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The paper covers Companies Act (section 209 to end), MRTP, FEMA, SEBI, SCRA, SICA, interpretation of statutes and secretarial procedure and practices. CA
Final November 2007 - CORPORATE LAWS & S. P. Question Nos. 1, 2
and 3 are compulsory. Answer any four questions from the rest of
the questions. Q
1 Answer any two of the following : (a) M/s ABC Ltd. had power under its
memorandum to sell its undertaking to another company having similar
objects. The Articles of the company contained a provision by which
directors were empowered to sell or otherwise deal with the property of
the company. The shareholders passed an ordinary resolution for the sale
of its assets on certain terms and required the directors to carry out
the sale. The Directors refused to comply with the wishes of the
shareholders where upon it was contended on behalf of the shareholders
that they were the principal and directors being their agents were bound
to give effect to their decision. Based on the above facts, decide the
following issues, having regard to the provisions of the Companies Act,
1956 and case laws. (i) Whether the contention of shareholders against
the non-compliance of their wishes by the directors is tenable. (ii) Can
shareholders usurp the powers which by the articles are vested in the
directors by passing a resolution in the general meeting? (b) KYC a
recognized Stock Exchange has not maintained proper books of account of
the stock exchange, on the ground that such books of account are not
essential. A complaint in this regard was made to SEBI who appointed Mr.
E, an expert to make an enquiry. Explain whether SEBI is authorised to
make inquiry and take action against the stock exchange (c) PQR Ltd. is
holding 33% of the paid up equity capital of Koya Stock Exchange. The
company appoints MNL Ltd. as its proxy who is not a member of the Koya
Stock Exchange, to attend and vote at the meeting of the stock exchange.
Examine whether the Koya Stock Exchange can restrict the appointment of
MNL Ltd. as proxy for PQR Ltd. and further restrict, the voting rights
of PQR Ltd. in the Koya Stock Exchange (5 x 2 = 10 marks) Q
2 Answer any two of the following. (a) Examine with reference to the
provisions of the Foreign Exchange Management Act, 1999, the residential
status of the branches mentioned below: (i) NNM Ltd. an Indian Company
having its registered office at Mumbai, India established a branch at
New York U.S.A. on 1st April 2005. (ii) DDI Ltd. a company
incorporated and registered in London established a branch at Kanpur in
India on 1st April 2005 (iii) DDI Ltd. has a branch office at
Singapore which is controlled by its Kanpur branch. (b) Explain the
meaning of “Capital Account Transactions” under the Foreign Exchange
Management Act, 1999. State its categories and also examine whether the
following transactions are permissible or not under the above Act as
Capital Account transactions : (i) Investment by person resident in
India in Foreign Securities (ii) Foreign currency loans raised in India
and abroad by a person resident in India (iii) Export, import and
holding of currency/currency notes (iv) Trading in transferable
development rights (v) Investment in a Nidhi Company. (c) (i) An
arrangement has been made among the Cotton producers that the cotton
produced by them will not be sold to mills below a certain price. The
arrangement was in writing but it was not intended to be enforced by
legal proceeding. Examine whether the above arrangement can be
considered as an agreement within the meaning of section 2(b) of the
Competition Act 2002 (ii) The Central Government has formed the opinion
that Mr. CBM ( A member of the Competition Commission of India) has
abused his position which may be prejudicial to public interest as a
member of the Commission. Examine the powers of the Central Government
in this regard (7 x 2 = 14 marks) Q
3 Answer any two of the following: (a) M/s Earth Chemicals and
Engineering Ltd. is a closely held unlisted company with a paid up share
capital of 3.00 crores, since 1st April, 2001 and its net
worth as on 31st March, 2007 was Rs. 5.00 crores. The net
tangible assets of the company as per last three audited balance sheets
as at 31st March, 2005, 2006 and 2007 were Rs. 4.00 crores,
4.50 crores and 5.00 crores respectively out of which monetary assets
were less than Rs. 50 lakhs in each of the three years. The company was
incorporated in 1998 and commenced its business on 1st April
1998 and since then it has earned good profits and it has not incurred
any loss in any year in the past. The company has not declared any
dividend so far. But according to the profits earned so far, the
management could have declared dividends in each of the last five years.
The name of the company was changed from Earth Engineering Ltd. to its
present name effective from 1st October, 2006. The company
wants to make a public issue of shares to raise Rs. 20.00 crores by
issuing equity shares at premium. For the purpose of including the
information in the prospectus. The company has prepared its accounts for
12 months ended 30th September, 2007 showing segment wise
revenue, which reveals that revenue from chemical segment was more than
the revenue from engineering segment. Keeping the relevant guidelines
issued by SEBI into account, examine whether the company can make the
desired issue of equity shares based on the facts stated above. (b) An
investor has complained to SEBI that he has not received the payment due
to him from the stock broker registered with Calcutta Stock Exchange
Association Ltd. The complainant has requested SEBI to take appropriate
action against the stock broker. State with reference to the provisions
of Securities and Exchange Board of India Act, 1992, the action that can
be taken against the stock broker, the procedure to be adopted and the
factors that will be taken into account of SEBI (c) “When two or more
provisions of the same statute are repugnant to each other, the court
will try to construe the provisions in such a manner, if possible, as to
give effect to all.” Examine the statement with reference to the
provisions of sections 166 and 210 of the Companies Act, 1956 which
appear to be seemingly contradictory to each other for compliance (8 x 2
= 16 marks) Q
4 (a) Mr. X was appointed as the Managing Director of ABC Ltd. for a
period of 5 year w.e.f 1st January, 2006. Since his work was
found unsatisfactory, his services were terminated from 15th
August, 2007 by paying compensation for the loss of office as provided
in the agreement entered into by the company. Later, the company
discovered that during his tenure of office Mr. X was guilty of many
corrupt practices and that he should have been removed without payment
of compensation. Advise the company whether the services of the Managing
Director can be terminated without payment of compensation as provided
in the agreement and whether the company can recover the amount already
paid to Mr. X by filing a suit (b) M/s FAB Electronics Ltd. (FEL) has
appointed four private companies as its selling agents for sale of its
white goods in the four regions of the country. A complaint has been
made to the Registrar of Companies, New Delhi that the four selling
agents are in fact functioning as sole selling agents and that the terms
and conditions of their appointment are not in the interest of FEL.
Advise FEL about the provisions of the Companies Act and the action that
may be taken by the authorities under the Act (8 +7 = 15 marks) Q
5 (a) The Board of Directors of XYZ Ltd. has agreed in principle to
grant ‘loan’ worth Rs. 38 lakhs to MNC Ltd. on the basis of the
following information. Advise XYZ Ltd. about the requirements to be
complied with under the Companies Act, 1956 for the proposed
inter-corporate loan to MNC Ltd. (i) Authorised share capital – Rs.
1,00,00,000 (ii) Issued, subscribed and paid capital – Rs. 50,00,000
(iii) Free reserves – Rs. 10,00,000
(b) M/s Flyover Constructions Ltd. has to recruit 2,000 Civil
Engineers on contract basis for a period of 5 years. The company entered
into an agreement with the employees that each employee will have to
deposit Rs. 50,000 as security which sum will be returned on completion
of 3 years of contract of service. The company wants to utilize the fund
so collected in their business. Advise the company with reference to
Companies Act in the matter of collection and utilization of money
received from employees as security deposit
(8 +7 = 15 marks) Q
6 (a) M/s Joel Ltd. was incorporated in London with a paid up capital of
10 million pounds. Mr. Y an Indian citizen holds 25% of the paid up
capital. M/s X Ltd. a company registered in India holds 30% of the paid
up capital of Joel Ltd. M/s Joel Ltd. has recently established a share
transfer office at New Delhi. The company seeks your advice as to what
formalities it should observe as a foreign company under Companies Act,
1956. State briefly the requirements relating to filing of accounts with
the Registrar of Companies by the foreign company in respect of its
global business as well as Indian business (b) The auditors of PQR Ltd.
accepted the Certificate of the Manager, a person of acknowledged
competence and high reputation, as to the value of the stock in trade.
The stock was grossly overstated for several years in the balance sheets
of the company. As a result of this over valuation dividends were paid
out of capital. The Auditors did not examine the books of account very
minutely. If they had done so and compared the amount of stock at the
beginning of the year with the purchases and sales during the year, they
would have noticed the over valuation. The company subsequently went
into liquidation and the auditors were sued to make good the loss caused
by the wrongful payment of dividends relying on the balance sheets
figures. Based on the above facts, you are required to decide with
reference to the provisions of the Companies Act, 1956 and the decided
case laws, the following issues : (i) Whether auditors of the company
will be liable for the loss caused to the company by the wrongful
payment of dividends based on the Balance Sheets duly audited by the
Auditors (ii) What are the statutory duties of the Auditors in this
regard? (8 +7 = 15 marks) Q
7(a) M/s City Hospital Private Ltd. has two groups of Directors. A
dispute arose between the two groups out of which one group controlled
the majority of shares. A very serious situation arose in the
administration of the company’s affairs when the minority group ousted
the lawful Board of Directors from the possession and control of the
management of the company’s factory and workshop. Books of account and
statutory records were held by minority group and consequently the
annual accounts could not be prepared for two years. The majority group
applied to the Company Law Board for relief under sections 397 and 398
of the Companies Act. You are required to decide with reference to the
provisions of the Said Act, the following issues. : (i) Can majority of
shareholders apply to the Company Law Board for relief against the
oppression by the minority shareholders? (ii) Whether Company Law Board
can grant relief in such circumstances. (b) Worthless Ltd. has gone into
liquidation because of the inability of the company to pay its debts.
During the course of winding up, a proposal was put forward by the
previous management to revive the working of the company through a
scheme of arrangement between the company and its creditors. As per the
scheme, all the creditors have to forego fifty percent of their dues.
Some of the creditors have voiced their opposition to the said scheme.
The company approaches you for advice. State the steps that have to be
taken by the company in this regard
(8 +7 = 15 marks) Q
8(a) Mr. X appointed as the Managing Director of XYZ Ltd. w.e.f. 1st
October, 2006. The company made an application to the Central Government
for approval, as the remuneration proposed to be paid to Mr. X was
beyond the limits laid down in Schedule XIII to the Companies Act, 1956.
The company started paying remuneration from the date of appointment and
continued to do so till 31st March, 2007. The Central
Government did not approve the remuneration as proposed by the company
and restricted the same to a lower amount. On scrutiny of the accounts,
it was noticed that the company, till 31st March, 2007 has
paid to Mr. X a total sum of Rs 1.20 lakhs in excess of the remuneration
sanctioned by the Central Government. Explain with reference to the
provisions of the Act whether Mr. X can keep the excess remuneration.
Draft a resolution for waiver of recovery of the excess remuneration so
paid by the company. (b) The articles of association of DEF Ltd.
mentioned in it that Mr. X and Mr. Y will act as directors of the
company from the date of incorporation. The company was incorporated on
2nd January, 2007. The articles also provided that the
directors will have to obtain qualification shares within one month from
the date of appointment as director. Mr. X purchased the shares of the
company on 28th February, 2007 and Mr. Y purchased on 28th
March, 2007 thus violating the provisions contained in the articles.
Having regard to the provisions of the Companies Act, examine the
validity of the appointments of Mr. X and Mr. Y as directors
(8 +7 = 15 marks) Q
9(a) Mr. Z an expert in modern agriculture practices is willing to lend
his services as a director of M/s. Lord Krishna Cotton Producer Company
Ltd. registered under Section 581C of the Companies Act, 1956. Advice
Mr. Z as to how he can be appointed as a director, including (1) The
total number of directors that can be appointed (2) The tenure of the
Directors (3) The time limit within which the appointment should be made
(4) the co-option of directors and (5) the voting powers of such
co-opted directors (b) M/s. Info-tech Overtrading Ltd., was ordered to
be wound up compulsorily by an order dated 15th October, 2007
of the Delhi High Court. The official liquidator who has taken control
of the assets and other records of the company has noticed the following
: (i) The Managing Director of the company has sold certain properties
belonging to the company to a private company in which his son was
interested causing loss to the company to the extent of Rs. 50 lakhs.
The sale took place on 10th May, 2007. (ii) The company
created a floating charge on 1st January, 2007 in favour of a
private bank for the overdraft facility to the extent of Rs. 5 crores,
by hypothecating the current assets viz., stocks and book debts. Examine
what action the official liquidator can take in this matter, having
regard to the provisions of the Companies Act, 1956 (8 +7 = 15 marks) CA
Final May 2007 - CORPORATE LAWS & S. P. Question Nos. 1, 2
and 3 are compulsory. Answer any four questions from the rest of
the questions. Q1. Answer any two of the
following : (a) A Company wants to include the following clause in its
Articles of Association : “ Each director shall be entitled to be paid
out of the funds of the company for attending meetings of the Board or a
committee thereof including adjourned meetings such sum as sitting fees
as shall be determined from time to time by the Directors, but not
exceeding a sum of Rs. 30,000 for each such meeting to be attended by
the Director”. You are required to advise the Company as to the
validity of such a clause and the correct legal position. (b) Describe
the provisions of the Securities Contracts (Regulation) Act, 1956
regarding the powers of the Central Government to supersede the
Governing Body of a recognized Stock Exchange and the consequences of
such supersession. (c) SEBI is of the opinion that in the interest of
investors, it is desirable to amend the rules of RSP Stock Exchange
prohibiting the appointment of the broke-member as President of the
Stock Exchange. Explain briefly with reference to the provisions of
Securities Contracts (Regulation) Act, 1956, whether it is possible for
SEBI to amend the rules of
the Stock Exchange, if the Stock Exchange does not change the rules (5+5
= 10 marks) Q2. Answer any two of the following: (a) (i) Tomco Ltd. a vehicles
manufacturing company situate at Pune, Maharashtra has received an order
from a transport company in Italy for supply of 100 Trucks on lease. You
are required to state, how the said Tomco Ltd. can accept such an order
(ii) Forex Dealers Ltd. is an Authorised Person within the meaning of
Foreign Exchange Management Act, 1999. Reserve Bank of India issued
certain directions to the said Authorised Person to file certain returns
which it failed to file. You are required to state the penal provisions
to which the said Authorised Person has exposed itself. Q2(b) (i) Mr. Sekhar resided in India for a period of 150 days in India
during the financial year 2006-2007 and thereafter went abroad. He came
back to India on 1st April, 2007 as an employee of a business
organization. What would be his residential status during the financial
year 2007-2008 ? (ii) Mr. Atul, an Indian National desires to obtain
foreign exchange for the following purposes: (a) Remittance of US Dollar
10,000 for payment for goods purchased from a party situated in Nepal
(b) US Dollar 10,000 for remitting as commission to his agent in U.S.A.
for sale of commercial plot situated near Bangalore, consideration in
respect of which was received by Mr. Atul by way of foreign currency
inward remittance amounting to US Dollar 1,00,000. Advise him, if he can
get the Foreign Exchange and under what conditions. Q2(c) (i) Hon’ble Justice Mr. HCJ, a retired High Court Judge, attained
the age of 61 years on 31st December, 2004. The Central
Government appointed him as the Chairperson of the Competition
Commission of India with effect from 1st January, 2005. You
are required to state, with reference to the provisions of the
Competition Act, 2002, the term for which he may be appointed as
Chairperson of the Competition Commission of India. Whether he can be
reappointed as such and till when he can remain as Chairperson of the
Competition Commission of India? (ii) After ceasing to be a member of
the Competition Commission of India with effect from 31st
March, 2007, Mr. MKP was offered the post of Executive Director with
appropriate remuneration and perquisites in the following organizations
with from 1st April, 2007: (a) HLL Ltd. a private sector
public limited company, whose case was disposed off by the Competition
Commission under the provisions of the Competition Act, 2002 in the
month of February, 2007 (b) Life Insurance Corporation of India. You are
required to state with relevant provisions of the Competition Act, 2002,
the option available to Mr.
MKP in respect of accepting the offers [7 x 2 = 14 marks) Q3. Answer any two of the following (a) As on 31st December,
2006, following information and figures are noticed from the Annual
Accounts for the year ended 31st March, 2006 of CAS Ltd., a
Company listed with The Stock Exchange, Mumbai: (i) Authorised Share
Capital Rs. 20.00 Crores comprising of 2 crore equity shares of Rs 10
each (ii) Paid up share capital Rs 9.00 crores comprising of 80 lac
Equity Shares of Rs. 10 each fully paid up and 20 lac Equity Shares of
Rs. 10 each called and paid upto Rs. 5 each. The total paid up capital
is paid up in cash. (iii) Securities Premium Account Rs. 20.00 Crores
(iv) 5 lac Fully Convertible Debentures of Rs. 100 each. These
debentures are due for conversion on
31st March, 2007 in full into fully paid Equity Shares
of Rs. 10 each in the ratio of one Debenture : two Equity Shares. (v)
General Reserve Rs. 30.00 crores (vi) Fixed Assets Revaluation Reserve
Rs. 10.00 crores. (vii) Outstanding Liabilities in respect of Bonus to
Employees & workers Rs. 25.00 lacs. (viii) Outstanding Liabilities
in respect of Interest payable on Public Deposits comprising of Fixed
Deposits from general public Rs. 15.00 lacs. Following other information
is gathered from the books of account and other records of the said
Company for the period upto 31st December, 2006 (a) The
partly paid shares were made fully paid prior to 30th June,
2006. (b) Bonus to employees and workers was paid on 15th
September, 2006. (c) Interest on Public Deposits was outstanding on 31st
December, 2006. The Directors of CAS Ltd. wants to issue Bonus Shares on
or after 1st April, 2007 in the ratio of 1:1. Advise the
Directors on the matter with reference to the guidelines issued by
Securities and Exchange Board of India on Bonus Issue. Q3 (b) Securities and Exchange Board of India (SEBI) has issued certain
guidelines in respect of fixation of exit price through “Book
Building” process for the shares to be bought back by the listed
companies, who want to voluntarily delist their shares from the stock
exchanges. You are required to state the salient features of the said
“Book Building” process. Q3(c) (i) What is the effect of a proviso?
Does it qualify the main provisions of an Enactment? (ii) Does an
explanation added to a section widen the ambit of a section? Support
your answer with an example from the Companies Act, 1956. (iii) What do
you understand by the term ‘Preamble’ and how does it help in
interpretation of a statute? (8 x 2 = 16 marks) Q4. (a) (i) Mr. MTP was appointed as a director at the Annual General
Meeting of a limited company held on 30th September, 2005 and
he carried on his duties and functions as a director. In the month of
August, 2006, it was found out that there were certain irregularities in
his appointment and on 31st August, 2006, his appointment was
declared invalid. But Mr. MTP continued to act as director even after 31st
August, 2006. You are required to state, with reference to the
provisions of the Companies Act, 1956, whether the acts done by Mr. MTP
are valid and binding upon the company? (ii) In course of administration
of the affairs of a limited company, chairman of its Board of Directors
came across a matter, which required the approval by way of a board
resolution. In the prevailing circumstances, it is not possible to
convene and hold a Board Meeting. The chairman approaches you to advise
him of the way and the relevant procedure to obtain such approval
without holding the Board Meeting. You are required to advise him on the
matter as per the provisions of the Companies Act, 1956. Q4(b) The management of ATP Ltd., a company listed with The Stock
Exchange, Mumbai wants to appoint Mr. BDF as a Director of the Company
at the Annual General Meeting of the Company to be held on 24th
May, 2007. It may be noted that Mr. BDF is not a retiring Director. The
Management seeks your guidance regarding the procedure to be adopted for
the purpose. You are required to state the procedure to be followed for
giving effect to such proposal and formalities to be observed after
appointment of Mr. BDF as Director, by the management of ATP Ltd., as
per the provisions of the Companies Act, 1956 (8+7 = 15 marks) Q5 (a) A majority of the Board of Directors of M/s Bulk Drugs Ltd. have
reasons to believe that some of the business activities carried on in
the name of the company are prima
facie against the interests of the company and its members. They
want the matter to be referred to Central Government in the form of an
application for appointment of an Inspector to reach to the bottom of
the matter and unveil the truth. In this connection you are required to
: (i) State the steps required to be taken with reference to the
provisions of the Companies Act, 1956. (ii) Draft an application to be
made to the Central Government. Q5(b) (i) Mr. SDR, a shareholder in M/s JKP Ltd. holding ten equity
shares of Rs. 10 each fully paid up wants to give a special notice to
the company for removal of a Mr. EDM, a director of M/s JKP Ltd. without
stating any reason in the notice. You are required to state as per the
provisions of the Companies Act, 1956 and/or any decided case law
whether Mr. SDR is entitled to do so? (ii) Would your answer to
different, if Mr. EDM was a director appointed by the Central Government
under Section 408 of the Companies Act, 1956?
(iii) State the relevant provisions of the Companies Act, 1956 in
case of an appropriate special notice is received by the company for
removal of any director (8+7 = 15 marks) Q6. (a) (i) Define the expression “Accounting Standards” within the
meaning of Companies Act, 1956. (ii) XYZ Limited did not prepare its
Balance Sheet as at 31st March, 2007 and the Profit and Loss
Account for the year ended on that date in conformity with some of the
mandatory Accounting Standards issued by the Institute of Chartered
Accountants of India. You are required to state with reference to the
provisions of the Companies Act, 1956, the responsibilities of directors
and statutory auditor of the company in this regard. Q6(b) (i) A two year old Producer Company registered under Section 581C
of the Companies Act, 1956 wants to donate some amount. The Chief
Executive of the Producer Company has approached you to advise him as to
how and for what purposes the donation can be made by such company. Also
state the monetary restrictions, if any, laid down in the Companies Act,
1956 on making donations by a Producer Company. You are informed that as
per the profit and loss account of the Producer Company for its last
accounting year the profit was Rs. 20.00 lacs. (ii) State the powers and
functions of the Board of Directors of a Producer Company as enumerated
in the Companies Act, 1956 (8+7 = 15 marks) Q7. (a) 60% shares of Indo-French Ltd. are held by French Group and
balance by an Indian Group. As per articles of association of the
company both groups had equal managerial powers. The relationship
between the two groups soured and the operations of the company reached
a deadlock. The Indian Group approached the Company Law Tribunal
(Company Law Board till Company Law Tribunal becomes functional,
referred to as CLB hereinafter) for action against the French Group for
oppression. Based on these facts, you are required to decide, with
reference to the provisions of the Companies Act, 1956 and/or the
decided case laws, the following issues: (i) Whether the contention of
oppression against the French Group by the Indian Group is tenable?
(ii) What are the powers of the CLB in this regard? Q7(b) State the provisions of the Companies Act, 1956 in respect of
appointment of Auditor in the following cases: (i) A Government Company
within the meaning of Section 617 of the Companies Act, 1956. (ii) A
public limited company at whose annual general meeting held on 30th
November, 2006 in respect its accounting year ended on 30th
June, 2006, the auditor was appointed to hold office as such till the
conclusion of its next annual general meeting, but whose auditor has
resigned on 15th March, 2007. (iii) A company whose
shareholders include the following: (a) Bank of Baroda ( a nationalized
bank) holding 12% of the Subscribed capital in the Company. (b) National
Insurance Co. Ltd. (carrying on general insurance business) holding 10%
of the Subscribed capital in the Company (c) Maharashtra State Financial
Corporation ( a public financial institution) holding 8% of the
Subscribed capital in the Company (8+7 = 15 marks) Q8. (a) MNC Ltd., a company, whose paid up capital was Rs. 4.00 Crores,
has issued rights shares in the ratio of 1:1. The said company is listed
with Mumbai Stock Exchange. Whether the company is required to appoint
any Audit Committee and if yes, draft a suitable Board Resolution to
appoint an Audit Committee covering the aspects as provided in the
Companies Act, 1956 and the Listing Agreement with the Stock Exchange.
In case the company is not required to appoint any Audit Committee,
state the provisions of the Companies Act, 1956 in respect of
appointment of Audit Committee by a Company. Q8(b) An allegation was levelled against PQR Ltd. that the funds of the
company are misused. Mr. Z, one of the Directors of the company wants to
inspect the books of account of the company in order to ascertain
whether the allegation was true. But since Mr. Z does not have the
knowledge of accounting, he appoints Mr. A, his friend and a practicing
Chartered Accountant to go through the books of account of the company
on his behalf. The company seeks your advice as to whether Mr. A may be
allowed to inspect the books of account of the company on behalf of Mr.
Z. You are required to give your advice to the company keeping in view
the provisions of the Companies Act, 1956. What would be your advice if
Mr. Z would have been a shareholder only and not a Director of the
company? (8+7 = 15 marks) Q9 (a) Following information is available from the audited Balance Sheet
as the 31st March, 2007 of ASK Ltd. : Capital & Liabilities Share Capital - Equity Share Capital (5000 shares of Rs. 10 each fully paid up in cash)
– 50,00,000 - Less : Calls in arrear -
50,000 = 49,50,000 Preference Share Capital
15,00,000 Share Application Money
10,00,000 Reserves and surplus Securities Premium – 15,00,000 Capital Redemption Reserve 12,00,000 Fixed Assets Revaluation Reserve – 10,50,000 Sinking Fund Reserve
11,00,000 General Reserve -
40,00,000 Profit and Loss Account -
22,00,000 Dividend Equalisation Reserve 6,00,000 Secured Loans - Cash Credit facility from Bank 1,00,00,000 Unsecured Loans : Fixed Deposits (From general Public maturing after
31.12.2007) – 20,00,000 Current liabilities and Provisions: Current Liabilities – 12,50,000 Provision for Taxation – 10,00,000 Total – 3,33,50,000 Assets Rs. Fixed Assets : Goodwill – 10,00,000 Land & Building – 75,00,000 Plant & Machinery1,50,00,000 Furniture & Other Assets – 2,50,000 Investments : Equity Shares in wholly owned Subsidiary Company KMC Ltd. – 12,50,000 Equity Shares representing 90% of Share capital of MTC Ltd. – 4,50,000 Debentures in SKT Ltd. – 12,00,000 Preference Shares in HUT Ltd. – 5,00,000 Capital account balance in Partnership Firm – BKP & Co
8,00,000 Current Assets : Stock and Book Debts 14,00,000 Cash & Bank Balances – 1,00,000 Loans & Advances : Inter-corporate Deposits – 25,00,000 Business Advances – 14,00,000 Total -
3,33,50,000 The directors of the company want to make further
investments stated below by taking a decision in the meeting of Board of
directors without seeking approval of the shareholders : (a) Loan to KMC
Ltd. – 25,00,000 (b) Loan to MTC Ltd. – 15,00,000 (c) Purchase of
further debentures in SKT Ltd. – 8,00,000 (d) Purchase of shares from
the open market in Glaxo Ltd. – 15,00,000 You are required to state, with reference to the
relevant provisions of the Companies Act, 1956, whether the directors
can do so and mention the relevant calculations. Q9(b) X Ltd. and Y Ltd. are two listed companies
engaged in the business of telecommunication. The companies are not
making profits and as such their share’s market prices have gone down.
A substantial portion of their share capital is held by Central
Government as well as some Public Financial Corporations. In order to
increase the share value, the Central Government wants to amalgamate the
aforesaid two companies into a single company. Examine the powers of
Central Government to amalgamate the two companies in public interest as
per the provisions of the Companies Act, 1956 (10+5 = 15 marks) CA Final New
Syllabus November 2006 Question Nos. 1, 2
and 3 are compulsory. Answer any four questions from the rest of
the questions. Q
1. Answer any two of
the following : (5 x 2 = 10 marks) (a) M/s
Star Health Specialities Limited owns a Multi-speciality Hospital in
Chennai. Dr.
Hamilton, a practising Heart Surgeon, has been appointed by the company as its non-executive ordinary director and it
wants to pay him fee, on case to case
basis, for surgery performed on the patients at the hospital. A question
has arisen whether payment of such fee to him
would amount to payment of managerial
remuneration to a director subject to any restriction under the Companies Act, 1956. Advise the
company, which seeks to ensure that the same does not contravene any
provision of the Companies Act, 1956.
(b) The shares of MLM Limited were listed in Cochin Stock Exchange. The
stock exchange delists the shares of
the company. The aggrieved company approaches you to know the remedy available to the
company. Give your suggestion to the
company keeping in view the provisions of the Securities Contracts (Regulation) Act, 1956. (c) Explain
the powers, which can be exercised by the Securities and Exchange
Board of India under the Securities
Contracts (Regulation) Act, 1956, while approving
the schemes for corporatisation and demutualisation submitted by recognised
stock exchanges, so that there is segregation of ownership and management
from the trading rights of members of such stock exchanges. Q 2. Answer any two of the
following : (7 x 2 = 14 marks) (a) Mr. Loma, an Indian National desires to obtain
foreign exchange for the following purposes :
(i) Payment to be made for securing insurance
for health from a company abroad (ii) Payment of commission on exports under
Rupee State Credit Route, (iii) Gift
remittance exceeding US Dollars 10,000. Advise him whether he can get foreign exchange and if so, under what condition ? (b) Mrs.
Kamala, a resident in India is likely to inherit an immovable property in
U.S.A. from her father, who is a resident outside India. Advise Mrs.
Kamala about the restrictions,
if any, in this regard under the Foreign Exchange Management
Act, 1999 explaining the relevant provisions of the Act. Will your
answer be different, if she is likely to inherit foreign securities ? (c) (i) Mr. ZPM was appointed as a Member of the
Competition Commission of India by Central
Government. He has a professional experience in international business for a period of 12 years, which is not a proper
qualification for appointment of a person as member. Pointing out this defect in the Constitution of Commission, Mr. YKJ, against whom the
commission gave a decision, wants to invalidate the proceedings of the commission.
Examine with reference to the provisions of the Competition Act,
2002 whether Mr. YKJ will succeed. (ii) ABC Limited made an initial public offer of certain number of equity shares. Examine whether these shares can be considered as
'Goods' under the Competition Act,
2002 before allotment. Q 3 Answer
any two of the following (8
x 2 = 16 marks) :
(a)
State the circumstances under which Securities and Exchange Board of
India may exercise the following powers :
(i) Prohibit a company from issuing
prospectus, any offer document or advertisement
soliciting money from public for the issue of securities.
(ii) Pass cease and desist order in respect of
any listed company. Explain the remedies
available under Securities and Exchange Board of India Act, 1992 to companies aggrieved by the above
orders of SEBI. (b) XYZ
Automobiles Limited intends to make a public issue of 2,00,00,000 equity
shares of Rs. 10 each through the 100%
book building process indicating a price
band. You are required to answer the following with
reference to the SEBI (Disclosure and Investor Protection)
guidelines : (i) What is the price band that can be
indicated in the red herring prospectus, if the floor price is
proposed to be fixed at Rs. 300 per equity share ?
(ii)
What are the restrictions, if the company wants to revise the price band
during
the bidding period ? (iii) How the shares are to be allocated
to different categories of investors like Qualified
institutional buyers, Retail individual investors, etc. ?
(c)
There is an apparent difference
between section 292 of the Companies Act, 1956,
which permits the board to delegate its power to make loans and section
372A of the Companies Act, which requires approval of loan by a resolution
passed at a board meeting with the consent of all the directors present
at the meeting. How would you interpret these two provisions applying the rule of
harmonious construction ? Q4(a)
Mr. Adam, a 15% shareholder of a company and other shareholders have
lost
confidence in the Managing Director
(MD) of the company. He is a director not
liable to retire by rotation and was re-appointed as Managing Director
for 5 years w.e.f. 1.4.2005 in
the last Annual General Meeting of the company. Mr.
Adam seeks your advise to remove the MD after following the procedure laid
down under the Companies Act, 1956 (i)
Specify the steps to be taken by Mr. Adam and the Company in this behalf
(ii) Draft a suitable
resolution to be passed for removal of MD (iii)
Is it necessary to state reasons to support the resolution for his removal
? (b) Registrar of Companies
has issued a show cause notice to the company and its
directors to show cause as to why prosecution be not filed against them for
not appointing a qualified Company Secretary, in contravention of the provisions
of section 383A of the Companies Act, 1956. According to the company, there is
adequate justification for not appointing the Secretary as it is a closely held company with only 7 shareholders and there is
no adequate work for him. Further, the
company cannot afford to pay him the salary, which will not be less than Rs. 15,000 to 20,000 p.m.
What is the remedy available to the company and
its directors — (i) before any
prosecution is filed by ROC ? (ii) after the
prosecution is filed by ROC in the Magistrate's Court ? (8+7 = 15 marks). Q5 (a) M/s. Raman Limited having a paid up share
capital of Rs. 5 crores owns an agency of Cement
Corporation of India Ltd. and proposes to supply cement, on credit, to M/s. Raman Enterprises Private
Limited. Mr. Raman is a common Director in both the
companies. State the requirements of
the Companies Act, 1956, if any, to be complied with by the company on the facts of this case.
Will it make any difference, if — (i) M/s.
Raman Enterprises Private Limited were a public company (ii) M/s. Raman Limited were carrying on real estate business and
it proposes to sell a flat to M/s.
Raman Enterprises Private Ltd. for Rs. 50 lakhs ? (b) The official liquidator of ABC Limited (in liquidation) instituted
misfeasance proceedings under section
543 of the Companies Act, 1956 against 'A', a director of the
company in liquidation. During the pendency of misfeasance proceedings
'A' died.
What is meant by Misfeasance ? Is it possible
for the official liquidator to implede the legal
representatives of 'A' and continue the proceedings against them ? (8+7 = 15 marks). Q 6(a) Bush and Tony Private
Limited approached you seeking your opinion on the
following appointments relating to Directors
and their relatives. (i) Appointment of
Mr. Somen (relative of one of the Directors) as the Managing Director of the company on a monthly
remuneration of Rs. 35,000 and other perquisites as are currently being
allowed to other executives of the company
(ii)
Appointment of Mr. Raman (relative of one of the Directors) as the
General Manager—Sales of the
company on a consolidated monthly remuneration of Rs. 30,000 (iii)
Appointment of Mr. Kabi (relative of one of the Directors) as an
Accounts Manager
of the company on a consolidated monthly remuneration of Rs.
17,000. Express your opinion explaining the relevant
provisions of the Companies Act, 1956..(b) XYZ Dairy
Products Producer Company Limited proposes to shift its Registered Office
from Hosur in Tamil Nadu to Bangalore in Karnataka. Explain the requirements
under the Companies Act, 1956 to give effect to this proposal (8+7 = 15 marks).. Q7(a)
Messrs Ahimsa Private Limited was
incorporated in the year 2001 under the Companies
Act, 1956 by 3 brothers, namely, Amit, Anil and Akhlesh. All the three
were Promoter-directors named in the Articles of Association and
subscribed for 100 shares each
in the company through Memorandum of Association. Thereafter, from time
to time, further shares were allotted in proportion of one-third
to each of them and in due course, the company started earning substantial
profits. Due to greed of money, the two brothers, namely, Amit and
Anil, joined hands together to assume complete control of the company, leaving
their brother, Akhlesh in lurch. Both the brothers got further shares allotted
to themselves, thereby their joint shareholding increased from 662/3%
to 90%, while the shareholding of Akhlesh got reduced from the erstwhile
33-1/3%
to 10%. No notice of any Board Meeting was sent to Akhlesh, who was sidelined
and was also removed as a Director.
Aggrieved
by the decisions taken by his two brothers at his back, Akhlesh seeks
your advice for taking out appropriate proceedings before the court or
judicial authority of competent jurisdiction. Also suggest the nature of
reliefs he
may claim while filing his case (b)
Mr. XYZ is the Managing Director of
M/s. ABC Limited and also BCD Limited. PQR Limited decides to appoint
him as the Managing Director of the company. State
the legal requirements under the Companies Act, 1956 to give effect to the
proposed appointment. Draft a resolution for the appointment of Mr. XYZ as
the Managing Director of PQR Limited (8+7 = 15 marks). Q8(a)
The scheme of amalgamation was approved by overwhelming
majority of the members of the merging companies, namely, ABC
Ltd. and XYZ Ltd. at meetings called as per directions of the court.
When the scheme of amalgamation was awaiting sanction of the court, the
exchange ratio was questioned by a small group of dissenting
shareholders of ABC Ltd. The exchange ratio was fixed by a
firm of reputed Chartered Accountants. Examine with reference to the
court rulings,
whether the dissenting shareholders will succeed. Would
your answer be different, if the exchange ratio was objected to by the Central
Government and not by the members of the merging companies ? (b)
Premier Housing Finance Company Limited is prepared to give housing
loans to the employees of Supreme Chemicals Limited subject to the
condition that the loans are guaranteed by Supreme Chemicals Limited.
Supreme Chemicals Limited
is not a listed company and the company will be exceeding the limits
prescribed under the Companies Act, 1956 by providing such guarantee.
The company
desires to give the guarantee early as part of employees' welfare measure
without waiting for the next annual general meeting, which is due only
after eight months. Advise the company about the legal requirements
under the Companies Act, 1956 to give effect to the above proposal. What
would
be your advice, if the company was required to provide security instead of
guarantee ? (8+7
= 15 marks). Q9(a) (i)
Articles of Association of a listed company has fixed payment of sitting
fee
for each Meeting of Directors subject to maximum of Rs. 10,000. In view
of increased responsibilities of independent directors of listed
companies, the
company proposes to increase the sitting fee to Rs. 25,000 per meeting. Advise
the company about the requirements under the Companies Act, 1956 to give
effect to this proposal (ii) Ram & Company was
appointed as auditor of ABC Limited at the Annual General Meeting held
on 30th September, 2004. Can Ram & Co. continue as auditor of the company in
case the next annual general meeting has not been held in time ? What
would be the position in case the next annual general meeting was
held on 30th September, 2005, but adjourned without considering the
business of appointment or re-appointment of auditor ? (b)
Explain the legal position in respect of the following with reference to
the provisions
of the Companies Act, 1956 : (i) XYZ Limited, having one Indian
subsidiary company and an overseas subsidiary company, attached to
its Balance Sheet documents mentioned under section 212 in respect
of its Indian subsidiary company only (ii) Statutory
auditors of a public company did not verify the correctness of the
particulars furnished in the Boards' Report in respect of certain employees
under section 217(2A) (8+7 = 15 marks). CA FINAL Group I - May 2006 - New Syllabus Questions 1, 2 and 3 are compulsory. Answer any four questions from the rest. Q 1 Answer any two of the following: (a) A is Managing Director of APAR Ltd. He gave his resignation letter to the Chairman of the Board of Directors on 31st December, 2005 and requested that he should be relived immediately. When does the resignation of Mr. A take effect? (b) On 31st March, 2006, D holds certain securities issued under ‘Collective Investment Scheme’. His name appears in the books of the scheme. He has transferred these securities to another person for a consideration. The transferee lodged the instrument of transfer with the authorities one month after the date on which the income on these securities became due. Examining the provisions of the Securities Contracts (Regulation) Act, 1956 state: (i) Whether D is entitled to receive and retain the income on these securities for the financial year ended 31st March, 2006 in the given case? (ii) Would your answer be still the same in case the transferee lodged the instrument of transfer with the authorities 14 days after the date on which the income on these securities became due? (c) The Executive Committee of a recognized Stock Exchange desire to transfer certain duties and functions of a clearing house to a recently set up Clearing Corporation, incorporated as a company under the Companies Act, 1956. Examining the provisions of the Securities Contracts (Regulation) Act, 1956 : (i) State the purposes for which such transfer of duties and functions can be made to Clearing Corporation (ii) What is the procedure to be adopted for such transfer of duties and functions? (5x2 = 10 marks) Q 2 Answer any two of the following: (a) State which kind of approval is required for the following transactions under the Foreign Exchange Management Act, 1999 : (i) X, a Film Star, wants to perform alongwith associates in New York on the occasion of Diwali for Indians residing at New York. Foreign Exchange drawal to the extent of US dollars 20,000 is required for this purpose (ii) F International Ltd. has purchased the trade mark from a Foreign Company to establish retail business chain in India as a joint venture at a consolidated price of US dollars 500,000 which is to be paid in Foreign currency of that country. (iii) R wants to get his heart surgery done at UK. Up to what limit Foreign Exchange can be drawn by him and what are the approvals required? (iv) L wants to pursue a course in Fashion design in Paris. The Foreign Exchange drawal is US dollars 20,000 towards tuition fees and US dollars 30,000 for incidental and stay expenses for studying abroad (b) A French Manufacturing Company desirous of setting up its branch office at Pune, seeks your advice on the objects for which the company may be allowed to set up the desired branch office. Advise the company about the procedure as required under the Foreign Exchange Management Act, 1999 to be followed in this regard. (c) Examine with reference to the relevant provisions of the Competition Act, 2002, the following: (i) Whether a Government Department supplying water for irrigation to the Agriculturists after levying charges for water supplied (and not a water tax) can be considered as an ‘Enterprise’. (ii) Whether a person purchasing goods not for personal use, but for resale can be considered as a ‘consumer’ (7 x 2 = 14 marks). Q 3 Answer any two of the following: (a) SEBI received complaints from some investors alleging that ABC Limited and some brokers are indulging in price manipulation in the shares of ABC Limited. Explain the powers that can be exercised by SEBI under the Securities and Exchange Board of India Act, 1992 in case the allegation are found to be correct (b) A designated Financial Institution under the Companies Act, 1956 proposes to go for issue of shares. Referring to the SEBI guidelines, the institution seeks your advice on the following: (i) What minimum reservation to promoters is to be made by the Financial Institution? (ii) To what conditions shall the Financial Institution be subject to, for reservation for employees out of the proposed issue? Advise (c) What are the Internal and External aids to interpretation of statutes? Give five examples each of Internal and External aids (8 x 2 = 16 marks) Q 4 (a) Clever, a Director of ABC Ltd. made default in filing of Annual Accounts and Annual Returns with the Registrar of Companies for a continuous period of three financial years ending 31st March, 2005. Referring to the provisions of the Companies Act, 1956 examine the validity of the following : (i) Whether X can continue to be a Director of ABC Ltd. and also EF Ltd., where he is a Director. Also state whether he can be reappointed as a Director in ABC Ltd. as well as EF Ltd. (ii) Would your answer be still the same in case X is a nominee Director of a Public Financial Institution? (iii) What would be your answer in case the defaulting company (i.e. ABC Ltd.) is a Private Company? (b) A meeting of members of a Company was convened under the orders of the Court to consider a scheme of compromise and arrangement. The meeting was attended by 200 members holding 5,00,000 shares in aggregate. 70 members holding 4,00,000 shares voted for the scheme. The remaining members voted against the scheme. Examine with reference to the relevant provisions of the Companies Act, 1956 whether the scheme is approved by the required majority (8+7 = 15 marks). Q 5 (a) From the following information extracted from the Balance Sheet of VCD Ltd. as at 31st March, 2006, Board of Directors of the Company decide to grant a loan of Rs. 80 crores to another Company JN Ltd. Paid-up share Capital: Equity Share Capital - Rs. 50 crores, Preference Share Capital – Rs. 10 crores, General Reserves – Rs 100 crores, Debentures – Rs 5 crores, Debentures Redemption Reserve – Rs 5 crores. The Company has already given loans to the following companies: (i) Peters Ltd. – Rs. 5 crores (ii) Steel India Ltd. – Rs. 10 crores. The Company has also given a corporate guarantee of Rs. 10 crores to NR & Co. Ltd. Advise whether the Board can go ahead with the above proposal (b) The subscribed share capital of AJR Company Ltd. at the end of the financial year ending 31st March, 2005 was Rs. 20 crores, out of which two Public Financial Institutions were holding share capital amounting to Rs. 3 crores. During the financial year 2005-2006, the company through public issue of shares raised its subscribed capital by additional Rs. 60 crores. Out of Rs. 60 crores, the two public financial institutions were further allotted shares amounting to Rs. 20 crores, raising the total contribution of these two institutions to Rs. 23 crores before the date of the company’s closure of books for annual general meeting scheduled for 15th September, 2005, where auditors were to be appointed. The company as usual, by getting an ordinary resolution passed appointed the auditors. A group of shareholders of the company allege that the appointment of auditors is violative of certain provisions of the Companies Act, 1956. They however, did not raise any objection to the appointment of auditors at the previous annual general meeting held on 10th September, 2004. Examining the provisions of the Companies Act, 1956 decide: (i) Whether contention of the shareholders shall be tenable? (ii) Should the contention of shareholders be tenable, what action is the company required to take for the appointment of auditors in the above situation at the annual general meeting scheduled for 15th September, 2005? (iii) Would your answer be still the same in case the total subscribed capital contributed by the two public financial institutions is only Rs. 10 crores, including the previous contribution of Rs. 3 crores? (8+7 = 15 marks). Q 6 (a) The Executive Committee of an Inter-state Co-operative Society decides to convert the Society into a ‘Producer Company’ under the provisions of the Companies Act, 1956. You being a Practising Chartered Accountant are approached by the Society for advice. Advise the society on the following matters: (i) The steps to be taken for conversion of the society into a ‘Producer Company’ (ii) Manner in which voting rights of members of Producer company after conversion may be exercised (b) Referring to the provisions of the Companies Act, 1956, as contained in Section 397 of the Act, Examine whether the following acts of the company amount to oppression : (i)Allotment of shares by the Directors of the Company by which the existing majority is reduced to minority (ii) Allotment of shares by the Directors by which the existing minority shareholders are made to majority (iii) A share sale agreement was executed by VC, an NRI. The shares and transfer deed were handed over to an escrow agent. The sale was subject to RBI permission. The shares were not transferred for 6 years since RBI permission was not received. VC, after waiting for a long period of time raises the issue and complains of oppression in the capacity of a member. As per the agreement the sale was unconditional. During the above period VC did not exercise any right as shareholder nor the company treated him as a member (8+7 = 15 marks). Q 7 (a) (i) Mr. John has been appointed as Additional Director on the Board of MCX Ltd. on 12th January, 2006. Mr. John has filed his consent to Act as a Director, if appointed, only with the company. Examine with reference to the provisions of the Companies Act, 1956 whether he is also required to file his consent with the Registrar of Companies (ii) One of the members of ADB Ltd. has proposed the name of Mr. Fame for appointment as a Director of the Company in the Annual General Meeting and given a notice under Section 257 of the Companies Act, 1956. Mr. Fame is one of the partners of Fame & Fame, Chartered Accountants, who are the retiring auditors of the company. But the audit of the company is being looked after by another partner of the firm. Examine whether Fame & Fame can be reappointed as auditors, if Mr. Fame is appointed as Director. (b) Examine the validity of the following: (i) The Board of Directors of a company decides to revise the accounts which have been submitted to the Auditors, but the auditors have not yet given their report. (ii) The Board of Directors of a company decides to revise the Audited accounts before adoption by the shareholders in the Annual General Meeting. (iii) The Board of Directors of a company decides to revise the accounts which have already been adopted by the shareholder in the Annual General Meeting (8+7 = 15 marks). Q 8 (a) PQR Machines Limited entered into a contract with MN Forgings, in which wife of P, a director of the company is a partner. The contract is for supply of certain components by the firm for a period of three years with effect from 1st September, 2005 on credit basis. The paid-up Share Capital was increased from Rs. 70 lakhs to Rs. 140 lakhs on 1st March, 2006. Explain the requirements under the Companies Act, 1956, which should have been complied with by PQR Machines Limited before entering into contract with MN Forgings. Whether there is any additional requirement which is required to be complied with by PQR Machines Limited in view of the increased paid-up Share Capital on 1st March, 2006. What would be your answer in case MN Forgings is a Private Company in which P’s wife is holding substantial shares? (b) Imprudent Company Limited approached Safe Finance Company Limited for a loan of Rs. 20 lakhs to finance purchase of some essential machinery. The company created a floating charge on some of its assets on 1st December, 2004 for Rs. 25 lakhs to secure Rs. 5 lakhs already due to Safe Finance Company Limited and additional amount to be advanced by the said Finance Company. Safe Finance Company Limited advanced Rs. 15 lakhs on 15th December, 2004 towards purchase of certain machinery. Some of the creditors filed winding up petition in the court on 1st January, 2005 on the ground that the company was unable to pay its debts and the company was ordered to be wound up on 15th December, 2005. Examine with reference to the provisions of the Companies Act, 1956 whether the floating charge is valid (8+7 = 15 marks). Q 9 (a) EF Chemicals Limited proposes to appoint one whole-time technical Director on a consolidated monthly remuneration of Rs. 30,000 and one whole-time Marketing Director on a consolidated salary of Rs. 25,000 per month for a period of three years with effect from 1st September, 2005. The company has got a Managing Director and he is getting Rs. 40,000 per month. Explain the requirements under Companies Act to be complied with by the company in connection with the proposed appointment of whole-time Directors taking into account the following data collected from the Balance Sheet of the company as on 31st March, 2005: (1) Paid-up Share Capital – Rs. 80,00,000 (2) Debentures redeemable after three years – Rs. 90,00,000 (3) Investments – Rs. 20,00,000 (4) Accumulated Loss – Rs. 70,00,000 (5) Preliminary Expenses not written off – Rs. 15,00,000. (b) A Public Company proposes to appoint an alternate Director for one of its Directors, who is likely to be outside India for most of the year. There is no specific provision in the Articles of Association in this regard. State the steps to be taken by the Company to give effect to the proposal. Draft a specimen resolution for appointment of Alternate Director and also state the kind of meeting at which such resolution is to be passed (8+7 = 15 marks). CA FINAL Group I - November 2005 - New Syllabus Questions 1, 2 and 3 are compulsory. Q 1 Answer any two of the following: (a) The Board of Directors of ABC Ltd. met thrice in the year 2004 and the 4th Meeting, though called, could not be held for want of quorum. Examine with reference to the relevant provisions of the Companies Act, 1956, the following: (i) Whether any provisions of the Companies Act, 1956 have been contravened? (ii) Is a Director bound to attend the Board Meetings and when his frequent absence from the Board Meeting may be excused? (b) Describe the provisions of the Securities Contracts (Regulation) Act, 1956 regarding the powers of the Central Government to supersede the Governing Body of a recognised Stock Exchange and the consequences of such supercession (c) (i) Delhi Stock Exchange wants to establish additional trading floor. Advise (ii) Complaints of unethical practices have been received against members of a recognized Stock Exchange by the Government. Examine whether the Government has any power to suspend the business of such a recognized Stock Exchange (5 +5 = 10 marks) Q 2 Answer any two of the following: (a) Explain the meaning of “Capital Account Transaction” under the Foreign Exchange Management Act, 1999. State whether there are any restrictions in respect of the following transactions: (i) Drawal of Foreign Exchange for payments due on account of amortisation of loans in ordinary course of business (ii) Purchases by a person resident outside India of shares of a company in India engaged in plantation activities (b) TKM Exporters of New Delhi are engaged in Export Business. It made certain exports, but failed to realise and repatriate to India the foreign exchange due on its exports. The Adjudicating Authority imposed a penalty under the provisions of Foreign Exchange Management Act, 1999 (FEMA). Being aggrieved by this penalty, the said exporter seeks your advice as to the authority to which appeal can be made and the time limit for making such appeals. You are required to advise on the matter. (c) (i) In a proceeding before the Competition Commission of India involving two pharmaceutical companies, the plaintiff requested the presiding officer to call upon the services of experts from the pharmaceutical sector to determine the truth of the allegations levelled by it against the respondent. The respondent opposed the request on the ground that such action can not be taken by the Competition Commission. You are required to state with reference to the provisions of the Competition Act, 2002, whether the contention of the respondent is tenable (ii) The Central Government has formed an opinion that Mr. CBM (a member of the Competition Commission of India) has acquired such financial interest that it may affect prejudicially his functions as a member of the Competition commission and it wants to remove him from his office. You are required to state with reference to the provisions of the Competition Act, 2002, whether the Central Government can do so and if yes, how? (7+7 = 14 marks) Q 3 Answer any two of the following: (a) An investor has complained to SEBI that he has not received the payment due to him from the stock broker registered with Calcutta Stock Exchange Association Ltd. The complainant has requested SEBI to take appropriate action against the stock broker. You are required to state with reference to the provisions of Securities and Exchange Board of India Act, 1992 the answer to the following: (i) What action SEBI can take against the stock broker on the complaint as stated above? (ii) What is the procedure to the adopted and what are the factors that will be taken into account while taking such action? (b) Following information is available from the records of Star Chemicals & Engineering Ltd. (i) The Company is a closely held unlisted Company (ii) The paid up share capital of the Company since 1st April, 1999 is Rs. 3.00 crores and its net worth as at 31st March, 2005 was Rs. 5.00 crores as per audited Balance Sheet (iii) The Net Tangible Assets of the Company as per last 3 (three) audited Balance Sheet as at 31st March, 2003, 2004 and 2005 were Rs. 4.00 crores, 4.50 crores and 5.00 crores respectively, out of which monetary assets were less than Rs. 50 lacs in each of three years (iv) The Company was incorporated in 1996 and commenced its business on 1st April, 1996 and since then it has earned good profits and it has not incurred any loss in any year in past (v) The company has not declared any dividend so far, but according to the profits earned so far, the management could have declared the dividend in each of the last five years (vi) The name of the Company was changed from Star Engineering Ltd. to its present name with effect from 1st October, 2004. The Company wants to make a public issue of shares to raise Rs. 20.00 crores by issuing equity shares at premium. For the purpose of including the information in the prospectus, the company has prepared its accounts for 12 months ended 30th September, 2005 showing segment-wise revenue, which revels that revenue from Chemical segment is more than the revenue from Engineering segment. You are required to state the relevant guidelines issue by SEBI and your conclusion whether the company can make the desired issue of equity shares based on the facts stated above (c) (i) Explain the rules relating to interpretation of Statutes, when the terms “notwithstanding” and “subject to” are used in any provision of an Act. (ii) State the effect of the words “notwithstanding anything contained in this Act” used in section 408 of the Companies Act, 1956, which vests certain powers in the Central Government to prevent oppression or mismanagement (8+8 = 16 marks) Q 4 (a) The last three years’ Balance Sheet of PTL Ltd., contains the following information and figures:
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