The paper covers Companies Act (section 209 to end), MRTP, FEMA, SEBI, SCRA, SICA, interpretation of statutes and secretarial procedure and practices.

CA Final May 2008 - CORPORATE LAWS & S. P.

Question Nos. 1, 2 and 3 are compulsory. Answer any four from the rest of the questions.

Q 1 Answer any two of the following : (a) Primus Group of Companies has three Companies, viz., Primus Rolling Mills Ltd., Primus Steel Pipe Manufacturers Ltd. and Primus Marketing Company Ltd. All the three Companies want to appoint Mr. Prem as their Managing Director. You are required to state with reference to the provisions of the Companies Act, 1956 whether such appointments are permissible (b) Working of City Stock Exchange Association Ltd. is not being carried on by its Governing Board in public interest. On receipt of representations from various investors and Investors' Association, the Central Government is thinking to withdraw the recognition granted to the said Stock Exchange. You are required to state the circumstances and procedure for withdrawal of such recognition as per the provisions of Securities Contracts (Regulation) Act, 1956 in this regard. Also state the effect of such withdrawal on the contracts outstanding on the date of withdrawal (c) The governing body of City Stock Exchange Association Ltd. is desirous of putting various restriction on voting rights of its members to be exercised in a meeting and on their right to appoint a proxy. You are required to state whether the same is permissible. Also state the role of Central Government in this respect (5 x 2 = 10 marks)

Q 2 Answer any two of the following (a) TKM Exporter 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. Q 2 (b) Mr. Kale, an Indian National desires to obtain foreign exchange for the following purposes : (i) Remittance of US Dollar 50,000 out of winnings on a lottery ticket (ii) US Dollar 100,000 for sending a tour of a cultural troup to U.S.A (iii) US Dollar 50,000 for meeting the expenses of his business tour to Europe. Advise him, if he can get the Foreign Exchange and under what conditions.

Q 2(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 as 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 x 2 = 14 marks)

Q 3 Answer any two of the following  (a)(i) What do you understand by the term "Price Sensitive Information" as contemplated in the Securities and Exchange Board of India Act, 1992 ? What are the information which can be deemed to be "Price Sensitive Information". (ii) MGR Ltd. wants to issue certain shares on preferential basis and has sought your advise in respect of pricing the shares for such issue. You are required to state the Guidelines issued by Securities and Exchange Board of India in respect of pricing of the issue of shares on a preferential basis.

Q 3(b) Excel Ltd., a Public Limited Company listed with the Stock Exchange, Mumbai, wants to make issue of equity shares on preferential basis pursuant to a scheme approved under Corporate Debt Restructuring framework specified by Reserve Bank of India to various persons as may be selected by the Board of Directors of the Company. Following information relevant to the preferential issue is available (i) Total No. of equity shares to be issued : 50 lac equity shares of Rs. 10 each out of which 30 lac equity shares will be allotted on 30th June, 2008 as fully paid up and balance 20 lac equity shares shall be allotted on the same date but paid up to Rs. 5 each and balance Rs. 5 shall be called upon at a later date and shall be paid up on 30th November, 2008 (ii) Out of the proposed allottees some persons are holding their shares in Excel Ltd. in physical form and not in dematerialsed form and some persons had sold their entire shareholding in Excel Ltd. in January, 2008 (iii) The meeting of general body of shareholders for approving the preferential issue was held on 15th March, 2008. - - Based on the above information you are required to answer the following queries with reference to the SEBI (Disclosure and Investor Protection) Guidelines, 2000 : (i) What would be the lock-in period for the shares allotted on preferential basis ? (ii) Who are the persons not entitled for allotment of shares on preferential basis ?

Q 3(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 x 2 = 16 marks)

Q 4 (a) Mr. Raj is director in 14 public limited companies as on 30th July, 2007 and continues to be so till 26th September, 2007. The following companies appoints Mr. Raj as a director at their respective Annual General Meetings held on dates mentioned against their names – (1) MLP Ltd. (AGM held on 27th September, 2007) (2) PAT Private Ltd. (AGM held on 25th September, 2007) (3) Retail Traders Association (a company registered under Section 25 of the Companies Act, 1956 (AGM held on 26th September, 2007) (4) KMC Ltd. (AGM held on 29th September, 2007). You are required to state with reference to the relevant provisions of the Companies Act, 1956 the options available to Mr. Raj in respect of accepting or not accepting the appointment of the above companies.

Q 4(b) What do you understand by the term "Director Identification Number" (DIN) ? Describe the procedure to obtain the same as enumerated under the Companies Act, 1956 read with the relevant Rules (8+7 = 15 marks)

Q 5(a)   A group of shareholders has approached you for advice regarding the affairs of LPM Paper Mills Ltd. according to them, the management of the company is not carrying out its functions in accordance with the prudent commercial practice and if the affairs of the company are allowed to run in future in the same manner, the company's solvency would be in danger. They want that a Special Audit be conducted to find out the actual nature of the transactions. (i) You are required to state with reference to the provisions of the Companies Act, 1956, as to when a special audit can be directed and by whom ? (ii) Draft an application to be submitted to the appropriate authority in this respect.

Q 5(b) Big Ball Ltd., a reputed Public Company, over the years, has performed excellently and its General Reserve is many times more than the paid up. capital of the Company. The Chairman of the company came to know that a _f group of unscrupulous persons is cornering the shares of the company and may lodge them for transfer in their names. It is apprehended that such transfer may lead to change in the composition of Board of Directors which may be prejudicial to the Public interest. You are required to state with reference to the provisions of the Companies Act, 1956 as to how Big Ball Ltd. can block the above stated transfer of shares (8+7 = 15 marks).

Q 6(a)(i) An inter-state co-operative society has been incorporated on 1st May, 2008 as a Producer Company under the provisions of the Companies Act. Give your comments on its proposal to have 18 directors on its Board after incorporation as a Producer Company (ii) Mr. Zameen, a member of a Producer Company, wants to transfer his shares. You are required to state as to how he can transfer his shares under the provisions of the Companies Act, 1956 (iii) A Producer Company wants to issue bonus shares. You are required to state the relevant provisions of the Companies Act, 1956 in this regard (iv) What are the modes of investment, from and out of its general reserves, available to a Producer Company formed and registered under Section 581C of the Companies Act, 1956 ?

Q 6(b) Amar Textiles Ltd. is a company engaged in manufacture of fabrics. The Company has investments in shares of other bodies corporate including 70% shares in Amar Cotton Co. Ltd. and it has also advanced loans to other bodies corporate. The aggregate of all the investments made and loans granted by Amar Textiles Ltd. exceeds 60% of its paid up share capital and free reserves and also exceeds 100% of its free reserves. In course of its business requirements, Amar Textiles Ltd. has obtained a term loan from Industrial Development Bank of India and is still subsisting. Now the Company wants to increase its holding from 70% to 80% of the equity share capital in Amar Cotton Co. Ltd. by purchase of additional 10% shares from other existing shareholders. State the legal requirements to be complied with by Amar Textiles Ltd. under the provisions of the Companies Act, 1956 to give effect to the above proposal. Will answer be different in Amar Textiles Ltd. would have defaulted in payment of matured fixed deposits accepted by it from the public? (8+7 = 15 marks).

Q 7(a)   The last three years' Balance Sheet of PTL Ltd., contains the following information and figures :

On going through other records of the Company, the following is also determined : Net Profit for the year (as calculated in accordance with the provisions of Section 349 & 350 of the Companies Act, 1956 – Rs 12,50,000 (2005-06), 19,00,000 (2006-07) and  34,50,000 (2007-08). In the ensuing Board Meeting scheduled to be held on 5th May, 2008, among other items of agenda, following items are also appearing - (i) To decide about borrowing from financial institutions on long term basis (ii) To decide about contributions to be made to charitable funds. Based on above information, you are required to find out as per the provisions of the Companies Act, 1956, the amount upto which the Board can borrow from financial institution and the amount upto which the Board of Directors can contribute to charitable funds during the Financial Year 2008-09 without seeking the approval in general meeting.

Q 7(b)   OGC Ltd. was a supplier of Raw Materials to SAM Ltd., which could not make payment to OGC Ltd. owing to huge losses and financial constraints. Ultimately, SAM Ltd., went into liquidation and Official Liquidator was appointed. OGC Ltd. filed a suit for recovery of its dues. The Court awarded a decree in favour of OGC Ltd. Armed with the Court's decree, OGC Ltd. approached the Official Liquidator to pay the amount to it in preference over dues of the workmen. The workmen protested the demand of OGC Ltd. and contended that their dues rank pari passu with the Secured Creditors and will override all other claims of other creditors even where a decree has been passed. You are required to ascertain the validity of the argument of the workmen in the light of the provisions of the Companies Act, 1956 and the decided cases on the subject (8+7 = 15 marks)

Q 8(a) HPC Ltd. for a number of years was in various types of business. In order to exit from its non-core business, its management decided to hive off the business of food processing by demerging the said business with an associate company, namely BCD Ltd. You are required to advise briefly, with reference to the provisions of the Companies Act, 1956, the steps the management should take to give effect to the proposed demerger.

Q 8(b)(i) Whether guarantee commission paid to a Director is remuneration to director requiring Central Government's permission when the amount of such commission exceeds the limit prescribed in Section 309 of the Companies Act, 1956 (ii) BHP Ltd. wants to make the liability of its directors unlimited. You are required to state with reference to the provisions of the Companies Act, 1956 whether this can be done. (iii) Mr. John is a director of MNC Ltd., which had accepted deposits from public. The Financial position of MNC Ltd. turned very bad and it failed to repay the deposits which fell due for payment on 10th April, 2007 and such repayment has not been made till 5th May, 2008. Another company JKL Ltd. wants to appoint the said Mr. John as its director at its annual general meeting to be held on 6th May, 2008. You are required to state with reference to the provisions of the Companies Act, 1956 whether Mr. John can be appointed as a director of JKL Ltd (8+7 = 15 marks)

Q9(a) LMB Ltd., Kolkata is a multi-product manufacturing company having paid up capital of Rs. 5.00 Crores. In order to increase the product portfolio, the said company intends to procure certain machines and equipments worth Rs. 1.00 crore from a partnership firm, namely, M/s. MLPK, in which the son of managing director of LMB Ltd. is a partner. The contract for purchase of said machines and equipments is to be placed before the board of directors of the company for its consideration. In view of above facts, you are required to explain briefly the procedure under the provisions of the Companies Act, 1956 to be followed by the LMB Ltd. to enter into the said contract :

Q 9(b)   Answer any one of the following : (i) Board of Directors of DBM Limited held a board meeting on 2nd May, 2008 at its registered office. You are required to state the salient points to be taken into account while drafting the minutes of the said board meeting (ii) Draft a board resolution for appointment of Mr. Paul as the managing director for 5 years with effect from 1st June, 2008 of DBM Limited passed in the above stated board meeting.

Q 9(c) Annual General Meeting of a Company has been concluded on 30th April, 2008. Now, the company is required to submit/file its Annual Return and Annual Accounts with Register of Companies. You are required to state the procedure for such submission/filing (8+3+4= 15 marks)

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 1^st April 2005. (ii) DDI Ltd. a company incorporated and registered in London established a branch at Kanpur in India on 1^st 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 1^st April, 2001 and its net worth as on 31^st March, 2007 was Rs. 5.00 crores. The net tangible assets of the company as per last three audited balance sheets as at 31^st 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 1^st 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 1^st 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 30^th 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 1^st January, 2006. Since his work was found unsatisfactory, his services were terminated from 15^th 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. 1^st 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 31^st 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 31^st 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 2^nd 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 28^th February, 2007 and Mr. Y purchased on 28^th 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 15^th 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 10^th May, 2007. (ii) The company created a floating charge on 1^st 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 1^st 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 31^st December, 2004. The Central Government appointed him as the Chairperson of the Competition Commission of India with effect from 1^st 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 31^st March, 2007, Mr. MKP was offered the post of Executive Director with appropriate remuneration and perquisites in the following organizations with from 1^st 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 31^st December, 2006, following information and figures are noticed from the Annual Accounts for the year ended 31^st 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  31^st 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 31^st December, 2006 (a) The partly paid shares were made fully paid prior to 30^th June, 2006. (b) Bonus to employees and workers was paid on 15^th September, 2006. (c) Interest on Public Deposits was outstanding on 31^st December, 2006. The Directors of CAS Ltd. wants to issue Bonus Shares on or after 1^st 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 30^th 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 31^st August, 2006, his appointment was declared invalid. But Mr. MTP continued to act as director even after 31^st 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 24^th 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 31^st 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 30^th November, 2006 in respect its accounting year ended on 30^th 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 15^th 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 31^st 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 31^st December, 2005 and requested that he should be relived immediately. When does the resignation of Mr. A take effect? (b) On 31^st 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 31^st 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 tuityon 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 Punu, 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 fol|owed 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 31^st 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. anf  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 0 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 Compcn{? (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 extractud froo the Ba|ance Sheet of VCD Ltd. as at 31^st March, 2006, Boqrd!of Directors of the Company decide to grant a loan of Rs. 80 crorms to another Cmpany JN Ltd. Paid-up share Capital: Equity Share Capital  - Rs. 50 crores,  Preference Share Capital ` –0Rs. 10 crores, General Reserves – Rs 100 crores, Debentures – Rs 5 srorus, Debentures Redemption Reserve – Rs 5 crores. The Company has already given loans to the following companies: (i) Peters Ltd. – Rs. 5 crores (ii)0Steel India Ltd. – Rs. 10 crores. The Company has also given a corporate guarantee of Rs. 10 crores to NR &amt; Co. Ltd. Advise whether the Board can go ahead wyth the above proposal (b) The subscribed share cqpital of AJR Company Ltd. at the end of the financial year ending 31^st March, 2005 was Rs. 20 crores, out of which two Public Financiil 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 15^th 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 10^th 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 15^th 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 con~ersion of the society into a ‘Producer Company’ (ii) Manner in which voting rights of members of Producer company after conversion may be exercised (b) Refurring 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 Direstors ov the Company by ( whych the existing majority is reduced to minority (ii) Allotment of shares by the Directors by which the existing minority shareholders are 0 made to majority (iii) A share sale agreement was execuved by VC, an NRI. The shares and transfer deed were handed over |o 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 12^th January, 2006. Mr. John has filed his consent to Act as a Director, if appointed, only with the company. Examine with ruference to the provisions of the Companies Act, 1956 whether he is also reyuired to file his consent with the Regystrar of Companies (ii) One of the members of ADB Ltd. has proposed the name of Mr. Fame for appointment as a Director of the Gompany in the Annual General Meeting and given a notice under Section 257 of the Companies Act, 1956. Mr. Fame is one of tje  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 1^st September, 2005 on credit basis. The paid-up Share Capital was increased from Rs. 70 lakhs to Rs. 140 lakhs on 1^st 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 1^st 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 machinury. The company created a floating ciarge on some of its asse|s on 1^st Tecember, 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(advancmd Rs. 15 lakhs on 15^|h December, 2004 toards purchase of certqin machinery. Some of the creditors filed winding up peti|ion in the court on 1^st January, 2005 on the ground that the company was unable to pay its debts and the company was ordered t be wound up0on 15^th December,0 0 2005. Examkne with reference to the provisions of the Companies Act,!1956 wiether the floating charge is valit (8+7 = 15 marks).

Q 9 (a) EF Chemicals Limited rroposes 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 1^st 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 collecued from the Balance Sheet of the company as on 31^st 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) Preliminazy Expgnses not"written off – Rs. 15,00,000. (b) A Pujlic Company proposes to appoint an altesnate Director for one of its Direcvors, 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.
Answer any four questions from the rest.

Q 1 Answer any two of the following: (a) The Board of Directors of ABC Ltd. met thrice in the year 2004 and the 4^th 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 aggrievgd by this penalty, the said exporter seeks your advice as uo the authority to which appeal can be made and the time limi| for making such appeals. You are (requirmd to advise n 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 1^st April, 1999 is Rs. 3.00 crores and its net worth as at 31^st 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 31^st 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 1^st April, 1996 and since then it has eqrned good prfits and it has not mncurred any 0 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 minagement could have duclared"the dividend in each of the last five years (vi) The name of the Company was changed from Star Engineering Ltd. to its presun| name with effect from 1^st October, 2004. The Company wants to make$a public issue of shares to raise Rs. 20.00 crores by issuing equyty sharms at premium. For the purpose of including the information in the prospuctus, the company has prepased kts accounts fr 12 months ended`30^tj September, 2005 showyng segment-wise revenue, which revels that revenue grom Chemical segment is more than the revenuu 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 0 interpretation of Statutes, when the terms “notwithstanding” and(“subject to” are usmd yn any provision of an Act. (ii) State the effect of the 0 words “notwithstanding anythmng 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)

0 Q 4 (a) The last three years’ Balance Sheet of PTL Ltd., contains the following information and figures:

 On going through other records of the Company, the following is also determined:  Net Profit for the year (as calculated in accordance with the provisions of Section 349 & 350 of the Companies Act, 1956) – FY 2002-03 = Rs 12,50,000, FY 2003-04 – Rs 19,00,000 and FY 2004-05 - Rs 34,50,000. In the ensuing Board Meeting scheduled to be held on 5^th November, 2005, among other items of agenda, following items are also appearing: (i) To decide about borrowing from Financial institutions on long-term basis. (ii) To decide about contributions to be made to Charitable funds. Based on above information, you are required to find out as per the provisions of the Companies Act, 1956, the amount upto which the Board can borrow from Financial institution and the amount upto which the board of Directors can contribute to Charitable funds during the financial year 2005-06 without seeking the approval in general meeting (8 marks).

Q 4 (b) Examine the validity of the following with reference to the relevant provisions of the Companies Act, 1956 and/or decided case laws: (i) Mr. G, a Director of Sam Limited was interested in a contract to be entered into by the company. The Articles of Association of Sam Limited contained a clause, which prohibited the directors from voting on the resolution in respect of any contract in which he is interested. The matter in respect of the said contract was put up for approval of the shareholders in a general meeting. The general meeting was attended by Mr. G. and he also voted on the resolution. Mr. G. claims that he has a right to vote on the resolution in the general meeting. (ii) The Articles of Association of Big Limited provide that a meeting of the Board of Directors of the company shall be held at 11.00 a.m. on the last day of every quarter e~ding 31^st March, 30^th $ June, 30^th!September,!a~d 31^st Tecember/ Relying onb such a clause in the articles, txe company did not send notices to the directors in!respect of the board meeting held on 30^th Septemrer, 2005. Some ov the directors(have questioned the validity of the ! ( boazd meeting on$the ground that individual notices have not been sent to the directors (7 marks)

Q 5 (b) (i) State the provisions of the Companies Act, 1956 regarfing the appointment of auditors in the following cases: (a9 A " company, whose Annual General Meeting was held on 30^th September, 2015, but it failed to appoint the aulitor (b) A company, whose finansial year shall end on 31^st December 2005 and whose auditor (appointed in last annual general meeting held on 30^th March 2005) had died on 15^th October 2005
(ii) State the consideration under the Companies Act, 1956 upon which the Central Government can prohibit the appointment of Sole Selling Agents in certain cases (7 marks)

Q 3 (b) Excel Ltd., a public limited company listed with The Stock Exchange, Mumbai, wants to make issue of equity shares oo preferential basis pursuant to scheme approved under Corpozate Debt Vestructuring frameork specified by Reserve Bank of India to various xersons as may be selected by the Board of Directors of the Comtany. ` Following informition relevant to the preferential issue is available : $ (i) Total No. of equity shares to be issued : 50 lac equity shares of Rs.  ` `10 each out of which 32 lac equity shares will be allotted on 30 the June, 2005 as fully paid up and balance 20 lac equity shares shall be allotted on the  same date but paid up to Rs. 5 each and balanke Rs. 5 shall be " ca|led upon at a later date and shall be paid up on 30<sup>th</sup> November, 2005. (ii) Out`of the proposed allottees some persons are holding their sheres in Excel Ltd. in physical form and not in dematerialised form and some persons had sold their entitled shareholding in Mxcel Ltd. in January, 2005. (iim) Uhe meeting of generel bdy of siareholders for approving the preferential issue was held on 15^th March, 2005. Based on the above information you are requised"to answer the ! following queries with reference to the SEBI (Disclosure and Investor0 Protection) Guidelines, 2000:&nbst; (i) What would be the lock-in period for(  the shares allotted on preferential basis? (ii) Who are the persons not entitled for allotment of shares on preferential basis? (8 marks)

Q 3 (c) (i) Explain the rule of`‘ejusdem generis’ with regard to interpretation of statutes. (ii) Sunrise Industries Ltd. has paid Rs. 1,00,000 to a political party as its contribution to fight elections. Can it do so under the provisions of the Companies Act, 1956 ? Will it make any difference if the company has advertised its products in the monthly magazine published by the political party? (8 marks)

Q 4 (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 (b) (i) M/s LMN Limited has been running in losses and has defaulted payment to its creditors. On 1.8.2004, the company mortgaged its plant and machinery to Mr. Patel, a close friend of the managing director of the company, against payment of his dues of Rs. 10 lakhs payable by the company. The other creditors were left in lurch. In the meantime, Mr. Raman (who was not paid by the company for supply of raw material of the value of Rs. 50,000) presented a petition for winding up the company before the High Court on 31.12.2004. The company was ordered to be wound up by the court on 30.04.2005. The Official Liquidator wants to declare the transaction of mortgage with Mr. Patel as invalid. Will he succeed? (ii) M/s Iqbal Sons Ltd issued shares of the nominal value of Rs. 10 per share, out of which Rs. 5 was payable on application and balance Rs. 5 was payable on call. The sall money was invited by tje Board of  Directors but some shareholders, including a non-executive director, failed to pay the same within the prescribed period. Explain the status of Director who defaulted in paying call$money (8+7 = 15 marks).

Q 5 (a) Mr. BPK was appointed as the sole selling agent of M/s KMP Ltd. with effect from 1^st January, 2002 for a period of five years. Mr. BPK earned his remuneration as follows during the years 2002 to 2004 : Year 2002 – Remuneration Rs. 4,41,000, Year 2003 – Remuneration Rs. 6,32,000, Year 2004 – Remuneration Rs 7,45,000. - -  On and from 1^st January, 2005, the sole selling agency agreement was terminated by M/s. KMP Ltd. You are required to calculate the amount of compensation payable by the said company to Mr. BPK under the provisions of the Companies Act, 1956. What would be your answer in a case where the said M/s KMP Ltd. was amalgamated with another company with effect from 1^st January, 2005 and Mr. BPK refused to act as the sole selling agent of the amalgamated company after amalgamation. (b) (i) Define the ezpression “Accounting Standards” within the meaning of Companies Act, 1956 (yi) XYZ Limited did not prepare its bqmance Sheet as at 31^st March, 2005 and txe profit & Loss Account for the year " ended"on that date in conformity with some of the mandatory Accunting  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 (8+7 = 15 marks).

Q 6 (a) (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 & Loss account of the Producer Company for its last accounting year, net profit was Rs. 20.00 lacs. (ii) Is it obligatory for every producer company to appoint a whole time secretary under the provisions of the Companies Act, 1956? (8 marks)

Q 6 (b) Amar Textiles Ltd. is a company engaged in manufacture of fabrics. The Company has investments in shares of other bodies corporate including 70% shares in Amar Cotton Co. Ltd. and it has also advanced loans to other bodies corporate. The aggregate of all the investments made and loans granted by Amar Textiles Ltd. exceeds 60% of its paid up share capital and free reserves and also exceeds 100% of its free reserves. In course of its business requirements, Amar Textiles Ltd. has obtained a term loan from Industrial Development Bank of India ( a public financial institution within the meaning of Section 4A of the Companies Act, 1956) and the same is still subsisting. Now the Company wants to increase its holding from 70% to 80% of the equity share capital in Amar Cotton Co. Ltd. by purchase of additional q0% shares from other existing shareholders. State the legal requirements to be complied with by Amqr Tgxtiles Ltd.$under the provisions of vhe Companies Ast, 1956 to give effect to the above proposal. Will your answer be different if Amar Textiles Ltd. would have tefaulted in payment of matured fixed deposits 0 accepted by it from the public? (7 marks)

Q 7(a)$Advise M/s. Super Specialities Ltd/ in resrect of the following propowals under consideration of its Board of " Directors : (i) Appointment of Managing Director who is more than 70 years of age: (ii) Payment of commission of 4% of the net profits per innum to the ordinary directors of the compcny: (iii) Payment of0remuneration to an ordinary director for rendering professional services; and (iv) Payment of remuneration of Rs. 41,000 per month to the whole time dkrector og the company running in loss and havinw cn effective capital of0Rs. 95.00 lacs (8 marks).

U 7(b) 60% shares of Indo-French Ltd. are held by French Group and balance by an Indyan Group. As per Articles of Association of"the company both groups had equal(managerial powers. The ( relationship between the two gro}ps soured and the operations of the$ compa~y reached a deadlock. The Indman Group approached the Compa~y Law Board 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 Company Law Board in this regard? (7 marks)

Q 8 (a) What do you understand by Corporate Governance? Explain how the provisions of the Companies Act, 1956 relating to Audit Committee will help in achieving some of the objectives of Corporate Governance (b) Mr. KMP is director of XLS Ltd. He intends to construct a residential building for his own use. The cost of construction is estimated at Rs. 1.50 Crores which Mr. KMP proposes to finance partly from his own sources to the tune of Rs. 60 lacs and the balance Rs. 90 Lacs from housing loan to be obtained from a housing finance company. For the purpose of obtaining the loan, he has approached the housing finance company which has in principle agreed to grant the loan, but has put a condition. The condition put by the housing finance company is that the Company XLS Ltd. of which Mr. KMP is a director should provide the guarantee for repayment of the loan and interest as per the terms of the proposed agreement for granting the loan to Mr. KMP. You are required to advice Mr. KMP on the matter keeping in view the relevant provisions of the Companies Act, 1956 (8+7 = 15 marks)

Q 9 (a) LMB Ltd., Kolkata is a multi-product manufacturing company having paid up capital of Rs. 5.00 Crores. In order to increase the product portfolio, the said company intends to procure certain machines and equipments worth Rs. 1.00 Crore from a partnership firm, namely, M/s MLPK, in which the son of managing director of LMB Ltd. is a partner. The contract nor purpose of said machines and equipments iw to be placed before the board of directors of the company for its consideration. In view of above facts, you are required to explain briefly thu procedure under the provisions of the Companies Act, 1956 to bu followed by LMB Ltd. to enter into the said contract (8 marks)

Q 9 (b) (i) Board of Directors of DBM Limited held a 0 board meeting on 2^nd May, 2005 at its registered office. You are resuired to state the0salient$points to be taken into accounu while drafting the minutes of the said board meeting. (ii) Draft a board0 resolution for appointment of Mr. Paul as the Managing Director of DBM Limited passed in the above stated board meeting (7 marks)

CA FINA\ Group I - November  2004 New Syllabus

Questions 1, 2 and 3 are compulsory.
( Answer any four  questions from the rest.