CMA Inter : Paper 5

Business Laws and Eth ics

Law Marathon
Applicable forJune 2025

Law Educator
Vignan Deepak
 Directors

1. What are the different duties of a director in a company as per the Companies Act,
2013? ( Dec 23syl (22), Dec 17,19,21)

2. Enumerate the provisions relating to Restrictions on powers of Board. ( Dec 17 )

3. Discuss the provisions of the Companies Act, 2013 regarding disqualifications for
appointment of director. ( Dec 19, Jun 24, 18,10 )

4. Directors are agents of the company." — Discuss. ( june 18 )

Answer
The company can act only through Directors, and so the relationship between the company
and the Director is that of Principal and Agent. Contract entered into by a person as a
Director of a company, will be binding on the Company. However, Directors are not Agents
of Members of the company.
Directors have personal liability. They would be personally liable under the following
circumstances:
• Director acts in his own name,
• Director enters into an agreement/ contract which does not state clearly as to whether
the Director signing in his personal capacity or in his representative capacity as an
Agent of the Company.
Rights of the Company:
• Contract executed by the Director in excess of his authority, is binding on the Company.
However, the Company may claim damages from the Director for breach of implied
warranty of authority.
• When Directors act properly on behalf of the Company, they do not incur personal
liability; they do not exceed their powers.

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5. Discuss the powers of the Board of Directors of a company as per the Companies Act,
2013. ( Jun 23 syl 22, Dec 23( 16) , Dec 18 )

6. Enumerate the provisions of the Companies Act, 2013 relating to women director in a
company? ( Dec 18 )

7. Describe the procedure for the resignation of Director under the Companies Act, 2013.
( Jun 19, Jun Syl (16) )

8. Discuss the rules of appointment of director elected by small shareholders in a company.

( Jun 19, Jun Syl (16) )

9. Discuss the prohibition and restrictions regarding political contributions made by a

company under companies act, 2013 ( Dec 22)

10. Discuss the procedure for rotation of a director ? ( Jun 23)

11. Remuneration of Directors?

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12.Role of Audit committee ? ( Dec 23 Syl (22) )
Answer:
Every Audit Committee shall act in accordance with the terms of reference specified in writing by
the
Board which shall, inter alia, include, –
• the recommendation for appointment, remuneration and terms of appointment of auditors of
the company;
• review and monitor the auditor’s independence and performance, and effectiveness of audit
process;
• examination of the financial statement and the auditors’ report thereon;
• approval or any subsequent modification of transactions of the company with related parties;
Provided that the Audit Committee may make omnibus approval for related party transactions
proposed to be entered into by the company subject to such conditions as may be prescribed;
Provided further that in case of transaction, other than transactions referred to in section 188,
and where Audit Committee does not approve the transaction, it shall make its recommendations
to the Board:
Provided also that in case any transaction involving any amount not exceeding one crore rupees
is entered into by a director or officer of the company without obtaining the approval of the Audit
Committee and it is not ratified by the Audit Committee within three months from the date of the
transaction, such transaction shall be voidable at the option of the Audit Committee and if the
transaction is with the related party to any director or is authorized by any other director, the
director concerned shall indemnify the company against any loss incurred by it:
Provided also that the provisions of this clause shall not apply to a transaction, other than a
transaction referred to in section 188, between a holding company and its wholly owned
subsidiary company.
• scrutiny of inter-corporate loans and investments;
• valuation of undertakings or assets of the company, wherever it is necessary;
• evaluation of internal financial controls and risk management systems;
• Monitoring the end use of funds raised through public offers and related matters.

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13. Cancellation or deactivation of DIN ( Dec 24 )
Answer:
Cancellation or Surrender or Deactivation of DIN
The Central Government or any officer authorised may, upon being satisfied on verification of
particulars or
documentary proof attached with the application received for cancellation, surrender or
deactivation of the DIN.
1) the DIN is found to be duplicated
2) the DIN was obtained in a wrongful manner or by fraudulent means
3) of the death of the concerned individual.
4) the concerned individual has been declared as a person of unsound mind by a competent
Court.
5) if the concerned individual has been adjudicated an insolvent.
6) on an application made in Form DIR-5 by the DIN holder to surrender his or her DIN along
with declaration that he has never been appointed as director in any company and the said DIN
has never been used for filing of any document with any authority, the Central Government
may deactivate such DIN.

14. Describe the term ‘independent director’ ? How many Independent Directors have to be
appointed in a company ?What is the time limit within which the Board has to appoint an
Independent director and at which meeting the Independent director is appointed under the
Companies Act, 2013?
( 2017 - June 6 marks,2016 - Dec [3] 5 marks ,2015 - June 2 marks)

15. Discuss the rules of vacation of director as per the provisions of Companies Act, 2013?

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16. Mr. Lalit, a Director of XY Limited proceeding on a long foreign tour, appointed Mr. Mohan
as an alternate director to act for him during his absence. The articles of the company
provide for appointment of alternate directors. Mr Lalit claims that he has a right to
appoint alternate director. State whether Mr. Lalit is correct based on legal provision?
Answer : (2014 - June 3 marks)
Appointment of alternate director can be done by the BOD and not by any individual director. Mr.
Lalit is not correct based on legal provision. Section 161 (2) of the Companies Act, 2013 provides
that the Board of Directors of a company may, if authorized by its Articles or by resolution passed
by the company in general meeting, appoint an alternate director to act for a director during his
absence for a period of not less than 3 months from the State in which the meetings of the Board
are ordinarily held. The alternate director can be appointed only by the Board of Directors and only
in cases where the Board is authorized by Articles or by the company in general meeting.
Hence Mr. Lalit the director in question, is not competent to appoint alternate director and the
appointment of Mr. Mohan as alternate director is not valid.

17. A company was formed and commenced business but directors were not appointed. In
such case who will act as director? 2013 - Dec [8]
Answer :
The designation as director does not mean that he indeed is a director. A person who has
control over direction, conduct or management of the business of the company is a director.
Company's Act, 2013 provides that only individuals can be director hence a firm, company,
association of persons, body of individuals or company can not function as director of a
company. Appointment of first directors: (Section 152 of Companies Act, 2013)
• Normally AOA contains the names of first directors.
• If AOA does not contain first directors then those who sign the MOA shall decide the
names of first directors.
• If first directors are not decided in this manner, the subscribers (signatories) to MOA will
be deemed as first directors of the company.

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18. Can the director be removed?if so give the procedure in As per the companies act 2013 ?
( Dec 22).
19. Mr. Joseph is the director of a Public Limited Company. He has been removed by the
company before the expiry of his term, by passing an ordinary resolution in general meeting.
Is the company justified in its action? Is Mr. Joseph entitled to claim compensation for loss of
his office? (Jun 15)
Answer:
(a) Yes, the company is justified in this action;
(b) As per Section169 ofCompaniesAct,2013, a company has thepower to remove a director by
ordinary resolution before the expire of his office. Mr. Joseph is not entitled to claim any
compensation for loss of his office. As per Section 202, a director is not entitled to any
compensation for loss of office.
In the present case Mr. Joseph is removed by passing an ordinary resolution, and such removal is
valid being authorized under Section 169. There is no entitlement of a director to claim
compensation for such removal in view of Section 202.
Only a managing director, or a director holding office of manager, or a director in whole time
employment are entitled to compensation for loss of office [Section 202].

20.In a public company the total number of Directors are 9 and 2 offices of the Directors have
fallen vacant. Referring to the relevant provisions of the Companies Act, 2013:
(i) What would be the quorum for the Board Meeting?
(ii) Can the articles of a company fix the quorum (higher or lower) for the Board Meeting?
(2014 - June 2 marks)
Answer :
Where the total number of Directors is 9 and 2 offices of the Directors have fallen vacant, the
number of directors remaining is 7. Therefore, quorum is to be calculated with reference to 7.
(i) As per Section 174 of Companies Act, 2013, quorum shall be 1/3rd of total strength of the
directors and any fraction shall be rounded off to next full figure. In the given case 1/3rd is 2.33.
Therefore, where the total strength is 7, the quorum shall be 3.
(ii) The articles of the company may fix a quorum higher than 1/3rd of total strength but not lower
than that. If it is fixed on lower side, it will be void.

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21.Auditors Report. ( Jun 24 )

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;
such other matters as may be prescribed.

22. Write short note of the following term : DIN 2017 - Dec [8]

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 Companies Act, 2013

1. Discuss the procedure for conducting a poll in a meeting of a company. ( Dec 17)

2. Elucidate the circumstances in which a company cannot buy-back its own shares as
per the provisions of the Companies Act, 2013. ? ( Dec 17, Jun Syl 23(16) , Jun 15)

3. Discuss the procedure for conversion of private company into One Person Company.
(Jun 18)

4. What are the procedures of sending notice through electronic mode under the
Companies Act , 2013? Jun 18

5. What are the features of companies registered under section 8 of the Companies Act,
2013? or Can a non-profit organisation be registered as a company under the
Companies Act, 2013? If so, what procedure does it have to adopt? ( Dec 18, Jun 16)

6. Discuss the provisions of the Companies Act, 2013 regarding issue of bonus shares.
(Dec 18, Dec 22)

7. What is meant by Lifting of Corporate Veil? In which circumstances the corporate veil
can be lifted by court? (Jun 19,Dec 24)

8. State the procedure for shifting of a registered office of the company from one state to
another state under the provisions of the Companies Act, 2013. Jun 19, Dec 16

9. Sweat equity shares are issued to directors or employees at a discount or for

consideration other than cash. Discuss under the provisions of the Companies Act,
2013. Dec 19

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10. XYZ Ltd. issued Notice for holding of its Annual General Meeting on 30th September 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. (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? Dec
19

11. What are the benefits of One Person Company? Dec 21

12. What is the procedure for issue of renewed share certificate under Companies Dec 21

13. Write Short Notes on Revocation of license under Section 8(6) of Companies Act. Dec
21,22,Jun 17
Answer:
Revocation of Licence
Section 8(6) provides that the Central Government, by order, revoke the licence granted to the
company registered under this section:
• if the company contravenes any of the requirements of this section; or
• any of the conditions subject to which a licence is issued; or
• the affairs of the company are conducted fraudulently or in a manner violative of the objects of
the company.
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.

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14. Examine the procedure to be followed for the incorporation of a company under section 7 of
the companies act 2013 Jun 23

15. Analyse the procedure of self prospectus under the companies act, 2013 Jun 23

16.List out the conditions by which secured debentures can be issued as per companies
Act,2013 Jun 24

17. Discuss the procedure of alteration of memorandum of association as per the Companies
Act, 2013. Jun 17 10 marks)

18.What are the conditions stipulated in the Companies Act, 2013 in formation of One Person
Company? Jun 17
Answer:
The following are the conditions in formation of a OPC:
• No person shall be eligible to incorporate more than a OPC or become nominee in more than
such company;
• 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;
No minor shall become member or nominee of OPC or can hold share with beneficial interest;
• Such company cannot be incorporated or converted into Section 8 company;
• Such company cannot carry out Non Banking Financial investment activities including
investment activities in securities of anybody corporate;
• No such company can convert voluntarily into any kind of company unless two years have
expired from the date of incorporation of OPC, except threshold limit of paid up share capital is
increased beyond ` 50 lakh or its average annual turnover during the relevant period exceeds `
2 crore rupees.

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19. Prepare the list of different rights of a shareholder of a company under the company act
2013 Jun 23,24
Answer:
A person who is a shareholder of a company has many rights under the Companies Act,
2013. Some of them are:
• The right to vote at all meetings [Sec.47];
• The right to requisition an extraordinary general meeting of the company [Sec.100];
• The right to receive notice of a general meeting [Sec.101];
• The right to appoint proxy and inspect proxy register [Sec.105]
• 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
• The right to require the company to circulate resolution [Sec.111].
• To have certificate of share held ready for delivery to him within two months from the
date of allotment [Sec.56]
• To Transfer shares subject to the provisions of the Act and Article of Association
[Sec.44].
• To inspect the Register of members and Register of debenture-holders and get
extracts there from [Sec.94].
• To obtain, on request, minutes of proceedings at general meetings as also to inspect
the minutes [Sec.119].
• To apply to the Tribunal to have any variation of shareholders rights set aside
[Sec.48].
• To participate in the removal of directors by passing an ordinary resolution [Sec.169]

20. Small Companies (Dec 18 , Jun 16)

21. Explain Red Herring Prospectus under the Companies Act, 2013. (Dec 16 5 marks)

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22. Discuss the provisions of the Companies Act, 2013 regarding issue of buy back of
shares Dec 23 Syl(22), Jun 16
Answer:
Buy back of Shares
Section 68(2) of the Companies Act, 2013 provides that a company shall purchase is
own shares or other specified securities if-
the buy-back is authorized by its articles;
a special resolution has been passed at a general meeting of the company authorizing
the buy back. This shall not apply to a case where-
the buy-back is, 10% or less of the total paid up equity capital and free reserves of
the company; and
such buy-back has been authorized by the Board by means of a resolution passed at
its meeting.
the buy-back is 25% or less of the aggregate of paid-up capital and free reserves of
the company.
In respect of the buy-back of equity shares in any financial year, the reference to
25% shall be construed with respect to its total paid-up equity capital in that financial
year.
the ratio of the aggregate of secured and unsecured debts owed by the company
after buy- back is not more than twice the paid up capital and free reserves. The Central
Government may, by order, notify a higher ratio of the debt to capital and free reserves
for a class or classes of companies;
all the shares or other specified securities for buy-back are fully paid up;
the buy-back of shares or other specified securities in a listed company is done in
accordance with the regulations made by SEBI; and
the buy-back in respect of shares or other specified securities of an unlisted
company is to be in accordance with the rules as may be prescribed.

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23.Discuss the provisions of the Companies Act, 2013 regarding Annual Return Dec 23 Syl
(16)
Answer:
Section 92 of the Companies Act, 2013 requires a company to file Annual Return. This
section provides that every company shall prepare an Annual Return in Form No. MGT-7.
The Annual Return shall contain the following particulars as they stood at the end of the
financial year.
• the register office of the company, its principal business activities, particulars of its
holding, subsidiary and associate companies;
• its shares, debentures and other securities and shareholding pattern;
• its indebtedness;
• its members and debenture holders along with changes therein since the close of the
previous financial year;
• its promoters, directors, key managerial personnel along with changes therein since
the close of the previous financial year;
• meetings of members or a class thereof, Board and its various committees along with
attendance details;
• remuneration paid to Directors and Key Managerial Personnel;
• 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;
• matters relating to certification of companies, disclosures as may be prescribed;
• details in respect of shares held by or on behalf of the Foreign Institutional Investors;
and
• such other matters as may be prescribed.
The return shall be signed by a director and the Company Secretary. Where there is no
company secretary, then it shall be signed by a Company Secretary in practice.
The proviso to Section 92(1)provides that the annual return of a OPC and small company,
shall be signed by the Company Secretary or where there is no Company Secretary by the
director of the Company.

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 Indian Contract Act, 1872
1. Define e-contracts? Briefly discuss some of the ingredients of e- contracts?. Dec 24 Dec 18

2. Briefly discuss circumstances of which liability of the surety is discharged ?- Dec 24

3. Briefly discuss essential elements of a valid contract ?

4. The position of Minor’s agreement and effect thereof is as under Indian Contract Act,1872? Jun 23

5. Describe the different ways under which contract may be discharged ? Dec 22

6. Doctrine of Privity Of Contract?

7. What do you mean by bailment? Mention the duties of a bailor in this respect. Dec 21

8. Define Misrepresentation under the Indian Contract Act,1872 Dec 2017

9. Discuss the remedies available to buyer against seller for breach of contract.
Answer
A buyer also has certain remedies against the seller who commits a breach.
These are as under:
1. Suit for Damages for Non-Delivery [Section 57]- When the seller wrongfully neglects or refuses to deliver the
goods to the buyer, the buyer may sue the seller for damages for non-delivery.
2. Suit for price- Where the buyer has paid the price and the goods are not delivered to him, he can recover the
amount paid.
3. Suit for specific performance [Section 58]- When the goods are specific or ascertained, a buyer may sue the
seller for specific performance of the contract and compel him to deliver the same goods.
4. Suit for Breach of Warranty [Section 59]-Where there is a breach of warranty by the seller, or where the buyer
elects or is compelled to treat the breach of condition as breach of warranty; the buyer cannot reject the goods.
The buyer may— (a) set up the breach of warranty in extinction or diminution of the price payable by him, or (b) sue
the seller for damages for breach of warranty.
5. Repudiation of contract before the due date [Section 60] Section 60 provides that where either party to a
contract of sale repudiates the contract before the date of delivery and the other may either treat the contract as
subsisting or wait till the date of delivery, or he may treat the contract as rescinded and sue for damages for the
breach.
6. Suit for interest The buyer may recover such interest or special damages, as may be recoverable by law. He may
also recover the money paid where the consideration for the payment of it has failed.

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10. Mr. X, a businessman has been fighting a long drawn litigation with Mr. Y, another businessman. To
support his legal campaign Mr. X enlists the services of Mr. Z, a legal expert, stating that an
amount of ` 10 lakhs would be paid, if Mr. Z does not take up the brief of Mr. Y. Mr. Z agrees, but at
the end of the litigation Mr. X refuses to pay. Decide whether Mr. Z can recover the amount
promised by Mr. X under the provisions of the Indian Contract Act, 1872. Jun 18
Answer
The problem as asked in the question is based on one of the essentials of a valid contract. Accordingly,
one of the essential elements of a valid contract is that the agreement must not be one which the law
declares to be either illegal or void. Further Contract Act specifies that any agreements in restraint of
trade, marriage, legal proceedings etc. are void agreements.
Thus Mr, Z cannot recover the amount of ` 10 lakhs promised by Mr. X because it is an illegal agreement
and cannot be enforced by law.

11. State the circumstances when an agent is personally liable for the contracts entered into by him on
behalf of the principal? Jun 18

12. Undue Influence Jun 18

13. Sunil, aged 16 years, was studying in a Medical College. On 1st March, 2017 he took a loan of 3
lakhs from Anil for the payment of his college fee and agreed to pay by 31st May, 2018. Sunil
possesses assets worth 15 lakhs. On due Sunil fails to pay back the loan to Anil. Anil now wants to
recover the loan from Sunil out of his assets.Whether Anil would succeed? Decide, referring to the
provisions of the Indian Contract Act, 1872.Jun 19

14. State the essential elements of a contract of bailment. Distinguish between the contract of bailment
and contract of pledge. Jun 19

15. Explain the meaning of 'Quasi-Contracts'. State the circumstances which are identified as quasi-
contracts by the Indian Contract Act, 1872. Dec 18

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16. C is the wife of A. She purchased some sarees on credit from B. B demanded the amount from A. A
refused. B filed a suit against A for the said amount. Decide in the light of provisions of the Indian
Contract Act, 1872, whether B would succeed. Dec 18
Answer
the legal presumption can be rebutted in the following cases:
(i) (ii) Where the goods purchased on credit are not necessaries. Where the wife is given sufficient money
for purchasing necessaries.
(iii) Where the wife is forbidden from purchasing anything on credit or contracting debts.
(iv) Where the trader has been expressly warned not to give credit to his wife.
If the wife lives apart for no fault on her part, wife has authority to pledge her husband’s credit for
necessaries. This legal presumption can be rebutted only in cases (iii) and (iv).Applying the above
conditions in the given case ‘B’ will succeed. He can recover the said amount from ‘A’ if sarees purchased
by ‘C’ are necessaries for her. O

17. P induced Q to buy his motorcycle saying that it was in a very good condition. Aftertaking the
motorcycle, Q complained that there were many defects in the motorcycle. P proposed to get it
repaired and promised to pay 40% cost of repairs. After few days, the motorcycle did not work at all.
Now Q wants to rescind the contract. Decide giving reasons. Dec 2017
Answer
According to Section 18 of the Indian Contract Act. 1872, misrepresentation is there:
Whena person positively asserts that a fact is true when his information does not warrant it to be so,
though he believes it to be true.When there is any breach of duty by a person, which brings an advantage
to the person committing it by misleading another to his prejudice. When a party causes, however,
innocently, the other party to the agreement to make a mistake as to the substance of the thing which is
the subject of the
agreement. Theaggrieved party, in case of misrepresentation by the other party, can avoid or rescind the
contract [Section19. Indian Contract Act, 1872]. The aggrieved party loses the right to rescind the
contract if he, after becoming aware of the misrepresentation, takes a benefit under the contract or in
some way affirms it. Accordingly in the given case Q could not rescind the contract, as his acceptance to
the offer of P to bear 40% of the cost of repairs impliedly amount to final acceptance of the sale [Long
v. Lloyd,(1958)].

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18. No consideration, no contract’. – state the exceptions to it. Dec 2017
Answer
There are exceptional cases where a contract is enforceable even through there is no consideration. They
are as follows:
1. Natural Love and affection: An agreement made without consideration is valid if, ―It is expressed in
writing and registered and is made on account of nature love and affection between parties standing in a
near relation to each other‖ – [Sec.251)]
2. Voluntary Compensation: A promise made without consideration is valid if it is a promise to compensate
wholly or in part, a person who has already voluntarily done something for the promisor or something
which the promisor was legally compelled to do [Sec.25(2)]
3. Time Barred Debt: A promise to pay wholly or in part, a debt which is barred by the law of limitation can
be enforced if the promise is in writing and is signee by the debtor or his authorized agent. [Sec.25(3)]
4. No consideration is required to create an agency(Sec.185).
5. Completed Gift:The rule "No consideration, no contract" does not apply to Completed Gifts Thus if a
person gives certain properties to another according to the provisions of the Transfer of Property Act, he
cannot subsequently demand the property back on the ground that there was no consideration.

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 Ethics
1. Explain the concept of Emotional intelligence ? Effects of Emotional Intelligence ? Dec 24,
Jun Syl 23(22)

2. Role of a professional Accountant

3. Nature Of Business Ethics?Dec 18, Jun 18,

4. Why a good understanding of business ethics is important Dec 17, Jun Syl 23(16) ,

5. Kinds Of Business Ethics Dec 24, Jun Syl 23(22) ,

6. Standards of a professional accountant which are framed by ICMAI

7. Attributes of Emotional Intelligence ? Dec Syl 23(22) ,

8. Explain Value Chain ? What are its new themes and challenges? Dec 19, Jun Syl 23(16) ,

9. Recognition of Ethical issues in business?Jun Syl 23(16) ,

10. what are the areas in Business Ethics? Write a short note on the same? Jun 18, Dec
22(16) ,

11. improving Ethical behaviour in business ? Jun 19, Dec 21

12. Discuss the importance of ethics. Jun 19, Dec 21,

13. Write Short Notes on Types of Ethics Dec 21

14. Advantages of Business Ethics Dec 19

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15. Common unethical practices by executives of a corporate Dec Syl 23(16) ,
Answer
Common unethical practices by executives of a corporate
(i) Corruption - financial/non-financial
(ii) Greed for profit/turnover
(iii) Accommodating a group, may be employees, vendors, customers.
(iv) Leak of knowledge
(v) Leak of professionalism
(vi) External pressure
(vii) Ego and dominance of top management ignoring right things

16. Relationship between ethics and law? Dec 24

Answer
Laws and ethics both serve similar purposes of guiding human conduct to make it conducive to civilized
social existence. They enforce a sense of right and wrong. Laws and ethics are equally important and
go hand in hand.

Law Ethics
Laws refer to the set of codified norms which Ethics refer to the set of norms which guide our
are enforced by the state. They act as external internal compass and judgements.
obligations.

While laws apply uniformly to all ethics can vary from person to person, and
they change more frequently than laws.

In case of a breach of law, the state is within Ethics are generally not enforceable.
its right to punish. Hence, they work as a
medium of retributive justice.

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17. Ethics is the first line of defence against corruption, while law enforcement is remedial and
reactive. However, both fail to achieve the desired aim in the Indian set-up." Do you agree? Give
reasons in support of your answer. Jun 19

Answer:
It is, absolutely correct to say that ethics is the first line of defense against corruption. What prevents
corruption in the first place is ethics. The enforcement of law is a reaction to the occurrence of the
corruption.
While the law can only lay down the do's and don'ts and the consequences of doing or not doing
something.
The compliance to law in letter and spirit can be achieved only through ethical practices being folowed.
An act may be perfectly legal but totaly unethical. Therefore, the statement law enforcement is remedial
and reactive is also true.
Certain unethical practice on account of the fact that is widely prevalent is apparently justified.
The following are some of the factors that have contributed to the prevalence of corruption in India:
(i) Cultural ethos: Putting a premium on materialism, profiteering, power play and casual
attitude for ethical values …. Myopic concern overriding long-term considerations and
values.
(ii) Institutional failures: Procedural formalities in-built obstacles, bureaucratic red-tapism
etc.
(iii) Poor enforcement of law: delay in justice.
(iv)Erosion of values in politicians, entrepreneurs political lobbying etc.

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 Industrial Laws
Factories Act

1. Discuss the welfare measures to be taken in a factory for the workmen employed therein as
per the Factories Act, 1948. Dec 19
2. Manufacturing process under the Factories Act, 1948. June 18
3. Critically examine the duties of certified surgeon under the Factories Act, 1948.June 18)
4. Who is Occupier under the Factories Act, 1948 - Dec 17
5. Write Short Notes on Hazardous Process Dec 21)
6. Discuss the different powers that can be exercised by an inspector under the Factories Act.
Dec 21,Dec22,Jun 24)
7. ABC Ltd. carrying manufacturing activities with aid of power and with eight workers for
last two years ending on 31.03.2014. Three more workers were appointed on
01.04.2014, two workmen left the company on 30.04.2014. Thereafter no workman
was employed nor any workmen left. Mr. Basant, one of the workman demanded that
Factories Act, 1948 shall be applicable to this company but the management denied. Give
your opinion.
Answer: - Dec [2] (3 marks)
According to Sec. 2 (m) of the Factories Act, 1948, ‘factory’ means any premises including the
precincts thereof :
(i) Wherein 10 or more workers are working or were working on any day of the preceding 12
months, and in any part of which a manufacturing process is being carried on with the aid of
power, or is ordinarily so carried on, or
(ii) Wherein 20 or more workers are working or were working on any day of the preceding 12
months, and in any part of which a manufacturing process is being carried on without the aid of
power, or is ordinarily so carried on.
In the given case, during the period 01.04.2014 to 30.04.2014, there were 11 workers
carrying manufacturing activities with aid of power. So, the Factories Act, 1948 is applicable
on ABC Ltd. Mr. Basant is correct

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3. What are the responsibilities of an occupier in a factory? June 11 ,17 - June 5 marks)

4. Write short note :

(i) Working hours for children 2010 - June ( 4 marks)
Answer :
Working Hours for Children : No child shall be employed or permitted : (i) to work in any
factory for more than four and half hours in any day; (ii) during the night; (iii) not more than
two shifts and shifts should be 5 hours apart; (iv) no child shall O be aOllowed to work in
any factory on any day on which he has already been working in any other factory; (v) no
female child shall be allowed to work in any factory except between 8 am to 7 pm.

(ii) ‘Overcrowding’ Dec 2010

Answer :
Overcrowding as per Factories Act :
(i) No room in any factory shall be overcrowded to become injurious to health.
(ii) Space for worker: (i) 9.9 cubic meter for every worker for factories existing
before application of Act and (ii) 14.2 Cubic meter for every worker for factories
built after the commencement of the Factories Act.
(iii) If the chief inspector requires, a notice specifying the maximum number of
workers who may be employed in the room shall be posted in each workroom.
(iv) The Chief inspector may grant exemptions to above conditions if he is satisfied
that such conditions are unnecessary.

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ESI Act
1. Mention any seven purposes for which the ESI fund may be expended Dec 19
2. Mention the benefits that are entitled to the insured persons under the Employees' State
Insurance Act, 1948. Dec 18,Jun 23

Code On Wages,2019
1. Explain the procedure for fixing and revising minimum wages under Minimum Wages
Act, 1948. Dec 18
2. Overtime' under Minimum Wages Act, 1948 Dec 18
3. Time limit for payment of wages (Section -17)

4. Kelson Limited has two separate units at Delhi and Mumbai in India. Every unit of the said
company prepares and maintains separate Balance Sheet and Profit and Loss Account.
Delhi unit is incurring continuous losses and hence bonus is not paid to the employees of
this unit. Decide, under the Payment of Bonus Act, 1965 whether the employees of the
said unit can claim bonus on the ground that the unit incurring loss is a part of one single
establishment? Jun 18,Dec 23
Answer:
All the two units shall be treated as two separate establishments since all the two units
maintain separate B/S and P&L Account.
Employees of the unit which is incurring losses:
are not entitled to claim bonus on the ground that the unit incurring loss is a
part of one single establishment;
are entitled to minimum bonus as per the provisions of Sec. 10,12,13 and 14
of the Payment of Bonus Act,1965, since minimum bonus is payable whether
or not there is any allocable surplus (and whether the establishment has
made a profit or incurred a loss).
However, for the purpose of computation of bonus, the amount of allocable surplus
shall be taken for that particular unit only, and not of all the two units taken together.

Business Laws and Ethics Page no.

 2. Critically examine the duties of certified surgeon under the Factories Act, 1948.
(2018 - June [4] (8 marks)
Answer:
Section 10 under the Factories Act, 1948 provides that the State Government may
appoint qualified medical practitioners to be certifying surgeons for the purposes of this
Act within such local limits or for such factory or class or description of factories as it may
assign to them respectively. The duties of certified surgeons are as follows-
• the examination and certification of young persons;
• the examination of person engaged in factories in such dangerous
occupations or processes as may be prescribed;
• the exercising of such medical supervision as may be prescribed for any
factory or class or description of factories, where -
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;
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 uZse in a manufacturing process, there is a likelihood
of injury to the health of workers employed in that manufacturing process;
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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Gratuity Act

1. Discuss the procedure for determination of the amount of gratuity. June 24, Dec 21)
2. Nomination for payment of Gratuity.? Dec 23
3. Mr. Gill, an employee of M/s Sonabheel Tea Ltd., continued to occupy the quarter of the
company for eight months after superannuation, company decided to forfeit the amount
of gratuity of Mr. Gill. Examine the decision taken by the company to forfeit the amount
ofgratuity in the light of the Payment of Gratuity Act, 1972. Dec 23
4. Deepak is employed in Assam Coffee Estate Ltd., a seasonal establishment. The factory
was in operation for four months only during the financial year 2018-19. Deepak was
not in continuous service during this period. However, he has worked only 60 days.
Referring to the provisions of The Payment of Gratuity Act, 1972, decide whether
Deepak is entitled to gratuity payable under the Act. Would your answer be the same in
case Deepak works for 100 days? Dec 17,Jun 19
Answer
For entitlement of gratuity one must work for at least 75% of the days on which the
establishment was open and in operation. The factory was in operation for 120 days.
One must work for 75% of 120 i.e. 90 days to claim gratuity. Deepak is not entitled to
gratuity, since he has actualy worked for less than 75% of the number of days on which the
establishment was in operation during such period.
If Deepak had worked for 100 days, then he would have been entitled to gratuity since the
number of days on which he would have worked, in that case, would have been 75% or more
of the number of days on which the establishment was in operation.

5. Describe the regulations relating to the payment of Gratuity? Dec 24

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6. Notice for payment of gratuity
(1) Within fifteen days of the receipt of an application under rule 7 for payment of gratuity,
the employer:
shall-
(i) if the claim is found admissible on verification, issue a notice in Form „L‟ to the applicant
employee, nominee or legal heir, as the case may be, specifying the amount of gratuity
payable and fixing a date, not being later than the thirtieth day after the date of receipt of
the application, for payment thereof, or
(ii) if the claim for gratuity is not found admissible, issue a notice in Form „M‟ to the
applicant employee, nominee or legal heir, as the case may be, specifying the reasons why
the claim for gratuity is not considered admissible. In either case a copy of the notice shall
be endorsed to the controlling authority.
In case payment of gratuity is due to be made in the employer‟s office, the date fixed for the
purpose in the notice in Form „L‟ under clause (1) of sub-rule (1) shall be re fixed by the
employer, if a written application in this behalf is made by the payee explaining why it is not
possible for him to be present in person on the date specified.
If the claimant for gratuity is a nominee or a legal heir, the employer may ask for such
witness or evidence as may be deemed relevant for establishing his identity or
maintainability of his claim, as the case may be. In that „case, the time limit specified for
issuance of notices under sub-rule (1) shall be operative with effect from the date such
witness or evidence, as the case may be, called for by the employer is furnished to the
employer.
A notice in Form „L‟ or Form „M‟ shall be served on the applicant either by personal
service after
taking receipt or by registered post with acknowledgement due.
A notice under sub-section (2) of section 7 shall in Form „L

Business Laws and Ethics Page no.

 The Employees Provident Fund and Miscellaneous Provisions Act, 1952

1. Answer the question:

EmployeesprovidentfundsandMiscellaneousProvisionsAct,1952 is not applicable to certain establishments.
List out those establishments.
2016 - Dec ( 2marks)

2. Sushil retired from the services of ABC Limited, on 31st March, 2014. He had a sum of ` 10 lakhs in his
Provident Fund Account. It has become due for payment to Sushil on 30th April, 2014, but the company
made the payment of the said amount after one year. Sushil claimed for the payment of interest on due
amount at the rate of 15 percent per-annum for one year. Decide, whether the claim of Sushil is tenable
under the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
2015 Dec (3 marks)
Answer:
According to Section 7Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952,
the employer shall be liable to pay simple interest @ of 12% per annum or at such higher rate as may be
specified in the Scheme on any amount due from him under this Act from the date on which the amount
has become so due till the date of its actual payment.
However, the higher rate of interest specified in the Scheme cannot exceed the lending rate of interest
charged by any scheduled bank. As per above provision, Sushil can claim for the payment of interest on
due amount @ 12 percent per annum or at the rate specified in the Scheme, whichever is higher, for one
year. Here in the absence of specified rate Sushil can claim only 12 percent per annum interest on the due
amount. Hence, claim of Sushil for interest rate 15% is not tenable.

3. A’ on retirement withdrew the entire amount of his accumulation in the Provident Fund. Later
on he was appointed for a fixed tenure. Employer disagreed to allow P.F. benefit in view of his
retirement and withdrawal of entire amount. Offer your views based on Rule position.
2012 - Dec
Answer :
When any employee withdraws all his deposited amount from his provident fund account, his
account is treated as closed and no further benefit can be given to the employee on this account.
Hence employer was right.

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4. An inspector appointed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
makes an inspection at 10 p.m. (five hours after factory timings) and seeks to take copies of the
“shareholders Register”. How far under the Act is his action reasonable?
2013 - Dec (3 marks)
Answer :
Under Section 13(2) of the Employees Provident Funds and miscellaneous Provision Act,1952, an inspector
can inspect and make copies of, take extract from any book, register or other documents maintained in relation
to the establishment and where he has reason to believe that any offence under this Act has been committed
by an employer seize with assistance as he may think fit, such book, register or other documents or portions
there of as he may consider relevant in respect of that offence. The register of shareholders is not relevant in
any offence mentioned in the Act. He is not justified in taking the copies of such register. Moreover he should
take copies of documents during working hours. It is unreasonable on his part to take copies at 10.00 p.m.

5. Mr. Malhotra aged 50 years joined the P.F. Scheme on 01.01.2003. He decided to leave the
service w.e.f. 01.07.2012 provided he gets Pension under E.P.F. Scheme. Advise based on
Rules.
Answer : 2012 - June (2 marks)
Pension is allowed when:
(i) an employee attains the age of 50 Years or more and
(ii) when he has completed a total service of 10 years or more and
(iii) when he is not receiving any other EPF Pension from any other Employer. It is presumed he is not
receiving any other EPF Pension.
He has attained the minimum age of 50 years but he has not completed minimum 10 years of service.
Hence, he will not be entitled to pension if he leaves w.e.f. 1.7.12. He will however, be entitled for
pension if he leaves the Employment after 1.1.2013.

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6. Comment on the following based on legal Provisions: (a) An employee desirous to
contribute 20% of salary as against 12% towards P.F. contributions (8% being voluntary)
and demand that employer shall also contribute 20%.
2011 - Dec (2 marks)
Answer :
Here, the employee cannot demand for matching contribution because the employer does
not have to make equal contribution over and above the statutory limit of 12% or 10% as the
case may be. The employer is bound to contribute upto the statutory limit only and if an
employee contributes more than statutory limit that does not mean the employer will also
have to do the same.

7. Mr. Suresh, a casual labour draws ` 5,000/- per month. His Employer does not include
his name for the purpose of provident fund. Whether the Employer is justified?
2010 - Dec (2 marks)
Answer :
Yes, the employer is justified because Suresh is a casual labour. Casual labour is not entitled
to be included in EPF scheme. As per EPF Act, all employees in factories or establishments
including contract labour but excluding casual labour are covered under this act, if their
monthly wages are up to ` 15,000 per month.

8. Comment on the following statements based on legal provision:

(b) During 2001-02, the number of employees were 50 and subsequently reduced to 10 during
2009-10. Employer discontinued deduction as EPF not applicable due to reduction of
Employees.
2010 - June (2 marks)
Answer :
EPF Act, 1952 provides that once the Act is applied to any establishment, it shall continue to be
applied even when subsequently the number of employees has reduced. Employer action is wrong
in the eyes of law. EPF scheme shall continue.

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 9. When can a member withdraw from his National Pension Funds account?
2017 - Dec 5 marks)
Answer:
Withdrawal from the National Pension Fund Account is allowed for the following purposes-
• For the purchase of a dwelling house/flat or for the construction of a dwelling house including the
acquisition of a suitable site for this purpose;
• For repayment of loans in special cases;
• Withdrawal within one year before the retirement; Such withdrawals are not required to be repaid..

10. What are the benefits a member of an Employees Provident Fund & Misc. Provisions Act
1952 can get on retirement/death?
Answer: 2013 - June 2 marks)
Retirement benefits are:
1. Accumulated Balance in PF A/C of the employee.
2. The employee pension on reaching 50/58 years of age or leaving/ retirement capital
return of pension.
3. Widow pension, children pension, nominee pension or death of member.
4. Deposit linked insurance to family or to nominee.

11. Under what circumstances pension under E.P.F. can be applied for by an employee?
2010 - Dec [2marks), Dec 2008 )
Answer:
The circumstances are as follows :
(i) On Superannuation Superannuation means reaching the retirement age with at least ten
years of service.
(ii) Before Superannuation - Onattainingtheagebetween50andretirement age and at least
ten years of service
(iii) Death - Death while in service or while not in service.
(iv) permanent disablement- on becoming permanently unfit. Employment is a person was doing
with the time of such disablement

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12. Determination of moneys due from employers (Employees Provident Fund and Miscellaneous
Provisions Act, 1952)
Answer:
Section 7A provides that in case where a dispute arises regarding the applicability of this Act to
an establishment, the Authority concerned may conduct such enquiry as he may deem necessary
decide such dispute and determine the amount due from any employer under the provision of this
Act, the scheme or the Pension Scheme or the Insurance Scheme as the case may be. Before
passing such order, the employer
concerned shall be given a reasonable opportunity of representing his case. For the purpose of
conducting inquiry the Authority shall have the same powers as are vested in a court under CPC
for trying a suit in respect of the following matters-
● Enforcing the attendance of any person or examining him on oath;
● Requiring the discovery and production of documents,
● Receiving evidence on affidavit;
● Issuing commissions for the examination of witnesses.
Where the employer, employee or any other person required to attend the inquiry, fails to attend
such inquiry, the Authority shall decide the case ex-parte and pass orders based on the available
documents put forth before him. The employer, within three months from the date of
communication of such order, may apply to the Authority to set aside the ex-parte order showing
that there are sufficient causes for not enabling him to attend the hearing on the prescribed date.
If the Authority is satisfied, he may set aside the ex-parte order and shall appoint a date for
proceeding with the inquiry. in „S.K. Nasiruddin Beedi Merchant Limited V. Central Provident
Fund Commissioner‟- AIR 2001 SC 850
it was held that the applicability of the Act to any class of employees is not determined and
decided by any proceeding under Section 7A of the Act but under the provisions of the Act itself.
When the Act became applicable to the employees in question, the liability arises. What is done
under Section 7A of the Act is only determination of qualification of the same.

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