CA Inter Corp Laws — Question Paper — September 2025

Part (i): LLP Agreement Submission Within 30 Days

Answer: YES, the Registrar would accept the LLP agreement as compliant. Section 11 of the Limited Liability Partnership Act, 2008 requires every LLP to file the LLP agreement with the Registrar within thirty days of its incorporation. An agreement submitted after 20 days falls within this 30-day window and must be accepted by the Registrar as compliant. Only if the agreement is submitted after 30 days can the Registrar refuse to accept it without the written consent of all partners (obtained under Section 11). Since the submission is on day 20, compliance with the statutory deadline is maintained.

Part (ii): Opposition to Form of Capital Contribution

Answer: The opposition may be correct depending on the LLP agreement. Section 12 and Section 23 of the LLP Act, 2008 establish that the form, amount, and timing of capital contributions are matters specified in the LLP agreement. Partners cannot unilaterally deviate from the agreed terms without the consent of all other partners. If the LLP agreement specifies that capital contributions must be made in a particular form (e.g., cash only, or movable property only), and Priyash desires to contribute in a different form (e.g., immovable property, or intellectual property), then the opposition of other partners would be correct and justified. The agreement cannot be changed unilaterally; any modification requires the written consent of all partners. However, if the agreement permits flexibility in the form of contribution, the opposition would not be justified.

Part (iii): Cooperative Society as LLP Partner

Answer: YES, Srijan Cooperative Society can be inducted as a partner in the LLP. Section 4 of the Limited Liability Partnership Act, 2008 states that "any person" can be a designated partner or a partner in an LLP. The definition of "person" under the LLP Act (as per the Indian Contract Act, 1872) explicitly includes bodies corporate, which encompasses cooperative societies registered in India. There is no prohibition in the LLP Act against a cooperative society becoming a partner. Cooperative societies, being bodies corporate with legal personality, have the capacity to enter into agreements, hold property, and fulfill the obligations of an LLP partner. Therefore, provided Srijan Cooperative Society is registered in India and has passed the necessary internal resolutions, it can be validly inducted as a partner in the LLP.

National Financial Reporting Authority (NFRA) — Functions and Powers

Establishment: NFRA is established under Section 132 of the Companies Act, 2013 as an independent regulatory body to oversee accounting and auditing standards for certain classes of companies, including listed companies like SMTN Limited.

Any 3 Functions of NFRA [Section 132(2)]:

1. Recommendation of Accounting and Auditing Standards: NFRA has the power to make recommendations to the Central Government on the formulation and laying down of accounting and auditing policies and standards for adoption by companies or their auditors. This ensures that financial reporting frameworks remain robust and aligned with international best practices.

2. Monitoring and Enforcement of Compliance: NFRA monitors and enforces compliance with accounting standards and auditing standards as may be prescribed. In the case of SMTN Limited, this function is directly triggered — NFRA investigates whether JJ & Co. followed applicable auditing standards (such as SA 240 — The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements and SA 700 — Forming an Opinion and Reporting on Financial Statements) while auditing the annual accounts.

3. Oversight of the Quality of Service of Professionals: NFRA has the function to oversee the quality of service of the professions associated with ensuring compliance with prescribed standards. This includes reviewing the audit quality of firms like JJ & Co. and ensuring that auditors adhere to professional standards when conducting audits of companies falling within NFRA's jurisdiction.

Actions NFRA Can Take Against JJ & Co. [Section 132(4)]:

If NFRA's investigation upholds the allegations raised by the minority shareholders — that JJ & Co. failed to disclose material information regarding SMTN Limited's revenue recognition practices and did not comply with auditing standards — NFRA has the authority to take the following actions:

1. Imposition of Monetary Penalty:
NFRA may impose a monetary penalty on the audit firm or the individual auditor(s) responsible. As per Section 132(4)(c) of the Companies Act, 2013:
- In the case of an individual (i.e., the engagement partner), the penalty shall not be less than ₹1,00,000 but may extend to five times the fees received.
- In the case of a firm, the penalty shall not be less than ₹10,00,000 but may extend to ten times the fees received.

2. Debarment from Practice:
NFRA can debar the member or the firm from engaging in practice as a chartered accountant or audit firm for a minimum period of 6 months and up to a maximum of 10 years, as it deems fit based on the gravity of the misconduct. In the present case, since SMTN Limited is a listed pharmaceutical company and the non-disclosure of revenue recognition practices is a material failure, NFRA may impose a substantial debarment period on JJ & Co. and the responsible partners.

3. Referral to Other Authorities:
While not explicitly a penal action under Section 132(4) alone, NFRA may also refer the matter to the Institute of Chartered Accountants of India (ICAI) or other appropriate authorities for any professional misconduct not directly within NFRA's mandate. Additionally, findings of NFRA can be used by MCA or SEBI to initiate further regulatory or legal proceedings.

Conclusion: In the case of SMTN Limited, since the audit by JJ & Co. failed to report material misstatements related to revenue recognition — a key area governed by Ind AS 115 / AS 9 — NFRA's investigation findings upholding the allegations would likely result in both monetary penalty and debarment of the responsible partners and the firm, sending a strong message regarding auditor accountability for listed entities.

Contemporanea Expositio est optima et fortissima in leges: This maxim translates as 'The contemporary exposition is the best and strongest in law,' meaning the most contemporaneous interpretation given to a statute by those responsible for its enactment or by authorities immediately after enactment is the strongest evidence of its true meaning. As a rule of interpretation, this principle recognizes that the drafters possessed the best understanding of legislative purpose and scope. When officials, courts, or administrators interpret a statute immediately after enactment consistently in a particular manner without challenge, this becomes the most reliable guide to legislative intent. This is especially valuable when statutory language is ambiguous or open to multiple interpretations, as the practical application by those closest to the legislative process reflects what Parliament actually intended.

Optima legis interpres est consuetudo: This maxim means 'Custom is the best interpreter of law,' reflecting that custom, usage, and established practice among those affected by legislation provide authentic interpretation. Long-established customs and usages in commercial, social, or legal contexts clarify statutory provisions when language is uncertain. When a practice has been universally accepted and followed for a considerable period without legislative interference, courts treat such usage as proof of how the community understands and applies the law. Courts accord significant weight to these interpretations because they demonstrate the real-world, practical operation of the statute across society.

Application as Rules of Interpretation: Both maxims function as extrinsic aids to statutory interpretation, employed when language is ambiguous or competing interpretations exist. They operate on the principle that interpretation must align with legislative intention and the practical understanding of those governed by the law. In Indian jurisprudence, courts have applied these maxims when interpreting fiscal, commercial, and constitutional statutes. If an interpretation has been consistently applied by authorities post-enactment and become settled practice, courts hesitate to abandon it, as disruption introduces uncertainty and defeats legitimate expectations. These maxims are crucial because literal interpretation alone may not serve justice; they help courts discover the true purpose and practical effect of legislation, bridging abstract statutory language and concrete real-world application. However, these maxims are non-absolute and can be overridden by clear, unambiguous statutory language or express legislative amendment. They function as interpretive principles rather than binding rules, with application dependent on case-specific facts and context.

Part (i): Export Transaction Status of Barter Trade

Under the Foreign Exchange Management Act, 1999, an 'export' is defined as the taking out of India of goods or services. The critical requirement is not the receipt of monetary payment in foreign currency, but rather the actual physical movement of goods out of India coupled with foreign exchange benefit or at least foreign exchange neutrality.

The RBI, through its circulars and guidelines, has clarified that barter transactions (where goods are exchanged for other goods, services, or securities without direct monetary payment) can constitute valid export transactions, provided:

1. The goods are genuinely transferred out of India with proper customs documentation
2. The consideration (equity instruments in this case) has ascertainable and fair market value
3. Proper valuation at arm's length rate is maintained
4. The transaction does not violate FEMA restrictions on capital account transactions
5. Appropriate documentation and declaration to customs authorities is completed

Therefore, supplying machines in exchange for equity instruments CAN be treated as an export transaction despite the absence of direct monetary payment, provided the equity instruments represent genuine foreign exchange consideration and the transaction is properly documented and valued at fair market value. However, the equity instruments must have identifiable foreign exchange value and the transaction must comply with FEMA regulations on outbound investments and capital transfers.

Part (ii): Export Agent Commission - Permissible Rate

The commission payable to an export agent under the Foreign Exchange Management Act is determined by:

1. Contractual Agreement: The rate agreed between exporter and agent in the export contract
2. Market Practice: Standard commission rates in international trade (typically 5-10%)
3. FEMA Compliance: The commission must be reasonable and justifiable

The standard market rate for export agent commission is 5-10% of invoice value. If Mr. Fred demands a rate exceeding the agreed contractual rate or the standard market rate of 10%, the exporter is justified in:

- Limiting payment to the contractually agreed rate
- Restricting to the reasonable market rate (10% of invoice value of goods supplied)
- Negotiating based on actual services rendered

Therefore, the commission should be limited to 10% of the invoice value of goods supplied, unless a specific higher rate was contractually agreed upon before the transaction. Paying more than the standard market rate without contractual justification would not be tenable under commercial and FEMA principles.

Part (i): Adequacy of Requisition for Calling EGM by Requisitionists

As per Section 100(2) of the Companies Act, 2013, the Board of Directors shall proceed to call an Extraordinary General Meeting (EGM) upon the requisition of members who hold, on the date of receipt of the requisition, not less than one-tenth (1/10th) of the paid-up share capital of the company carrying the right of voting.

Further, under Section 100(4) of the Companies Act, 2013, if the Board does not, within 21 days from the date of receipt of a valid requisition, proceed to call a meeting on a day not later than 45 days from the date of the requisition, the meeting may be called and held by the requisitionists themselves within a period of three months from the date of the requisition.

Applying the provisions to the given case:

The paid-up share capital of Autumn and Spring Ltd is ₹200.56 Crores. One-tenth of the paid-up share capital = ₹200.56 ÷ 10 = ₹20.056 Crores.

The requisitionists hold share capital worth ₹36.52 Crores, which clearly exceeds ₹20.056 Crores. Hence, the threshold requirement under Section 100(2) is satisfied.

The requisition was presented to the Board on 01.07.2024. The Board was required to take steps to call the meeting within 21 days, i.e., by 22.07.2024. The Directors did not respond till 24.07.2024, meaning 21 days had elapsed without action. Therefore, the requisitionists are entitled under Section 100(4) to call and hold the EGM themselves.

Conclusion: The requisition was adequate in terms of the shareholding threshold, and since the Board failed to act within 21 days, the requisitionists were fully within their rights to call the EGM themselves.

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Part (ii): Validity of Notice — Signature, Explanatory Statement, and Sohan Lal's Contention

(a) Notice signed by only one requisitionist:

As per Rule 17 of the Companies (Management and Administration) Rules, 2014, where a meeting is called by requisitionists, the notice shall be signed by all requisitionists or by such of them who are duly authorised in writing by the remaining requisitionists. In the present case, the notice was signed by only one requisitionist who was duly authorised by the others. This is expressly permitted under Rule 17. Therefore, the notice is valid on the ground of signature.

(b) Non-attachment of Explanatory Statement:

As per Section 102(1) of the Companies Act, 2013, a statement setting out material facts concerning each item of special business to be transacted at a general meeting shall be annexed to the notice calling such meeting. Non-compliance with Section 102 makes the resolution passed at the meeting voidable and the company and every officer in default shall be liable to a penalty under Section 102(4).

In the present case, no explanatory statement was annexed as required. The fact that reasons were mentioned within the notice itself does not satisfy the strict requirement of annexure under Section 102. However, since the intent and purpose of Section 102 — ensuring members are informed — was partially served by inclusion within the note itself, the matter may be treated as a technical irregularity rather than a fundamental defect. Nonetheless, strictly speaking, non-annexure of the explanatory statement is a deficiency and the notice is not fully compliant with Section 102.

(c) Contention of Sohan Lal regarding non-receipt of Notice:

As per Section 101 of the Companies Act, 2013, notice of every meeting shall be given to every member of the company. Under Section 100(5), a meeting called by requisitionists shall be called in the same manner, as nearly as possible, as that in which a meeting is called by the Board.

Sohan Lal became a member of the company on 10.07.2024. The requisitionists decided to proceed with calling the meeting only after 24.07.2024 (when the 21-day board period expired). The notice would have been issued after 24.07.2024. Since Sohan Lal was already a registered member on the date the notice was issued, he was entitled to receive the notice.

Conclusion: Sohan Lal's contention is correct and valid. He was a member at the time the notice was dispatched and should have been included in the list of members to whom notice was sent. Failure to send him the notice is a defect in the notice procedure, though it does not automatically invalidate the meeting — it may, however, give him grounds to challenge proceedings if he suffered prejudice.

Applicability of CSR Provisions to Chicago Bricks Inc.

As per Rule 3 of the Companies (CSR Policy) Rules, 2014, every foreign company as defined under Section 2(42) of the Companies Act, 2013, having its branch office or project office in India, which fulfils the criteria specified in Section 135(1) of the Act, is required to comply with the CSR provisions. Chicago Bricks Inc. operates a branch in India, so it falls within the ambit of these provisions.

Threshold Check under Section 135(1):

CSR provisions apply if, in the immediately preceding financial year, the company has:
- Net worth ≥ ₹500 crore, OR
- Turnover ≥ ₹1,000 crore, OR
- Net profit ≥ ₹5 crore

For FY 2025-26, the relevant preceding year is FY 2024-25. Net profit for FY 2024-25 = ₹85 Crore × 20% = ₹17 Crore, which exceeds ₹5 crore. Therefore, CSR provisions are applicable to Chicago Bricks Inc. for FY 2025-26.

CSR Spending Obligation:

Under Section 135(5), a company must spend at least 2% of the average net profits of the three immediately preceding financial years.

Average net profit (FY 2022-23, 2023-24, 2024-25) = (₹15 Cr + ₹13 Cr + ₹17 Cr) ÷ 3 = ₹15 Crore

CSR obligation = 2% × ₹15 Crore = ₹30 Lakhs

Requirement of CSR Committee — Section 135(9):

As per Section 135(9) of the Companies Act, 2013, where the amount required to be spent by a company under Section 135(5) does not exceed ₹50 Lakhs, the requirement for constitution of a CSR Committee shall not be applicable, and the functions of the CSR Committee shall, in such cases, be discharged by the Board of Directors of the company.

Since the CSR obligation of ₹30 Lakhs is less than ₹50 Lakhs, the exemption under Section 135(9) is triggered.

Conclusion:

The branch's view is correct. Although CSR provisions are applicable to Chicago Bricks Inc. (since net profit exceeds ₹5 crore), the formation of a CSR Committee is not mandatory because the CSR spending obligation (₹30 Lakhs) does not exceed ₹50 Lakhs. The Board of Directors itself can discharge all CSR Committee functions as permitted under Section 135(9) of the Companies Act, 2013. Mr. Ramesh's advice to constitute a CSR Committee is therefore not legally required in the present case.

Relevant Law: Section 100 and Section 102 of the Companies Act, 2013 read with Rule 17 of the Companies (Management and Administration) Rules, 2014.

(a) Validity of the Requisition — Threshold under Section 100(2):

Under Section 100(2)(a) of the Companies Act, 2013, the Board is obligated to call an EGM on requisition of members holding, on the date of receipt of the requisition, not less than one-tenth (1/10th) of the paid-up share capital carrying voting rights.

Here, the paid-up share capital is ₹500.56 Crores. The 1/10th threshold = ₹50.056 Crores. The requisitionists hold share capital worth only ₹36.52 Crores, which is approximately 7.3% of paid-up capital — below the 10% threshold. Therefore, strictly speaking, the requisition does not satisfy the statutory minimum and cannot be termed 'validly presented' despite the question's characterisation. The statutory reserve of ₹75.45 Crores is irrelevant for this computation as Section 100 refers only to paid-up share capital.

(b) Right of Requisitionists to Call the Meeting Themselves:

Assuming the requisition is treated as valid (for further analysis), Section 100(4) provides that if the Board does not, within 21 days from the date of deposit of the requisition, proceed to call a meeting to be held within 45 days from such deposit, the requisitionists may call and hold the meeting themselves.

The requisition was deposited on 01.07.2024. The 21-day deadline expired on 22.07.2024. Since the Board took no steps until 24.07.2024 (i.e., beyond 21 days), the requisitionists were within their rights under Section 100(4) to proceed with calling the meeting on 24.07.2024. The requisitionists' action is legally justified.

(c) Notice Signed by Only One Requisitionist:

Under the proviso to Section 100(4) read with Rule 17 of the Companies (Management and Administration) Rules, 2014, a notice for a meeting called by requisitionists may be signed by any one or more of the requisitionists who together hold more than one-half of the total voting power of all requisitionists, or by a person duly authorised by them. Since the notice was signed by one requisitionist duly authorised by the others, this is valid and in compliance with the statutory requirement.

(d) Service of Notice via Email:

Under Section 101 of the Companies Act, 2013 read with Rule 18 of the Companies (Management and Administration) Rules, 2014, notice of a general meeting may be given in electronic mode (including email) to members who have registered their email addresses. Service of notice through email is therefore permissible and valid.

(e) Non-attachment of Explanatory Statement:

Section 102(1) of the Companies Act, 2013 mandates that a statement setting out all material facts concerning each item of special business shall be annexed to the notice calling the meeting. This explanatory statement is not a mere formality — it enables members to make an informed decision on whether to attend and vote.

In the present case, although the reasons were mentioned in the body of the email, a separate explanatory statement was not annexed as required. This is non-compliant with Section 102. Merely including reasons in the covering email does not discharge the statutory obligation to annex a formal explanatory statement. Any resolution passed on such special business at the meeting may be challenged as irregular and potentially void. The omission is a defect that vitiates the calling of the meeting in respect of special business.

Conclusion: The requisition itself appears to fall short of the 10% threshold under Section 100(2). Even assuming validity, the requisitionists were entitled to call the meeting after the Board's 21-day default. The notice by one authorised requisitionist via email is valid, but the failure to annex a separate explanatory statement under Section 102 is a violation that can render resolutions on special business invalid.

Issue 1: Eligibility of ZFG & Associates (Partnership Firm) as Merchant Banker

Under Regulation 3 of the SEBI (Merchant Bankers) Regulations, 1992, no person shall act as a merchant banker unless holding a valid certificate of registration granted by SEBI. Crucially, the regulations require that an applicant for registration as a merchant banker must be a body corporate. A partnership firm does NOT qualify as a body corporate under Indian law.

Since ZFG & Associates is a partnership firm, it is NOT eligible to be registered or to act as a merchant banker/intermediary. The assignment of ZFG & Associates for managing 40% of the ₹6 Crore tranche (i.e., ₹4 Crore worth of equity shares) as a merchant banker intermediary is invalid and in contravention of SEBI (Merchant Bankers) Regulations, 1992. Bull Investments Ltd, being a company (body corporate), satisfies the eligibility requirement and can validly act as a merchant banker.

Issue 2: Lock-in Period for Pre-IPO Allotted Shares

Under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), shares allotted to persons other than promoters within one year prior to the date of filing the Draft Red Herring Prospectus (DRHP) with SEBI are subject to a lock-in of 6 months from the date of allotment in the IPO.

- ZFG & Associates: Allotted equity shares worth ₹4 Crore on 01.04.2024. If the DRHP is filed within one year of 01.04.2024, these shares will be locked in for 6 months from the IPO allotment date. ZFG cannot freely sell these shares to retail investors until the lock-in expires.
- Bull Investments Ltd: Similarly, allotted equity shares worth ₹2 Crore on 01.04.2024. The same 6-month lock-in from IPO allotment date applies if DRHP is filed within one year of allotment.

This lock-in restriction directly conflicts with the stated purpose of both entities selling these shares to retail investors as part of the IPO.

Issue 3: Mr. Kuber's OFS through Book Building at Stock Exchange Platform

Mr. Kuber, an investment banker, intends to handle 40% of ₹10 Crore (i.e., ₹4 Crore) through an Offer for Sale (OFS) via the book building mechanism on the stock exchange platform by inviting bids above the floor price. Under SEBI ICDR Regulations 2018, book building is a valid price discovery mechanism where investors bid at or above the announced floor price or within a price band.

However, the OFS through stock exchange mechanism (as per SEBI Circular) is available only to shareholders of listed companies for selling their existing shareholding. Since Sridha Bookmarks Ltd is planning an IPO (i.e., it is not yet listed), the OFS route through the stock exchange platform as contemplated by Mr. Kuber is not permissible at the pre-listing stage. The correct route for an unlisted company raising capital through a public offer would be through issuance of a prospectus/red herring prospectus under SEBI ICDR Regulations 2018.

Conclusion: (1) ZFG & Associates, being a partnership firm, cannot legally act as a merchant banker. (2) Both ZFG and Bull Investments hold pre-IPO shares subject to a 6-month lock-in from IPO allotment, which prevents their immediate sale to retail investors. (3) Mr. Kuber's intended OFS route via stock exchange is not available to an unlisted company making an IPO; the correct mechanism is a public offer through a prospectus under SEBI ICDR Regulations, 2018.

Relevant Provisions: Section 108 of the Companies Act, 2013, read with Rule 20 of the Companies (Management and Administration) Rules, 2014, governs the facility of voting through electronic means (E-Voting) by members of a company.

Mandatory E-Voting — Who is Required:

As per Rule 20(2) of the Companies (Management and Administration) Rules, 2014, the following companies are mandatorily required to provide the facility of E-Voting to their members:

(a) Every listed company; and
(b) Every company having not less than 1,000 shareholders.

For all other companies, providing E-Voting is optional/voluntary.

Analysis of the Given Case:

Nature of the company: Fabulous Fabricators and Mechanics Ltd. is a listed public limited company. This fact alone triggers the mandatory requirement under Rule 20(2)(a).

Paid-up share capital: ₹200.30 Crore — this exceeds any prescribed threshold and is relevant to confirm its status as a company of significant size.

Number of members: The company has 965 members holding voting rights, which is less than 1,000. However, since the company is a listed company, it must mandatorily provide E-Voting irrespective of the number of shareholders. The threshold of 1,000 shareholders is an independent criterion applicable to unlisted companies.

Position of Mr. Riddhi: Mr. Riddhi, a director, was of the view that E-Voting was not mandatory for Fabulous Fabricators. His view is incorrect in law. Since the company is a listed entity, it is obligated under Rule 20(2)(a) to provide the E-Voting facility to its members — the number of members (965, being less than 1,000) is irrelevant to this obligation.

Decision of the Board: The Board of Directors was correct in deciding to provide the E-Voting facility. It was not merely a discretionary decision — it was a statutory obligation under Section 108 of the Companies Act, 2013 read with Rule 20 of the Companies (Management and Administration) Rules, 2014.

Conclusion: The Annual General Meeting scheduled on 12.12.2023 must provide E-Voting as a mandatory facility. The view of Mr. Riddhi is not tenable in law. The Board's decision to provide E-Voting is not only correct but also a compliance requirement since Fabulous Fabricators and Mechanics Ltd. is a listed public limited company.

Part (i): Validity of ₹110 Crore Loan to the Trust

The Board's decision to provide a loan of ₹110 Crore to the Trust is INVALID under the Companies Act, 2013.

Under Section 186 of the Companies Act, 2013, a company is prohibited from advancing any loan to any person or body corporate except in the following circumstances: (a) to its subsidiaries (up to 100% of paid-up capital plus free reserves); (b) to holding and associate companies (up to 100% of paid-up capital plus free reserves, with Board and shareholder approval); (c) to persons/body corporate in which the company has invested 20% or more of paid-up capital; and (d) to registered employees (up to 6 months' salary or ₹10 lakh, whichever is less).

The Trust created for the employee share scheme is a separate legal entity (body corporate) that does not fall within any of the specified exceptions. It is neither a subsidiary, nor a holding/associate company, nor a body corporate in which Forward Troopers Ltd. has invested 20% or more, nor is it an individual employee. The quantum of ₹110 Crore far exceeds any permissible limit for employee loans. Therefore, the company cannot legally advance this loan to the Trust without violating Section 186. The Board's decision, while well-intentioned for facilitating employee share ownership, exceeds the statutory authority granted to it under the Companies Act, 2013, and is therefore void.

Part (ii): Validity of Mr. Strong's Contention

Mr. Strong's contention is INCORRECT. Under Section 186(2)(e) of the Companies Act, 2013, a company can grant loans to its registered employees (members) to the extent of six months' salary or ₹10 lakh, whichever is less. This provision does not restrict the purpose of such loans solely to purchase of the company's own shares.

While Section 60 of the Companies Act, 2013 specifically restricts loans to registered employees (particularly directors and KMPs) to "personal requirements or for the purchase of shares of the company," the broader provision under Section 186 is not similarly restricted by share type. Section 60 applies specifically to directors and key managerial personnel, whereas the second scheme appears directed at general employees. For employees who are not directors or KMPs, Section 186 permits loans for any purpose, including purchase of shares in other entities such as the holding company, Security Troopers Ltd.

Additionally, Section 61 of the Companies Act, 2013 (which restricts financial assistance for purchase of the company's own shares) applies only to acquisition of the company's shares, not shares of other companies. Therefore, providing loans to employees to purchase holding company shares does not trigger this restriction.

Mr. Strong's understanding is based on Section 60's limitation, which does not extend to all employees under general lending provisions. The Board can legally permit loans for purchase of Security Troopers Ltd. shares within the prescribed limits, provided the scheme is otherwise compliant with the Articles and applicable regulations.

(i) Validity of the loan of ₹110 Crore to the Trust:

The relevant provision here is Section 67 of the Companies Act, 2013, which restricts financial assistance by a company for purchase of its own shares or shares of its holding company.

General Prohibition [Section 67(1)]: No public company shall give, whether directly or indirectly — whether by way of loan, guarantee, security, or otherwise — any financial assistance for the purpose of, or in connection with, purchase of or subscription for shares in the company or its holding company.

Exception under Section 67(2)(b): The prohibition under Section 67(1) does not apply to the provision of money by a company in accordance with any scheme for the purchase of, or subscription for, fully paid-up shares in the company or its holding company, provided:
- The shares are to be held by trustees for the benefit of the employees (including salaried directors); and
- The company is not a private company.

Analysis: Forward Troopers Ltd. is a public limited company. The proposed trust will hold shares for the benefit of employees. Both conditions under Section 67(2)(b) are satisfied. Further, there is no prescribed ceiling on the amount under Section 67(2)(b) as long as it is within the solvency of the company. The company's paid-up capital is ₹1,145 Crore and free reserves are ₹1,012 Crore (Total ₹2,157 Crore), and the loan of ₹110 Crore is well within these limits.

Conclusion: The decision of the Board of Directors of Forward Troopers Ltd. to grant a loan of ₹110 Crore to the Trust for the purchase of its own shares under an employee share scheme is valid and permissible under Section 67(2)(b) of the Companies Act, 2013.

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(ii) Validity of Mr. Strong's Contention:

Mr. Strong approved Option (1) but opposed Option (2), contending that loans can only be granted for purchase of shares of Forward Troopers Ltd. (the company itself) and not of Security Troopers Ltd. (its holding company).

Exception under Section 67(2)(c): The prohibition under Section 67(1) does not apply to the giving of loans by a company to persons in the employment of the company (other than directors or key managerial personnel), for an amount not exceeding their salary or wages for a period of six months, with a view to enabling them to purchase or subscribe for fully paid-up shares in the company or its holding company, to be held by themselves by way of beneficial ownership.

Analysis: The proposed Option (2) involves direct loans to employees (not directors or KMP) to a maximum of 5 months' salary (within the permissible limit of 6 months). The shares to be purchased are of Security Troopers Ltd., which is the holding company of Forward Troopers Ltd. Section 67(2)(c) explicitly covers loans for purchase of shares of the holding company as well.

Conclusion: Mr. Strong's contention is incorrect and not tenable in law. Section 67(2)(c) of the Companies Act, 2013 expressly permits a company to grant loans to its employees for purchase of shares of both the company itself and its holding company. Option (2) is therefore valid and permissible, as all conditions — amount (5 months ≤ 6 months limit), beneficiaries (employees, not directors/KMP), fully paid-up shares, and beneficial ownership — are fulfilled.

Sub-part (i): ₹3.15 Crore Suspected Fraud

Answer: Lamp bell & Associates should NOT agree with Mr. Sharp's request. The suspected fraud of ₹3.15 crore must be reported to the Central Government, not merely mentioned in the Director's Report.

Applicable Provision: Section 143(12) of the Companies Act 2013 and Rule 13 of the Companies (Audit and Auditors) Rules 2014.

Threshold Determination: Sharp Surgical Ltd. is a public limited company with paid-up capital of ₹350.10 crore (exceeding ₹10 crore). Under Rule 13, the prescribed threshold for reporting fraud to the Central Government is ₹1 crore or more. The suspected amount of ₹3.15 crore exceeds this threshold.

Correct Procedure:

1. Mandatory Central Government Reporting: The auditor must immediately report the suspected fraud to the Central Government in electronic mode, in the prescribed format and manner. This is a non-negotiable statutory duty under Section 143(12).

2. Timeline: The report must be made within 2 days of detection (as the auditor correctly did by informing the Audit Committee within 2 days).

3. Cannot be Substituted: The statutory obligation to report to the Central Government cannot be replaced by merely mentioning the matter in the Director's Report. The Director's Report (under Section 134) is for other corporate governance matters, not for fraud reporting, which has a separate statutory mechanism.

4. Status Immaterial: The fact that the fraud is "suspected" and under investigation does not exempt the auditor from reporting. Section 143(12) applies to any circumstance which in the auditor's judgment is fraud.

Sub-part (ii): ₹0.15 Crore Suspected Siphoning

Applicable Provision: Section 143(13) of the Companies Act 2013 and Rule 13(3) of the Companies (Audit and Auditors) Rules 2014.

Threshold Analysis: The amount of ₹0.15 crore falls below the ₹1 crore threshold applicable to large public companies. Therefore, this matter does not qualify for Central Government reporting.

Correct Procedure:

1. Audit Committee Reporting: The auditor must report this suspected fraud to the Audit Committee. This is the prescribed procedure for frauds below the Central Government reporting threshold.

2. Disclosure in Audit Report: The auditor shall make an appropriate disclosure in the audit report (or communicate to the Audit Committee) regarding the detection and reporting of this suspected fraud.

3. Further Action: The Audit Committee may, at its discretion, refer the matter to the Board or direct further action. However, the statutory obligation of the auditor is to report to the Audit Committee.

4. Cannot be Relegated to Director's Report: Similar to the first fraud, this cannot be addressed solely through mention in the Director's Report. The statutory fraud reporting mechanism must be followed.

Conclusion: Both frauds must follow their respective statutory pathways—the ₹3.15 crore to the Central Government and the ₹0.15 crore to the Audit Committee—rather than being treated as a matter for the Director's Report as Mr. Sharp requested.

Part (i): Validity of CA Ms. Marina's Advice

The advice given by CA Ms. Marina is not entirely correct. A determination must be made whether Ms. Martha qualifies as a Significant Beneficial Owner (SBO) under Section 90 of the Companies Act, 2013 read with the Companies (Significant Beneficial Owners) Rules, 2018 (as amended in 2019/2020).

Under Rule 2(1)(h), an individual is an SBO if she holds, indirectly or together with any direct holdings, not less than 10% of the shares, voting rights, or dividend entitlement of the reporting company.

Computation of Ms. Martha's beneficial interest in equity:

Total equity share capital of Acio-Support Ltd. = 1,20,000 shares × ₹100 = ₹1,20,00,000

Shares held directly (in own name) = ₹6,50,000 → Percentage = 6,50,000 ÷ 1,20,00,000 × 100 = 5.42%

Beneficial interest held indirectly = ₹3,00,000 → Percentage = 3,00,000 ÷ 1,20,00,000 × 100 = 2.50%

Combined (direct + indirect) = ₹9,50,000 → 7.92%

Since 7.92% is below the 10% threshold, Ms. Martha does not qualify as a Significant Beneficial Owner. Therefore, she is not required to file a declaration in Form BEN-1 to the company.

Further, it is important to note that the SBO framework is specifically designed to capture indirect beneficial ownership (i.e., ownership through intermediaries such as body corporates, HUFs, partnerships, or trusts). Direct shareholding is already reflected in the register of members and does not, by itself, trigger SBO obligations. CA Ms. Marina's general statement that SBO declaration is required on both direct and indirect holdings lacks precision — the declaration is triggered only when the combined indirect and direct interest meets the 10% threshold.

Hence, CA Ms. Marina's advice is not in line with the SBO Rules — Ms. Martha need not file Form BEN-1 since her combined beneficial interest (7.92%) falls short of the prescribed threshold.

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Part (ii): Instances Where SBO Rules Are NOT Applicable

Contrary to the general statement that SBO Rules apply in every case, Rule 8 of the Companies (Significant Beneficial Owners) Rules, 2018 carves out specific exemptions. The provisions of the SBO Rules shall not apply to the extent the shares of a reporting company are held by:

(a) The authority constituted under Section 125(5) of the Companies Act, 2013 (i.e., the Investor Education and Protection Fund Authority — IEPF).

(b) Its holding reporting company, provided that the details of such holding reporting company are reported in Form BEN-2.

(c) The Central Government, State Government, or any local authority.

(d) A reporting company, body corporate, or any entity controlled by the Central Government, any State Government, or partly by both.

(e) SEBI-registered investment vehicles such as Mutual Funds, Alternative Investment Funds (AIFs), Real Estate Investment Trusts (REITs), and Infrastructure Investment Trusts (InvITs) regulated by SEBI.

(f) Investment vehicles regulated by the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (IRDAI), or Pension Fund Regulatory and Development Authority (PFRDA).

In all such cases, the reporting company is not required to identify or register SBOs in respect of shares held by these exempt entities, and such entities are not required to file Form BEN-1.

Sub-part (i): Whether supply of machines in exchange for equity investments constitutes 'Export' under FEMA, 1999

Yes, the transaction qualifies as 'export' under FEMA, 1999, despite the absence of a monetary factor.

Under Section 2(l) of the Foreign Exchange Management Act, 1999, 'export' is defined as 'the taking out of India to a place outside India of any goods.' The definition focuses entirely on the physical movement of goods from India to a place outside India. It does not prescribe that the consideration must be monetary in nature.

In the given scenario, machines (goods) are physically taken out of India and supplied to a foreign entity. The fact that the consideration received is in the form of equity investments (shares) rather than money does not alter the character of the transaction. Export against equity participation (i.e., swap of goods for shares in an overseas company) is a recognised mode of export under the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations. Such transactions are permitted subject to compliance with the relevant FEMA regulations and RBI guidelines.

Therefore, the transaction constitutes a valid 'export' under FEMA, 1999, and the absence of a monetary factor is not a disqualifying element.

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Sub-part (ii): Whether export agent commission of Mr. Fred can be paid in full or is capped at 10% of invoice value

The commission demanded by Mr. Fred is not necessarily capped at 10% of invoice value.

Under the Foreign Exchange Management (Current Account Transactions) Rules, 2000 read with RBI Master Direction on Export of Goods and Services, Authorised Dealer (AD) banks are permitted to allow remittance of commission to foreign buying agents or indent agents (such as Mr. Fred) on export transactions up to 12.5% of the invoice value without obtaining prior approval from the Reserve Bank of India.

The 10% cap was applicable under the old Foreign Exchange Regulation Act, 1973 (FERA) regime and is not the prevailing cap under FEMA. Under the liberalised FEMA framework, the permissible limit has been revised upward.

Accordingly:
- If Mr. Fred's demanded commission is up to 12.5% of invoice value, the AD bank can freely allow payment without any special RBI permission.
- If Mr. Fred's commission exceeds 12.5% of invoice value, prior approval of the Reserve Bank of India will be required before making such remittance.

In conclusion, the commission is not rigidly capped at 10%. The applicable ceiling under FEMA is 12.5% of invoice value for payment through AD banks without RBI approval, and beyond that limit, RBI sanction is mandatory.

FUNCTIONS OF NFRA (Section 132, Companies Act, 2013)

Function 1: Investigation of Audit Failures - NFRA is empowered to investigate whether the audit of any listed company (as SMTN Limited is) has been conducted in compliance with auditing standards referred to in Section 143(10). In this case, NFRA will examine whether JJ & Co. failed to identify and disclose material irregularities in revenue recognition practices and whether such failure constitutes non-compliance with Auditing Standards.

Function 2: Monitoring and Enforcement of Accounting and Auditing Standards Compliance - NFRA monitors whether auditors comply with accounting standards (AS/Ind AS) and auditing standards (SA). It ensures that financial statements are prepared in accordance with prescribed standards and that audits are conducted with due professional care and diligence. NFRA will assess whether JJ & Co. complied with SA 240 (Auditor's Responsibilities Relating to Fraud) and other relevant standards.

Function 3: Conducting Inquiries into Audit Failures and Recommending Action - Under Section 136, NFRA has power to conduct inquiries into matters relating to audit failures and breaches of accounting/auditing standards. Upon such inquiry, it can recommend suitable action against the audit firm, auditors, or other entities found responsible. NFRA will examine the quality of JJ & Co.'s audit work and whether it breached professional standards.

ACTIONS AVAILABLE TO NFRA AGAINST JJ & CO. (Sections 136, 142)

Action 1: Monetary Penalties - NFRA may impose substantial monetary penalties on JJ & Co. under Section 142. The penalty structure varies depending on the breach severity. For audit failures involving listed companies and material misstatements in financial reporting, penalties can be imposed on both the audit firm and responsible partners.

Action 2: Suspension or Cancellation of Registration - NFRA can order suspension of the Peer Review Certificate or cancel the registration of the audit firm under the auditor registration provisions. This would prevent JJ & Co. from conducting audits of listed companies or other prescribed entities for the suspension period or permanently if registration is cancelled.

Action 3: Debarment from Conducting Audit of Listed Companies - NFRA can recommend debarment of JJ & Co. from conducting statutory audit of listed companies for a specified period. Given the materiality of the audit failure (failure to disclose irregularities in revenue recognition), NFRA may impose a substantial debarment period, effectively restricting the firm's audit practice.

Additional Action: Recommendation to ICAI - NFRA can recommend to the Institute of Chartered Accountants of India (ICAI) for initiating disciplinary proceedings against the auditors/partners responsible under the Chartered Accountants Act, 1949. This may result in suspension or removal from the register of auditors.

Action 4: Issuance of Directions - NFRA may issue directions to the audit firm regarding remediation of audit processes, implementation of stronger quality control measures, and compliance frameworks to prevent future failures.

In the context of SMTN Limited, since the audit failure relates to non-disclosure of material matters (revenue recognition irregularities) that directly affect financial statement credibility, NFRA would likely impose stringent penalties and possibly debarment, particularly because this failure breaches fundamental auditing standards like SA 240 and SA 320 (Materiality in Planning and Performing an Audit).

Applicable Provisions: Section 100 and Section 101 of the Companies Act, 2013 read with Rule 17 of the Companies (Management and Administration) Rules, 2014.

(i) Adequacy of Requisition for Calling EGM by Requisitionists Themselves

As per Section 100(2) of the Companies Act, 2013, the Board of Directors is obligated to call an Extraordinary General Meeting (EGM) upon receipt of a requisition by members holding, as on the date of deposit of the requisition, not less than one-tenth (1/10th) of such paid-up share capital of the company as carries the right of voting.

Further, as per Section 100(4), if the Board does not, within 21 days from the date of deposit of a valid requisition, proceed to call a meeting, the requisitionists themselves may call and hold the meeting within 3 months from the date of deposit of the requisition.

For the requisition to be adequate and valid, the following conditions must be satisfied:
1. Requisitionists must collectively hold at least 1/10th of total paid-up share capital carrying voting rights.
2. The requisition must set out the matters for consideration and must be signed by the requisitionists.
3. The Board must have failed to proceed to call the meeting within 21 days.
4. The requisitionists must call the meeting within 3 months of depositing the requisition.

Provided the requisitionists satisfy the 1/10th shareholding threshold and the Board has not acted within 21 days, the requisition is adequate and the requisitionists are legally empowered to call the EGM themselves.

(ii) Validity Issues: Signing by One Requisitionist, Publication of Explanatory Statement, and Sohan Lal Not Receiving Notice

A. Signing of Notice by Only One Requisitionist:

As per Rule 17(2) of the Companies (Management and Administration) Rules, 2014, when the requisitionists themselves call the meeting, the meeting shall be called in the same manner, as nearly as possible, as that in which meetings are to be called by the Board. The notice need not necessarily be signed by all requisitionists; it may be signed by any two or more of the requisitionists, or by one acting with the authority of the group. However, signing by only one requisitionist when multiple requisitionists exist — without proper authorisation — may render the notice procedurally defective, thereby affecting the validity of the notice. The appropriate course is for the majority or all requisitionists to sign, or to authorise one to sign on their behalf.

B. Publication of Explanatory Statement Instead of Circulation:

As per Section 102(1) of the Companies Act, 2013, for any item of special business to be transacted at a general meeting, an explanatory statement must be annexed to the notice of the meeting. Section 102(4) provides that non-annexure of the explanatory statement shall render the notice and any resolution passed on such item void.

Mere publication of the explanatory statement in a newspaper, without annexing it to the notice sent to members, does not satisfy the requirement of Section 102. Therefore, publication in lieu of circulation/annexure is a non-compliance and adversely affects the validity of the notice and any resolution passed thereat.

C. Sohan Lal Not Receiving the Notice:

Sohan Lal became a member of the company on 10.07.2024. Under Section 101(1) of the Companies Act, 2013, notice of every meeting of the company shall be given to every member of the company. Entitlement to notice is determined based on membership as on the date of dispatch of notice.

If the notice was dispatched before 10.07.2024, Sohan Lal was not a member at that time and therefore was not entitled to receive the notice — his non-receipt does not affect the validity of the meeting.

However, if the notice was dispatched on or after 10.07.2024, Sohan Lal, being a member, ought to have received the notice. In such a case, Section 101(3) provides that the accidental omission to give notice to, or the non-receipt of notice by, any member shall not invalidate the proceedings of the meeting. Thus, even if Sohan Lal did not receive the notice due to an accidental omission, the meeting and its proceedings remain valid.

Conclusion: The constitution of Sohan Lal not receiving the notice is governed by Section 101(3), and his raising an objection on this ground alone would not succeed in invalidating the meeting, provided the omission was accidental.

Definition of 'Deposit': As per Section 2(31) of the Companies Act, 2013 read with Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014, 'deposit' includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include such amounts as are specifically excluded under the Rules (e.g., amounts from directors, share application money, inter-corporate loans, bank borrowings, convertible notes by start-ups within prescribed limits, etc.).

(i) JK Textiles Limited — Deposits from Members for Less than Six Months:

As per Rule 3(1)(b) of the Companies (Acceptance of Deposits) Rules, 2014, no company shall accept deposits for a period less than six months or more than thirty-six months. However, there is a limited exception: a company may, for the purpose of meeting short-term requirements, accept deposits for a period of not less than three months but less than six months, provided that such deposits shall not exceed 10% of the aggregate of the paid-up share capital, free reserves, and securities premium account of the company.

In this case, JK Textiles Limited proposes to accept ₹1 crore from its members for a tenure less than six months without any stated qualification that it is for short-term requirements or that it is within the 10% threshold. Since the proposal does not fulfil the preconditions for the exception, the proposal is NOT valid. The company would need to ensure the tenure is at least six months, or if intending a shorter tenure, it must (a) restrict it to meeting short-term requirements, (b) ensure the tenure is not less than three months, and (c) ensure the amount does not exceed 10% of the prescribed base.

(ii) ATC Technologies Private Limited — Convertible Note Repayable in Six Years:

As per Rule 2(1)(c)(xix) of the Companies (Acceptance of Deposits) Rules, 2014 (inserted by the 2017 Amendment), amounts received by a start-up company by way of a convertible note — defined as an instrument evidencing receipt of money initially as debt, repayable at the option of the holder with interest, or convertible into equity shares within a period not exceeding five years from the date of issue — in a single tranche from a person, for an amount not less than ₹25 lakhs, are excluded from the definition of 'deposit'.

For this exclusion to apply, the convertible note must be convertible into equity shares or repayable within five years from the date of issue. In the given case, K is lending ₹50 lakhs (satisfying the ₹25 lakh minimum) in a single tranche (condition met) to ATC Technologies Private Limited (a start-up — condition met). However, the note is repayable within six years, which exceeds the five-year limit prescribed under the Rules.

Since the period of repayment/conversion (6 years) exceeds five years, the amount will NOT qualify for the exclusion and will be treated as a 'deposit'. Once treated as a deposit, a private company can only accept deposits from its members under Section 73(2) of the Companies Act, 2013. K is merely the director's friend and is not a member of ATC Technologies Private Limited.

Therefore, the proposal is NOT valid. For it to be valid, the convertible note should be structured so that it is repayable or convertible into equity shares within five years from the date of issue.

Relevant Provision: Section 28 of the Companies Act, 2013 deals with 'Offer for Sale' — where securities are allotted with a view to being offered to the public, the offer document is deemed a prospectus and all provisions relating to prospectus apply accordingly.

(i) Validity of Offer for Sale by ZFG & Associates and Bull Investments Ltd.

As per Section 28(3)(b), where the persons making the offer for sale are a company, the offer document must be signed by two directors of such company; and where the persons making the offer are a firm, the offer document must be signed by not less than one-half of the partners of such firm.

Further, as per Section 28(2)(b), it shall be evidence that the allotment was made with a view to offering to the public if it is shown that at the date of offer, the whole consideration had not been received by the company. Conversely, where full consideration has been paid prior to the offer, the deeming provision does not operate adversely — the offer can validly proceed.

ZFG & Associates (a firm): The offer document was issued on 10.10.2024. Full consideration has been paid to Sridha Bookmarks Ltd. The question does not indicate any deficiency in signing by the partners. Assuming the offer document was signed by not less than half the partners, the offer for sale made by ZFG & Associates is valid at law.

Bull Investments Ltd. (a company): The offer document was issued on 25.09.2024. Full consideration has been paid. However, the offer document was signed by only one director, whereas Section 28(3)(b) mandatorily requires the signature of two directors of the company. Since this statutory requirement has not been complied with, the offer for sale made by Bull Investments Ltd. is not valid at law. The offer document is defective and non-compliant with Section 28 of the Companies Act, 2013.

(ii) Whether the Board of Directors' objection to Mr. Kuber's Offer Document should be upheld?

Mr. Kuber, to whom 40% of the balance shares were issued, has made an offer for sale through an offer document. The Board of Directors of Sridha Bookmarks Ltd. has opposed the offer document on the ground that it does not contain the name of the person or entity bearing the risk of making such offer of sale.

As per Section 28(3)(a), the offer document (deemed prospectus) must contain, in addition to matters required under Section 26, the following:
(a)(i) the net amount of consideration received or to be received by the company in respect of the securities; and
(a)(ii) the place and time at which the contract of allotment may be inspected.

Further, the offer document must clearly identify and be signed by the person or persons making the offer, as they bear liability for any mis-statements or omissions therein. The name and identity of the person bearing the risk — i.e., Mr. Kuber — is a fundamental disclosure required so that the public can identify who is responsible for the offer and any representations made therein.

Since Mr. Kuber's offer document does not contain the name of the person bearing the risk of making the offer, it fails to comply with the mandatory requirements under Section 28 read with Section 26 of the Companies Act, 2013. The objection raised by the Board of Directors should be upheld. The offer document issued by Mr. Kuber is incomplete and non-compliant as it does not disclose the identity of the person making/bearing the risk of the offer, which is an essential ingredient of any valid offer for sale document under the Companies Act, 2013.

(i) Validity of Offer for Sale by ZFG & Associates and Bull Investments Ltd.

The relevant provision governing offer for sale through offer documents is Section 28 of the Companies Act, 2013, which deals with offer of sale of shares by certain members of a company. Where shares are offered to the public through an offer document, such document is deemed to be a prospectus issued by the company.

A critical requirement under Section 28(4) relates to the signing of such offer documents:
- Where the offeror is a body corporate, the offer document must be signed by not less than two directors of such body corporate.
- Where the offeror is a firm, the offer document must be signed by not less than one-half of the partners of the firm.
- Where the offeror is an individual, the offer document must be signed by the offeror himself or his duly authorized attorney.

Additionally, it is a pre-condition under Section 28 that the full consideration for the shares must have been paid by the offeror to the company before the offer to the public is made.

ZFG & Associates is a firm (partnership). The question does not mention any defect in the signing of their offer document dated 10.10.2024, and both intermediaries have paid the full consideration to Sridha Bookmarks Ltd. as required. Therefore, the offer for sale by ZFG & Associates is valid at law, subject to compliance with other applicable requirements.

Bull Investments Ltd. is a body corporate (company). Under Section 28(4), the offer document of a corporate offeror must be signed by a minimum of two directors. In the given case, the offer document of Bull Investments Ltd. was signed by only one director, which is in direct contravention of this requirement. The fact that full consideration was paid does not cure this defect. Therefore, the offer for sale by Bull Investments Ltd. is NOT valid at law.

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(ii) Whether the Board's objection against Mr. Kuber's offer document sustains

Mr. Kuber, to whom 40% of the balance shares were issued, seeks to offer those shares to the public through an offer document. The Board of Directors of Sridha Bookmarks Ltd. has objected that the offer document does not contain the name of the person or entity bearing the onus of making such offer of sale.

Under Section 28(2) of the Companies Act, 2013, a document by which an offer for sale is made is deemed to be a prospectus, and all provisions relating to contents, liabilities, and responsibilities applicable to a prospectus apply equally to such offer document. The identification of the person responsible for making the offer — i.e., the offeror — is a fundamental mandatory disclosure requirement in any offer document/prospectus.

An offer document that omits the name of the person bearing the onus of making the offer lacks a basic and essential element. Without such identification, statutory liabilities for misstatements and omissions under the Act cannot be fastened upon a specific person, and investors cannot identify against whom they have recourse. This is not a mere procedural deficiency but a substantive defect.

Further, under Section 28(4)(b), where the offeror is an individual, the offer document must be signed by the offeror himself, which necessarily presupposes that the offeror's identity is disclosed in the document.

Therefore, the objection raised by the Board of Directors of Sridha Bookmarks Ltd. is valid and sustains. Mr. Kuber's offer document, as presently constituted without naming the person bearing the onus of the offer, does not comply with the requirements of Section 28 of the Companies Act, 2013.

Legal Analysis under the Motor Vehicles Act, 1988

Issue of Overloading: The driver of Jumbo Road Lines Ltd. committed the offence of overloading under Section 194 of the Motor Vehicles Act, 1988. The registered laden weight (RLW) of the truck was 1000 tons. The driver first loaded goods up to the registered capacity (1000 tons for the company's consignment), and then additionally loaded another 1000 tons of goods from a local trader for personal monetary gain. This resulted in the truck carrying double its registered permissible weight, which is a clear violation of the Act.

Liability of the Driver: The driver is personally and primarily liable for the act of overloading. He loaded the additional goods on his own initiative, outside the scope of his employment, and for personal gain (extra payment from the local trader). Under Section 194 of the Motor Vehicles Act, 1988 (as amended by the Motor Vehicles Amendment Act, 2019), any person who drives or causes or allows to be driven a vehicle in excess of the permissible weight is liable to pay fine of ₹20,000 plus ₹2,000 per ton of excess load. Since the excess load here is 1000 tons, the financial penalty on the driver would be substantial.

Liability of Jumbo Road Lines Ltd. (Company): As the registered owner of the vehicle, Jumbo Road Lines Ltd. also bears responsibility under the Motor Vehicles Act. The company, as owner, is vicariously liable for the operations of the vehicle. However, since the driver acted entirely outside the scope of his authorised duties and for his own personal benefit (accepting payment from a third party trader), the company may seek to recover losses from the driver. Nevertheless, the owner cannot entirely escape liability under the Act because the vehicle belongs to the company and was being operated on a public road.

Damage to Public Property: The overloaded truck rammed into a road divider, causing damage to public property. This gives rise to additional liability under the Prevention of Damage to Public Property Act, 1984, and also triggers third-party liability provisions under the Motor Vehicles Act, 1988. The insurance policy of the vehicle may cover third-party property damage, but the insurer may seek recovery (subrogation) from the driver for the deliberate act of overloading.

Conclusion: The driver is primarily liable for the offence of overloading and the resultant damage. Jumbo Road Lines Ltd., as the registered owner, also bears vicarious liability under the Motor Vehicles Act, 1988, but may take legal recourse against the driver for acting beyond the scope of his employment and for causing financial loss to the company.

Part (a): Whether the plea of double jeopardy should be accepted

Answer: NO, the plea of double jeopardy should NOT be accepted by the court.

Although both suits arise from the same factual incident (the overloaded truck damaging the road divider), they constitute different offenses with distinct legal ingredients, objectives, and consequences. Double jeopardy protection applies when a person is prosecuted for the same offense under the same law on the same facts. Here, two separate offenses are involved:

1. Under Motor Vehicles Act, 1988: Overloading the truck beyond its registered capacity—a violation of transport safety regulations
2. Under Damage to Public Property Act, 1984: Causing damage to public property (road divider)—a violation of public asset protection laws

These offenses have different legal elements. Overloading could occur without causing damage; conversely, damage could result from various causes. The protection against double jeopardy does not extend to multiple prosecutions for different offenses arising from the same act, provided each statute is independent with its own object and scope.

Part (b): Underlying principles and General Clauses Act, 1897

Principle of Distinct Legal Ingredients: Each statute targets a different aspect of the conduct. The Motor Vehicles Act focuses on regulatory compliance and public safety norms for transportation, while the Damage to Public Property Act focuses on protecting state/municipal assets. These are substantively different offenses requiring proof of different elements.

Principle of Separate Objects and Purposes: The General Clauses Act, 1897 provides that statutes must be interpreted in a manner that gives effect to each law according to its object and purpose. Section 6 and the interpretive provisions of the Act emphasize that multiple statutes operating on the same facts do not automatically conflict. When two laws serve different protective functions (one regulating transport safety, the other protecting public property), they operate concurrently unless expressly repugnant.

Doctrine of Harmonious Construction: Under Section 3 and the general philosophy of the General Clauses Act, when two statutes can coexist without direct contradiction, they must be read together to give effect to both. There is no inherent repugnancy between prosecuting for regulatory violation (MVA) and compensatory liability (DPPA). Both laws seek to advance distinct public interests—transport safety and public asset protection respectively.

Principle of Different Consequences: The Motor Vehicles Act prescribes penalties for overloading as a regulatory offense; the Damage to Public Property Act prescribes compensation and penalties for damage caused. These are not the same punishment for the same act—they are different legal consequences flowing from different statutory breaches.

Application: Jumbo Road Lines Ltd. violated the maxim of Noscitur a sociis (things are known by their associates). The company knew the truck's capacity was 1000 tons, loaded 100 tons extra unlawfully, and this overloading directly caused the accident. Each statute independently prohibits what the company did:
- Loading beyond capacity (MVA violation)
- Damaging public property through negligence/recklessness (DPPA violation)

Under the General Clauses Act principles, separate statutes with distinct objects operate in tandem. Double jeopardy applies to the same offense; here, there are two different offenses. The company is not being punished twice for one crime—it is being rightfully prosecuted for two distinct violations of law.

Answer to (a): Whether the plea of Double Jeopardy be accepted?

The plea of double jeopardy raised by Jumbo Road Lines Ltd. will NOT be accepted by the court.

The two suits filed against the company are for two distinct and separate offences under two different legislations:
- First suit by Traffic Police under the Motor Vehicles Act, 1988 — for the offence of overloading the truck.
- Second suit by Highway Authority under the Prevention of Damage to Public Property Act, 1984 — for the offence of damaging public property (dividers and iron structures on roadside).

Although both offences arise from the same act (operating an overloaded truck), the nature, ingredients, and elements of each offence are entirely different. The offence of overloading is not the same as the offence of damaging public property. Since the two offences are not identical, the principle of double jeopardy — which bars punishment twice for the same offence — does not apply here.

Therefore, both prosecutions can proceed independently and simultaneously.

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Answer to (b): Underlying Principle — Section 26 of the General Clauses Act, 1897

Section 26 of the General Clauses Act, 1897 lays down the governing principle for situations where a single act or omission constitutes an offence under two or more enactments. It reads as follows:

*"Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence."*

Key principles emerging from Section 26:

1. Same act — Multiple enactments: When a single act or omission simultaneously violates provisions of two or more statutes, the offender can be prosecuted under any one or all of those statutes. The law does not prohibit multiple prosecutions merely because they arise from the same act.

2. Bar only against double punishment for the SAME offence: The protection under Section 26 (and also under Article 20(2) of the Constitution of India) is limited — it only bars being punished twice for the identical offence. If the offences under the two enactments have different ingredients, different nature, or protect different interests, they are not the "same offence" and double jeopardy does not apply.

3. Distinction between 'same act' and 'same offence': This is the crux. The term 'same offence' requires identity of the offence — same facts, same ingredients, same legal character. Two offences do not become the 'same' merely because they originate from one act. In the present case:
- Overloading (MVA) protects road safety and vehicle regulation.
- Damage to public property (PDPPA) protects government/public infrastructure.
These serve different legislative purposes and therefore constitute different offences.

Application to Jumbo Road Lines Ltd.:

The company's single act of operating an overloaded truck gave rise to two separate legal violations — one under the Motor Vehicles Act, 1988 (for overloading) and another under the Prevention of Damage to Public Property Act, 1984 (for damaging road-side dividers and iron structures). As per Section 26 of the General Clauses Act, 1897, the company is liable to be prosecuted under both enactments since these are different offences, even though they stem from the same act. The plea of double jeopardy is therefore not tenable, and both suits shall proceed.

Conclusion: The court will reject the plea of Jumbo Road Lines Ltd. The company can be prosecuted and punished under both Acts, as the protection against double jeopardy applies only where the offence is identical — not merely where the same act underlies two different statutory violations.

Sub-part (i): Whether E-Voting facility is optional for Fabulous Fabricators and Mechanics Ltd.

Under Section 108 of the Companies Act, 2013 read with Rule 20 of the Companies (Management and Administration) Rules, 2014, the provision of e-voting facility is mandatory for: (a) every listed company, and (b) every company having not less than 1,000 shareholders. For all other companies, providing e-voting is optional.

Therefore, the correctness of Mr. Riddhi's contention depends on the nature and shareholder strength of Fabulous Fabricators and Mechanics Ltd. If the company is neither a listed company nor has 1,000 or more shareholders, then e-voting is indeed optional and Mr. Riddhi's contention would be correct. However, if the company satisfies either condition, e-voting is mandatory and his contention would be incorrect.

Sub-part (ii): Can the Chairman stop Mr. Mohan from physically voting at the meeting?

No, the Chairman cannot stop Mr. Mohan from voting physically at the meeting. The governing principle under Rule 20 of the Companies (Management and Administration) Rules, 2014 is as follows: a member who has actually cast his vote through remote e-voting is not entitled to vote at the general meeting. However, a member who has opted for e-voting but has NOT exercised (i.e., not cast) his vote through the remote e-voting facility is still entitled to vote at the general meeting.

In the present case, Mr. Mohan had opted for e-voting but could not exercise the option — meaning he did not cast any vote through e-voting. Accordingly, he retains full right to vote physically at the meeting. The Chairman's contention that opting for e-voting permanently bars him from voting at the meeting is legally incorrect and contrary to the intent of Rule 20. The Chairman must allow Mr. Mohan to cast his vote at the meeting.

Sub-part (iii): Validity of legal team's suggestion regarding postal ballot for appointment of Mr. Keshav as Small Shareholders' Director

The legal team's suggestion is valid and correct in law. Under Section 110 of the Companies Act, 2013 read with Rule 22 of the Companies (Management and Administration) Rules, 2014, certain items of business are mandatorily required to be transacted only through postal ballot and cannot be transacted at a general meeting.

The election of a Small Shareholders' Director under Section 151 of the Companies Act, 2013 is specifically listed as one such item under Rule 22. This means the appointment of Mr. Keshav as a Small Shareholders' Director must necessarily be done through the postal ballot process and cannot be decided by voting at a general meeting (whether by show of hands, poll, or e-voting at the meeting).

Therefore, the legal team's suggestion that this matter can only be undertaken by voting through postal ballot and not otherwise is legally valid and correct.

(i) Whether E-Voting is Optional for Fabulous Fabricators and Mechanics Ltd.:

Under Section 108 of the Companies Act, 2013 read with Rule 20 of the Companies (Management and Administration) Rules, 2014, the facility of voting through electronic means (E-Voting) is mandatory only for:
(a) Every listed company, and
(b) Every company having not less than 1,000 shareholders.

For all other companies (i.e., unlisted companies with fewer than 1,000 shareholders), providing E-Voting facility is optional. If Fabulous Fabricators and Mechanics Ltd. is an unlisted company with fewer than 1,000 shareholders, then the contention of Mr. Riddhi that the E-Voting facility is optional is correct and valid in law. Such a company may provide E-Voting at its discretion but is not legally bound to do so.

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(ii) Whether the Chairman Can Stop Mr. Mohan from Physically Voting:

As per Rule 20(4)(ix) of the Companies (Management and Administration) Rules, 2014, a member who has cast his vote by remote e-voting prior to the meeting may also attend the meeting but shall not be entitled to cast his vote again.

The critical distinction here is between opting for e-voting and actually casting a vote through e-voting. In the present case, Mr. Mohan had opted for E-Voting but could not exercise his option — meaning he did not cast his vote through the e-voting mechanism. Since he has not cast his vote through remote e-voting, the bar under Rule 20(4)(ix) does not apply to him.

Therefore, the Chairman's refusal to allow Mr. Mohan to cast his vote physically at the meeting is not correct and not valid in law. Mr. Mohan, being a member who has not cast his vote through any mode, is fully entitled to vote physically at the meeting. The Chairman ought to have permitted him to vote.

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(iii) Validity of Legal Team's Suggestion Regarding Postal Ballot for Appointment of Mr. Keshav as Small Shareholders' Director:

Under Section 110 of the Companies Act, 2013 read with Rule 22(2) of the Companies (Management and Administration) Rules, 2014, certain resolutions are required to be passed only through postal ballot and cannot be transacted at a general meeting through ordinary voting. One of the items specifically listed under Rule 22(2) is:

Election of a Director elected by small shareholders under Section 151 of the Companies Act, 2013.

Since the appointment of Mr. Keshav as a Small Shareholders' Director falls squarely within the category mandated for postal ballot under Rule 22(2), the suggestion of the legal team is valid and correct in law. The company cannot transact this matter through ordinary voting at a general meeting; it must mandatorily be done through the postal ballot procedure as prescribed under Section 110 and Rule 22.

(i) Whether Aptruck Limited can buy-back 10% of its shares:

Under Section 68 of the Companies Act, 2013, a company may buy-back its own shares subject to several conditions. The proposed buy-back of 10% of shares is analysed below:

Number of shares proposed to be bought back: 10% × 1 crore = 10,00,000 shares
Total buy-back consideration: 10,00,000 × ₹500 = ₹50 crores

Condition 1 — 25% ceiling [Section 68(2)(c)]: The buy-back amount shall not exceed 25% of the total paid-up capital and free reserves of the company in any financial year.
- Total paid-up capital + Free reserves = ₹50 crores + ₹100 crores = ₹150 crores
- 25% of ₹150 crores = ₹37.5 crores (maximum permissible)
- Proposed buy-back = ₹50 crores > ₹37.5 crores → CONDITION VIOLATED

Condition 2 — Type of resolution [Section 68(2)(b)]: A Board Resolution is sufficient only if the buy-back amount is up to 10% of (paid-up equity capital + free reserves). For amounts beyond 10%, a Special Resolution in general meeting is mandatory.
- 10% of ₹150 crores = ₹15 crores (threshold for board/ordinary resolution)
- Proposed buy-back = ₹50 crores > ₹15 crores → Special Resolution required
- The company has passed only an Ordinary Resolution → CONDITION VIOLATED

Conclusion: Aptruck Limited cannot proceed with the buy-back of 10% of its shares because (a) the consideration of ₹50 crores exceeds the 25% statutory ceiling of ₹37.5 crores, and (b) the Ordinary Resolution passed is legally insufficient — a Special Resolution in general meeting was required.

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(ii) Maximum eligible buy-back amount under Section 68 of the Companies Act, 2013:

The maximum permissible buy-back is governed by the 25% of (paid-up capital + free reserves) ceiling under Section 68(2)(c):

- Paid-up share capital = ₹50 crores
- Free reserves = ₹100 crores
- Total = ₹150 crores
- Maximum buy-back = 25% × ₹150 crores = ₹37.5 crores

In terms of number of shares: ₹37,50,00,000 ÷ ₹500 = 7,50,000 shares

Solvency / Debt-equity check [Section 68(2)(d)]: Post buy-back, the aggregate of secured and unsecured debts must not exceed twice the paid-up capital and free reserves.
- Total debts (secured + unsecured) = ₹30 + ₹20 = ₹50 crores (unchanged, as buy-back is funded from free reserves)
- Post buy-back paid-up capital + reserves ≈ ₹112.5 crores (₹150 crores − ₹37.5 crores)
- 2 × ₹112.5 crores = ₹225 crores
- ₹50 crores < ₹225 crores → CONDITION SATISFIED

Maximum eligible amount = ₹37.5 crores (i.e., buy-back of 7,50,000 shares at ₹500 each). A Special Resolution in the general meeting would be required for this buy-back as the amount exceeds 10% of (paid-up capital + free reserves).

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(c) 'Non-obstante' and 'Without Prejudice':

'Non-obstante' (often written as 'Notwithstanding anything contained in...') is a legal drafting device inserted at the beginning of a statutory provision or clause to give it overriding effect over other provisions that may conflict with it. The purpose is to ensure that the clause containing the non-obstante language prevails even if another provision would otherwise apply.

*Illustration:* Section 74(1) of the Companies Act, 2013 begins: *'Notwithstanding anything contained in any other law for the time being in force...'* — meaning that Section 74(1) will prevail over any conflicting provision in any other statute.

'Without Prejudice' is a legal expression used in correspondence or negotiations to indicate that the communication, offer, or concession made therein cannot be used as an admission or evidence against the maker in any future legal proceedings. It protects a party from having its settlement offers cited against it in court.

*Illustration:* During a commercial dispute, Company A writes to Company B: *'Without prejudice to our legal rights, we are willing to accept ₹10 lakhs in full settlement.'* If negotiations fail and the matter proceeds to court, Company B cannot produce this letter as evidence that Company A acknowledged owing ₹10 lakhs. The offer is shielded from being treated as an admission.

Note: The question appears to reference 'Non-obtains' — this term is not a standard legal expression in the Companies Act, 2013 or CA curriculum. It is possible that 'Non-obstante' was intended. The explanation above covers 'Non-obstante' accordingly.

Sub-part (i): Whether the Company Can Buy-Back 10% of Its Shares

Under Section 68 of the Companies Act, 2013, a company can buy back its own shares subject to several mandatory conditions. Analysing the given facts against each condition:

Condition 1 – Authorization by Articles: Satisfied. The company's articles authorise the buy-back. ✓

Condition 2 – Type of Resolution Required: The proposed buy-back is 10% of 1 crore shares = 10 lakh shares × ₹500 = ₹50 crores. Now, 10% of (Paid-up Capital + Free Reserves) = 10% × (₹50 + ₹100) = ₹15 crores. Since the proposed buy-back (₹50 crores) exceeds ₹15 crores, a Special Resolution is mandatorily required under Section 68(2)(b). The company has passed only an Ordinary Resolution, which is legally insufficient. ✗

Condition 3 – 25% Cap on Buy-Back Amount [Section 68(2)(c)]: The buy-back shall not exceed 25% of total paid-up capital and free reserves. Maximum permissible = 25% × (₹50 + ₹100) = ₹37.5 crores. The proposed buy-back of ₹50 crores exceeds ₹37.5 crores. ✗

Condition 4 – Debt-Equity Ratio [Section 68(2)(d)]: Post buy-back, secured and unsecured debt must not exceed twice the paid-up capital and free reserves. Existing debt = ₹30 + ₹20 = ₹50 crores. Post buy-back net worth ≈ ₹95 crores; 2 × ₹95 = ₹190 crores. Debt ₹50 crores < ₹190 crores. ✓

Conclusion: The company cannot proceed with the proposed buy-back as it violates two mandatory conditions — the 25% monetary ceiling under Section 68(2)(c) and the requirement of a Special Resolution under Section 68(2)(b). Merely passing an ordinary resolution and using free reserves as the source does not rectify these violations.

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Sub-part (ii): Maximum Eligible Amount for Buy-Back under Section 68

Under Section 68(2)(c) of the Companies Act, 2013, the buy-back of shares in any financial year shall not exceed 25% of the total paid-up equity capital and free reserves of the company.

Maximum Eligible Amount = 25% × (Paid-up Share Capital + Free Reserves) = 25% × (₹50 crores + ₹100 crores) = ₹37.5 crores.

Additional verification — debt-equity ratio at maximum buy-back: Shares bought back = ₹37.5 crores ÷ ₹500 = 7.5 lakh shares. Face value of shares extinguished = 7.5 lakh × ₹50 = ₹3.75 crores. Post buy-back Paid-up Capital = ₹50 − ₹3.75 = ₹46.25 crores; Free Reserves = ₹100 − ₹37.5 = ₹62.5 crores; Total = ₹108.75 crores. Permissible debt = 2 × ₹108.75 = ₹217.5 crores. Actual debt = ₹50 crores < ₹217.5 crores. ✓ The debt-equity condition is satisfied at this level.

Therefore, the maximum eligible buy-back amount for Aptruck Limited is ₹37.5 crores. This would also require a Special Resolution (since ₹37.5 crores > 10% of ₹150 crores = ₹15 crores).

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Sub-part (c): Legal Terminologies — 'Non-obstante' and 'Without Prejudice'

*(Note: The term 'Non-obtuse' is not a recognised legal term; the standard legal term intended here is 'Non-obstante', which is a well-established concept in Indian statute law and the CA Intermediate syllabus.)*

Non-obstante Clause: The term 'non-obstante' is derived from Latin, meaning 'notwithstanding'. A non-obstante clause is typically introduced by the words *"Notwithstanding anything contained in this Act / any other law for the time being in force..."*. Such a clause gives the section in which it appears an overriding effect over other provisions that may be inconsistent with it. It signals legislative intent to make that particular provision prevail in case of a conflict.

*Illustration:* Section 271 of the Companies Act, 2013 begins with "Notwithstanding anything contained in clause (d) of section 117..." — this means Section 271 will override Section 117(d) wherever both provisions would otherwise apply simultaneously.

Without Prejudice: The phrase 'Without Prejudice' is written on correspondence or statements made during negotiation or settlement discussions. It means that the communication cannot be used as an admission or be cited as evidence in any subsequent legal proceedings. It protects a party making a concession or offer during settlement talks from having that concession used against it if the negotiations fail and the matter goes to court.

*Illustration:* Company X and Company Y are in a contractual dispute. Company X writes a letter marked 'Without Prejudice' offering to settle for ₹5 lakhs. If the settlement fails and the matter proceeds to arbitration, Company Y cannot produce this letter in evidence to argue that Company X admitted its liability was worth ₹5 lakhs. The offer was protected by the 'without prejudice' privilege.

Sub-part (i): Filing of LLP Agreement after 30 days of incorporation

Under Section 23(1) of the Limited Liability Partnership Act, 2008, the partners of an LLP shall, within 30 days of the date of incorporation, make a LLP agreement and file a copy of the same with the Registrar. However, the Act and the LLP Rules, 2009 do not render a late-filed agreement void or unacceptable. If the LLP agreement is filed after 30 days, the Registrar shall accept the filing but with additional fees as prescribed for delayed filing. Therefore, the Registrar would accept the LLP agreement filed after 30 days but would levy an additional/penalty fee for the delay. The agreement itself remains valid; only the default in timing attracts the penalty fee.

Sub-part (ii): Opposition to Priyesh's manner and form of capital contribution

Under Section 32 of the LLP Act, 2008, the contribution of a partner to an LLP may consist of any combination of tangible movable or immovable property, intangible property, or other benefit to the LLP, including money, promissory notes, agreements to contribute cash or property, and contracts for services performed or to be performed. The obligation of a partner to contribute is governed by the LLP agreement and is not mandated to be only in cash or any particular form. Thus, Priyesh has the statutory right to contribute in the manner and form he desires, provided it is reflected in or consistent with the LLP agreement. The opposition by other partners to the form of Priyesh's contribution is not correct in law — partners cannot be compelled to contribute only in a prescribed form. The decision on form and manner lies with the contributing partner as agreed under the LLP agreement.

Sub-part (iii): Induction of Srijan Cooperative Society as a partner

Under Section 5 of the LLP Act, 2008, any individual or body corporate may become a partner of an LLP. The term 'body corporate' is defined in Section 2(1)(d) of the LLP Act to mean a company as defined in the Companies Act, a foreign company, an LLP, or a foreign LLP. Critically, the definition does not include a cooperative society registered under any law relating to cooperative societies. Since a cooperative society is not a 'body corporate' within the meaning of the LLP Act, Srijan Cooperative Society cannot be inducted as a partner in the LLP. The induction would be legally invalid.

Sub-part (c): Legal Maxims of Interpretation

Maxim 1 — 'Contemporanea Expositio est optima et fortissima in lege':
This maxim translates to 'Contemporary exposition is the best and strongest in law.' It means that the best way to interpret a statute is by reference to the understanding and meaning given to it at the time of its enactment by those who were contemporary with the legislature. When the language of a statute is ambiguous, the meaning that was universally accepted and acted upon by the courts and public at the time the statute was passed serves as the strongest guide to legislative intent. This maxim is especially applied to ancient or old statutes where contemporary practice helps resolve textual uncertainty. However, it should be used cautiously; it does not override a clear and unambiguous statutory text.

Maxim 2 — 'Optima legum interpres est consuetudo':
This maxim translates to 'Custom is the best interpreter of law.' It recognises that long-established custom and usage provide the best guide to the meaning of a statute. When a statute has been uniformly understood and consistently acted upon in a particular manner over a long period without challenge, that usage itself becomes an authoritative exposition of the law. Courts give weight to established practice and conduct to interpret doubtful statutory provisions. The underlying principle is that repeated and uniform practice reflects the true and practical meaning intended by the legislature. This maxim is closely related to the contemporaneous exposition maxim but focuses on continuous usage over time rather than understanding at the moment of enactment.

Sub-part (c): Absolute Prohibition on Investment by Person Resident Outside India under FEMA, 1999

Under the Foreign Exchange Management Act, 1999 read with the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, certain sectors and circumstances exist where a person resident outside India is absolutely prohibited from making any investment in India. In these cases, no Foreign Direct Investment (FDI) is permitted — neither under the Automatic Route nor under the Government Approval Route.

Circumstances of Absolute Prohibition:

1. Where the investment is proposed to be made by a citizen of Pakistan or an entity incorporated in Pakistan — investment is prohibited in sectors such as Defence, Space, Atomic Energy, and all other sectors that are otherwise open, unless specifically permitted by the Government.

2. Where the investment is in a sector/activity that falls within the Negative List (prohibited sectors) irrespective of the country of origin of the investor.

Forms of Business (Prohibited Sectors) where investment is absolutely prohibited:

The following sectors/activities are included in the prohibited list under the Consolidated FDI Policy:

1. Lottery Business — including Government/private lottery, online lotteries, etc.

2. Gambling and Betting — including casinos and online gambling platforms.

3. Chit Funds — no FDI permitted in any form of chit fund activity.

4. Nidhi Company — as defined under the Companies Act, 2013.

5. Trading in Transferable Development Rights (TDRs) — real estate instruments representing development potential of land.

6. Real Estate Business or Construction of Farm Houses — Note: this prohibition does not extend to development of townships, construction of residential/commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) which are separately governed.

7. Manufacturing of Cigars, Cheroots, Cigarillos and Cigarettes — whether of tobacco or of tobacco substitutes.

8. Activities/Sectors not open to private sector investment — such as Atomic Energy (governed by the Atomic Energy Act, 1962) and certain Railway operations (other than those specifically permitted under the FDI policy).

In all the above cases, investment by a person resident outside India is absolutely prohibited and no approval — whether automatic or government — can be granted to permit such investment.

(b) Under the Limited Liability Partnership Act, 2008:

(i) Validity of Sulagana's advice on January–December accounting basis:

The advice of Sulagana does NOT hold good at law. Under Section 2(1)(l) of the Limited Liability Partnership Act, 2008, 'financial year' in relation to an LLP means the period from 1st April to 31st March of the following year. There is a proviso that where an LLP is incorporated after 30th September of a year, the financial year of that LLP may end on 31st March of the year next following, if the LLP so decides.

In the present case, Sulagana, Sukanya & Associates LLP was incorporated on 1st November, 2024 (i.e., after 30th September 2024). Therefore, its first financial year may run from 1st November 2024 to 31st March 2026. In no case can accounts be maintained on a January–December basis. Suresh's advice to follow the April–March financial year is correct in law.

(ii) Whether HUF can be admitted as a partner:

Section 5 of the LLP Act, 2008 provides that only an individual or a body corporate may become a partner in an LLP. A Hindu Undivided Family (HUF) is neither an individual nor a body corporate — it is a distinct personal law concept without separate legal personality as a corporate body. Accordingly, an HUF cannot be admitted as a partner in an LLP. Dilip's offer to induct the HUF as a partner cannot be accepted. However, Dilip himself, in his individual capacity, may be considered for admission as a partner if he satisfies the conditions of Section 5.

(iii) Position if a Charitable Trust approached instead of Dilip:

The position would be the same. A Charitable Trust is also neither an 'individual' nor a 'body corporate' within the meaning of Section 5 of the LLP Act, 2008. A trust has no independent corporate legal personality and is not recognised as a body corporate under the Act. Therefore, a Charitable Trust cannot become a partner in an LLP, and the offer cannot be accepted.

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(c) Bye-laws after Previous Publication — Section 23 of the General Clauses Act, 1897:

Section 23 of the General Clauses Act, 1897 lays down the procedure that must be followed when any Central Act or Regulation confers a power to make rules or bye-laws subject to the condition of previous publication. The following provisions apply:

1. Draft Publication: The authority empowered to make the bye-laws shall, before making them, publish a draft of the proposed bye-laws for the information of persons likely to be affected thereby.

2. Manner of Publication: The draft shall be published in such manner as the authority deems sufficient, or as the appropriate Government directs, if the condition of previous publication so requires.

3. Notice of Consideration Date: Along with the draft, a notice specifying a date on or after which the draft will be taken into consideration must be published. This gives the public adequate time to respond.

4. Consideration of Objections/Suggestions: The authority having the power to make the bye-laws — and, where the bye-laws require sanction, approval, or concurrence of another authority, that authority also — shall take into consideration any objection or suggestion received from any person with respect to the draft before the date so specified.

5. Conclusive Proof of Due Making: Publication of the bye-law in the Official Gazette, purporting to have been made in exercise of such power, shall be conclusive proof that the bye-law has been duly made in compliance with this section.

The purpose of this provision is to ensure transparency, public participation, and procedural fairness before delegated legislation in the form of bye-laws comes into force.