NEW SYLLABUS

333
: 1 :

Roll No
Time allowed : 3 hours

Maximum marks : 100

Total number of questions : 6

Total number of printed pages : 7

NOTE : 1. Answer ALL Questions.

2. All references to sections relate to the Companies Act, 2013 unless stated otherwise.
PART A
1.

(a)

Discuss the provisions and powers of Competition Commission of India to impose

penalty for non-furnishing of information on combination under the Competition
Act, 2002.
(5 marks)

(b)

Comment on the following :

(i)

No offer of buy-back shall be made within a period of 180 days from the date
of Board meeting or meeting of shareholders, as the case may be, in respect of
the preceding offer of buy-back.

(ii)

In the event of forfeiture of the amount lying in the escrow account, the acquirer
shall be paid one-third of the amount forfeited in terms of regulation 17(10) of
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

(iii)

An offer in which the acquirer has stipulated a minimum level of acceptance is

known as 'conditional offer'.
(3 marks each)

(c)

"Certain disclosures are required to be made in the first financial statements prepared
after the amalgamation orders." Mention such disclosures.
(6 marks)

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Attempt all parts of either Q.No. 2 or Q.No. 2A
2.

(a)

Explain the term 'persons acting in concert' (PACs) with reference to SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011.
(5 marks)

(b)

Toko Trading Corporation (TTC) is a listed Japanese corporate entity and is holding
24% paid-up equity in Toko Tara India Pvt. Ltd. TTC wishes to extend external
commercial borrowings (ECB) to the extent of USD 4 million to its Indian entity. Can
it do so ? Explain your answer with reference to the concept of 'recognised lender' under
the ECB Guidelines.
(5 marks)

(c)

What does the term 'crown jewel' stand for, as a defence strategy in respect of a
takeover bid ?
(5 marks)
OR (Alternate question to Q.No. 2)

2A. (i)

'General exemptions' under regulation 10 and 'Exemption by board' under regulation 11

of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 are one
and the same. Comment.
(5 marks)

(ii)

What are the documents that are required to be filed under the Companies (Court) Rules,
1959 so as to facilitate the court to sanction the scheme of demerger ?
(5 marks)

(iii) "Prior approval of the Reserve Bank of India is required before acquiring controlling
stake in a deposit taking NBFC." Do you agree ? Justify your answer.
(5 marks)
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3.

(a)

Yellow Overseas Ltd. (YOL) merged with Yellow India Ltd. (YIL). YOL availed the
benefit of amortisation of preliminary expenses only for two years till merger order.
Whether YIL is eligible to avail this benefit for the remaining period ? Substantiate
your answer.
(5 marks)

(b)

What is 'observation letter' issued by stock exchanges ? What are the obligations of
listed companies in relation to 'observation letter' with reference to merger ?
(5 marks)

(c)

Ludhiana Berry Ltd. has proposed merger of Jalandhar Berry Ltd. with itself. The merger
scheme has been approved by 76% shareholders of Ludhiana Berry Ltd. and 98%
shareholders of Jalandhar Berry Ltd. (in value terms). Explain with the help of relevant
provisions and decided cases, whether this will be binding on all the shareholders
(including dissenting shareholders).
(5 marks)

PART B

4.

(a)

Explain the provisions of the Income-tax Act, 1961 in relation to computation of capital
gains arising out of slump sale.
(5 marks)

(b)

Write a short note on the valuation of stock options under SEBI (Share Based Employee
Benefits) Regulations, 2014.
(5 marks)

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(c)

Blue Springs Ltd. incorporated a new company namely Defence Springs Ltd. and
transferred its defence component division to it on slump sale basis for a lump sum
consideration of `255 lakh. The assets and liabilities of the defence component division
are as under :
` (in lakh)
Assets :
Gross value of fixed assets

410

Accumulated depreciation till date

240

Current assets (other than liquid assets)

80

Liquid assets

30

Liabilities :
Trade liabilities

60

Secured loans (including short-term loans)

80

Short-term loans

35

Calculate the following

(i)

Aggregate value of total assets;

(ii)

Book value of net assets;

(iii)

Networth of the defence component division; and

(iv)

Capital gains as per section 50B of the Income-tax Act, 1961.

(5 marks)

5.

(a)

White Chicks Ltd. is listed on Bombay Stock Exchange. The management wishes to
issue sweat equity shares to the new Chairman and Managing Director for which
extra-ordinary general meeting is scheduled on 15th July, 2016.

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Based on the following information, calculate the minimum value at which sweat equity
shares can be issued, and submit your opinion to the management making your own
assumptions, wherever required. Substantiate your answer with relevant provisions of
SEBI Regulations.
Particulars

(` )

Average of weekly high and low of the closing prices during

last six months as on 'relevant date'

275.00

Average of weekly high and low of the closing prices during

last six weeks as on 'relevant date'

285.00

Average of weekly high and low of the closing prices during

last six years as on 'relevant date'

185.00

Average of weekly high and low of the closing prices during

last two months as on 'relevant date'

282.00

Average of weekly high and low of the closing prices during

last two weeks as on 'relevant date'

314.00

Average of weekly high and low of the closing prices during

last two years as on 'relevant date'

214.00
(5 marks)

(b)

"Market based approach to valuation is adopted for determination of price in the

case of preferential allotment, buy-back and open offer. But the market price is not so
reliable for the purpose of valuation." In the light of the statement, state the limitations
of market based approach particularly in case of preferential allotment, buy-back and
open offer.
(5 marks)

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(c)

Apart from comprehensive analysis covering the past, present and future earnings and
prospects of the company, several other factors are to be taken into account for the
valuation of an enterprise.
List out the important factors that deserve consideration for proper valuation of an
enterprise.
(5 marks)

PART C
Attempt all parts of either Q.No. 6 or Q.No. 6A
6.

(a)

Great Ltd. having registered office at Jaipur (Rajasthan), entered into an agreement with
Newsome Trading for supply of raw material worth `4 crore. It was clearly mentioned
in the agreement that all disputes will be referred to Delhi High Court. Now, Great Ltd.
has defaulted in payments. The management of Newsome Trading has approached you
for opinion about jurisdiction as they want to file recovery suit alongwith winding-up
petition. Supporting with decided case laws, advise them.
(5 marks)

(b)

Constitution of National Company Law Tribunal (NCLT) will usher a new era as far
as insolvency issues are concerned and will also open up new professional opportunities
for Company Secretaries. Comment.
(5 marks)

(c)

Subrata, one of the guarantor for debt facilities taken by Great Herald Ltd. is
aggrieved by an order of Debt Recovery Tribunal. Advise him about the further course
of action.
(5 marks)

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(d)

Debt Recovery Tribunal has passed an order for recovery of `5 crore against Prism Ltd.
and its directors. What modes of recovery are available to recovery officer ? Advise.
(5 marks)
OR (Alternate question to Q.No. 6)

6A. (i)

Write a note on the list of contributories in case of compulsory winding-up.

(5 marks)

(ii)

In relation to insolvency laws, mention any five reforms carried out in India in 21st century.
(5 marks)

(iii) Oriental Bank of India (OBI) extended loan of `20 crore to Aamran Fabricators Ltd.
(AFL). Debt Recovery Tribunal (DRT) has issued order against AFL for recovery of
outstanding dues amounting to `28.5 crore as against the claim of `30 crore filed by
OBI. Aggrieved by the order of Debt Recovery Tribunal, AFL wants to file appeal in
Debts Recovery Appellate Tribunal under section 18 of the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002. Explain the
pre-conditions to be fulfilled for filing of an appeal against the order of DRT.
(5 marks)
(iv) Mention the other functions of securitisation company or reconstruction company as per
the Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002.
(5 marks)
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NEW SYLLABUS

333
Roll No

: 1 :

Time allowed : 3 hours

Maximum marks : 100

Total number of questions : 6

Total number of printed pages : 7

NOTE : 1. Answer ALL Questions.

2. All references to sections relate to the Companies Act, 2013 unless stated otherwise.
PART A
1.

(a)

Blueberry Ltd., a subsidiary of Greenberry Ltd., merged with its holding company.
Greenberry Ltd. was holding 92% equity shares in merged subsidiary company. The
management of holding company has sought your opinion about incidence of stamp duty
payment. Give your opinion in light of the provisions of the Companies Act, 2013.
(5 marks)

(b)

The Competition Commission of India has power to initiate investigation for any
combination and there is set procedure for the same under section 29 of the Competition
Act, 2002. Mention important milestones of the procedure for the investigation of a
combination.
(5 marks)

(c)

The Board of directors of Bright Electronics Ltd. (BEL) has decided to amalgamate with
Comfort Electricals Ltd. (CEL) which is the holding company of BEL. In order to fasten
their amalgamation process, they approached their secured and unsecured creditors to
seek their written consent to the proposed scheme of amalgamation. All the secured
creditors of CEL have given their consent in writing but unsecured creditors have raised
their doubt on the scheme and they refused to give their consent. The Board of directors
of CEL requested the court to grant exemption or waiver from calling the meeting of
secured and unsecured creditors of CEL on the ground that the proposed amalgamation
would help them to pay off the entire outstanding dues of unsecured creditors. Offer
your comments as to whether CEL can get exemption from convening the meeting of
secured and unsecured creditors.
(5 marks)

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(d)

Sameer, an acquirer along with persons acting in concert (PACs) is holding 23% shares
in Purpleberry Ltd. (a BSE listed company). Now, he intends to acquire 3% additional
equity shares in Purpleberry Ltd. through secondary market in the current financial year.
He is acquiring less than 5% shares in the financial year and is of the view that he
need not to make open offer to public. Give your opinion regarding the need to make
an open offer to the public.
(5 marks)
Attempt all parts of either Q.No. 2 or Q.No. 2A

2.

(a)

Metal Ltd. (transferee company) filed a petition under sections 391 to 394 of the
Companies Act, 1956 for approval and sanction of the scheme of reconstruction,
arrangement and demerger between Metal Ltd. and Brass Ltd. (transferor company). The
Regional Director objected that the authorised share capital of the transferee company
is not sufficient to allot new shares to the members of the transferor company and therefore,
the transferee company should be directed to increase its authorised share capital after
following the procedure prescribed under the Companies Act, 2013. Will the objection
hold good ? Explain.
(5 marks)

(b)

'Crown jewel' strategy for prevention of takeover bids is not a successful tool in Indian
context. Comment.
(5 marks)

(c)

The voting rights of Vaibhav Pharma Ltd. (VPL) which is one of the promoter company
of Poorvi Adhesive Ltd. (PAL) has increased beyond 75% of the total paid-up capital
of the company due to the buy-back of shares by PAL pursuant to section 68. The
Securities and Exchange Board of India issued a show cause notice to VPL alleging
that they had to make a public announcement to acquire shares from the shareholders
of the company and by not doing so they have violated provisions of the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011. Keeping in view the provisions
of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, give
your comments.
(5 marks)

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OR (Alternate question to Q.No. 2)

2A.

(i) Success of a merger depends upon various factors. What are the factors relevant in
evaluating the effectiveness of a merger ?
(5 marks)
(ii) Delta Overseas Ltd., an industrial company incorporated in the year 2009, has merged
with Mars India Ltd. Mention the tax benefits available to the remaining entity namely
Mars India Ltd.
(5 marks)
(iii) CIPL, a non-banking finance company, had submitted an application for approval of
a scheme of arrangement under section 391 of the Companies Act, 1956 before the High
Court. Soham, a depositholder of CIPL, has filed an application before the Company
Law Board (CLB) for ordering repayment of deposits. The CLB passed an order to
repay the deposits under section 45QA(2) of the Reserve Bank of India Act, 1934. The
CIPL challenged the order of CLB in the High Court. Offer your comments
whether CLB is correct in passing such an order in the given circumstances.
(5 marks)

3.

(a)

Comment on the following :

(i)

Applicability of Accounting Standard (AS) 14 for amalgamation.

(ii)

Issue of preference shares to persons outside India under external commercial

borrowing (ECB) guidelines.

(iii)

Compulsory acquisition of shares of minority shareholders of unlisted companies.

(3 marks each)

(b)

Distinguish between 'demerger' and 'slump sale'.

(6 marks)

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PART B
4.

(a)

Explain the pricing of shares issued under FDI Policy, 2015 to persons resident outside
India by an Indian company.
(5 marks)

(b)

The share capital of Suraj Ltd. is `1,00,00,000 (60,000 equity shares of `100 each and
4,00,000, 12.5% preference shares of `10 each). The company has earned a profit of
`65,00,000 after payment of 35% income-tax amounting to `35,00,000. Calculate earnings
per share (EPS) of Suraj Ltd.
(5 marks)

(c)

"Super profits are calculated as the difference between maintainable future profits and
the return on net assets." Comment.
(5 marks)

5.

(a)

The Wind Urja Ltd. (WUL) is a closely held unlisted company with financial details
as under :
Market Value
on 31.03.2015
Assets

(` in lakh)

Land and building

6,500

Plant and machinery

2,000

Furniture and fixtures

Trade receivables

20
1,000

Cash and cash equivalents

30

Spares

10

Outside Liabilities
Trade payables
Long-term loans
Outstanding expenses

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20
2,000
5

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Worldwide Wind Energy Ltd. (WWEL) is ready to take over WUL by paying 35%
premium over the market value of assets and liabilities as goodwill. Calculate the price
which WWEL is ready to pay to shareholders of WUL.
(5 marks)
(b)

You are a Company Secretary of Modern India Ltd., which is planning to go for an
IPO. The Managing Director of your company asked you to advise about the differential
pricing norms necessarily to be followed by the issuer company as per the SEBI (Issue
of Capital and Disclosure Requirements) Regulations, 2009. Advise the company about
the conditions for differential pricing.
(5 marks)

(c)

Write a note on the procedure adopted by the government when amalgamation of

government companies is in public interest.
(5 marks)
PART C
Attempt all parts of either Q.No. 6 or Q.No. 6A

6.

(a)

Genre Ltd. having registered office at Noida (U.P.) entered into an agreement with Parsu
Trading for supply of raw material worth `2 crore. It was clearly mentioned in the
agreement that all disputes will be referred to the Delhi High Court. Genre Ltd. has
defaulted in payments. The management of Parsu Trading has approached you for opinion
about jurisdiction since they want to file winding-up petition. Give your advice with
decided case laws.
(5 marks)

(b)

In relation to insolvency laws, mention four reforms carried out in India in 21st Century.
(5 marks)

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(c)

Fair Deal Ltd. (FDL) is aggrieved by the order of the Debt Recovery Tribunal (DRT).
The management of FDL has decided to file an appeal against the order of DRT. Advise.
(5 marks)

(d)

Labour union of MG Textile Ltd. (MGL) filed a winding-up petition for unpaid wages
of workmen. Will the petition be maintainable ? Based on case laws, give your opinion
as to the workers' right in winding-up.
(5 marks)
OR (Alternate question to Q.No. 6)

6A. (i)

Auto Components Ltd. (ACL), an industrial company became sick and the Board of
directors of the company referred it to the BIFR on 15th March, 2013. Credit Bank
Ltd. (CBL), a secured creditor of ACL took possession of the land and building of the
company on 18th November, 2013 under section 13(4) of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The
company has challenged the action of the bank on the ground that the company is under
reference to BIFR. Give your opinion as to whether the contention of the company will
hold good.
(5 marks)

(ii)

Lalit Hardware Ltd. (LHL) was ordered to be wound-up and Nayan was appointed as
the official liquidator. The official liquidator sought to sell the goods, which were imported
by availing duty exemption granted in favour of 100% export oriented unit under the
scheme without payment of any customs duty by bonding the goods to the Department.
Since export obligations were not fulfilled, the Commissioner of Customs claimed recovery
of customs duty and central excise duty and requested the official liquidator to incorporate
in the sale notice that the removal of the goods are subject to payment of duty components
as the goods are bonded goods. Official liquidator refused to accept this condition. The
Commissioner of Customs filed writ petition seeking prevention of removal of goods
without settlement of customs duty, central excise duty and interest payable thereon.
Based on the above facts, give your opinion whether writ petition in the case of a company
which is in the process of liquidation by the order of company court is maintainable ?
(5 marks)

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(iii) Mention the effects of recognition of foreign main proceedings under the UNCITRAL
Model Law.
(5 marks)
(iv) Subrata, one of the guarantors for debt facilities taken by Krishna Ltd., is aggrieved
against the order of recovery officer of the Debt Recovery Tribunal (DRT). He intends
to initiate action against order of the recovery officer. Advise him about next course
of action.
(5 marks)
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NEW SYLLABUS

333
Roll No

: 1 :

Time allowed : 3 hours

Maximum marks : 100

Total number of questions : 6

Total number of printed pages : 7

NOTE : 1. Answer ALL Questions.

2. All references to sections relate to the Companies Act, 2013 unless stated otherwise.
PART A
1.

(a)

While combination which causes or is likely to cause an appreciable adverse effect on

competition within the relevant market in India is prohibited under section 6 of the
Competition Act, 2002, certain transactions are exempted and are, therefore, not prohibited.
List out the transactions or dealings which are not hit by section 6 of the Competition
Act, 2002.
(5 marks)

(b)

The draftsmen of the Competition Act, 2002 had demonstrated utmost concern
and care in identifying questionable combinations and prohibiting such combinations. In
order to achieve this object, extra territorial jurisdiction is conferred on the Competition
Commission of India (CCI) to inquire and pass orders even if both the parties to an
agreement are outside India.
List out the circumstances where the CCI can pass orders consequent to extra territorial
jurisdiction conferred on it.
(5 marks)

(c)

Brown Ltd. committed certain defaults in repayment of deposits. Subsequently, the said
defaults were remedied and a period of 30 months has lapsed after such defaults ceased
to subsist.
Brown Ltd. desires to purchase its own shares. Do you think Brown Ltd. is entitled
to proceed with the proposed buy-back of shares ?
Give reasons for your answer quoting the relevant provisions applicable to the issue under
consideration.
(5 marks)

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(d)

The paid-up capital of Cool Ltd. as on 31st March, 2014 is `10 crore and its free reserves
as on the same date was `10 crore. Cool Ltd. proposes to buy-back its shares for a
value upto 15% of its paid-up capital.
State whether the Board of Cool Ltd. can approve buy-back of company's shares upto
15% of the paid-up capital under the provisions of the Companies Act, 2013.
(5 marks)
Attempt all parts of either Q.No. 2 or Q.No. 2A

2.

(a)

Aspire Ltd. is the target company in respect of which an acquirer made an open offer
for acquisition of shares and the open offer has commenced. Dreams Ltd. is the subsidiary
of Aspire Ltd.
Dreams Ltd. signed the loan agreements with financial institutions for major capital
expenditure for its expansion project and started withdrawing the loan amount during
the open offer period. The said borrowings are clearly within the ordinary course of
its business.
No approval was taken by Aspire Ltd. from its shareholders nor did Dreams Ltd. obtain
the approval from its shareholders. The internal auditors have opined that the target
company has violated the provisions of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011 as no approval was obtained by the shareholders of the
target company for the borrowings effected. The statutory auditors have agreed with
the views of the internal auditors and pointed out that the target company Aspire Ltd.
has failed in its obligations that are required to be complied with during the offer period
in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
as approval of its members by way of special resolution through the mechanism of postal
ballot was not obtained. Moreover, they maintained that Dreams Ltd. borrowed money
for its expansion programme when the open offer of target company was on and therefore
Dreams Ltd. violated the provisions of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011.
State in clear terms whether there is a violation of the provisions of the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011 by Aspire Ltd. or Dreams Ltd.
(6 marks)

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(b)

As per the scheme of arrangement, textiles undertaking of Cotton Ltd. is proposed to

be demerged to Jutewel Ltd. under sections 391 and 394 of the Companies Act, 1956.
One of the conditions of the aforesaid scheme is that any excess in the value of net
assets of textiles undertaking proposed to be transferred to the resulting company shall
be credited to general reserve.
If you as an advisor to the parties to the arrangement are asked to advise, what will
be your response considering the applicable accounting standards and legal provisions
applicable to the aforesaid case.
(5 marks)

(c)

In an open offer, the schedule of activities and the timelines of all competing offers shall
be identical. Explain.
(4 marks)
OR (Alternate question to Q.No. 2)

2A. Comment on the following statements :

(i) In terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011, 'offer period' and 'tendering period' are one and the same.
(3 marks)
(ii) The acquirer can opt out of the open offer process at any point of time by informing
stock exchange wherein the shares of the target company are listed and furnishing a
copy of the communication to the target company.
(3 marks)
(iii) Revision of offer price can be made by the acquirer upward but that can be exercised
only in the event of there being a competing offer.
(3 marks)
(iv) Acquisition pursuant to a scheme made under section 18 of the Sick Industrial Companies
(Special Provisions) Act, 1985 or any statutory modification thereto shall be automatically
exempt from the obligation to make an open offer under Regulations 3 and 4 of the
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 but not the
acquisition made pursuant to the provisions of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002.
(3 marks)
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(v) The acquisition of shares resulting from invocation of pledge by a public financial
institution is exempt from open offer obligation.
(3 marks)
3.

(a)

Flying Ltd. got demerged and the resulting company Soars Ltd. was formed. It was
a demerger within the meaning of section 2(19AA) of the Income-tax Act, 1961. Your
advice is sought by Flying Ltd. regarding the tax concession available to a demerged
company.
(5 marks)

(b)

Alps (Pvt.) Ltd. is taking over an unlisted company Mountain Ltd., through the route
stipulated under section 395 of the Companies Act, 1956. Alps (Pvt.) Ltd. wants to
compulsorily acquire the shares of minority shareholders of Mountain Ltd. A group
of minority shareholders objected to the compulsory acquisition of their shares by Alps
(Pvt.) Ltd.
(i)

Will their objections stand good as per the provisions under section 395 of the
Companies Act, 1956 ?

(ii)

Will Alps (Pvt.) Ltd. be entitled to carry forward unabsorbed depreciation and
accumulated losses of Mountain Ltd ?
(5 marks)

(c)

Hardnut Ltd. wants to buy-back its equity shares. The company has equity share capital
of `100 crore (face value of `10 fully paid-up) and free reserves of `200 crore. Partly
paid equity shares are `60 crore. Preference share capital of face value `100 fully paid
is `40 crore. The company seeks your opinion about the quantum of shares that can
be bought back.
(5 marks)
PART B

4.

(a)

Zen Ltd. has earned a profit of `40,00,000 before tax for the year ended
31st March, 2014. Tax amounts to `11,40,000. The share capital of the company is
`60,00,000 (4,00,000 equity share of `10 each and 2,00,000, 7% preference shares of
`10 each). Compute earnings per share (EPS) of Zen Ltd.
(5 marks)

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(b)

Valuation of shares of an enterprise demands a detailed and comprehensive analysis

embracing a host of factors at macro and micro level.
List out five important factors that influence the determination of price of the shares.
(5 marks)

(c)

How is the open offer price for acquisition of shares of a listed target company whose
shares are frequently traded determined ?
(5 marks)

5.

(a)

Various judicial pronouncements on valuation principles demonstrate salient dicta of courts

in relation to the subject. You are required to list out the principles set-out by the courts
in this regard.
(6 marks)

(b)

Blue Ltd. and Moon Ltd. have agreed to amalgamate to form a new company Blue
Moon Ltd. After negotiation, the two companies have decided on the balance sheets
as given below :
(` in '000)
Blue Ltd.

Moon Ltd.

5,00,000

10,00,000

EQUITY AND LIABILITIES

(1)

Shareholders' funds
(a)

Share capital
Equity shares of `10 each

(b)

(2)

Reserves and surplus

Reserve fund

20,000

Surplus

40,000

40,000

40,000

60,000

6,00,000

11,00,000

Current liabilities
Trade payables
TOTAL

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ASSETS
(1) Non-current assets
(i) Tangible assets
(a) Land and building
(b) Plant and machinery
(ii) Intangible assets (Goodwill)
(2) Current assets
(a) Inventories
(b) Trade receivables
(c) Cash and cash equivalents
TOTAL

Blue Ltd.

(` in '000)
Moon Ltd.

2,00,000
1,70,000
50,000

4,25,000
2,75,000
1,00,000

80,000
30,000
70,000

1,20,000
1,00,000
80,000

6,00,000

11,00,000

The assets and liabilities are taken over by Blue Moon Ltd. Compute the total number
of shares of the Blue Moon Ltd. having a value of `10 each to be issued to the
shareholders of Blue Ltd. and Moon Ltd. using net asset value method.
(5 marks)
(c)

In which circumstances, is the market based approach to valuation not relevant and
useful ?
(4 marks)
PART C
(Attempt all parts of either Q.No. 6 or Q.No. 6A)

6.

Write notes on the following :

(a)

Four grounds on which a company may be wound-up

(b)

'State' with reference to the UNCITRAL model law

(c)

Types of foreign proceedings covered

(d)

Protection of creditors and other interested persons under the UNCITRAL model law

(e)

Mode of recovery of debt determined by Debt Recovery Tribunal (DRT).

(4 marks each)

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OR (Alternate question to Q.No. 6)
6A.

(i) "The effects provided by Article 20 of the UNCITRAL model law in respect of
recognition of a foreign main proceeding are discretionary in nature." Comment whether
the statement is correct or not and state the effects of recognition of a foreign main
proceeding as per Article 20.
(5 marks)
(ii) "The official liquidator cannot have recourse to the doctrine of election. He can challenge
the order passed by the recovery officer and appeal under the Recovery of Debts Due
to Banks and Financial Institutions Act, 1993 but cannot approach the company court
to set aside the auction or confirmation of sale when the same has been confirmed by
the recovery officer under the Act."
Comment on the above statement giving the options, if any, available to the official
liquidator in this regard.
(5 marks)
(iii) The provisions of the Securities and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 do not apply to certain cases. List out six such cases
where the provisions of the Act do not apply.
(5 marks)
(iv) Explain the salient features of Chapter 11 dealing with the US Bankruptcy Code.
(5 marks)
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Roll No

: 1 :

Time allowed : 3 hours

Maximum marks : 100

Total number of questions : 6

Total number of printed pages : 7

NOTE : 1. Answer ALL Questions.

2. All references to sections relate to the Companies Act, 2013 unless stated otherwise.
PART A
1.

(a)

Gtech International Ltd. and Agri International Ltd., two multinational companies, entered
into an agreement in USA which is likely to have adverse effect on competition in Agri
market in India. Domestic companies dealing in the market raised the issue before the
Competition Commission. Offer your comments regarding the jurisdiction of Competition
Commission in such matters under the Competition Act, 2002.
(5 marks)

(b)

(i)

Explain the twin conditions for a valid resolution to be passed for a 'compromise
or arrangement' under the Companies Act, 1956.

(ii)

State with reasons and case law, whether a copy of such resolution has to be
filed with the Registrar of Companies under section 117.
(5 marks)

(c)

Explain amalgamation in the nature of merger.

(5 marks)

(d)

In a scheme of amalgamation between Eye Foundation Ltd. (transferor company) and

Lasik Centre (India) Pvt. Ltd. (transferee company), the Regional Director raised
objections that additional filing fee and stamp duty on the increase of share capital of

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the transferee company has to be paid and also against changing the name of the transferee
company to Eye Foundation Ltd. which is the name of the transferor company, without
complying with section 13. Will the objections of the Regional Director hold good ?
Explain.
(5 marks)

Attempt all parts of either Q.No. 2 or Q.No. 2A

2.

(a)

ABC Ltd. has completed buy-back of equity shares on 30th April, 2014. The company
desires to make further issue of equity shares on 31st August, 2014. Can the company
proceed and allot further equity shares on 31st August, 2014 assuming that all other
requirements are complied with or will be complied with ?
Will your answer be different, if the company desires to issue and allot on the very
same day (i.e., 31st August, 2014), preference shares instead of equity shares assuming
that all other requirements are complied with or will be complied with ?
(5 marks)

(b)

Mention any five forms/reports/returns, etc., that are required to be filed with the
Registrar of Companies, SEBI and stock exchanges at various stages of the process of
merger/amalgamation.
(5 marks)

(c)

There are a host of factors that drive the business world to opt for mergers and
amalgamations for creation of sustainable competitive advantage. Discuss at least five
such factors that prompt mergers and amalgamations.
(5 marks)

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OR (Alternate question to Q.No. 2)
2A.

(i) Mention the factors which make a company vulnerable to takeover bids.
(5 marks)
(ii) What are the obligations of the committee of independent directors of the target company
with regard to providing reasoned recommendations on the open offer being made by
the acquirers ?
(5 marks)
(iii) Explain the concept of 'vertical merger' and differentiate between 'forward integration'
and 'backward integration'.
(5 marks)

3.

(a)

Which of the activities are not covered under section 6 of the Competition Act, 2002
with regard to furnishing of a notice to the Commission disclosing details of the proposed
combination ?
(3 marks)

(b)

Amilo Exports Ltd., a listed company has opened an escrow account in connection with
acquiring another company. The company wants your opinion for the release of amount
from escrow account. Comment.
(3 marks)

(c)

Dominio Retail Ltd. has plans to make large acquisitions without committing much capital.
Advise the company regarding funding of acquisitions.
(3 marks)

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(d)

Good Earth Pvt. Ltd. wants to become a public listed company without opting for initial
public offer (IPO). What is the best strategy available for the company ? Distinguish
the same from 'strategic alliance'.
(3 marks)

(e)

Is a scheme sanctioned under section 44A(4) of the Banking Regulation Act, 1949
conclusive evidence that all the requirements of this section relating to amalgamation
have been complied with ?
(3 marks)
PART B

4.

(a)

Balance sheets of Fair Deal Ltd. (FDL) and Genuine Cosmetics Ltd. (GCL) as on
31st March, 2013, i.e., the date on which the companies were amalgamated and a new
company Well Worth Ltd. (WWL) was formed are as follows :
Balance sheets as on 31st March, 2013

FDL

GCL

(` '000)

(` '000)

6,500
3,000

4,500
5,000

2,000

1,000

11,500

10,500

8,000

7,500

3,500
11,500

3,000
10,500

EQUITY AND LIABILITIES

Shareholders' funds
Equity shares of `10 each
Reserves and surplus
Current liabilities
Trade creditors and other liabilities
TOTAL

II

ASSETS
Non-current assets
Current assets
TOTAL

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The fixed assets of FDL were valued at `10,000 thousand and that of GCL were valued
at `9,000 thousand. WWL would issue the requisite number of equity shares of `10
each at 50% premium to discharge the claim of equity shareholders of FDL and GCL.
How many shares of WWL should be issued to takeover the business of the two merging
companies ?
(5 marks)
(b)

Briefly explain, how offer price is determined in respect of a proposed acquisition by

the acquirer from public shareholders under the open offer in terms of Regulation 8 of
the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
You may assume that the shares of the target company whose shares are proposed to
be acquired are frequently traded on the stock exchanges.
(5 marks)

(c)

State the procedures that are typically adopted by the valuer in a valuation report.
(5 marks)

5.

(a)

While market based approach to valuation is an effective tool in the hands of strategic
buyer, the same is not relevant and therefore not useful in certain cases. List out the
cases where market based approach to valuation is not a suitable method.
(5 marks)

(b)

Write a note on 'valuation of slump sale'.

(5 marks)

(c)

When shall equity shares be deemed to be infrequently traded on a stock exchange,

if the company notifies the stock exchange of the Board meeting in which the delisting
proposal was considered ?
(5 marks)

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PART C
Attempt all parts of either Q.No. 6 or Q.No. 6A
6.

(a)

State, whether a Civil Court shall have jurisdiction to entertain any suit in respect of
any matter which falls under the purview of the Debt Recovery Tribunal or its
appellate authority.
(5 marks)

(b)

What features have been enshrined in the Enforcement of Security Interest and Recovery
of Debts Laws (Amendment) Act, 2012 to strengthen the regulatory and institutional
framework related to recovery of debts due to banks and financial institutions ?
(5 marks)

(c)

Mention any five transactions or events to which the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002 shall not apply.
(5 marks)

(d)

XYZ Bank Ltd., being a secured creditor, filed an application before the Debt
Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 to recover `5 crore from Gem Pvt. Ltd. Recovery certificate was issued
by the Tribunal and the recovery officer sold the property of the company mortgaged
to the bank in auction, based on the recovery certificate. However, the company was
in liquidation and the official liquidator challenged the sale of the property of the company
before the company court. The bank has sought your expert opinion in the matter.
Substantiate your opinion with reasons and case law, especially on the question of
jurisdiction of the company court in the matter.
(5 marks)

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OR (Alternate question to Q.No. 6)
6A.

(i) What are the legal challenges and complexities faced while dealing with insolvency ?
(10 marks)
(ii) Discuss in general, the process involved in securitisation.
(5 marks)
(iii) What are the risks associated with cross border insolvency ?
(5 marks)
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Roll No

: 1 :

Time allowed : 3 hours

Maximum marks : 100

Total number of questions : 6

Total number of printed pages : 4

NOTE : 1. Answer ALL Questions.

2. All references to sections relate to the Companies Act, 1956 unless stated otherwise.
PART A
1.

(a)

(b)

(c)

(d)

"The resolution according approval of shareholders under section 391(2) is neither an

ordinary resolution nor a special resolution." Comment in the light of judicial precedent
and also discuss whether filing of such resolution with the Registrar of Companies is
mandatory.
(5 marks)
Do you agree that "every scheme of arrangement requires prior approval of stock
exchanges" ? Highlight the relevant provisions in support of your answer.
(5 marks)
The Boards of directors of Music India Ltd. (MIL) and Sound India Ltd. (SIL) have
decided a scheme of arrangement. The scheme has been approved with adequate majority.
As per the scheme of arrangement, the 'software undertaking' of MIL is proposed to
be transferred to SIL under sections 391 to 394. One of the conditions of the scheme
is that any excess in the value of net assets of 'software undertaking' transferred to SIL
shall be available for distribution to the shareholders of SIL.
Regional Director, Ministry of Corporate Affairs, has raised objection in his affidavit filed
with the High Court stating that excess, if any, in the value of the net assets of the
'software undertaking' should be adjusted to the capital reserve as prescribed in AS-14
and not to the general reserve as proposed in the scheme of arrangement.
Examine the applicability of AS-14 and give your opinion whether contention raised
by the Regional Director holds good in law.
(5 marks)
Discuss the legal issues concerning 'poison pill devices' as defence mechanism against
hostile takeovers.
(5 marks)
Attempt all parts of either Q.No. 2 or Q.No. 2A

2.

(a)

Explain the human and cultural aspects of a merger.

(5 marks)

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(b)

(c)

Palm Ltd. bought back some shares in compliance with section 77A. As a consequence,
the shareholding of one shareholder, Vaibhav Ltd., increased from 24% to 27%. Palm Ltd.
disclosed the changed shareholding pattern to the stock exchange. On receiving the
information regarding increase in holding of Vaibhav Ltd. to 27%, SEBI has issued a
show-cause notice to Vaibhav Ltd. for its failure to make a public offer under the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011. Prepare a reply
to the show-cause notice.
(5 marks)
Define 'reverse merger' and explain the strategic significance of reverse merger.
(5 marks)
OR (Alternate question to Q.No. 2)

2A.

(i) What is the legal protection available to creditors for protecting their interest in case
of reduction of capital proposed by the company ?
(5 marks)
(ii) X Ltd. is a listed company and holds 100% equity of Y Ltd. Y Ltd. holds 15% equity
in Z Inc., USA as on 31st March, 2014. Due to the poor performance of Z Inc., USA,
Boards of directors of X Ltd. and Z Inc., USA in their meeting held on 20th May,
2014 approved merger of Z Inc., USA with X Ltd. with effect from 1st April, 2014.
The scheme of merger was filed with the Hon'ble High Court of Delhi pursuant to sections
391-394. The Registrar of Companies (ROC) has raised objections that sanction of the
scheme of merger would result in the buying back by the X Ltd. of shares of its subsidiary
Z Inc., USA and would thereby violate the provisions of section 42 and section 77.
Comment whether the objection raised by the ROC is sustainable in the court of law.
(5 marks)
(iii) Renu Ltd., a listed company of which you are the Company Secretary, is planning a
demerger. Enumerate the steps to be taken for demerger.
(5 marks)

3.

Explain the following :

(a)

Buy-back through reverse book-building.

(5 marks)

(b)

Thresholds of combinations under the Competition Act, 2002.

(5 marks)

(c)

Funding through leveraged buyouts.

(5 marks)

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PART B
4.

(a)

(b)

(c)

The shares of XYZ Ltd. are listed on more than one stock exchange. On 3rd February,
2014, its share was quoted @ `100 per share in Bombay Stock Exchange and
@ `90 per share in National Stock Exchange. The company issued 10,000 sweat equity
shares on the same date @ `90 to Anand. Examine whether the transaction violates
SEBI (Issue of Sweat Equity) Regulations, 2002.
(5 marks)
Anay Infrastructure Ltd. (AIL) wants to acquire entire business of Pranav Land Ltd.
(PLL). AIL has 6,00,000 equity shares and PLL has 4,00,000 equity shares with market
value of `60 and `40 respectively. Their respective EPS is `8 per share and `4.50
per share. It is proposed to give one share of AIL to the shareholders of PLL in the
ratio of two shares held in PLL.
Based on the above, you are required to
(i) Calculate the EPS after the acquisition of the company; and
(ii) Show the impact on EPS for the shareholders of both the companies.
(5 marks)
Bhupen India Ltd. (BIL) is a listed company and the Board of directors of BIL has
authorised Managing Director for evaluating the proposal for acquisition of Sahil India
Ltd. (SIL). The financial positions of BIL and SIL are given below :
No. of equity shares
Market price per share (` )
Market capitalisation (` )

BIL
10,000
60
6,00,000

SIL
6,000
36
2,16,000

BIL is willing to pay `3,32,000 in cash for the acquisition of SIL. If SIL's market
price reflects only its value as a separate entity, calculate the cost of acquisition when
acquisition is financed by cash. Give your comment, what would be the impact on
shareholders of BIL when the cost of acquisition becomes negative.
(5 marks)
5.

(a)
(b)

Explain 'earnings based valuation technique'.

(5 marks)
"Where no mistake is found in computation of exchange ratio worked out by a recognised
firm of chartered accountants and same has been accepted by the shareholders/creditors
with overwhelming majority, still court has a right to substitute its own exchange ratio."
Comment on the statement in the light of judicial pronouncements.
(5 marks)

(c)

What do you understand by 'brand valuation' ? What is its importance ?

(5 marks)

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PART C
Attempt all parts of either Q.No. 6 or Q.No. 6A
6.

Write notes on the following :

(a) Objectives of UNCITRAL Model Law
(b) Overriding effect of the Recovery of Debts Due to Banks and Financial Institutions
Act, 1993
(c) World Bank principles for effective insolvency
(d) Objectives of asset reconstruction company (ARC)
(e) Powers of courts to declare dissolution void.
(4 marks each)
OR (Alternate question to Q.No. 6)

6A. (i)

(ii)

What are the remedies available to the secured lenders under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, if
borrowers do not make payment ?
(5 marks)
Rose Textiles India Ltd. (RTIL) is a company engaged in the business of textiles
manufacturing. Due to the global slowdown, the business of RTIL has been badly
affected. The members of the company have taken a decision for winding-up the company
without consulting creditors of the company. One of the creditors representing 25%
of the total outstanding liability objected to the company's proposal on the ground that
the consent of creditors is mandatory and by not doing so, company's winding-up proposal
is bad in law. Give your comments keeping in view the provisions of the Companies
Act, 1956.

(5 marks)
(iii) What measures can an asset securitisation company take under the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for
the purpose of assets reconstruction ?
(5 marks)
(iv) What are the powers of the Board under section 17 of the Sick Industrial Companies
(Special Provisions) Act, 1985 to make an order on completion of the enquiry ?
(5 marks)
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