CA Inter Corp Laws — Question Paper — January 2025

Relevant Provision: Section 42 of the Limited Liability Partnership Act, 2008

Nature of X's Position

A has made an agreement to transfer 70% of his share in the profits of Alpha LLP to his daughter X. X is therefore a transferee of a partner's interest — she is NOT a partner of Alpha LLP. The transfer of a profit share does not, by itself, make the transferee a partner, nor does it cause dissolution of the LLP.

Rights of a Transferee under Section 42

Section 42 of the Limited Liability Partnership Act, 2008 specifically deals with the rights of a transferee of a partner's interest. The provision lays down the following:

(i) Economic Right Only: A transferee is entitled to receive, to the extent transferred, the distributions (profits) to which the transferring partner (A) would otherwise be entitled. Accordingly, X is entitled to receive 70% of A's share of profits from Alpha LLP.

(ii) No Management or Information Rights: Under Section 42(3) of the LLP Act, 2008, a transferee is not entitled to:
- Participate in the management of the LLP, or
- Have access to records or other information concerning the transactions of the LLP.

Are the Partners Correct?

Yes, the partners — A, B, C, and D — are absolutely correct in denying X access to information about the trading transactions of Alpha LLP. X's claim that she is entitled to information merely because she is to recover a percentage of profits is legally untenable. The LLP Act, 2008 expressly restricts the rights of a transferee to economic entitlements only, and specifically bars access to records and transactional information.

Remedy Available to X

X has no remedy against the LLP or its partners for denial of access to information, as such a right is not conferred upon her by law. Her only remedy lies against A (the transferring partner) — she can enforce the agreement and compel A to pay over to her the 70% of his profit share once the profits are determined and distributed. She cannot, however, compel the LLP to provide her with information directly.

Conclusion: The partners are correct in denying X access to trading transaction information. X's rights are limited solely to receiving the agreed portion of profits from A, and she has no statutory right to inspect LLP records or information under the LLP Act, 2008.

The General Clauses Act, 1897 does not prevent an offense from being punishable under multiple Acts. The applicable principle relates to the nature of repeal and the application of multiple enactments to the same subject matter.

When the Sale of Goods Act, 1930 was enacted, it did not expressly repeal the Indian Contract Act, 1872. According to the principle of statutory interpretation embodied in the General Clauses Act, 1897, the Sale of Goods Act operates as a special enactment that supplements the general principles of the Indian Contract Act rather than replaces them. Both Acts continue to apply unless there is express repeal or necessary contradiction between the provisions.

In the present case, Mr. A's fraudulent conduct in selling unmarketable goods violates principles under both Acts simultaneously: (1) Under the Indian Contract Act, 1872, fraud is a ground for rescinding the contract (Section 19), and the buyer can claim damages for breach; (2) Under the Sale of Goods Act, 1930, the sale involves breach of the implied condition that goods are of merchantable quality (Section 14) and breach of warranty regarding fitness for purpose.

The General Clauses Act permits the application of both Acts to the same act because they address different aspects of the transaction—the general law of contracts and the special law governing sales of goods respectively. Therefore, Mr. A is liable under both Acts, and the buyer (Mr. B) can pursue remedies available under either or both statutes. He may rescind the contract and claim damages under the Indian Contract Act and/or reject the goods and claim compensation under the Sale of Goods Act. This simultaneous liability is a feature of the overlapping nature of the two Acts, not a violation of any principle in the General Clauses Act, 1897.

According to Section 3 of the General Clauses Act, 1897, "good faith" is defined as honesty of intention and freedom from knowledge of circumstances which ought to put a person on inquiry. The definition encompasses two essential elements: (1) honest intention without fraudulent motive, and (2) freedom from knowledge of circumstances that would reasonably alert a prudent person to investigate further.

Applying this definition to Mr. P's purchase, the transaction is questionable regarding good faith, despite his honest intention. The first component (honesty) may be satisfied—Mr. P likely intended to buy genuinely. However, the second component presents a significant difficulty.

Mr. P's failure to check the car or test drive it violates the standard of care expected in such transactions. Any reasonable person purchasing a motor vehicle should ordinarily verify its mechanical condition, roadworthiness, and legal title. By not conducting these basic checks, Mr. P placed himself squarely in circumstances that ought to have put him on inquiry. Good faith does not mean blind trust or naivety, even with friends. Personal relationships do not exempt a buyer from exercising prudent diligence.

The crucial point is that Section 3's definition requires "freedom from knowledge of circumstances which ought to put a person on inquiry." Mr. P had such circumstances—the nature of a motor vehicle purchase inherently requires verification checks. His failure to perform these checks suggests he either had knowledge of circumstances warranting inquiry or failed to exercise reasonable care. Either way, the statutory test for good faith is not satisfied.

A person acting in good faith must take reasonable steps commensurate with the nature and value of the transaction. Purchasing a car without verification falls short of this requirement. The transaction would be more defensible as made in good faith if Mr. P could demonstrate he made reasonable inquiries, verified ownership documents, and obtained mechanical assurance—actions a prudent person would typically undertake.

Conclusion: Under Section 3 of the General Clauses Act, 1897, Mr. P's purchase cannot be conclusively said to be made in good faith due to insufficient diligence. While honesty of intention may exist, the absence of reasonable verification measures means he lacked the "freedom from knowledge of circumstances which ought to put him on inquiry" required by the statutory definition.

(i) Whether the Board is compelled to consider directions regarding shift of venue:

As per Section 96 of the Companies Act, 2013, every company must hold its Annual General Meeting (AGM) at the registered office of the company or at some other place within the city, town or village in which the registered office is situated. The Board of Directors is the authority empowered to call and convene the AGM.

The foundation, as an external body (not the Board itself), cannot compel the Board to shift the venue of the AGM unless the direction is given through proper corporate channels (e.g., by shareholders holding requisite voting rights through a validly passed resolution). Moreover, if the proposed venue shift would take the meeting outside the city/town/village of the registered office, it would be in direct violation of Section 96(2), making it impermissible regardless of the direction. Therefore, the Board is NOT bound to comply with the foundation's direction to shift the venue if it contravenes the statutory requirements under Section 96.

(ii) Whether a 15 days' prior notice is valid:

As per Section 101(1) of the Companies Act, 2013, a general meeting of a company may be called by giving not less than 21 clear days' notice either in writing or through electronic mode. The notice must specify the place, date, day, and hour of the meeting and contain a statement of business to be transacted.

A shorter notice is permissible only if consent in writing or by electronic mode is accorded by members holding not less than 95% of the paid-up share capital having the right to vote at that meeting [Section 101(1) proviso].

Therefore, the foundation's decision to give only 15 days' notice is NOT valid as it falls short of the mandatory 21 clear days required under Section 101(1). Unless 95% of members consent in writing to the shorter notice, the meeting held on such notice would be irregular and legally defective.

(iii) Whether the decision to provide only physical voting and not E-Voting is valid:

As per Section 108 of the Companies Act, 2013 read with Rule 20 of the Companies (Management and Administration) Rules, 2014, the following classes of companies are mandatorily required to provide the facility of voting through electronic means (e-voting) to their members:

1. Every listed company;
2. Every company having 1,000 or more members.

If the foundation/company falls under either of the above categories, the decision to provide only physical voting and deny the e-voting facility is NOT valid and is contrary to the statutory mandate. Such companies cannot restrict voting to physical mode alone.

However, if the company is neither listed nor has 1,000 or more members, provision of e-voting is optional, and in such case, providing only physical voting would be permissible.

Conclusion: The validity of restricting voting to physical mode depends on whether the company is listed or has 1,000 or more members. In most cases involving a foundation of reasonable size, this restriction would be invalid under Section 108 read with Rule 20.

Sub-part (i): Validity of Special Notice by Mr. H, Mr. J, and Mr. K

As per Section 115 of the Companies Act, 2013, a special notice is required for a resolution proposing the appointment of a person as auditor other than the retiring auditor, or for expressing that a retiring auditor shall not be re-appointed.

To validly issue such a special notice, the members giving the notice must collectively hold either:
- Not less than 1% of total voting power, OR
- Shares on which an aggregate sum of not less than ₹5,00,000 has been paid up.

In the present case, the aggregate paid-up share capital held by the three members is:
Mr. H: ₹1,50,000 + Mr. J: ₹1,00,000 + Mr. K: ₹2,50,000 = ₹5,00,000

Since the aggregate paid-up value of shares held is exactly ₹5,00,000, which satisfies the condition of "not less than ₹5,00,000", Mr. H, Mr. J, and Mr. K can validly issue such a Special Notice to the company under Section 115 of the Companies Act, 2013.

---

Sub-part (ii): Last Date for Issue of Special Notice

As per Section 115(1) of the Companies Act, 2013, the special notice must be deposited at the registered office of the company not less than 14 days before the date of the meeting, exclusive of:
- The day on which the notice is deposited, AND
- The day of the meeting.

The AGM is scheduled on 28.09.2024.

Excluding the day of the meeting (28th September) and the day of deposit, there must be at least 14 clear days in between.

Counting back 14 clear days from 28.09.2024 (excluding meeting day): 27, 26, 25, 24, 23, 22, 21, 20, 19, 18, 17, 16, 15, 14 September 2024.

Since the day of deposit is also to be excluded, the last date for deposit = 13th September 2024.

Verification: If deposited on 13.09.2024 (excluded), the 14 clear days are 14th to 27th September (14 days), and the meeting day 28th September is also excluded. This satisfies the requirement.

Therefore, the last date for giving Special Notice to the company is 13th September, 2024.

---

Sub-part (iii): Company's Obligation to Communicate the Special Notice to Other Members

Yes. As per Section 115(2) of the Companies Act, 2013, upon receipt of a valid special notice, the company is obligated to:
- Immediately give notice of the proposed resolution to all its members in the same manner as notice for any general meeting is given; OR
- If that is not practicable, by advertisement in a newspaper having appropriate circulation, or in any other mode permitted by the articles — all this not less than 7 days before the meeting.

Additionally, under Section 140(4) of the Companies Act, 2013, since the special notice concerns the non-reappointment of the existing auditor (M/S CVB & Associates), the company must also forthwith send a copy of the special notice to the retiring auditor. The retiring auditor is entitled to make a written representation and request that it be circulated to members. If received in time, the company shall send a copy of such representation to every member to whom notice of the meeting is sent.

Therefore, the company is obligated to communicate the Special Notice both to its members (not less than 7 days before the meeting) and to the retiring auditor M/S CVB & Associates.

Answer: (A)

Under Section 140(8) of the Companies Act, 2013, when an auditor resigns, they are required to communicate their resignation to the company and file a notice with the Registrar of Companies. Since JK Logistics Ltd. is a private company (not directly holding government shares), notification to the C&AG is not mandatory. The 75% ownership by RK Logistics Ltd. does not change JK Logistics' classification for audit notification purposes—the classification depends on the direct shareholding pattern of the company being audited, not its parent.

Mr. Rohan should have informed: (1) JK Logistics Ltd., and (2) the Registrar of Companies.

For failure to comply with this notification requirement, the auditor is liable to a penalty not exceeding ₹5 lakhs under Section 140 read with the Schedule IV of the Companies Act, 2013. The higher penalty reflects the serious nature of auditor's non-disclosure obligations and the importance of transparency in corporate governance.

Contention (i) - TENABLE

Section 13(8)(a) of the Companies Act, 2013 specifically provides that where a prospectus has been issued, any variation of the objects of the company in the memorandum shall require a special resolution, not an ordinary resolution. A special resolution requires approval by not less than 75% of members voting, whereas the facts indicate only that votes in favour exceeded votes against—this constitutes ordinary majority only. The statutory requirement for a special resolution has not been satisfied. Therefore, this contention is legally tenable and the variation is invalid.

Contention (ii) - TENABLE

Section 13(8)(b) of the Companies Act, 2013 mandates that "the notice of the special resolution shall be published in one English newspaper and one vernacular newspaper, circulating in the city where the registered office of the company is situated, indicating clearly the justification for such variation." This is a mandatory procedural requirement to provide transparency to all stakeholders about the proposed change. The facts do not indicate that such newspaper publication was undertaken, nor was the justification for diversion of funds clearly disclosed in newspapers as required. Non-compliance with this mandatory requirement renders the variation procedurally defective. Therefore, this contention is tenable.

Contention (iii) - TENABLE

This contention has substantial merit. Section 13 of the Companies Act, 2013 empowers variation of "objects" stated in the memorandum of association. Objects refer to the core business activities and purposes that the company is established to undertake. When a company's memorandum specifies objects such as "manufacturing and distributing life-saving drugs," any variation must substitute these with clearly defined new business objects.

Investment in equity shares of another company (X Limited) does not constitute a proper business object in the sense contemplated by Section 13. Purchasing shares represents a financial investment activity, not a distinct business operation or core function. The memorandum of association is meant to describe what the company does (its business objectives), not how it invests surplus funds. While companies may undertake investments, these are not typically classified as "objects" requiring memorandum variation. The prospectus was issued for specific capital-raising purposes; the funds cannot be diverted to general financial investments without clear business justification and proper authorization of a distinct new business object.

Furthermore, the AI software development could potentially be justified as a new business object if properly stated and authorized. However, investment in equity shares of an unrelated large company lacks the specificity required for a valid variation of objects under Section 13.

Conclusion: All three contentions are tenable under the Companies Act, 2013. The board's action violates Section 13(8) on multiple grounds: (i) inadequate majority for approval, (ii) failure to publish mandatory notices, and (iii) investment in equity shares not constituting a proper variation of business objects.

PART (a): VARIATION OF PROSPECTUS OBJECTS

The shareholders' contentions require examination under the Companies Act, 2013. Variation of the objects specified in a prospectus is governed by Section 123, which mandates a Special Resolution (requiring 3/4th majority, i.e., 75% of members present and voting). Additionally, Section 110 prescribes the procedure for notice of resolutions.

First Contention (Majority Requirement): This contention is TENABLE. The passing of the EGM resolution with votes "in excess of votes cast against" indicates a simple majority, not the 75% majority mandated for a special resolution under Section 123. Since variation of prospectus objects requires a special resolution, the resolution is procedurally invalid. The mere fact that more votes were cast in favor does not satisfy the statutory requirement.

Second Contention (Newspaper Publication): This contention is TENABLE. Under Section 110 and the Companies (Management and Administration) Rules, 2014, notice of an EGM for passing a special resolution must be published in two newspapers—one in English and one in the vernacular language—circulating in the city where the company's registered office is situated. Furthermore, the notice must contain clear justification for the variation of funds. The omission to publish such notice with proper justification renders the resolution defective.

Third Contention (Illegal Investment): This contention is NOT TENABLE. Investment in equity shares of a listed company (X Limited) is not inherently illegal. Companies are permitted to invest surplus funds in marketable securities, including equity shares, if such investment falls within the company's modified objects and authorized capital. The investment of ₹5,00,000 in a listed company is a permissible deployment of funds and does not violate any statutory provision, provided it is within the company's investment authority.

Conclusion: Two of the shareholders' contentions (on majority and newspaper publication) are tenable and render the resolutions invalid. The company would need to pass fresh special resolutions with proper majority and public notice procedures.

---

PART (b): CASUAL VACANCY IN OFFICE OF AUDITOR

Sohan Lal's resignation creates a casual vacancy in the office of statutory auditor under Section 140 of the Companies Act, 2013.

Appointment Procedure: RST Ltd. must appoint a new auditor within 30 days from the date of casual vacancy. The company may appoint the auditor through either of the following routes:
1. By Board of Directors, if the company's Articles of Association empower the Board to appoint auditors for casual vacancies; or
2. By General Meeting (convening an EGM if necessary), with approval of members by simple majority.

Conditions to be Complied:
1. The newly appointed auditor must satisfy the eligibility criteria under Section 141 (not disqualified under Section 141 clauses, member of ICAI in good standing, no conflict of interest).
2. Professional remuneration must be fixed by the company before appointment.
3. Notice of resignation and observations from the retiring auditor must be obtained and placed before the General Meeting (or Board), as per Section 143(2).
4. The newly appointed auditor holds office until the conclusion of the next Annual General Meeting (unless removed earlier).
5. If no appointment is made within 30 days, the Central Government may appoint an auditor under Section 140(1)(iv).
6. The appointment must be notified to the Registrar of Companies within 15 days.

Note: Since Sohan Lal surrendered his Certificate of Practice, the process is a straightforward casual vacancy replacement, and any qualified chartered accountant in practice (except those disqualified under Section 141) can be appointed.

---

PART (c): FEMA COMPLIANCE FOR NRI REAL ESTATE INVESTMENT AND COMMISSION

(i) Permissibility of Investment and Commission:

Under the FEMA (Acquisition and Transfer of Immovable Property) Rules, 2000, an NRI can acquire residential properties with the following restrictions:
- Maximum ONE residential property for self-occupation or residence
- Property value must be within prescribed limits
- Property must be acquired directly from the owner

Mr. Murari Lal is acquiring FOUR residential properties, which EXCEEDS the limit of one property. Therefore, investment in the excess three properties is NOT PERMISSIBLE under the existing rules without specific RBI authorization.

Regarding commission to brokers: Commission on real estate transactions is permissible as it falls under current account transactions under Section 6 of FEMA. Payment of brokerage/commission is a service charge and does NOT require separate approval, provided it complies with applicable commission limits.

(ii) Maximum Commission Without RBI Approval:

Under FEMA guidelines for real estate transactions, the maximum commission payable to each broker is typically 5% of the transaction value without requiring RBI approval. This is calculated on the property value.

Calculation per broker:
- Total transaction value for 4 properties: 4 × ₹2,00,00,000 = ₹8,00,00,000
- Assuming commission is split equally between two brokers or calculated per property basis:
- Per property maximum commission (5%): ₹2,00,00,000 × 5% = ₹10,00,000
- Maximum per broker (handling 2 properties): 2 × ₹10,00,000 = ₹20,00,000

Alternatively, if commission is 5% of total amount remitted (₹4,80,00,000):
- Total maximum commission (5%): ₹24,00,000
- Per broker (if equally divided): ₹12,00,000

Note: The investment itself requires RBI approval for the excess three properties. Payment of commission within the prescribed 5% limit does not require separate RBI approval.

Part (a): Public Issue by SCPL (Private Limited Company) — Provisions under Companies Act, 2013

Based on the facts, SCPL appears to be a Private Limited Company seeking to raise funds through a Public Issue. The following provisions of the Companies Act, 2013 are relevant:

Restriction on Private Company: Under Section 2(68) of the Companies Act, 2013, a private company, by its Articles of Association, is prohibited from making any invitation to the public to subscribe for any securities of the company. Therefore, SCPL, as a private limited company, cannot make a Public Issue of shares or debentures.

Conversion Required: For SCPL to access public capital markets, it must first convert itself into a Public Company by altering its Articles of Association under Section 14 and complying with the procedural requirements therein, including obtaining a new Certificate of Incorporation from the Registrar of Companies.

Rights Issue — Permissibility: A Rights Issue under Section 62(1)(a) of the Companies Act, 2013 is available to both public and private companies. Under this provision, a company proposing to increase its subscribed capital may offer further shares to existing equity shareholders in proportion to the paid-up share capital held by them. SCPL can validly make a Rights Issue without needing to convert to a public company, provided it follows the prescribed notice and offer procedure.

Other Applicable Provisions:
- If the Rights Issue is to existing members only, compliance with Section 62(1)(a) and a notice period of not less than 15 days and not more than 30 days is required.
- SEBI (ICDR) Regulations, 2018 would additionally apply once SCPL converts into a public company and plans a public offering.
- Promoters' minimum contribution and lock-in requirements under SEBI regulations would apply to any public issue.

Conclusion: SCPL cannot make a Public Issue in its current form as a private limited company. It may, however, proceed with a Rights Issue under Section 62(1)(a). To proceed with a Public Issue, conversion to a public company is mandatory.

---

Part (b): Statutory Obligations of Dinn Table Limited

Given financial data: Total Assets ₹310 crore, Gross Turnover ₹200 crore, Outstanding Borrowings/Loans ₹110 crore, Net Worth ₹300 crore.

Assuming Dinn Table Limited is a Public Company, the following obligations arise:

1. Audit Committee (Section 177): Under Rule 6 of the Companies (Meetings of Board and its Powers) Rules, 2014, an Audit Committee is mandatory for public companies with turnover ≥ ₹100 crore. With turnover of ₹200 crore, Dinn Table Limited must constitute an Audit Committee comprising at least 3 directors, with majority being Independent Directors.

2. Nomination and Remuneration Committee (Section 178): The same class of companies required to form an Audit Committee must also constitute a Nomination and Remuneration Committee. Accordingly, Dinn Table Limited is required to constitute this committee as well.

3. Internal Audit (Section 138 read with Rule 13): Every public company with turnover ≥ ₹200 crore in the preceding financial year is required to appoint an Internal Auditor. With turnover of exactly ₹200 crore, this obligation applies to Dinn Table Limited.

4. CSR Committee (Section 135): CSR obligation applies to companies with net worth ≥ ₹500 crore, or turnover ≥ ₹1,000 crore, or net profit ≥ ₹5 crore. With net worth ₹300 crore and turnover ₹200 crore, CSR provisions are NOT applicable to Dinn Table Limited.

5. Secretarial Audit (Section 204): Mandatory for public companies with paid-up capital ≥ ₹50 crore or turnover ≥ ₹250 crore. With turnover of ₹200 crore (below ₹250 crore), Secretarial Audit is not mandatory unless paid-up capital criterion is met.

Summary of Obligations: Dinn Table Limited is required to (i) constitute an Audit Committee under Section 177, (ii) constitute a Nomination and Remuneration Committee under Section 178, and (iii) appoint an Internal Auditor under Section 138. CSR and Secretarial Audit obligations are not triggered based on the given figures.

Answer: (C)

RK Logistics Ltd. Classification: The company is held by three state governments: Haryana (19%), Rajasthan (20%), and Punjab (18%), totaling 57% state government shareholding. Since the combined government stake exceeds 51%, RK Logistics Ltd. qualifies as a Government Company under Section 2(45) of the Companies Act, 2013, which defines a government company as one in which not less than 51% of paid-up capital is held by Central/State Government(s).

JK Logistics Ltd. Classification: Although government entities do not directly hold shares in JK Logistics Ltd., the company is held 75% by RK Logistics Ltd., making it a subsidiary of RK Logistics Ltd. Section 2(45) explicitly provides: "and includes a company which is a subsidiary of a government company as so defined." Therefore, JK Logistics Ltd. is classified as a Government Company by virtue of being a subsidiary of the Government Company (RK Logistics Ltd.).

Conclusion: Both companies qualify as Government Companies—RK Logistics directly through government shareholding, and JK Logistics indirectly as a subsidiary of a Government Company.

Sub-part (i): Loans to Mr. Soban and Ms. Sabana — SSPL being a Private Company

Relevant Provision — Section 67(2) of the Companies Act, 2013: No public company shall give any financial assistance, whether directly or indirectly and whether by way of a loan, guarantee, provision of security or otherwise, for the purpose of or in connection with a purchase of, or subscription for, any shares in the company or its holding company.

Critical Distinction — Private vs. Public Company: Section 67(2) expressly applies only to public companies. SSPL is a private limited company. A key departure of the Companies Act, 2013 from the Companies Act, 1956 is that the 2013 Act does not contain any deeming provision under which a private company subsidiary of a public company is treated as a public company. Under Section 2(71), a public company is simply one that is not a private company — there is no deemed status for subsidiaries.

Since SSPL was incorporated as a private limited company and retains that character, the restriction under Section 67(2) does not apply to it, notwithstanding that its holding company SBL is a listed public company.

Section 67(3)(c) — which permits loans to employees (other than directors or KMP) not exceeding six months' salary for purchasing fully paid-up shares — is an exception carved out of Section 67(2) for public companies. Since SSPL is not a public company and Section 67(2) is inapplicable, this exception clause is also not a limiting factor here.

Conclusion on Sub-part (i): Both loans — ₹15,00,000 to Mr. Soban (Deputy Marketing Manager) and ₹20,00,000 to Ms. Sabana (CFO) — can be disbursed by SSPL. Being a private limited company, SSPL is not bound by the prohibitions under Section 67(2) of the Companies Act, 2013.

---

Sub-part (ii): Would the answer differ if SBL held only 25% of SSPL?

Holding Company Relationship: Under Section 2(46) read with Section 2(87) of the Companies Act, 2013, a company is a 'subsidiary' of another if the other (holding) company controls the composition of its Board of Directors or exercises or controls more than one-half (i.e., more than 50%) of its total voting power. If SBL holds only 25% of SSPL's shares, SBL does not qualify as the holding company of SSPL; SSPL would simply be a company in which SBL holds a minority stake.

Effect on SSPL's Status: In either scenario — 100% holding or 25% holding — SSPL remains incorporated as a private limited company. There is no provision under the Companies Act, 2013 that converts a private company into a public company merely by virtue of its shareholding pattern or its being a subsidiary.

Conclusion on Sub-part (ii): No, the answer would not be different. Whether SBL holds 100% or only 25% of SSPL, SSPL remains a private limited company. Section 67(2) continues to be inapplicable, and the loans to Mr. Soban and Ms. Sabana can still be granted. The reduction in SBL's holding only changes the holding–subsidiary relationship but does not alter SSPL's fundamental character as a private company.

Advice to Stuti Ceramics Pvt. Ltd. (SCPL) on Private Placement of Securities

Can SCPL Raise Funds Through Private Placement?

Yes, SCPL can raise the remaining funds (₹ 500 lakh – ₹ 100 lakh already raised = ₹ 400 lakh) through Private Placement of securities. Section 42 of the Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 governs private placement. Since SCPL does not wish to convert into a public company and banks/FIs are reluctant to lend further, private placement is a permissible and suitable avenue for raising funds without going public.

What is Private Placement?

Private placement means any offer or invitation to subscribe to securities made to a select group of identified persons by a company (other than by way of public offer) through the issue of a Private Placement Offer-cum-Application Letter (Form PAS-4).

Conditions/Requirements under Section 42:

1. Special Resolution: The company must obtain prior approval of its shareholders by way of a Special Resolution (passed by postal ballot for unlisted companies) for the proposed offer. A separate special resolution must be passed for each offer or invitation.

2. Identified Persons: The offer shall be made only to a select group of persons identified by the Board, whose number shall not exceed 200 in a financial year (for each class of securities), excluding Qualified Institutional Buyers (QIBs) and employees offered securities under ESOP.

3. Offer Letter: The company shall issue offer and application in Form PAS-4 accompanied by an application form serially numbered and addressed specifically to each identified person. The offer shall be made only to such persons who have been identified.

4. No Public Advertisement: No offer shall be made through any public advertisement or any marketing, distribution, or circulation of offer documents.

5. Separate Bank Account: All monies received on application shall be kept in a separate bank account and shall be utilised only after allotment and filing of return of allotment (Form PAS-3) with the Registrar.

Limit for Fresh Offer:

Under Section 42(6), no fresh offer or invitation shall be made unless the allotments with respect to any earlier offer or invitation have been completed, or that offer or invitation has been withdrawn or abandoned by the company. This means SCPL cannot make successive or rolling offers simultaneously — each round must be closed (allotment completed or offer withdrawn) before a new offer is made.

Time Limit for Allotment of Securities:

As per Section 42(6), the company must allot the securities within 60 days from the date of receipt of the application money. If securities are not allotted within 60 days, the application money must be repaid within 15 days from the expiry of the 60-day period. In case of failure to repay within those 15 days, the company shall be liable to repay the money with interest at the rate of 12% per annum from the expiry of the 60th day.

Post-Allotment Compliance:

SCPL must file a Return of Allotment in Form PAS-3 with the Registrar of Companies within 15 days of allotment along with a complete list of all security-holders.

Conclusion: SCPL is well within its rights to raise the balance ₹ 400 lakh through private placement under Section 42 of the Companies Act, 2013, provided it complies with the procedural requirements of passing a special resolution, issuing Form PAS-4 to not more than 200 identified persons per financial year, completing allotment within 60 days of receipt of application money, and filing Form PAS-3 within 15 days of allotment.

Applicable Provision: Section 76 of the Companies Act, 2013 read with Rule 3 of the Companies (Acceptance of Deposits) Rules, 2014 governs acceptance of deposits from persons other than members by eligible companies.

Meaning of Eligible Company: Under Section 76, an eligible company is a public company having:
- A net worth of not less than ₹100 crore, OR
- A turnover of not less than ₹500 crore

Analysis of Dolls Toys Limited:

The given financial data of Dolls Toys Limited is:
- Net Worth = ₹310 crore
- Paid-up Share Capital = ₹200 crore
- Free Reserves and Securities Premium = ₹110 crore
- Turnover = ₹300 crore

Since the net worth is ₹310 crore, which is greater than the threshold of ₹100 crore, Dolls Toys Limited qualifies as an eligible company under Section 76, even though its turnover (₹300 crore) is below the ₹500 crore threshold. The two conditions are alternative (OR), not cumulative.

Conclusion: Dolls Toys Limited is permitted to accept deposits from public other than its members.

Maximum Limit Permissible: As per Rule 3 of the Companies (Acceptance of Deposits) Rules, 2014, an eligible company can accept deposits from persons other than members up to 25% of the aggregate of paid-up share capital, free reserves, and securities premium account.

Maximum permissible public deposits = 25% × (₹200 crore + ₹110 crore) = 25% × ₹310 crore = ₹77.50 crore

Key Conditions to be fulfilled: Before accepting such deposits, Dolls Toys Limited must comply with the following conditions under Section 76:
1. Pass a special resolution in the general meeting and file it with the Registrar of Companies.
2. Obtain a credit rating from a recognised credit rating agency and disclose it in the advertisement.
3. Create a Deposit Repayment Reserve of at least 20% of the amount of deposits maturing during the following financial year.
4. Obtain a deposit insurance as prescribed.
5. Issue a circular or advertisement in the prescribed form before inviting deposits.
6. Comply with directions of the Reserve Bank of India to the extent applicable.

Thus, Dolls Toys Limited, being an eligible company, may accept public deposits up to ₹77.50 crore subject to fulfilment of the above conditions.

Definition of Document under the General Clauses Act, 1897: According to Section 3 of the General Clauses Act, 1897, a 'document' includes any matter expressed or described upon any substance by means of letters, figures or marks, or by more than one of those means, intended to be used, or which may be used, as evidence of that matter. The definition is intentionally broad and is not restricted to any particular form or substance. It encompasses any written expression capable of serving as evidence.

Key Characteristics of a Document:
For something to be classified as a document, the following elements must be present: (1) Matter is expressed or described; (2) Expression is on any substance; (3) Expression is through letters, figures, or marks; (4) It is intended to be used, or may be used, as evidence of that matter.

(i) Power of Attorney: A Power of Attorney is a formal deed executed by a person (principal) authorizing another person (attorney) to act on their behalf in legal and financial matters. A Power of Attorney will be treated as a document under the General Clauses Act, 1897 because: (a) it expresses the intent of the principal in writing; (b) it contains letters and figures on paper or other substance; (c) it is specifically intended to serve as evidence of the authority delegated by the principal to the attorney; (d) it is a recognized legal instrument that can be produced in courts and administrative proceedings to prove the authorization. Therefore, it squarely falls within the definition of document.

(ii) Cheque: A cheque is a negotiable instrument as defined under the Negotiable Instruments Act, 1881. A cheque will be treated as a document under the General Clauses Act, 1897 because: (a) it expresses the drawer's instruction in writing; (b) it contains letters, figures, and marks (including the drawer's signature, date, amount in words and figures); (c) it is drawn on a substance (paper) and is intended to be used and relied upon as evidence of the drawer's instruction to the bank to pay a specified sum to the named payee; (d) cheques are regularly produced in courts and proceedings as documentary evidence of payment instructions and transactions. Hence, cheques clearly qualify as documents under the Act.

Dolls Toys Limited is NOT permitted to accept deposits with a repayment period of 4 months.

Legal Framework: Chapter V-B of the Companies Act, 2013 (Sections 73-78) and the Companies (Acceptance of Deposits) Rules, 2014 regulate the acceptance of deposits by companies.

Key Provision on Repayment Period: As per Rule 5 of the Companies (Acceptance of Deposits) Rules, 2014, the repayment period for deposits must be minimum 12 months and maximum 60 months (5 years). Any deposit accepted outside this range is not a valid deposit under the Act.

Analysis: A 4-month repayment period falls short of the prescribed minimum of 12 months. This violates Rule 5 of the Deposit Rules, making such deposits impermissible.

Statutory Requirement: Section 74(1)(d) of the Companies Act, 2013 mandates that companies accept deposits only in accordance with the rules made by the Central Government. Acceptance of deposits with a 4-month tenure breaches this requirement.

Consequences: Deposits accepted contrary to prescribed conditions are void. The company may face penalties under Section 78 of the Companies Act, 2013, and the deposits must be refunded immediately upon discovery of the violation.

Conclusion: Dolls Toys Limited must ensure any deposit acceptance adheres to the 12-60 month repayment window. For funds required urgently (4 months), the company should explore alternatives such as bank loans, commercial paper, or equity financing rather than accepting non-compliant deposits.

Answer:

(i) Date of Coming Into Force of a New Law:

As per Section 5 of the General Clauses Act, 1897, the date of coming into force of a new enactment is determined as follows:

• If the enactment specifies a date, it comes into force on that specified date.

• If no date is specified in the enactment, it comes into force on the date on which the President gives their assent to the enactment.

• The Government of India may prescribe different dates for different provisions of the same enactment coming into force.

(ii) Points Not Affected by Repeal of Old Enactment:

When a new enactment repeals an existing law, Section 6 of the General Clauses Act, 1897 provides that the repeal shall not affect the following matters:

• Previous Operation: The repeal does not affect anything done or omitted to be done before the repeal comes into force. All acts and transactions completed under the old law remain valid.

• Acquired Rights and Obligations: Any rights acquired, powers conferred, duties imposed, or liabilities incurred under the old law continue to exist and remain enforceable.

• Pending Legal Proceedings: Any legal proceeding, suit, or prosecution lawfully begun under the old enactment shall not abate but shall continue to be proceeded with under the new enactment.

• Penalties Incurred: Any penalty, forfeiture, or punishment incurred under the old enactment is not affected by the repeal, and such penalties remain recoverable.

• Existing Contracts and Property: All contracts, agreements, property rights, status of persons established under the old law remain valid and unaffected by the repeal.

• Formal Proceedings: Any formal proceeding lawfully begun under the old law and not completed shall be continued under the provisions of the new enactment to the extent applicable.

The Plain Word Rule states that when the words of a statute are clear, plain, and unambiguous, they require no further explanation and must be interpreted according to their ordinary and literal meaning. The court should not go beyond the plain meaning of the words or read into them any hidden meaning. This principle is based on the assumption that the legislature uses language to express its intention clearly, and if the language is plain, that plain meaning must be accepted. No extrinsic aids or external interpretation should be sought to alter or modify the plain meaning of statutory words.

The Technical Words Rule provides an exception to the above principle. When a statute uses words that are technical in nature or words of art (having specialized meaning in a particular field), such words must be understood in their technical sense, not in their ordinary sense. Technical words carry specialized meanings developed through usage in specific fields like science, commerce, medicine, or law. For example, the word 'security' in the Companies Act has a technical meaning different from its ordinary meaning. Similarly, 'debenture,' 'preference shares,' or 'memorandum' have technical meanings in company law and must be interpreted accordingly.

Interplay between the two rules: These two rules work together to guide statutory interpretation. First, examine whether the words used are plain or technical. If plain and unambiguous, apply their ordinary meaning without explanation. If technical terms are used, the court must understand them in their accepted technical sense. This prevents both mischievous interpretation (reading plain words in an artificial way) and misinterpretation (treating technical terms as if they were ordinary words). The interpreter must recognize that legislatures use technical language deliberately when dealing with specialized subjects, and such language must be respected and given its technical meaning.

Practical application: The rule ensures consistency and certainty in statutory interpretation. A taxpayer should not be able to claim that a technically defined term means something different because it sounds different in plain English. Conversely, courts should not impose technical meanings on genuinely plain words merely because interpretation seems complex.

Issue: Question text appears corrupted or incomplete. The question asks about the assessment year (अनुप्रयोग वर्ष) under the Income Tax Act, 1961, but the facts to be analyzed are missing or unreadable in sub-part (a). The Hindi text 'निकिधों मामों के लिए संकलपिक क्षमता हो समारोह प्रकिथ' does not form coherent meaningful content and appears to contain OCR/transcription errors. To provide an accurate answer on assessment year provisions (AY is the year following the financial year in which income is earned, as per Section 2(47) of the Income Tax Act, 1961), the specific facts and circumstances need to be clearly stated. Please verify the question text and resubmit with legible facts.

Answer: (B) The appointment of AG & Associates as auditors of JK Logistics Ltd. is not valid due to indebtedness of partner Mr. Avinash exceeding the prescribed limit. Under Section 144(1)(d) of the Companies Act, 2013, an auditor (and by extension, the audit firm) shall not be directly or indirectly indebted to the company or its subsidiary, holding company, or associate company for an amount exceeding ₹1 lakh. In this case, Mr. Avinash has incurred a total indebtedness of ₹3.5 lakhs (loan) + ₹1.49 lakhs (service dues) = ₹4.99 lakhs to RK Logistics Ltd. Since JK Logistics Ltd. is 75% owned by RK Logistics Ltd., RK Logistics Ltd. constitutes the holding company of the client company. The indebtedness of Mr. Avinash to the holding company (₹4.99 lakhs) substantially exceeds the prescribed limit of ₹1 lakh, rendering him ineligible for appointment as auditor. Consequently, the entire audit firm AG & Associates, with Mr. Avinash as a partner, is disqualified from accepting the audit engagement. Option (A) is incorrect as the indebtedness clearly exceeds ₹1 lakh. Option (C) is incorrect because disqualification due to indebtedness applies regardless of whether the disqualified partner signs the financials—the entire firm stands disqualified. Option (D) is incorrect because indebtedness to the holding company falls squarely within the scope of prohibited indebtedness under Section 144(1)(d).

Answer: The direction of the Regional Director is legally valid but may be challengeable on procedural grounds. Mr. D's contention appears weak based on the statutory framework, though procedural deficiencies could form viable grounds.

Applicable Legal Framework:

Section 67 of the Companies Act, 2013 empowers the Regional Director to direct a company to change its name where: (1) the company name is identical to or too closely resembles a name already registered as a trademark, (2) an application is made by the trademark owner within 3 years from the date of incorporation, and (3) the Regional Director is satisfied of the similarity.

Critical Analysis:

Compliance with Statutory Requirements: The company was incorporated on 1st June 2022. Mr. X filed the application on 10th July 2024—approximately 2 years and 9 days later, which is well within the mandatory 3-year period prescribed under Section 67(2). The Regional Director therefore possessed the legal authority to entertain the application and issue the direction.

Grounds Mr. D Might Raise:

(1) Procedural Defect—Lack of Natural Justice: The direction was issued within 24 hours of the application without affording the company an opportunity to be heard. While Section 67 does not explicitly mandate a hearing before issuance, principles of natural justice (audi alteram partem) are embedded in administrative law. The company had no chance to present evidence that the name was sufficiently distinct due to the legal suffix "Private Limited" or to contest the trademark's applicability. This procedural infirmity could render the direction voidable under the NCLT's supervisory jurisdiction.

(2) Insufficient Similarity: The registered trademark is "UINA Infra projects" while the company name is "UINA Infra Projects Private Limited." The statutory addition of "Private Limited" creates a material distinction and serves to identify the legal form of the entity. Mere similarity in the descriptive core may not constitute "too closely resembles" when the complete name is assessed. A consumer is unlikely to confuse the two given the different suffixes and contexts of use.

(3) Estoppel/Legitimate Expectation: The company operated for 2 years (1st June 2022 to 10th July 2024) with full knowledge of the Registrar. Mr. X discovered the name only after recovering from illness on 20th May 2024. Courts may consider whether a 2-year lapse before action reflects consent or waiver, though this ground is weaker given the clear 3-year statutory window.

Validity Conclusion:

The Regional Director had statutory authority under Section 67(2) to issue the direction since the application was filed within 3 years. The direction is therefore valid in law. However, it may be improper on procedural grounds (denial of opportunity to be heard) and could be challenged before the NCLT under Section 400 of the Companies Act, 2013. Mr. D should file an appeal emphasizing procedural defects and the distinguishing nature of the full legal name, though success is not assured unless the NCLT finds manifest procedural violation or clear absence of "close resemblance."

Validity of Appointment of M/s XYZ: Questionable

The appointment of M/s XYZ is technically valid as a separate legal entity, but raises serious independence and qualification concerns under the Companies Act, 2013.

Relevant Provisions:

1. Auditor Rotation Requirement (Section 140): M/s DEF's retirement after 9 years satisfies the rotation requirement (auditors cannot continue for 10 consecutive years or 2 consecutive terms of 5 years).

2. Disqualification of Mr. F (Section 141(3)(d)): The critical issue is Section 141(3)(d), which states: "any person who has been a partner or proprietor of an audit firm which held the position of auditor...if less than two years have expired after the date on which he ceased to hold that position, shall be disqualified." Mr. F, as a partner in DEF (the retiring auditor), is personally disqualified for 2 years from being an auditor or actively involved in the audit function.

3. Independence Requirement (Section 141): Section 141 requires that a person/firm appointed as auditor must be qualified and independent. Independence is fundamental and foundational to auditor appointment.

Issues with XYZ's Appointment:

(a) Breach of Independence: Mr. F, who was in charge of certification of Right Trading Limited's financial statements in DEF, immediately joining M/s XYZ creates a continuity problem. This compromises XYZ's independence in fact and appearance.

(b) Violation of Cooling-off Period: While Companies Act does not explicitly mandate a cooling-off period, SA 220 (Standard on Auditing 220) on quality control and professional ethics require a reasonable period before personnel of retiring auditors can be involved with the incoming auditor for the same client.

(c) Circumvention of Rotation Spirit: The object of auditor rotation (Section 140) is to ensure fresh perspective and independence. Mr. F's presence in XYZ effectively continues the same audit team and oversight, defeating the rotation requirement's purpose.

Conclusion: The appointment of M/s XYZ is questionable and potentially invalid if Mr. F is in a position to direct, supervise, or be significantly involved in the audit of Right Trading Limited. For valid appointment, M/s XYZ should ensure that Mr. F is not involved in this audit engagement, and ideally, there should be a cooling-off period of at least 2 years as implied by Section 141(3)(d) principles.

Applicable Provision: Section 19 of the Companies Act, 2013 governs restrictions on a subsidiary company from holding shares in its holding company and the exercise of voting rights by a subsidiary in the holding company.

Identification of Relationship:
Home Décor Limited (HDL) holds 6,00,000 out of 10,00,000 equity shares of Star Furnishing Limited (SFL), i.e., 60% of SFL's paid-up share capital. Since HDL holds more than 50% of the total share capital of SFL, HDL is the Holding Company and SFL is the Subsidiary Company of HDL under Section 2(87) of the Companies Act, 2013.

SFL in turn holds 7% equity shares of HDL (the holding company), of which 2% is held as a legal representative of a deceased member of HDL.

---

(i) Can Star Furnishing Limited make further investment in equity shares of Home Décor Limited?

As per Section 19(1) of the Companies Act, 2013, no company shall hold any shares in its holding company, and any allotment or transfer of shares of the holding company to the subsidiary shall be void.

The three exceptions permitted under Section 19(1) are:
- (a) where the subsidiary holds such shares as the legal representative of a deceased member of the holding company;
- (b) where the subsidiary holds such shares as a trustee; or
- (c) where the subsidiary held such shares before it became a subsidiary (i.e., it was already a member at the time of acquiring subsidiary status).

In the present case, SFL's existing holding of 5% (7% − 2% legal representative) may be permitted under exception (c) above. However, any further investment in HDL's equity shares by SFL would not fall under any of the three exceptions and would constitute a fresh acquisition in violation of Section 19(1).

Conclusion: SFL cannot make further investment in the equity shares of HDL during 2024-25.

---

(ii) Can Star Furnishing Limited exercise voting rights at the Annual General Meeting of Home Décor Limited?

As per Section 19(2) of the Companies Act, 2013, a subsidiary company shall not, and shall have no right to, vote as a member at any meeting of the holding company or at any class meeting of holders of any class of shares in the holding company.

However, the proviso to Section 19(2) read with Section 19(3) provides that this prohibition on voting does not apply where the subsidiary holds shares as a legal representative of a deceased member or as a trustee.

In the present case:
- SFL holds 5% equity shares of HDL in its own capacity — voting rights on these shares are prohibited under Section 19(2).
- SFL holds 2% equity shares of HDL as a legal representative of a deceased member — voting rights on these shares are permitted under the exception to Section 19(2).

Conclusion: SFL cannot exercise voting rights in respect of the 5% shares held in its own name at the AGM of HDL. However, SFL can exercise voting rights in respect of the 2% shares held as legal representative of the deceased member of HDL.

PART (a): VALIDITY OF 30% INTERIM DIVIDEND DECLARATION

The Board's declaration of 30% interim dividend is INVALID under Section 123 of the Companies Act, 2013.

Section 123 - Restrictions on Dividend Payment:

Section 123(1) provides that no dividend can be declared or paid by a company except out of profits for the current or preceding financial years, or from the surplus accumulated in the dividend equalization reserve account. Critically, the dividend cannot exceed the average of the profits of the preceding 5 financial years. This restriction applies equally to interim dividend declarations by the Board.

Calculation of Average Profits (as percentage):
FY 2018-19: 20%
FY 2019-20: 15%
FY 2020-21: 15%
FY 2021-22: 15%
FY 2022-23: 30%

Average = (20 + 15 + 15 + 15 + 30) ÷ 5 = 19%

Grounds of Invalidity:

1. Exceeds Average Profits: The declared dividend of 30% far exceeds the statutory limit of 19% (average of preceding 5 years). This is a direct violation of Section 123.

2. Insufficient Current Profits: The company suffered losses in Q1 and Q2 of FY 2023-24, indicating absence of profits in the current financial year to support such a high dividend.

3. Conflicting with Legislative Intent: Section 123 ensures that dividends are paid only when sustainable profits exist. The Board's motive to "sustain its image" despite losses contradicts the protective purpose of the statute.

Conclusion: The interim dividend declaration of 30% is void and invalid as it contravenes Section 123 of the Companies Act, 2013. The Board should declare a dividend not exceeding 19%, and only if sufficient profits (free of accumulated losses) are available.

---

PART (b): LLP WINDING UP AND PENALTIES FOR NON-FILING

Grounds for Tribunal Winding Up under Section 63, Limited Liability Partnership Act, 2008:

Section 63 empowers the Tribunal to wind up an LLP on several grounds. In this case, the Tribunal validly exercised its jurisdiction despite objections from some partners:

1. Losses and Insolvency: The LLP transitioned from profitability to persistent losses due to obsolete practices, indicating inability to sustain operations.

2. "Just and Equitable" Doctrine: Section 63(1) allows winding up when "it is just and equitable" to do so. The Tribunal found it appropriate given deadlock (some partners for winding up, others against) and the LLP's inability to recover.

3. Partner Disagreement: When partners are fundamentally divided on the LLP's future (three for winding up vs. others opposing), this constitutes grounds for "just and equitable" winding up under Section 63.

The Tribunal's order is valid as it operates independently of partner consensus when statutory grounds exist.

Provisions and Penalties for Non-filing Annual Return:

Section 36, LLP Act, 2008: Mandates that every LLP must file its annual return and statement of accounts with the Registrar within 60 days from the end of the financial year.

Penalties under Section 62, LLP Act, 2008: For failure to file annual returns from FY 2020-21 onwards:
- Penalty on LLP: Up to ₹10,000 or ₹100 per day of default, whichever is higher, up to a maximum of ₹5 lakhs.
- Penalty on Partners: Each partner liable to a fine of up to ₹5,000 per day of default.
- Additional Consequences: The LLP may be struck off the Register if default continues beyond the prescribed period.

In M/s Strong Steels LLP's case, non-filing from 2020-21 triggered cumulative penalties and potential strike-off proceedings.

---

PART (c): STATUTORY INTERPRETATION - DEFINITIONS

(i) Purpose of Including Definitions in Statutes:

Definitions in statutes serve critical interpretative functions:

1. Clarification of Ambiguous Terms: Remove uncertainty from words that could have multiple meanings, ensuring uniform application.

2. Establishing Precise Scope: Demarcate the exact boundaries of applicability, helping courts and administrators apply the law consistently.

3. Prevention of Litigation: Clear definitions minimize disputes over interpretation, reducing litigation burden.

4. Ensuring Legislative Intent: Definitions articulate the legislature's precise intent regarding specific concepts.

5. Facilitating Statutory Construction: Aid courts in statutory interpretation when ambiguity arises elsewhere in the Act.

(ii) Types of Definitional Words and Their Meanings:

"Means" (Exhaustive Definition): Provides an exclusive, restrictive definition. The term used only means the definition provided, no more, no less. It excludes any other interpretations. Example: "'Employee' means a person employed under a contract of service."

"Includes" (Extended/Additive Definition): Extends the normal or ordinary meaning of a term without limiting it to the definition alone. It adds to the natural meaning rather than replacing it. Additional things fall within the scope. Example: "'Income' includes salary, interest, and rent."

"Means and Includes" (Comprehensive Definition): Combines both exhaustive and extended approaches. It provides an exclusive definition while simultaneously extending the scope beyond that definition. It is both restrictive and additive. Example: "'Business' means and includes any trade, profession, or venture undertaken for profit."

"In apply to and include" (Contextual Extension): Used when a definition is applied in a specific context or specific application. It extends the meaning in that particular application without necessarily applying to all contexts. Meaning is situational and context-dependent.

Note on Question: The Hindi text of this question appears to be garbled or corrupted with OCR/translation errors, making the precise scenario difficult to reconstruct. Based on the available data — XYZ Limited, total assets / asset cost of ₹75 crores, and the rates provided in sub-part (a) for years 2019–2023 — the most reasonable interpretation is a Written Down Value (WDV) depreciation calculation under Schedule II of the Companies Act, 2013.

Sub-part (a): Calculation of Written Down Value (WDV) of Asset — 31st March each year

Assuming the asset was acquired at the beginning of FY 2018-19 for ₹75,00,00,000 (₹75 crores), depreciation is charged at the WDV rates given for each year.

The Written Down Value Method under Schedule II of the Companies Act, 2013 requires that depreciation be charged on the opening book value at the prescribed rate each year.

| Year | Opening WDV (₹ Cr) | Rate | Depreciation (₹ Cr) | Closing WDV (₹ Cr) |
|------|-------------------|------|---------------------|--------------------|
| 31.03.2019 | 75.00 | 20% | 15.00 | 60.00 |
| 31.03.2020 | 60.00 | 15% | 9.00 | 51.00 |
| 31.03.2021 | 51.00 | 15% | 7.65 | 43.35 |
| 31.03.2022 | 43.35 | 15% | 6.50 | 36.85 |
| 31.03.2023 | 36.85 | 30% | 11.06 | 25.80 |

Total Depreciation charged over 5 years = ₹49.21 crores

Written Down Value as at 31st March 2023 = ₹25.79 crores (approx.)

As per Schedule II of the Companies Act, 2013, where the remaining useful life of an asset becomes nil before the end of its scheduled useful life, the entire remaining book value must be written off. Depreciation rates under WDV method must result in the asset being written down to its residual value by the end of useful life.

Answer: (B)

When an AGM scheduled for 5th September 2024 fails due to want of quorum, XYZ Limited has specific statutory obligations under the Companies Act, 2013 and the Companies (Management and Administration) Rules, 2014.

Under Rule 12 of the Companies (Management and Administration) Rules, 2014, when an AGM cannot be held, the company must file two things with the Registrar:

1. An intimation stating the reasons for non-holding of the AGM (in this case, want of quorum)
2. A copy of the unadopted financial statements that were intended to be placed before the AGM

Both must be filed within 30 days from the date originally fixed for the AGM (i.e., by 5th October 2024 in this case).

The key principle is that the statutory filing requirement is independent of whether the AGM was held or the statements were adopted. The company cannot withhold filing on the premise that statements remain unadopted. Option (A) is therefore incorrect.

Once the financial statements are adopted in a subsequent meeting (the 2nd December 2024 EGM in this scenario), the company must then file the adopted financial statements along with the minutes of that meeting.

In the given case, XYZ Limited violated the filing requirement by not filing the unadopted statements by 5th October 2024 and instead waiting until 3rd January 2025 after adoption in the EGM.

FEMA 1999 – Investment and Commission Provisions

(i) Permissibility of Investment by Mr. Murari Lal and Commission Payment

Under the Foreign Exchange Management Act, 1999, investment by Mr. Murari Lal is permissible subject to the following conditions:

If Mr. Murari Lal is a resident individual, he can make investment abroad under the Liberalized Remittance Scheme (LRS). The current limit is USD 250,000 per financial year (for all permitted current or capital account transactions including overseas investment). The investment must be made through authorized dealers and only in specific permitted channels such as equity shares, immovable property, or units of overseas funds.

If Mr. Murari Lal is a non-resident, investment is permissible subject to compliance with extant FEMA regulations and source of funds verification.

Payment of commission on investment transactions is permissible provided it represents legitimate brokerage or agency fees for the transaction and does not exceed prescribed limits without explicit RBI approval. The commission must be reasonable and directly linked to the investment transaction undertaken.

(ii) Maximum Commission Without RBI Approval

The maximum amount of commission that can be paid to each broker/intermediary without prior RBI approval is generally 5% of the transaction value for investment-related transactions. This applies to commissions paid to brokers, agents, or intermediaries facilitating the investment abroad.

However, specific provisions under FEMA schedules or notifications may prescribe different limits for particular transactions (such as FDI, portfolio investment, or specific investment vehicles). When commission exceeds 5% or falls outside prescribed limits, specific RBI approval is required before the payment is made.

The payment of commission must be supported by appropriate documentation showing the genuine nature of the service provided and must be effected through authorized channels with proper reporting to authorized dealers.

Sub-part (i): Whether the Tribunal can waive off or reduce the penalty imposed on Mr. J

Yes, the Tribunal can waive off or reduce the penalty imposed on Mr. J. This is governed by Section 31 of the Limited Liability Partnership Act, 2008, which deals with the concept of Lesser Penalty.

As per Section 31(1) of the LLP Act, 2008, notwithstanding anything contained in this Act, the Tribunal may, by order in writing, on application made to it, reduce or waive the penalty leviable under the Act on any partner or employee of an LLP, who —
(a) first provides information regarding any default to the Registrar or to the Tribunal; or
(b) provides full and true disclosure of facts pertaining to such default.

In the given case, Mr. J was convicted by the Tribunal and a penalty of ₹1,25,000 was imposed. He subsequently approached the Tribunal and provided paid (paid = paid, meaning he voluntarily furnished) information about the other accused persons involved in the fraud and also aided in the investigation process. Since Mr. J has satisfied the conditions under Section 31(1) — namely providing information and cooperating with the investigation — the Tribunal has the power and discretion to reduce or waive the penalty of ₹1,25,000 imposed on him.

Conclusion: The Tribunal can waive off or reduce the penalty imposed on Mr. J, subject to its satisfaction that the disclosure is full and true and conditions under Section 31(1) of the LLP Act, 2008 are fulfilled.

---

Sub-part (ii): Whether the LLP can suspend Mr. J for revealing the names of the other accused

No, the LLP cannot suspend Mr. J from service for the act of revealing the names of the other accused involved in the fraud.

This protection is provided under Section 31(2) of the LLP Act, 2008, which states that a partner or employee who provides information or makes disclosures as referred to in Section 31(1) shall not be subject to any civil or criminal liability or any action by the limited liability partnership or its partners for such disclosure.

In the given case, Mr. J revealed the names of other accused as part of his disclosure to the Tribunal and co-operated in the investigation. This act of disclosure is expressly protected under Section 31(2) of the LLP Act, 2008. Any action by the LLP against Mr. J — including suspension — on account of such disclosure would be in contravention of this statutory protection.

Conclusion: The LLP cannot suspend Mr. J from service for revealing the names of the other accused involved in the fraud. He is statutorily protected under Section 31(2) of the Limited Liability Partnership Act, 2008 from any action (including disciplinary action) by the LLP or its partners for making such a disclosure.

The rule of Ejusdem Generis is a principle of statutory interpretation that means 'of the same kind' or 'of the same class.' According to this rule, when particular or specific words are followed by general or catch-all words in a statute, the general words are presumed to be limited and apply only to things of the same kind or class as those specifically mentioned. For example, if a statute reads 'Dogs, cats, birds and other animals,' the phrase 'other animals' would be restricted to domesticated or household animals similar to dogs, cats, and birds, not to all animals in general. This rule aids courts in interpreting the true intention of the legislature.

Instances where the Rule of Ejusdem Generis is NOT applied by courts:

1. When the Specific Words are Exhaustive or Independent: When the specific words enumerated in the statute are complete in themselves and exhaust the entire class or subject matter, the rule does not apply. The general words following them are treated as mere surplusage or ornamental language. For instance, if a statute mentions 'son, daughter, grandson, granddaughter and other heirs,' and these specific words already comprehensively cover all categories of heirs, the general words may be disregarded and the rule would not restrict their meaning.

2. When there are No Preceding Specific Words: The rule fundamentally requires that particular words must precede general words. When a statute contains only general words without any prior specific enumeration, or when general words appear first followed by specific words, the rule of ejusdem generis cannot be invoked. The general words must then be given their full and literal meaning without any artificial restriction.

3. When the Legislative Intent is Clear and Explicit: When the legislative intent is manifestly clear from the statute's context, language, structure, or avowed object that the general words were intended to be given their full and unrestricted meaning, courts will not apply the rule. If the legislature has explicitly indicated that general words should be construed in their widest sense, the rule is set aside. This commonly occurs in taxation statutes, public welfare legislation, and statutes dealing with matters of wide public concern, where the legislature's expansive intent is evident.

(i) Trigger Point for Registration of Charge

As per Section 77(1) of the Companies Act, 2013, it is the duty of every company creating a charge on its property or assets to register the particulars of the charge with the Registrar of Companies within 30 days of its creation.

The charge in the present case was created by way of equitable mortgage (deposit of title deeds of factory land and building) on 1st March, 2023. A charge is created at the time the security interest is constituted — i.e., when the mortgage/equitable mortgage is executed and title deeds are deposited with the bank. The creation of a charge and the availment of the credit facility are two distinct events.

The contention of Naveen Tools Ltd (NTL) that registration is triggered only when the cheque was issued in August 2023 is legally untenable. The credit limit sanctioned by Goodwill Bank was backed by the equitable mortgage from 1st March, 2023 itself. Whether NTL drew down the facility or not does not affect the creation of the charge. Therefore, the trigger point for registration is 1st March, 2023, and NTL was required to register the charge within 30 days thereof, i.e., by 30th March, 2023.

Regarding the argument that it is the Bank's responsibility: Section 77(1) unambiguously casts the primary duty on the company to register the charge. Section 78 of the Companies Act, 2013 merely provides an alternative remedy to the charge-holder (Goodwill Bank) to apply for registration if the company fails to do so — it does not transfer or extinguish the company's primary obligation. NTL cannot escape liability by shifting responsibility to the bank.

(ii) Consequences of Non-Registration of Charge

The following consequences arise under the Companies Act, 2013 upon non-registration of a charge:

1. Charge becomes void (Section 77(3)): An unregistered charge shall be void as against the liquidator and any creditor of the company. This means in the event of winding up, Goodwill Bank loses its status as a secured creditor and will be treated as an unsecured creditor with respect to that charge.

2. Money becomes immediately payable: Once the charge becomes void due to non-registration, the money secured by such charge becomes immediately payable as if the security had never existed. The bank can demand immediate repayment of the entire outstanding amount from NTL.

3. Penal consequences (Section 86): Contravention of Section 77 attracts the following penalties:
- The company shall be liable to a fine of not less than ₹1 lakh, which may extend to ₹10 lakh.
- Every officer of the company who is in default shall be liable to imprisonment up to 6 months OR a fine of not less than ₹25,000 which may extend to ₹1 lakh, or with both.

4. Condonation provisions: It may be noted that the Registrar can allow registration within 300 days from the date of creation of charge on payment of additional fees. Beyond 300 days, NTL would need to approach the Central Government for condonation of delay under Section 87 of the Companies Act, 2013, which may be allowed on such terms and conditions as the Government thinks fit.

In conclusion, NTL is in default from 30th March, 2023, and the assertion of its management is not sustainable under the law.

(a) Examination of whether Avanrika can inspect on behalf of Sanjana:

Relevant Provisions under the Companies Act, 2013:

Inspection of Books of Accounts — Section 128(3):
Under Section 128(3) of the Companies Act, 2013, the books of account and other books and papers maintained by a company shall be open for inspection by any director during business hours. This right of inspection is expressly conferred upon the *director personally*. The provision does not extend this right to any agent, representative, or any other person authorised by the director through a power of attorney.

Inspection of Minutes Books — Section 118(10):
Under Section 118(10) of the Companies Act, 2013, every director shall have the right to inspect the minutes books of the proceedings of meetings of the Board of Directors and committees thereof. This is again a personal right vested in the director and is not transferable or delegable to any other person.

Analysis of the present case:

Sanjana, being an Independent Director of Designers Clothe (I) Ltd., has a right to inspect both the books of account (under Section 128(3)) and the minutes books of Board Meetings (under Section 118(10)). However, the critical issue is whether this right can be exercised through a power of attorney in favour of Avanrika, a Chartered Accountant.

The rights under Sections 128(3) and 118(10) are strictly personal rights of the director. The Companies Act, 2013 does not contain any provision permitting a director to delegate the right of inspection to any other person — whether through a power of attorney or otherwise. The intent behind these provisions is to enable directors to personally satisfy themselves about the affairs of the company, as part of their fiduciary duty and oversight role.

Since the right of inspection is a personal, non-delegable right, the authorisation given by Sanjana through a power of attorney in favour of Avanrika has no legal sanctity under the Companies Act, 2013.

Conclusion:

Avanrika cannot make an inspection of the books of account or the minutes books of the Board Meetings on behalf of Sanjana. The fact that Avanrika is a Chartered Accountant and a friend of Sanjana, or that she resides in Mumbai where the Registered Office is located, does not confer upon her any legal right to inspect under the Act. Sanjana must exercise her right of inspection *personally*. The geographical inconvenience of Sanjana residing in Kolkata does not override the statutory requirement for personal inspection.

Answer: (C)

Under Section 413 of the Companies Act, 2013, even when financial statements are not adopted at a general meeting, there is a statutory obligation to file them with the Registrar within 30 days from the date the meeting was held. The company is not required to separately inform the Registrar about the non-adoption (as the AGM meeting minutes will reflect this), but the unadopted financial statements must still be filed.

These unadopted financial statements are filed as provisional financial statements or marked as unadopted, distinguishing them from adopted financial statements that represent the company's final position. This requirement ensures transparency and prevents companies from avoiding disclosure simply because financial statements were not adopted at the general meeting. The directors' argument that filing was unnecessary until adoption is legally incorrect.

In this case, XYZ Limited should have filed the unadopted financial statements for FY 2023-2024 within 30 days of the 12th September 2024 meeting (i.e., by 12th October 2024), marked as provisional/unadopted. The subsequent adoption at the EGM on 2nd December 2024 and filing on 3rd January 2025 does not alter this obligation retroactively.

The following expert views are provided on the matters raised by the Board of Directors of Quick Money Limited regarding Impact Assessment under Rule 8(3) of the Companies (CSR Policy) Rules, 2014 read with Section 135 of the Companies Act, 2013:

(i) Meaning of Impact Assessment

Impact Assessment means the assessment of the actual effect or outcome of CSR projects on the target beneficiaries and the community at large. It is a structured process to evaluate whether CSR projects have achieved their intended social, environmental, or economic outcomes. The impact assessment study examines the difference made by the CSR project in the lives of the intended beneficiaries and the broader community, thereby helping companies measure the effectiveness and long-term sustainability of their CSR initiatives.

The findings of the impact assessment report must be placed before the Board of Directors and shall be annexed to the Annual Report on CSR.

(ii) Whether Impact Assessment is Required for All Companies

No, impact assessment is not required to be undertaken by all companies. As per Rule 8(3) of the Companies (CSR Policy) Rules, 2014, impact assessment is mandated only for specified companies subject to the following conditions being satisfied:

Condition 1 — Company Threshold: The company must have average CSR obligation of ₹10 crore or more in the three immediately preceding financial years.

Condition 2 — Project Threshold: Impact assessment is required only for those individual CSR projects having an outlay of ₹1 crore or more.

Condition 3 — Completion Criterion: The CSR project must have been completed not less than one year before undertaking the impact assessment study.

In the present case, Quick Money Limited has a minimum average CSR obligation of ₹15 crores, which exceeds the threshold of ₹10 crores. Therefore, Quick Money Limited is mandatorily required to undertake impact assessment for all eligible completed CSR projects having individual outlays of ₹1 crore or more that were completed at least one year prior to such assessment.

Expenditure on Impact Assessment: The expenditure incurred on impact assessment may be included as part of CSR expenditure. However, such expenditure shall not exceed 5% of total CSR expenditure for that financial year or ₹50 lakh, whichever is less.

(iii) Who Can Conduct Impact Assessment

As per Rule 8(3) of the Companies (CSR Policy) Rules, 2014, impact assessment shall be carried out by an Independent Agency. The Rules do not prescribe a specific list of agencies but require that the agency be independent, i.e., it should not have any conflict of interest with the company or the CSR project being assessed. This ensures objectivity and credibility of the assessment.

The impact assessment report prepared by such independent agency must be:
- Placed before the Board of Directors of the company; and
- Annexed to the Annual Report on CSR (as part of the Board's Report).

This requirement ensures transparency and accountability in CSR spending and allows stakeholders to evaluate the real-world outcomes of CSR activities.

Applicable Provisions: Section 73 of the Companies Act, 2013 read with Rule 3 and Rule 13 of the Companies (Acceptance of Deposits) Rules, 2014

(a) Maximum Limit of Deposits Acceptable from Members:

As per Rule 3(3) of the Companies (Acceptance of Deposits) Rules, 2014, a private company (other than a start-up or a company which is not an associate or subsidiary of any other company) can accept deposits from its members up to a limit of 100% of its paid-up share capital, free reserves, and securities premium account.

The components for BLH Private Limited are:
- Paid-up Share Capital: ₹9,00,00,000
- Securities Premium Reserve: ₹2,00,00,000
- General Reserves (Free Reserves): ₹9,00,00,000
- Total Base = ₹20,00,00,000

Maximum permissible deposits from members = 100% × ₹20,00,00,000 = ₹20,00,00,000

Note: The 'Deposit with UMB Bank Limited' of ₹12,00,00,000 is an asset (money deposited BY the company in a bank — likely the Deposit Repayment Reserve Account or a term deposit). It does not reduce the deposit acceptance capacity. The Cash Credit Loan of ₹5,00,00,000 is a borrowing and also does not affect this calculation.

(b) Board's Intention to Avoid Deposit Repayment Reserve Account (DRR) — Not Permissible:

As per Rule 13(1) of the Companies (Acceptance of Deposits) Rules, 2014, every company accepting deposits must, on or before 30th April of each year, deposit a sum not less than 20% of the amount of its deposits maturing during the following financial year in a scheduled bank in a separate account designated as the 'Deposit Repayment Reserve Account'. This amount shall not be utilised for any purpose other than repayment of deposits.

The Board's contention that the DRR need not be maintained since repayment would be made from moneys received from customers booking the NOVA project is not tenable in law. The statutory obligation under Rule 13 is unconditional and mandatory; it cannot be bypassed on the grounds of an alternative repayment source. The DRR requirement exists to protect depositors and is not contingent on the source of repayment funds. This exemption from Rule 13 is available only to Government companies — BLH Private Limited does not qualify.

(c) Choice of Appropriate Deposit Proposal:

The Board should select a proposal that:
1. Does not exceed the aggregate limit of ₹20,00,00,000 (100% of paid-up capital + free reserves + securities premium), and
2. Is accompanied by compliance with Rule 13 — 20% DRR to be maintained in a scheduled bank account.
3. A resolution in general meeting must be passed before accepting deposits (Section 73(2) of the Companies Act, 2013).
4. The company must also file Form DPT-1 (circular/advertisement) and comply with credit rating and deposit insurance requirements as applicable.

The Board must select the proposal within the ₹20,00,00,000 ceiling and must not proceed with any deposit acceptance unless the DRR obligation is also concurrently fulfilled. Final Answer: The permissible deposit limit is ₹20,00,00,000; the Board cannot legally avoid creating the Deposit Repayment Reserve Account.

The acceptance of deposits by companies is governed by Section 73 of the Companies Act, 2013, read with Section 76 and the Companies (Acceptance of Deposits) Rules, 2014.

Legal Framework:

Section 73 generally prohibits acceptance of deposits. However, Section 76 provides an exemption permitting companies to accept deposits from their members subject to prescribed conditions and limits.

Key Conditions under the Companies (Acceptance of Deposits) Rules, 2014:

1. Deposits must be from members only - not from the public or non-members
2. Aggregate deposit limit - Total deposits accepted must not exceed 10% of the sum of paid-up capital and free reserves
3. Individual member limit - Generally capped at ₹3 lakhs per member
4. Repayment period - Maximum 3 to 5 years
5. Interest rate - Must be reasonable and transparent (8% p.a. falls within acceptable parameters)
6. Approvals - Board resolution and shareholder approval (if required)
7. Documentation - Formal deposit agreement specifying terms, security, and repayment mechanism

Analysis of Proposals:

The two proposals aggregate to ₹34,00,00,000 (₹20 cr + ₹14 cr). The critical compliance issue is whether this total amount exceeds the statutory limit of 10% of (paid-up capital + free reserves). Without knowing the company's financial position, this is the primary verification point.

Board Recommendation:

ACCEPT both proposals subject to the following conditions being satisfied:

1. Verification of deposit limit: The company's Finance/Accounts department must confirm in writing that the total deposits of ₹34 crores do not exceed 10% of the sum of paid-up capital and free reserves as on the date of acceptance
2. Member status: Deposits must be from the company's members only; non-member deposits cannot be accepted without Central Government approval (which is unlikely)
3. Approvals: Ensure appropriate Board resolutions are passed and shareholder approval obtained if required by the company's Articles
4. Documentation: Execute formal deposit agreements with clear terms:
- Amount, interest rate (8% p.a.), and repayment schedule
- Security arrangements (if any)
- Consequences of default
- Dispute resolution mechanism
5. Financial capacity: Ensure the company's cash flow and financial position permit timely repayment with interest

Justification:

Both proposals comply with statutory interest rate requirements. The 8% p.a. interest is commercially reasonable and transparent. Deposits from members are statutorily permitted under Section 76 when conditions are met. Proper governance through Board and shareholder approval provides requisite safeguards. The key limiting factor is the 10% deposit cap on aggregate funds, which must be verified before acceptance.

Answer: (B)

When financial statements are adopted at an EGM after failing to be adopted at an AGM, Section 136 of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 prescribes that:

1. No separate notification required: The company is NOT required to separately inform the Registrar about the non-adoption in the previous AGM held on 12th September 2024. The fact that statements are only filed after adoption is inherently understood.

2. Filing timeline: The adopted financial statements must be filed with the Registrar within 30 days from the date of adoption at the EGM (2nd December 2024). In this case, the deadline would be 2nd January 2025. Filing on 3rd January 2025 would technically be one day late, attracting potential penalty, but the principle remains that the 30-day period runs from the EGM adoption date.

3. Status of previously filed unadopted statements: If any unadopted financial statements were filed before adoption, they would be treated as provisional financial statements and superseded by the adopted statements once filed. This is the standard legal terminology under the Companies Act and ensures that only the officially adopted statements remain on record.

4. Treated as FY 2023-2024 statements: The adopted statements will be recognized as the official financial statements for the financial year 2023-2024 regardless of the adoption delay.

Options (A), (C), and (D) are incorrect: (A) wrongly requires notification to the Registrar; (C) suggests unadopted statements are returned (not the correct procedure); (D) uses imprecise terminology instead of the legally established term "provisional financial statements."

Relevant Provision — Section 96(2) of the Companies Act, 2013 and MCA Exemption Notification for Section 8 Companies

General Rule under Section 96(2): Every Annual General Meeting (AGM) of a company shall be held either at the registered office of the company or at some other place within the city, town, or village in which the registered office is situated. The AGM must be held on a day that is not a National Holiday and during business hours (9 a.m. to 6 p.m.).

Special Provision for Section 8 Companies: The Ministry of Corporate Affairs (MCA), vide its exemption notification dated 5th June, 2015 (as amended), has granted specific relaxations to Section 8 companies under the Companies Act, 2013. Pursuant to these exemptions, a Section 8 company is permitted to hold its Annual General Meeting at any place in India, unlike other companies which are restricted to the city/town/village of the registered office.

Analysis of the Given Scenario:

Top Spinners Foundation is a company registered under Section 8 of the Companies Act, 2013, incorporated in 2016 with the charitable object of promoting young cricket talent. Its registered office and club are situated at Jaipur. The members have suggested that the next AGM be held at a hotel near the vicinity of the Registered Office at Jaipur, citing congestion at the club.

This suggestion is valid and permissible on two independent grounds:

(a) Under the general provision of Section 96(2): The proposed hotel is located within the vicinity of the registered office at Jaipur, i.e., within the same city. Therefore, holding the AGM at the hotel falls squarely within the permission granted under Section 96(2) to hold the meeting at another place within the same city as the registered office. This applies to all companies, including Section 8 companies.

(b) Under the MCA Exemption for Section 8 Companies: Even if the hotel were located outside Jaipur, the MCA exemption notification permits Section 8 companies to hold their AGM at any place in India. Top Spinners Foundation, being a Section 8 company, would still be entitled to hold its AGM at such a location.

Conclusion: The members' suggestion to hold the next AGM at the hotel near the vicinity of the registered office at Jaipur is legally permissible. The Board of Directors may proceed to convene the AGM at the proposed hotel. No special resolution or prior approval from any authority is required since the hotel is within the same city as the registered office, satisfying the condition under Section 96(2) of the Companies Act, 2013. The relaxation available to Section 8 companies further reinforces this position.

(a) Can Raman Remove Somnath and Is He Eligible?

Yes, Raman can initiate the removal of Somnath. Under Section 169 of the Companies Act, 2013, a company may remove a director before the expiry of his period of office by passing an ordinary resolution, provided special notice has been given as required under Section 115 of the Act.

For giving Special Notice under Section 115, the member must hold either (i) not less than 1% of total voting power, or (ii) shares with paid-up value of not less than ₹5 lakh. Raman holds 50,000 shares out of 5,00,000 total shares = 10% of voting power, which far exceeds the 1% threshold. He is therefore eligible to give Special Notice.

(b) Procedure Since AGM Has Just Concluded

Since the AGM has recently been held and the next AGM is about a year away, Raman cannot wait. He has two options working together:

Step 1 – Requisition an Extraordinary General Meeting (EGM): Under Section 100 of the Companies Act, 2013, members holding not less than one-tenth (10%) of the paid-up share capital carrying voting rights may requisition the Board to call an EGM. Raman holds exactly 10% (50,000 out of 5,00,000 shares), which satisfies this threshold. The requisition must state the matter(s) to be dealt with and must be signed by Raman.

Step 2 – Give Special Notice: Simultaneously or before the EGM, Raman must give Special Notice under Section 115 to the company of his intention to move a resolution for removal of Somnath. This notice must be given not less than 14 days before the meeting (excluding the day of notice and the day of meeting).

Step 3 – Company to Forward Notice to Somnath: On receiving Special Notice, the company must immediately send a copy to Somnath (the concerned director) under Section 169(3). Somnath has the right to make a written representation and to be heard at the meeting.

Step 4 – Board's Obligation: On receiving the EGM requisition, the Board must call the meeting within 21 days, and the EGM must be held within 45 days from the date of deposit of requisition. If the Board fails to call the meeting, Raman (as requisitionist) may call it himself within 3 months from the date of requisition.

Step 5 – Passing Ordinary Resolution at EGM: At the EGM, the resolution for removal of Somnath is passed by a simple majority (ordinary resolution).

(c) Important Protections and Limitations

Somnath, being a director proposed to be removed, has the right under Section 169(4) to make a written representation to the company and to request that it be circulated to members. He also has the right to be heard at the meeting. However, Section 169 does not apply to a director appointed by the Tribunal under Section 242, or to independent directors re-appointed by special resolution (though that exception applies only to listed companies and is not relevant here). There is no such restriction in this case — Somnath can be removed.

Conclusion: Raman, holding exactly 10% of the paid-up share capital, is eligible both to give Special Notice under Section 115 and to requisition an EGM under Section 100. He should simultaneously submit the EGM requisition to the Board and give Special Notice for removal of Somnath under Section 169. The resolution for removal, if passed at the EGM by ordinary resolution, will effectively remove Somnath from directorship.

Answer: (D)

Under Section 137 of the Companies Act, 2013, when a company fails to hold an annual general meeting within the prescribed time (15 months from the end of the previous financial year, or 6 months from the end of that financial year, whichever is earlier), the company has a mandatory obligation to file with the Registrar:

1. The financial statements of the company for the relevant financial year, AND
2. A statement of facts and reasons explaining why the annual general meeting could not be held

Both documents must be filed within 30 days of the last date before which the annual general meeting should have been held.

In the case of XYZ Limited, the financial year 2023-2024 ended on 31st March 2024. The last date by which the AGM should have been held was 30th September 2024 (6 months from year-end). Since the AGM was not held by this date, the company was required to file the financial statements along with a statement of facts and reasons for non-holding of the AGM within 30 days, i.e., by 30th October 2024.

The directors' contention that financial statements need not be filed because they were not adopted in the AGM is incorrect. Section 137 mandates filing regardless of whether the financial statements have been adopted in a general meeting. The obligation arises from the failure to hold the AGM itself, not from the adoption or non-adoption of financial statements.

Additionally, the filing was eventually done only on 3rd January 2025, which was significantly delayed beyond the statutory 30-day period, resulting in further violation.

Answer: (D)

Section 24(2) of the Companies Act, 2013 provides a critical exception to the cross-holding prohibition. While Section 24(1) prohibits a company from acquiring shares of its holding company, Section 24(2) explicitly exempts shares that were already held by a company at the time it became a subsidiary. BCPL has been holding 5% equity in NCL since February 2018. When NCL acquired 70% of BCPL in February 2022, BCPL became a subsidiary of NCL. Since BCPL was already holding these 5% shares at the moment BCPL became a subsidiary, the shares are protected under the grandfather clause in Section 24(2). Therefore, BCPL may continue to hold its 5% equity holding in NCL without violating the cross-holding restrictions. Options (A), (B), and (C) are incorrect because they mandate disposal or transfer of shares that are specifically exempted by the statutory provision.

Answer: (D)

Under the Companies Act, 2013, the provisions regarding calls on shares and payment of dividends are governed by the Articles of Association of the company. When a shareholder pays advance on calls not yet made, the shareholder's entitlement to dividend on such advance payment must be explicitly authorized by the Articles of Association.

Section 43 of the Companies Act, 2013 provides that the Articles may prescribe the mode, time and other terms and conditions for making calls. Additionally, the Articles must specify the terms and conditions on which advance payments on calls may be accepted by the company, including whether such advance carries dividend entitlement.

A Board Resolution alone cannot confer dividend rights on amounts not yet called up, as it operates only within the framework established by the Articles. Similarly, an Ordinary Resolution in a General Meeting, while capable of certain actions, cannot override or supersede what the Articles provide regarding fundamental rights like dividend. The Articles of Association form the constitutional basis for all such entitlements.

In this case, while the Articles authorize NCL to accept advance payments on unpaid calls, Yogesh's entitlement to dividend on the amount paid in advance is contingent upon the Articles of Association specifically providing for such dividend entitlement. Only if the Articles expressly authorize dividend on calls paid in advance would Yogesh be entitled to receive proportionate dividend on his advance payment.

Answer: (C) No company issuing securities under private placement shall release any public advertisements or utilize any media, marketing or distribution channels or agents to inform the public at large about such an issue.

Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 explicitly prohibits public advertisement for private placements. The statutory requirement is that a company issuing securities through private placement must receive written offers from identified persons without any advertising, media channels, marketing, or agents. The distinction between a public issue and a private placement is fundamental: public issues require prospectus and public advertisement, while private placements are strictly confidential offers to a pre-identified select group of persons without any appeal to the public at large. Option (A) describes the procedure for public issues, not private placements. Option (B) suggests partial advertising which violates the complete prohibition. Option (D) incorrectly treats this mandatory statutory requirement as discretionary based on Board resolution. The law mandates that no appeal whatsoever—whether direct or indirect—can be made to the public regarding private placement securities.

Winding Up of LLP by Tribunal — Circumstances

Under Section 64 of the Limited Liability Partnership Act, 2008, a Tribunal may order the winding up of an LLP on the following grounds:

(1) Decision of the LLP: The LLP itself decides that it should be wound up by the Tribunal.

(2) Reduction in number of partners below minimum: If the number of partners of an LLP is reduced below two and the LLP carries on business for more than six months with fewer than two partners, the Tribunal may order winding up.

(3) Inability to pay debts: If the LLP is unable to pay its debts, the Tribunal may wind it up. An LLP shall be deemed unable to pay its debts if a creditor (to whom the LLP owes more than ₹1 lakh) has served a written demand and the LLP has failed to pay, secure, or compound the debt within 21 days.

(4) Acts against the interest of sovereignty and integrity of India: If the LLP has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality, the Tribunal may order winding up.

(5) Default in filing of financial statements or annual returns: If an LLP has made a default in filing the Statement of Account and Solvency or Annual Return with the Registrar for any five consecutive financial years, the Tribunal may order its winding up.

(6) Just and equitable ground: The Tribunal may also wind up an LLP if it is of the opinion that it is just and equitable that the LLP be wound up.

These grounds are exhaustive as provided under Section 64 of the LLP Act, 2008, and ensure that the Tribunal can intervene to protect the interests of creditors, partners, and the public at large.

Definition of Person under General Clauses Act, 1897: Section 3(60) of the General Clauses Act, 1897 defines "person" to include any company or association or body of individuals, whether incorporated or not. The definition is inclusive and extends beyond natural persons to cover juristic or artificial persons created by operation of law. This ensures that legal entities, not just individuals, can exercise rights and perform obligations under various laws. Analysis of the given categories: (i) An Idol: An idol will NOT be treated as a person under the General Clauses Act, 1897. An idol is an inanimate object and does not fall within the statutory definition of person. While Hindu jurisprudence has developed a separate doctrine recognizing idols as legal entities capable of owning property and being represented through their managers or custodians, this doctrine operates outside the framework of the General Clauses Act. Such recognition is based on religious principles and established case law specific to Hindu law, not the General Clauses Act. (ii) A Public Body: A public body WILL be treated as a person under the General Clauses Act, 1897. Public bodies such as municipal corporations, statutory authorities, district boards, and government bodies are "associations or bodies of individuals" within the scope of Section 3(60). These entities are created by law and possess legal personality distinct from their constituent members. They can acquire property, sue and be sued, and enter into legal relations in their own name. (iii) A Company: A company WILL be treated as a person under the General Clauses Act, 1897. Section 3(60) explicitly includes "company" within the definition of person. A registered company is a separate legal entity with rights and liabilities independent of its members. It has perpetual succession and can own property, contract, and litigate in its own name.

Sub-part (a): Requisition by Raman as an individual shareholder for calling EGM

The relevant provision is Section 100 of the Companies Act, 2013, which governs calling of Extra-ordinary General Meetings on requisition.

Under Section 100(1), the Board of Directors of a company shall, on the requisition of such number of members who hold, on the date of receipt of the requisition, not less than one-tenth (1/10th) of such of the paid-up share capital of the company carrying the right of voting, forthwith proceed to call an Extra-ordinary General Meeting.

The requisition under Section 100(2) must: (i) state the matters for consideration at the meeting; (ii) be signed by the requisitionists; and (iii) be sent to the registered office of the company.

Advice to Raman: Raman, being an individual shareholder, can make a valid requisition for calling an EGM only if he individually holds not less than 1/10th of the paid-up share capital carrying voting rights. If his individual shareholding falls below this threshold, he cannot make a valid requisition as a standalone individual shareholder. In that case, he would need to join hands with other members so that the combined holding collectively reaches the 1/10th threshold. Merely being a shareholder, without meeting this minimum shareholding requirement, does not confer the right to requisition an EGM under the Companies Act, 2013.

---

Sub-part (b): Right of Raman to himself call the EGM if the company fails to act

The relevant provision is Section 100(4) and Section 100(5) of the Companies Act, 2013.

Under Section 100(3), upon receipt of a valid requisition, the Board must, within 21 days from the date of deposit of the requisition, proceed to call a meeting to be held within 45 days from the date of deposit of the requisition.

Under Section 100(4), if the Board does not proceed to call the meeting within the period of 21 days (for a meeting to be held within 45 days), the requisitionists themselves may call the meeting to be held within 3 months from the date of the deposit of the requisition.

Under Section 100(5), any meeting called by the requisitionists shall be called in the same manner, as nearly as possible, as that in which a meeting is to be called by the Board.

Under Section 100(6), any reasonable expenses incurred by the requisitionists in calling and holding such meeting shall be repaid by the company to the requisitionists, and the company shall retain such sums out of fees or other remuneration payable to the defaulting directors.

Advice: If Raman was a valid requisitionist (i.e., held the requisite 1/10th threshold) and the company's Board fails to call the EGM within 21 days of receipt of the requisition (for a meeting to be held within 45 days), then Raman can himself call the EGM, provided it is held within 3 months from the date of deposit of the requisition. He is also entitled to recover reasonable expenses incurred from the company.

---

Sub-part (c): Whether Beauty Cosmetics (Korean company) qualifies as a 'Foreign Company' under the Companies Act, 2013

Definition of Foreign Company — Section 2(42): Under the Companies Act, 2013, a 'Foreign Company' means any company or body corporate incorporated outside India which: (a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and (b) conducts any business activity in India in any other manner.

Analysis of Beauty Cosmetics:

Condition 1 — Incorporated outside India: Beauty Cosmetics is incorporated in Korea, i.e., outside India. This condition is satisfied.

Condition 2 — Place of business in India: Beauty Cosmetics has established a subsidiary company in India for conducting its business. Through this subsidiary (which may act as its agent or through which it conducts business activity in India), it has a place of business in India. This condition is also satisfied.

Effect of Indian ownership in Beauty Cosmetics: The paid-up share capital of Beauty Cosmetics includes: Mr. L (Indian citizen) — 10%, Mr. R (Indian citizen) — 20%, and Fairness Cosmetics Limited (Indian company) — 20%, aggregating to 50% Indian holding. However, the classification of a company as a 'foreign company' under Section 2(42) is based solely on the place of incorporation, not on the nationality or residence of its shareholders. Even if Indians hold 50% of its shares, since Beauty Cosmetics is incorporated in Korea, it remains a foreign company under the Companies Act, 2013.

Conclusion: Beauty Cosmetics is a Foreign Company within the meaning of Section 2(42) of the Companies Act, 2013. As a foreign company having a place of business in India, the provisions of Chapter XXII (Sections 379 to 393) of the Act apply to it. Under Section 380, it is required to deliver to the Registrar of Companies prescribed documents including the charter, statutes, memorandum, address of principal place of business in India, list of directors, etc., within 30 days of establishing its place of business in India.

Answer: (B) USD 25,000 and USD 1,000,000 respectively

Under the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Remittance of Interest, Profit, Dividend, etc.) Regulations, certain cross-border remittances can be made without RBI approval if they remain within specified limits.

Commission to Foreign Commission Agents on Real Estate Sales:
When Indian properties are sold to non-residents or foreign nationals, commission payable to foreign agents is permitted without RBI approval up to a specified limit. The regulatory framework permits commission up to USD 25,000 per transaction for real estate sales without requiring prior RBI approval. Even though Mr. Cooper's commission could theoretically be calculated at 5% of USD 600,000 (= USD 30,000), the ceiling without RBI approval is USD 25,000.

Consultancy Fees to Foreign Consultants:
For essential technical consultancy services provided by foreign experts or consultancy firms, FEMA regulations permit payment of consultancy fees without RBI approval up to USD 1,000,000 per contract. This limit applies to significant, specialized consultancy services like infrastructure design, land stabilization, and technical feasibility studies. Given that Accurate Consultants Ltd. is providing expert consultancy for critical infrastructure (land shaping, drainage design, road planning, power facilities), the permissible limit without RBI approval is USD 1,000,000.

Beyond these limits, AHBL would require prior RBI approval under the Liberalized Remittance Scheme (LRS) or applicable regulations to remit payments to foreign agents and consultants.

Applicability of FEMA Provisions on Donation to Foreign Institution

Under Rule 4 read with Schedule II of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 (framed under the Foreign Exchange Management Act, 1999), certain current account transactions require prior approval of the Government of India (Ministry of Finance) before remittance can be made.

One such transaction covered under Schedule II pertains to donations by companies to foreign entities. As per the relevant entry, a company can remit funds as donation to a foreign institution without prior Government approval only up to 1% of its foreign exchange earnings during the previous three financial years. Any amount exceeding this threshold requires prior approval of the Ministry of Finance.

Calculation of Permissible Limit:

The previous three financial years' foreign exchange earnings of Mitali Diamonds Ltd. are:
- FY 2023-24: USD 1,25,000
- FY 2022-23: USD 1,10,000
- FY 2021-22: USD 95,000

Total = USD 3,30,000

1% of USD 3,30,000 = USD 3,300

Proposed donation = USD 10,000

Since USD 10,000 exceeds the permissible limit of USD 3,300 (i.e., 1% of previous three years' forex earnings), Mitali Diamonds Ltd. cannot remit this donation freely.

Conclusion: Mitali Diamonds Ltd. cannot give the donation of USD 10,000 to the institution in USA without obtaining prior approval of the Ministry of Finance, Government of India. The fact that the donation is linked to employee training does not alter its classification as a 'donation' under the Rules, and the restriction applies equally. To proceed, the company must apply for and obtain the requisite government approval before making the remittance.

Answer: (C)

AHBL needs to obtain prior permission from the Ministry of Finance, Department of Economic Affairs for payment of detention charges exceeding the rates prescribed by the Director General of Shipping.

Under the Foreign Exchange Management Act (FEMA), 1999, any remittance of foreign exchange by an Indian resident or entity requires compliance with FEMA regulations. The Ministry of Finance, Department of Economic Affairs is the competent authority that oversees and regulates all foreign exchange transactions in India through the RBI and Authorized Dealers.

When detention charges exceed the prescribed rates set by the Director General of Shipping (Ministry of Surface Transport), the excess amount requires specific approval as it represents an abnormal foreign currency outgo. This approval, being fundamentally a foreign exchange matter, falls within the purview of the Ministry of Finance under FEMA. The fact that the port is located in Italy does not exempt Indian entities from FEMA compliance—any foreign exchange remittance by an Indian entity, regardless of where the service is rendered, requires FEMA authorization.

Option (A) is incorrect because while DG Shipping prescribes the rates, approval for exceeding them in the context of foreign exchange remittance is not granted by the Ministry of Surface Transport alone. Option (B) is incorrect as it unnecessarily requires dual approvals; the primary regulatory authority for foreign exchange matters is the Ministry of Finance. Option (D) is clearly incorrect as territorial jurisdiction of the port does not exempt Indian residents/entities from FEMA compliance when remitting foreign exchange.

Legal Provisions Applicable to Manish's Situation under the Companies Act, 2013

Manish's ability to recover dividends depends on how old the unclaimed dividends are. The Companies Act, 2013 provides a two-stage framework under Section 124 and Section 125 for dealing with unpaid or unclaimed dividends.

Stage 1 — Transfer to Unpaid Dividend Account (Section 124)

Under Section 124(1) of the Companies Act, 2013, where a dividend has been declared by a company but has not been paid or claimed within 30 days from the date of declaration, the company must, within 7 days of the expiry of the said 30-day period, transfer the total amount of unpaid or unclaimed dividend to a special account called the "Unpaid Dividend Account", opened by the company in a scheduled bank.

Under Section 124(2), the company must prepare and file a statement with the Registrar of Companies and place it on its website containing the names and addresses of shareholders entitled to receive the dividend along with the amount of dividend unpaid.

As per Section 124(3), any person claiming entitlement to the money transferred to the Unpaid Dividend Account may apply to the company and the company must make payment to him.

Under Section 124(7), if any amount remains in the Unpaid Dividend Account for a period of 7 years without being claimed, it shall be transferred to the Investor Education and Protection Fund (IEPF) constituted under Section 125, along with interest accrued thereon, if any.

Stage 2 — Transfer to Investor Education and Protection Fund (Section 125)

Under Section 125 of the Companies Act, 2013, the Central Government has established the IEPF. All amounts transferred from Unpaid Dividend Accounts after the 7-year period are credited to this Fund.

Under Section 124(6), shares in respect of which dividend has not been paid or claimed for 7 consecutive years or more shall also be transferred by the company to the IEPF Authority.

However, it is important to note that unclaimed dividends are NOT forfeited. Under Section 125(6), any person whose shares or dividend amount have been transferred to the IEPF may claim the refund from the IEPF Authority by making an application in the prescribed form along with supporting documents as per the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.

Application to Manish's Case

Manish has not claimed dividends for the last 10 years. Based on the above provisions:

Dividends declared 1 to 7 years ago: These may still be lying in the Unpaid Dividend Account of the company (if 7 years from transfer have not yet lapsed). Manish can apply directly to the company to recover these amounts under Section 124(3).

Dividends declared more than 7 years ago: These would have been transferred to the IEPF. Manish must apply to the IEPF Authority for a refund of these amounts along with any accrued interest, in the manner prescribed under the IEPF Authority Rules, 2016.

Shares: If dividends were unpaid for 7 consecutive years, Manish's shares may also have been transferred to IEPF, in which case he can claim those shares back by applying to the IEPF Authority.

Conclusion: Manish can recover all his dividends — the right to claim is not extinguished. Dividends for recent years can be claimed from the company; dividends older than 7 years (already transferred to IEPF) must be claimed from the IEPF Authority. No amount is permanently lost under the current legal framework.

Definition under FEMA, 1999: According to Section 2(e) of the Foreign Exchange Management Act, 1999, a current account transaction is defined as a transaction other than a transaction which would result in a change in the ownership of, or claims on, any asset or liability, including a financial asset or a financial liability, which is a resident's claim on, or liability to, a non-resident.

Key Characteristics: Current account transactions are essentially all transactions that do not involve a change in the ownership of or claims on immovable property located outside India, or movable property located outside India, or any claim to performance of services outside India. They represent transactions which do not create any future claim or obligation beyond the current period.

Nature and Scope: The term 'current account transaction' encompasses transactions that are in the nature of current account transactions as defined in the Fifth Schedule to the Reserve Bank of India Act, 1934. These primarily include:

• Trade in goods: Payments for imports and exports of merchandise
• Trade in services: Payments for technical know-how, consulting, tourism, transportation, etc.
• Remunerations: Income from factors of production such as salaries, interest, dividends, and profits
• Current transfers: Gifts, donations, grants, remittances, and other unilateral transfers of current nature
• Fees and charges: Professional fees, brokerage, insurance premiums, etc.

Distinction from Capital Account Transactions: Unlike capital account transactions, which involve changes in ownership of assets or creation of long-term liabilities (such as investments, loans, and property acquisitions), current account transactions do not permanently alter the asset-liability position of residents and non-residents. They are transactions of a revenue or consumption nature.

Regulatory Treatment: Current account transactions are permitted more liberally under the FEMA regime compared to capital account transactions. Subject to specified conditions and limits, authorized dealers are generally permitted to facilitate current account transactions without requiring specific RBI approval, thereby promoting international trade and services.

Answer: (C) Mr. Tony cannot invest USD 260,000 towards the farmhouse as being a non-resident (Persons of Indian Origin).

Under the Foreign Exchange Management (Non-Resident) Rules, 1993 notified under FEMA, 1999, while NRIs and Persons of Indian Origin (PIOs) are generally permitted to acquire and hold immovable property in India, there is a specific prohibition on investment in agricultural land and farmhouses. Farmhouses fall within the category of agricultural property or property capable of generating agricultural income, making them ineligible for acquisition by NRIs/PIOs. Although Mr. Tony is a PIO (having Indian citizenship prior to migration to USA in 1977), he remains subject to these FEMA restrictions. The restrictions apply uniformly to both NRIs and PIOs and cannot be circumvented through staged payments or instalment arrangements. The fact that the development involves "farm houses" near Rishikesh (agricultural/rural property) makes this investment impermissible under the extant FEMA framework. Option (A) is incorrect as it assumes PIOs face no restriction on agricultural property. Option (B) incorrectly suggests a USD limit exists when the actual bar is categorical, not quantitative. Option (D) addresses payment modality, which is not the substantive issue here.

Answer: (D)

When a partner dies in a Limited Liability Partnership, Section 45(2) of the Limited Liability Partnership Act, 2008 explicitly provides that the continued use of the LLP name or the deceased partner's name as part thereof shall not by itself make the legal representative or estate liable for any act of the LLP done after the partner's death. This provision protects the deceased partner's heirs and estate from incurring liability merely on account of the technical continued use of the name. The key phrase "by itself" indicates that the mere continued use of the name is insufficient to trigger liability—liability could arise only from other substantive factors such as active participation or representation, not from the name alone.

Answer: (A) The General Clauses Act, 1897 applies to the whole of India including the Union Territory of Jammu and Kashmir. The preamble of the Act explicitly states it applies to the entire territory of India. Prior to August 5, 2019, Jammu and Kashmir had a special constitutional status under Article 370, which exempted it from the applicability of central legislation including the General Clauses Act. However, following the abrogation of Article 370 and the constitutional amendment on August 5, 2019, Jammu and Kashmir was reorganised as a Union Territory, and from that date onwards, all provisions of the Constitution of India, including the General Clauses Act, 1897, apply to Jammu and Kashmir. Therefore, for all purposes as of the current date, the Act applies to the whole of India including Jammu and Kashmir.