Question 1

Mr. R extended a loan to Mr. D with X, Y, and Z as sureties. Each surety executed a bond with varying penalty amounts, X with a penalty of ₹ 1,00,000, Y with ₹ 20,000 and Z with ₹ 40,000. In due course of Mr. D's failure to repay the borrowed money to Mr. R, Examine the liabilities of the sureties in accordance with the Indian Contract Act, 1872, when Mr. D defaults to the tune of ₹ 42,000. Additionally, assess the situation, if there is no contractual arrangement among the sureties.

Accepted Answer

**Applicable Provisions — Sections 146 and 147 of the Indian Contract Act, 1872**

**Part 1: Liability of X, Y, and Z when Mr. D defaults to the tune of ₹42,000**

**Section 147** of the Indian Contract Act, 1872 governs the situation of co-sureties who are bound in **different sums**. It states that co-sureties bound in different sums are liable to pay **equally as far as the limits of their respective obligations permit**.

Here, X, Y, and Z are co-sureties with penalty bonds of ₹1,00,000, ₹20,000, and ₹40,000 respectively. Mr. D defaults on ₹42,000.

**Step 1 — Equal division:** ₹42,000 ÷ 3 = ₹14,000 per surety.

**Step 2 — Check against individual limits:**
- X's limit: ₹1,00,000 → ₹14,000 is within limit ✓
- Y's limit: ₹20,000 → ₹14,000 is within limit ✓
- Z's limit: ₹40,000 → ₹14,000 is within limit ✓

**Conclusion:** Since all sureties can absorb the equal share within their respective penalty bonds, each of X, Y, and Z is **liable to contribute ₹14,000** to Mr. R, totalling ₹42,000.

**Part 2: Situation where there is no contractual arrangement among the sureties**

**Section 146** of the Indian Contract Act, 1872 provides that in the **absence of any contract to the contrary**, co-sureties are bound, as between themselves, to pay **each an equal share** of the whole debt or the unpaid portion thereof.

Where there is no specific contractual arrangement defining varying penalty amounts, Section 146 applies as the default statutory rule. Mr. D's default of ₹42,000 is d…

Question 2

Calculate the date of maturity of the following bill of exchange explaining the relevant rules relating to determination of the date of maturity, as provided in the Negotiable Instruments Act, 1881.

Accepted Answer

**Rules for Determining Date of Maturity under the Negotiable Instruments Act, 1881:**

As per **Section 22** of the Negotiable Instruments Act, 1881 (NI Act), every promissory note or bill of exchange which is not expressed to be payable on demand, at sight, or on presentment is entitled to **3 days of grace** added to the period of payment. As per **Section 23**, in calculating the date at which such an instrument matures, the **day of the date** (or day of sight, or day of event) is **excluded**. As per **Section 25**, if the day on which a bill falls due (including after adding grace days) is a **public holiday**, the instrument shall be deemed due on the **next preceding business day**. Sundays are public holidays for this purpose.

**(i) Bill drawn on 21/06/2023, payable 100 days after date:**

Excluding the date of drawing (21 June 2023), we count 100 days forward:
- June: 22nd to 30th = 9 days
- July: 31 days → cumulative 40 days
- August: 31 days → cumulative 71 days
- September: 29 more days needed → 29th September 2023 (Day 100)

**Nominal due date = 29 September 2023**

Adding 3 days of grace: 30 Sep, 1 Oct, **2 October 2023**

2nd October 2023 is **Gandhi Jayanti** — a declared national public holiday. Therefore, under Section 25, the bill matures on the next preceding business day. 1st October 2023 is a **Sunday** (also a public holiday). Therefore, the maturity falls back to **30th September 2023 (Saturday)**, which is a business day.

**Date of Maturity = 30th…

Question 3

Wills Pvt. Ltd. convened the Annual General Meeting (AGM) with the intention of approving financial statements for approval by shareholders. However, due to the absence of the required quorum, the meeting had to be cancelled. Subsequently, the company's directors forget to submit the annual return to the RoC. The directors held the belief that the 60 days time frame for filing return from the AGM's date would not apply, since the AGM itself was cancelled. Has the company violated the stipulations outlined in the Companies Act, 2013? If the company has breached the provisions of the Act, what are the potential penalties it might face?

Accepted Answer

**Violation of the Companies Act, 2013 — Analysis**

**Relevant Provision — Section 92 of the Companies Act, 2013:**

Every company is required to file its **Annual Return** with the Registrar of Companies (RoC). As per Section 92(4) of the Companies Act, 2013, the annual return shall be filed within **60 days from the date on which the Annual General Meeting (AGM) is held**.

The critical proviso to Section 92(4) states: **Where an AGM is not held in any year, the annual return shall be filed within 60 days from the date on which the AGM ought to have been held**, along with a statement specifying the reasons for non-holding of the AGM.

**Assessment of the Directors' Belief:**

The directors' belief that the 60-day timeline is inapplicable because the AGM was cancelled is **legally incorrect and untenable**. An AGM that fails for want of quorum is treated in law as an AGM **not held**. Section 96 of the Companies Act, 2013 mandates that every company (other than an OPC) must hold an AGM within 6 months of the close of the financial year. The cancellation due to absence of quorum does not discharge the obligation to hold the AGM, nor does it suspend the obligation to file the annual return.

Therefore, the 60-day filing window runs from the **date on which the AGM ought to have been held** (i.e., the last permissible date under Section 96). Since the directors failed to file the annual return within this period, **Wills Pvt. Ltd. has violated the provisions of Section 92(4) …

Question 4

PQR Private Limited operates as a manufacturing company, generating a turnover of ₹ 150 crores and holds an outstanding loan of ₹ 75 crores from a public financial institution solely in the previous financial year (with a total loan availed of ₹ 110 crores, but ₹ 35 crores were repaid during the same year). The company's Board has delegated the authority to CEO to designate an internal auditor to conduct internal audit. The CEO believes that the company is not legally obligated to have an internal auditor. Analyse the accuracy of the CEO's belief by referring to the provisions outlined in the Companies Act, 2013. What would be your response if the Board of Directors wanted to appoint the Secretary of the company, Mr. A as an internal auditor?

Accepted Answer

**Part (a): Is Internal Audit Mandatory for PQR Private Limited?**

The CEO's belief is INCORRECT. According to **Section 138(1)(b)** of the Companies Act, 2013, every private company which has, in the immediately preceding financial year, either a turnover exceeding ₹5 crores OR borrowings exceeding ₹25 crores, shall constitute an internal audit function.

Analysis of PQR Private Limited:
- **Turnover**: ₹150 crores (exceeds ₹5 crores threshold) ✓
- **Borrowings**: ₹75 crores outstanding from public financial institution in previous FY (exceeds ₹25 crores threshold) ✓

Since PQR Private Limited satisfies BOTH criteria, it is legally **obligated to appoint an internal auditor**. The CEO's understanding is factually incorrect, and the Board's delegation of authority to the CEO does not override this mandatory legal requirement.

**Part (b): Can the Secretary (Mr. A) be appointed as Internal Auditor?**

NO. The Board cannot appoint the Secretary as internal auditor. According to **Section 138(4)** of the Companies Act, 2013, certain disqualifications apply:

(a) **He must be a Chartered Accountant or Cost Accountant** – Unless Mr. A possesses these qualifications, he is disqualified on this ground alone.

(b) **He cannot be in full-time employment in the company** – As the company's Secretary, Mr. A is clearly a full-time employee, which is an absolute disqualification.

Even if Mr. A were a CA or CMA, his full-time employment status as Secretary makes him ineligible. The law m…

Question 5

While interpreting the statutes what will be the effect of "Usage" or "Customs and Practices"?

Accepted Answer

**Effect of Usage and Customs in Statutory Interpretation**: Usage and customs serve as an important **external aid to statutory interpretation**. When the language of a statute is ambiguous, unclear, or capable of multiple interpretations, established and well-known customs and practices can be invoked to determine the legislative intent and clarify the statutory provision's meaning.

**Conditions for Application**: For usage or custom to be effective in interpretation, it must satisfy certain criteria: (1) It must be **well-established and notorious**—widely known and recognized in the relevant field or community; (2) It must be **ancient or longstanding**—not of recent origin; (3) It must be **uniform and consistent**—applied consistently over time; and (4) It must be **reasonable and not contrary to law or public policy**. Usage is particularly relevant when interpreting technical terms, commercial language, trade terminology, and words used in specialized contexts like banking, insurance, or commerce.

**Limitation—Cannot Override Clear Language**: The paramount rule is that **usage and customs cannot override or contradict the express language of the statute**. If the statutory provision is clear, unambiguous, and explicit, custom cannot modify or change its meaning. Usage operates only as a **secondary aid** when ambiguity exists. Where parliament has used clear language, the legislative intent is manifest, and custom cannot be used to defeat that intent.

**Judicial A…

Question 6

Mr. Rama bought an electric switch of ₹ 50,000 from SN Watch Co. For the purpose of making payment, he drew a cheque payable to the order of Mr. SN Dhawan, owner of the watch company or ordered, Mr. SN Dhawan put the cheque in office drawer. One of the employee Mr. Joseph stole the cheque from office drawer, forged the signature of Mr. Dhawan and indorsed it to Mr. Parashar for goods he bought from him of ₹ 50,000. Mr. Parashar encashed the cheque, on the very same day. From Rama's account. After 3 days when Dhawan came to know about the theft. He intimated Mr. Rama about the theft of the cheque. Examine the liability of the Mr. Rama in this case.

Accepted Answer

**Legal Analysis of Mr. Rama's Liability**

**Nature of the Cheque**: Mr. Rama drew a cheque payable to the **order** of Mr. SN Dhawan. An order cheque requires a valid endorsement by the payee for its negotiation. Any transfer without a valid endorsement, or on the basis of a **forged endorsement**, is wholly inoperative.

**Effect of Forged Endorsement under the Negotiable Instruments Act, 1881**: Under **Section 58 of the Negotiable Instruments Act, 1881**, a person who takes a negotiable instrument bearing a **forged endorsement** acquires no title whatsoever to the instrument, even if he took it for value and in good faith. A forged endorsement is a **nullity** — it is void ab initio. Accordingly, Mr. Parashar, who received the cheque on the basis of Joseph's forged endorsement of Dhawan's signature, acquired **no valid title** to the cheque.

**Bank's Position and Payment in Due Course**: Under **Section 85(1) of the Negotiable Instruments Act, 1881**, the drawee bank is discharged by payment in due course only when the cheque payable to order **purports to be endorsed** by or on behalf of the payee. However, **"payment in due course"** under **Section 10** requires payment to be made in good faith, without negligence, and to a person entitled to receive it. Since the endorsement was forged — rendering it void — Mr. Parashar was not a person entitled to receive payment. The bank that encashed the cheque on a forged endorsement did **not make payment in due course**, and…

Question 7

A group of enthusiastic women is planning to establish the Nursing Medicare Association, a limited liability company with the objective of providing comprehensive theory and practical training to nursing nurses. The association aims to operate under the provisions of section 8 of the Companies Act, 2013, with a core objective of education. The intended duration for the association's operation is set at two years, after which a dissolution will be initiated. In the event of dissolution, any remaining assets exceeding liabilities will be allocated among the members according to the standard procedures permitted by the Companies Act.

Assess the viability of the proposal and offer guidance to the promoters, taking into account the regulations outlined in the Companies Act, 2013.

Accepted Answer

**Assessment of Viability of Nursing Medicare Association as a Section 8 Company**

**Section 8 of the Companies Act, 2013** governs the incorporation of companies formed for charitable and non-profit purposes. Such companies are permitted to be formed with limited liability — either by shares or by guarantee — without the use of the word 'Limited' or 'Private Limited' in their name. The proposal is assessed point-by-point below.

**Point 1 — Object of Education (VALID):** Section 8(1) permits registration of a company whose objects include promotion of **commerce, art, science, sports, education, research, social welfare, religion, charity, or protection of environment**. Providing theory and practical nursing training falls squarely within **education and social welfare**, making this aspect of the proposal perfectly valid.

**Point 2 — Limited Liability Structure (VALID):** A Section 8 company may be incorporated with limited liability. The members' liability may be limited by shares or by guarantee. The promoters' intention to form a limited liability company is permissible and does not conflict with Section 8.

**Point 3 — Fixed Two-Year Duration (REQUIRES CAUTION):** The Companies Act, 2013 does not expressly prohibit the formation of a company for a fixed or limited duration. However, Section 8 companies are fundamentally conceived as **perpetual, non-profit entities**. Incorporating with a pre-determined dissolution timeline of two years, while not explicitly barred, …

Question 8

A clause that begins with the words 'notwithstanding anything contained' is a clause, that has the effect of making the provision prevail over others. It can operate at four levels. Explain any two of them.

Accepted Answer

A **notwithstanding clause** (beginning with 'notwithstanding anything contained') is a legislative device that grants precedence to a particular provision over other conflicting provisions. It operates at four distinct levels, creating different scopes of overriding effect.

**1. Horizontal Level:** At this level, the notwithstanding clause operates between provisions at the same hierarchical level within an Act. It makes one provision prevail over another provision of equal status within the same Act, chapter, or part. For example, a provision in Section 85 stating 'notwithstanding anything contained in Sections 80 to 84' ensures that Section 85's provision takes precedence over the earlier sections at the same level. This is commonly used where multiple provisions deal with similar subject matter, and one is intended to be the general rule while another is an exception or special case.

**2. Vertical Level:** At this level, the notwithstanding clause enables a provision at a higher legislative level to override provisions at lower hierarchical levels. For instance, provisions of a Central Act can override State Acts, or provisions of the principal Act can override subordinate legislation, rules, and regulations framed thereunder. The notwithstanding clause at the vertical level ensures constitutional hierarchy and prevents inconsistency between legislation of different levels. This is particularly important in federalist systems where both central and state governments hav…

Question 9

Rajesh obtained a loan of ₹ 10 lakhs from Mahesh. Following this, Rajesh appointed Mahesh as his agent to facilitate the sale of his land, granting him the authority to deduct the loan amount from the proceeds of the sale. Later on, Rajesh wants to withdraw or cancel this agency agreement. Assess the lawfulness of Rajesh's decision to revoke the above mentioned agency, taking into account the provisions of the Indian Contract Act, 1872.

Accepted Answer

**Assessment of Lawfulness of Revocation of Agency by Rajesh**

**Applicable Provision — Section 202 of the Indian Contract Act, 1872**

Section 201 of the Indian Contract Act, 1872 lays down the general rule that a principal may revoke the authority given to an agent at any time before the agent has exercised it. However, Section 202 carves out a crucial exception — it states that **where the agent has himself an interest in the subject-matter of the agency**, the agency **cannot**, in the absence of an express contract, be terminated to the prejudice of such interest.

This type of agency is commonly referred to as an **'Agency Coupled with Interest'** and is treated as irrevocable under the Act.

**Application to the Given Case**

In the present case, Rajesh (the principal) obtained a loan of ₹10 lakhs from Mahesh (the agent). Subsequently, Rajesh appointed Mahesh as his agent to sell his land and specifically **authorised Mahesh to deduct the loan amount from the sale proceeds**. This arrangement creates a direct personal and financial interest of Mahesh — the agent — in the very subject-matter of the agency, i.e., the proceeds from the sale of the land.

Since Mahesh's right to recover his debt of ₹10 lakhs is directly linked to and secured through the agency, this constitutes a classic case of agency coupled with interest. The following elements clearly establish this:

1. **Existence of a debt** — Mahesh has a pre-existing claim of ₹10 lakhs against Rajesh.
2. **Agency…

Question 10

Sunshine Limited, an unlisted company, registered in the State of U.P. with 40 shareholders, wants to organize the Annual General Meeting of the company for the financial year 2022-23 as under:
(i) The meeting shall be held on 28th September, 2023 which happens to be Raksha Bandhan, a day declared as a holiday by the U.P. Government.
(ii) The venue for the meeting shall be Lonavala, a hill resort in Maharashtra. Out of 40 shareholders, 38 have given their consent in writing for conducting the meeting in Lonavala.

Advise the Company on the feasibility of the above with reference to the provisions of Companies Act, 2013.

Accepted Answer

**(a) Feasibility of AGM arrangements under Companies Act, 2013:**

**Provision under Section 96(2) of the Companies Act, 2013** governs the time, place, and date of Annual General Meetings.

**(i) Holding AGM on 28th September, 2023 (Raksha Bandhan — U.P. State Holiday):**

As per **Section 96(2) of the Companies Act, 2013**, every AGM shall be called during **business hours** (i.e., between 9:00 a.m. and 6:00 p.m.) on a day that is **not a National Holiday**.

The term **"National Holiday"** under the Companies Act, 2013 means a day declared as a holiday by the **Central Government** — which includes Republic Day (26th January), Independence Day (15th August), and Gandhi Jayanti (2nd October).

Raksha Bandhan has been declared a holiday by the **U.P. State Government**, not by the Central Government. Therefore, it does **not qualify** as a "National Holiday" within the meaning of the Companies Act, 2013.

**Conclusion:** Holding the AGM on 28th September, 2023 (Raksha Bandhan) is **permissible and feasible**, provided the meeting is held during business hours (9 a.m. to 6 p.m.).

---

**(ii) Holding AGM at Lonavala, Maharashtra (Registered Office in U.P.) with 38 out of 40 shareholders' consent:**

As per **Section 96(2) of the Companies Act, 2013**, an AGM shall ordinarily 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.

However, the **proviso to Section 96(2)…

Question 11

RNL Ltd. issued a post-dated cheque of ₹ 5.50 Lakhs to Mr. VR Gupta on account of full and final settlement of its liability for shares purchased at a renowned company. Company draws the cheque on 21.8.2023 and mentioned the cheque to be paid on 26.9.2023.

Further, Company instructed the bank, on which cheque was drawn to stop the payment of cheque, if at the time of presentment, Bank account has insufficient funds to make payment. Mr. VR Gupta presented the cheque to bank for payment on 30.11.2023. On 30.11.2023 bank account maintained by company was having only ₹ 4.90 lakhs. Bank debited for payment.

The cheque dishonoured for non-payment. In the above case, who will be responsible for dishonor of cheque and payment of ₹ 5.50 lakh due to Mr. VR Gupta ?

Accepted Answer

**Responsibility for Dishonour of Cheque — Section 138, Negotiable Instruments Act, 1881**

**RNL Ltd. is responsible** for the dishonour of the cheque and remains liable to pay ₹5.50 lakhs to Mr. VR Gupta.

**Applicable Law — Section 138 of the Negotiable Instruments Act, 1881:** Where a cheque drawn by a person on an account maintained by him for payment of any amount of money to another person from out of that account is returned by the bank unpaid either because of insufficiency of funds in the account or that it exceeds the arrangement — such person shall be deemed to have committed an offence.

**Analysis of Key Facts:**

**1. Nature of the Stop Payment Instruction:** RNL Ltd. instructed the bank to stop payment *only if the account had insufficient funds* at the time of presentment. This was not an unconditional stop payment — it was a conditional instruction directly linked to the anticipated insufficiency of funds. The courts and the law treat such a conditional stop-payment instruction as equivalent to dishonour due to insufficient funds. The drawer cannot escape liability under Section 138 by giving a stop-payment instruction that is itself triggered by lack of funds. The root cause of dishonour remains insufficient funds (₹4.90 lakhs against ₹5.50 lakhs required).

**2. Cheque Presented Within Valid Period:** The cheque was payable on **26.9.2023** and was presented on **30.11.2023**, which is within **3 months** from the date the cheque became payable (valid up t…

Question 12

The Board of Directors of 'A Limited' made a private placement offer to a group of 150 persons to subscribe for 100 equity shares @ ₹ 100 each on 15th April, 2022 after passing a special resolution on 8th March, 2022. The company received application money from the members on 12th April, 2022 but did not make an allotment of shares till 31st July, 2022. Instead, during this interim period, the company used the application money for the payment of dividend that had been declared by the company. Some of the members raised an objection that as the allotment was not done by the Company within the prescribed time limit, the company is liable to refund the application money with interest @ 15% p.a. for each non-compliance. Examine the validity of the objection raised by the members with referenc…

Accepted Answer

**Applicable Law:** Section 42 of the Companies Act, 2013 governs private placements.

**Issue 1: Validity of objection regarding allotment within prescribed time**

As per **Section 42(6) of the Companies Act, 2013**, a company making a private placement shall allot securities within **60 days** from the date of receipt of application money. If the company fails to allot within 60 days, it must repay the application money to subscribers within **15 days** from the expiry of the 60-day period. If repayment is not made within those 15 days, the company shall be liable to repay the application money **with interest at the rate of 12% per annum** from the expiry of the 60th day.

In the given case, the application money was received on **12th April, 2022**. The 60-day period expired on **11th June, 2022**. Since the company did not make allotment until **31st July, 2022** (which is well beyond the prescribed 60-day limit), the company is indeed in default.

**Conclusion on Issue 1:** The objection raised by the members regarding non-allotment within the prescribed time limit is **valid**. The company is liable to repay the application money along with interest. However, the members are **incorrect** in claiming interest @ **15% p.a.** — the rate prescribed under Section 42(6) of the Companies Act, 2013 is **12% p.a.**, not 15%. The objection is valid in principle but incorrect as to the rate of interest.

**Issue 2: Whether application money can be used for payment of dividend**…

Question 13

Mr. Avinash currently holds the position of a Whole-time director (Key Managerial Personnel) at Mohan Pharma Limited, a company that maintains substantial ownership stake in X Limited (55% shares), Y Limited (60% shares), and Z Limited (65% shares). Mr. Avinash has expressed his desire to expand his role as a Whole-time director to two additional companies, namely both X Limited and Y Limited. Determine the validity of his appointment as a Whole-time director in these additional companies with reference to the provisions of the General Clauses Act, 1897.

Accepted Answer

**Analysis of Mr. Avinash's Appointment as Whole-time Director in Subsidiary Companies**

The validity of Mr. Avinash's appointment must be examined under **Section 196 of the Companies Act, 2013**, which is the primary legislation governing whole-time directors. While the question references the General Clauses Act, 1897, that Act provides the general definitional and interpretative framework; the specific provisions governing whole-time directors stem from the Companies Act, 2013.

**Section 196 Restriction**: A whole-time director shall not, without the consent in writing of the Board of Directors, act as a director in any other company, except with prior approval of the Central Government or as permitted under the Schedule/Rules.

**Definition of Subsidiary (Section 2(87), Companies Act, 2013)**: A company is a subsidiary of another company if the holding company holds not less than 50% of the voting power in that company. In this case: X Limited (55% ownership) and Y Limited (60% ownership) both qualify as subsidiaries of Mohan Pharma Limited.

**Exemption for Subsidiary Companies**: The Companies Act, 2013 provides an exemption to the Section 196 restriction. Under the First Schedule and related provisions, a whole-time director or manager of a holding company is permitted to act as a whole-time director in its subsidiary company(ies) without requiring Board consent or Central Government approval. This exemption recognizes the practical necessity of group management str…

Question 14

On the basis of above facts answer the following questions: (i) Whether Company was eligible to accept deposit from public? What is the criteria of acceptance of deposit and tenure for which deposit can be accepted? Whether the tenure decided by Company was in accordance with provisions of Companies Act, 2013? (ii) With reference to the loan advanced by Mr. Seth to Company, state whether the same is to be classified as a deposit or not?

Accepted Answer

**(i) Eligibility, Criteria and Tenure for Acceptance of Deposits from Public**

**Eligibility:** Under **Section 76 of the Companies Act, 2013** read with **Rule 3 of the Companies (Acceptance of Deposits) Rules, 2014**, only an **"eligible company"** can invite, accept, or renew deposits from the public. An eligible company means a public company having a **net worth of not less than ₹100 crores** OR a **turnover of not less than ₹500 crores**, which has obtained prior consent by way of a special resolution, complied with credit rating requirements, and created a deposit repayment reserve.

**Assessment of WEE Remedies Ltd.:** The company has a net worth of **₹320 crores** (as on 31.3.2022), which exceeds the threshold of ₹100 crores. Therefore, WEE Remedies Ltd. qualifies as an eligible company and is **eligible to accept deposits from the public**, subject to compliance with other procedural requirements (special resolution, credit rating, deposit insurance, etc.).

**Criteria for acceptance:** The company must pass a special resolution, obtain credit rating, take deposit insurance, create a Deposit Repayment Reserve Account equal to at least 20% of deposits maturing during the following financial year, and file a return of deposits with the Registrar of Companies.

**Tenure:** As per **Rule 3(1)(ii) of the Companies (Acceptance of Deposits) Rules, 2014**, deposits accepted from the public can be for a **minimum period of 6 months and a maximum period of 36 months (3 year…

Question 15

Based on the above case scenario, provide legal analysis regarding the charge registration, AGM convening procedures, and compliance with Companies Act provisions.

Accepted Answer

**Legal Analysis of MCL's Compliance Issues under the Companies Act, 2013**

**(a) Register of Members at Faridabad Branch Office**

Under **Section 94(1) of the Companies Act, 2013**, the Register of Members maintained under Section 88 must ordinarily be kept at the **Registered Office** of the company. However, the proviso to Section 94(1) permits a company to keep such registers at any other place in India provided: (i) **more than one-tenth (10%) of the total members reside** at that place, and (ii) a **Special Resolution** is passed at a general meeting, with an advance copy of the proposed special resolution furnished to the Registrar of Companies.

In MCL's case, **15% of paid members** reside in Faridabad — this exceeds the 1/10th threshold. Accordingly, MCL **can** keep its Register of Members at the Faridabad branch office, **subject to passing a Special Resolution** and forwarding an advance copy to the ROC. Without the Special Resolution, the placement would be non-compliant.

**(b) Charge Registration — Compliance and Default Analysis**

Under **Section 77(1) of the Companies Act, 2013**, every company creating a charge on its property must register particulars with the Registrar **within 30 days** of the charge's creation.

**Timeline:**
- Charge created: **18th June, 2023**
- Normal 30-day deadline: **18th July, 2023** — MCL **failed** to register.
- On MCL's application, the Registrar granted a further **30-day extension** (i.e., within 60 days from creation),…

Question 16

With reference to provisions of Companies Act, 2013, answer the following questions:

Accepted Answer

**Note: This question appears incomplete — specific case facts and circumstances are missing. The following addresses general provisions under the Companies Act, 2013.

(i) Member's Register Location: Section 88 of the Companies Act, 2013 requires every company to maintain a register of members at its registered office. The company may apply to the Registrar under Section 88(2) for permission to maintain the register at a different location within the same city or a specified location. Maintaining it at Faridabad would be valid **only if**: (a) Faridabad is the same city as the registered office, OR (b) the company has obtained prior written approval from the Registrar of Companies. Without such approval, the decision to maintain the Member's Register at Faridabad would be **invalid**.

(ii) Charge Registration: Without specific details of the charge structure, the general position is: A **floating charge** or **fixed charge** created on 18th June 2023 must be registered within **30 days** from the date of creation (i.e., by 18th July 2023) under Section 77 of the Companies Act, 2013. An application filed on 19th August 2023 would be **20 days late** and thus **non-compliant** with the statutory requirement. The company would face consequences including the charge becoming void against the liquidator and creditors. The Registrar may accept a late filing with a late fee under Section 77(3), but this does not cure the statutory default.

(iii) AGM Notice at Shorter Notice: Sect…

Question 17

Multiple questions regarding Debenture Trustee, Auditor eligibility, Doctrine of Novation, and agency

Accepted Answer

**Part (a): Debenture Trustee Requirements**

Under **Section 117 of the Companies Act, 2013**, a Debenture Trustee must satisfy these requirements: (1) be a **body corporate** (not an individual); (2) have minimum net worth of ₹5 crore; (3) not be a promoter, director, or associate of the issuing company; (4) not be a creditor for amount exceeding ₹5 crore; and (5) not hold securities with face value exceeding ₹50 lakhs.

**(i) Investor holding advantageous stake**: **CANNOT** be appointed. The entity must be a body corporate; an individual investor is ineligible. Additionally, holding an advantageous stake creates a conflict of interest.

**(ii) Lender with ₹1,000 debt**: **CAN** be appointed. The debt amount is negligible and falls well below the ₹5 crore creditor limit. No disqualification arises from such minimal indebtedness.

**(iii) Individual who provided guarantee**: **CANNOT** be appointed. First, a Debenture Trustee must be a body corporate; individuals are ineligible. Second, providing a personal guarantee creates a material conflict of interest, as the guarantor has a direct stake in debenture repayment.

**Part (b): Auditor Eligibility Assessment**

Under **Sections 139–144 of the Companies Act, 2013**, an auditor must be a practicing Chartered Accountant and must not be disqualified. Key disqualifications include: creditor/debtor relationships exceeding ₹5 lakhs; spouse holding securities beyond prescribed face value limits (currently ₹25,000); and close relat…

CA Inter Corp Laws

Drill 5 questions from this paper — instant grading

Worked Solution

Write it like this

1The skeleton

2Examiner-rewarded phrases

3Common trap