Test Series: March, 2021

MOCK TEST PAPER 1

FINAL (NEW) GROUP I
PAPER 4: CORPORATE AND ECONOMIC LAWS
Time 3 Hours (Marks 100)
QUESTIONS
Division A: Multiple Choice Questions (30 Marks)
Case scenario 1
Mr. Sameer, holding 15% shares of Towe Ltd., an unlisted company, since 30th September 2019, is unpaid
to the extent of Rs. 10 lakh, filed a petition with Tribunal on 5 th April, 2020, for winding up of Towe Ltd. and a
copy of the same was filed with Registrar of Companies (ROC).
The Registrar of Companies (ROC) submitted his views to the National Company Law Tribunal (NCLT) on
18th May, 2020. The ROC mentioned in his views that it was just and equitable that Towe Ltd. should be
wound up, on analyzing the information available with him with respect to the affairs of Towe Ltd.
The Tribunal appointed provisional liquidator, Mr. Raj, on 20 th May, 2020, without giving, notice of the same
as well as without affording opportunity for making representations, to the company. Mr. Raj is registered as
an insolvency professional under the Insolvency and Bankruptcy Code, 2016 and he filed the declaration with
respect to his independence to the Tribunal on 25 th May, 2020.
Tribunal passed its order for winding up of Towe Ltd. on 16 th June, 2020 and the provisional liquidator, Mr.
Raj was appointed as the Company Liquidator. The Tribunal directed Mr. Sameer to deposit an amount of
Rs. 1 lakh as security for costs as a precondition to issue directions to Towe Ltd.
The intimation thereof, of passing such order was sent to Mr. Raj as well as to the Registrar of Companies,
by the Tribunal. The ROC on receipt of such order from Tribunal made an endorsement to that effect in his
records relating to Towe Ltd. and also made a notification in the Official Gazette that such order of winding
up has been made by the Tribunal.
Mr. Raj calculated that the outstanding liabilities and debts of Towe Ltd. whi ch amounted to Rs. 70 lakh and
the expenses of winding up were estimated at Rs. 3 lakh.
Towe Ltd. has at present 8 members which are holding shares unpaid to the extent of Rs. 40 lakh, in total.
Following were the past members of the company:-
(1) Mr. Kishan ceased to be member on 23 rd March, 2019, from whom Towe Ltd. had unpaid calls on shares
amounting to Rs. 8 lakh. At the time when, Mr. Kishan ceased to be a member, the outstanding liabilities
of the company were only Rs. 5 lakh.
(2) Mr. Dhawan ceased to be member on 28 th May, 2019, from whom Towe Ltd. had unpaid calls on shares
amounting to Rs. 16 lakh. At the time when, Mr. Dhawan ceased to be a member, the outstanding
liabilities of the company were only Rs. 13 lakh.
(3) Mr. Tanmay who ceased to be member on 17 th June, 2019, was having unpaid calls on shares of Towe
Ltd. amounting to Rs. 15 lakh. At the time when, Mr. Tanmay ceased to be a member, the outstanding
liabilities of the company were only Rs. 10 lakh.
Towe Ltd. created a floating charge, as agreed, on the stock of the company on 23 rd August, 2019, to secure
a current account with Munim Bank which was in debit by Rs. 12 lakh from 1 st May, 2019 and thereafter the
bank also advanced Rs. 15 lakh on 1 st September, 2019, for meeting the operating expenses of the company.

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Munim Bank charged Rs. 1,18,500 as interest for financial year ended on 31 st March, 2020, by debiting the
said current account of Towe Ltd. on the total amount of Rs. 27 lakh (Rs.12 lakh + Rs. 15 lakh). Towe Ltd.
remained solvent during the financial year 2019-20.
Multiple Choice Questions (5 questions of 2 Marks each): Total 10 Marks
1. Whether Mr. Sameer was eligible to file petition for winding up against Towe Ltd.?
(a) No, as he is not holding fully paid up shares of Towe Ltd.
(b) No, as he is not holding shares for 12 months or more prior to presenting such petition for winding
up.
(c) Yes, as he is a holding not less than 10% of the shares of Towe Ltd.
(d) Yes, as he is holding shares for 6 months or more prior to presenting such petition for winding up.
2. What was the last date available with ROC to submit his views to NCLT on the petition filed by Mr.
Sameer and with the NCLT to pass order for winding up, respectively?
(a) 5th June, 2020 and 5 th July, 2020 respectively.
(b) 4th June, 2020 and 4 th July, 2020 respectively.
(c) 5th May, 2020 and 5 th July, 2020 respectively.
(d) 5th May, 2020 and 4 th July, 2020 respectively.
3. Whether the act of Tribunal can be considered valid for not giving notice of appointment of provisional
liquidator, Mr. Raj as well as opportunity for making representations, to Towe Ltd.?
(a) Partially invalid, as giving notice of appointment of provisional liquidator, Mr. Raj, is mandatorily
for the tribunal. However, whether to afford opportunity to Towe Ltd. for making representations is
upon the sole discretion of the tribunal.
(b) Valid, if in the opinion of the tribunal, there were some special reasons, whether recorded in writing
or not, for not giving notice as well as opportunity for making representations, if any, to Towe Ltd.
(c) Valid, if in the opinion of the tribunal, there were some special reasons, recorded in writing, for not
giving notice as well as opportunity for making representations, if any, to Towe Ltd.
(d) Not valid, as giving notice of appointment of provisional liquidator, Mr. Raj as well as opportunity
for making representations, to Towe Ltd., is mandatorily required to be given by the tribunal.
4. How much amount, Mr. Kishan, Mr. Dhawan and Mr. Tanmay, would be liable to pay as a contributory,
if in case tribunal calls past members to satisfy the contributions?
(a) Mr. Kishan shall not be liable to pay any amount, Mr. Dhawan and Mr. Tanmay shall be liable to
pay Rs. 16 lakh and Rs. 10 lakh, respectively.
(b) Mr. Kishan, Mr. Dhawan and Mr. Tanmay shall be liable to pay Rs.5 lakhs, Rs. 13 lakh and Rs. 10
lakh, respectively.
(c) Mr. Kishan shall not be liable to pay any amount, Mr. Dhawan and Mr. Tanmay shall be liable to
pay Rs. 13 lakh and Rs. 10 lakh, respectively.
(d) Mr. Kishan and Mr. Dhawan shall not be liable to pay any amount and Mr. Tanmay shal l be liable
to pay Rs. 10 lakh.

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5. How much amount of floating charge created on the stocks of Towe Ltd. shall be valid and how much of
interest shall be allowed if no other rate is notified by the Central Government, other than the rate of
interest prescribed in the Act?
(a) Rs. 27 lakh and Rs. 1,18,500, respectively.
(b) Rs. 15 lakh and Rs. 98,750, respectively.
(c) Rs. 27 lakh and Rs. 98,750, respectively.
(d) Rs. 12 lakh and Rs. 1,18,500, respectively.
Case scenario 2
An investor filed a complaint to a Recognized Stock Exchange (RSE) against Kolex Ltd. alleging that the
company has changed its registered office within Jaipur city itself in contravention of the provisions of the
Companies Act, 2013, as no ordinary or special resolution was passed in the general meeting, before such
change was made.
Kolex Ltd. had already replied via email to the aggrieved investor by quoting the relevant section, that in case,
if the registered office the company is to be changed within the same city, then only passing of board
resolution is required, which was duly complied with by Kolex Ltd.
The Recognized Stock Exchange, on receipt of such application from the investor inquired into the details of
the company and came to know that the company has been incurring losses for the last 2 consecutive financial
years and also it has a negative net worth. In addition to it, the Recognized Stock Exchange got report, from
its analysts, that the securities of such company have remained infrequently traded during the preceding 2
years.
The Recognized Stock Exchange after giving an opportunity of being heard, passed an order dated 8 th
September, 2020, with respect to delisting the securities of Kolex Ltd. from its platform, by recording the
reasons of the same in writing.
At the time of aforesaid hearing and on analysis of the information and explanations asked for by the official
of Recognized Stock Exchange, he came to know that Kolex Ltd. has been indulged in market manipulation
and the said official immediately informed to the Securities Exchange Board of India (SEBI) regarding the
same and the SEBI after inquiring into the same, passed a cease and desist order against Kolex Ltd., dated
5th October, 2020, as per section 11D of the SEBI Act, 1992, having reasonable grounds to believe that the
company has been indulged in market manipulation.
The aforesaid Recognized Stock Exchange furnished its periodical returns on 10 th November, 2020, as
required, to SEBI containing the requisite particulars but didn’t furnish the details of delisted securities of
Kolex Ltd. believing that there is no need to furnish the same as only details pertaining to securities delisted
during previous 1 month are required to be furnished and in case of Kolex Ltd., 1 month h as already passed,
since its delisting.
Along with furnishing of the aforesaid return, it also made an application on the same date to the Securities
Exchange Board of India, for renewal of its recognition in Form A, which was about to expire on 15 th February,
2021, along with the applicable fees.
Kolex Ltd. was aggrieved with the order passed by Recognized Stock Exchange with respect to delisting as
well as with the cease and desist order passed by the Securities Exchange Board of India and due to which
it filed appeals with Securities Appellate Tribunal (SAT), in respect of both the orders, within the prescribed
time limits.
However, at the time of appellate proceedings by Securities Appellate Tribunal, the Presiding Officer of SAT
was removed on 25 th February, 2021, by the Central Government, after giving a reasonable opportunity of
being heard in the matter, on the grounds that he has abused his position as to render his continuation in
office detrimental to the public interest.
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The Central Government appointed Justice Ram as the new presiding officer on 25 th March, 2021 i.e. on the
day of his 62 nd birthday, in consultation with the Chief Justice of India.
Multiple Choice Questions (4 questions of 2 Marks each): Total 8 Marks
6. Which of the aforementioned grounds are valid for delisting the securities by RSE?
(a) The company has incurred losses during the preceding 2 consecutive years and it has negative
net-worth.
(b) The securities of the company have remained infrequently traded during the preceding 2 years.
(c) The company has changed its registered office in contravention of the provisions of Companies
Act by not passing ordinary or special resolution in the general meeting.
(d) None of the above (2 Marks)
7. Whether the aforesaid contention of RSE is valid, that here is no need to furnish the details of delisted
securities of Kolex Ltd.?
(a) No, as it is the duty of RSE to furnish the details of delisted securities during the previous 3 months,
to SEBI and 3 months have not passed since delisting of securities of Kolex Ltd.
(b) Yes, as it is the duty of RSE to furnish the details of delisted securities only during the previous 1
month, to SEBI and in given case, as 1 month has passed, the contention of RSE is valid.
(c) Partially yes, as it is the duty of RSE to furnish the details of delisted securities during the previous
2 months, to SEBI and in given case, as 2 months have passed, the contention of RSE is valid to
that extent.
(d) No, as it is the duty of RSE to furnish the details of delisted securities during the previous 6 months,
to SEBI and 6 months have not passed since delisting of securities of Kolex Ltd. (2 Marks)
8. What shall be the last date prior to the expiry of the period of recognition, by which, the RSE, shall make
an application to the SEBI for renewal of recognition, in case could not make application on 10 th
November, 2020, and what shall be fees payable along with such application?
(a) 15th February, 2021 and applicable fees is Rs. 200
(b) 15th November, 2020 and applicable fees is Rs. 200
(c) Application for renewal is to be made within 3 months after expiry i.e. by 15 th May, 2021 and
applicable fees is Rs. 500.
(d) 15th December, 2020 and applicable fees is Rs. 500 (2 Marks)
9. What shall be the dates on which Kolex Ltd. would have filed appeals against delisting order of RSE as
well as cease and desist order of SEBI, respectively, assuming it filed appeals on the last prescribed
date against both the orders?
(a) 23rd October, 2020 and 20 th October, 2020.
(b) 23rd September, 2020 and 19 th November, 2020.
(c) 23rd September, 2020 and 20 th October, 2020.
(d) 23rd October, 2020 and 19 th November, 2020. (2 Marks)

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10. In order to make Robotics Toys Private Limited as its subsidiary, Golden Rays Robots Limited raised its
investment in Robotics Toys from 40% to 60% of its paid-up capital. From the options given below,
choose the one which correctly indicates as to when the Robotics Toys shall be considered the
undertaking of Golden Rays Robots Limited.
(a) In order that Robotics Toys is considered as one of its undertaking, Golden Rays is required to
invest more than 10% of its ‘net worth’ calculated as per the audited balance sheet of the preceding
year or the Robotics Toys must have contributed in generation of 10% of the total income of Golden
Rays during the previous Financial Year.
(b) In order that Robotics Toys is considered as one of its undertaking, Golden Rays is required to
invest more than 20% of its ‘net worth’ calculated as per the audited balance sheet of the preceding
year or the Robotics Toys must have contributed in generation of 20% of the total income of Golden
Rays during the previous Financial Year.
(c) In order that Robotics Toys is considered as one of its undertaking, Golden Rays is required to
invest more than 25% of its ‘net worth’ calculated as per the audited balance sheet of the preceding
year or the Robotics Toys must have contributed in generation of 25% of the total income of Golden
Rays during the previous Financial Year.
(d) In order that Robotics Toys is considered as one of its undertaking, Golden Rays is required to
invest more than 30% of its ‘net worth’ calculated as per the audited balance sheet of the preceding
year or the Robotics Toys must have contributed in generation of 30% of the total income of Golden
Rays during the previous Financial Year. (2 Marks)
11. Mr. A is an authorized dealer holding a valid Authorization issued by the Reserve Bank of India under
section 10 of the FEMA, 1999. During the course of his business, he violated one of the conditions
subject to which the Authorization was granted to him. The Adjudicating Authority imposed a penalty of
Rs. 1,50,000 under section 13 (being 3 times the amount involved in the violation, i.e. Rs. 50,000). Mr.
A accepted the default. State the time limit before which Mr. A should pay the penalty, assuming he
does not prefer an appeal to the Appellate Authority:
(a) Within 30 days from the date of the Order imposing the penalty.
(b) Within 45 days from the date of the Order imposing the penalty.
(c) Within 60 days from the date of the Order imposing the penalty.
(d) Within 90 days from the date of the Order imposing the penalty. (1 Mark)
12. A Limited, an Indian company holds a commercial plot in Chennai, India. It intends to sell the same. M/s
Super Seller is a real estate broker with Head Office in the USA. M/s Super Seller is appointed to find
buyers for the land. A company Glory Inc., based out of USA is identified as a buyer. Glory Inc., is
controlled from India and is hence a Person Resident in India under FEMA provisions. Glory Inc., agrees
to buy the land for USD 6,00,000 (assume 1 USD = Rs.70). M/s Super Seller is to be paid commission
at the rate of 7% of the sale proceeds. The commission is to paid to the H.O of M/s Super Seller in USA.
Decide, in light of the relevant provisions of FEMA, 1999, which of the following is correct (Ignoring TDS
implications arising under the Income Tax Act, 1961):
(a) Prior permission is not required for remittance of commission upto USD 25,000. For balance
commission of USD 17,000, permission of RBI is to be sought by A Limited.
(b) Prior permission is not required for remittance of commission upto USD 30,000. For balance
commission of USD 12,000, permission of RBI is to be sought by A Limited.
(c) Prior permission is not at all required for remittance of the entire commission.
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 (d) Prior permission is required to be taken from The Reserve Bank of India for the entire amount of
commission. (2 Marks)
13. Best Nidhi Limited has been incorporated on 01/04/2020 as a Nidhi Company under section 406 of the
Companies Act, 2013 with 250 members. Its main object is to accept deposits from members and lend
loans to members for the mutual benefit of the members. It also provides locker facilities to members.
For FY 2020-2021, the income of the company (before deducting any expense) was Rs. 40,00,000.
Expenses incurred during the year amounted to Rs.10,00,000. Calculate the maximum amount of rental
income that could have been earned during the FY 2020-2021 by the company.
(a) Rs. 10,00,000
(b) Rs. 7,50,000
(c) Rs. 8,00,000
(d) Rs. 6,00,000 (2 Marks)
14. Mr. Romil was appointed as an IRP during the Corporate Insolvency Resolution Process on 3 rd of March,
2019. He can make a Public announcement -
(a) latest by 6th March 2019
(b) latest by 7th March 2019
(c) latest by 10th March 2019
(d) latest by 14th March 2019 (1 Mark)
15. Z Ltd, a Starup is permitted to raise ECB under the automatic route with the minimum average maturity
period of :
(a) 1 years
(b) 3 years
(c) 5 years
(d) 10 years (1 Marks)
16. Shivdeep submitted his claim as an operational creditor to the liquidator of Chiranjeevi Food Products
Limited, a company under liquidation. If Shivdeep wants to alter his claim, state the time period within
which he can do so after its submission.
(a) Five days
(b) Ten days
(c) Fourteen days
(d) Fifteen Days (1 Mark)
17. Ruby Petals Limited, a small company, files an application with the NCLT stating that the fast track
corporate insolvency resolution process against it cannot be completed within the prescribed period of
90 days. On being satisfied, NCLT orders to extend the period of such process by 30 days. However,
Ruby Petals Limited again initiates an application for further extension of time period of insolvency
process by another 10 days. Which of the following option is applicable to such a situation:
(a) NCLT can extend the period by another 10 days because total extension does not exceed 45 days.
(b) NCLT is empowered to grant another extension of 10 days if Ruby Petals deposits Rs. 50,000 as
penalty.
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 (c) NCLT is empowered to grant another extension of 10 days if Ruby Petals deposits Rs. 100,000 as
penalty.
(d) NCLT cannot extend the period by another 10 days because such extension shall not be granted
more than once. (1 Mark)
18. A valuer in a company will be appointed by the ----------- or in its absence, by the -------------of that
company.
(a) Board of directors, Shareholders
(b) Board of Directors, Audit committee
(c) Shareholders, Audit committee
(d) Audit Committee, Board of Directors (1 Mark)
Division B: Descriptive questions (70 Marks)
1. (a) Mr. Ramakant, the non-independent director of Superb Industries Limited (SIL) is planning to go
abroad for 4 months for resolving of some family issues related to her daughter. The Board of
Directors of SIL proposed to appoint Mr. Subh as an alternate director in the company in place of
Mr. Ramakant.
Following were the legal issues in the given situation:
(1) Mr. Subh does not satisfy the eligibility criteria to become Independent Director of SIL as
given under section 149(6) of the Companies Act, 2013.
(2) Mr. Ramakant returned to India within 2 months before the scheduled arrival.
(3) Mr. Subh (in addition to Mr. Ramakant), to be included in the "total number of directors" used
for calculating rotational directors under sec 152(6).
Examine in the given scenario, the aforementioned legal issues in the light of the Companies Act,
2013. (8 Marks)
(b) Mr. Ram and Mr. Mohan were appointed as the Whole-Time Director and Managing Director
respectively in Gopi Industries Limited (GIL). Raja Limited, a holding company of GIL, was willing
to appoint Mr. Ram as its Whole-Time Director and Mr. Mohan as Managing Director. Enumerate
the legal provision as regards the holding of office by KMPs and decide on the eligibility of Mr. Ram
and Mr. Mohan in Raja Limited as its managerial personnel in terms of the Companies Act, 2013.
What if the office of Mr. Ram is vacated due to his sudden resignation given on 1st September 2020
in GIL?
(6 Marks)
2. (a) Doomed Limited wanted to reduce the rank of Mr. happy (the Chief Operations Officer of the
company) during the pendency of investigation being conducted on the company on the order of
the Tribunal as per the provisions of the Act. Doomed Ltd. made an application to Tribunal
regarding the reduction of the rank of the Mr. happy on 2nd May, 2020 and received objection of
the Tribunal on 29 th May, 2020. What course of action/ remedy is available to Doomed Ltd. and to
Mr. happy as per the provisions of the Companies Act, 2013? (8 Marks)
(b) In the case, the Director, on the basis of information in his possession, has reason to believe that
Mr. X, is in possession of proceeds of crime involved in money-laundering. He authorised Mr. Y,
officer subordinate to him to seize property found as a result of such search. Mr. Y seized the said
property on 10.2.2020 and filed an application requesting for retention of such property seized
before Adjudicating Authority. Enumerate the law as regards the retention of the seized property
and Compute the time period for retention of such seized property by Mr. Y. (6 Marks)
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3. (a) Insincere Limited on 22 nd May, 2020 mortgaged one of the freehold land of the company in the
favor of the bank, from which Mr. Daman, a director of the company had taken housing loan for his
residential purpose. Since Insincere Ltd. had been running in losses and was unable to honor the
liabilities due towards the other creditors. As, the Board of Directors of the company was aware of
the financial crisis faced by the Insincere Ltd. and of creation of a mortgage in order to give
preference to Mr. Daman over other creditors. On 23 rd September, 2020 some creditors of the
company filed a petition for the winding up before Tribunal. It passed an order for the winding up
of the company on 5 th November, 2020. Discuss on the nature of the transaction of mortgage
created with bank in the given circumstances in the light of the Companies Act, 2013. (8 Marks)
(b) Perpetual Limited is an Asset Reconstruction Company (ARC) under the SARFAESI Act, 2002.
During the financial year 2020-2021, Mr. Param one of the director of the company in urgent need
of money transferred 10% of his shareholding to Mr. shariff (another director of the company) which
increased Mr. Shariff’s shareholding to 20%. Perpetual Ltd. also appointed Mr. Vikram as CEO for
managing the overall operations and resources of a company. However, for the said purposes,
Perpetual Limited did not take approval of the Reserve Bank of India. RBI cancelled the certificate
of registration granted to Perpetual Limited. Perpetual Ltd. contended that decision of RBI is
inappropriate as transfer of shareholding and appointment of CEO is not a substantial change in
management. Discussion on the validity of decision of the RBI in the light of the applicable Law.
(6 Marks)
4. (a) Bharti Limited, a company listed on Bharat Stock Exchange Limited (a recognised stock exchange
in India) had been incurring losses continuously during the preceding 3 years but its net worth has
not become negative till date. The stock exchange decided to delist the securities of the company
after giving an opportunity of being heard to the company. Mr. Binay (the investor) who holds equity
shares up to 10% of the total equity share capital of the company has suffered heavy losses due
to delisting of securities by the stock exchange. You have been hired by Mr. Binay to consu lt him
regarding the Security Laws. Examine the given situation and mention the various grounds of
delisting under SCRA and the remedies available to Mr. Binay in the light of the Securities Contract
(Regulation) Act, 1956 [SCRA]. (8 Marks)
(b) Defaulter Limited, an unlisted company registered in India with total assets amounting to Rs. 3
crore and turnover of Rs. 50 lakh as per financial statement immediately preceding the financial
year was facing financial crisis. The financial creditors of the firm wanted to file a petition for
initiating the insolvency resolution process with the Adjudicating Authority. The financial creditors
want an early recovery of their dues. In view of the above position , state whether insolvency
process can be initiated under fast track process under the IBC and maximum period for the
completion of process? (6 Marks)
5. (a) (i) Draft a specimen resolution of approval of Directors’ report of the financial year 2020-2021.
(4 Marks)
(ii) Earth Developers Private Limited, a Bengaluru based company is regular in filing its annual
return as well as financial statements, is having four directors but so far, no Managing Director
has been appointed. Due to the manifold increase in the construction work undertaken by the
company in the last two years, it is urgently felt that a Managing Director needs to be
appointed. Accordingly, Mr. Pranav is appointed as MD by the Board of Directors at its
meeting specifying the terms and conditions including monthly remuneration payable to him.
Enumerate on the requirement and validity of an appointment of Mr. Pranav in the given
scenario in the context of relevant law? (4 Marks)
(b) What is an overseas direct investment? Differentiate between Automatic Route and Approval Route
for direct investment? (6 Marks)

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6. (a) Delegare Limited, incorporated in Singapore desires to establish a place of business at Mumbai.
You being a practicing Chartered Accountant have been appointed by the company as a liaison
officer, for compliance of legal formalities on behalf of the company. Examining the provisions of
the Companies Act, 2013, state the documents you are required to furnish on behalf of the
company, on the establishment of a place of business at Mumbai. (8 Marks)
(b) (i) Ever Lasting Ltd. went into liquidation. XYZ Bank Ltd. the secured creditor, decided to
realize its security interest by informing liquidator of such security interest and identify
assets subject to which such security interest has to be realized. Liquidator denied the XYZ
Bank Ltd. to enforce its security interest as said secured creditor is not a part of Committee
of creditors. Throw a light on the stated situation and examine on the validity of the stand
taken by the Liquidator. (3 Marks)
(ii) State on the nature of liability caused on an offence committed under the Prevention of
Money Laundering Act, 2002. (3 Marks)

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 Test Series: March, 2021
MOCK TEST PAPER 1
FINAL (NEW) GROUP I
PAPER 4: CORPORATE AND ECONOMIC LAWS
Suggested answers
Division A: Multiple Choice Questions
1. (d)
2. (b)
3. (c)
4. (c)
6. (d)
7. (a)
8. (b)
9. (b)
10 (b)
10. (b)
11. (d)
12. (b)
13. (c)
14. (a)
15. (b)
16. (c)
17. (d)
18. (d)
Division B: Descriptive questions (70 Marks)
1. (a) As per Section 161(2) of the Companies Act, 2013, the Board of Directors of a company may, if so
authorised by its articles or by a resolution passed by the company in general meeting, appoint a
person, not being a person holding any alternate directorship for any other director in the company,
to act as an alternate director for a director during his absence for a period of not less than three
months from India.
Provided that no person shall be appointed as an alternate director for an independent director
unless he is qualified to be appointed as an independent director under the provisions of this Act.
Provided further that an alternate director shall not hold office for a period longer than that
permissible to the director in whose place he has been appointed and shall vacate the office if and
when the director in whose place he has been appointed returns to India.
Provided also that if the term of office of the original director is determined before he so returns to
India, any provision for the automatic re-appointment of retiring directors in default of another
appointment shall apply to the original, and not to the alternate director.
In the above question, Mr. Ramakant was going abroad for personal cause of family issue related
his daughter, does not effect on the appointment of alternate director. Even if Mr. Subh does not
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 satisfy the eligibility criteria to become Independent Director of SIL, it does not affect on his
appointment as Alternate Director because Mr. Ramakant, the original director is also not an
Independent Director. Since Mr. Ramakant has returned to India within 2 months before his
scheduled arrival, Mr. Subh shall vacate the office on return of Mr. Ramakant (Original Director) to
India.
Therefore, Mr. Subh can be appointed as alternate director of SIL and he shall vacate his office on
returning of Mr. Ramakant to India. The alternate director, Mr. Subh, shall not be included in the
“total number of directors” for the purpose of section 152(6), as alternate director is holding
alternate directorship in place of the original director. Further as per the above provisos given under
section 161(2), it is clearly stated that if the term of office of the original director is determined
before he so returns to India, any provision for the automatic re-appointment of retiring directors in
default of another appointment shall apply to the original, and not to the alternate director. For this
very purpose, Mr. Subh, will not be included in the “total number of directors” as rotational director
under section 152(6) of the Companies Act, 2013.
(b) As per Section 203(3) of the Companies Act, 2013, a Whole-Time Key Managerial Personnel shall
not hold office in more than one company except in its subsidiary company at the same time.
Provided that nothing contained in this sub-section shall disentitle a Key Managerial Personnel
from being a director of any company with the permission of the Board.
Provided also that a company may appoint or employ a person as its managing director, if he is
the managing director or manager of one, and of not more than one, other company and such
appointment or employment is made or approved by a resolution passed at a meeting of the Board
with the consent of all the directors present at the meeting and of which meeting, and of the
resolution to be moved thereat, specific notice has been given to all the directors then in I ndia.
In the above question, Mr. Ram cannot be appointed as Whole-Time Director in Raja Ltd because
Raja Ltd. is not the subsidiary company of GIL. Mr. Mohan can be appointed as Managing Director
in Raja Ltd. if all the conditions specified in section 203(3) are complied with.
Therefore, Mr. Ram cannot be appointed as Whole-time Director in Raja Ltd. whereas Mr. Mohan
can be appointed as Managing Director in Raja Ltd. with the unanimous resolution being passed
at the Board Meeting.
Where, if the office of Mr. Ram is vacated on 1st September 2020, the resulting vacancy shall be
filled-up by the Board at a meeting of the Board within a period of six months from the date of such
vacancy i.e. latest by 31 st March, 2021.
2. (a) As per Section 218 of the Companies Act, 2013, if during the course of any investigation of the
affairs and other matters of or relating to a company, other body corporate or person under section
210, section 212, section 213 or section 219 or of the membership and other matters of or re lating
to a company, or the ownership of shares in or debentures of a company or body corporate, or the
affairs and other matters of or relating to a company, other body corporate or person, under section
216; or
During the pendency of any proceeding against any person concerned in the conduct and
management of the affairs of a company under Chapter XVI,
such company, other body corporate or person proposes—
(i) to discharge or suspend any employee; or
(ii) to punish him, whether by dismissal, removal, reduction in rank or otherwise; or
(iii) to change the terms of employment to his disadvantage, the company, other body corporate
or person, as the case may be,

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 shall obtain approval of the Tribunal of the action proposed against the employee an d if the Tribunal
has any objection to the action proposed, it shall send by post notice thereof in writing to the
company, other body corporate or person concerned.
Where if, no objection is received: If the company, other body corporate or person concerned
does not receive within 30 days of making of application, the approval of the Tribunal, then and
only then, the company, other body corporate or person concerned may proceed to take against
the employee, the action proposed.
Where if objection is received: If the company, other body corporate or person concerned is
dissatisfied with the objection raised by the Tribunal, it may, within a period of thirty days of the
receipt of the notice of the objection, prefer an appeal to the Appellate Tribunal in such manner
and on payment of such fees as may be prescribed.
Order of Appellate Tribunal: The decision of the Appellate Tribunal on such appeal shall be final
and binding on the Tribunal and on the company, other body corporate or person concerned.
In the above question, since the Doomed Ltd. have received the objection of the Tribunal within 30
days from the date of making application, so the Doomed Ltd. can prefer an appeal against the
order of the Tribunal to the Appellate Tribunal within 30 days. No further appeal can be preferred
against the order of the Appellate Tribunal by the company or the employee concerned.
Therefore, Doomed Limited can prefer an appeal against the order of objection of Tribunal within
30 days to the Appellate Tribunal and if the decision of the Appellate Tribunal is against Mr. happy,
then he cannot appeal further against the order of the Appellate Tribunal.
(b) Retention of seized property
As per section 20 of the Prevention of Money Laundering Act, 2002 [PMLA], property seized under
section 17 or 18 of the Prevention of Money Laundering Act or frozen under section 17(1A) of the
Prevention of Money Laundering Act can be retained by authorised officer, if he has reason to
believe that such property is required to be retained for adjudication under section 8 of Prevention
of Money Laundering Act .The property can be retained for a period of 180 days from day on which
the asset was seized or frozen. Details of property seized or frozen have to be informed to
Adjudicating Authority in prescribed manner.
The seized property is required to be returned to person from whom it was seized after 180 days,
unless Adjudicating Authority permits retention of property beyond this period.
Time period for retention of such seized property : As per section 17(4) of the PMLA, 2002, the
authority seizing any record or property under sub-section (1) or freezing any record or property
under sub-section (1A) shall, within a period of thirty days from such seizure or freezing, as the
case may be, file an application, requesting for retention of such record or property seized under
sub-section (1) or for continuation of the order of freezing served under sub -section (1A), before
the Adjudicating Authority.
As Mr. Y seized the property of Mr. X on 10.2.2020. He can file an application requesting for
retention of such property seized before Adjudicating Authority latest by 13 th March, 2020.
3. (a) As per Section 328 of the Companies Act, 2013,where a company has given preference to a person
who is one of the creditors of the company or a surety or guarantor for any of the debts or other
liabilities of the company, and the company does anything or suffers anything done which has the
effect of putting that person into a position which, in the event of the company going into liquidation,
will be better than the position he would have been in if that thing had not been done prior to six
months of making winding up application, the Tribunal, if satisfied that, such transaction is a
fraudulent preference may order as it may think fit for restoring the position to what it would have
been if the company had not given that preference.
If the Tribunal is satisfied that there is a preference transfer of property, movable or immovable, or
any delivery of goods, payment, and execution made, taken or done by or against a company within
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 six months before making winding up application, the Tribunal may order as it may think fit and
may declare such transaction invalid and restore the position.
In the question, the company had created a legal mortgage on 22nd May, 2020 and the creditors
made a petition for winding up of the company on 23rd September, 2020, so the above transaction
of creation of legal mortgage on the freehold land of the company falls within the ambit o f section
328 of the Act.
Therefore, creation of mortgage of the freehold land of the company is the transaction covered
under the fraudulent preference since the mortgage is created 6 months preceding the date of
making of winding up petition and therefore, the Tribunal may order as it may think fit and may
declare such transaction on creation of mortgage as invalid and restore the position.
(b) As per section 3(6) of the SARFAESI Act, 2002, every asset reconstruction company, shall obtain
prior approval of the Reserve Bank for any substantial change in its management including
appointment of any director on the board of directors of the asset reconstruction company or
managing director or chief executive officer thereof or change of location of its registered office or
change in its name:
Provided that the decision of the Reserve Bank, whether the change in management of a
securitisation company or a reconstruction company is a substantial change in its management or
not, shall be final.
Explanation— For the purposes of this section, the expression “substantial change in management”
means the change in the management by way of transfer of shares or change affecting the
sponsorship in the company by way of transfer of shares or amalgamation or transfer of the
business of the company.
In the above question, there has been change in shareholding of directors which falls under the
“substantial change in management” including appointment of CEO and the decision of the Reserve
Bank as to whether the change in management of the asset reconstruction company is a substantial
change in management or not, shall be final.
Therefore, the decision of the Reserve Bank, shall be final and will be held valid.
4. (a) As per section 21A of the Securities Contracts (Regulation) Act, 1956 read with Rule 21 of the
Securities Contract (Regulation) Rules, 1957, a recognised stock exchange may delist the
securities, after recording the reasons therefor, from any recognised stock exchange on any of the
ground or grounds as may be prescribed under this Act:
Provided that the securities of a company shall not be delisted unless the company concerned has
been given a reasonable opportunity of being heard.
A listed company or an aggrieved investor may file an appeal before the Securities Appellate
Tribunal against the decision of the recognised stock exchange delisting the securities within fifteen
days from the date of the decision of the recognised stock exchange delisting the securities
Following are the grounds namely:—
(a) the company has incurred losses during the preceding three consecutive years and it has
negative net worth;
(b) trading in the securities of the company has remained suspended for a period of more than
six months;
(c) the securities of the company have remained infrequently traded during the preceding three
years;
(d) the company or any of its promoters or any of its director has been convicted for failure to
comply with any of the provisions of the Act or the Securities and Exchange Board of India
Act, 1992 or the Depositories Act, 1996 or rules, regulations, agreements made thereunder,
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 as the case may be and awarded a penalty of not less than rupees one crore or imprisonment
of not less than three years;
(e) the addresses of the company or any of its promoter or any of its directors, are not known or
false addresses have been furnished or the company has changed its registered office in
contravention of the provisions of the Companies Act; or
(f) shareholding of the company held by the public has come below the minimum level applicable
to the company as per the listing agreement under the Act and the company has failed to
raise public holding to the required level within the time specified by the recognized stock
exchange.
In the above question, the net worth of the company has not become negative. Therefore, either
the company or Mr. Binay may file an appeal before the Securities Appellate Tribunal against the
decision of the recognised stock exchange within 15 days from the date of the decision.
(b) Vide Notification no. SO 1911(E) dated 14-6-2017, read with section 55(2) of the Insolvency and
Bankruptcy Code, the Central Government prescribed the following class of corporate debtors on
whom the provisions pertaining to the fast track corporate insolvency resolution process are
applicable-
(a) Small company under section 2(85) of the Companies Act
(b) A start-up (other than partnership firm)
(c) An unlisted company with total assets not exceeding Rupees one crore as per financial
statement of immediately preceding the financial year.
As per section 56 of the Code, the fast track corporate insolvency resolution process shall be
completed within a period of 90 days from the insolvency commencement date. The Adjudicating
Authority may on receipt of an application extend the duration of such process by 45 days.
Provided that any extension of fast track corporate insolvency resolution process under this section
shall not be granted more than once.
In the above question, the fast track insolvency resolution process is not applicable on the Defaulter
Ltd. because the total assets exceed rupees one crore, so the financial creditors of the company
cannot file an application under the fast track insolvency. Turnover of the company has no
relevance in deciding whether fast track corporate insolvency resolution is applicable on the
company or not.
Therefore, an application for fast track insolvency resolution cannot be made. The insolvency
resolution process shall be completed within 180 days from the insolvency commencem ent date
and extendable by maximum 90 days.
5. (a) (i) “Resolved that the draft of the Directors ‘Report for the year ended 31st March, 2020, as
submitted before the meeting, duly initiatalled by the Chairman of the meeting for the purpose
of identification, be and is hereby considered and approved by the Board and that the same
be signed on behalf of the Board of Directors of the company by Mr….. Director and Mr. …..,
Director.
Resolved further that pursuant to provisions stipulated under sub-section 3 of the Section 179
of the Companies Act, 2013 read with Companies (Meetings of Board and the powers) Rules,
2014, all the directors of the company be and is hereby severally authorised to file the
resolution with the Registrar of Companies,…. Along with requisite e-Form.”
(ii) The given problem deals with the Companies Act, 2013 to be read in light of notification No.
464 (E), dated 05-06-2015 w.r.t. section 196(4), where by a private company is exempted
from the application of said section.

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 Section 196 (4) requires that the terms and conditions of appointment of a Managing Director and
the remuneration payable to him shall be approved by the Board of Directors at a meeting which
shall be subject to approval by a resolution at the next General Meeting of the company and by the
Central Government in case such appointment is at variance to the conditions specified in P art I of
the Schedule V.
Therefore, there is no requirement regarding the approval of appointment of Mr. Pranav as MD in
the Earth Developers Private Limited, at the immediate next General Meeting of the shareholders.
Therefore his appointment as MD in Earth Developers Private Ltd., is valid.
(b) Direct investment outside India/overseas direct investment means investments, either under the
Automatic Route or the Approval Route, by way of:
(i) contribution to the capital or subscription to the Memorandum of a foreign entity or
(ii) purchase of existing shares of a foreign entity either by market purchase or private placement
or through stock exchange, signifying a long-term interest in the foreign entity (JV or WOS).
Difference between Automatic Route and Approval Route for direct investment
Automatic route for direct investment or financial commitment outside India: An Indian Party
has been permitted to make investment/ undertake financial commitment in overseas Joint
Ventures (JV)/ Wholly Owned Subsidiaries (WOS), as per the ceiling prescribed by the Reserve
Bank.
With effect from July 03, 2014, it has been decided that any financial commitment (FC) exceeding
USD 1 (one) billion (or its equivalent) in a financial year would require prior approval of the Reserve
Bank even when the total FC of the Indian Party is within the eligible limit under the automatic route
[i.e., within 400% of the net worth (Paid up capital + Free Reserves) as per the last audited balance
sheet].
Approval route for direct investment or financial commitment outside India:
(i) Prior approval of the Reserve Bank would be required in all other cases of direct investment
(or financial commitment) abroad.
(ii) Reserve Bank would, inter alia, take into account the following factors while considering such
applications:
(a) Prima facie viability of the JV / WOS outside India;
(b) Contribution to external trade and other benefits which will accrue to India through such
investment (or financial commitment);
(c) Financial position and business track record of the Indian Party and the foreign entity;
and
(d) Expertise and experience of the Indian Party in the same or related line of activity as of
the JV / WOS outside India.
Therefore, under the approval route (proposals not covered by the conditions under the
automatic route) prior approval of the Reserve Bank would be required. For which a specific
application in Form ODI with the documents prescribed therein is required to be made through
the Authorized Dealer Category – I banks.
6. (a) Under section 380(1) of the Companies Act, 2013 every foreign company shall, within 30 days of
the establishment of place of business in India, deliver to the Registrar for registration the following
documents:
(1) a certified copy of the charter, statutes or memorandum and articles , of the company or
other instrument constituting or defining the constitution of the company. If the instruments
are not in the English language, a certified translation thereof in the English language;

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 (2) the full address of the registered or principal office of the company;
(3) a list of the directors and secretary of the company containing such particulars as
prescribed under the Companies (Registration of Foreign Companies) Rules, 2014,
(4) the name and address or the names and addresses of one or more persons resident in
India authorised to accept on behalf of the company service of process and any notices or
other documents required to be served on the company;
(5) the full address of the office of the company in India which is deemed to be its principal
place of business in India;
(6) particulars of opening and closing of a place of business in India on earlier occasion or
occasions;
(7) declaration that none of the directors of the company or the authorised representative in
India has ever been convicted or debarred from formation of companies and management in
India or abroad; and
(8) any other information as may be prescribed.
According to the Companies (Registration of Foreign Companies) Rules, 2014, any document
which any foreign company is required to deliver to the Registrar shall be delivered to the Registrar
having jurisdiction over New Delhi.
(b) (i) As per Provisions laid down in section 52 of the Insolvency and Bankruptcy Code, 2016, an
option is given to secured creditor to realize its security interest by informing liquidator in
respect of such security interest and identify assets subject to which such security interest
has to be realized. Therefore, it is not mandatory under Code proceedings for financial creditor
to be a part of CoC (Committee of Creditors) to enforce its security interest. Hence, application
filed by Financial creditor was to be accepted.
Therefore the stand taken by the liquidator on his denial to the XYZ Bank Ltd. to enforce its
security interest on the account that secured creditor is not a part of Committee of creditors,
is not valid.
(ii) Money Laundering basically is knowingly dealing with proceeds of crime, directly or indirectly.
The Act provides both for civil and criminal liability.
Criminal liability under the Prevention of Money Laundering Act
Crime which results in tainted money is a separate offence under various laws as specified in
Schedule to Prevention of Money Laundering Act. These offences are punishable under those Acts.
The punishment is to the person/s who is/are involved in actually committing that offence.
The offence as specified in section 4 of the Prevention of Money Laundering Act is a separate
offence. The punishment under section 4 of Prevention of Money Laundering Act is not only to
those who are actually involved in dealing with tainted money but also on those who are knowingly
involved, directly or indirectly, in dealing with proceeds of crime.
This is a criminal offence, which will be tried by special courts designated for this purpose under
section 2(z) of the Prevention of Money Laundering Act. The trial will be both for charges under
the specific Act which is a crime and also offence of money laundering under Prevention of Money
Laundering Act. However, it is not 'joint trial'.
Civil Liability i.e. confiscation of tainted property
In addition to criminal liability, the property involved in money laundering can be attached and
frozen by Central Government and later confiscated.

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