MODEL TEST PAPER 1

FOUNDATION COURSE
PAPER 2: BUSINESS LAWS
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed
by way of note forming part of the answer.
Working Notes should form part of the answer.
(Time allowed: 3 Hours) (100 Marks)

1. (a) Kashish was running a business of artificial jewellery since long. He sold
his business to Naman and promises, not to carry on the business of
artificial jewellery and real diamond jewellery in that area for a period of
next one year. After two months, Kashish opened a show room for real
diamond jewellery. Naman filed a suit against Kashish for closing the
business of real diamond jewellery business as it was against the
agreement. Whether Kashish is liable to close his business of real diamond
jewellery following the provisions of Indian Contract Act, 1872? (7 Marks)
(b) The paid-up capital of Darshan Photographs Private Limited is ` 1 Crores
in the form of 50,000 Equity Shares of ` 100 each and 50,000 Preference
Shares (not carrying any voting rights) of ` 100 each. Shadow Evening
Private Limited is holding 25,000 Equity Shares in Darshan Photographs
Private Limited. State with reason,
(a) Whether Darshan Photographs Private Limited is subsidiary of
Shadow Evening Private Limited?
(b) Whether your answer would be different in case Shadow Evening
Private Limited is holding 25,000 Equity Shares and 5,000
Preference Shares in Darshan Photographs Private Limited?
(7 Marks)
(c) Define partnership and name the essential elements for the existence of
a partnership as per the Indian Partnership Act, 1932. (3+3 = 6 Marks)
2. (a) Kapil entered in a contract with Rahul to purchase 1000 litres of mustard oil
at the price which should be fixed by Akhilesh. Rahul already delivered 600
litres out of 1000 litres to Kapil but when remaining 400 litres was ready to
deliver, Akhilesh denied fixing the price of mustard oil. Rahul asked Kapil
to return the oil already delivered and avoid the delivery of 400 litres. Kapil
sued Rahul for non-delivery of remaining 400 litres mustard oil. Advise in
the light of the Sale of Goods Act, 1930. (7 Marks)

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 (b) Explain the 'Doctrine of ultra vires’ under the Companies Act, 2013. What
are the consequences of 'ultra vires' acts of the company? (7 Marks)
(c) “LLP is an alternative corporate business form that gives the benefits of
limited liability of a company and the flexibility of a partnership”. Explain.
(6 Marks)
3. (a) A and B are partners in M/s Aee Bee & Company. Firm is doing business
of trading of plastic bottles. A is authorised to sell the stock of plastic bottles.
It was decided between them that A should sell the plastic bottles at the
minimum price which they have decided and if A sells at a price less than
minimum price, he should first take the permission of B. Due to sudden
change in government policy, the price of plastic bottles were continuously
declining. To save the loss of firm, A sold the stock at lower price.
Meanwhile, A tried to contact B but could not do so as B was on foreign
trip. Afterwards when B came, he filed the suit to recover the difference of
sale price and minimum price to the firm. Whether B can do so under the
provisions of Indian Partnership Act, 1932? (7 Marks)
(b) (i) Tycoon Private Limited is the holding company of Glassware Private
Limited. As per the last profit and loss account for the year ending
31st March, 2023 of Glassware Private Limited, its turnover was ` 1.80
crore and paid up share capital was ` 80 lakh. The Board of Directors
wants to avail the status of a small company. The Company Secretary
of the company advised the directors that Glassware Private Limited
cannot be categorized as a small company. In the light of the above
facts and in accordance with the provisions of the Companies Act,
2013, you are required to examine whether the contention of
Company Secretary is correct, explaining the relevant provisions of
the Act. (4 Marks)
(ii) In the Flower Fans Private Limited, there are only 5 members. All
of them go in a boat on a pleasure trip into an open sea. The boat
capsizes and all of them died being drowned. Explain with
reference to the provisions of Companies Act, 2013:
(A) Is Flower Fans Private Limited no longer in existence?
(B) Further is it correct to say that a company being an artificial
person cannot own property and cannot sue or be sued?
(3 Marks)
(c) “An anticipatory breach of contract is a breach of contract occurring
before the time fixed for performance has arrived”. Discuss stating also
the effect of anticipatory breach on contracts. (6 Marks)
4. (a) (i) Nitesh Gupta is constructing his house. For this purpose, he entered
in a contract with M/s Baba Brick House to supply of 10,000 bricks on
12th August 2023. M/s Baba Brick House has two Lorries of 5,000

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 brick capacity. On 12th August 2023, one of the Lorries was not in
working condition so M/s Baba Brick House supplied only 5,000 bricks
and promised Nitesh Gupta to supply rest 5,000 bricks on next day.
Nitesh Gupta wants to cancel the contract, as M/s Baba Brick House
did not supply the bricks as per the contract. M/s Baba Brick House
gave the plea that no fault has been made from its part, hence
contract should not be cancelled. In this situation, whether Nitesh
Gupta can avoid the contract under Indian Contract Act, 1872?
(4 Marks)
(ii) Rahul, a transporter was entrusted with the duty of transporting
tomatoes from a rural farm to a city by Aswin. Due to heavy rains,
Rahul was stranded for more than two days. Rahul sold the
tomatoes below the market rate in the nearby market where he was
stranded fearing that the tomatoes may perish. Can Aswin recover
the loss from Rahul on the ground that Rahul had acted beyond his
authority taking into account the provisions of the Indian Contract
Act, 1872? (3 Marks)
(b) What are Negotiable Instruments? Explain its essential characteristics
under the Negotiable Instruments Act, 1881. (7 Marks)
(c) Explain in brief the various types of laws in the Indian Legal System.
(6 Marks)
5. (a) (i) A agrees to sell certain goods to B on a certain date on 10 days credit.
The period of 10 days expired and goods were still in the possession
of A. B has also not paid the price of the goods. B becomes insolvent.
A refuses to deliver the goods to exercise his right of lien on the
goods. Can he do so under the Sale of Goods Act, 1930? (4 Marks)
(ii) AB sold 500 bags of wheat to CD. Each bag contains 50 Kilograms
of wheat. AB sent 450 bags by road transport and CD himself took
remaining 50 bags. Before CD receives delivery of 450 bags sent
by road transport, he becomes bankrupt. AB being still unpaid,
stops the bags in transit. The official receiver, on CD's insolvency
claims the bags. Decide the case with reference to the provisions
of the Sale of Goods Act, 1930. (3 Marks)
(b) (i) When the continuing guarantee can be revoked under the Indian
Partnership Act, 1932? (4 Marks)
(ii) What do you mean by Goodwill as per the provisions of Indian
Partnership Act, 1932? (3 Marks)
(c) Explain any five circumstances under which contracts need not be
performed with the consent of both the parties. (6 Marks)

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6. (a) Priyansh purchased some goods from Sumit. He issued a cheque to Sumit
for the sale price on 14th June, 2023. Sumit presented the cheque in his
bank and his bank informed him on 19 th June, 2023 that cheque was
returned unpaid due to insufficiency of funds in the account of Priyansh.
Sumit sued against Priyansh under section 138 of the Negotiable
Instruments Act, 1881. State with reasons, whether this suit is
maintainable? (7 Marks)
(b) State the essential elements of a contract of bailment. (6 Marks)
(c) State the various essential elements involved in the sale of
unascertained goods and its appropriation as per the Sale of Goods Act,
1930. (7 Marks)

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 MODEL TEST PAPER 2
FOUNDATION COURSE
PAPER 2: BUSINESS LAWS (100 Marks)
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
1. (i) Mr. Y aged 21 years, lost his mental balance after the death of his parents
in an accident. He was left with his grandmother aged 85 years, incapable
of walking and dependent upon him. Mr. M, their neighbour, out of pity,
started supplying food and other necessaries to both of them. Mr. Y and his
grandmother used to live in the house built by his parents. Mr. M also
provided grandmother with some financial assistance for her emergency
medical treatment. After supplying necessaries to Mr. Y for four years,
Mr. M approached the former asking him to payback ` 15 Lakhs inclusive
of ` 7 Lakhs incurred for the medical treatment of the lady
(grandmother). Mr. Y pleaded that he has got his parents’ jewellery to sell
to a maximum value of ` 4 Lakhs, which may be adjusted against the
dues. Mr. M refused and threatened Mr. Y with a legal suit to be brought
against for recovering the money.
Now, you are to decide upon based on the provisions of the Indian Contract
Act, 1872:
(a) Will Mr. M succeed in filing the suit to recover money?
(b) What is the maximum amount of money that can be recovered by Mr.
M?
(c) Shall the provisions of the above Act also apply to the medical
treatment given to the grandmother? (7 Marks)
(ii) Jagannath Oils Limited is a public company and having 220 members. Of
which 25 members were employed in the company during the period 1st
April 2006 to 28th June 2016. They were allotted shares in Jagannath Oils
Limited first time on 1st July 2007 which were sold by them on 1st August
2016. After some time, on 1st December 2016, each of those 25 members
acquired shares in Jagannath Oils Limited which they are holding till date.
Now the company wants to convert itself into a private company. State with
reasons:
(a) Whether Jagannath Oils Limited is required to reduce the number of
members.
(b) Would your answer be different, if above 25 members were the
employee in Jagannath Oils Limited for the period from 1st April 2006
to 28th June 2017? (7 Marks)
(iii) (a) What do you mean by 'Partnership for a fixed period' as per the Indian
Partnership Act, 1932? (2 Marks)

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 (b) Can a minor become a partner in a partnership firm? Justify your
answer and also explain the rights of a minor in a partnership firm.
(4 Marks)
2. (i) Sonal went to a Jewellery shop and asked the salesgirl to show her
diamond bangles with Ruby stones. The Jeweller told her that we have a
lot of designs of diamond bangles but with red stones. If she chooses for
herself any special design of diamond bangle with red stones, they will
replace red stones with Ruby stones. But for the Ruby stones they will
charge some extra cost. Sonal selected a beautiful set of designer bangles
and paid for them. She also paid the extra cost of Ruby stones. The
Jeweller requested her to come back a week later for delivery of those
bangles. When she came after a week to take delivery of bangles, she
noticed that due to Ruby stones, the design of bangles has been completely
disturbed. Now, she wants to terminate the contract and thus, asked the
manager to give her money back, but he refused for the same. Answer the
following questions as per the Sale of Goods Act, 1930.
(a) State with reasons whether Sonal can recover the amount from the
Jeweller.
(b) What would be your answer, if Jeweller says that he can change the
design as to his original form, but he will charge extra cost for the
same? (7 Marks)
(ii) An employee, Mr. Karan, signed a contract with his employer, company
ABC Limited, that he will not solicit the customers after leaving the
employment from the company.
But after Mr. Karan left ABC Limited, he started up his own company PQR
Limited and he started soliciting the customers of ABC Limited for his own
business purposes.
ABC Limited filed a case against Mr. Karan for breach of employment
contract and for soliciting their customers for own business. Mr. Karan
contended that there is a corporate veil between him, and his company and
he should not be personally held liable for this.
In this context, the company ABC Limited seek your advice as to the
meaning of corporate veil and when the veil can be lifted to make the
owners liable for the acts done by a company. (7 Marks)
(iii) “A LLP (Limited Liability Partnership) is a type of partnership which provides
the benefits of limited liability but allows its members the flexibility of
organizing their internal structure as a partnership based on a mutually
arrived agreement.”
In line with the above statement clearly elaborate the difference between
LLP and Limited Liability Company (LLC). (6 Marks)
3. (i) State whether the following are partnerships under the Indian Partnership
Act, 1932:

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 (a) X, a contractor, appointed Y one of his servants to manage his business
of loading and unloading railway wagons. Y was to receive 50% of the
profits of the business and also to bear the losses, if any.
(b) Two firms each having 12 partners combine by an agreement into one
firm.
(c) A and B, co-owners, agree to conduct the business in common for
profit.
(d) Some individuals form an association to which each individual
contributes ` 500 annually. The objective of the association is to
produce clothes and distribute the clothes free to the war widows.
(e) A and B, co-owners share between themselves the rent derived from a
piece of land.
(f) A and B buy commodity X and agree to sell the commodity, sharing the
profits equally.
(g) 10 major persons form an association to which each member
contributes ` 10,000. The purpose is to produce medicines for free
distribution to poor patients. (7 Marks)
(ii) BC Private Limited and its subsidiary KL Private Limited are holding 90,000
and 70,000 shares respectively in PQ Private Limited. The paid-up share
capital of PQ Private Limited is ` 30 Lakhs (3 Lakhs equity shares of ` 10
each fully paid). Analyse with reference to provisions of the Companies Act,
2013 whether PQ Private Limited is a subsidiary of BC Private Limited.
What would be your answer if KL Private Limited holds 1,60,000 shares in
PQ Private Limited and no shares are held by BC Private Limited in PQ
Private Limited? (7 Marks)
(iii) As per the general rule, "Stranger to a contract cannot file a suit in case of
breach of contract". Comment and explain the exceptions to this rule as per
the provisions of the Indian Contract Act, 1872. (6 Marks)
4. (i) (a) Mr. R extended a loan to Mr. D with X, Y, and Z as sureties. Each surety
executed a bond with varying penalty amounts, X with a penalty of
` 10,000, Y with ` 20,000 and Z with ` 40,000, in the event of Mr. D's
failure to repay the borrowed money to Mr. R. Examine the liabilities of
the sureties in accordance with the Indian Contract Act, 1872, when Mr.
D defaults to the tune of ` 42,000. Additionally, assess the situation, if
there is no contractual arrangement among the sureties. (4 Marks)
(b) X agrees to pay Y ` 1,00,000, if Y kills Z. To pay Y, X borrows
` 1,00,000 from W, who is also aware of the purpose of the loan. Y kills
Z but X refuses to pay. X also to repay the loan to W. Explain the validity
of the contract.
(i) Between X and Y
(ii) Between X and W (3 Marks)
(ii) What is a Bill of Exchange? Also, explain its essential characteristics under
the Negotiable Instruments Act, 1881. (7 Marks)

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 (iii) What do you understand by Law? Also, elaborate the procedure for making
a law. (6 Marks)
5. (i) (a) An auction sale of certain goods was held on 7th March 2023 by the fall
of hammer in favour of the highest bidder X. The payment of auction
price was made on 8th March 2023 followed by the delivery of goods on
10th March 2023. Based upon the provisions of the Sale of Goods Act,
1930, decide when the auction sale is complete. (2 Marks)
(b) Certain goods were sold by sample by J to K, who in turn sold the same
goods by sample to L and L by sample sold the same goods to M. M
found that the goods were not according to the sample and rejected the
goods and gave a notice to L. L sued K and K sued J. Can M reject the
goods? Also advise K and L as per the provisions of the Sale of Goods
Act, 1930. (5 Marks)
(ii) Can a partner be expelled? If so, how? Which factors should be kept in
mind prior to expelling a partner from the firm by the other partners
according to the provision of the Indian Partnership Act, 1932? (7 Marks)
(iii) (a) Both a sub-agent and a substituted agent are appointed by the agent.
But, however, there are some points of distinction between the two.
Explain any three points under the Indian Contract Act, 1872. (3 Marks)
(b) Differentiate between Novation and Alteration as per the Indian
Contract Act, 1872. (3 Marks)
6. (i) Utkarsh purchased some goods from Saksham for ` 50,000 on 14th August,
2023. Saksham drawn a bill of exchange on Utkarsh and sent to him for
acceptance on the same day at 3:00 p.m. Utkarsh requested Saksham to
allow him some time for acceptance. Saksham allowed him 48 hours for
acceptance. Utkarsh could not accept till 16th August, 2023 (3:00 p.m.).
Saksham treated the bill as dishonoured for non-acceptance. Referring to
the provisions of the Negotiable Instruments Act, 1881, whether bill of
exchange was dishonoured due to non-acceptance? (7 Marks)
(ii) Explain the following statements in the light of provisions of the Indian
Contract Act, 1872:
(a) "Agreements made out of love and affection are valid agreements."
(b) "Promise to pay a time barred debt cannot be enforced." (6 Marks)
OR
(ii) State the essential elements of a contract of bailment. (6 Marks)
(iii) What are the implied conditions in a contract of 'Sale by sample' under the
Sale of Goods Act, 1930? Also state the implied warranties operative under
the Act. (7 Marks)

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 MODEL TEST PAPER 3
FOUNDATION COURSE
PAPER 2: BUSINESS LAWS
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed
by way of note forming part of the answer.

(Time allowed: 3 Hours) (100 Marks)

1. (a) In light of provisions of the Indian Contract Act, 1872 answer the following:
(i) Mr. S and Mr. R made contract wherein Mr. S agreed to deliver paper
cup manufacture machine to Mr. R and to receive payment on delivery.
On the delivery date, Mr. R did not pay the agreed price. Decide
whether Mr. S is bound to fulfil his promise at the time of delivery?
(ii) Mr. Y has given loan to Mr. G of ` 30,00,000. Mr. G defaulted the loan
on due date and debt became time barred. After the time barred debt,
Mr. G agreed to settle the full amount to Mr. Y. Whether acceptance of
time barred debt Contract is enforceable as per the Indian Contract Act,
1872?
(iii) A & B entered into a contract to supply unique item, alternate of which
is not available in the market. A refused to supply the agreed unique
item to B. What directions could be given by the court for breach of
such contract? (7 Marks)
(b) (i) Nolimit Private Company is incorporated as unlimited company having
share capital of ` 10,00,000. One of its creditors, Mr. Samuel filed a suit
against a shareholder Mr. Innocent for recovery of his debt against Nolimit
Private Company. Mr. Innocent has given his plea in the court that he is
not liable as he is just a shareholder. Explain whether Mr. Samuel will be
successful in recovering his dues from Mr. Innocent? (4 Marks)
(ii) A Company registered under Section 8 of the Companies Act, 2013,
has been consistently making profits for the past 5 years after a major
change in the management structure. Few members contented that
they are entitled to receive dividends. Can the company distribute
dividend? If yes, what is the maximum percentage of dividend that can
be distributed as per provisions of the Companies Act, 2013? Also, to
discuss this along with other regular matters, the company held a
general meeting by giving only 14 days’ notice. Is this valid?
(3 Marks)
(c) (i) "Whether a group of persons is or is not a firm, or whether a person is or
is not a partner in a firm." Explain the mode of determining existence of
partnership as per the Indian Partnership Act, 1932? (4 Marks)

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 (ii) Discuss the provisions regarding personal profits earned by a partner
under the Indian Partnership Act, 1932? (2 Marks)
2. (a) Mr. G sold some goods to Mr. H for a certain price by issue of an invoice, but
payment in respect of the same was not received on that day. The goods were
packed and lying in the godown of Mr. G. The goods were inspected by H's
agent and were found to be in order. Later on, the dues of the goods were
settled in cash. Just after receiving cash, Mr. G asked Mr. H that goods should
be taken away from his godown to enable him to store other goods purchased
by him. After one day, since Mr. H did not take delivery of the goods, Mr. G
kept the goods out of the godown in an open space. Due to rain, some goods
were damaged.
Referring to the provisions of the Sale of Goods Act, 1930, analyse the
above situation and decide who will be held responsible for the above
damage. Will your answer be different if the dues were not settled in cash
and are still pending? (7 Marks)
(b) Define OPC (One Person Company) and state the rules regarding its
membership. Can it be converted into a non-profit company under Section
8 or a private company? (7 Marks)
(c) List the differences between the Limited Liability Partnership (LLP) and the
Limited Liability Company. (6 Marks)
3. (a) P, Q, R and S are the partners in M/S PQRS & Co., a partnership firm which
deals in trading of Washing Machines of various brands.
Due to the conflict of views between partners, P & Q decided to leave the
partnership firm and started competitive business on 31st July, 2023, in the
name of M/S PQ & Co. Meanwhile, R & S have continued using the property
in the name of M/S PQRS & Co. in which P & Q also has a share.
Based on the above facts, explain in detail the rights of outgoing partners
as per the Indian Partnership Act, 1932 and comment on the following:
(i) Rights of P & Q to start a competitive business.
(ii) Rights of P & Q regarding their share in property of M/S PQRS & Co.
(7 Marks)
(b) MNP Private Ltd. is a company registered under the Companies Act, 2013
with Paid Up Share Capital of ` 5 crores and turnover of ` 35 crores. Explain
the meaning of the "Small Company" and examine the following in
accordance with the provisions of the Companies Act, 2013:
(i) Whether the MNP Private Ltd. can avail the status of small company?
(ii) What will be your answer if the turnover of the company is ` 45 crores?
(7 Marks)
(c) Define Misrepresentation and Fraud. Explain the difference between Fraud
and Misrepresentation as per the Indian Contract Act, 1872. (6 Marks)
4. (a) M Ltd. contract with Shanti Traders to make and deliver certain machinery
to them by 30th June 2023 for ` 11.50 lakhs. Due to labour strike, M Ltd.
could not manufacture and deliver the machinery to Shanti Traders. Later,
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 Shanti Traders procured the machinery from another manufacturer for
` 12.75 lakhs. Due to this, Shanti Traders was also prevented from
performing a contract which it had made with Zenith Traders at the time of
their contract with M Ltd. and were compelled to pay compensation for
breach of contract. Advise Shanti Traders the amount of compensation
which it can claim from M Ltd., referring to the legal provisions of the Indian
Contract Act, 1872. (7 Marks)
(b) What are Inchoate and Ambiguous Instruments under the Negotiable
Instruments Act, 1881? (7 Marks)
(c) What is the significance of the Supreme Court and High Court in the Indian
judiciary? (6 Marks)
5. (a) (i) Ram sells 200 bales of cloth to Shyam and sends 100 bales by lorry and
100 bales by Railway. Shyam receives delivery of 100 bales sent by lorry,
but before he receives the delivery of the bales sent by railway, he
becomes bankrupt. Ram being still unpaid, stops the goods in transit. The
official receiver, on Shyam’s insolvency claims the goods. Decide the
case with reference to the provisions of the Sale of Goods Act, 1930.
(4 Marks)
(ii) Classify the following transactions according to the types of goods they
are:
(A) A wholesaler of cotton has 100 bales in his godown. He agrees to sell
50 bales and these bales were selected and set aside.
(B) A agrees to sell to B one packet of sugar out of the lot of one hundred
packets lying in his shop.
(C) T agrees to sell to S all the apples which will be produced in his garden
this year. (3 Marks)
(b) State the grounds on which a firm may be dissolved by the Court under the
Indian Partnership Act, 1932? (7 Marks)
(c) Explain whether the agency shall be terminated in the following cases
under the provisions of the Indian Contract Act, 1872:
(i) A gives authority to B to sell A's land, and to pay himself, out of the
proceeds, the debts due to him from A. Afterwards, A becomes insane.
(ii) A appoints B as A's agent to sell A's land. B, under the authority of A,
appoints C as agent of B. Afterwards, A revokes the authority of B but
not of C. What is the status of agency of C? (6 Marks)
6. (a) (i) Advik purchased a mobile from Bhanu. He issued a promissory note to
Bhanu which was payable on demand but no specific place for payment
was mentioned on it. On maturity, Bhanu did not present the promissory
note for payment. As the promissory note was not duly presented for
payment, whether Advik would be discharged from liability under the
provisions of the Negotiable Instruments Act, 1881? (4 Marks)

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 (ii) Shiva gave a gift of ` 21,000 to his sister through a cheque issued in
her favour on the occasion of Raksha Bandhan. Afterwards, Shiva
informed his sister not to present the cheque for payment and also
informed the bank to stop the payment. Examining the provisions of the
Negotiable Instruments Act, 1881, decide whether Shiva’s acts
constitute an offence under section 138 of the Act? (3 Marks)
(b) What do you mean by Quantum Meruit and state the cases where the claim
for Quantum Meruit arises? (6 Marks)
(c) Write the exceptions to the doctrine of Caveat Emptor as per the Sale of
Goods Act, 1930. (7 Marks)

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 MODEL TEST PAPER 4
FOUNDATION COURSE
PAPER 2: BUSINESS LAWS
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed
by way of note forming part of the answer.
(Time allowed: 3 Hours) (100 Marks)

1. (a) (i) Rahul found a smart watch in a restaurant. He enquired about all
the customers present there but the true owner could not be found.
He handed over the same to the manager of the restaurant to keep
till the true owner is found. After a week he went back to the
restaurant to enquire about the smart watch. The manager refused
to return it to Rahul, saying that it did not belong to Rahul. In the
light of the Indian Contract Act, 1872, can Rahul recover it from the
Manager? (4 Marks)
(ii) Mr. Vikas a businessman has been fighting a long-drawn litigation
with Mr. Neeraj an industrialist. To support his legal campaign, he
enlists the services of Mr. Manoj a Judicial officer stating that the
amount of `10 lakhs would be paid to him if he does not take up
the brief of Mr. Neeraj.
Mr. Manoj agrees but, at the end of the litigation Mr. Vikas refuses
to pay to Mr. Manoj. Decide whether Mr. Manoj can recover the
amount promised by Mr. Vikas under the provisions of the Indian
Contract Act, 1872? (3 Marks)
(b) (i) Mr. Samyak was appointed as an employee of Moonlight Timber
Private Limited on the condition that if he was to leave his
employment, he will not solicit customers of the company. After
some time, he was fired from the company. He set up his own
business under proprietorship and undercut Moonlight Timber
Private Limited’s prices. On the legal advice from his legal
consultant and to refrain from the provisions of breach of contract,
he formed a new company under the name Nine Stars Timbers
Private Limited. In this company, his wife and a friend of
Mr. Samyak were the sole shareholders and directors. They took
over Samyak’s business and continued it. Moonlight Timber Private
Limited files a suit against Nine Stars Timbers Private Limited for
violation of contract. Nine Stars Timbers Private Limited argued
that the contract was entered into between Mr. Samyak and
Moonlight Timber Private Limited and as the company has separate
legal entity, Nine Stars Timbers Private Limited has not violated the

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 terms of agreement. Explain with reasons, whether separate legal
entity between Mr. Samyak and Nine Stars Timbers Private Limited
will be disregarded? (4 Marks)
(ii) Pacific Motors Limited is a government company. Rama Auto
Private Limited is a private company having share capital of ten
crores in the form of ten lacs shares of ` 100 each. Pacific Motors
Limited is holding five lacs five thousand shares in Rama Auto
Private Limited. Rama Auto Private Limited claimed the status of
Government Company. Advise as legal advisor, whether Rama
Auto Private Limited is government company under the provisions
of Companies Act, 2013? (3 Marks)
(c) (i) When the continuing guarantee can be revoked under the Indian
Partnership Act, 1932? (2 Marks)
(ii) With reference to the provisions of Indian partnership Act, 1932
explain the various effects of insolvency of a partner. (4 Marks)
2. (a) Mrs. Seema went to the local rice and wheat wholesale shop and asked
for 100 kgs of Basmati rice. The Shopkeeper quoted the price of the
same as ` 125 per kg to which she agreed. Mrs. Seema insisted that
she would like to see the sample of what would be provided to her by the
shopkeeper before she agreed upon such a purchase.
The shopkeeper showed her a bowl of rice as a sample. The sample
exactly corresponded to the entire lot.
The buyer examined the sample casually without noticing the fact that
even though the sample was that of Basmati Rice, it contained a mix of
long and short grains.
The cook on opening the bags complained that the dish, if prepared with
the rice would not taste the same as the quality of rice was not as per
requirement of the dish.
Now Mrs. Seema wants to file a suit of fraud against the seller alleging
him of selling a mix of good and cheap quality rice. Will she be
successful?
Explain the basic law on sale by sample under Sale of Goods Act, 1930?
What would be your answer in case Mrs. Seema specified her exact
requirement as to length of rice? (7 Marks)
(b) (i) Explain listed company and unlisted company as per the provisions
of the Companies Act, 2013. (2 Marks)
(ii) Explain the classification of the companies on the basis of control
as per the Companies Act, 2013. (5 Marks)
(c) (i) Who are the individuals which shall not be capable of becoming a
partner of a Limited Liability Partnership? (3 Marks)

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 (ii) What are the effects of registration of Limited Liability Partnership?
(3 Marks)
3. (a) (i) Mr. Ram and Mr. Raheem are working as teachers in Ishwarchand
Vidhyasagar Higher Secondary School and also are very good
friends. They jointly purchased a flat which was given on rent to Mr.
John. It was decided between landlords and tenant that the rent
would be ` 10,000 per month inclusive of electricity bill. It means
electricity bill will be paid by landlords. The landlords, by mistake,
did not pay the electricity bill for the month of March 2023. Due to
this, the electricity department cut the connection. Mr. John has to
pay the electricity bill of ` 2800 and ` 200 as penalty to resume the
electricity connection. Mr. John claimed ` 3000 from Mr. Ram but
Mr. Ram replied that he is liable only for ` 1500.
Mr. John said that Mr. Ram and Mr. Raheem are partners therefore
he can claim the full amount from any of the partners. Explain,
whether under the provision of Indian Partnership Act, 1932,
Mr. Ram is liable to pay whole amount of ` 3000 to Mr. John?
(4 Marks)
(ii) Explain in detail the circumstances which lead to liability of firm for
misapplication by partners as per provisions of the Indian
Partnership Act, 1932. (3 Marks)
(b) Mr. R, a manufacturer of toys approached MNO Private Limited for
supply of raw material worth ` 1,50,000/-. Mr. R was offered a credit
period of one month. Mr. R went to the company prior to the due date
and met Mr. C, an employee at the billing counter, who convinced the
former that the payment can be made to him as the billing-cashier is on
leave.
Mr. R paid the money and was issued a signed and sealed receipt by
Mr. C. After the lapse of due date, Mr. R received a recovery notice from
the company for the payment of ` 1,50,000/-.
Mr. R informed the company that he had already paid the above amount
and being an outsider had genuine reasons to trust Mr. C who claimed
to be an employee and had issued him a receipt.
The Company filed a suit against Mr. R for non-payment of dues. Discuss
the fate of the suit and the liability of Mr. R towards company as on
current date in consonance with the provision of the Companies Act,
2013? Would your answer be different if a receipt under the company
seal was not issued by Mr. C after receiving payment? (7 Marks)

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 (c) Define consideration. What are the legal rules regarding consideration
under the Indian Contract Act, 1872? (6 Marks)
4. (a) (i) Mr. A, the employer induced his employee Mr. B to sell his one
room flat to him at less than the market value to secure promotion.
Mr. B sold the flat to Mr. A. Later on, Mr. B changed his mind and
decided to sue Mr. A. Examine the validity of the contract as per
the provisions of the Indian Contract Act, 1872. (3 Marks)
(ii) Mr. S promises Mr. M to paint a family picture for ` 20,000 and
assures to complete his assignment by 15th March, 2023.
Unfortunately, Mr. S died in a road accident on 1st March, 2023 and
his assignment remains undone. Can Mr. M bind the legal
representative of Mr. S for the promise made by Mr. S? Suppose
Mr. S had promised to deliver some photographs to Mr. M on
15th March, 2023 against a payment of ` 10,000 but he dies before
that day. Will his representative be bound to deliver the
photographs in this situation?
Decide as per the provisions of the Indian Contract Act, 1872.
(4 Marks)
(b) Explain the Rules as to compensation payable in case of dishonour of
promissory note, bill of exchange or cheque, by any party liable to the
holder or any endorsee covered under the Negotiable Instruments Act,
1881. (7 Marks)
(c) Write a short note on the following:
(i) Ministry of Corporate Affairs (MCA)
(ii) Ministry of Home Affairs (6 Marks)
5. (a) (i) Rachit arranges an auction to sale an antic wall clock. Deepa, being
one of the bidders, gives the highest bid. For announcing the
completion of sale, the auctioneer falls the hammer on table but
suddenly hammer brakes and damages the watch. Deepa wants to
avoid the contract. Can she do so under the provisions of the Sale
of Goods Act, 1930? (4 Marks)
(ii) X contracted to sell his car to Y. They did not discuss the price of
the car at all. X later refused to sell his car to Y on the ground that
the agreement was void being uncertain about price. Can Y
demand the car under the Sale of Goods Act, 1930? (3 Marks)
(b) “Partner indeed virtually embraces the character of both a principal and
an agent”. Describe the said statement keeping in view of the provisions
of the Indian Partnership Act, 1932. (7 Marks)
(c) State the essential elements of a contract of bailment. (6 Marks)

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6. (a) Shankar drew a cheque in favour of Surendar. After having issued the
cheque, Shankar requested Surendar not to present the cheque for
payment and gave a stop payment request to the bank in respect of the
cheque issued to Surendar. Decide, under the provisions of the
Negotiable Instruments Act, 1881 whether the said acts of Shankar
constitute an offence? (7 Marks)
(b) Define contract of indemnity and contract of guarantee and state the
conditions when guarantee is considered invalid? (6 Marks)
(c) (i) State the various essential elements involved in the sale of
unascertained goods and their appropriation as per the Sale of
Goods Act, 1930. (4 Marks)
(ii) What are the consequences of the destruction of specified goods,
before making of contract and after the agreement to sell under the
Sale of Goods Act, 1930. (3 Marks)

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 MODEL TEST PAPER 5
FOUNDATION COURSE
PAPER 2: BUSINESS LAWS
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed
by way of note forming part of the answer.
(Time allowed: 3 Hours) (100 Marks)
1. (a) (i) Mr. Chetan was travelling to Manali with his wife by bus of
Himalayan Travels Pvt. Ltd. Due to some technical default in the
bus, the driver has to stop the bus in a mid-way in cold night. The
driver advised the passengers to get to the shelter in the nearest
hotel which was at a distance of only one kilometer from that place.
The wife of Mr. Chetan caught cold and fell ill due to being asked
to get down and she had to walk in cold night to reach hotel.
Mr. Chetan filed the suit against Himalayan Travels Pvt. Ltd. for
damages for the personal inconvenience, hotel charges and
medical treatment for his wife. Explain, whether Mr. Chetan would
get compensation for which he filed the suit under the Indian
Contract Act, 1872? (4 Marks)
(ii) Sahil sells by auction to Rohan a horse which Sahil knows to be
unsound. The horse appears to be sound, but Sahil knows about
the unsoundness of the horse. Is this contract valid in the following
circumstances under the Indian Contract Act, 1872:
(A) If Sahil says nothing about the unsoundness of the horse to
Rohan.
(B) If Sahil says nothing about it to Rohan who is Sahil’s son.
(C) If Rohan says to Sahil “If you do not deny it, I shall assume
that the horse is sound.” Sahil says nothing. (3 Marks)
(b) (i) ABC Limited has allotted equity shares with voting rights to XYZ
Limited worth ` 15 Crores during the Financial Year 2023-24. After
that the total Paid-up Equity Share Capital of ABC Limited is ` 100
Crores.
Define the Meaning of Associate Company and comment on
whether ABC Limited and XYZ Limited would be called Associate
Company as per the provisions of the Companies Act, 2013?
(4 Marks)
(ii) MTK Private Limited is a company registered under the Companies
Act, 2013 on 5th January 2022. The company did not start its
business till 31s July 2024. Identify under which category MTK
Private Limited company is classified. Explain the definition of the
category of the company in detail. (3 Marks)

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 (c) (i) What is the difference between partnership and co-ownership as
per the Indian Partnership Act, 1932? (4 Marks)
(ii) Discuss the provisions regarding personal profits earned by a
partner under the Indian Partnership Act, 1932? (2 Marks)
2. (a) Mr. Manoj was running a shop selling good quality washing machines.
Mr. Vivek came to his shop and asked for washing machine which is
suitable for washing woollen clothes. Mr. Manoj showed him a particular
machine which Mr. Vivek liked and paid for it. Later on, when the
machine was delivered to Mr. Vivek’s house, it was found that it was the
wrong machine and also unfit for washing woollen clothes. He
immediately informed Mr. Manoj about the delivery of the wrong
machine. Mr. Manoj refused to exchange the same, saying that the
contract was complete after the delivery of the washing machine and
payment of price. With reference to the provisions of the Sale of Goods
Act, 1930, discuss whether Mr. Manoj is right in refusing to exchange the
washing machine. (7 Marks)
(b) (i) Mr. Sooraj sold his business of cotton production to a cotton
production company, CPL Private Limited, in which he held all the
shares except one which was held by his wife. He is also the
creditor in the company for a certain amount. He also got the
insurance of the stock of cotton of CPL Private Limited in his own
name and not in the name of the company. After one month, all the
stocks of the cotton of CPL Private Limited were destroyed by fire.
Mr. Sooraj filed the claim for such loss with the Insurance company.
State with reasons that whether the insurance company is liable to
pay the claim? (4 Marks)
(ii) Alfa school is a section 8 company which started imparting
education on 1.4.2015, with the sole objective of providing
education to children of weaker society either free of cost or at a
very nominal fee depending upon the financial condition of their
parents. However, on 31st March 2023, it came to the knowledge of
the Central Government that the said school was operating by
violating the objects of its objective clause due to which it was
granted the status of a section 8 company under the Companies
Act, 2013. Describe what powers can be exercised by the Central
Government against the Alfa School, in such a case? (3 Marks)
(c) What do you mean by Designated Partner? Whether it is mandatory to
appoint Designated partner in a LLP? (6 Marks)
3. (a) M/s ABC & Associates, a partnership firm with A, B and C as senior
partners engaged in the business of curtain manufacturing and exporting
to foreign countries. On 25 th August, 2022, they inducted Mr. P, an
expert in the field of curtain manufacturing as their partner. On 10 th
January 2024, Mr. P was blamed for unauthorized activities and thus
expelled from the partnership by approval of all of the remaining
partners.

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 (i) Examine whether action by the partners was justified or not?
(ii) What should have the factors to be kept in mind prior expelling a
partner from the firm by other partners according to the provisions
of the Indian Partnership Act, 1932? (7 Marks)
(b) (i) Powertech Limited was registered as a public company. There are
230 members in the company as noted below:
(a) Directors and their relatives 190
(b) Employees 15
(c) Ex-Employees (Shares were allotted when
they were employees) 10
(d) 5 couples holding shares jointly in the name of
husband and wife (5*2) 10
(e) Others 5
The Board of Directors of Powertech Limited proposes to convert it
into a private company. Also advise whether a reduction in the
number of members is necessary. (4 Marks)
(ii) Popular Products Ltd. is company incorporated in India, having a
total Share Capital of ` 20 Crores. The Share capital comprises of
20 Lakh equity shares of ` 100 each. Delight Products Ltd. and
Happy Products Ltd. hold 2,50,000 and 3,50,000 shares
respectively in Popular Products Ltd. Another company, Cheerful
Products Ltd. holds 2,50,000 shares in Popular Products Ltd. Jovial
Ltd. is the holding company for all the above three companies
namely Delight Products Ltd.; Happy Products Ltd. and Cheerful
Products Ltd. Can Jovial Ltd. be termed as a subsidiary company
of Popular Products Ltd.
State the related provision in favour of your answer, if Jovial Ltd.
controls the composition of directors of Popular Products Ltd.
(3 Marks)
(c) Who is considered as an agent under the Indian Contract Act, 1872, and
what are the duties and obligations associated with this role? (6 Marks)
4. (a) (i) Mr. Om Kashyap was a big businessman of Pune City having two
sons and one married daughter. He decided to gift his house to his
daughter. For this purpose, he called his lawyer at his house and
made a written document for such gift. The lawyer advised him to
get the transfer document properly registered. When they both
were going for registration of document, they met with an accident,
and both of them died. Later, the daughter found the document and
claimed the house on the basis of that document. Explain, whether
she can get the house as gift under the Indian Contract Act, 1872?
(4 Marks)

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 (ii) Due to urgent need of money amounting to ` 3,00,000, Pawan
approached Raman and asked him for the money. Raman lent the
money on the guarantee of Suraj and Tarun. Pawan makes default
in payment and Suraj pays full amount to Raman. Suraj, afterwards,
claimed contribution from Tarun but Tarun refused to contribute on
the basis that there is no contract between Suraj and him. Examine
referring to the provisions of the Indian Contract Act, 1872, whether
Tarun can escape from his liability. (3 Marks)
(b) State the Difference between promissory note and bill of exchange.”
(7 Marks)
(c) What do you understand by Law? Also, elaborate the procedure for
making a law. (6 Marks)
5. (a) Simran went to a Jewellery shop and asked the salesgirl to show her
diamond bangles with Ruby stones. The Jeweller told her that we have
a lot of designs of diamond bangles but with red stones if she chooses
for herself any special design of diamond bangle with red stones, they
will replace red stones with Ruby stones. But for the Ruby stones they
will charge some extra cost. Simran selected a beautiful set of designer
bangles and paid for them. She also paid the extra cost of Ruby stones.
The Jeweller requested her to come back a week later for delivery of
those bangles. When she came after a week to take delivery of bangles,
she noticed that due to Ruby stones, the design of bangles has been
completely disturbed. Now, she wants to terminate the contract and thus,
asked the Jeweller to give her money back, but he refused for the same.
Answer the following questions as per the Sale of Goods Act, 1930.
(i) State with reasons whether Simran can recover the amount from
the Jeweller.
(ii) What would be your answer if Jeweller says that he can change the
design, but he will charge extra cost for the same? (7 Marks)
(b) (i) Subject to agreement by partners, state the rules that should be
observed by the partners in settling the accounts of the firm after
dissolution under the provisions of the Indian Partnership Act,
1932. (4 Marks)
(ii) State the legal position of a minor partner under the Indian
Partnership Act, 1932 after attaining majority:
(A) When he opts to become a partner of the same firm.
(B) When he decides not to become a partner. (3 Marks)
(c) How is a contract is discharged under the Indian Contract Act, 1872 and
what are the different ways in which the obligations created by a contract
can come to an end? (6 Marks)
6. (a) (i) M owes money to N. Therefore, he makes a promissory note for
the amount in favor of N, for safety of transmission he cuts the note
in half and posts one half to N. He then changes his mind and calls

100
 upon N to return half of the note which he had sent. N requires M
to send the other half of the promissory note. Decide how rights of
the parties are to be adjusted. (4 Marks)
(ii) Rama executes a promissory note in the following form, 'I promise
to pay a sum of `10,000 after three months'. Decide whether the
promissory note is a valid promissory note. (3 Marks)
(b) What constitutes a contingent contract under the Indian Contract Act,
1872, and what are its essential elements? (6 Marks)
(c) Describe in brief the rights of the buyer against the seller in case of
breach of contract of Sale under the Sale of Goods Act, 1930.
(7 Marks)

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 MODEL TEST PAPER 6

FOUNDATION COURSE
PAPER 2: BUSINESS LAWS
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
QUESTIONS
Time Allowed: 3 Hours Maximum Marks: 100

1. (a) (i) Ashok goes to super market to buy a Air Conditioner. He selects a
branded Air Conditioner having a price tag of ` 40,000 after a
discount of ` 3000. Ashok reaches at cash counter for making the
payment, but cashier says, “Sorry sir, the discount was upto
yesterday. There is no discount from today. Hence you have to pay
` 43,000.” Ashok got angry and insists for ` 40,000. State with
reasons whether under Indian Contract Act, 1872, Ashok can
enforce the cashier to sell at discounted price i.e. ` 40,000.
(4 Marks)
(ii) Rahul, a transporter was entrusted with the duty of transporting
tomatoes from a rural farm to a city by Aswin. Due to heavy rains,
Rahul was stranded for more than two days. Rahul sold the
tomatoes below the market rate in the nearby market where he
was stranded fearing that the tomatoes may perish. Can Aswin
recover the loss from Rahul on the ground that Rahul had acted
beyond his authority? (3 Marks)
(b) (i) Mr. Mohan had purchased some goods from Sunflower Limited on
credit. A credit period of one month was allowed to Mr. Mohan.
Before the due date, Mr. Mohan went to the company and wanted to
repay the amount due from him. He found only Mr. Ramesh there,
who was the factory supervisor of the company. Mr. Ramesh told
Mr. Mohan that the Accountant and the cashier are on leave, he is
in-charge of receiving money and he may pay the amount to him.
Mr. Ramesh issued a money receipt under his signature. After two
months, Sunflower limited issued a notice to Mr. Mohan for
non-payment of the dues within the stipulated period. Mr. Mohan
informed the company that he had already cleared the dues and he
is no more responsible for the same. He also contended that
Mr. Ramesh is an employee of the company whom he had made the
payment and being an outsider, he trusted the words of Mr. Ramesh
as duty distribution is a job of the internal management of the
company. Analyse the situation and decide whether Mr. Mohan is
free from his liability. (4 Marks)

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 (ii) Mike Limited is incorporated in India having Liaison office at
Singapore. Explain in detail meaning of Foreign Company and
analysis on whether Mike Limited would be called as Foreign
Company as it established a Liaison office at Singapore as per
the provisions of the Companies Act, 2013? (3 Marks)
(c) Whether a minor may be admitted in the business of a partnership
firm? Also, explain the rights of a minor in the partnership firm under
the Indian Partnership Act, 1932. (6 Marks)
2. (a) (i) An auction sale of the certain goods was held on 7th March, 2024 by
the fall of hammer in favour of the highest bidder X. The payment of
auction price was made on 8th March, 2024 followed by the delivery
of goods on 10th March, 2024. Based upon on the provisions of the
Sale of Goods Act, 1930, decide when the auction sale is complete.
(3 Marks)
(ii) Certain goods were sold by sample by J to K, who in turn sold the
same goods by sample to L and L by sample sold the same goods
to M. M found that the goods were not according to the sample
and rejected the goods and gave a notice to L. L sued K and K
sued J. Can M reject the goods? Also advise K and L as per the
provisions of the Sale of Goods Act, 1930. (4 Marks)
(b) Mr. Rajeev, an assessee, was a wealthy man earning huge income by
way of dividend and interest. He formed three Private Companies and
agreed with each to hold a bloc of investment as an agent for them.
The dividend and interest income received by the companies was
handed back to Mr. Rajeev as a pretended loan. This way, Mr. Rajeev
divided his income into three parts in a bid to reduce his tax liability.
Decide, for what purpose the three companies were established?
Whether the legal personality of all the three companies may be
disregarded. (7 Marks)
(c) “LLP is an alternative corporate business form that gives the benefits of
limited liability of a company and the flexibility of a partnership”.
Explain. (6 Marks)
3. (a) State giving reasons whether the following are partnerships as per the
provisions under the Indian Partnership Act, 1932.
(i) X, Y, and Z agree to divide the profits equally, but the loss, if any,
is to be borne by X alone. Is it case of partnership? (3 Marks)
(ii) X, a publisher, agrees to publish a book at his own expense
written by Y and to pay Y, half of the net profit. Does this create a
relationship of partnership between X and Y? Can paper dealer
i.e. third party make Y liable for paper supplied to X? (2 Marks)
(iii) A and B purchase a tea shop and incur additional expenses for
purchasing utensils etc. each contributing half of the total

103
 expense. The shop is leased out on daily rent which is divided
between both. Does this arrangement constitute a partnership
between A and B? (2 Marks)
(b) The State Government of X, a state in the country is holding 48 lakh
shares of Y Limited. The paid up capital of Y Limited is ` 9.5 crore (95
lakh shares of ` 10 each). Y Limited directly holds 2,50,600 shares of Z
Private Limited which is having share capital of ` 5 crore in the form of
5 lakh shares of ` 100 each. Z Private Limited claimed the status of a
subsidiary company of Y Limited as well as a Government company.
Advise as a legal advisor, whether Z Private Limited is a subsidiary
company of Y Limited as well as a Government company under the
provisions of the Companies Act, 2013? (7 Marks)
(c) “An anticipatory breach of contract is a breach of contract occurring
before the time fixed for performance has arrived”. Also, discuss the
effect of anticipatory breach of contracts under the Indian Contract Act,
1872. (6 Marks)
4. (a) (i) Mr. Gaurav and Mr. Vikas entered into a contract on 1st July, 2024,
according to which Mr. Gaurav had to supply 100 tons of sugar to
Mr. Vikas at a certain price strictly within a period of 10 days of the
contract. Mr. Vikas also paid an amount of ` 70,000 towards
advance as per the terms of the above contract. The mode of
transportation available between their places is roadway only.
Severe flood came on 2nd July, 2024 and the only road connecting
their places was damaged and could not be repaired within fifteen
days. Mr. Gaurav offered to supply sugar on 20th July, 2024 for
which Mr. Vikas did not agree. On 1st August, 2024, Mr. Gaurav
claimed compensation of ` 20,000 from Mr. Vikas for refusing to
accept the supply of sugar, which was not there within the purview of
the contract. On the other hand, Mr. Vikas claimed for refund of
` 70,000, which he had paid as advance in terms of the contract.
Analyse the above situation in terms of the provisions of the Indian
Contract Act, 1872 and decide on Mr. Vikas contention. (4 Marks)
(ii) R gives his umbrella to M during raining season to be used for two
days during Examinations. M keeps the umbrella for a week.
While going to R’s house to return the umbrella, M accidently slips
and the umbrella is badly damaged. Who bear the loss and why
under the provisions of the Indian Contract Act, 1872? (3 Marks)
(b) What is a cheque under the Negotiable Instruments Act, 1881, and who
are the parties involved? What are the essential elements of a cheque?
(7 Marks)
(c) What is the structure of the Indian Judicial System, and what is the
hierarchy of courts in India? (6 Marks)
5. (a) (i) Avyukt purchased 100 Kgs of wheat from Bhaskar at `30 per kg.
Bhaskar says that wheat is in his warehouse in the custody of
Kishore, the warehouse keeper. Kishore confirmed Avyukt that he

104
 can take the delivery of wheat from him and till then he is holding
wheat on Avyukt’s behalf. Before Avyukt picks the goods from
warehouse, the whole wheat in the warehouse has flowed in flood.
Now Avyukt wants his price on the contention that no delivery has
been done by seller. Whether Avyukt is right with his views under
the Sale of Goods Act, 1930. (4 Marks)
(ii) Classify the following transactions under the Sale of Goods Act,
1930 according to the types of goods they are:
(A) A wholesaler of cotton has 100 bales in his godown. He
agrees to sell 50 bales and these bales were selected and
set aside.
(B) A agrees to sell to B one packet of sugar out of the lot of one
hundred packets lying in his shop.
(C) T agrees to sell to S all the apples which will be produced in
his garden this year. (3 Marks)
(b) When does dissolution of a partnership firm take place under the
provisions of the Indian Partnership Act, 1932? Explain. (7 Marks)
(c) Define consideration. State the characteristics of a valid consideration
under the Indian Contract Act, 1872. (6 Marks)
6. (a) (i) ‘Nakul’ made promissory note in favour of ‘Sahdev’ of `10,000 and
delivered to him. ‘Sahdev’ indorsed the promissory note in favour of
‘Arjun’ but delivered to Arjun’s agent. Subsequently, Arjun’s agent
died, and promissory note was found by ‘Arjun’ in his agent’s table
drawer. ‘Arjun’ sued ‘Nakul’ for the recovery of promissory note.
Whether ‘Arjun’ can recover amount under the provisions of the
Negotiable Instrument Act 1881? (4 Marks)
(ii) Utkarsh purchased some goods from Saksham for ` 50,000 on
14th August. Saksham drawn a bill of exchange on Utkarsh and
sent to him for acceptance on the same day at 3:00 pm Utkarsh
requested Saksham to allow him some time for acceptance.
Saksham allowed him 48 hours for acceptance. Utkarsh could not
accept till 16th August (3:00 pm). Saksham treated the bill as
dishonoured for non-acceptance. Referring the provisions of the
Negotiable Instruments Act, 1881, whether bill of exchange was
dishonoured due to non-acceptance? (3 Marks)
(b) Explain the terms “Trafficking relating to public offices and titles” and
“Stifling prosecution” as per the Indian Contract Act, 1872. (6 Marks)
(c) Explain any six circumstances in detail in which a non-owner can
convey better title to the bona fide purchaser of goods for value under
the Sale of Goods Act, 1930. (7 Marks)

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 MODEL TEST PAPER 7

FOUNDATION COURSE
PAPER – 2: BUSINESS LAWS
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed
by way of note forming part of the answer.
(Time allowed: 3 Hours) (100 Marks)

1. (a) Rahul owns an electronics store. Pankaj visited the store to buy a water
purifier priced at ` 54,000/-. He specifically requested Rahul for a purifier
with a copper filter. As Pankaj wanted to buy the purifier on credit, with
the intention of paying in 9 equal monthly instalments, Rahul demands a
guarantor for the transaction. Sooraj (a friend of Pankaj) came forward
and gave the guarantee for payment of water purifier. Rahul sold Pankaj,
a water purifier of a specific brand. Pankaj made payment for 4 monthly
instalments and after that became insolvent. Explain with reference to
the Indian Contract Act, 1872, the liability of Sooraj as a guarantor to pay
the balance price of water purifier to Rahul.
What will be your answer, if Rahul sold the water purifier misrepresenting
it as having a copper filter, while it actually has a normal filter? Neither
Pankaj nor Sooraj was aware of this fact and upon discovering the truth,
Pankaj refused to pay the price. In response to Pankaj 's refusal, Rahul
filed the suit against Sooraj, the guarantor. Explain with reference to the
Indian Contract Act, 1872, whether Sooraj is liable to pay the balance
price of water purifier to Rahul? (7 Marks)
(b) A company, DEF limited as on 31.03.2024 had a paid-up capital of ` 1
lakh (10,000 equity shares of ` 10 each). In June 2024, DEF limited
issued additional 10,000 equity shares of ` 10 each which was fully
subscribed. Out of 10,000 shares, 5,000 of these shares were issued to
MNO private limited company. MNO is a holding company of JKL private
limited by having control over the composition of its board of directors.
Now, JKL private limited claims the status of being a subsidiary of DEF
limited as being a subsidiary of its subsidiary i.e. MNO private limited.
Examine the validity of the claim of JKL private limited.
State the relationship if any, between DEF limited & MNO Private Limited
as per the provisions of the Companies Act, 2013. (7 Marks)

106
 (c) Referring to the provisions of the Indian Partnership Act, 1932, answer
the following:
(i) "If a partner is otherwise expelled; the expulsion is null and void."
Discuss. (4 Marks)
(ii) "The partner who is expelled will cease to be liable to the third party
for the act of the firm done after expulsion." Analyse. (2 Marks)
2. (a) (i) Ashish, a trader, delivered a camera to Mohan on 'sale or return'
basis. Mohan delivers the camera to Raj on the terms of 'sale for
cash only or return'. Afterward, Raj delivered it to Vikas on a 'sale
or return' basis without paying cash to Mohan. The camera, which
was in possession of Vikas, was lost by theft though he exercised
due care for its safety. Referring to the provisions of the Sale of
Goods Act, 1930, analyse the situation and advise whether Mohan,
Raj or Vikas are, jointly or severally, liable to pay the price of the
camera to Ashish. (4 Marks)
(ii) Akash of Jaipur sold 100 smart TV set @ ` 50,000/- per set to Barun
of Delhi. He delivered the TV sets to Chirag, a transport carrier for
transmission to Barun. Barun further sold these 100 TV sets to
Sarthak @ ` 60,000/- per set. On reaching the goods at the
destination, Barun demanded the delivery but Chirag, wrongfully,
refused to deliver the goods to Barun. That is why; he failed to
deliver TV sets to Sarthak and suffered a huge loss on account of
non-delivery. Akash came to know about this. He directed Chirag
to stop the delivery to Barun and re-deliver the goods to him at
Jaipur.
Answer the following questions under the provisions of the Sale of
Goods Act, 1930:
(A) Whether Akash has the right to stop the goods in transit?
(B) Whether Barun can claim loss suffered due to non­delivery
from Akash? (3 Marks)
(b) Ram wants to incorporate a company in which he will be the only
member. According to provisions of the Companies Act, 2013, what type
of company can be incorporated? What are the salient features of this
type of company? (7 Marks)
(c) Referring to the provisions of the Limited Liability Partnership Act, 2008,
answer the following:
(i) Under what circumstances a Limited Liability Partnership is
compulsorily required to change its name? Also, explain the
compliance requirement following the change of name and the
consequences, if any, in case of default therein. (4 Marks)
(ii) What do you mean by a Small Limited Liability Partnership?
(2 Marks)

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3. (a) Referring to the provisions of the Indian Partnership Act, 1932, answer
the following:
(i) Ram and Shyam are partners in a partnership firm named as RS &
Co. (the firm). Gaurav, a renowned businessman, is their common
friend. Ram introduced Gaurav to Sahil, a supplier to the firm, as
his newly joined partner. Gaurav knowing that he is not a partner
preferred to keep quiet on such an introduction. This information
about Gaurav, being a partner of the firm, was shared by Sahil with
another businessman Madhav. Next day, Sahil supplied the raw
material on credit and Madhav lent ` 5 lakhs to the firm for a short
period on the understanding that Gaurav is a partner of the firm. On
due dates, the firm failed to discharge its liability towards both.
Advise Gaurav, whether he is liable to Sahil and Madhav for the
aforesaid liability of the firm. (4 Marks)
(ii) On admission as a new partner, Ashwin agreed to be liable for the
existing debts (referred to as the old debts) of the firm by an
agreement signed by all partners including Ashwin. Examine,
whether Ashwin will be liable in a suit filed by the creditor against
the firm and all existing partners for recovery of the old debt of the
firm. (3 Marks)
(b) (i) MN Limited borrowed a secured loan of ` 5 crore from Star Bank
Limited (the bank) to meet its working capital requirement.
However, the borrowing powers of the company, under its
Memorandum of Association, were restricted to ` 1 crore. The bank
released the loan amount in two instalments of ` 1 crore and ` 4
crore. On the due date for repayment of the loan, the company
refused to accept the liability of ` 5 crore on the ground that the
borrowing was ultra vires the company. The company's books of
accounts show that the company has utilized the loan amount of
` 3 crore for repayment of its lawful debts. The utilization of the
remaining ` 2 crore cannot be traced. Referring to the doctrine of
ultra-vires under the Companies Act, 2013, examine the validity of
the decision of the company denying the repayment of the loan and
explore the remedy, if any, available to the bank for recovery of the
loan. (4 Marks)
(ii) After incorporation of Unique Private Limited (the company) on
15th May, 2024 the share certificates were issued to Arnav, Sohail
and Suman being subscribers to the Memorandum of Association
of the company without affixing the common seal thereon and
under the signature of Arnav and Sohail, the directors of the
company. The company has yet to appoint a company secretary.
On objection raised by Suman, a director, about the validity of the
share certificate signed by other two directors, Arnav and Sohail,
clarified that since the company has opted not to have the common

108
 seal for the company the share certificates (i.e. the document)
signed by two directors are valid. Referring to the provisions of the
Companies Act, 2013, examine the correctness of the objection
raised by one of the directors and in response, the clarification
offered by other directors.
Would your answer be different, if the company had a company
secretary? (3 Marks)
(c) Explain the term Wagering agreement in the light of the Indian Contract
Act, 1872. Also, explain some transactions resembling wagering
transaction but which are not void. (6 Marks)
4. (a) (i) Mr. R extended a loan to Mr. D with X, Y, and Z as sureties. Each
surety executed a bond with varying penalty amounts, X with a
penalty of ` 10,000, Y with ` 20,000 and Z with ` 40,000, in the
event of Mr. D's failure to repay the borrowed money to Mr. R.
Examine the liabilities of the sureties in accordance with the Indian
Contract Act, 1872, when Mr. D defaults to the tune of ` 42,000.
Additionally, assess the situation, if there is no contractual
arrangement among the sureties. (4 Marks)
(ii) X agrees to pay Y ` 1,00,000, if Y kills Z. To pay Y, X borrows
` 1,00,000 from W, who is also aware of the purpose of the loan. Y
kills Z but X refuses to pay. X also to repay the loan to W. Explain
the validity of the contract.
(A) Between X and Y
(B) Between X and W (3 Marks)
(b) A promissory note, payable at a certain period after sight, must be
presented to the maker thereof for payment. Under which scenarios,
presentment for payment is not necessary and the instrument is
dishonoured at the due date for presentment according to the provisions
of the Negotiable Instrument Act, 1881? (7 Marks)
(c) What do you understand by Law? Also, elaborate the procedure for
making a law. (6 Marks)
5. (a) (i) Karan agreed to sell his laptop to Vishal for a price to be fixed by
Kiran a hardware engineer. However, before the delivery of the
laptop, Karan changed his mind and did not share any particulars
and configuration of the laptop with Kiran, which made her unable
to do the valuation. Kiran refused to do valuation.
Vishal needed laptop for his project, so he promised Karan that, if
the laptop is delivered to him, he would pay a reasonable price for
it However, Karan decided not to sell his laptop to Vishal. Now,
Vishal wants to know from you, being a legal expert, whether Karan
is bound by his promise as he agreed earlier to deliver his laptop

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 to him at a reasonable price. If he does not agree to deliver what is
the other remedy available to Vishal? Advise, referring to the
provisions of the Sale of Goods Act, 1930. (3 Marks)
(ii) Mrs. Meenu went to the local rice and wheat wholesale shop and
asked for 100 kgs of Basmati rice. The Shopkeeper quoted the
price of the same as ` 125 per kg to which she agreed. Mrs. Meenu
insisted that she would like to see the sample of what would be
provided to her by the shopkeeper before she agreed upon such a
purchase.
The shopkeeper showed her a bowl of rice as a sample. The
sample exactly corresponded to the entire lot.
Mrs. Meenu examined the sample casually without noticing the fact
that even though the sample was that of Basmati Rice, but it
contained a mix of long and short grains.
The cook on opening the bags complained that the dish if prepared
with the rice would not taste the same as the quality of rice was not
as per the requirement of the dish.
Now Mrs. Meenu wants to file a suit for fraud against the seller
alleging him of selling a mix of good and cheap quality rice. Will she
be successful?
Decide the fate of the case and options open to Mrs. Meenu for
grievance redressal as per the provisions of Sale of Goods Act,
1930?
What would be your answer in case Mrs. Meenu specified her exact
requirement as to the length of rice? (4 Marks)
(b) “Indian Partnership Act, 1932 does not make the registration of firms
compulsory nor does it impose any penalty for non-registration.” In light
of the given statement, discuss the consequences of non-registration of
the partnership firms in India? (7 Marks)
(c) (i) In case of breach of contract, the court may award compensation
or damages. Explain the circumstances when court may award
ordinary damages, special damages and liquidated damages under
the provisions of the Indian Contract Act, 1872. (3 Marks)
(ii) What are the conditions need to be fulfilled to make the following
agreements valid without consideration as per the provisions of the
Indian Contract Act, 1872?
(A) Agreement made based on natural love and affection
(B) Promise to pay time-barred debts (3 Marks)

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6. (a) Mr. Y issued a cheque for ` 10,000 to Mr. Z which was dishonoured by
the Bank because Y did not have enough funds in his account and has
no authority to overdraw. Examine as per the provisions of the
Negotiable Instruments Act, 1881 whether-
(i) Mr. Y is liable for dishonour of cheque, if yes, what are the
consequences for such an offence?
(ii) What would be your answer if Y issued a cheque as a donation to
Mr. Z? (7 Marks)
(b) Explain the term ‘Quasi Contracts’ and state their characteristics.
(6 Marks)
(c) Distinguish between 'Sale' and 'Hire Purchase' under the Sale of Goods
Act, 1930. (7 Marks)

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 MODEL TEST PAPER 8
FOUNDATION COURSE
PAPER – 2: BUSINESS LAWS
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed
by way of note forming part of the answer.
Working Notes should form part of the answer.
(Time allowed: 3 Hours) (100 Marks)
1. (a) (i) Mr. A was running an orphanage. His friend Mr. S, a philanthropist
agreed to donate ` 2 lakh for treatment of a child, who was suffering
from cancer. On emergency, Mr. A incurred ` 1.5 lakh on treatment
of child. Now, Mr. S refused to pay. Whether Mr. A can claim ` 1.5
lakh from Mr. S with reference to provisions of the Indian Contract
Act, 1872? (3 Marks)
(ii) Mr. L let out his residential house to Mr. M for ` 50,000 p.m. for a
period of one year. According to the Rent agreement, electricity bill
will be paid by Mr. L. But Mr. L could not pay electricity dues up to
5 months, due to his financial hardships. The Electricity Board sent
the notice of disconnection, if it is not paid within a week's time. To
avoid all this, Mr. M paid the electricity bill of ` 50,000 with penalty.
Later on, L refused to reimburse ` 50,000 and argued that he has
paid bill voluntarily because of his own interest. Decide with
reference to provisions of the Indian Contract Act, 1872 whether
Mr. M is entitled to be reimbursed by Mr. L? (4 Marks)
(b) (i) XYZ Ltd. was incorporated to hold the patent for a new product.
The company is expecting to start its commercial production within
the next two years. In the meanwhile, for timely installation, the
company has placed the purchase order for plant and machinery
with a down payment of ` 1 crore. Referring to the provisions of the
Companies Act, 2013 examine, whether the company can go for
acquiring the status of a dormant company? (4 Marks)
(ii) Mike LLC incorporated in Singapore having an office in Pune, India.
Analyze whether Mike LLC would be called a foreign company as
per the provisions of the Companies Act, 2013? Also explain the
meaning of foreign company. (3 Marks)
(c) State the modes by which a partner may transfer his interest in the firm
in favour of another person under the Indian Partnership Act, 1932. What
are the rights of such a transferee? (6 Marks)

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2. (a) Sony, a friend of Priya wanted to buy her two-wheeler. Priya agreed to
sell her two-wheeler to Sony and it was decided that price of her two-
wheeler will be fixed by Priya's father, who is an auto dealer. Priya
immediately handed over the keys to Sony. However, Priya's father
refused to fix the price as he did not want Priya to sell her vehicle. Priya
expressed her inability to sell the two-wheeler to Sony and asked for
return, but Sony refused to return the same. Explain-
(i) Can Priya take-back the vehicle from Sony?
(ii) Will your answer be different, if Priya had not handed over the
vehicle to Sony? (7 Marks)
(b) Define OPC (One Person Company) and state the rules regarding its
membership. Can it be converted into a non-profit company under
Section 8 or a private company? (7 Marks)
(c) A LLP is a new form of legal business entity with limited liability. It's an
alternative corporate business vehicle that only gives the benefits of
limited liability at low compliance cost but allows its partners the flexibility
of organizing their internal structure as a traditional partnership. Keeping
in view of above, define the following characteristics of LLP.
(i) Body Corporate
(ii) Mutual Agency
(iii) Foreign LLPs
(iv) Artificial legal person (6 Marks)
3. (a) (i) P, Q and R formed a partnership agreement to operate motor buses
along specific routes for a duration of 12 years. After operating the
business for four years, it was observed that the business incurred
losses each year. Despite this, P is determined to continue the
business for the remaining Period. Examine with reference to the
Indian Partnership Act, 1932, can P insist to continue the business?
If so, what options are available to Q and R who are reluctant to
continue operating the business? (4 Marks)
(ii) A and B operate a textile merchant business in partnership. Mr. A
finances the business and is a sleeping partner. In the regular
course of business, B acquires certain fabric goods belonging to C.
However, B is aware that these goods are stolen property. Despite
this knowledge, B proceeds to purchase and sell some of these
stolen goods. Moreover, B records proceeds from these sales in
the firm’s books. Now, A wants to avoid the liability towards C, on
the grounds of misconduct by B. In the light of the provisions of the
Indian Partnership Act, 1932 discuss the liability of A and B towards
C. (3 Marks)
(b) (i) XYZ is a company incorporated under the Companies Act, 2013.
The paid up share capital of the company is held by others as on
31.03.2024 in as under:

113
 (1) Government of India 20%
(2) Life Insurance Corporation of India (Public Institution) 8%
(3) Government of Tamil Nadu 10%
(4) Government of Rajasthan 10%
(5) ABC Limited (owned by Government Company) 15%
As per above shareholding, state whether XYZ limited be called a
Government Company under the provisions of the Companies Act,
2013. (4 Marks)
(ii) M and N holding 70% and 30% of the shares in the company. Both
died in an accident. Answer with reference to the provisions of the
Companies Act, 2013, what will be the legal effect on the company
as both the members have died? (3 Marks)
(c) Explain in brief with reference to the provisions of the Indian Contract
Act, 1872, what are the rights enjoyed by Surety against the Creditor,
the Principal Debtor and Co-Sureties? (6 Marks)
4. (a) (i) Mr. J entered into an agreement with Mr. S to purchase his house
for ` 20 lakh, within three months. He also paid ` 50,000/- as token
money. In the meanwhile, in an anti-encroachment drive of the local
administration, Mr. S's house was demolished. When Mr. J was
informed about the incident he asked for the refund of token money.
Referring to the relevant provisions of the Indian Contract Act, 1872
state whether Mr. J is entitled to the refund of the amount paid.
(4 Marks)
(ii) Rama directs Shyam to sell laptops for him and agrees to give
Shyam eleven percent (11%) commission on the sale price fixed by
Rama for each laptop. As Government of India put restrictions on
import of Laptops, Rama thought that the prices of laptops might
go up in near future and he revokes Shyam's authority for any
further sale. Shyam, before receiving the letter at his end sold 5
laptops at the price fixed by Rama. Shyam asked for 11%
commission on the sale of 5 Laptops for ` 1 lakh each. Explain
under the provisions of the Indian Contract Act, 1872:
(1) Whether sale of laptops after revoking Shyam's authority is
binding on Rama?
(2) Whether Shyam will be able to recover his commission from
Rama, if yes, what will be the amount of such commission?
(3 Marks)
(b) What are Inchoate and Ambiguous Instruments under the Negotiable
Instruments Act, 1881? (7 Marks)
(c) Describe in brief about the following Regulatory bodies of the
Government of India:

114
 (i) Securities and Exchange Board of India
(ii) Reserve Bank of India
(iii) Insolvency and Bankruptcy Board of India (6 Marks)
5. (a) (i) Ram sells 200 bales of cloth to Shyam and sends 100 bales by lorry
and 100 bales by Railway. Shyam receives delivery of 100 bales
sent by lorry, but before he receives the delivery of the bales sent
by railway, he becomes bankrupt. Ram being still unpaid, stops the
goods in transit. The official receiver, on Shyam’s insolvency claims
the goods. Decide the case with reference to the provisions of the
Sale of Goods Act, 1930. (4 Marks)
(ii) Classify the following transactions according to the types of goods
they are:
(A) A wholesaler of cotton has 100 bales in his godown. He
agrees to sell 50 bales and these bales were selected and set
aside.
(B) A agrees to sell to B one packet of sugar out of the lot of one
hundred packets lying in his shop.
(C) T agrees to sell to S all the apples which will be produced in
his garden this year. (3 Marks)
(b) State the circumstances, in which a Court may, at the suit of the partner,
dissolve a partnership firm under the provisions of the Indian Partnership
Act, 1932. (7 Marks)
(c) In accordance with the provisions of the Indian Contract Act, 1872,
answer the following:
(i) Rights of Bailor against any wrong doer (Third Party)
(ii) Duties of the Pawnee (6 Marks)
6. (a) Referring to the provisions of the Negotiable Instruments Act, 1881,
answer the following in the given scenario:
(i) Aman drew the bill of exchange (the bill) on Baban, who accepted
it, payable to Magan or order. Magan indorsed the bill to Gagan.
Gagan indorsed the bill to Akash to be delivered to him on the next
day. However, on the death of Gagan on the same day, his only
son Ankit delivered the bill to Akash on the next day as intended by
his deceased father. On presenting the bill on the due date, Baban
refused to pay. Explaining the importance of delivery in negotiation,
decide, whether Akash can enforce the payment of the bill against
Baban or the previous parties. (4 Marks)
(ii) Reliable Limited, an Indian company, is a global leader in
Petrochemical products. For payment of the sale price of machinery
imported from Alex Manufacturing Limited, a USA based company
(the exporter), the Indian company drew a bill of exchange on
Manish, a resident of Mumbai (India) who accepted the bill at
Mumbai payable to the exporter in Los Angeles, USA. Decide,

115
 whether the bill of exchange is an inland instrument or a foreign
instrument. Assume that the bill of exchange was signed by the
authorised person for the drawer company. (3 Marks)
(b) Answer the following as per the provisions of the Indian Contract Act,
1872:
(i) 'Agent cannot personally enforce, nor be personally bound by,
contracts on behalf of the principal' however there are some
exceptions to this general rule, explain. (4 Marks)
(ii) State the rights of Indemnity-holder when sued. (2 Marks)
OR
(b) What is the meaning of contingent contract? Write briefly its essentials.
Also, explain any three rules relating to enforcement of a contingent
contract. (6 Marks)
(c) J, a wholesaler of premium Basmati rice delivered on approval 100 bags
of rice of 10 kg each to a local retailer, on sale or returnable basis within
a month of delivery. The next day the retailer sold 5 bags of rice to a
regular customer K. A week later K informed the retailer that the quality
of rice was not as per the price.
The retailer now wants to return all the rice bags to J, including the 4
bags not used by K. Can the retailer do so?
Also briefly describe the provisions underlying in this context of the Sale
of Goods Act, 1930, (7 Marks)

116
 MODEL TEST PAPER 9
FOUNDATION COURSE
PAPER 2 : BUSINESS LAWS
Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.
Working notes should form part of the answers
(Time allowed: 3 Hours) (100 Marks)
1. (a) R owns an electronics store. P visited the store to buy a water purifier
priced at `54,000/-. He specifically requested R for a purifier with a copper
filter. As P wanted to buy the purifier on credit, with the intention of paying
in 9 equal monthly instalments, R demands a guarantor for the
transaction. S (a friend of P) came forward and gave the guarantee for
payment of water purifier. R sold P, a water purifier of a specific brand. P
made payment for 4 monthly instalments and after that became insolvent.
Explain with reference to the Indian Contract Act, 1872, the liability of S as
a guarantor to pay the balance price of water purifier to R.
What will be your answer, if R sold the water purifier misrepresenting it
as having a copper filter, while it actually has a normal filter? Neither P
nor S was aware of this fact and upon discovering the truth, P refused
to pay the price. In response to P's refusal, R filed the suit against S,
the guarantor. Explain with reference to the Indian Contract Act 1872,
whether S is liable to pay the balance price of water purifier to R?
(7 Marks)
(b) A company, ABC limited as on 31.03.2023 had a paid-up capital of ` 1
lakh (10,000 equity shares of ` 10 each). In June 2023, ABC limited
had issued additional 10,000 equity shares of ` 10 each which was
fully subscribed. Out of 10,000 shares, 5,000 of these shares were
issued to XYZ private limited company. XYZ is a holding company of
PQR private limited by having control over the composition of its board
of directors.
Now, PQR private limited claims the status of being a subsidiary of
ABC limited as being a subsidiary of its subsidiary i.e. XYZ private
limited. Examine the validity of the claim of PQR private limited.
State the relationship if any, between ABC limited & XYZ private limited
as per the provisions of the Companies Act, 2013. (7 Marks)
(c) The Indian Partnership Act does not make the registration of firms
compulsory, yet the consequences or disabilities of non-registration
have a persuasive pressure for their registration. Still, there are come
cases where non-registration of firm does not affect certain rights.
Explain with reference to the provisions of the Indian Partnership Act,
1932. (6 Marks)

117
2. (a) Sony, a friend of Priya wanted to buy her two-wheeler. Priya agreed to
sell her two-wheeler to Sony and it was decided that price of her two-
wheeler will be fixed by Priya's father, who is an auto dealer. Priya
immediately handed over the keys to Sony. However, Priya's father
refused to fix the price as he did not want Priya to sell her vehicle. Priya
expressed her inability to sell the two-wheeler to Sony and asked for
return, but Sony refused to return the same. Explain-
(i) Can Priya take-back the vehicle from Sony?
(ii) Will your answer be different, if Priya had not handed over the
vehicle to Sony? (7 Marks)
(b) Ram wants to incorporate a company in which he will be the only
member. According to provisions of the Companies Act, 2013, what
type of company can be incorporated? What are the salient features of
this type of company? (7 Marks)
(c) A LLP is a new form of legal business entity with limited liability. It's an
alternative corporate business vehicle that only gives the benefits of
limited liability at low compliance cost but allows its partners the
flexibility of organizing their internal structure as a traditional
partnership. Keeping in view of above, define the following
characteristics of LLP.
(i) Body Corporate
(ii) Mutual Agency
(iii) Foreign LLPs
(iv) Artificial legal person (6 Marks)
3. (a) (i) P, Q and R formed a partnership agreement to operate motor buses
along specific routes for a duration of 12 years. After operating the
business for four years, it was observed that the business incurred
losses each year. Despite this, P is determined to continue the
business for the remaining Period. Examine with reference to the
Indian Partnership Act, 1932, can P insist to continue the business?
If so, what options are available to Q and R who are reluctant to
continue operating the business? (4 Marks)
(ii) A and B operate a textile merchant business in partnership. Mr. A
finances the business and is a sleeping partner. In the regular
course of business, B acquires certain fabric goods belonging to
C. However, B is aware that these goods are stolen property.
Despite this knowledge, B proceeds to purchase and sell some of
these stolen goods. Moreover, B records proceeds from these
sales in the firm’s books. Now, A wants to avoid the liability
towards C, on the grounds of misconduct by B. In the light of the
provisions of the Indian Partnership Act, 1932 discuss the liability
of A and B towards C. (3 Marks)

118
 (b) (i) XYZ is a company incorporated under the Companies Act, 2013.
The paid up share capital of the company is held by others as on
31.03.2024 in as under:
(1) Government of India 20%
(2) Life Insurance Corporation of India (Public Institution) 8%
(3) Government of Tamil Nadu 10%
(4) Government of Rajasthan 10%
(5) ABC Limited (owned by Government Company) 15%
As per above shareholding, state whether XYZ limited be called a
government company under the provisions of the Companies Act,
2013. (4 Marks)
(ii) M and N holding 70% and 30% of the shares in the company.
Both died in an accident. Answer with reference to the provisions
of the Companies Act, 2013, what will be the legal effect on the
company as both the members have died? (3 Marks)
(c) Explain in brief with reference to the provisions of the Indian Contract
Act, 1872, what are the rights enjoyed by Surety against the Creditor,
the Principal Debtor and Co-Sureties? (6 Marks)
4. (a) (i) Mr. J entered into an agreement with Mr. S to purchase his house
for ` 20 lakh, within three months. He also paid ` 50,000/- as token
money. In the meanwhile, in an anti-encroachment drive of the local
administration, Mr. S's house was demolished. When Mr. J was
informed about the incident he asked for the refund of token money.
Referring to the relevant provisions of the Indian Contract Act,
1872 state whether Mr. J is entitled to the refund of the amount
paid. (4 Marks)
(ii) Rama directs Shyam to sell laptops for him and agrees to give
Shyam eleven percent (11%) commission on the sale price fixed
by Rama for each laptop. As Government of India put restrictions
on import of Laptops, Rama thought that the prices of laptops
might go up in near future and he revokes Shyam's authority for
any further sale. Shyam, before receiving the letter at his end sold
5 laptops at the price fixed by Rama. Shyam asked for 11%
commission on the sale of 5 Laptops for ` 1 lakh each. Explain
under the provisions of the Indian Contract Act, 1872:
(1) Whether sale of laptops after revoking Shyam's authority is
binding on Rama?
(2) Whether Shyam will be able to recover his commission from
Rama, if yes, what will be the amount of such commission?
(3 Marks)
(b) A promissory note, payable at a certain period after sight, must be
presented to the maker thereof for payment. Under which scenarios

119
 presentment for payment is not necessary and the instrument is
dishonoured at the due date for presentment according to the
provisions of the Negotiable Instrument Act. 1881? (7 Marks)
(c) Describe in brief about the following Regulatory bodies of the
Government of India: -
(i) Securities and Exchange Board of India
(ii) Reserve Bank of India
(iii) Insolvency and Bankruptcy Board of India (6 Marks)
5. (a) PTC Hotels in Bombay decided to sell their furniture by auction sale. For
this purpose, they appointed RN & Associates as auctioneer. They invited
top ten renowned Architects in Bombay for bidding. A right to bid was not
notified by them. Furniture was put up in lots for sale. It was decided that
for every lot of furniture there will be a reserve price. On 25th Feb 2024,
Auction sale was started at 10.am in the lawn of PTC Hotels Bombay. For
a special lot of furniture three parties came for bidding Mr. Neel, Mr. Raj
and Mr. Dev on behalf of their respective companies. Bidding was as
follows:
Mr. Neel ` 5.70 lakh
Mr. Raj ` 4.85 lakh
Mr. Dev ` 6.10 lakh
The sale was completed in favour of Mr. Neel by RN & Associates by
fall of hammer. Mr. Dev's Bid was rejected on ground that Right to bid
was reserved and company of Mr. Dev was not invited to bid.
For another bid of Italian Furniture was made by two parties as follows:
Mr. Dheer ` 15 lakh
Mr. Madhu (on behalf of R N & Associates) ` 15.20 lakh
Sale was completed in favour of Mr. Dheer instead of Mr. Madhu.
Mr. Dev and Mr. Madhu argued that auction sale was not lawful. Give
your opinion with reference to provisions of the Sale of Goods Act,
1930 whether Auction Sale will be considered lawful or not? (7 Marks)
(b) "Dissolution of partnership doesn't mean dissolution of firm". Do you
agree with this statement? State any three situations where court can
dissolve the partnership firm. (7 Marks)
(c) Where a party to a contract refuses altogether to perform, or is
disabled from performing his part of it, the other party has a right to
rescind it. Discuss this statement and the effects of such refusal under
the provisions of The Indian Contract Act, 1872. (6 Marks)
6. (a) Mr. Y issued a cheque for ` 10,000 to Mr. Z which was dishonoured by
the Bank because Y did not have enough funds in his account and has no
authority to overdraw. Examine as per the provisions of the Negotiable
Instruments Act, 1881 whether-

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 (i) Mr. Y is liable for dishonour of cheque, if yes, what are the
consequences for such an offence?
(ii) What would be your answer if Y issued a cheque as a donation to
Mr. Z? (7 Marks)
(b) Explain the term Wagering agreement in the light of the Indian Contract
Act, 1872. Also, explain some transactions resembling with wagering
transaction but which are not void.
OR
(b) What is the meaning of contingent contract? Write briefly its essentials.
Also, explain any three rules relating to enforcement of a contingent
contract. (6 Marks)
(c) J, a wholesaler of premium Basmati rice delivered on approval 100
bags of rice of 10 kg each to a local retailer, on sale or returnable basis
within a month of delivery. The next day the retailer sold 5 bags of rice
to a regular customer K. A week later K informed the retailer that the
quality of rice was not as per the price.
The retailer now wants to return all the rice bags to J, including the 4
bags not used by K. Can the retailer do so?
Also briefly describe the provisions underlying in this context of the
Sale of Goods Act, 1930, (7 Marks)

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 MODEL TEST PAPER 10
FOUNDATION COURSE
PAPER – 2: BUSINESS LAWS
Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.
Working notes should form part of the Answers.
(Time allowed: 3 Hours) (100 Marks)

1. (a) (i) Mr. L let out his residential house to Mr. M for ` 50,000 p.m. for a
period of one year. According to the Rent agreement, electricity bill
will be paid by Mr. L. But Mr. L could not pay electricity dues up to 5
months, due to his financial hardships. The Electricity Board sent the
notice of disconnection, if it is not paid within a week's time. To avoid
all this, Mr. M paid the electricity bill of ` 50,000 with penalty. Later
on, L refused to reimburse ` 50,000 and argued that he has paid bill
voluntarily because of his own interest. Decide with reference to
provisions of the Indian Contract Act, 1872 whether Mr. M is entitled
to be reimbursed by Mr. L? (3 Marks)
(ii) Mr. A offered to sell 25 chairs to Mr. B @ ` 1,500 per chair on
12.02.2024. A promised B that he would keep the offer open till
15.02.2024. However, on 13.02.2024, he sold those chairs to Mr.
C @ ` 1,700 per chair without the knowledge of B. Mr. B
communicated the acceptance of the above offer on 14.02.2024.
Advise, with reference to provisions of the Indian Contract Act,
1872 whether Mr. B can claim damages from Mr. A? (2 Marks)
(iii) Mr. A was running an orphanage. His friend Mr. S, a
philanthropist agreed to donate ` 2 lakh for treatment of a child,
who was suffering from cancer. On emergency, Mr. A incurred
` 1.5 lakh on treatment of child. Now, Mr. S refused to pay.
Whether Mr. A can claim ` 1.5 lakh from Mr. S with reference to
provisions of the Indian Contract Act, 1872? (2 Marks)
(b) (i) Kamal, a Chartered Accountant started his e-commerce business by
incorporating a One Person Company (the OPC) on 1st October,
2023. He, being a sole member of the OPC named his brother
Sudhakar, with his consent, as his nominee in the Memorandum of
Association of the OPC. Now, Kamal intends to replace Sudhakar
and to nominate any one of the following short- listed friends as a
nominee with effect from 1st January, 2024.
(1) Robert, an Indian citizen, and a resident in India shifted his
residence to the USA on 31st May, 2022 and has not returned
to India till 1st January, 2024.
(2) Dinkar, an Indian citizen, and non-resident in India came for
employment in India on 1st April, 2023 and have been
continuously staying in India since then.

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 Referring to the provisions of the Companies Act, 2013, advise
Kamal regarding eligibility of his short-listed friends to be
appointed nominee and the procedure to be followed for changing
the name of the nominee as per the provisions of the Companies
Act, 2013. (4 Marks)
(ii) XYZ Ltd. was incorporated to hold the patent for a new product.
The company is expecting to start its commercial production
within the next two years. In the meanwhile, for timely installation,
the company has placed the purchase order for plant and
machinery with a down payment of ` 1 crore. Referring to the
provisions of the Companies Act, 2013 examine, whether the
company can go for acquiring the status of a dormant company?
(3 Marks)
(c) Referring to the provisions of the Indian Partnership Act, 1932, answer
the following:
(i) "If a partner is otherwise expelled; the expulsion is null and void."
Discuss. (4 Marks)
(ii) "The partner who is expelled will cease to be liable to the third
party for the act of the firm done after expulsion." Analyse.
(2 Marks)
2. (a) (i) M/s RK Traders (Buyer) made a contract with M/s CK Traders
(Seller) for purchase of 2000 kg of basmati rice specifically grown in
Chhattisgarh State should be packed in pink colour bags of 25 kg
each to identify the place of origin by specifying the mode of packing
of basmati rice. The seller agreed for specific packing of rice grown
in Chhattisgarh State. However, by misunderstanding, staff of seller
packed the quantity of 1800 kg of basmati rice grown in the State of
Maharashtra in white colour bags of 30 kg each and the remaining
quantity of 200 kg, grown in Chhattisgarh State, in pink colour bags
of 25 kg each. Referring to the provisions of the Sale of Goods Act,
1930 analyse, whether the buyer has the right to reject the entire
quantity of basmati rice supplied by the seller.
On the other hand what is the remedy available to buyer if he has
to accept the entire quantity to fulfil his other contracts with other
parties? (4 Marks)
(ii) Kartik agreed to sell his laptop to Vasant for a price to be fixed by
Kusum a hardware engineer. However, before the delivery of the
laptop, Kartik changed his mind and did not share any particulars
and configuration of the laptop with Kusum, which made her
unable to do the valuation. Kusum refused to do valuation.
Vasant needed laptop for his project, so he promised Kartik that, if
the laptop is delivered to him, he would pay a reasonable price for
it However, Kartik decided not to sell his laptop to Vasant. Now,
Vasant wants to know from you, being a legal expert, whether
Kartik is bound by his promise as he agreed earlier to deliver his
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 laptop to him at a reasonable price. If he does not agree to deliver
what is the other remedy available to Vasant? Advise, referring to
the provisions of the Sale of Goods Act, 1930. (3 Marks)
(b) Referring to the provisions of the Companies Act, 2013, answer the
following:
(i) "Corporate veil sometimes fails to protect the members of the
company from the liability connected to the company's actions."
Explain any three instances. (5 Marks)
(ii) What is the effect of Memorandum and Articles when registered?
(2 Marks)
(c) Referring to the provisions of the Limited Liability Partnership Act,
2008, answer the following:
(i) Under what circumstances a Limited Liability Partnership is
compulsorily required to change its name? Also, explain the
compliance requirement following the change of name and the
consequences, if any, in case of default therein. (4 Marks)
(ii) What do you mean by a Small Limited Liability Partnership?
(2 Marks)
3. (a) Referring to the provisions of the Indian Partnership Act, 1932, answer the
following:
(i) Ram and Shyam are partners in a partnership firm styled as RS &
Co. (the firm). Gopal, a renowned businessman, is their common
friend. Ram introduced Gopal to Sundar, a supplier to the firm, as
his newly joined partner. Gopal knowing that he is not a partner
preferred to keep quiet on such an introduction. This information
about Gopal, being a partner of the firm, was shared by Sundar
with another businessman Madhav. Next day, Sundar supplied
the raw material on credit and Madhav lent ` 5 lakhs to the firm
for a short period on the understanding that Gopal is a partner of
the firm. On due dates, the firm failed to discharge its liability
towards both. Advise Gopal, whether he is liable to Sundar and
Madhav for the aforesaid liability of the firm. (3 Marks)
(ii) On admission as a new partner, Amar agreed to be liable for the
existing debts (referred to as the old debts) of the firm by an
agreement signed by the all partners including Amar. Examine,
whether Amar will be liable in a suit filed by the creditor against
the firm and all existing partners for recovery of the old debt of the
firm. (2 Marks)
(iii) Suman, having 10% share in the property of ` 200 lakh of a firm
retires from the firm on 31st March, 2023. The firm continues with
the business thereafter without final settlement of accounts
between the existing and retired partners and earned profits of
` 10 lakh during the financial year ending 31st March, 2024.
Suman, in her own interest and in the absence of any provision in
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 the partnership firm on this point, claimed ` 3 lakh from the firm
toward the use of her share in the property and profit of the firm
which was-rejected by the partners. There is no contract between
the partners contrary to the provisions of the Act in this regard.
Examine the validity of the amount claimed by Suman under the
provisions of the Indian Partnership Act, 1932. (2 Marks)
(b) (i) JV Limited borrowed a secured loan of ` 5 crore from Star Bank
Limited (the bank) to meet its working capital requirement. However,
the borrowing powers of the company, under its Memorandum of
Association, were restricted to ` 1 crore. The bank released the loan
amount in two instalments of ` 1 crore and ` 4 crore. On the due
date for repayment of the loan, the company refused to accept the
liability of ` 5 crore on the ground that the borrowing was ultra vires
the company. The company's books of account show that the
company has utilised the loan amount of ` 3 crore for repayment of
its lawful debts. The utilisation of the remaining ` 2 crore cannot be
traced. Referring to the doctrine of ultra-vires under the Companies
Act, 2013, examine the validity of the decision of the company
denying the repayment of the loan and explore the remedy, if any,
available to the bank for recovery of the loan. (4 Marks)
(ii) After incorporation of Goodwill Private Limited (the company) on
15th May, 2024 the share certificates were issued to Amit, Sumit
and Sumati being subscribers to the Memorandum of Association
of the company without affixing the common seal thereon and
under the signature of Amit and Sumit, the directors of the
company. The company has yet to appoint a company secretary.
On objection raised by Sumati, a director, about the validity of the
share certificate signed by other two directors, Amit and Sumit,
clarified that since the company has opted not to have the
common seal for the company the share certificates (i.e. the
document) signed by two directors are valid. Referring to the
provisions of the Companies Act, 2013, examine the correctness
of the objection raised by one of the directors and in response,
the clarification offered by other directors.
Would your answer be different, if the company had a company
secretary? (3 Marks)
(c) (i) In case of breach of contract, the court may award compensation or
damages. Explain the circumstances when court may award
ordinary damages, special damages and liquidated damages under
the provisions of the Indian Contract Act, 1872. (3 Marks)
(ii) What are the conditions need to be fulfilled to make the following
agreements valid without consideration as per the provisions of
the Indian Contract Act, 1872?
(A) Agreement made based on natural love and affection
(B) Promise to pay time-barred debts (3 Marks)

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4. (a) (i) Raghav found gold and diamond studded wristwatch value
approximately ` 1,00,000/- on the roadside. He picked it up and then
advertised in the newspaper that the true owner thereof can take the
watch after showing proper evidence. After waiting for a certain
period of time, when the true owner did not tum up, he gifted that
wristwatch to his son Mahesh. A few days later, Madhav, the true
owner of watch, somehow noticed his watch on wrist of Mahesh. He
approached him to collect the same, but Mahesh refused. In the
evening, Raghav called Madhav and told him that he incurred
` 20,000 to find the true owner if he fails to reimburse him the lawful
expenses incurred on finding out the true owner, he will sue him for
recovery thereof or retain the possession of the watch with him till
recovery. Even he can sell the watch for recovery of expenses.
Advise whether the following actions of Raghav were lawful
according to provisions of The Indian Contract Act, 1872:
(A) Gifting the wristwatch to his son.
(B) Warning Madhav to sue for recovery of lawful expenses
incurred in finding true owner.
(C) Retaining the possession of wristwatch till recovery of lawful
expenses.
(D) Selling of wristwatch for recovery of expenses. (4 Marks)
(ii) Woollen Garments Limited entered into a contract with a group of
women in July, 2023 to supply various woollen clothes for men,
women and kids like sweaters, monkey caps, mufflers; woollen
coats, hand gloves etc. before the commencement of the winter
season. The agreement expressly provides that the woollen
clothes shall be supplied by the end of October, 2023 before
starting of winter season. However, due to the prolonged strike,
women group could tender the supplies in March, 2024 when the
winter season was almost over. Analysing the situation and
answer the following questions in light of the provisions of the
Indian Contract Act, 1872:
(A) Whether company can reject the total supply by women group?
(B) Whether company can accept the total supply on request of
women group? (3 Marks)
(b) (i) With reference to provisions of the Negotiable Instruments Act,
1881, tell the instances where a person shall be deemed to have
committed an offence for dishonour of cheque and what are the
conditions to be complied with for not constituting such an offence?
(4 Marks)
(ii) (A) All cheques are bills while all bills are not cheques. Explain the
additional features of a cheque which differentiate a cheque
from bill as per the Negotiable Instruments Act, 1881.
(B) Ambiguous instrument (3 Marks)

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 (c) Explain the types of laws in the Indian Legal System considering the
Indian Regulatory Framework. (6 Marks)
5. (a) (i) Ashok, a trader, delivered a camera to Mangesh on 'sale or return'
basis. Mangesh delivers the camera to Rahul on the terms of 'sale
for cash only or return'. Afterward, Rahul delivered it to Vishal on a
'sale or return' basis without paying cash to Mangesh. The camera,
which was in the possession of Vishal was lost by theft though he
exercised due care for its safety. Referring to the provisions of the
Sale of Goods Act, 1930, analyse the situation and advise, whether
Mangesh, Rahul or Vishal are, jointly or severally, liable to pay the
price of the camera to Ashok. (4 Marks)
(ii) Ansari of Jaipur sold 100 smart TV set @ ` 50,000/- per set to
Baburam of Delhi. He delivered the TV sets to Chetan, a transport
carrier for transmission to Baburam. Baburam further sold these
100 TV sets to Shayamlal @ ` 60,000/- per set. On reaching the
goods at the destination, Baburam demanded the delivery but
Chetan, wrongfully, refused to deliver the goods to Baburam. That
is why; he failed to deliver TV sets to Shayamlal and suffered a
huge loss on account of non-delivery. Ansari came to know about
this. He directed Chetan to stop the delivery to Baburam and re-
deliver the goods to him at Jaipur.
Answer the following questions under the provisions of the Sale of
Goods Act, 1930:
(A) Whether Ansari has right to stop the goods in transit?
(B) Whether Baburam can claim loss suffered due to non­delivery
from Ansari? (3 Marks)
(b) State the circumstances, in which a Court may, at the suit of the
partner, dissolve a partnership firm under the provisions of the Indian
Partnership Act, 1932. (7 Marks)
(c) In accordance with the provisions of the Indian Contract Act, 1872,
answer the following:
(i) Rights of Bailor against any wrong doer (Third Party)
(ii) Duties of the Pawnee (6 Marks)
6. (a) Referring to the provisions of the Negotiable Instruments Act, 1881,
answer the following in the given scenario:
(i) Aman drew the bill of exchange (the bill) on Baban, who accepted
it, payable to Magan or order. Magan indorsed the bill to Gagan.
Gagan indorsed the bill to Akash to be delivered to him on the
next day. However, on the death of Gagan on the same day, his
only son Ankit delivered the bill to Akash on the next day as
intended by his deceased father. On presenting the bill on the due
date, Baban refused to pay. Explaining the importance of delivery
in negotiation, decide, whether Akash can enforce the payment of
the bill against Baban or the previous parties. (4 Marks)

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 (ii) Reliable Limited, an Indian company, is a global leader in
Petrochemical products. For payment of the sale price of
machinery imported from Alex Manufacturing Limited, a USA
based company (the exporter), the Indian company drew a bill of
exchange on Manish, a resident of Mumbai (India) who accepted
the bill at Mumbai payable to the exporter in Los Angeles, USA.
Decide, whether the bill of exchange is an inland instrument or a
foreign instrument. Assume that the bill of exchange was signed
by the authorised person for the drawer company. (3 Marks)
(b) Answer the following as per the provisions of the Indian Contract Act,
1872:
(i) 'Agent cannot personally enforce, nor be personally bound by,
contracts on behalf of the principal' however there are some
exceptions to this general rule, explain. (4 Marks)
(ii) State the rights of Indemnity-holder when sued. (2 Marks)
OR
(i) Explain any four differences between Contract of Indemnity and
Contract of Guarantee. (4 Marks)
(ii) Whether the threat to commit suicide is coercion? (2 Marks)
(c) (i) Explain the legal rules of auction sale relating to the following points
as per provisions of the Sale of Goods Act, 1930:
(A) Bid by seller with or without notification
(B) Bidder to retract from his bid
(C) Effect of pretending bidding (4 Marks)
(ii) Explain the provisions relating to the delivery of the wrong
quantity of goods as per the provisions of the Sale of Goods Act,
1930. (3 Marks)

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