CA PCC - Law ethics Communication

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Note - In some cases, only paragraph reference is given. These paragraph numbers are  of my book 'Law, Ethics and Communication'.

CA PCC May 2007

PAPER - 3 : LAW, ETHICS AND COMMUNICATION PART- I

Part I - Question Nos. 1 and 2 are compulsory. Attempt any eight questions from rest

Q 1 (a) Mr. Ramaswamy of Chennai placed an order with Mr. Shah of Ahmedabad for supply of Urid Dhall on 10.11.2006 at a contracted price of Rs. 40 per kg. The order was for the supply of 10 tonnes within a month’s time viz. before 09.12.2006. On 04.12.2006 Mr. Shah wrote a letter to Mr. Ramashwmy stating that the price of Urid Dhall was sky rocketing to Rs. 50 Per. Kg. and he would not be able to supply as per original contract. The price of Urid Dhall rose to Rs. 53 on 09.12.06 Advise Mr. Ramaswamy citing the legal position. (5 Marks)

Ans – See Anticipatory Breach of Contract – para 33.1-2

Q 1(b) Each subdivision carries one mark. Pick-up the correct answer from the following: (i) In a contract of guarantee a person, who promises to discharge another’s liability is called (a) Principal Debtor (b) Creditor (c) Indemnifier (d) Surety. - - (ii) The Delivery of goods by one person to another as security for the payment of a debt is called (a) Bailment (b) Pledge (c) Mortgage (d) Hypothecation - - (iii) Which of the following is not applicable to negotiable Instrument? (a) It must be in writing (b) It must be transferable (c) It must be registered (d) It must be signed. - - Answer Yes’ or ‘No’ to the following: (iv) In case of joint promise, the liability to pay the promise will devolve on any one or more promisors. (v) Deposit of money in a Bank Amounts to Bailment. (5x1=5 Marks)

Ans – (i) (d) see para 34.2-1 (ii) (b) see para 35.6(iii) (c) - see para 37.2 (iv) Yes – since any one can be held liable -see para 31.1-5 (v) No – since money is not ‘goods’ - see para 35.1-2

Question 2 (a) German Pharmaceuticals Limited is a zero debt company having 10 lakhs Equity shares of Rs. 10 each. The Directors desire to buy back its own shares. Can it do so? If so, how? (5 Marks)

Ans – Yes, See para 13.2

Q2  (b) Each subdivision carries one mark. Answer Yes’ or ‘No’ to the following: (i) A minor also can become a member of a Company. (ii) New shares cannot be issued to outsiders without prior offer to the existing shareholders. - - Pick-up the correct answer from the following : (iii) As per Companies Amendment Act, 2000 a Private Company and Public Company must have a minimum paid-up capital of (a) Rs. 1 lakh and Rs. 2 lakhs respectively (b) Rs. 3 lakhs and Rs. 5 lakhs respectively (c) Rs. 2 lakhs and Rs. 3 lakhs respectively (d) None of the above. - - (iv) A model form of Articles contained in Table ‘A’ relates to a Company limited by (a) Shares (b) Guarantee (c) Shares and Guarantee (d) None of the above. - - (v) Dividend can be declared out of (a) Capital reserve (b) Revaluation reserve (c) Debenture Redemption reserve (d) Earlier year’s reserve brought forward. (5*1 = 5 Marks)

Ans – (I) He can become member of fully paid shares through guardian – see para 15.2-8 (ii) Partly correct – see para 11.1-1 (iii) (d) Correct answer is 1 lakh and 5 lakh – see para 5.2-4 (iv) (a) – see para 7.1-3 (v) (d)

Question 3 Mr. ‘E’ joined as supervisor on monthly salary of Rs. 3,400 on 1.02.2007 and resigned from his job on 28.02.2007. The company declared a bonus of 20% to all eligible employees and paid it on time. Mr. ‘E’ knowing the facts made a claim to HRD, which in turn rejected the claim. Examine the validity in the light of the provisions of the payment of Bonus Act, 1965. (5 Marks)

Ans – No, since he has not completed 30 working days – see para 46..2-1

Question 4 PQR Limited received a cheque for Rs. 50,000 from its customer Mr. LML After a week company came to know that the proceeds were not credited to the account of PQR Limited due to some ‘defects’, as informed by the Banker. What according to you are the possible effects? (5 Marks)

Ans – See para 38.4-1

Question 5 Define the term ‘Employer’ under the Provident Fund and Miscellaneous Provisions Act, 1952. (5 Marks)

Ans – See para 45.1-1

Question 6 State the circumstances under which the drawer of a cheque will be liable for an offence relating to dishonour of the cheque under the Negotiable Instrument Act, 1881. Examine, whether there is an offence under the Negotiable Instrument Act, 1881, if a Drawer of a cheque after having issued the cheque, informs the Drawee not to present the cheque as well as informs the Bank to stop the payment. (5 Marks)

Ans – See para 39-1-2 for first part. For second part , answer is Yes – se para 39.1-6

Question 7 Explain the provisions of the Payment of Gratuity Act, 1972 relating to ‘forfeiture of the amount of Gratuity’ payable to an employee. (5 Marks)

Ans – See para 47.2-8

Question 8 Briefly discuss the provisions relating to constitution of National Company Law Tribunal and National Company Law Appellate Tribunal. (5 Marks)

Ans – See para 27.1-2

Question 9 What is E filing? List at least five advantages of E filing under MCA 21. (5 Marks)

Ans – See para 27.3-2

Question 10 Mr. Ram Lal and his friend desire to incorporate a Public Company and approach you for help. Advise. ( 5 Marks)

Ans – See para 4.2 and 4.2-8

Question 11 Explain the doctrine of ‘Indoor management’ in brief. The Secretary of a Company issued a share certificate to ‘A’ under the Company’s seal with his own signature and the signature of a Director forged by him. ‘A’ borrowed money from ‘B’ on the strength of this certificate. ‘B’ wanted to realise the security and requested the company to register him as a holder of the shares. Explain whether ‘B’ will succeed in getting the share registered in his name. (5 Marks)

Ans – See para 6.2-5. B cannot succeed as forgery is nullity in law.

Question 12 Explain in brief ‘Equity Share Capital’ and ‘Preference Share Capital’. (5 Marks)

Ans – See para 8P-1

PART – II Question No. 13 is compulsory. Attempt any two questions of the rest.

Question 13 (a) What is Corporate Social Responsibility? Why it is needed in Indian Business environment? (5 Marks)

Ans – Refer para 62.2

Q 13 (b) Explain briefly the matters to be considered and the steps that may be taken by a Finance and Accounting professional when he is required to resolve an ethical conflict in the application of Fundamental principles. (5 Marks)

Ans –  Refer para 67.3-2

Question 14 What is meant by ‘Sustainable Development’? State the special responsibilities of the industries that are based on natural resources. How the adoption of Green Accounting System. helps in avoiding policy decisions which are non-sustainable for the country? (5 Marks)

Ans – Refer para 64.2. and 64.2-4

Question 15 Answer any two out of four in ‘yes’ or ‘no’ with brief reasons: (a) Knowledge without morality is a social sin. (b) Consumer purchases goods and health services for personal purpose only. (c) Consumer and Public interest are both synonymous .(d) Ethics are necessary in marketing to build Brand image only. (5 Marks)

Ans – (a) Yes. Refer para 60.1-2 (b) Yes. An individual consumer obviously purchases goods and health services for his own use. However, consumer as a group may purchase goods for social benefit (c) No. An individual consumer will look at his personal interest. For example, he may prefer goods at lower price if the seller manufactures and sales them by unfair means e.g. neglecting environment or evading taxes. However, this would not be in public interest (d) Certainly No.  Ethics in business is necessary for sustainable development and good corporate governance as responsible part of society. Improvement in brand image is only a side effect. And not the purpose.

Question 16 Explain in brief the measures to ensure ethics in the Work place. (5 Marks)

Ans – Refer para 65.3

PART – III Question No. 17 is compulsory and attempt any two question of the rest.

Question 17 (a) What is meant by ‘Emotional Intelligence’ and ‘Emotional Quotient’? State any six social competencies associated with Emotional Intelligence. (5 Marks)

Ans – Refer para  52.3

Q 17 (b) Draft a ‘Power of Attorney’ by subscribers of Memorandum of Association of the Company authorising a Chartered Accountant to appear before the Registrar of Companies to do the needful for the purpose of incorporation of the company. (5 Marks)

Ans -  Refer para 57.3-4

Question 18. Draft a notice for ABC’s Annual General Meeting with four ordinary business. (5 Marks)

Ans – Refer para 19.3

Question 19 What do you understand by Group Dynamics? (5 Marks)

Ans – Refer para 53.3-3

Question 20 Mr. A has not received a dividend warrant of Rs. 1,500 for 150 shares of XYZ Ltd. Draft an indemnity bond, to be given to the company for seeing release of Dividend. (5 Marks)

Ans – Refer para 57.6-3

 

CA – PCC November 2007

Paper - 3

Law, Ethics and Communication

Section - A

Part I - Question Nos. 1 and 2 are compulsory. Attempt any eight questions from rest

Q1  (a) A, B and C are partners in a firm. They jointly promise to pay Rs. 1,50,000 to P. C became insolvent and his private assets are sufficient to pay only 1/5 of his share of debts. A is compelled to pay the whole amount to P. Examining the provisions of the Indian Contract Act, 1872, decide the extent to which A can recover the amount from B. (5 marks)

Ans – Refer para 31.1-5. A will get Rs 10,000 from assets of C. He can recover Rs 70,000 from B.

Q1 (b) (i) State whether the following statements are correct or incorrect: (a) A minor cannot be appointed as an agent. (b) Where there are co-sureties a release by the creditor of one of them does not discharge the others (2x1 =2 marks)

Ans – (i) Incorrect Refer para 36.1 (b) Yes. Refer para 34.6-1

(ii) Pick-up the correct answer from the following : (a) In case of void agreements, collateral transactions are (1)  Also void (2) Unenforceable (3) Not affected (4) Illegal (b) A contract of insurance is (1) Contingent contract (2) Wagering agreement (3) Contract of guarantee (4) Unilateral agreement (c) 'A' signs the instrument in the following manner. State the instrument which cannot be considered as Promissory note :  (1) I promise to pay B or order Rs. 500 (2) I acknowledge myself to be indebted to B Rs. 1,000, to be paid on demand, for value received (3) I promise to pay B Rs. 10,000 after three months (4) I promise to pay B Rs. 500 seven days after my marriage with C  (3 x 1 = 3 marks)

Ans – (i) (3) Collateral transaction can be enforced Refer para 30.5-4 (b) (1) Refer para 29.6 (c) (4) Refer para 37.2

Q 2 (a) XYZ Limited called its Annual General meeting on 28th September, 2007. The notice of the meeting was posted on 6th September, 2007. With reference to the provisions of the Companies Act, 1956 examine whether the notice given by the company was valid (5 marks)

Ans – Refer para 18.3-4

Q 2(b) (i) State whether the following statements are true or false : (a) Proxy has no right to speak at the general meeting of a company (b) A public company cannot issue equity shares with differential rights as to dividend (2 x 1 = 2 marks)

Ans – (i) True Refer para 20.2 (ii) False – Shares with differential rights can be issued Refer para 8.1-1

Q2(b) (ii) Pick-up the correct answer from the following: (a) Share certificates are to be issued by a company within (1) Two months after allotment (2) One month after allotment (3) Six months after allotment (4) Three months after allotment  (b) Alteration of object clause of Memorandum of Association of a company requires (1) Special resolution (2) Approval of registrar of companies (3) Approval of company law board (4) Special resolution and approval of company law board (c) The financial year of AVD Company Ltd. ended on 31st March, 2007. The Annual General Meeting of the company was held on 10th October, 2007. As per requirements of the Companies Act, 1956, the Annual Return of the company should be filed with the Registrar of Companies within (1) 60 days from 10th October, 2007 (2) 60 days from 30th September, 2007 (3) 90 days from 30th September, 2007 (4) 90 days from 10th October, 2007 (1 mark each)

Ans – (a) (4) Refer para 14.1-1 (b) (1) Refer para 5.5-1 (c) (2) Refer para 27.2-2

Q 3 State with reasons whether the following persons are entitled to receive Bonus under the payment of Bonus Act, 1965 : (i)   An apprentice under the Apprentice Act (ii)   A probationer (iii)   An employee employed through contractors on building operations (iv)   A retrenched employee (v)   A dismissed employee reinstated with back wages (5 marks)

Ans – Refer para 46.2-1

Q 4 Explain as to why shall the combination of 'not negotiable’ with 'Account payee' crossing be considered as the safest form of crossing a cheque (5 marks)

Ans – In addition, cheque should be made payable to payee only, and not to bearer or order - Refer para 38.2-5

Q 5 State the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 regulating the quantum of contribution to be made by the employer and employee to the provident fund. Is it possible for an employee to increase the amount of his contribution to the provident fund more than the minimum contribution as statutorily prescribed ? (5 marks)

Ans – Refer para 45.3-1. Employee can increase his contribution.

Q 6 What is meant by maturity of a Bill of Exchange or Promissory Note ? Calculate the date of maturity of the following bills of exchange explaining the relevant rules relating to determination of the date of maturity as provided in the Negotiable Instruments Act, 1881: (i) A Bill of Exchange dated 31st August, 2007 is made payable three months after date (ii) A Bill of Exchange drawn on 15th October, 2007 is payable twenty days after sight and the bill is presented for acceptance on 31st October, 2007 (5 marks)

Ans – Refer para 40.1-3

Q 7 Explain the manner in which the gratuity payable to employees in a seasonal as well as other establishments is calculated under the Payment of Gratuity Act, 1972. State also the maximum amount of gratuity payable under the Act (5 marks)

Ans – Refer para 47.2 and 47.2-1

Q 8 What is meant by 'Pre-Incorporation Contracts' ? Can these contracts be enforced by the prospective company after its incorporation against the third parties with whom the promoters had entered into certain contracts ? Explain. (5 marks)

Ans – Refer para 4.1-4

Q 9 Mr. V, alongwith six other persons desires to float a company for charitable purposes, as permissible under Section 25 of the Companies Act, 1956. He seeks your advise about the procedure to be followed to give effect to the above proposal. Advise him (5 marks)

Ans – Refer paras 4.2 and  26.3-1

Q 10 Board of Directors of a private company decided to convert it into a public company. State the steps to be taken for such conversion in order to comply with the requirements under the Companies Act, 1956. (5 marks)

Ans – Refer para 26.1-4

Q 11 The quorum for a General meeting of a public company is 15 members personally present according to the provisions of the articles of association of the company. Examine with reference to the provisions of the Companies Act, 1956 whether there is proper quorum at a General meeting of the company which was attended by the following persons : (i)    13 members personally present (ii)   2 members represented by proxies who are not members of the company (iii)   One person representing two member companies (5 marks)

Ans – There is proper quorum. Even if proxies are not counted, one person representing two companies will be two members personally present - Refer para 20.1-5

Q 12 ADJ Company Limited decides to buy-back its own shares. Advise the company's Board of Directors about the sources out of which the company can buy-back its own shares. What conditions are attached to the buy-back scheme of the company in accordance with the provisions of the Companies Act, 1956? Explain. (5 marks)

Ans – Refer para 13.2

PART – II Question No. 13 is compulsory. Attempt any two questions of the rest.

Q 13(a) What is meant by 'Corporate Governance'? State the major 'characteristics' of good corporate governance. (5 marks)

Ans – Refer para 63.1-2

Q 13(b) Finance and accounting professional working as an employee in an organisation have to face various threats which make it difficult for them to comply with fundamental principles relating to ethics. Explain the safeguards in the work environment which may be created by a business enterprise to overcome such threats (5 marks)

Ans – Refer para 67.3-2

Q 14 Explain the meaning of the terms 'ethics' and 'business ethics' and also state the requirements of 'business ethics' (5 marks)

Ans – Refer para 59.1, 60.1 and 60.1-1

Q 15 Answer any two out of four. You are required to state whether the statement is correct or incorrect with brief reasons: (a) Company management has responsibility only towards its shareholders (b) Window-dressing of financial statements will not be useful in the long run (c) Ethics and morals are synonymous (d) Competition Act, 2002 protects the interest of consumers (5 marks)

Ans – (a) No. It has responsibility towards all stakeholders including society - Refer para 60.1-3 (b) Yes.  Refer para 67.1-2 (c) No. Refer para 59.1

Q 16 What is meant by 'Environmental ethics'? How does it's non-adoption leads to 3 Ps viz.. Polluter, Pay and Principles? Explain. (5 marks)

Ans – Refer para 64.2

PART – III Question No. 17 is compulsory and attempt any two question of the rest.

Q 17 (a) What is meant by 'Critical thinking’? How shall you develop critical thinking? (5 marks)

Ans – Refer para 52.2-2

Q 17 (b) J desires to gift out her flat to Mumbai in City Cooperative Society registered under the Maharashtra Cooperative Societies Act, 1960, to her brother A. Stating the legal requirements to be complied with, draft a Gift Deed. Take your own data regarding date, flat no., floor area etc. (5 marks)

Ans – Refer para 57.2-2 (Mention about permission from Society and other concerned authorities, registration with related authorities etc.)

Q 18 Third Annual General Meeting of ABC Limited was held on 28th September, 2007. Several business was transacted at the meeting including the adoption of annual accounts for the year ended 31st March, 2007. The meeting was attended by 30 members in person and 5 members in proxy. Draft the minutes of the Annual General meeting indicating how shall the adoption of accounts, being one of the business transacted at the meeting, be recorded (5 marks)

Ans – Refer para 19.3-1

Q 19 What do you understand by 'Group conflicts'? How shall these be managed effectively? Explain. (5 marks)

Ans – Refer para 53.4

Q 20 You have been assigned the job of composing business messages. What check-list would you prepare for organizing the message? (5 marks)

Ans – Refer para 54.3-1  

CA PCC Examination, May 2008

PART—I

Question Nos. 1 and 2 are compulsory. Attempt any eight questions from rest.

  Q 1(a) P appoints A as his agent to sell his estate. A, on looking over the estate before selling it, finds the existence of a good quality Granite-Mine on the estate, which is unknown to P. A buys the estate himself after informing P that he (A) wishes to buy the estate for himself but conceals the existence of Granite-Mine. P allows A to buy the estate, in ignorance of the existence of Mine. State giving reasons in brief the rights of P, the principal, against A, the Agent. What would be your answer if A had informed P about the existence of Mine before he purchased the estate, but after two months, he sold the estate at a profit of Rs. 1 lac ? (5 marks)

Answer - Refer para 36.3-3. In first case, Agent has fiduciary relationship with Principal and hence he is liable  to give benefit obtained by him, even if section 216 does not strictly apply. In second case, Agent is not liable since he had disclosed all the facts.

Q 1(b) (i) State with reasons whether the following statements are correct or incorrect (a) In a contract of guarantee, forbearance by the creditor to sue the Principal Debtor discharges the surety (b) A pledge of documents of title to goods by a mercantile agent is a valid pledge (2 x 1 = 2 marks)

Answer - (i) No. Refer para 34.4-6 (ii) Yes. Refer para 35.6-4.

Q 1(b)(ii)(a) Pick-up the correct answer from the following and give reasons - If time is the essence of the contract and there is a failure to perform the contract by the specified time, the contract : (1) becomes voidable at the option of the promisee (2) becomes unenforceable {3) becomes void (4) remains valid.

Answer - (1) - see para 31.1-11

Q 1(b)(ii)(b) Pick-up the correct answer from the following and give reasons -  A contingent contract is - (1) valid (2) void (3) voidable (4) illegal.

Answer - (1) See para 29.6 [It is void only if contingent on impossible event]

Q 1(b)(ii)(c) Pick-up the correct answer from the following and give reasons - A Promissory note drawn jointly by X., a minor and Y, a major is - (1) void (2) valid but not negotiable (3) valid but can be enforced only against Y (4) None of the above (3 x 1 = 3 marks)

Answer - (3) See para 37.4-4.

Q 2 (a) MN Limited held its Annual General Meeting on 27th March, 2008. Mr. M, the Chairman of the said meeting died on 1st April, 2008, when minutes of the annual general meeting were not yet recorded and signed. How would you deal with the situation ? Would your answer be different in case the meeting held on 27th March, 2008 was a Board meeting? (5 marks)

Answer - Refer para 22.1-1. As regards second part of question, minutes of Board meeting can be signed by Chairman of the meeting or Chairman of next succeeding meeting [section 193(1A)(a)].

Q 2(b) (i) State whether the following statements are True or False and give reasons (a) A certificate of incorporation issued by the Registrar of Companies is not valid if all the signatures of the subscribers to memorandum of association have been forged (b) A Public Company can issue either redeemable or irredeemable preference shares (2 x 1 = 2 marks)

Answer - (a) False. Refer para 4.3-1 (b) False. Refer para 8.2.2.

Q 2(b)(ii)(a) Pick-up the correct answer from the following and give reasons - A Public Company need not offer further shares to existing shareholders, if : (1) Ordinary resolution is passed to that effect by the company in General meeting (2) Special resolution is passed to that effect by the company in General meeting (3) Resolution is passed by Board of Directors and approved by Company Law Board (4) Special resolution is passed by the Company in General meeting and approved by Registrar of Companies

Answer - (2). Refer para 11.1-1.

Q 2(b)(ii)(b) Pick-up the correct answer from the following and give reasons - Resolution requiring special notice is required (1) For appointment of a person other than the retiring auditor as auditor at the Annual General Meeting (2) For removing a Director before the expiry of the period of his office (3) For both (1) and (2) (4) For None of the above.

Answer - (3). Refer para 21.1-1.

Q 2(b)(ii)(c) Pick-up the correct answer from the following and give reasons - Quorum for a General meeting of a Public Company is (1) 5 members present in person or by proxy (2) 3 members personally present as required by the Articles of Association of the company (3) 5 members personally present (4) 2 members personally present (3 x 1 = 3 marks)

Answer - (3). Refer para 20.1-1.

Q 3 A workshop is employing 50 workmen. A shop-supervisor is drawing monthly wages of Rs. 9,000. HRD paid annual bonus to all employees except the Supervisor. The Supervisor contends that he is also entitled to bonus. Referring to the provisions of the Payment of Bonus Act, 1965 decide whether the HRD's action is correct (5 marks)

Answer - Action of HRD is correct since salary exceeds Rs 3,500 per month. See para 46.2-1.

Q 4 What is meant by 'Presentment' of a bill of exchange under the Negotiable Instruments Act, 1881 ? When is such a bill of exchange presented for payment ? State when is the presentment not necessary (5 marks)

Answer - Refer para 40.1, 40.2-1, 40.2.

Q 5 Describe in brief the mode of transfer of balance to the credit of Provident Fund Account of an employee leaving one organisation and joining another organization, to the new employer under the provisions of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (5 marks)

Answer - Refer para 44.4-1

Q 6 'A' draws a bill of exchange payable to himself on 'X’ who accepts the bill without consideration just to accommodate 'A'. 'A' transfers the bill to 'P' for good consideration. State the rights of 'A' and 'P'. Would your answer be different if 'A' transferred the bill to 'P' after maturity ? (5 marks)

Answer - Refer para 42.2-1. X is liable to P if A does not pay. However, X can recover from A. Negotiation after maturity of accommodation is valid if the endorsee takes it in good faith for consideration.

Q 7. Examining the provisions of the Payment of Gratuity Act, 1972, state whether gratuity is payable to an employee for the periods when he does not actually work in the organization. Explain the manner in which gratuity is calculated for regular employees (5 marks)

Answer - Refer para 47.1-5 (leave, accident, sickness, lay-off, lockout or strike, absence without leave, cessation of work), 47.2-1 [(salary/ 26) x 15)].

Q 8 A Public Company proposes to issue 'Sweat Equity Shares' to its employees. Referring to the provisions of the Companies Act, 1956, state the conditions required to be fulfilled by the Company (5 marks)

Answer - Refer para 11.3.

Q 9 A charge requiring registration with Registrar of Companies was created on 1st 5 February, 2008 by XYZ Limited. The Secretary of the Company realised on 15th March, 2008 that the charge was not filed with the Registrar. State the steps to be taken-by the Secretary to get the charge registered with the Registrar (5 marks)

Answer - Refer para 23.50-7 (delay upto 300 days is condonable by ROC).

Q 10. What is meant by 'Red-herring prospectus' ? State the circumstances under which such prospectus is required to be filed with the Registrar of Companies. What is the requirement relating to filing of final prospectus in such cases ? (5 marks)

Answer - Refer para 12.3-1.

Q 11 VD Company Ltd. is registered in Tamilnadu within the jurisdiction of the Registrar of Companies, Chennai. The company proposes to shift its registered office to a place within the jurisdiction of Registrar of Companies, Coimbatore. State the steps to be taken by the company to give effect to the proposed shifting of its registered office (5 marks)

Answer - Refer para 5.4-1 (Application to RD since change in jurisdiction of ROC).

Q 12 DJA Company Ltd., desirous of buying back of all its equity shares from the existing shareholders of the company, seeks your advice. Examining the provisions of the Companies Act, 1956 advise whether the above buy back of equity shares by the company is possible. Also state the sources out of which buy-back of shares can be financed (5 marks)

Answer - Refer para 13.2, 13.2-1 (buy back of all shares is not possible).

 

PART II

Question No. 13 is compulsory. Answer any two questions of the rest.

Q 13(a) Explain the role played by different committees in regulating the 'Corporate Governance'. (b) Self interest threats may occur as a result of financial or other interests of finance and accounting professional. Give three examples each of such threats when the accounting professional is working as— (i) An auditor or consultant (ii) An employee in a company (5+5 = 10 marks)

Answer - (a) Refer para 63.2-1. Audit Committee, Remuneration committee and Investors Grievance Committee (b) Refer para 67.3, 67.3-2.

Q 14 Explain the extent to which it is possible to observe ethical behaviour in marketing. Also explain in brief the merits and demerits of the above (5 marks)

Answer - Refer para 60.1-1. Corporate image, market reputation is built if ethical behaviour is observed, though in short run, it may result in lower profits or even losses.

Q 15 Answer any two out of four.

Q 15(a) State whether the statement is correct or incorrect with brief reasons  - Ensuring fair treatment to whistle blowers will help in creating good ethical accounting environment in a business enterprise

Answer - Yes. Refer para 61.3.

Q15 (b) State whether the statement is correct or incorrect with brief reasons  - Ethical behaviour in marketing is necessary to avoid Government intervention/ regulation

Answer - Yes, but that is only one of the reasons. Refer para 60.1-2

Q 15(c) State whether the statement is correct or incorrect with brief reasons  - Promotion policies based on individual merit and not purely on the basis of seniority is discriminatory

Answer - Incorrect. Refer para 65.2

Q 15(d) State whether the statement is correct or incorrect with brief reasons  - Depletion of Ozone layer will have adverse effect on human beings and not on vegetation (2 x 2.5 = 5 marks)

Answer - Incorrect. Refer para 64.1-3.

Q 16. State the benefits of socially responsible corporate performance (5 marks)

Answer - Refer para 62.2 and 60.1-4.

PART—III

Question No. 17 is compulsory. Attempt any two questions of the rest.

Q 17(a) Explain clearly the meaning of the term 'Grapevine' as applicable to 'Communication'. (b) Draft a 'Power of Attorney' by an assessee authorising a Chartered Accountant to appear before Income-tax officer in respect of the pending taxation matter (5+5 = 10 marks)

Answer - (a) Refer para 50.3-1 (b) Refer para 57.3-5.

 

Q 18 Board of Directors of Prakash Traders Private Limited propose to convene an extraordinary general meeting for changing the name of the company to Prakash International Private Limited. Draft the notice for calling the Extraordinary General Meeting of the Members (5 marks).

Answer - Refer para 19.3-1.

Q 19 Draft a notice for calling the Board of Directors meeting of M/s. MN Limited where Mr. RS is to be co-opted as an Additional Director and also to consider buy-back of company's equity shares to an extent of 10%, of issued share capital (5 marks)

Answer - Refer para 66.3-2

Q 20 Explain clearly the process of Communication (5 marks)

Answer - Refer para 48.1-5.

 

CA PCC PAPER – 3 : LAW, ETHICS AND COMMUNICATION

November 2008 ICAI

PART - I

Question Nos. 1 and 2 are compulsory.

Attempt any eight questions from rest

Question 1(a) A gives to C a continuing guarantee to the extent of Rs. 5000 for the vegetables to be supplied by C to B from time to time on credit. Afterwards, B became embarrassed, and without the knowledge of A, B and C contract that C shall continue to supply B with vegetables for ready money, and that the payments shall be applied to the then existing debts between B and C. Examining the provision of the Indian Contract Act, 1872, decide whether A is liable on his guarantee given to C. (5 Marks)

Q1(b) State with reasons whether the following statements are correct or incorrect: (i) In case of alternative promise one branch of which is legal and the other illegal, the whole contract can not be performed. (ii) The contract of Insurance is not fully covered under the contract of Indemnity. (2×1=2 Marks)

Q1(c) Pick-up the correct answer from the following and give reasons: (i) When a person without expressing his final willingness proposes certain terms on which he is willing to negotiate he makes: 1. Counter offer 2. Standing offer 3. Offer 4. Invitation to an offer. (ii) The principle that no one shall be allowed to enrich himself at the expense of another is known as: 1. Quantum Meruit 2. Nudem Pactum 3. Quasi-contract  4. None of these. (iii) A negotiable instrument that is payable to order can be transferred by: 1. Simple delivery 2. Endorsement and delivery 3. Endorsement 4. Registered Post (3×1=3 Marks)

Question 2 (a) STD Ltd. convened its Board of Directors meeting on 1st August, 2008. During the course of the meeting the date for calling annual general meeting was discussed but no decision could be taken on it in the meeting. However, the Secretary of the company issued the notice for calling the annual general meeting of the shareholders without taking any authorization from the Board of Directors. State who is the proper authority to issue the notice for calling the annual general meeting and to whom such notice is to be given. (5 Marks)

Q2(b) State whether the following statements are True of False and give reasons: (i) An ultra-vires transaction will not affect the right of a Company to acquire property. (ii) Reserve Capital of a Public Company may be called at any time. (2×1=2 Marks)

Q2(c) Pick-up the correct answer from the following and give reasons: (i) If a company does not receive the minimum subscription, it should refund all money received from applicants for shares without interest: 1. Within 30 days of issue of prospectus 2. Within 60 days of issue of prospectus 3. Within 90 days of issue of prospectus 4. Within 120 days of issue of prospectus. (ii) A small depositor means a depositor who has deposited in a financial year a sum not exceeding: 1. Ten thousand rupees 2. Fifteen thousand rupees 3. Twenty thousand rupees 4. Fifty thousand rupees. (iii) An extra ordinary general meeting may be convened by: 1. Board of Directors 2. Requisitionists 3. Company Law Board/Tribunal 4. All the above. (3×1=3 Marks)

 Question 3 ABC Textiles Ltd. employed 20 full–time and 5 part-time employees who were drawing salary of less than Rs.10,000 per month. After completing service of 28 days, in an accounting year, 10 full-time employees submitted their resignations and left the service of the company. The Board of directors of this company decided not to give the bonus to the employees, who resigned, to the remaining full-time employees and to the part-time employees. Against the decision, all the employees applied to the authorities for relief. Decide, stating the provisions of the Payment of Bonus Act, 1956, whether the employees, who resigned, remaining full-time employees and part-time employees will get relief. (5 Marks)

  Question 4 B issued a cheque for Rs.1,25,000 in favour of S. B had sufficient amount in his account with the Bank. The cheque was not presented within reasonable time to the Bank for payment and the Bank in the meantime, became insolvent. Decide, under the provisions of the Negotiable Instrument Act, 1881 whether S can recover the money from B. (5 Marks)

Question 5 E was an employee of Tea Estate Ltd. The whole of the undertaking of Tea Estate Ltd. was taken over by a new company - Asia Tea Estate Ltd. The services of E remained continuous in new company. After serving for one year E met with an accident and became permanently disabled. E applied to the new company for the payment of gratuity. The company refused to pay gratuity on the ground that E has served only for a year in the company. Examine the validity of the refusal of the directors in the light of the provisions of the Payment of Gratuity Act, 1972. (5 Marks)

Question 6 Discuss under the Employees Provident Funds and Miscellaneous Act, 1952 as whether the Provident fund contribution is a preferential payment in case of the employer being declared insolvent. (5 Marks

Question 7 Describe in brief the advantages and protections available to a “holder in due course” under the provisions of the Negotiable Instruments Act, 1881. (5 Marks)

Question 8 What will be the consequence in case a Private Company incorporated under the provisions of Indian Companies Act,1956 defaults in complying with conditions constituting Private Company in terms of Section 3 (1) (iii) of the Companies Act, 1956. (5 Marks)

Question 9 Developers Ltd. hold a General Meeting of shareholders for passing a special resolution regarding alteration of Articles of Association. Out of the members present in the meeting 20 voted in favour, 4 against and 8 members did not vote and remained absent from voting. The Chairman of the meeting declared the resolution as passed. Is it a valid resolution as per the provisions of the Indian Companies Act, 1956 ? (5 Marks)

 Question 10 The Articles of a Public Company clearly stated that Mr. A will be the solicitor of the company. The Company in its general meeting of the shareholders resolved unanimously to appoint B in place of A as the solicitor of the company by altering the articles of association. Examine, whether the company can do so ? State the reasons clearly. (5 Marks)

Question 11 The Articles of Association of MSW Ltd. contained a provision that upto 4% of issue price of the shares may be paid as underwriting commission to the underwriters. The Board of directors decided to pay 5% underwriting commission. Can the Board of directors do so ? State the provisions of law in this regard as stated under the Indian Companies Act, 1956. (5 Marks)

Question 12 What is meant by “Shelf prospectus” ? Who can file a “Shelf prospectus” with the Registrar of Companies? Stating the provisions of Companies Act, 1956 point out the circumstances under which such prospectus is required to be filed with the Registrar of Companies. (5 Marks)

PART-II

Question No. 13 is compulsory. Attempt any two questions from rest.

Question 13(a) To pay proper attention to business ethics is certainly beneficial in the interest of business. Describe four such benefits which may be obtained by paying attention to business ethics.

Q13(b) Explain how corporate social responsibility minimises the ecological damage and helps in achieving long-term objectives, so that the business may gain long-term profit maximization. (5+5=10 Marks)

Question 14 A retailer was purchasing goods regularly from XYZ Ltd. for the purpose of resale. There were defects in the goods in one of the purchase lot and as a result the retailer suffered loss of his share in competition. The retailer sued the said company for this reason. The company contended that the goods were purchased for the purpose of resale and therefore, not bound. Is it a valid contention ? Explain clearly the provisions of Competition Act, 2002 in this regard. (5 Marks)

 Question 15 Answer any two out of four. You are required to state whether the statement is correct or incorrect with brief reasons: (a) The Governance Model positions management as accountable solely to investors (b) Business does not sub-serve environmental ethics. (c) Consumer for personal use and consumer for commercial use are synonymous. (d) Water pollution is also a kind of resource depletion. (5 Marks)

  Question 16 State, how far a sound ethical environment in a company may be created and corporate scandals may be avoided. (5 Marks)

PART III

Question Nos. 17 is compulsory. Attempt any two questions from rest.

Question 17(a) Explain clearly the advantages of a formal communication.

Q17(b) As a secretary of AB forgings Ltd., draft a notice of a board of directors meeting to consider any five items as agenda of the meeting, to be held on November 15, 2008 at the registered office of the Company at Mysore (5+5 = 10 marks).

Question 18 What is meant by “Negotiation”? Name the various steps which can be identified in the process of negotiation from start to the completion of the process. (5 Marks)

Question 19 ABC Ltd. wants to hold its Annual General Meeting on 15th December, 2008 to discuss the matters relating to ordinary business. Draft a notice along with notes in brief for calling annual general meeting of its shareholders. (5 Marks)

Question 20 State the various components which are required to draft a partnership deed. (5 Marks)

 

Note - In some cases, only paragraph reference is given. These paragraph numbers are  of my book 'Law, Ethics and Communication'.

 

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