Test Series: March, 2019

MOCK TEST PAPER – 1

FINAL (OLD) COURSE: GROUP – I
PAPER 4: CORPORATE AND ALLIED LAWS
All MCQ’S are compulsory
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.

(Time Allowed – 3 Hours) Maximum Marks – 100

Division A: Multiple Choice Questions (30 marks)

(Question nos. 1-10 are of 2 marks each and from 11- 20 are of 1 mark each)
1. ABHI Limited is a wholly owned subsidiary company of ETERNAL Limited. ETERNAL Ltd., makes an
application for merger of Holding and Subsidiary Companies under the section 232 of the Companies
Act, 2013. The Company Secretary of the ETERNAL Ltd., states that company cannot apply for merger
under section 232 of the said Act. He further stated that the company shall have to apply for merger as
per section 233 i.e. Fast Track Merger. State the correct statement in terms of the validity of the
difference in the opinion of the Company secretary-
(a) Opinion of the Company Secretary of the ETERNAL Ltd. is valid holding that merger shall be as
per section 233.
(b) Opinion of the Company Secretary of the ETERNAL Ltd. is invalid as merger shall be possible only
as per section 232.
(c) Opinion of the Company Secretary of the ETERNAL Ltd. is invalid as the fast track merger under
the section 233 are of the optional nature.
(d) Opinion of the Company Secretary of the ETERNAL Ltd. is invalid as the provisions given for fast
track merger in the section 233 can be made between only small companies.
2. ABC and Co., the tax consultants of X Limited for which an interim resolution professional – Mr. A, has
been appointed under the Corporate Insolvency resolution process has refused to furnish information to
Mr. A on the grounds of client confidentiality. Are they right?
(a) Yes, they are right
(b) No, the Insolvency Code provides powers to the IRP to access all information from various parties
(c) Partly right, they can do so only after consent of the directors
(d) Mr. A is not right in even asking for this information
3. Aakaar Solar Energy Private Limited was allowed the status of a ‘dormant company’ after a certificate
to this effect was issued on 1 st July 2018 by the Registrar of Companies, Delhi and Haryana. Mention
the latest date after which the Registrar is empowered to initiate the process of striking off the name of
the company if Aakaar Solar Energy continues to remain as a dormant company.
(a) After 30th June, 2023.
(b) After 30th June, 2019.
(c) After 30th June, 2020.
(d) After 30th June, 2021.
4. Jupiter Shopping Mall Limited was incorporated on 3 rd December, 2016. As on 31 st March 2018, it had
free reserves of Rs. 50.00 lacs and its Securities Premium Account showed a balance of Rs. 7.50 lacs.
1

© The Institute of Chartered Accountants of India

 One of its directors Raha has a leaning towards a particular political party in which his other family
members are actively involved. Raha convinced the other two directors of the company i.e. Promila and
Rana to contribute a sum of Rs. 10.00 lacs to this political party. Accordingly, the Board of Directors
held a meeting on 16 th December, 2018 and passed a resolution to contribute the decided amount.
Advise the company as to how much amount they can contribute to a political party in the FY 2018 -19.
(a) The company cannot contribute any amount to a political party in the FY 2018-19.
(b) The company can contribute maximum Rs. 2.50 lacs in the FY 2018-19.
(c) The company can contribute maximum Rs. 3.75 lacs in the FY 2018-19.
(d) The company can contribute maximum Rs. 5.00 lacs in the FY 2018-19.
5. Astistav Private Limited is a company with ten shareholders. A member holding less than one-tenth of
the share capital of the company apply to the Tribunal for relief against oppression and
mismanagement? State whether a member have a right to apply to the tribunal in above situation:
(a) A single Member cannot apply to the Tribunal for relief against oppression and mismanagement
(b) A member cannot apply as he is holding less than one-tenth of the share capital of the company
(c) A member can apply being one-tenth of the total number of members.
(d) A member cannot apply as the requirement of atleast hundred members is not complied with.
6. Nanny Marcons Private Limited was incorporated on 9 th June, 2017. For the financial year 2017-2018,
it did not file its financial statements and annual returns. For the time being the company desires to be
treated as ‘inactive company’ since it does not intend to carry on any business permitted by its
Memorandum. As to when ROC can issue certificate of status of dormant company to ‘Nanny Marcons’
on the basis of non-submission of financial statements if the company makes an application to the
Registrar in this respect.
(a) After non-submission of financial statements for the two financial years i.e. 2018-19 and 2019-20.
(b) After non-submission of financial statements for the next financial year i.e. 2018-19.
(c) After non-submission of financial statements for the three financial years i.e. 2018-19, 2019-20 and
2020-21.
(d) After non-submission of financial statements for the four financial years i.e. 2018-19, 2019-20,
2020-21 and 2021-22.
7. Mr. KG filed a complaint against Mr. P alleging that Mr. P has communicated unpublished price sensitive
information to Mr. X. Mr. P took a plea that Mr. X requested him for such information and it was done
bonafidely. State the correct statement as to the liability of Mr. P in the given situation-
(a) Mr. P will not be liable as he communicated about unpublished price sensitive information on the
request of Mr. X
(b) Mr. P will not be liable as he communicated about unpublished price sensitive information to
Mr. X, in the ordinary cause of business
(c) Mr. P will not be liable as he communicated about unpublished price sensitive information to
Mr. X, as it was done without any malafide intention.
(d) Mr. P will be liable as he communicated about unpublished price sensitive information to Mr. X,
whether with or without his request for such information.
8. Mr. X filed an application for initiation of insolvency process before the NCLT on 1st Feb, 2019. On
ascertaining the commission of default by the corporate debtor on 10th Feb,2019, NCLT admitted the
application and declared moratorium. From which date does the Corporate Insolvency Resolution
Process commence?
(a) CIRP process shall commence from the date of initiation of the insolvency process

© The Institute of Chartered Accountants of India

 (b) CIRP process shall commence from the date of occurrence of default
(c) CIRP process shall commence from the date of declaration of moratorium
(d) CIRP process shall commence from the date of admission of the application
9. Minimum threshold prescribed for applicability of SARFAESI Act on NBFCs is –
(a) 1 crore
(b) 10 crore
(c) 100 crore
(d) 500 crore
10. Drug trafficking is a punishable offence is India. Suppose, Mr. X and Mr. Y are involved in drug trafficking
including imported drugs trafficking. Under which Act, Mr. X and Mr. Y can be prosecuted?
(a) Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985
(b) Prevention of Money Laundering Act, 2002
(c) Foreign Exchange Management Act, 1999
(d) Offences under the Unlawful Activities (Prevention) Act, 1967
11. Amazon Limited was incorporated on 23 rd March, 2017. You are one of the promoters and Directors of
the Company. You are explaining the other promoters that we need to appoint First Auditor within 30
days from the date of Incorporation of the Company. How will you guide them and appoint first auditor
for the Company?
(a) You will ask other shareholders to have a meeting and appoint first auditor until the conclusion of
first annual general meeting;
(b) You will ask other shareholders to have a meeting and appoint first auditor for the period of 5 years;
(c) You will ask Board of Directors to have a meeting and appoint first auditor for the period of 5 years;
(d) You will ask Board of Directors to have a meeting and appoint first auditor until the conclusion of
first annual general meeting.
12. Srishakti Homecare Limited, incorporated on 30 th October, 2018, has ten subscribers to the
Memorandum out of which two are private limited companies and remaining individuals. However, there
is no mention in any of the documents as to who shall be the first directors. Advise the company
regarding the appointment of first directors who shall manage the affairs of the company.
(a) All the subscribers to the Memorandum shall be deemed to be the first directors.
(b) The two private limited companies being subscribers to the Memorandum shall decide as to who
shall be the first directors.
(c) All the individual subscribers to the Memorandum shall be deemed to be the first directors.
(d) As the company requires minimum three directors, the eight individual subscribers shall choose
two from among themselves and one shall be chosen by the two private limited companies from
among themselves.
13. A group of creditors of X Limited makes a complaint to the Registrar of Companies. They asserted that
the management of the company is indulged in destruction and falsification of the accountin g records of
the company. The complainants request the Registrar to take an immediate steps to stop the
management to tamper with the records. The complaint was received in the morning on 1 st January
2019 and the ROC entered the premises within half an hour for the search. The course of action that
can be taken by Registrar are:
(a) Registrar may enter and search the place where such books or papers are kept and seize them

© The Institute of Chartered Accountants of India

 (b) Registrar may enter and search the place where such books or papers are kept and can seize only
after obtaining an order from the special court
(c) Registrar may enter and search the place where such books or papers are kept only on the order
of the special court
(d) Registrar may enter and search the place where such books or papers are kept and give an
opportunity to the company to represent why such documents may not be seized.
14. With whom will the Central Government file an application if it is of the opinion that such a scheme is
not in public interest or in the interest of the creditors?
(a) Cannot move an application
(b) it may file an application before the Tribunal
(c) it may file an application before the Parliament
(d) It may file through Special Petition before Supreme Court.
15. When can a winding up order not be called a notice of discharge?
(a) when the business of the company is continued
(b) when the business of the company is closed since 2 years.
(c) On the discretion of the management
(d) till a provisional Liquidator is appointed
16. In case a Valuer becomes interested in any property, stock etc of the company, he may be appointed
as Registered Valuer of the company after a cooling off period of:
(a) 3 years
(b) 5 years
(c) 1 year
(d) He will never be appointed as Registered Valuer of the company
17. Any person who is aggrieved by the order of Appellate Tribunal (NCLAT) may approach to the Supreme
Court on any question of law within:-
(a) 30 Days
(b) 45 Days
(c) 60 Days
(d) 90 days
18. State the incorrect statement w.r.t to the withdrawl of the corporate Insolvency Resolution process :
(a) Withdrawl of CIRP is allowed after post admission
(b) Approval of 66 % voting shares of CoC is required
(c) Adjudicating authority is the concerned authority for the Withdrawl
(d) Withdrawl is of admitted application made under section 7, 9, and10
19. Person who has provided goods or services and the payment for same is due from the corporate
debtor, is a:
(a) Financial Creditor
(b) Operational creditor
(c) Corporate applicant

© The Institute of Chartered Accountants of India

 (d) Both (a) & (b)
20. The nature of the liabilities of the entity which comes from a transaction on operation, are:
(a) Debt
(b) Financial debt
(c) Operational debt
(d) Both (b) & (c)
Division B: Descriptive Questions (70 Marks)
1. (a) State the legal positions as to the valid appointment of the directors in the given situations in the
light of the Companies Act, 2013-
i. Shiksham Ltd. was formed for prompting the girls education with 15 directors in its Board.
Due to expansion of its objective at large scale, the company increased the strength of its
directors to 20 without passing SR.
ii. Mr. Kabir was appointed as an alternate director on behalf of Mr. Robert, as Mr. Robert
goes abroad and comes back to India temporarily and leaves country again.
iii. PQR Ltd., who failed to file financial statement in previous financial year 2017- 2018,
appointed Mr. Khurana as a director in July 2018. (6 Marks)
(b) The last three years’ Balance Sheet of PTL Ltd., contains the following information and figures:
As at As at As at
31.03.2016 31.03.2017 31.03.2018
Rs. Rs. Rs.
Paid up capital 50,00,000 50,00,000 75,00,000
General Reserve 40,00,000 42,50,000 50,00,000
Credit Balance in 5,00,000 7,50,000 10,00,000
Profit & Loss Account
Debenture Redemption Reserve 15,00,000 20,00,000 25,00,000
Securities Premium 2,00,000 2,00,000 2,00,000
Secured Loans 10,00,000 15,00,000 30,00,000
On going through other records of the Company, the following is also determined:
Net Profit for the year (as calculated in accordance 12,50,000 19,00,000 34,50,000
with the provisions of the Companies Act, 2013)
In the ensuing Board Meeting scheduled to be held on 5 th November, 2018, among other items of
agenda, an items to decide on borrowing from Financial institutions on long-term basis. is also
appearing. Based on above information, you are required to find out as per the provisions of the
Companies Act, 2013, the amount upto which the Board can borrow from Financial institution during
the financial year 2018-19 without seeking the approval in general meeting. (4 Marks)
(c) Explain how the auditor will be appointed in the following cases:
(i) The Auditor of the company (other than government company) has resigned on
31st December, 2017, while the Financial year of the company ends on 31 st March, 2018.
(ii) A company, whose shareholders include the following:
(a) Bank of Baroda (A Nationalized Bank) holding 12% of the subscribed capital in the
company.
(b) National Insurance Company Limited (carrying on General Insurance Business) holding
10% of the subscribed capital in the company.
5

© The Institute of Chartered Accountants of India

 (c) Maharashtra State Financial Corporation (A Public Financial Institution) holding 8% of
the subscribed capital in the company. (4 Marks)
2. (a) Mr. Shram, is an employee of the company ABC Limited and investigation is going on him under
the provisions of Companies Act, 2013. The company wants to terminate the Mr. Shram on the
ground of investigation proceeding against him. ABC Ltd. filed the application to tribunal for
approval of termination. However, not received any reply from the tribunal within 30 days of filling
an application. The company consider it as a deemed approval and terminated Mr. Shram. Examine
the given situations in the light of the stated facts as per the Companies Act, 2013-
• Is the contention of company being valid in law?
• What is remedy available to Mr. Shram?
• What is remedy available to Mr. Shram, if reply of Tribunal has been received within 30 days
of application? (8 Marks)
(b) Mr. Z (Member of SEBI) due to his severe accident was in financial debt availed for his treatment.
He was deranged and was in mental stress. This effected on the performance of his duties in a
responsible manner. A group of complainants have alleged that M r. Z is not normal in his behaviour
and rendering of his services in office may be detrimental to the public interest and so should be
removed from his office. Advise in the given situation, the tenability of maintenance of complaint.
(6 Marks)
3. (a) (i) AMC Ltd. was ordered to be wound up compulsory by an order dated 10 th March, 2019 by the
Tribunal. The official liquidator who has taken control for the assets and other records of the
company has noticed the following:
The Managing Director of the company has sold certain properties belonging to the company
to a private company in which his son was interested causing loss to the company to the
extent of INR 50 lakhs. The sale took place on 15 th October, 2018.
Examine what action the official liquidator can take in this matter, having regard to the
provisions of the Companies Act, 2013. (4 Marks)
(ii) In the annual general meeting of XYZ Ltd., while discussing on the matter of retirement and
reappointment of director Mr. X, allegations of fraud and financial irregularities were marked
against him by some members. This resulted into chaos in the meeting. The situation was
normal only after the Chairman declared about initiating an inquiry against the director Mr. X,
however, could not be re-appointed in the meeting. The matter was published in the
newspapers next day. On the basis of such news, whether the court can take cognizance of
the matter and take action against the director on its own? Justify your answer with reference
to the provisions of the Companies Act, 2013. (4 Marks)
(b) Mr. Rich, a resident of India, proposed to purchase a flat for Rs. 1 crore jointly with his daughter’s
children, who is presently residing in USA. Discuss the nature of the proposed transaction in the
light of the Foreign Exchange Management Act, 1999. (6 Marks)
4. (a) Mr. IP was proposed to be appointed as a resolution professional for the insolvency resolution
process initiated against BMR Ltd. Mr. R, a relative of director of BMR Ltd. is a partner in the
insolvency professional entity in which Mr. IP is partner. In the light of the given facts, examine the
nature of the proposal of the appointment of Mr. IP for the conduct of the CIRP as per the Insolvenc y
and Bankruptcy Code, 2016. (6 Marks)
(b) Mr. Ram, an operational creditor filed an application for corporate insolvency resolution process.
He does not proposed for appointment of an interim resolution professional in the application. State
the provisions given by the Code in the given situation. State the period of IRP holding the said
office. (2 Marks)

© The Institute of Chartered Accountants of India

 (c) Referring to the provisions of the Banking Regulation Act, 1949, examine the validity of the
following:
(i) Accounts and Balance Sheet along with auditor’s report has been filed with Reserve Bank of
India after nine months from the end of the period to which these relate.
(ii) Trinity Bank Limited acquired a building from ABC College in discharging a term loan advance.
The building had been mortgaged as security with the bank and the college had failed to repay
the loan. The bank proposes to retain the building with it and let out on commercial basis to
shops. (6 Marks)
5. (a) (I) (i) As per provisions of the Companies Act, 2013, what is the status of XYZ Ltd., a Company
incorporated in London, U.K., which has a share transfer office at Mumbai?
(ii) ABC Ltd., a foreign company having its Indian principal place of business at Kolkata,
West Bengal is required to deliver various documents to Registrar of Companies under
the provisions of the Companies Act, 2013. You are required to state, where the said
company should deliver such documents. (4 Marks)
(II) Mr. Truth, a director of Horizan Private Limited, is duly authorized by the Board of directors
to prepare and file returns, report or other documents to the Registrar of Companies on behalf
of the company. Though he filed all the required documents to Registrar in time, however,
subsequently it was found that the filed documents were false and inaccurate in respect to
material particulars (knowing it to be false) submitted to the Registrar. State the penal
provision under the Companies Act, 2013? (4 Marks)
(b) Mr. Ramesh was partner in the Firm, Rajkumar & sons. The said firm was established by Mr. Raj
kumar, who is director of the Subh Labh Pvt. Limited which is a one person company. Subh Labh
PVT. LTD. have foreign income from the clientele being of outside India. Companies generation of
foreign income was invested by the Mr. Rajkumar in its firm without being disclosed in its financial
records. Mr. Ramesh was not aware of the such undisclosed flow of fund in the Firm . Give the
following answer considering the given facts-
(i) Liability of Mr. Ramesh being a partner of a firm, involved in use of income of Subh Labh Pvt.
Ltd. obtained from their foreign clientele.
(ii) Liability of Mr. Rajkumar being a director of the Subh Labh Pvt. Ltd. (6 Marks)
6. (a) Mr. Ram, a Managing Director of MJV Ltd., was appointed on 1st April, 2015. One of the terms of
appointment was that in the absence of adequacy of profits or if the company had no profits in a
particular year, he will be paid remuneration in accordance with Schedule V. For the financial year
ended 31st March, 2017, the company suffered heavy losses. The company was not in a position
to pay any remuneration but he was paid Rs. 50 lacs for the year, as paid to other directors. The
effective capital of the company is Rs.100 crores.
In addition, the company also appointed Mr. Bharat, a director, for professional services rendered
as software engineer. It was agreed to pay suitable additional remuneration to Mr. Bharat whenever
his services are utilized.
Referring to the provisions of Companies Act, 2013, as contained in Schedule V, examine the
validity of the payment of remuneration to Mr. Ram, and Mr. Bharat an additional remuneration for
rendering his services. (6 Marks)
(b) Referring to the provisions of the Companies Act, 2013, examine the validity of the following:
The Board of Directors of ABC Limited proposes to declare dividend at the rate of 20% to the equity
shareholders, despite the fact that the company has defaulted in repayment of public deposits
accepted before the commencement of this Act. (2 Marks)
(c) (i) ABC Ltd. made an initial public offer of certain number of equity shares. Examine whether

© The Institute of Chartered Accountants of India

 these shares can be considered as ‘Goods’ under the Competition Act, 2002 before allotment.
(3 Marks)
(ii) Explain the difference between Interpretation and Construction. (3 Marks)

© The Institute of Chartered Accountants of India