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Answer Paper

Corporate and economics law Duration: 80

Details: Test – 5 Marks: 45

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ANS-1 As per the requirements of a valid arbitration agreement, parties to the arbitration
agreement must agree that the determination of their substantive rights by a neutral third
person acting as the arbitral tribunal would be final and binding upon them.

Since in the given case, the arbitration agreement formed by the XYZ Pvt. Ltd. contained a
clause that any questions, claim right, matter, thing, whatsoever, in any way arising out o f or
relating to the contract designs, drawings, specifications estimates, instructions, or orders, or
those conditions or failure to execute the same whether arising during the progress of' the
work, or after the completion, termination or abandonment thereof, the dispute shall, firstly,
be referred to the Chief Engineer , Mr. Builder. He will has jurisdiction over the work specified
in the contract. He shall within a period of ninety days from the date of dispute bought into
notice, give written notice of his decision to the contractor. Chief Engineer's decision shall be
final and binding on both the parties.

Here Chief Engineer is not a neutral party and has a Control over the work specified in the
contract, so this is not a valid arbitration agreement.

ANS-2 Section 6 of the Foreign Contribution (Regulation) Act, 2010 prescribes that no member
of a Legislature shall while visiting any country accept, except with the prior permission of the
Central Government for any foreign hospitality. Foreign Hospitality [as per section 2(m)] means
any offer not being a purely casual one, made in cash or kind by a foreign source for providing a
person with the costs of travel to any foreign country with free boarding lodging or medical
treatment. Therefore, prior approval is required from Central Government for the medical
expenses. Provided that it shall not be necessary to obtain any such permission for an emergent
medical aid needed on account of sudden illness contracted during a visit outside India, but
where such foreign hospitality has been received, the person receiving such hospitality shall
give, within one month from the date of receipt of such hospitality an intimation to the Central
Government as to the receipt of such hospitality, and the source from which and the manner in
which such hospitality was received by him.
As per Rule 7 of Foreign Contribution (Regulation) 2011, foreign hospitality may be received by
member of Legislature in the following manner

In case of emergent medical aid needed on account of sudden illness during a visit abroad, the
acceptance of foreign hospitality shall be required to be intimated to the Central Government
within one month of such receipt giving full details including the source, approximate value in
Indian Rupees, and the purpose for which and the manner in which it was utilized.

Hence, Mr. Peter has to follow the above procedure.

ANS-3 (i) As per section 2(j) of the FCRA, 2010, “foreign source” includes a society, club or other
association or individuals formed or registered outside India. Accordingly in the given case,
amount (i.e., loan) received by M/s KG & Co., being a partnership firm not covered under the
above provisions, from club registered in London for its business purpose, is permissible.

(ii) As per section 3 of the FCRA, 2010, no foreign contribution shall be accepted by any
association or company engaged in the production or broadcast of audio news or audio visual
news or current affairs programs through any electronic mode, or any other electronic form as
defined in the Information Technology Act, 2000 or any other mode of mass communication;
Accordingly, Hello FM is not permitted to receive any fund from a foreign company.

(iii) As per the provisions of the Foreign Contribution (Regulation) Act, 2010, “foreign
contribution” means the donation, delivery or transfer made by any

for his personal use, if the market value, in India, of such article, on the date of such gift, is not
more than such sum as may be specified from time to time, by the Central Government by the
rules made by it in this behalf; (This sum has been specified as Rs 25,000/- currently). In the
given situation, Mr. Happy received the wrist watch (market value Rs 25,000) as marriage
anniversary gift from his uncle, a citizen of USA. Since, the value of the wrist watch is within the
prescribed limit, hence, Mr. Happy is permitted to receive the article

ANS-4 Application by corporate debtor: An application for fast track insolvency resolution can
be made by any corporate debtor falling under any of the below mentioned category:- a
corporate debtor with assets and income below a level as may be notified by the Central
Government; or

(a) a corporate debtor with such class of creditors or such amount of debt as may be notified by
the Central Government; or

(b) such other category of corporate persons as may be notified by the Central Government.

Time period for completion of fast track corporate insolvency resolution process

The fast track corporate insolvency resolution process shall be completed within a period of 90
days from the insolvency commencement date.

Extension: The aggrieved may make an application to the Adjudicating Authority if it is satisfied
that the fast track corporate insolvency resolution process cannot be completed within a period
of 90 days, it may, by order; extend the duration of such process to a further period which shall
not be exceeding 45 days.

In the light of the provisions above and the fact of the question:

(i) The application made by M/s Sharp Industries for initiating fast track corporate insolvency
resolution process is admissible if it falls within the purview of the mentioned categories of
corporate debtor.

(ii) The fast track corporate insolvency resolution process shall be completed within 135 days
(90+45) from the insolvency commencement date.
ANS-5 According to section 22 of the Insolvency and Bankruptcy Code, 2016, First Meeting of
Creditors

 The first meeting of the committee of creditors shall be held within seven days of the
constitution of the committee of creditors.

 The committee of creditors in the first meeting may by a majority vote of not less than sixty-
six per cent. of the voting share of the financial creditors, either resolve to appoint the interim
resolution professional as a resolution professional or to replace the interim resolution
professional by another resolution professional.

 Notice of the Meeting

The resolution professional shall give notice of each meeting of the committee of creditors to:-

(a) Members of Committee of creditors, including the authorised representatives referred to in

sub-sections (6) and (6A) of section 21 and sub-section (5);

(b) Members of the suspended Board of Directors or the partners of the corporate persons, as
the case may be;

(c) Operational creditors or their representatives if the amount of their aggregate dues is not
less than ten per cent. of the debt.

Quorum for the Meeting

A meeting of committee of creditors shall quorate if members of the committee of creditors

representing at least thirty three percent of the voting rights are present either in person or by
video/audio means
 If the requisite quorum for committee of creditors is not fulfilled the meeting cannot be
held and the meeting shall automatically stand adjourned at the same time and place on the
next day.
 The adjourned meeting shall quorate with the members of the committee attending the
meeting.

As per the facts of the question and the provisions of law:

(1) The first meeting of committee of creditors was validly held within three days of the
constitution of the committee of creditors.

(2) The requisite quorum was present in the meeting as all 40 financial creditors attended the
meeting.

(3) The Act requires that not less 66% of the financial creditors shall resolve to appoint
resolution professional. However, in the given case 71.4% [(25/35)* 100] voted in favour of Mr.
TK. Hence, the said appointment is valid.

ANS-6 (i) As per Section 5(7) of the Insolvency and Bankruptcy Code, 2016, financial creditor
means any person to whom a financial debt is owed and includes a person to whom such debt
has been legally assigned or transferred to.

Whereas the term Financial debt defined under Section 5(8) means a debt along with interest,
if any, which is disbursed against the consideration for the time value of money and includes
any amount raised pursuant to the issue of bonds, notes, debentures, loan stock or any similar
instrument.

As per the facts, Mr. Raman, was an investor and a debenture holder of ‘Optionally Convertible
Debenture Bond (OPDB)’ issued by the Asset Ltd. With the debenture payable, as on the
maturity date with interest, it was disbursed against consideration for the time value of the
money. Thus, it can be said that debentures on maturity will come under that purview of
Section 5(8)(c). Since Mr. Raman is a person to whom a financial debt is owed, he will come
within the definition of Financial creditor.

(ii) Being a debenture-holder and shareholder of the company he, being a creditor is entitled to
claim debt amount. Therefore, as per section 7, Mr. Raman is entitled to file an application to
initiate CIRP against the M/s Asset Ltd.

ANS-7 MCQS

1. B

HINT: As per section 2 clause j, foreign source includes: -

i) The Government of any foreign country or territory and any agency of such Government;

(ii) Any international agency, not being the United Nations or any of its specialized agencies, the

World Bank, International Monetary Fund or such other agency as the Central Government
may, by notification, specify in this behalf

(iii) a foreign company

(iv) a corporation, not being a foreign company, incorporated in a foreign country or territory

(v) a multi-national corporation referred to in sub-clause (iv) of clause (g);

(vi) a company within the meaning of the Companies Act, 1956 (1 of 1956), and more than one-
half of the nominal value of its share capital is held, either singly or in the aggregate, by one or
more of the following, namely: -

(A) the Government of a foreign country or territory (B) citizens of a foreign country or territory
(C) corporations incorporated in a foreign country or territory

(D) trusts, societies or other associations of individuals (whether incorporated or not), formed
or registered in a foreign country or territory (E) foreign company

2. D

HINT : As per Section 2 clause h, = foreign contribution means the donation, delivery or transfer
made by any foreign source,— (i) of any article, not being an article given to a person as a gift
for his personal use, if the market value, in India, of such article, on the date of such gift, is not
more than 100,000

3. D

HINT : As per section 14(1) , The Central Government may, if it is satisfied after making such
inquiry as it may deem fit, by an order, cancel the certificate if: -

(a) the holder of the certificate has made a statement in, or in relation to, the application for
the grant of registration or renewal thereof, which is incorrect or false; or

(b) holder of certificate has violated any of terms and conditions of certificate or renewal
thereof; or

(c) in opinion of Central Government, it is necessary in the public interest to cancel the
certificate; or

(d) holder of certificate has violated any of provisions of this Act or rules or order made there
under

(e) if the holder of the certificate has not been engaged in any reasonable activity in its chosen
field for the benefit of the society for two consecutive years or has become defunct

4. A
HINT: As per section 17 sub sections 2, every bank or authorized person in foreign exchange
shall report to such authority as may be specified —

(a) Prescribed amount of foreign remittance

(b) the source and manner in which the foreign remittance was received (c) other particulars in
such form and manner as may be prescribed.

5. D

Hint: The jurisdiction of court is ousted as a valid arbitration agreement exists. As per Section 8,
if there is an arbitration agreement between the parties, the dispute shall not be submitted to
the court, but instead shall be submitted to arbitration.

6. (d)

Hint: As per section 23 of the IBC

7. (b) The resolution passed for liquidation is not valid in law as it has not been approved by
minimum of 66% of the voting shares of the financial creditors