Question 1

The company can create charge in favour of the lender on the assets which are:

Accepted Answer

**Answer: (C)**

Under **Section 77 of the Companies Act, 2013**, a company is required to register charges created on its property or assets or any of its undertakings. The scope of 'property or assets' under the Act is broad — it includes both **tangible and intangible assets**, and assets situated **within India as well as outside India**. Therefore, ACC Private Limited can validly create a charge in favour of Laxmi Bank Limited on its buildings (tangible assets) situated in both India and Germany, as well as on its trademark right over its logo (intangible asset). There is no restriction under the Companies Act, 2013 limiting charge creation to tangible assets or to assets situated only in India.

Question 2

Cross Limited is a company incorporated under the erstwhile Companies Act, 1956 while XYZ Private Limited is a company registered under the Companies Act, 2013. XYZ Private Limited has issued ₹1,00,000 convertible preference shares (carrying right to vote) of ₹100 each and 10,00,000 equity shares of ₹10 each fully paid. Cross Limited is holding all the preference shares and 1,00,000 equity shares of XYZ Private Limited. Examine whether:

Accepted Answer

**Part (i): Applicability of Companies Act, 2013 to Cross Limited**

As per **Section 1(4) of the Companies Act, 2013**, this Act applies to companies incorporated under this Act or under any previous company law. **Section 465** of the Companies Act, 2013 repealed the Companies Act, 1956. Since Cross Limited was incorporated under the erstwhile Companies Act, 1956, it qualifies as a company incorporated under a 'previous company law.' Accordingly, the **provisions of the Companies Act, 2013 are fully applicable to Cross Limited**, notwithstanding that it was originally incorporated under the old legislation.

**Part (ii): Whether XYZ Private Limited is a Public Company**

The relevant provision is the **proviso to Section 2(71) of the Companies Act, 2013**, which states that a company which is a **subsidiary of a company, not being a private company** (i.e., a public company), shall be **deemed to be a public company** for the purposes of this Act, even if its articles continue to provide for private company characteristics.

For this proviso to apply, two conditions must be satisfied: (a) Cross Limited must be a public company, and (b) XYZ Private Limited must be a **subsidiary** of Cross Limited.

**(a) Status of Cross Limited:** Cross Limited is named 'Cross Limited' (without the word 'Private'), indicating it is a **public company**. This condition is satisfied.

**(b) Whether XYZ Private Limited is a subsidiary of Cross Limited:** As per **Section 2(87) of the Companies…

Question 3

HelpIndia Limited was incorporated on 1st April 2022. The balances extracted from its audited financial statements are: FY 2022-23 — Net Profit before tax ₹11.00 crore, Net Profit after tax ₹4 crore; FY 2023-24 — Net Profit before tax ₹10.00 crore, Net Profit after tax ₹5 crore. HelpIndia Limited is considering allocating the minimum required amount for Corporate Social Responsibility (CSR) activities to be undertaken during FY 2024-25, provided it is mandatory to do so. They seek advice on this matter. Furthermore, HelpIndia Limited requests assistance in calculating the minimum amount to be allocated, if necessary, considering the relevant provisions of the Companies Act, 2013.

Accepted Answer

**CSR Applicability under Section 135 of the Companies Act, 2013**

Section 135(1) of the Companies Act, 2013 mandates CSR obligations on a company which, in the immediately preceding financial year, has: (a) net worth of ₹500 crore or more; OR (b) turnover of ₹1,000 crore or more; OR (c) **net profit of ₹5 crore or more**.

For determining CSR applicability for FY 2024-25, the immediately preceding financial year is **FY 2023-24**.

As per Rule 2(1)(h) of the Companies (CSR Policy) Rules, 2014 (as amended by the Companies (CSR Policy) Amendment Rules, 2021), **'net profit'** means the net profit of a company as per its financial statements prepared in accordance with the applicable provisions of the Act (excluding profits from overseas branches and dividends from complying domestic companies). This corresponds to **Net Profit After Tax (NPAT)**.

Net Profit (as per financial statements) for FY 2023-24 = **₹5 crore**, which equals the threshold of ₹5 crore. Since the threshold condition is '₹5 crore or more', it is **satisfied**.

**Conclusion on Applicability:** CSR spending is **mandatory** for HelpIndia Limited for FY 2024-25.

**Calculation of Minimum CSR Spend**

As per Section 135(5), the minimum CSR spend is **2% of the average net profits** of the three immediately preceding financial years.

However, HelpIndia Limited was incorporated on **1st April 2022**. Therefore, it has only completed **two financial years** (FY 2022-23 and FY 2023-24) before FY 2024-25.

The **…

Question 4

Mr. Rohan Sharma, an international cricket player, has started Rohan Sharma Cricket Academy, a private coaching club which provides coaching for cricket. The Academy has a cricket team which participates in cricket matches all over India as well as outside India. Rohan Sharma Cricket Academy, in collaboration with Melbourne Cricket Academy, is organizing a cricket event in Melbourne, Australia in May 2024 and June 2024. Rohan Sharma Academy is required to remit USD 2,00,000 to Melbourne Cricket Academy as its share for organizing the cricket event in Melbourne. Advise whether it can get foreign exchange and if so, under what conditions.

Accepted Answer

Yes, Rohan Sharma Cricket Academy can obtain foreign exchange to remit USD 2,00,000 to Melbourne Cricket Academy. This payment constitutes a **current account transaction** as per FEMA 1999.

The remittance qualifies as payment for services (organizing and participating in a cricket event), which is explicitly permitted under FEMA (Current Account Transactions) Rules 2000. Current account transactions are those that do not constitute capital account transactions and include payments for professional services, technical fees, and similar items. Section 5 of FEMA 1999 distinguishes between current and capital accounts, with current account transactions being permitted without requiring RBI approval on a transaction-by-transaction basis.

**Conditions to be Satisfied**

First, the Academy must provide **documentary evidence** to the Authorized Dealer. This should include an executed Memorandum of Understanding (MOU) or contract with Melbourne Cricket Academy, a detailed invoice or bill specifying the event details and cost breakdown, information about the cricket event (dates, venues, participating teams), and documentation establishing the legitimacy and credentials of Melbourne Cricket Academy.

Second, the transaction must be routed through an **Authorized Dealer**, typically a bank authorized by the RBI to deal in foreign exchange. The Authorized Dealer will verify the authenticity and business genuineness of the transaction, examine the credentials of Melbourne Cricket Acad…

Question 5

The maximum rate at which interim dividend can be declared by the Board during the current financial year is as under:

Accepted Answer

**Answer: (B)**

As per the proviso to **Section 123(3) of the Companies Act, 2013**, where a company has incurred a loss during the current financial year up to the end of the **quarter immediately preceding the date of declaration of interim dividend**, the Board shall not declare interim dividend at a rate higher than the **average dividend declared by the company during the immediately preceding three financial years**.

In the given case, the Board declared interim dividend on **11th August 2023**. The quarter immediately preceding this date ends on **30th June 2023**, and the company has incurred losses both in the previous financial year (FY 2022-23: Nil dividend) and in the current financial year up to 30th June 2023. Hence, the restriction under the proviso applies.

The average of dividends declared in the **immediately preceding three financial years** (FY 2022-23, FY 2021-22, and FY 2020-21) is: (0% + 10% + 11%) ÷ 3 = **7%**.

Therefore, the Board **cannot declare interim dividend at a rate higher than 7%**, making **(B) correct**.

Question 6

Explain the following as per the provisions of the Companies Act, 2013:

Accepted Answer

**Annual Return under Section 92 of the Companies Act, 2013**

**(i) Abridged Form of Annual Return**

Under **Section 92(1)** of the Companies Act, 2013, every company is required to prepare an Annual Return in the **prescribed form** containing particulars as they stood on the close of the financial year regarding its registered office, principal business activities, particulars of its holding, subsidiary and associate companies, shares and debentures, members, promoters, directors, key managerial personnel, meetings, remuneration of directors and KMP, penalties, and matters relating to certification of compliances.

The proviso to **Section 92(1)** provides that **One Person Companies (OPCs)** and **Small Companies** shall file an **abridged Annual Return** in such form as may be prescribed. The Ministry of Corporate Affairs has prescribed **Form MGT-7A** as the abridged form for OPCs and Small Companies, as opposed to the detailed **Form MGT-7** applicable to other companies. This simplified form has fewer disclosure requirements, providing relief from the extensive reporting burden otherwise applicable to larger companies. The purpose is to reduce compliance costs and administrative burden for smaller entities, thereby supporting the ease of doing business.

The Annual Return is required to be filed with the Registrar of Companies within **60 days** from the date of holding of the Annual General Meeting.

**(ii) Signing of Annual Return**

**Section 92(6)** of the Compan…

Question 7

APR Limited, a company renowned for manufacturing various types of mats, has established a strong brand presence and garnered a commendable reputation over the years. As of March 31, 2023, its Balance Sheet reflects the following financial position: Authorized Share Capital (25,00,000 equity shares of ₹10 each) — ₹2,50,00,000; Issued, subscribed and paid-up Share Capital (10,00,000 equity shares of ₹10 each, fully paid-up) — ₹1,00,00,000; Free Reserves — ₹3,00,00,000. The Board of Directors intends to propose a bonus issue wherein existing shareholders would receive 1 additional share for every 2 shares held. The Board wants to know the conditions and the manner of issuing bonus shares under the provisions of the Companies Act, 2013.

Accepted Answer

**Bonus Issue — Conditions and Manner under the Companies Act, 2013**

**Relevant Provision:** Section 63 of the Companies Act, 2013 governs the issue of fully paid-up bonus shares by a company.

**Sources from which Bonus Shares can be issued:**
A company may issue fully paid-up bonus shares to its members out of:
(i) Its **free reserves** (including surplus in the Statement of Profit and Loss);
(ii) The **Securities Premium Account**; or
(iii) The **Capital Redemption Reserve Account**.

**Conditions for Issue of Bonus Shares [Section 63(2)]:**
1. The issue must be **authorised by the Articles of Association** of the company.
2. It must be **recommended by the Board of Directors** and subsequently **authorised by the shareholders** in a general meeting.
3. The company must **not have defaulted** in payment of interest or principal in respect of fixed deposits or debt securities issued by it.
4. The company must **not have defaulted** in respect of payment of statutory dues of employees such as contribution to **Provident Fund, Gratuity, and Bonus**.
5. Any **partly paid-up shares** outstanding on the date of allotment must be made **fully paid-up** before bonus shares are allotted.
6. **Bonus shares shall not be issued in lieu of dividend.**

**Manner of Issuing Bonus Shares:**
1. The Board of Directors shall pass a **resolution recommending** the bonus issue.
2. The recommendation shall be placed before shareholders for approval at a **General Meeting** (ordinary resolutio…

Question 8

Explain the following with reference to the provisions of the General Clauses Act, 1897:

Accepted Answer

**MOVABLE PROPERTY**

Section 3(18) of the General Clauses Act, 1897 defines **Movable Property** as property of every description except land and things attached to the earth or permanently fastened to anything which is attached to the earth. This is an inclusive definition that applies uniformly across all central laws unless expressly excluded. Movable property includes tangible assets such as furniture, vehicles, machinery, money, securities, goods, and chattels that can be displaced from one location to another. It also encompasses intangible movable property including intellectual property rights, shares, debentures, and debts. The essential characteristic is that the property must be capable of being moved; hence, immovable property such as land, buildings, structures, permanent fixtures, trees rooted in the earth, and minerals in situ are expressly excluded. This definition is fundamental in taxation, contract law, and procedural law.

**OATH**

Section 3(31) of the General Clauses Act, 1897 defines **Oath** to include and shall be deemed to mean a solemn affirmation in the case of persons by law entitled to make a solemn affirmation instead of taking an oath. An oath is a formal and solemn declaration made before a competent authority (magistrate, judge, notary public, or authorized officer) with the intention of binding the conscience of the person making it. The definition recognizes that certain categories of persons—such as those with conscientious objections to …

Question 9

In respect of dividend declared which of the Statement is not correct?

Accepted Answer

**Answer: (C)**

Under **Section 124(1) of the Companies Act 2013**, where a dividend declared by a company has not been paid or claimed within **30 days** from the date of declaration, the company is required to transfer the total unpaid/unclaimed dividend amount to the **Unpaid Dividend Account** within **7 days** from the date of expiry of the said 30-day period — **not 10 days** as stated in Option (C). Therefore, Statement (C) is **not correct**.

The remaining statements are correct: **Section 123(4)** requires deposit in a separate scheduled bank account within **5 days** of declaration (Statement A); **Section 127** mandates payment within **30 days** of declaration (Statement B); and **Section 124(2)** requires placing the statement of unpaid dividend shareholders on the website within **90 days** of transfer to the Unpaid Dividend Account (Statement D).

Question 10

Explain the provisions of the Companies Act, 2013 — who can get a licence to operate as a section 8 company (non-profit organization)?

Accepted Answer

**Section 8 of the Companies Act, 2013** deals with the formation of companies with charitable objects, commonly known as **Non-Profit Organisations (NPOs)**. These companies are granted a licence by the **Central Government (delegated to the Registrar of Companies)** to operate without the suffix 'Limited' or 'Private Limited' in their name.

**Who Can Apply for a Section 8 Licence?**

As per **Section 8(1) of the Companies Act, 2013**, the Central Government may grant a licence to register a person or an association of persons as a Section 8 company if the following conditions are satisfied:

**1. Eligible Applicants:**
The following can apply for a licence under Section 8:
- A **person** or an **association of persons** intending to be registered as a limited company.
- An **existing company** (whether limited by shares or limited by guarantee) that desires to convert itself into a Section 8 company.

**2. Objects of the Proposed Company:**
The Central Government must be satisfied that the company intends to promote any of the following objects:
- **Commerce**, art, science, sports, education, research, social welfare, religion, charity, or **protection of environment**.
- Any other object that is **useful to the society**.

**3. Application of Income and Profits:**
The company must intend to apply its **profits, if any, or other income** solely for promoting its objects. This means:
- No dividend shall be paid to its members.
- Surplus funds cannot be distributed among me…

Question 11

Wood Limited has received ₹4,00,000 as a non-interest bearing security deposit under a contract of employment, from its employee Mr. Cotton. Mr. Cotton draws an annual salary of ₹3,85,000. Analyse under the provisions of the Companies Act, 2013, whether the said amount received by Wood Limited will be considered as deposits or not.

Accepted Answer

**Relevant Provision:** Under **Rule 2(1)(c)(iv) of the Companies (Acceptance of Deposits) Rules, 2014** framed under the **Companies Act, 2013**, any amount received from an **employee of the company**, not exceeding his **annual salary**, under a contract of employment and in the nature of a **non-interest bearing security deposit**, is specifically **excluded from the definition of 'deposit'**.

**Analysis of Wood Limited's Case:**

Mr. Cotton is an employee of Wood Limited and has paid ₹4,00,000 as a non-interest bearing security deposit under a contract of employment. These facts satisfy the qualitative conditions of Rule 2(1)(c)(iv) — i.e., the amount is from an employee, it is non-interest bearing, and it is given under a contract of employment.

However, the exemption is subject to a **quantitative ceiling**: the amount must **not exceed the employee's annual salary**.

- Amount received as security deposit: **₹4,00,000**
- Annual salary of Mr. Cotton: **₹3,85,000**
- Amount within the ceiling (not a deposit): **₹3,85,000**
- Amount exceeding the ceiling (treated as deposit): ₹4,00,000 − ₹3,85,000 = **₹15,000**

**Conclusion:** Out of the total ₹4,00,000 received from Mr. Cotton, **₹3,85,000 will NOT be treated as a deposit** (being within the annual salary limit and satisfying all conditions of the exemption). However, the **excess amount of ₹15,000** (i.e., the portion exceeding the annual salary) **will be treated as a 'deposit'** under the Companies Act, 2013, and…

Question 12

Explain the interpretation of statute aid — 'Read the Statute as a Whole'.

Accepted Answer

**Reading the Statute as a Whole** is an important internal aid to statutory interpretation that requires courts to interpret every provision of a statute within the context of the entire enactment, ensuring all parts are harmoniously construed together rather than in isolation.

**Meaning and Principle:** When interpreting a statutory provision, courts must not view it as a standalone clause but as an integral part of the complete legislative scheme. All parts of the statute—preamble, sections, provisos, explanations, schedules—must be read in conjunction with each other. The objective is to arrive at an interpretation that gives consistent, harmonious, and meaningful effect to every provision, avoiding contradictions between different parts.

**How the Aid Works:** The court gathers the legislative intent by examining the statute holistically. Related sections must be read together to understand their interconnection. If one interpretation renders a provision meaningless or creates conflict with another part, that interpretation should be rejected in favor of one that harmonizes all provisions. Words and phrases used throughout the statute should be given consistent meaning unless context suggests otherwise. Definitions provided in one section should inform the interpretation of similar terms elsewhere.

**Key Principles Applied:** First, no provision should be construed in a manner that makes another provision redundant or ineffective. Second, different parts should not be…

Question 13

Choose the correct option in terms that whether the provisions of Corporate Social Responsibility are applicable to ACC Private Limited.

Accepted Answer

**Answer: (B)**

Under **Section 135 of the Companies Act, 2013**, CSR provisions apply to every company (including private limited companies) having in the immediately preceding financial year: (i) net worth of ₹500 crore or more, OR (ii) turnover of ₹1,000 crore or more, OR (iii) net profit of ₹5 crore or more.

ACC Private Limited's turnover is ₹1,010 crore, which exceeds the ₹1,000 crore threshold. Hence, CSR provisions are applicable on the basis of turnover.

Option (A) is incorrect — CSR applies to private companies too if thresholds are met. Option (C) is incorrect — net profit is ₹4.9 crore, which does not exceed ₹5 crore. Option (D) is incorrect — net worth is ₹100 crore, which does not meet the ₹500 crore threshold. Only the turnover criterion is satisfied.

Question 14

Crystal Limited recently received a communication from the Central Government requesting the preparation of periodical financial results along with the completion of either a full audit or a limited review of these financial results. The Board of Directors has raised an objection, arguing that Crystal Limited, being an unlisted company, is not obligated to prepare periodical financial results. Analyze the situation, citing relevant provisions of the Companies Act, 2013, with respect to the company's obligation regarding the preparation of periodical financial results.

Accepted Answer

**Relevant Provision: Section 129A of the Companies Act, 2013**

Section 129A was inserted into the Companies Act, 2013 by the Companies (Amendment) Act, 2020. It empowers the **Central Government** to direct any company or class of companies, by notification, to prepare **periodical financial results** on a half-yearly basis (or such other periodical basis as may be specified).

**Key Requirements under Section 129A:**

**1. Applicability:** The Central Government may, by written direction, require **any company or class of companies** — including unlisted companies — to prepare periodical financial results. The section does not restrict its application only to listed companies.

**2. Audit/Limited Review:** The company so directed must have such periodical financial results either **completed with a full audit** or subjected to a **limited review** by the statutory auditor of the company. Crystal Limited has been asked for exactly this, which is consistent with the section.

**3. Board Approval and Signing:** The Board of Directors must approve the periodical financial results. They shall be signed by the Chairperson of the Board or at least two directors (one of whom shall be the Managing Director, if any), the Chief Executive Officer, the Chief Financial Officer, and the Company Secretary, where they have been appointed.

**4. Filing with Registrar:** After completion of the audit or limited review, the company must file the periodical financial results with the **Registr…

Question 15

Mr. Prateek (an individual) has started a Limited Liability Partnership firm along with Brown Limited and Picture Limited. As per the provisions of the Limited Liability Partnership Act, 2008, advise the Limited Liability Partnership firm about who can be the designated partners of the firm.

Accepted Answer

**Designated Partners under the LLP Act 2008 — Section 7**

**Statutory Requirement:** As per **Section 7(1) of the Limited Liability Partnership Act, 2008**, every LLP shall have at least **two designated partners who are individuals**, and at least **one of them shall be a resident in India**.

**Key Rule regarding Body Corporates:** A body corporate **cannot itself act as a designated partner**. Under **Section 7(2)**, if all partners of an LLP are body corporates, then at least two individuals **nominated** by such body corporates shall act as designated partners.

**Analysis of the Present Case:**

The LLP consists of three partners:
1. **Mr. Prateek** — an Individual
2. **Brown Limited** — a Body Corporate
3. **Picture Limited** — a Body Corporate

Since not all partners are body corporates, Section 7(2) does not apply in full. However, the basic requirement of at least **two individual designated partners** under Section 7(1) must still be satisfied.

**Who can be Designated Partners:**

- **Mr. Prateek** (individual) — can directly act as a designated partner, provided he gives his prior consent in the prescribed form as required under **Section 7(3)**.
- **Brown Limited and Picture Limited** — being body corporates, they **cannot** themselves be designated partners. However, each of them may **nominate an individual** to act as a designated partner on their behalf.

**Practical Advice to the LLP:**

Since only Mr. Prateek is an individual and the LLP requires **at le…

Question 16

In what way is 'Heading and Title of a Chapter' considered as internal aid in the interpretation of statutes?

Accepted Answer

**Internal aids to interpretation** are materials found within the statute itself that assist in understanding its meaning and intent. **Headings and chapter titles** serve as significant internal aids in the following ways:

**Purpose and Scope Indication**: Headings and chapter titles provide a clear indication of the subject matter and purpose of the sections they introduce. They act as signposts that guide the reader towards the intended legislative object and help identify the scope of provisions falling under them.

**Clarification of Ambiguities**: When the operative text of a section is ambiguous or capable of multiple interpretations, the heading or chapter title can serve as an aid to resolve that ambiguity. They indicate the legislative intent and help narrow down the correct interpretation among competing meanings.

**Understanding Legislative Scheme**: Headings and titles reveal the overall structure and scheme of the Act. They show how different provisions are organized and classified, enabling the interpreter to understand the inter-relationship between various sections and their collective purpose.

**Aid in Grouping Provisions**: Chapter titles help group related provisions together, allowing an interpreter to understand how one section relates to others within the same chapter. This contextual understanding aids in harmonious interpretation of related provisions.

**Limitations on Their Use**: However, headings and chapter titles have important limitations. …

Question 17

The notice for the Annual General Meeting should be served by:

Accepted Answer

**Answer: (D) 10th August 2023**

As per **Section 101 of the Companies Act 2013**, a general meeting must be called by giving not less than **21 clear days' notice**. The term 'clear days' means both the **day of service of notice** and the **day of the meeting** are excluded from the count.

The AGM is held on **1st September 2023**. Counting 21 clear days backward, excluding 1st September (day of meeting) and excluding the day of service itself, the notice must be served on or before **10th August 2023** — this leaves exactly 21 clear days (11th August to 31st August inclusive = 21 days).

Therefore, the notice must be served by **10th August 2023**.

Question 18

Enumerate the circumstances in which a Limited Liability Partnership may be wound up by the Tribunal. Give your answer in respect of the provisions of the Limited Liability Partnership Act, 2008.

Accepted Answer

**Winding Up of LLP by Tribunal — Section 64 of the Limited Liability Partnership Act, 2008**

Under **Section 64(1) of the Limited Liability Partnership Act, 2008**, a Limited Liability Partnership (LLP) may be wound up by the Tribunal on the following grounds:

**(1) Decision of the LLP itself:** The LLP has decided that it should be wound up by the Tribunal. This reflects a voluntary decision of the partners to seek winding up through the Tribunal route.

**(2) Reduction in number of partners below two:** The number of partners of the LLP is reduced below **two** and the LLP carries on business for a period of more than **six months** while the number is so reduced. Each LLP must have at least two partners; prolonged operation below this minimum is a ground for winding up.

**(3) Inability to pay debts:** The LLP is **unable to pay its debts**. An LLP shall be deemed unable to pay its debts if a creditor to whom the LLP owes a sum exceeding ₹1 lakh has served a demand notice and the LLP has failed to pay, secure, or compound the sum within 21 days, or if execution or other legal process issued in favour of a creditor is returned unsatisfied, or if the Tribunal is satisfied that the LLP is unable to pay its debts.

**(4) Act against sovereignty and integrity of India:** The LLP has **acted against the interests of the sovereignty and integrity of India**, the security of the State, public order, decency, or morality. This is a public interest ground and enables the State to…

Question 19

Kesar Limited, an unlisted company, furnishes the following data: (a) Paid-up share capital as on 31st March 2024 — ₹49 crore; (b) Turnover for the year ended 31st March 2024 — ₹100 crore; (c) Outstanding loan from bank as on 3rd March 2024 is ₹102 crore (₹105 crore loan originally obtained from bank) and the outstanding balance as on 31st March 2024 is ₹95 crore after repayment. Considering the above scenario and in accordance with the provisions of the Companies Act, 2013, determine whether Kesar Limited is required to appoint an Internal Auditor during the financial year 2024-2025.

Accepted Answer

**Applicable Provision:** Section 138 of the Companies Act, 2013 read with Rule 13 of the Companies (Accounts) Rules, 2014 mandates certain classes of companies to appoint an Internal Auditor. For an **unlisted public company**, internal audit is mandatory if, during the preceding financial year, ANY ONE of the following thresholds is triggered:

1. **Paid-up share capital** of ₹50 crore or more;
2. **Turnover** of ₹200 crore or more;
3. **Outstanding loans or borrowings** from banks or public financial institutions exceeding ₹100 crore **at any point of time**;
4. **Outstanding deposits** of ₹25 crore or more at any point of time.

**Analysis of Kesar Limited for FY 2024-25** (based on data of preceding FY 2023-24):

**Criterion 1 — Paid-up Share Capital:** ₹49 crore as on 31st March 2024. This is **below ₹50 crore**. Criterion NOT triggered.

**Criterion 2 — Turnover:** ₹100 crore for FY 2023-24. This is **below ₹200 crore**. Criterion NOT triggered.

**Criterion 3 — Outstanding Loans from Bank:** The outstanding balance as on 3rd March 2024 was **₹102 crore**, which **exceeds ₹100 crore**. The fact that the balance reduced to ₹95 crore by 31st March 2024 is irrelevant — Rule 13 uses the phrase "at any point of time during the preceding financial year." Since ₹102 crore was outstanding on 3rd March 2024 (falling within FY 2023-24), this threshold is **triggered**.

**Conclusion:** Even though two criteria are not met, Kesar Limited satisfies Criterion 3 (outstanding bank lo…

Question 20

Sheesham Limited is a company engaged in the business of manufacturing premium quality furniture in the state of Tamil Nadu. In light of the provisions of the General Clauses Act, 1897, and the Companies Act, 2013, please advise on the specific timelines regarding the payment of dividends subsequent to its declaration at the Annual General Meeting (AGM) held on 8th August 2023.

Accepted Answer

The payment of dividends after declaration at the Annual General Meeting is governed by the **Companies Act, 2013**, with the computation of the timeline regulated by the **General Clauses Act, 1897**.

**Timeline Under Companies Act, 2013:**

Section 123(5) of the Companies Act, 2013 prescribes that every company shall pay dividends declared by the Board or sanctioned by shareholders within **30 days from the date of declaration**. For Sheesham Limited, if the dividend is declared on 8th August 2023 at the AGM, the payment must be completed by 7th September 2023.

**Computation of Time - General Clauses Act, 1897:**

Section 13 of the General Clauses Act, 1897 provides the method for computing time periods. When an act is required to be done within a specified number of days from a given date, the given day (day of declaration) is not counted in the reckoning. The count begins from the next day. Therefore, for the 30-day period starting from 8th August 2023: counting begins from 9th August 2023, and the 30th day falls on 7th September 2023.

**Specific Timeline for Sheesham Limited:**

Given the AGM date of 8th August 2023, Sheesham Limited must ensure payment to all shareholders whose names appear on the register on the record date by **7th September 2023**. If this date falls on a public holiday or weekend, payment should be made on the next working day as per banking conventions.

**Mode and Mechanism of Payment:**

The Companies (Declaration and Payment of Dividend) Rule…

Question 21

Whether Manoj could be considered as resident or not as per the Limited Liability Partnership Act, 2008?

Accepted Answer

**Answer: (A)**

Under **Section 7(1) of the Limited Liability Partnership Act, 2008**, every LLP must have at least two designated partners who are individuals, and at least one of them must be a **resident in India**. A person is considered a resident in India if he has stayed in India for a period of **not less than 182 days** during the **immediately preceding one year**.

In the present case, Manoj joined as a partner on **25th January 2023**. The relevant preceding one year is therefore 25th January 2022 to 24th January 2023. During this entire period, Manoj was **out of India from 1st September 2021 to 23rd December 2022**, meaning he was present in India only from **23rd December 2022 to 24th January 2023** — approximately **33 days** — which is far below the required 182 days.

Therefore, **Manoj cannot be considered a resident in India** under the LLP Act, 2008, as he did not fulfil the 182-day stay requirement in the preceding one year. Option (B) is incorrect because it applies a threshold of 120 days, which is not the criterion under the LLP Act (that threshold applies under Income Tax Act). Options (C) and (D) are incorrect as they apply financial year-based income tax residency tests, which are not applicable here.

Question 22

Explain the provisions of the Companies Act, 2013, in respect of 'Inspection of Register of Charges and Instrument of Charges'.

Accepted Answer

**Inspection of Register of Charges and Instrument of Charges under the Companies Act, 2013**

The provisions relating to inspection of the register of charges and instruments of charges are governed by **Section 85 of the Companies Act, 2013**.

**Right of Inspection:**

The register of charges maintained by the company under Section 85, along with the instruments creating the charges, shall be **open for inspection** by any member, creditor, or any other person at all times during business hours. This right is available subject to such reasonable restrictions as the company may impose by its articles or in general meeting.

**Persons Entitled to Inspect:**

1. **Any member or creditor of the company** — shall be allowed to inspect the register and instruments of charges without payment of any fees.
2. **Any other person** — may inspect such register and instruments of charges on payment of such fees as may be prescribed (as per the Companies (Registration of Charges) Rules, 2014).

**Right to Obtain Copies:**

Any person inspecting the register or instruments of charges is entitled to obtain **copies** of the register of charges or any part thereof or a copy of the instrument creating any charge. Such copies shall be provided on payment of such fees as may be prescribed.

**Time Limit for Providing Copies:**

The company shall provide the copy of the register or instrument of charge within **seven days** of the request being made by any person. If the company fails to allow…

Question 23

Enumerate the provisions of the Companies Act, 2013 in respect to the following:

Accepted Answer

**Provisions of the Companies Act, 2013 regarding Minutes of Meetings**

**(i) Matters Not to be Included in Minutes — Chairman's Discretion**

As per **Section 118(3) of the Companies Act, 2013**, the Chairman of the meeting shall exercise **absolute discretion** in regard to the inclusion or non-inclusion of any matter in the minutes. The Chairman may exclude any matter which, in his opinion, is or could reasonably be regarded as:

(a) **Defamatory** of any person; or

(b) **Irrelevant or immaterial** to the proceedings; or

(c) **Detrimental to the interests of the company.**

The Chairman's discretion in this regard is absolute, meaning no challenge can ordinarily be raised against his decision to exclude such matters. This provision ensures that the minutes record only substantive and relevant proceedings while protecting individuals and the company from potentially harmful or extraneous content being placed on permanent record.

**(ii) Maximum Time Allowed for Entering Minutes of Proceedings**

As per **Section 118(1) of the Companies Act, 2013**, every company shall cause minutes of the proceedings of:
- Every **general meeting** of any class of shareholders or creditors;
- Every **resolution passed by postal ballot**; and
- Every **meeting of its Board of Directors** or of every **committee of the Board**,

to be prepared and signed in the prescribed manner and kept within **thirty (30) days** of the conclusion of every such meeting, or passing of resolution by postal…

Question 24

What are the documents that must be annexed to a prospectus offering for subscription in securities of a company incorporated or to be incorporated outside India, as per the Companies (Registration of Foreign Companies) Rules, 2014?

Accepted Answer

**Documents to be Annexed to a Prospectus of a Foreign Company**

As per **Rule 13 of the Companies (Registration of Foreign Companies) Rules, 2014** (framed under Section 389 of the Companies Act, 2013), every prospectus issued by or on behalf of a company **incorporated or to be incorporated outside India** must have the following documents annexed to it:

**(i) Previously Issued Prospectus or Application Form:** A copy of any prospectus or form of application for shares or debentures of the company that was previously published in India, if any.

**(ii) Constitutional Documents:** A copy of the **memorandum and articles of association** or other instrument constituting or defining the constitution of the company. Where the company is yet to be incorporated, a copy of the **draft memorandum and articles** proposed to be adopted must be annexed.

**(iii) Material Contracts:** Copies of every **material contract** referred to in the prospectus — other than a contract entered into in the ordinary course of business or a contract entered into more than **two years** before the date of the prospectus. Where a contract is not reduced to writing, a **memorandum giving full particulars** of that contract must be provided.

**(iv) Documents from Experts:** A copy of any letter, report, balance sheet, valuation, statement, or other document referred to in the prospectus as having been made by an **expert**, which purports to be made by that expert.

**(v) Audited Financial Statements…

Question 25

University of Oxford is planning a cultural event in UK in May 2024 and has invited Ms. Kanika Tripathi and her group, an Indian artist, to perform at the event. Ms. Kanika Tripathi needs to withdraw foreign exchange of USD 75,000 for the purpose of her visit to UK for performing at the cultural event of University of Oxford. Advise whether she can withdraw foreign exchange and if so, under what conditions.

Accepted Answer

**Yes, Ms. Kanika Tripathi can withdraw foreign exchange for her cultural performance abroad, subject to specified conditions.**

**Legal Framework:** The withdrawal is permissible under the **Foreign Exchange Management Act, 1999** (FEMA) and specifically under the **Foreign Exchange Management (Permissible Current Account Transactions) Rules, 2000**. Schedule 1 of these Rules permits current account transactions for travel abroad for various purposes, including participation in cultural events and performances.

**Basis for Permissibility:** An individual artist performing abroad can withdraw foreign exchange as it constitutes a permissible current account transaction under FEMA. The withdrawal covers travel expenses, accommodation, and other incidental expenses necessary for the cultural performance. This falls within the scope of travel for business purposes and cultural engagement, both recognized under the Schedule 1 of the Rules.

**Conditions for Withdrawal:**

1. **Authorization from Authorized Dealer:** The withdrawal must be made through an **Authorized Dealer** (typically banks authorized by RBI). Ms. Tripathi must approach an AD with her request.

2. **Documentation Required:** She must furnish:
   • Formal invitation letter from the University of Oxford specifying the cultural event, dates (May 2024), and her role as performer
   • Contract or agreement detailing the performance engagement
   • Proof that the event is a genuine cultural performance
   • Details …

Question 26

What would be the worth of Capital Contribution by Manoj?

Accepted Answer

**Answer: (C) ₹37,25,000**

Under the **Limited Liability Partnership Act, 2008**, where a partner contributes property as capital, the value of such contribution is determined at the **fair market value (FMV) on the date of contribution** (i.e., the date of admission as partner).

Manoj was admitted as a partner on **25th January 2023**. The FMV of the office premises on that date was **₹32,25,000** (not the FMV on 1st January 2023 when he was merely approached, nor the original cost of ₹25,00,000).

His total capital contribution = FMV of office premises (₹32,25,000) + Cash (₹5,00,000) = **₹37,25,000**.

Question 27

Whether Manoj will be liable to contribute ₹5,00,000 after dissolution of the firm?

Accepted Answer

**Answer: (C)**

Under **Section 34(1) of the Limited Liability Partnership Act, 2008**, upon dissolution of an LLP, a partner who has agreed to contribute capital under the LLP Agreement remains obligated to fulfil that commitment. The obligation to contribute capital as per the agreement does not extinguish merely because dissolution has occurred before the contribution deadline.

Manoj had contractually agreed to contribute ₹5,00,000 as capital within six months of his admission (i.e., by 25th July 2023). The dissolution of M/s Etharkkum Advisors LLP does not discharge this obligation. The unpaid capital contribution is treated as a liability of Manoj to the LLP and is available to satisfy the claims of creditors during winding up. Therefore, Manoj **is liable** to deposit ₹5,00,000, and the creditor's suit is maintainable.

Question 28

Finload Limited wants to raise funds for its upcoming project. Accordingly, it has issued private placement offer letters for issuing equity shares to 57 persons, of which six are qualified institutional buyers and remaining are individuals. Choose the correct statement as per the provisions of the Companies Act, 2013.

Accepted Answer

**Answer: (B)**

Under Section 42 of the Companies Act, 2013, a private placement is an offer or invitation to subscribe to securities made to a selected group of persons, limited to **not more than 50 persons**. Importantly, **qualified institutional buyers (QIBs) are excluded from the count** of persons for determining whether the prescribed limit is exceeded.

In this case, Finload Limited has made offers to 57 persons total: 6 QIBs and 51 individuals. Since QIBs are not counted, the prescribed limit calculation is based on the 51 individuals only. As 51 exceeds the limit of 50 persons, the offer is deemed to be an offer to the public and must comply with prospectus provisions under Section 32 and related provisions.

Option (A) is incorrect—public limited companies may undertake private placement. Option (C) is incorrect—while QIBs are excluded from the count, the 51 individuals still exceed the limit. Option (D) is incorrect—QIBs are specifically permitted under private placement and their exclusion from the count is a key advantage.

Question 29

Whether Krtiken Electronics Private Limited could be partner in M/s Aryan & Aryan LLP?

Accepted Answer

**Answer: (B)**

Mrs. Archika Jain's advice was **incorrect**. Krtiken Electronics Private Limited **can** be a partner in M/s Aryan & Aryan LLP. Although the **Limited Liability Partnership Act, 2008** originally defined 'body corporate' with reference to a company under the Companies Act, 1956, this does not mean a company incorporated under the Companies Act, 2013 is excluded. **Section 8 of the General Clauses Act, 1897** provides that where any Act repeals and re-enacts, with or without modification, any provision of a former enactment, references in any other enactment to the provision so repealed shall — unless a different intention appears — be construed as references to the provision so re-enacted. Since the Companies Act, 2013 repealed and re-enacted the Companies Act, 1956, the reference to 'company' in the LLP Act, 2008 must be read as a company defined under **Section 2(20) of the Companies Act, 2013**. Krtiken Electronics Private Limited, being a private limited company incorporated under the Companies Act, 2013, qualifies as a 'body corporate' and is thus eligible to become a partner in M/s Aryan & Aryan LLP, provided its memorandum and articles authorise it to do so — which they do.

Question 30

Following the provisions of Limited Liability Partnership Act, 2008 read with the General Clauses Act, 1897, what should be the last date to inform the registrar about the admission of Ms. Shanaya?

Accepted Answer

**Answer: (B) 16th February 2024**

Under **Section 25 of the Limited Liability Partnership Act, 2008**, whenever a new partner is admitted into an LLP, the LLP is required to inform the Registrar of Companies within **30 days** of such admission.

Ms. Shanaya was admitted as a new partner on **17th January 2024**. As per **Section 9 of the General Clauses Act, 1897**, when a period is expressed as a number of days 'after' or 'from' a specified event, the **day of the event itself is excluded** while computing the period.

Accordingly, the 30-day period begins from **18th January 2024** (Day 1), and the last date to intimate the Registrar falls on **16th February 2024** (Day 30).

The fact that Ms. Shanaya met with an accident and was declared of unsound mind on 3rd February 2024 has **no bearing** on the deadline to intimate the Registrar — the obligation arises on the date of admission and runs against the LLP, not the partner. The last date to inform the Registrar is therefore **16th February 2024**.

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