CA Inter Law May 2024

General Clauses
Act, 1897
Introduction
• Enacted on 11th March 1897
• Contains
- Definitions
- General Rule of Interpretation
• It is ‘Law of all the laws’
• Applicable to Central Acts
• Does not define any territorial extent clause
- where central law applies, it also applies
• Also known as  Interpretation Law of India
• It does not apply to State Acts (they have their own GCA, but they are in line
with GCA)
 OBJECTS

The General Clauses Act, 1897 has following objects:

 To Shorten the language of Central Acts and
regulations
 To provide uniformity of expression in Central Acts by
definitions
 State Rules of Interpretation
 Definitions
Open for interpretation Closed for interpretation
Inclusive Definition Exhaustive Definition
 
Word ‘includes’ is used Word ‘means’ or ‘means &
 includes’ is used
Eg. Body Corporate U/s 2(11) 
definition Eg. Company U/s 2(20) definition
Body Corporate or corporation Company means a company
Includes a company incorporated incorporated under this act or
outside India under previous act
Explain the impact of the two words
"means" and "includes" in a
definition, while interpreting such
definition.(4 Marks) (MTP Oct. 23)
(MTP Mar. 24)
Use of Words shall & may
Shall  Imperative or Mandatory
May  Not Mandatory but Directory

Important note:
Sometimes, the word ‘may’ has to be interpreted as ‘shall’.
Eg. Section 3 of the Companies Act, 2013 states that ‘a company ‘may’ be
formed for any lawful purpose by….’ 
may will be interpreted as shall
Formal legal document which creates or confirms a right or record a
fact is a—
(a) Document
(b) Deed
(c) Statute
(d) Instrument
(MTP M 21)
 Sec. 5  Comes into operation
Whether date of operation /commencement is specified

Yes No
Act will be applicable Then act will be applicable
from that date From consent of

Before Constitution After Constitution

Governor General President
Note :- Act applies from midnight
 Note of Sec. 5
1. Rules will be effective rules ae published by gazette
notification
2. Normally all laws are prospective unless then are expressly
made restrospective
Where an act of parliament does not expressly specify any particular day as to the day of coming into operation of such Act,
then it shall come into operation on the day on which:(1 Mark) (MTP Sep. 22)
(a) It receives the assent of the President
(b) It receives the assent of the Governor General
(c) It is notified in the official gazette
(d) It receives assent of both the houses of Parliament
 Sec. 6  Repeal
• It is not an amendment
• It is complete obliteration of provision as if it never existed

Sec. 6 Consequences of Repeal

Repeal any enactment, then such repeal shall not  (RRIP)
a) Revive anything not in force at the time when repeal takes effect
b) Affect any right, obligation, liability incurred under enactment so
Repealed
c) Affect any investigation, legal proceedings
d) Affect any penalty, forfeiture or punishment for any offence committed
under enactment so repealed
•"Whenever an Act is repealed, it must be
considered as if it had never existed."
Comment and explain the effect of repeal
under the General Clause Act, 1897.4
Marks (May 23)
 Sec. 6A - All Amendments in repealed Act to Continue
• Where any Central Act or Regulation made after this Act
• Repeal any enactment
• Then such repeal shall not affect the continuance of any amendment /
omission / insertion made by enactment so repealed
 Sec. 6A
Fact of case Sec. 138 to By Banking , Later on
142 of NI Act PFI, NI laws banking, PFI,
was amendment NI act was
amended Act, 1988 repealed

Question • Will amendment made under NI act will also be repealed

Law Repeal shall not affect continuance of any amendment made

by Act so repealed

Conclusion Amendment act will remain valid.

 Sec. 7 – Revival of Repealed Act
- In any Central Act or Regulation made after commencement of this
act
- Where any enactment repealed, either wholly or partially has
been revived
- Then any such revival shall expressly state the purpose
Company Act, 1956 - Sec 1 to 658
Winding up - Sec 425 to 560 (Supervision of Court)
Companies Act, 2013 - repealed Company Act, 1956
Winding up U/Co. Act 13 - Sec 271 to 366 (Supervision of NCLT)
However at the formation of Companies Act, 2013, since NCLT was not
there, thus Companies Act, 2013 provides for continuance of Sec 271 to
366 of Companies Act, 1956 to facilitate winding up
Sec. 8 Consequences of References to Repealed Act
Where
This Act OR Any Central Act OR Regulation made after
commencement of this Act

Repealed & reenacted (Purana hataya naya laya), any provision of previous
enactment then any reference in any other Act, above provision so repealed
shall, unless a different intention appears be considered as reference to
provisions so reenacted.
As per POBA, 1965 – as per sec 2(1) – financial year in relation to company
shall have the same meaning as defined under companies act 1956  since
now Companies Act, 1956 repealed & Companies Act, 2013 reenacted after
repealed  now any reference about companies Act 1956 means reference to
Companies Act 2013
 Sec. 9 – Commencement & Termination Of Time
Q. Count 10 Days from 1st January 2019
 1st Jan + 10 Days  11th Jan
thus 1st Jan to be excluded
Q. IT return can be submitted upto 31st July. Whether
31st July to be included ??
Now last date to include is 31st July as well
• Komal Ltd. declares a dividend for its shareholders in its AGM held on 27th September,
2022. Referring to provisions of the General Clauses Act, 1897 and the Companies Act,
2013, advice: (module) (MTP MAY 2020)
• The dates during which Komal Ltd. is required to pay the dividend?
• The dates during which Komal Ltd. is required to transfer the unpaid or unclaimed
dividend to unpaid dividend account?
• Hint -
• Payment of dividend: In the given instance, Komal Ltd. declares dividend for its
shareholder in its Annual General Meeting held on 27/09/2022. Under the provisions of
Section 127 of the Companies Act, 2013, a company is required to pay declared dividend
within 30 days from the date of declaration, i.e. from 28/09/2022 to 27/10/2022. In this
series of 30 days, 27/09/2022 will be excluded and last 30th day, i.e. 27/10/2022 will be
included. Accordingly, Komal Ltd. will be required to pay dividend within 28/09/2022 and
27/10/2022 (both days inclusive).
• Transfer of unpaid or unclaimed divided: As per the provisions of Section 124 of the
Companies Act, 2013, where a dividend has been declared by a company but has not
been paid or claimed within 30 days from the date of the declaration, to any shareholder
entitled to the payment of the dividend, the company shall, within 7 days from the date
of expiry of the said period of 30 days, transfer the total amount of dividend which
remains unpaid or unclaimed to a special account to be opened by the company in that
behalf in any scheduled bank to be called the “Unpaid Dividend Account” (UDA).
Therefore, Komal Ltd. shall transfer the unpaid/unclaimed dividend to UDA within the
period of 28th October, 2022 to 3rd November, 2022 (both days inclusive).
Sheesham Limited is a company engaged in the business of
manufacturing premium quality furniture in the state of Tamil Nadu.
In light of the provisions outlined in the General Clauses Act, 1897,
and the Companies Act, 2013, please advise on the specific timelines
regarding the payment of dividends subsequent to its declaration at
the Annual General Meeting (AGM) held on 8th August 2023.
(4 Marks) (MTP April 24)
 Sec. 10
Fact of case Last day to sue It was Sunday & He sued on
was 31st Jan court was closed immediately next day
Question • Will suit be maintainable

Law If certain Act/ proceeding was to be done within prescribed

time and court/ office is closed on such day, then it is deemed
to be done in prescribed time if done on next immediate day
when court / office is open.

Conclusion Yes suit will be maintainable

Sec. 11-Measurement of Distance

Any distance will be measured in a straight line on horizontal plane
• Kiran and Naman had a long dispute regarding the ownership of a land for
which a legal suit was pending in the court. The court fixed the date of
hearing on 29.04.2023, which was announced to be a holiday
subsequently by the Government. What will be the computation of time
of the hearing in this case under the General Clauses Act, 1897? (MTP
Sep. 23)
• Ans – When court opens
• Shree was supposed to submit an appeal to the High Court of Delhi on 8th
September, 2023, which was the last day on which such appeal could be
submitted. However, on that day the High Court was closed due to total
Lockdown in Delhi for 30 days due to visit of foreign delegates from 40
countries for G40 Summit. Examine the remedy available to Shree under
the provisions of the General Clauses Act, 1897.(3 Marks) (MTP Oct. 23)
• Hint – When court reopens
 Sec. 12 – Duty to be taken pro-rate
Fact of case Sugar Custom duty Rs. 100 for 1000 kg

Calculate the duty for 100kg of Sugar

Law Any duty / customs / exercise


Leviable on a quantity weigh / measure / value

Like duty is leviable on same rate on any greater / less quantity
Conclusion 100/1000*100 = Rs.10
 Sec. 13
• Masculine gender always include ‘She’
• ‘Singular’ always include ‘Plural’
Exception 1) If male / female word is expressly mentioned in law
E.g (1) Male descendants will not include female descendants
(2) Bullock will not include cow.
Exception 2) It will not cover all cases
E.g (1) Previous year in companies act will not mean previous years
In all Central Acts and Regulations, unless there is
anything repugnant in the subject or context,
words importing the masculine gender shall be
taken: (1 Mark) (MTP Sep. 23)
A. To exclude females
B. To exclude girl child
C. To include females
D. To exclude boy child
• Mr. Avinash currently holds the position of a Whole-time director
(Key Managerial Personnel) at Moon Pharma Limited, a company
that maintains substantial ownership stake in X Limited (55%
shares), Y Limited (60% shares), and Z Limited (65% shares). Mr.
Avinash has expressed his desire to expand his role as a Whole-time
director to encompass both X Limited and Y Limited. Determine the
validity of his appointment as a Whole-time director in these
additional companies, as per the provisions of the General Clauses
Act, 1897.4 M (Nov 23)
• Hint – subsidiary includes subsidiaries
• Mrs. Neelu Chandra was director in Laddoo Sweets Private Limited. Once while
dealing with supplier of raw materials for company, she agreed to get some
secret commission from supplier for making the deal. Afterwards, on finding
the facts, the company has filed the suit against Mrs. Neelu Chandra. She
contended that section 166 of the Companies Act, 2013, provides “A director of
a company shall not achieve or attempt to achieve any undue gain or advantage
either to himself or to his relatives, partners, or associates and if such director
is found guilty of making any undue gain, he shall be liable to pay an amount
equal to that gain to the company.” She contended that section 166 is
applicable to male director only, she being female will not be liable.
• In the light of the provisions of the General Clauses Act, 1897, decide whether
she is bound by the provisions of section 166 of the Companies Act, 2013?(RTP
Nov 23)
• Hint – Masculine includes feminine . She is bound for punishment
Sec. 14 – Powers Conferred to be exercised from time to time
Fact Sec. 12 confer power to R.D for permission to shift Regd.
Office from one state to another can be do it only once or he
can continue to exercise the power

Law If any power is conferred


Then unless different intention appears

Power may be exercised from time to time as occasion requires
Conclusion R.D can continue to give permission till be is expressly
restricted
Sec. 15 – Power to appoint to appoint INCLUDE power to appoint ex-officio

Where by any legislation or regulation, a

power to appoint any person to fill any
office or execute any function is conferred,
any such appointment, may be made
either by name or by virtue of office.
Sec. 16 – power to appoint to include power to Suspend / Dismiss

Power to appoint

Includes power to suspend / dismiss

Unless otherwise specified
• Examine the validity of the following statements with reference to the
General Clauses Act, 1897:
• Board of Directors of Sabarwal Construction Private Limited authorised
by passing resolution in board meeting Mr. Munim to appoint five
employees for accounts department of company. Mr. Munim appointed
five employees including Mr. Rupal who was relative of one of the
director of company. After one month, Mr. Munim observed that Mr.
Rupal was not performing his duties honestly. Mr. Munim issued the
order of dismissal of Mr. Rupal with proper reasons. Mr. Rupal filed a
petition in the court that his dismissal order is not valid as Board of
Directors had authorized Mr. Munim only for appointment of employees
not for dismissal. Whether is Mr. Rupal correct with his words? (April
22)(4 Marks)
• Hint – one who can appoint can also dismiss
 Sec. 17 – Substitution of Functionaries
It shall be sufficient to mention the office title of the officer at
present executing the functions of an office for the purpose of
indicating the application of law

Sec. 18 – Successor
Any act done by functionary , can also be done by its
successor
 Sec. 19 – Official Chief & Subordinate
In any
Any Central Act Regulation made after commencement
of act
Any law relating to Chief as senior of any office shall also apply to his deputies
/ subordinates who is lawfully performing duties of that office in place of their
superior
Example : in case under the Preventive Detention Act, where there is a change in
the Advisory Board after service of the detention order, the new Advisory Board
can consider the case pending before the earlier board.
Sec. 20 – words used in definition to have same meaning for whole Act
Any expression used in

Notification, orders, schemes, rule forms

Shall have same meaning

As in act or regulation

E.g. Companies Act, 2013 – defined the word ‘Company’ later on certain rules were
formed on concerned meeting. These rules also include the word ‘company’ now
‘company’ as used in rules shall have same meaning as assigned in companies Act
 Sec. 21 – power to issue include power to amend as well
A power

To issue

Notification/ order, rules, by laws

Include power to

Amend. Vary or rescind them
E.g.
1/4/2014  Companies Act, 2013 –existence
24/June/2015  Exemption notification to govt co. by MCA
Dec. 2017  MCA amends its exemption notification & provided that govt. co. shall be
entitled to exemption only if there is non-compliance of Sec. 137 or 92
Sec. 22 – Validity of rules before commencement of Act
Co. Act
Fact of case 
Prescribed But NCLT was notified in
Applicable provisions Dec. 2016
 for NCLT
29th Aug. 2013

Whether provisions of NCLT applicable from 29th Aug or Dec. 2016?

Law Rules / Bye law / orders


Issued before will not enforce to

Till commencement of Act/ regulation
Conclusion Provision of NCLT applicable from Dec. 2016
Sec. 23 –Making of rule or bye-laws after previous publications
Step 1 Make Draft by manner decided by govt. / authority
Step 2 Publish Draft mentioning time for suggestions /
objections / comments
Given to

Affected person Permission authorities

Step 3 Interested person will make objections / suggestions
Step 4 Incorporate / consider suggestions / comments if req.

Step 5 Publish final copy in official gazette / conclusive proof

 Sec. 24 – Continuation of orders issued under enactments repealed
and reenacted
• Where any Central Act or Regulation, is, after the commencement of this Act,
• repealed and re-enacted with or without modification,
• then, unless it is otherwise expressly provided
• any notification, order, scheme, rule, form or bye-law, made or issued under the repealed Act or
Regulation, shall, so far as it is not inconsistent with the provisions re-enacted,
• continue in force,
• and be deemed to have been made or issued under the provisions so re-enacted,
• unless and until it is superseded by any appointment notification, order, scheme, rule, form or
bye-law, made or issued under the provisions so re-enacted
• Example - The Mines Act of 1923 was repealed and replaced by the Mines Act of 1952. Rules
made under the repealed Act must be deemed to continue in force by virtue of this section until
superseded.
 Sec. 25 – Recovery of Fines
Whether fine prescribed in specified law

Yes No
Same fine will apply Fines prescribed by
a) Sec. 63 to Sec. 70 of IPC
b) Provisions of code of criminal
procedures will apply
 Sec. 26 –Provision as to offence punishable under two or more enactments

1. Will not be punished twice / only punish under either of

law
2. Trial can be held under different laws, but punishment
once
3. If 2 alternative charges in same trial, acquittal from one
does not ban conviction from other.

"No person shall be prosecuted and punished for the same offence • more than once." Explain in the light of
provisions .of Section 26 of the General Clauses Act, 1897.3 Marks (May 23)
An act or omission constitutes an offence under two enactments. Referring to the provisions of the General Clauses Act, 1897, state
which among the following is correct in such a situation: (module)
a) The offender shall be liable to be prosecuted and punished under that enactment only, which was enacted last and not under the other
enactment.
b) The offender shall be liable to be prosecuted and punished under that enactment only, which was enacted first and not under the other
enactment.
c) The offender shall be liable to be prosecuted and punished under both the enactments.
d) The offender shall be liable to be prosecuted and punished under that either or any of those enactments, but shall not be punished twice
for the same offence.

As per the provisions of the General Clauses Act, 1897, where an act or omission constitutes an offence under two or more
enactments, then the offender shall be liable to be prosecuted and punished under: (Mar.22)(1 Mark)
a) Under either or any of those enactments
b) Twice for the same offence
c) Either (a) or (b) as per the discretion of the court
d) Under the cumulative effect of both the enactments
A company enter into process of reducing capital. Mr. Shah is concerned officer designated for preparing the list of creditor to
records their reservation and reach to a settlement under section 66 of the Companies Act, 2013. Mr. Shah while preparing such list
deliberately conceal the name of Ms. Ramya who is one of the company’s creditor and object to the reduction, whereas make
misstatement in context of some other creditors’ claims. The offence committed by Mr. Shah is punishable under; (i) Under section
447 of the Companies Act, 2013 and (ii) Also under sections 417 read with 415 of Indian Penal Code 1860 (as dishonest concealment
is involved). You are required to select the most appropriate option out of given below in context of offence committed by Mr.
Shah:
a) Mr. Shah shall be liable to be prosecuted under both of the Companies Act, 2013 and the Indian Penal Code 1860, but shall be punished
under either of the Companies Act, 2013 or the Indian Penal Code, 1860.
b) Mr. Shah shall be liable to be prosecuted under both of the Companies Act, 2013 and the Indian Penal Code, 1860, but shall be punished
under the Companies Act, 2013 or the Indian Penal Code, 1860 where maximum punishment is lower.
c) Mr. Shah shall be liable to be prosecuted and punished under either of the Companies Act, 2013 or the Indian Penal Code, 1860.
d) Mr. Shah shall be liable to be prosecuted and punished under both of the Companies Act, 2013 and the Indian Penal Code, 1860. (RTP Nov
23 )
 Sec. 27 – Service by Post
1) Deemed to be served by post if :-
Properly Posted by
Pre-paid
Addressed + + Registered
post
2) Should be served by post – Acknowledgement due

Unless acknowledgement is not obtained it is not served

What is the meaning of service by post as per provisions of the General Clauses Act, 1897? (3
Marks) (MTP Sep. 22)
Hint: “Meaning of Service by post”: As per section 27 of the General Clauses Act, 1897,
where any legislation or regulation requires any document to be served by post, then
unless a different intention appears, the service shall be deemed to be effected by:
(i) properly addressing
(ii) pre-paying, and
(iii) posting by registered post.
A letter containing the document to have been effected at the time at which the letter
would be delivered in the ordinary course of post.
 Question
(c) Mr. Rachit purchased a new house and after some time he shifted to his
new house. He was regularly filing his Income Tax Return but he did not
update his address with the Income Tax Department. The Income Tax
department sent a show cause notice to Mr. Rachit whereby the time limit
for reply was 15 days from service of notice. The notice was properly sent
by registered post to his address which was in the records of the Income
Tax Department. The notice reached at old house and present owner of
that house refused to accept that notice. After a certain period, the Income
Tax Department took a penal action against Mr. Rachit. He requested the
department, that he should not be charged as he did not receive the said
notice. Advise in terms of the provisions of the General Clauses Act, 1897,
whether sending of the show cause notice by the Income Tax Department
would be considered proper service of notice?
Give your answer with reference to the provisions of the General Clauses
Act, 1897.
(4 Marks) (MTP Mar. 24)
 Sec. 27
Cases Due service when done
1) Addressee refuses to Assumed that done
accept order
2) Post return with not Due service presumed
available in house / house
locked / shop closed
3) Sec. 138 notice Due service presumed
unclaimed
4) Regd. Post Due service cannot be presumed
acknowledgment due is
instead sent by only regd.
Post
 AFFIDAVIT – SECTION 3(3)
• ‘Affidavit’ shall include affirmation and declaration
• In the case of persons by law
• Allowed to affirm or declare instead of swearing.

• In simple language, affidavit means a

• Sworn statement in writing
• Made under oath or on affirmation
• Before an authorized Magistrate or officer.
 CENTRAL ACT- SECTION 3(7)
• Central Act mean an Act of Parliament.
It shall include:
• An Act of the Dominion Legislature or
• Of the Indian Legislature Passed before the commencement of the
constitution.
AND
• An Act made before such commencement
• By the Governer–General in Council or
• The Governer-General,
• Acting in a legislative capacity
 Central Government [Sec. 3(8)]

Before Constitution After Constitution

Governor general in council and President and includes

includes in relation to
State U.T Part C States
Function Administration
S.G Acting Chief
within scope Commissioner ,
Govt. of a Chief commissioner Lieutenant
Province acting acting within its Governor, or
scope (in chief Govt. of
within it’s scope commissioner Administrator neighboring
province ) state
• ‘Commencement’ [Section 3(13)]:
‘Commencement’ used with reference to an Act or Regulations, shall mean
the say on which the Act or Regulations comes into force.
• ‘Document’ [Section 3(18)]:
‘Document’ shall include any
• matter (written,Expressed or described upon)
• any substance
• By means of letters, figures or marks or by more than one of those means.
• Which is intended to be used or which may be used, for the purpose or
recording that matter.
include printing, lithography and photography.
• A book, file, painting, inscription and even computer files are all documents.
• However, it does not include Indian currency notes.
 Financial year [SECTION 3(21)]
• Financial year' shall mean the year commencing on the first day of
April.
• Note: Section 3(66) separately defines a year which means a calendar
year starting from January to December.
• Difference between Financial Year and Calendar Year: Financial year
starts from first day of April but Calendar Year starts from first day of
january
• What is “Financial Year” under the General Clauses Act, 1897?
(module)
• Mr. Apar and Mr. New, both aspiring Chartered Accountants have
met in a conference for CA students. Both are having an argument
about the meaning of Financial Year. They have approached you as a
senior in the profession to guide them about the meaning of
Financial Year as per the provisions of the General Clauses Act,
1872. Also, brief them about the difference between a calendar year
and financial year.(RTP MAY 2021) (4 Marks) (MTP Oct. 23) (4
Marks) (MTP Mar. 24)
 GOOD FAITH [SECTION 3(22)]
• A thing shall be deemed to be done in “good faith” where
• It is in FACT done honestly, whether it is done negligently or not;
• The question of good faith under the General Clauses Act is ONE OF
FACT. It is to determined with reference to be circumstances of each
case.

• "The act done negligently shall be deemed to be done in good

faith."Comment with the help of the provisions of the General
Clauses Act, 1897.(3 Marks) (MTP Sep. 23)
 Governement [SECTION 3(23)]
• `Government' or 'the Government' shall include both the Central
Government and any State Government.

Q.Income Tax Act, 1961 provides that the gratuity paid by the
government to its employees is fully exempt from tax. You are
required to explain the scope of the term 'government' and clarify
whether the exemption from gratuity income will be available to the
State Government Employees? Give your answer in accordance with
the provisions of the General Clauses Act, 1897.
• Hint – Govt includes both central and state((MTP Sep. 23)
 Land

Shall include Benefits to arise out of land

Immovabl (e.g Trees , right to access )
e Property
[Section 3 Things attached to the earth
(26)] e.g – building /trees )

Things permanently fastened

to anything attached to the
earth ( e.g bathroom fittings )
 IMMOVABLE PROPERTY – SECTION 3 (26)
• Timber is not immovable property
• Right of way to access from one place to another may come within
the definition of Immovable property whereas the right to drain of
water is not immovable property.

Which of the following is not an Immovable Property?

(a) Land
(b) Building
(c) Timber
(d) Machinery permanently attached to the land(1 Mark) (MTP M
21)
 Question
19. Yogveer Singh has a mango orchard at Manchanga Village,
Bilaspur. The orchard has more than one hundred Mango trees.
Yogveer Singh has sold orchard along with all the mango trees.
Explain, in the lights of provisions of the General Clauses Act 1897,
whether the sale of trees will be considered as sale of Immovable
Property?
(RTP May24)
What among the following could be (iii) Right to drain water
considered in the term ‘Immovable (iv) Doors and Windows of the house
Property’ as defined under section 3(26) (a) Only (i) and (iv)
of the General Clauses Act, 1897? (2 (b) Only (i), (ii) and (iv)
Marks) (MTP Oct. 22) (c) Only (i) and (ii)
(i) The soil for making bricks (d) Only (ii), (iii) and (iv)
(ii) Right to catch fish
M owned a land with fifty tamarind trees. He sold his land and the timber (obtained after cutting the fifty trees) to N. M wants to know
whether the sale of timber tantamount to sale of immovable property. Advise him with reference to provisions of the General Clauses Act,
1897. (RTP Mar 23)
Hint: . “Immovable Property” [Section 3(26) of the General Clauses Act, 1897]: ‘Immovable Property’ shall include:
(i) Land,
(ii) Benefits to arise out of land, and
(iii) Things attached to the earth, or
(iv) Permanently fastened to anything attached to the earth.
It is an inclusive definition. It contains four elements: land, benefits to arise out of land, things attached to the earth and things permanently
fastened to anything attached to the earth. Where, in any enactment, the definition of immovable property is in the negative and not
exhaustive, the definition as given in the General Clauses Act will apply to the expression given in that enactment.
In the instant case, M sold Land along with timber (obtained after cutting trees) of fifty tamarind trees of his land. According to the above
definition, Land is immovable property; however, timber cannot be immovable property since the same are not attached to the earth.
Mr. Z passed away at the age of 75 leaving behind some properties
including both movable and immovable to be distributed between his two
sons A & B, as per his registered will. According to the provisions of his duly
registered will, Mr. Z specified that all immovable properties should go to A,
while all the movable properties should go to B. Both the brothers divided
the properties as per the will except for mentioned properties, because
they could not establish which property should go to whom. Kindly help
them by identifying the property which should go to B out of the followings,
as per the provisions of the General Clauses Act, 1897 : (Nov 23)
a. Standing crop in the fields
b. Tubewell in the agricultural land
c. Cut crops, ready to sell
d. Sandalwood tree
 “Person” [Section 3(42)]:
“Person” shall include:
(i) any company, or
(ii) association, or
(iii) body of individuals, whether incorporated or not
Explain the following with reference to the provisions of the General
Clauses Act, 1897:
(i) Movable Property
(ii) Oath(4 Marks) (MTP April 24)
CA Inter Law Nov 2023

Interpretation Of
statues
 Need for Interpretation (AUDI)
• To remove ambiguities: Although in modern times the statutes are drafted by legal experts,
yet they are expressed in a language and no language is perfect. The English language is not
an instrument of mathematical precision. The courts have to resort to interpretation to
remove ambiguities in the language.
• To understand intent of the legislature: A statute is made by legislator and many times the
intent of the legislature is derived not only from the language but also the surrounding
circumstances that prevailed at the time when that particular law was enacted.
• Different situations and facts: In the words of Denning L.J., 'it is not within human powers to
foresee the manifold set of facts which may arise in the future; and that, even if it were, it is
not possible to provide for them in the statute in terms free from all ambiguity'.
• Multiple interpretations: If any provision of the statute is open to two interpretations, the
court has to choose that interpretation which represents the true intention of the legislature.
 Some Legal Terms
1. Statute:
 Law / Act
Includes ordinance, orders, bye-laws, rules, regulations, notifications.
'a statute is a will of legislature conveyed in the form of text'.
2. Instrument:
 Formal legal Document which creates a Right or Record
Includes Agreement, Deed, Charter, Record.
3. Deed: Instrument in writing  Purporting  To effect some legal disposition
NOTE: all deeds are instrument but all instruments are not deeds
How will you interpret the term "Instrument" used in a statutes? (NOV 2019)
 Difference between Interpretation and
Construction:
• where the Court adheres to the plain meaning of the language used by
the legislature, it would be ‘interpretation’ of the words, but where the
meaning is not plain, the court has to decide whether the wording was
meant to cover the situation to understand intent of legislature . Here,
the court would be resorting to ‘construction’.
• Conclusions drawn by Interpretation are within the letter of law but by
construction are within the spirit though not necessarily within the letter
of the law.
 Rules of Interpretation
Primary Rule Secondary Rule

Rule of 1. Noscitur a sociis

1. Literal Construction 2. Contemporanea Expositia
2. Reasonable Construction
3. Harmonious Construction
4. Beneficial Construction
5. Exceptional Construction
6. Ejusdem Generis
7. Mischief Rule
 Shortcut to Remember
ROMAN  HD
R Rule  Which rule
O Other Imp Pts.
M Meaning
A Applicable
N Not applicable
H How to apply
D Draftsman
 Rule of Literal / Grammatical Interpretation
(i) R  Rule Primary and Cardinal rule
Entry gate of every interpretation
(ii) Meaning  Interpret literally & grammatically

Giving words their

Ordinary and natural meaning
(iii) Applicable Language  Plain, simple, unambiguous, only 1 meaning

(iv) Not - If words or law creates Ambiguity, unreasonable or absurd results, defeats
Applicable intention of law is defeated. in consistency, in completeness,

(v) H  How 1. Follow rules of grammar

2. No word to be added or deleted
 Rule of Literal / Grammatical Interpretation
(vi) D  Draftsman Perfect (Assumption)

(vii) Other Imp Pts  i. Absoluta sententia expositore non indigent


If plain words capable of only one interpretation, no
explanation required

ii. If two interpretation – Narrower & Broader  use
narrower if broader fails to serve purpose
_______is the cardinal rule of construction required by law to disclose any interest as
that words, sentences and phrases of a he is not personally interested or
statute should be read in their ordinary, concerned in the proposal. He made his
natural and grammatical meaning so that presumption relying on the 'Rule of Literal
they may have effect in their widest Construction'. Explaining the scope of
amplitude. (1 Mark) (MTP Oct. 22) (MTP interpretation under this rule in the given
Oct. 23) situation, decide whether the decision of
Nehul is correct? (3 Marks) (MTP Sep. 23)
(a) Rule of Literal Construction Hint - we have to interpret in its broader
(b) Rule of Harmonious Construction sense of referring to any concern or
(c) Rule of Beneficial Construction interest containing any information and
(d) Rule of Exceptional Construction facts What is required is a full and frank
disclosure without reservation or
Nehul, a director of a Company, not being suppression, as, for instance where a son or
personally concerned or interested, daughter or father or mother or brother or
financially or otherwise, in a matter of a sister is concerned in any contract or
proposed motion placed before the Board matter, the shareholders ought fairly to be
Meeting, did not disclose his interest informed of it and the material facts
although he has knowledge that his sister disclosed to them.
is interested in that proposal. He restrains
from making any disclosure of his interest
on the presumption that he is not
Rule of Reasonable / Logical Interpretation/Golden Rule
(i) Rule Primary
(ii) Meaning  If legislature fails to give intended results

Give sensible meaning to it
(iii) Applicable Words / Provisions

If words or law creates Ambiguity, unreasonable or absurd results, defeats intention of law is
defeated. in consistency, in completeness,
(iv) Not - Applicable  Language is plain simple, unambiguous and has only 1 meaning and give
intended results.
(v) How to apply If absurdity , adopt construction

which was the intent of the legislator

(vi) Draftsman Faulty

Maxim  Utres magis valeat Quam pareat
(vii) Other Imp Pts.

It is better to have effect then to be made void
 Rule of Harmonious Construction
(i) Rule Primary
When there is conflict between two or more provisions
(ii) Meaning 

Harmonize it to give effect to all provisions
Where there is conflict between .
(iii) Applicable 
i. Two statutes of same law
ii. Two statutes of different laws
iii. Conflict between previous and new law
(iv) Not - Applicable  Where statute give a clear indication as to which provision is subservient and which overrides.
This is done by the use of the terms “subject to”, “notwithstanding” and “without prejudice”.

(v) How to apply i. Harmonize

ii. If not possible give effect to both
iii. Still not possible, amended, later act should prevail
iv. Specific rule to over-ride general rule
(vi) Draftsman Faulty (Assumption)

(vii) Other Imp Pts. Statute should give clear reference of over riding provisions by using words. Subject
to, notwithstanding, without prejudice.
Subject to

•a clause that uses the words

“subject to” is subservient to
another.
 Notwithstanding
• A clause that begins with the words “notwithstanding anything contained” is
called a non-obstante clause. Unlike the “subject to” clause, the notwithstanding
clause has the effect of making the provision prevail over others.
• A notwithstanding clause can operate at four levels.
1. Notwithstanding anything contained in another section or sub– section of that
statute.
2. Notwithstanding anything contained in a statute.
3. Notwithstanding anything contained in specific section(s) or sub-section(s) or
all the provisions
contained in another statute.
4. Notwithstanding anything contained in any other law for the time being in
force.

A clause that begins with the words "notwithstanding anything contained" is a

clause that has the effect of making the provision prevail over others. It can
operate at four levels. Explain any two of them.4 Marks (Nov 23 )
 Without prejudice
• When certain particular provisions follow general provisions and when it is
stated that the particular provisions are without prejudice to those general
provisions the particular provisions would not restrict or circumscribe the
operation and generality of the preceding general provisions. In other words,
the particular provisions shall operate in addition to and not in derogation of
the general provisions.
• Example 5: Section 4(3) of the Companies Act, 2013, “Without prejudice to the
provisions of sub-section (2), a company shall not be registered with a name
which contains ”
• This implies that while registering (and deciding) the name of the company [as
per section 4(3)], provisions of section 4(2) shall also be operative.
• Explain the meaning of ‘Without Prejudice’ as a Harmonious aid to
interpretation of statutes. Support your answer with the help of an example.
(RTP Nov 23)
• When there is a conflict between two or more statues or two or more
parts of a statute then which rule is applicable: (1 Mark) (MTP Oct.
23)
• Welfare construction
• Strict construction
• Harmonious construction
• Mischief Rule
•
 Mischief Rule / Heydon’s Rule /Beneficial
(i) Rule Primary
Where statute does not give intended result
(ii) Meaning 

Words in statute may be extended to give intended meaning
i. Where actual law is different but intention of lawmaker is different
(iii) Applicable ii. Where law was made to grant remedy to a problem

(iv) Not - Applicable  Language is plain simple, unambiguous and has only 1 meaning and give
intended results.

(v) How to apply • Court shall consider:

a) What was the earlier law ?
b) What was the mischief ?
Then suppress mischief &
advance remedy
c) What is the remedy ?
d) Reason for the remedy.

(vi) Draftsman Faulty (Assumption)

(vii) Other Imp Pts.
 Rule of Exceptional Construction
(i) Rule Primary
Where statute does not give intended result
(ii) Meaning 

Words in statute may be eliminated/replaced to give sensible meaning
i. Directors (May) & Mandatory Provisions (Shall) or Conjunctive (and) or disjunctive (or )
(iii) Applicable do not provide intention of lawmaker

(iv) Not - Applicable  Language is plain simple, unambiguous and has only 1 meaning and give
intended results.
(v) How to apply i. ‘May’ should be treated as directory and ‘shall’ should be treated
as compulsory
ii. ‘And’ means addition whereas ‘or’ means optional

(vi) Draftsman Faulty (Assumption)

• (vii) Other Imp Pts. whether it is mandatory or directory depends upon 1.the nature of the thing empowered to
be done, 2.the object for which it is done, and 3.the person for whose benefit the power is to be exercised.
 Rule of Beneficial Construction:
• Beneficial construction will be given to a statute, which brings into effect
provisions for improving the conditions of certain classes of people who are under
privileged or who have not been treated fairly in the past. In such cases it is
permissible to give an extended meaning to words or clauses in enactments. But
this can only be done when two constructions are reasonably possible and not
when the words in a statute are quite unambiguous
• A method of interpretation which brings into effect provisions for improving the
conditions of certain classes of people who are under privileged or who have not
been treated fairly in the past. (RTP Nov 23)
• Rule of Literal Construction
• Rule of Harmonious Construction
• Rule of Beneficial Construction
• Rule of Exceptional Construction
 Ejusdem Generis
• The general work will derive meaning from group of word it follows
• E.g. Pineapple juice, orange, mosambi juice, etc (kya hoga??? …Vodka, gin,
whiskey )
• E.g bread , butter, fruits , vegetable and other things
• Other things means - edibles

Rule of Ejusdem Generis

Series of words forming particular class, or category are used & then
general word follow them

In such case general words should be construed with reference to the
previous words & accordingly meaning should be derived
 Noscitur A Sociis
(i) Rule Secondary
‘Word is known by its associates’
(ii) Meaning  
The meaning of a word is derived from the words found in immediate connection.when words
with analogous meaning are coupled together , understood in cognate sense

When some articles are grouped together, each word in the entry
(iii) Applicable
draws color from the other words therein.

(iv) Not - Applicable It cannot be applied where the meaning of the words was
deliberately used in order to make the scope wider.
(v) How to apply • 2 or more specific words
• One ambiguous specific word
• Such ambiguous specific word to derive its meaning from
other specific word
“Associate words to be understood in common sense manner.” Explain this statement with reference to rules of
interpretation of statutes. (3 Marks) (MTP Oct. 22)

Define the concept of "Doctrine of Noscitur a Sociis" with example in accordance with the provisions of the
Interpretation of Statutes.3 Marks (Nov 23 )

_______means that when two or more words that are susceptible of analogous
meaning, are coupled together they are understood to be used in their cognate
sense. (1 Mark) (MTP Oct. 23)
○ Noscitur a Sociis
○ Contemporanea Expositio
○ prima facie
○ absoluta sententia expositore non indigent
 Effect of usage and customs
● The Latin maxim of 'Optima legum interpres est consuetude' which means that
the best interpreter of laws is custom, has been recognised as one of the oldest
principle in construing statutes.
● The Apex Court also confirmed another maxim Contemporanea expositio est
optima et fortissinia in lege' meaning 'the best way to construe a document is to
read it as it would have been read when made'. The rule is that a statute must be
considered in the light of all circumstances existing at the time of its enactment.
[Desh Bandhu Gupta v. Delhi Stock Exchange Asson. Ltd. — (SC) 1979]
● At the time of interpreting a Statute what will be the effect of ‘Usage’ or
‘customs and Practices’? (Module) (Nov 23 )
● Explain the Doctrine of Contemporanea Expositio.3 Marks (May 23)
 Aid to Interpretations

Internal Aid External Aid

1. Long title
1. History
2. Preamble
3. Heading & chapter name 2. Consolidating Statutes
4. Definitions & Previous laws
5. Illustrations 3. Usage
6. Proviso 4. Earlier Act / later act.
7. Explanations
5. Dictionary definition
8. Schedule
9. Marginal notes 6. Court decisions
10. Act as a whole
 Internal Aids
1) Long/short title • Short title – identifies enactment & used for convenience – not aid
• Long title – describes enactment and used to ascertain object ,general
scope and purpose
2) Preamble • Express more comprehensively scope, object and purpose than long
title.
• Preamble discloses primary intention of legislature but can only be used
as aid if statute is not clear
3) Headings/ title Used for interpretation of sections included in it.
of chapter

4) Definitions When definition is included, interpreter uses

definition meaning and not ordinary meaning
5) Illustrations Good guide to find intention of draftman but is not part of
(Examples) section , so cannot modify /curtail section
When can the Preamble be used as an aid to interpretation of a statute? (RTP Mar
23)
Hint: When will courts refer to the preamble as an aid to construction?
Situation 1: Where there is any ambiguity in the words of an enactment the
assistance of the preamble may be taken to resolve the conflict.
Situation 2: Where the words of an enactment appear to be too general in scope
or application then courts may resort to the preamble to determine the scope or
limited application for which the words are meant.
Use of the word ‘may’ in section 5 of the Hindu Marriage Act, 1955 provides that “a marriage
may be solemnized between two Hindus ” has been construed to be mandatory in the sense
that both parties to the marriage must be Hindus as defined in section 2 of the Act. It was
held that a marriage between a Christian male and a Hindu female solemnized under the
Hindu Marriage Act was void. This result was reached also having regard to the preamble of
the Act which reads: ‘An Act to amend and codify the law relating to marriage among Hindus’
[Gullipoli Sowria Raj v. Bandaru Pavani, (2009)1 SCC714]
Explain the impact of the two words "means" and "includes" in a definition, while interpreting such definition. (3 Marks) (MTP
Oct. 22)
Impact of the words “Means” and “Includes” in the definitions- The definition of a word or expression in the definition
section may either be restricting of its ordinary meaning or may be extensive of the same.
When a word is defined to ‘mean’ such and such, the definition is ‘prima facie’ restrictive and exhaustive, we must
restrict the meaning of the word to that given in the definition section.
But where the word is defined to ‘include’ such and such, the definition is ‘prima facie’ extensive, here the word
defined is not restricted to the meaning assigned to it but has extensive meaning which also includes the meaning
assigned to it in the definition section.
Example:
Definition of Director [section 2(34) of the Companies Act, 2013]—Director means a director
appointed to the board of a company. The word “means” suggests exhaustive definition.
Definition of Whole time director [Section 2(94) of the Companies Act, 2013]—Whole time director includes a director
in the whole time employment of the company. The word “includes” suggests extensive definition. Other directors may
be included in the category of the whole time director.

Preamble - Example
The preamble of the Hindu Marriage Act, 1955 reads, 'An Act to amend and codify the law relating to marriage among
Hindus'. Section 5 of the Act reads, 'A marriage may be solemnised between any two Hindus...'. A question arose
that whether use of the word 'may' in Section 5 of the Act can be construed mandatory in the sense that both parties
to the marriage must be Hindus. The court having regard to, inter alia, preamble of the Act held that a marriage
between a Christian male and a Hindu female solemnised under the Hindu Marriage Act was void. [Gullipoli Sowria
Raj v. Bandaru Pavani — (SC) 2009]
 Internal Aids
6) Proviso • It is not rule but exception to main provision to carve out qualification
to main provision which is too general
• Starts with Provided that , to exclude something or limit applicability

7) Explanation An internal aid that may be added to include something within the
section or to exclude something from it
Normally used to clear ambiguity
8) Schedule • A list , a format ,Form part of Act
• Read together with Act for construction
• If conflict between enactment or schedule,
then Act prevail

9) Marginal notes Normally cannot be used for construction except in

exceptional cases .

10) Act as a whole Act must be readed as whole in order to ascertain true
meaning of several clauses for proper harmonisation
 Proviso vs. Exception and Saving Clauses
• 'Exception' is intended to restrain the enacting clause to
particular cases i.e reverse effect to the section e.g sec 149 –
total 15 directors – except by passing S.R
• 'Proviso' is used to remove special cases from the general
enactment and provide for them specially (provided that ) sec
188- RPt- B.R N.A to Arm,s length transaction
• 'Saving clause' is used to preserve provision of other sections
in statute e.g MOA – alteration – S.R save as sec 61
 External aids
1) History Helps in understanding subject matter object and scope of
law.

2) Consolidating May solve doubtful points in statute for intention

statutes & Previous law

3) Usage
In case of doubt, usage helps to create
understanding
4) Earlier law/ later If there are 2 different act in each cases, various rules of
law/ Analogous law interpretation can be used to know exact interpretation.

5) Dictionary Useful where word is not defined in act.

definition
6) Court decision Used for construction of our own law
However prime importance given to Indian statutes
In what way are the following terms considered as external aid in the interpretation of statutes:
(i) Historical Setting
(ii) Use of Foreign Decisions (3 Marks) (MTP Oct. 22) (MTP may 24)
Hint:
(i) Historical Setting: The history of the external circumstances which led to the enactment in
question is of much significance in construing any enactment. We have, for this purpose, to take
help from all those external or historical facts which are necessary in the understanding and
comprehension of the subject matter and the scope and object of the enactment. History in
general and Parliamentary History in particular, ancient statutes, contemporary or other authentic
works and writings all are relevant in interpreting and construing an Act.
(ii) Use of Foreign Decisions: Foreign decisions of countries following the same system of jurisprudence
as ours and given on laws similar to ours can be legitimately used for construing our own Acts.
However, prime importance is always to be given to the language of the Indian statute. Further, where
guidance can be obtained from Indian decisions, reference to foreign decisions may become
unnecessary.

Pick the odd one out of the following aids to interpretation:(1 Mark) (MTP Oct. 22)
(a) Preamble
(b) Marginal Notes
(c) Proviso
(d) Usage
● What is External Aid to interpretation? Explain how the Dictionary
definitions are the External Aids to Interpretations?(3 Marks) (MTP
Sep. 23)
● In what way are the following terms considered as external aid in the
interpretation of statutes:
● (i) Historical Setting
● (ii) Use of Foreign Decisions (3 Marks) (MTP Oct. 22) (MTP Oct. 23)
● 1.Pick the odd one out of the following aids to interpretation:(1 Mark)
(MTP Oct. 22)
● a. Preamble
● b.Marginal Notes
● c. Proviso
● d.Usage
Statutory interpretation is a practice through which the courts break down the
words of a legislation and give true intent to it. While the legislature makes
the laws, the judiciary performs the art of interpretation to give meaning to
the words of the law maker. It is correctly said that “The purpose of
Interpretation of Statutes is to help the Judge to ascertain the intention of the
Legislature – not to control that intention or to confine it within the limits,
which the Judge may deem reasonable or expedient”. For interpretation of
statutes various tools are used, you are required to pick the option depicting
correct sequence of tools in order their application.
● a. Internal Aids to Construction, External Aids to Constructions, and Literal
Construction
● b.Literal Construction, Internal Aids to Construction, and External Aids to
Constructions
● c. Internal Aids to Construction, Literal Construction, and External Aids to
Constructions
● d.External Aids to Constructions, Internal Aids to Construction, and Literal
Construction (1 Mark) (MTP Sep. 23)
● 3. An internal aid that may be added to include
something within the section or to exclude something
from it, is—
● a. Proviso
● b. Explanation
● c. Schedule
● d. Illustrations(1 Mark) (MTP Sep. 23)
● 4. The Preamble is most important in any legislation,
it:
● a. Provides definitions in the Act.
● b. Expresses scope, object and purpose of the Act.
● c. Provides explanation of all the sections of the
entire Act.
● d. Provides side notes often found at the side of a
section.(1 Mark) (MTP Oct. 23)
CA Inter Law May 2024

FEMA Act, 1999

 FEMA 1999
Resident (Individual)

PRI PROI
 
Preceding year  more than 182 day

Not PRI
India reside
E  Employment 182 more stay
Exception Going outside India  B  Business / vocation
doesnt matters

U  Uncertain period PROI

Coming in India  otherwise than EBU

 Nutshell
It person goes out  PROI  Irrespec > 182
of India for EBU tive of days
stay

If person come to  PROI  --------” ----------

India otherwise
than EBU

If person comes to Last year stay doesn’t matter

India for EBU 
PRI
*Note:
1. Residential status for B.C (Body Corporate)
PRI

Registered or Office, branch, agency Office branch outside India

Incorporated in India  
In India But controlled by PRI
2. If left India for studies  PROI (RBI circular)
3. Airhostess coming and going outside India
 Check where she is employed

Outside India Any branch in India

 
PROI
PRI
(even if stayed in India > 182 days )
(Provided stay > 182 days )
• Mr. X had resided in India during the financial year 2019-2020 for less than 182
days. He had come to India on April 1, 2020 for carrying on business. He intends to
leave the business on April 30, 2021 and leave India on June 30, 2021. Determine his
residential status for the financial years 2020-2021 and 2021-2022 up to the date of
his departure?
Hint - As explained in the above illustration, Mr. X will be considered as a ‘person
resident in India’ from 1st April 2020. As regards, financial year 2021-2022, Mr. X
would continue to be an Indian resident from 1st April 2021.
• If he leaves India for the purpose of taking up employment or for business/vocation
outside India, or for any other purpose as would indicate his intention to stay
outside India for an uncertain period, he would cease to be person resident in India
from the date of his departure. It may be noted that even if Mr. X is a foreign citizen,
has not left India for any of these purposes, he would be considered, ‘person resident
in India’ during the financial year 2021-2022. Thus, it is the purpose of leaving India
which will decide his status from 1st July 2021.
• Mr. Z had resided in India during the financial year 2019-2020. He left India on 1st
August, 2020 for United States for pursuing higher studies for three years. What would
be his residential status during financial year 2020-2021 and during 20212022?
• Answer
• Mr. Z had resided in India during financial year 2019-2020 for more than 182 days. After that
he has gone to USA for higher studies. He has not gone out of or stayed outside India for or on
taking up employment, or for carrying a business or for any other purpose, in circumstances
as would indicate his intention to stay outside India for an uncertain period. Accordingly, he
would be ‘person resident in India’ during the financial year 2020-2021. RBI has however
clarified in its AP circular no. 45 dated 8th December 2003, that students will be considered
as non-residents. This is because usually students start working there to take care of their
stay and cost of studies.
• For the financial year 2021-2022, he would not have been in India in the preceding financial
year (2020-2021) for a period exceeding 182 days. Accordingly, he would not be ‘person
resident in India’ during the financial year 2021-2022.
• Miss Alia is an airhostess with the British Airways. She flies for 12
days in a month and thereafter takes a break for 18 days. During the
break, she is accommodated in ‘base’, which is normally the city
where the Airline is headquartered. However, for security
considerations, she was based at Mumbai. During the financial year,
she was accommodated at Mumbai for more than 182 days. What
would be her residential status under FEMA?
• Miss Alia stayed in India at Mumbai ‘base’ for more than 182 days in the
preceding financial year. She is however employed in UK. She has not
come to India for employment, business or circumstances which indicate
her intention to stay for uncertain period. Under section 2(v)(B), such
persons are not considered as Indian residents even if their stay exceeds
182 days in the preceding year. Thus, while Miss Alia may have stayed in
India for more than 182 days, she cannot be considered to be a Person
Resident in India.
• If however she has been employed in Mumbai branch of British Airways,
then she will be considered a Person Resident in India.
Dealing in foreign exchange, etc. [Section
3]
• No person shall-
a) deal in or transfer any foreign exchange or foreign security to any
person not being an authorised person (AP);
b) make any payment to or for the credit of any person resident outside
India
c) receive otherwise than through an authorised person, any payment by
order or on behalf of any person resident outside India in any manner.
d) enter into any financial transaction in India as consideration for or in
association with acquisition or creation or transfer of a right to
acquire, any asset outside India by any person
Current A/c transaction vs Capital A/c Tarnsaction
Capital a/c For PRI  If alters  Asset / Liability/
transaction contingent liability outside India
(CAT)

For PROI  If alters  asset/ liability  In India

Current a/c Other than capital a/c transaction

transaction Includes (SIRF)
(sec. 5)
CUAT S  Short term banking / credit facility (max 3 months)
I  Interest on loan/ income from investment
R  Parents / spouse / children  residing abroad  living
expenses
F  Foreign travel, education, medical care of parents, spouse,
children
*Current A/c Transaction[sec. 5]
It is permitted, unless specifically prohibited
 Schedule

I II III
Prohibited Requires prior Requires prior approval of
RBI
approval of C.G
 Schedule

I  Prohibited II  C.G Permission (CA me FM/SM/ DT / Costing)

REAL  Cash Dukarndaari RIP Approval
R  Racing / riding horse  Income C  Cultural tours HRD ministry
E  Equally investment A  Advt. in foreign print media by S.G/ P.S.U
 Finance Ministry
 
Commission Exceeding USD 10,000
 Except promotion of tourism, foreign
In joint venture/ Wholly owned subsidiary investment, international bidding
A  Any other prescribed F  Freight of vessel chartered by P.S.U  Ministry of surface transport
L  Lottery winning M  Multimodal transport  Director general of shipping
C  Call back services 
D  Dividend in dividend bal. Scheme To agent abroad
R Rupee state credit route T  Transponder hiring charges for  Information Broadcasting
  TV channel ministry
Export commission  Internet service provider
 D Detention charges  Surface transport
Except 10% of invoice value of tea/tobacco. S sponsorship / prize abroad
I  Interest income in non-resident special rupee a/c 
P  Purchase of wrong thing Other than International / National/ state
(lottery ticket, banned managing, Football pools, body exceeding USD 1 lakh
sweepstakes) M  member of P&I club  Finance
Co.  CIF basis  Ocean transport  Surface
• Exemption for payment by International Credit Card while on
a visit abroad – If a person is on a visit abroad, he can incur
expenditure stated in Schedule III if he incurs it through
International credit card.
 Question
Ms. Prabha, a classical dancer of Bharatnatyam, wants to go to the USA for a
performance. In this connection she requires foreign exchange drawal of US$
50,000. Explain Ms. Prabha, the provision of the Foreign Exchange Management
Act, 1999, in respect of permission required for such drawal of foreign
exchange.(4 Marks) (MTP Mar. 24)
Mr. Shivesh, an Indian National desires to obtain Foreign Exchange for the
following purposes:
(i) Remittance of US Dollar 50,000 out of winnings on a lottery ticket.
(ii) US Dollar 100,000 for sending a cultural troupe on a tour of U.S.A.
Advise him whether he can get Foreign Exchange and if so, under what
conditions?(RTP May24)
University of Oxford is one of the leading institutes of UK. In the month of
May 2024, they are planning a cultural event in UK. The University has
invited Ms. Kanika Tripathi and her group, an Indian artist to perform in
the event.Ms. Kanika Tripathi needs to withdrawal foreign exchange of
USD 75,000 for the purpose of visit to UK for performing at cultural event
of University of Oxford in UK. Advise whether she can withdraw Foreign
Exchange and if so, under what conditions?(4 Marks) (MTP April 24)
 Question
(c) Mr. Rohan Sharma, an international cricket player has started its
cricket academy, namely, Rohan Sharma Cricket Academy, a private
coaching club, which provides coaching for cricket. The Academy
has a cricket team which participates in cricket matches all over
India as well as outside India.
Rohan Sharma Cricket Academy in a collaboration with Melbourne
Cricket Academy is organizing a cricket event in Melbourne,
Australia in the month of May 2024 and June 2024. Rohan Sharma
Academy is required to remit USD 200,000 to Melbourne Cricket
academy as a part of its share for organizing the cricket event in
Melbourne. Advise whether it can get Foreign Exchange and if so,
under what conditions?
(4 Marks) (MTP April 24)
 Schedule III- Requiring RBI approval

Individuals Others
Donation  Exceeding
MOGAMBO-SE  Chair in edu. Inst
  Funds of edu. 1% of their foreign exch. Earning or
M  Medica expenses abroad, Institute 50 lakh USD
 Technical institutes
treatement, check-up
O  Other prescribed Commission   To agent abroad for
G  Gift / donation 5% of inward remittance
sale of flats Plots in
A  Abroad for employment or USD 25,000
India
M  Maintenance of close
relative abroad Consultancy   Infra. Project  USD  1 C.r
B Business Travel /  Other project
 USD  10 lakhs
conference / travel / meeting
O Re-imbusrsement of
S  Study abroad
Pre – incorporation
E  Emigration
 contract  5% of Invt. Bought in India or
Limit USD  2,50,000 USD  1 lakh

Exceeds  RBI permission
 Question
(d) Mr. Pravesh, an Indian National desires to obtain Foreign
Exchange for the following purposes:
(i) US$ 140,000 for studies abroad on the basis of estimates
given by the foreign university.
(ii) U.S. $ 10,000 for remittance towards hiring charges of
transponders.
Advise him whether he can get Foreign Exchange, as per the
provisions of the Foreign Exchange Management Act, 1999.
(4 Marks) (MTP Mar. 24)
 No Permission if done by RFC (Resident /foreign currency
a/c ) or EEFC (Exchange earners foreign currency A/c)
Except (i) P & club (ii) Flats (iii) pre-incorp. expenses
 No RBI permission for  EMS (Emigration  If required by
medical study country of emigration,
abroad ) medical institute,
university.

Resident but not Citizen of foreign state

permanently resident except Pakistan Can remit upto net
in India (3 years) salary after tax & P.F
Citizen of India deputed Deah.
to foreign Co.

If individual rents  Amt. Reduced from 2,50,000 USD

any amt. from
Liberalised
*Capital A/c Transaction [Sec. 6]
Prohibited unless specifically permitted
 Division

Cannot Permissible for Prohibited

restrict  PRI
PROI

Cannot restrict Amortisation of loan / depn in asset

Asset acquired outside India  when
PROI
Asset acquired in India  when PRI
 Permissible  SIA  G.F  LCD  DI

Particulars PRI PROI

S  Securities Purchase in foreign  From B.C in India
 Capital of firm /ADP in
India
I  Immovable property Transfer outside India Acquire transfer in India
A  A/c foreign currency In/ outside India In India
G  Guarantee In favor of PROI For PRI
F  Foreign Currency From India / abroad -
Loan
L  Loan/ Deposits From PROI From PRI
C Capital Assets Outside India of asset in India Same
D  Derivative contract Outside India In India
I  Insurance policy In foreign currency X
 Prohibited
1) PROI cannot invest in India in any form

Chit fund
Nidhi Co.
Agriculture or plantation activity
Except Township development
Real estate or construction of farm house   resident / commercial –
construction road,
Trading in Transferable development bridge, real estate trust
right

2) PRI  from person Co. /  Citizen or resident of Korea

 > 2,50,000 USD

• No person resident in India shall undertake any capital account
transaction with any person who is, a citizen of or a resident of
Democratic People’s Republic of Korea, or an entity
incorporated or otherwise, in Democratic People’s Republic
of Korea, until further orders, unless there is specific approval
from the Central Government to carry on any transaction.
* L.R.S Scheme USD 2,50,000 (capital +current)
(Individual + Minor) No Clubbing by family members for CAT

Unless co-owner / co-partner
• M/s. Kedhar Sports Academy, a private coaching club, provides coaching for
cricket, football and other similar sports. It coaches sports aspirants pan India. It
also conducts various sports events and campaigns, across the country. In 2022, to
mark the 25th year of its operation, a cricket tournament (akin to the format of T-
20) is being organized by M/s. Kedhar Sports Academy in Lancashire, England, in
the first half of April. The prize money for the ‘winning team’ is fixed at USD 40,000
whereas in case of ‘runner-up’, it is pegged at USD 11,000. You are required to
choose the correct option from the four given below which signifies the steps to be
taken by M/s. Kedhar Sports Academy for remittance of the prize money of USD
51,000 (i.e. USD 40,000+USD 11,000) to England keeping in view the relevant
provisions of Foreign Exchange Management Act, 1999:
• For remittance of the prize money of USD 51,000, M/s Kedhar Sports Academy is required to
obtain prior permission from the Ministry of Human Resource Development (Department of
Youth Affairs and Sports).
• For remittance of the prize money of USD 51,000, M/s Kedhar Sports Academy is required to
obtain prior permission from the Reserve Bank of India.
• For remittance of the prize money of USD 51,000, M/s Kedhar Sports Academy is not
required to obtain any prior permission from any authority, whatsoever, and it can
proceed to make the remittance.
• For remittance of the prize money of USD 51,000, M/s Kedhar Sports Academy is required to
obtain prior permission from the Ministry of Finance (Department of Economic Affairs).
• Akash Ceramics Limited, an Indian company, holds a commercial plot in Chennai which it
intends to sell. M/s. Super Seller, a real estate broker with its Head Office in the USA, has
been appointed by Akash Ceramics Limited to find some suitable buyers for the said
commercial plot in Chennai which is situated at a prime location. M/s. Super Seller identifies
Glory Estate Inc., based out of USA, as the potential buyer. It is to be noted that Glory Estate
Inc. is controlled from India and hence, is a ‘Person Resident in India’ under the applicable
provisions of Foreign Exchange Management Act, 1999. A deal is finalised and Glory Estate
Inc. agrees to purchase the commercial plot for USD 600,000 (assuming 1 USD = ` 70).
According to the agreement, Akash Ceramics Limited is required to pay commission @ 7% of
the sale proceeds to M/s. Super Seller for arranging the sale of commercial plot to Glory
Estate Inc. and commission is to remitted in USD to the Head Office of M/s. Super Seller
located in USA. Considering the relevant provisions of Foreign Exchange Management Act,
1999, which statement out of the four given below is correct (ignoring TDS implications
arising under the Income-tax Act, 1961):
• There is no requirement of obtaining prior permission of Reserve Bank of India (RBI) for remittance of
commission upto USD 25,000 by Akash Ceramics Limited to M/s. Super Seller but for the balance
commission of USD 17,000, prior permission of RBI is required to be obtained.
• There is no requirement of obtaining prior permission of Reserve Bank of India (RBI) for remittance of
commission upto USD 30,000 by Akash Ceramics Limited to M/s. Super Seller but for the balance
commission of USD 12,000, prior permission of RBI is required to be obtained.
• There is no requirement of obtaining prior permission of Reserve Bank of India (RBI) for remittance of
entire commission of USD 42,000 by Akash Ceramics Limited to M/s. Super Seller.
• It is mandatory to obtain prior permission of Reserve Bank of India (RBI) for remittance of
entire commission of USD 42,000 by Akash Ceramics Limited to M/s. Super Seller.
CA Inter Law May 2024

LLP Act, 2008

 Enactment
• The Ministry of Law and Justice on 9th January 2009 notified the Act
• 81 sections and 4 schedules.

Schedule Deals with

I mutual rights and duties of partners and limited
liability partnership and its partners
II conversion of a firm into LLP.
III conversion of a private company into LLP.
IV conversion of unlisted public company into LLP.
 Need
1. alternative to the traditional partnership with
unlimited personal liability
2. benefits of limited liability but allows its
members the flexibility of organizing their
internal structure as a partnership based on a
mutually arrived agreement.
 Question
5. (a) “LLP is an alternative corporate business form
that gives the benefits of limited liability of a company
and the flexibility of a partnership”. Explain.
(5 Marks) (MTP Mar. 24)
 Characteristics and Comparison with Other Forms Of Business ( PLASTIC + Basics )

Particulars Company Partnership LLP

Firm
1 Perpetual Yes No Yes
Succession
2 Liability Limited Unlimited Limited to agreed Contribition
3 Artifical person but yes no yes
separate legal Entity
4 Seperation of Ownership yes No Partners in the LLP are
From entitled to manage the
management business of LLP. But only the
designated partners are
responsible for legal
Compliances
5 Separate Property in its Yes No Yes
own name
6 Transferability Of Shares Freely transferable in With consent With consent of partners
Public co of partners
 Characteristics and Comparison with Other Forms Of Business ( PLASTIC + Basics )

Particulars Company Partnership LLP

Firm
7 Incorporated Yes No Yes
Association (Registration
Compulsory )
8 Common Seal not mandatory Not required not mandatory

9 Capacity to sue in Yes Through Yes

its own name partners
10 Min Members /Partners Pvt – 2 2 at least two partners and shall
Public – 7 also have at least 2 individuals
OPC- 1 as designated partners, of
whom at least one shall be
resident in India

11 Max Members / Pvt- 200 50 No limit

Partners Public – No limit
 Characteristics and Comparison with Other Forms Of Business ( PLASTIC + Basics )

Company Partnership LLP

Firm
Particulars
12 Agreement MOA/AOA Partnership LLP Agreement
deed
13 Business For profit or non Only for profit Only for profit
profit
14 Mutual Agency Members not agent All partners All partners will be the agents
of company are of the LLP alone. No one
agent of firm partner can bind the other
and partner by his acts.
of other
partners
 ADVANTAGES OF LLP FORM (LOL-FEE)

L 1. All partners enjoy limited liability.

O 2. organised and operates on the basis of an
agreement.
L 3. Less legal and procedural requirements.
F 4. Flexible Capital Structure
E 5. Easy to form
E 6. Easy to dissolve.
 Some Imp definitions
1. Body Corporate  As defined in 2(20) of Co. Act.

Includes excludes
 
• LLP under this act. • Corporation sale
• LLP incorporated • Co-operative
outside India society
• CIOI • As notified by C.G.

2. Business  Every trade, occupation, profession

 Only profit motive
 Some Imp definitions
3. F.Y  1st April to 31st Mar.
 If LLP incorporated after 30 Sep.

then FY till next 31st Mar.

4. Foreign LLP  Incorp. Outside India + POB  in India

5 Small LLP  Contribution Turnover

(preceding F.Y.)
[Sec. 2(i) (ta)]  & 
Does not exceed Does not exceed
25 lakhs 40 lakhs
 Other Imp Details
1) File Statement of  Within 6  With  Signed
A/c & Solvency months ROC by of
of F.Y. LLP
(Sec. 34)

2. Annual Return  within 60 days closure of F.Y. (Sec. 35)

 Steps to incorporate LLP
Reservation of File e-form no RUNLLP
Name of LLP ROC reserves name for 3 months

File application In e-form FiLLP
form for Includes Name / business / Address/ details of partner
incorporation
 Attach statement By Adv. /CA/ That all requirements
CS/ CMA &
 of act
subscriber
Execute LLP During incorp.
Agreement
Within 30 days of incorporation file with ROC

Registrar  Within 14  Register & give (Certificate conducive
days or certificate evidence about
 incorporation )
Effect of
Registration Becomes B.C
 Partner Designated Partner
1. Who can be • Individual (Resident / NR / • Individuals
OCI/ Foreign national )
• LLP
• Co.
• Foreign LLP
2. Requirement • Atleast 2 partners (Sec. 6) • Atleast 2 D.P. individual
• If no. fall below 
 1 should be resident in India (atleast 120
• After 6 months days in F.Y. )
 • If all partner B.C
• Personally liable (same like co. 
) • Nominee of such B.C. (Sec. 7)
3. Disqualification Sec. 5 Rule
i. Unsound mind i. Insolvent  last 5 years
ii. Insolvent ii. Last 5 yrs.  suspended payment to
iii. Applied for insolvency & creditor
application pending iii. Convided for moral turpitude
+
Sentence of atleast 6 months
iv. Convicted for Sec. 30 offence (fraud)
 Question
(b) Mr. Prateek (an individual) has started a Limited Liability
Partnership firm along with Brown Limited and Picture
Limited. As per the provisions of the Limited Liability
Partnership Act, 2008, advise Limited Liability Partnership
firm, about who can be the designated partners of the firm.
(5 Marks) (MTP April 24)
 Question
(b) Mohan and Rakul are college friends and intend to do
trading in musical instruments. They have met Mr. John
and Ms. Kate who are non-resident Indian and they all
have decided to form a Limited Liability Partnership (LLP)
under the name and style of Mohan John LLP with an
initial capital contribution of ` 1,00,000 each. The LLP was
incorporated on October 15, 2020. The LLP intends to
appoint Mr. John and Ms. Kate as designated partners and
consults same with its Company Secretary. You as the
Company Secretary advise the LLP on the appointment of
Mr. John and Ms. Kate as the only designated partners of
the LLP.
(5 Marks) (MTP Mar. 24)
 Other IMP Pts.
i. Prior consent required for DP
ii. D.P. should acquire DPin no or has DIR no.
iii. Liability of D.P (sec. 8)
Compliance of provision of Act.
Liable to penalties
iv. Changes in DP  appoint New D.P within 30
days
v. If no. D.P or less than 2  all partners will be
deemed to be D.P.
 Name of LLP (Sec. 15)
End with LLP
If changes name  within 15 days  give notice
of change to ROC
If name  C.G may  Change within 3 months
Ask to
too identical Change  Ask to change only till 3 years from incorp.
 Cessation of Partnership (Sec. 24)

Mode Effect
 
• Continues to be partner  if notice
i. As per LLPA not give to ROC no public notice
ii. By notice in writing to all given
the other partners 
(atleast 30 days notice) • Continues to be liable for
obligation while be was partner
iii. By Law
• Death/ dissolution of LLP
His contribution in firm
• Right
• Declared unsound +
• Applied / declared insolvent Acc. Profits  his share
 Liabilities of LLP & Partner
Normally LLP liable for all it’s act (separate legal
entity)
LLP bound by acts of No authority  partner
partners unless Parson doesn’t believe him to be partner
 any remaining liability to be borne by property of
LLP
Partners not personally liable unless

As per Sec. 30 (fraud) liability becomes unlimited

liable for punishment
 Question
18. Mohit is a creditor of ABC LLP. He has a claim of ` 10,00,000
against the LLP. However, the assets of the LLP are valued at only `
7,00,000. Now, Mohit seeks to hold the partners of the LLP
personally accountable for the shortfall of ` 3,00,000. Under the
provisions of the Limited Liability Act, 2008, can Mohit demand for
the deficit from the partners of ABC LLP?
(RTP May24)
 Other Imp Points
1) R.D or officer not Can compound  Which punishable by fine only
below rank of R.D
 offence

2) Trf of partners right  Same like partnership

 Partner  right  Trf.  Transferee  will not be partner
 Transferor  partner
3) Conversion Firm
Pvt. Co.  As per provision of Act.
Unlisted Co.
 Within 15 days inform ROC
 Other Imp Points
4) Compromise / Arrangement

 Tribunal On In meeting Unless all

may
 application of  LLP creditors   
material fact
partners By 3/4 th Maj .
disclosed

 Order by Filed with

Tribunal
 ROC  Within 30
days
5) Winding up – Circumstances
By • Application by LLP
Tribunal • Reduction of partners below 2  more than 6 month
• Act against soverelgnty or integrative of India.
• Default in filing Statemetn of A/c & solvey 5 consecutive
Or years
Annual return
• Any just / equitable ground
 Question
5. (a) Enumerate the circumstances in which a Limited
Liability Partnership may be wound up by the Tribunal. Give
your answer in respect of the provisions of the Limited
Liability Partnership Act, 2008.
(5 Marks) (MTP April 24)
Mr. Ankit Sharma wants to form a LLP taking him, his wife Mrs. Archika
Sharma and One HUF as partners for that. Whether this LLP can be
incorporated under LLP Act, 2008? Explain. (module)
Hint - HUF is not covered in the definition of body corporate and cannot
be partner in LLP.

There is an LLP by the name Ram Infra Development LLP which has 4
partners namely Mr. Rahul, Mr. Raheem, Mr. Kartar and Mr. Albert. Mr.
Rahul and Mr. Albert are non – resident while other two are
resident. LLP wants to take Mr. Rahul and Mr. Raheem as Designated
Partner. Explain in the light of Limited Liability Partnership Act, 2008
whether LLP can do so? (module)
Hint - Hence, in the given problem, besides Mr. Ram and Mr. Raheem, Mr.
Albert should also be designated partners.
Question

1. Which of the following cannot be

converted into LLP?
a. Partnership firm
b. Private company
c. Listed company
d. Unlisted company
Question

2. The approved name of LLP shall be

valid for a period of ___ from the date of
approval:
a. 1 Month
b. 2 Months
c. 3 months
d. 6 months
Question

3. Name of the Limited Liability

Partnership shall be ended by:
a. Limited
b. Limited Liability partnership or LLP
c. Private Limited
d. OPC
Question

4. Which one of the following statements

about limited liability partnerships (LLPs)
is incorrect?
a. An LLP has a legal personality separate
from that of its members.
b. The liability of each partner in an LLP is
limited.
c. Members of an LLP are taxed as partners.
d. A listed company can convert to an LLP.
Question
5. For the purpose of LLP, Resident in India means:
a. Person who has stayed in India for a period of not
less than 182 days during the current year.
b. Person who has stayed in India for a period of not
less than 180 days during the immediately
preceding one year.
c. Person who has stayed in India for a period of not
less than 181 days during the immediately
preceding one year
d. Person who has stayed in India for a period of
not less than 120 days during the financial year.
Question

6. LLP shall have atleast Partners.

a. 2
b. 4
c. 3
d. 5
Question

7. The maximum no. of Persons in a LLP

is —
a. 50
b. 100
c. 20
d. No limit
Question

8. Duration of LLP —
a. Is Limited
b. Depends on the Partnership Agreement
c. Extends upto proper dissolution
(perpetual succession)
d. None of the above
Question

9. The is responsible for doing all acts,

matters and things as are required to be
done by LLP as per the
Act.
a. Designated Partner
b. Active Partner
c. Designated Director
d. All the Partners
Question

10. Which of the following enjoys

separate legal entity status?
a. Partnership Firm
b. LLP
c. Company
d. Both B and C
 Question
What does the principle of "reading the statute as a
whole" imply in the interpretation of statutes? Explain
with the help of an example.
(RTP May24) (4 Marks) (MTP April 24)
• It is the elementary principle that construction of a
statute is to be made of all its parts taken together and
not of one part only.
• The deed must be read as a whole in order to ascertain
the true meaning of its several clauses, and the words of
each clause should be so interpreted as to bring them
into harmony with other provisions