notification;
e) deductions for such amenities and services supplied by the employer as the appropriate
Government or any officer specified by it in this behalf may, by general or special order,
authorize and such deduction shall not exceed an amount equivalent to the value of such
amenities and services.
f) deductions for recovery of:
i. advances of whatever nature (including advances for travelling allowance or
conveyance allowance), and the interest due in respect thereof, or for adjustment of
overpayment of wages;
ii. loans made from any fund constituted for the welfare of labour, as may be prescribed
by the appropriate Government, and the interest due in respect thereof;
g) deductions for recovery of loans granted for house-building or other purposes approved
by the appropriate Government and the interest due in respect thereof;
h) deductions of income-tax or any other statutory levy levied by the Central Government or
State Government and payable by the employee or deductions required to be made by
order of a court or other authority competent to make such order;
i) deductions for subscription to, and for repayment of advances from any social security fund
or scheme constituted by law including provident fund or pension fund or health insurance
scheme or fund known by any other name;
j) deductions for payment of co-operative society subject to such conditions as the
appropriate Government may impose;
k) deductions made, with the written authorization of the employee, for payment of the fees
and contribution payable by him for the membership of any Trade Union registered under
the Trade Unions Act, 1926;
l) deductions for recovery of losses sustained by the railway administration on account of
acceptance by the employee of counterfeit or base coins or mutilated or forged currency
notes;
m) deductions for recovery of losses sustained by the railway administration on account of the
failure of the employee to invoice, to bill, to collect or to account for the appropriate
charges due to the railway administration whether in respect of fares, freight, demurrage,
wharfage and cranage or in respect of sale of food in catering establishments or in respect
of commodities in grain shops or otherwise;
n) Deductions for recovery of losses sustained by the railway administration on account of
any rebates or refunds incorrectly granted by the employee where such loss is directly
attributable to his neglect or default;
o) Deductions, made with the written authorization of the employee, for contribution to the
Prime Minister’s National Relief Fund or to such other fund as the Central Government may,
by notification, specify.

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CMA Inter Super 30 Questions 1.50
p) Notwithstanding anything contained in this Code and subject to the provisions of any other
law for the time being in force, the total amount of deductions which may be made under
sub-section (2) in any wage period from the wages of an employee shall not exceed fifty per
cent. of such wages.
3. Where the total deductions authorized under sub-section (2) exceed fifty per cent. of the
wages, the excess may be recovered in such manner, as may be prescribed.
4. Where any deduction is made by the employer from the wages of an employee under this
section but not deposited in the account of the trust or Government fund or any other
account, as required under the provisions of the law for the time being in force, such
employee shall not be held responsible for such default of the employer.

75. Analyse the powers of board of directors or a director of a company under the
Companies Act, 2013.
The Board of Directors of a company shall be entitled to exercise all such powers, and to do all
such acts and things, as the company is authorised to exercise and do provided that in
exercising such power or doing such act or thing, the Board shall be subject to the provisions
contained in this Act, or in the memorandum or articles, or in any regulations not inconsistent
therewith and duly made thereunder, including regulations made by the company in general
meeting:
Provided further that the Board shall not exercise any power or do any act or thing which is not
directed or required, whether under this Act or by the memorandum or articles of the company
or otherwise, to be exercised or done by the company in general meeting.
But, no regulation made by the company in general meeting shall invalidate any prior act of the
Board which would have been valid if that regulation had not been made. Moreover, the Board
of Directors of a company shall exercise the following powers on behalf of the company by
means of resolutions passed at meetings of the Board, namely:
a) to make calls on shareholders in respect of money unpaid on their shares;
b) to authorize buy-back of securities under Section 68;
c) to issue securities, including debentures, whether in or outside India;
d) to borrow monies;
e) to invest the funds of the company;
f) to grant loans or give guarantee or provide security in respect of loans;
g) to approve financial statement and the Board’s report;
h) to diversify the business of the company;
i) to approve amalgamation, merger or reconstruction;
j) to take over a company or acquire a controlling or substantial stake in another
company;
k) any other matter which may be prescribed:

Provided that the Board may, by a resolution passed at a meeting, delegate to any committee
of directors, the managing director, the manager or any principal officer of the company or in
the case of a branch office of the company, the principal officer of the branch office, the powers
specified in clauses (d) to (f) on such conditions as it may specify.

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