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Question Paper

Corporate & Other Laws Duration: 75

Details: Test- 4 Marks: 40

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Q-1 In Evergreen Limited, the Board of Directors declared an interim dividend but could not
distribute the dividend due to objections of audit committee that the accounts considered
by the Board were false; and true financial results were inflated by not incorporating
outstanding liabilities and over-valuation of Inventories. A Shareholder filed a suit for non-
payment of dividend. One of the directors contended that he never attended the board
meeting where the issue related to payment of interim dividend was declared on the basis
of false accounts. Discuss about the validity of contention of the director.

(4 Marks)

Q-2 Rise Limited, a company with diversified interests, has constituted Investor Education
and Protection Fund as required under the provisions of the Companies Act, 2013. The
company has so far not deposited any amount to the fund. The President (Finance) has
asked you, the Company Secretary, to submit a note on accounts payable to the credit of
Fund and the period within which amount shall be paid. Prepare the said note.

(5 Marks)

Q-3 From the following information in respect of two companies Viz. ZYX Limited and CBA
Private Limited, compute the amount the companies are required to spend on account of
Corporate Social Responsibility (CSR):

Financial Year ZYX Limited Net Profit/(loss) CBA Private Limited Net
(INR in Crore) Profit / (Loss) (INR in Crore)

2014-2015 Not incorporated (4)

2015-2016 6 (1)

2016-2017 18 6

(5 Marks)
Q-4 Adorable Limited, incorporated under the Companies Act, 2013 has on its Board, 5
director and a managing director. The company has also appointed a Company Secretary.
The financial statements of the company, Viz. balance sheet and statement of profit and loss
for the year ended 31st March, 2015, were authenticated under signatures of one director
and the Company Secretary.

Referring to the provisions of the Companies Act, 2013, examine the validity of
authentication. What shall be your answer in case the company in question is a ‘One Person
Company’?

(5 Marks)

Q-5 Ram is a practising Chartered Accountant and partner of two audit firms namely PYMG
and YE. In the immediately preceding financial year, PYMG has completed its two terms of
five consecutive years in Gayatri Pvt. Ltd. having paid-up share capital of INR 60 crore. Now
Gayatri Pvt. Ltd. is considering appointing YE firm as its statutory auditors. Can Gayatri Pvt.
Ltd. appoint YE firm as its auditors?

What will be your answer in the following cases?

(i) If appointing company is a one person company;

(ii) If appointing company is a small company

(5 Marks)

Q-6 Vijay is an auditor of XYZ Ltd, a listed public company having paid-up share capital of
INR 10 crore. Advise him as to whether he can render the following services, keeping in
mind, the relevant provisions of Companies Act, 2013?

(i) Vijay wants to conduct internal audit of XYZ Ltd. He also wishes to provide actuarial
services to XYZ Ltd.
(ii) Vijay wishes to “design and implement one financial system” and offer management
services to ABC Ltd, the holding company of XYZ Ltd.

(iii) What will be your answer in the above two cases if services are provided to PQR Ltd, a
subsidiary company of XYZ Ltd.?

(6 Marks)

Q-7 (I) CASE STUDY BASED MCQs: -

(3×2 = 6 Marks)

Mr. Abhinav Gyan is a tech expert and one among the promoter of Doon Technology
Limited (DTL). He did his engineering from one of the prestigious IIT in CSE and then perused
masters in management from IIM. He started DTL fifteen years back. DTL is famous for
advance technologies such as artificial intelligence, block-chain solutions and many others.
The company went public a decade ago but not listed. Since DTL is expanding its operations
in wake of opportunities arises out of industrial revolution, hence willing to retain the profit
for growth of the company, but shareholders are seeking dividend; because for
shareholders larger the bottom line means larger the dividend. The outbreak of COVID-19 is
another reason which forced the directors to retain the earnings. After the closure of books
of accounts for year 2019-20, directors proposed the dividend of 10% against the
expectation of 20% by shareholders. But considering the extended lock-down which causes
a delay in delivering the projects (results in deferment of revenue and additional cost),
directors are of the opinion to revoke the dividend. Shareholder seeks appointment of
internal auditor for audit on a concurrent basis, whereas management of DTL states it does
not require to appoint an internal auditor under the law and it will cause an unnecessary
financial burden on the company. The excerpts from financial statements of the preceding
financial year 2019-20 are as under:

Particulars Amount in crores

Paid-up share capital 45

Turnover 495

Outstanding loans or borrowing* 105

Outstanding deposits 22#

*Includes inter-corporate loan of INRs 25 crores

# up-till 31st January, 2020 the outstanding deposit was INRs 30 crores

Mr. Gyan, one of the shareholders of DTL, out of his savings bought 40,000 shares of
another company Time Consultancy Services (TCS) of face value of 10 each. On such shares,
the final call of 2 is due but unpaid by Mr. Gyan. In the meantime, TCS declared the dividend
at a rate of 15%. Out of total dividend of INRs 8.4 crores declared on 31st August 2020, INRs
0.42 crores remain unpaid as on 30th September 2020 at the end of TCS. Out of such INRs
0.42 crores, INRs 12 lakhs are on account of the operation of law and INRs 3 lakhs on
account of legal disputes of right. The unpaid dividend was finally paid on 12 th December,
2020 in full.

Mr. Gyan came from humble background, hence as part of ethical commitment to uplift the
society by promoting education to children of the economically weak section, he decided to
form a section 8 company around 2 years back with the support of fellow professional, who
later become a member of such a company. Receipts are excess of expenditure hence it was
decided that Gyan foundation will declare some dividend to its members.

1. Regarding un-paid call money by Mr. Gyan, in light of dividend due to him from TCS, state
which of following statements hold truth?

(a) Dividend can’t be adjusted against the unpaid call money

(b) The dividend of INRs 48,000 can be adjusted against unpaid call money

(c) The dividend of INRs 48,000 can be adjusted against unpaid call money, if consent is
given by Mr. Gyan

(d) The dividend of INRs 64,000 can be adjusted against unpaid call money, if consent is
given by Mr. Gyan

2. With reference to the declaration of dividend by Gyan Foundation, state which of

following statements hold truth?

(a) Gyan Foundation can declare dividend out of the capital as well.

(b) Gyan Foundation can declare dividend either out of current years or previous years’
profit, but need to transfer a certain % to reserve.

(c) Gyan Foundation can’t declare the dividend because three years has not been elapsed
since its incorporation

(d) Gyan Foundation can’t declare the dividend in any case.

3. What will be the amount of penalty which TCS needs to pay under section 127 of the
Companies Act, 2013?

(a) Up-to INRs 1000 per day till the default continues

(b) INRs 64,800

(c) INRs 97,200

(d) INRs 1,08,000

(II) General MCQs:-

4. JX Limited, an unlisted public Company has its registered office in Mumbai. Due to a
shortage of storage place, the board of directors of JX Limited has decided not to preserve
the books of accounts and other related records of accounts. The board has approached
you, to seek an advice on this matter. Give suitable advice to the board of JX Limited

(a) The company is not mandatorily required to maintain the Statutory Registers and
records at the Registered Office.

(b) The company can make space by destroying all Statutory Registers and Records which
are older than 8 years.

(c) Company can shift the statutory Registers and Records at JX Limited’s branch office
situated at Pune, where more than one-tenth of the total number of members entered in
the register of members reside.

(d) Company can digitize all the Statutory Registers and records.

5. Karm Ltd. is a listed company. It has a paid –up capital of INR 40 crore and turnover of INR
100 crore. Decide whether the company needs to comply with internal audit requirement
under the provisions of Companies Act, 2013

(a) No, the provisions of internal audit are not applicable to listed companies

(b) No, because the company has the paid-up capital of INR 40 crore only

(c) No, the turnover is less than INR 200 crore

(d) Yes, because the provisions of internal audit are applicable to every listed company.

6. PQR & Co. is an audit firm having 3 partners P; Q and R, chartered accountants. Mr. P; Q
and R are holding appointment as an auditor in 4, 6 and 10 companies respectively. What
are the maximum numbers of audits in remaining in the name of PQR & Co.?
(a) NIL

(b) 20

(c) 40

(d) 60

7. NTW Ltd is listed on National Stock Exchange and has a turnover of INR 4500 crores. NTW
Ltd has 12 subsidiaries, 3 associate companies and 5 joint venture companies (collectively
referred to as NTW Group). AKW & Co LLP is the statutory auditor of NTW Ltd. NTW Ltd
wants to appoint AKW as the statutory auditors for entire NTW Group. In respect of this,
please advise the management of NTW Group.

(a) AKW & Co LLP can be appointed as statutory auditors for only 10 companies of NTW
Group.

(b) AKW & Co LLP can be appointed as statutory auditors for only 20 companies of NTW
Group.

(c) AKW & Co LLP can be appointed as statutory auditors for all the companies of NTW
Group.

(d) AKW & Co LLP can be appointed as statutory auditors for all the companies of NTW
Group provided they meet the limits requirements as per the Companies Act 2013.

(4×1 = 4 Marks)