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Test Series: October, 2023
MOCK TEST PAPER
FINAL COURSE GROUP – II
PAPER 6D: ECONOMIC LAWS
SUGGESTED ANSWERS
Answer to Case Study 1
1.1 (c)
1.2 (b)
1.3 (b)
1.4 (d)
1.5 (b)
1.6 As per Rule 8 of the Security Interest (Enforcement) Rules, 2002 which deals with Sale of immovable
secured assets, following steps are required to be followed –
(a) Possession Notice: Where the secured asset is an immovable property, the authorised officer
shall take or cause to be taken possession, by delivering a possession notice, to the borrower and
by affixing the possession notice on the outer door or at such conspicuous place of the property.
[Rule 8(1)]
Thus, the possession notice displayed at the bottom of the door is incorrect. It should be placed at
the conspicuous place of the property.
(b) Possession Notice to be published in Newspaper: The possession notice shall also be
published in two leading newspaper, one in vernacular language having sufficient circulation in that
locality, by the authorised officer. [Rule 8(2)]
(2A) All notices under these rules may also be served upon the borrower through electronic mode
of service. [Rule 8(2)]
(c) Actual possession of immovable property: In the event of possession of immovable property
which is actually taken by the authorised officer, such property shall be kept in his own custody or
in the custody of any person authorised or appointed by him, who shall take as much care of the
property in his custody as an owner of ordinary prudence would, under the similar c ircumstances,
take of such property. [Rule 8(3)]
(d) Insurance of immovable property: The authorised officer shall take steps for preservation and
protection of secured assets and insure them, if necessary till they are sold or otherwise disposed
of. [Rule 8(4)]
(e) Valuation of property: Before effecting sale of the immovable property, the authorised off icer
shall obtain valuation of the property from an approved valuer and in consultation with the secured
creditor, fix the reserve price of the property and may sell the whole or any part of such immovable
secured asset by any of the following methods:—
• by obtaining quotations from the persons dealing with similar secured assets or otherwise
interested in buying of such assets; or
• by inviting tenders from the public;
• by holding public auction including through e-auction mode; or
• by private treaty. [Rule 8(5)]

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(f) Notice to borrower and publication in newspaper:
The authorised officer shall serve to the borrower a notice of 30 days for sale of the immovable
secured asset.
Provided that if the sale of such secured asset is being effected by either inviting tenders from the
public or by holding public auction, the secured creditor shall cause a public notice in two leading
newspapers one in vernacular language having sufficient circulation in the locality by setting out
the terms of sale, which shall include, -
(a) the description of the immovable property to be sold, including the details of the
encumbrances known to the secured creditor;
(b) the secured debt for recovery of which the property is to be sold;
(c) reserve price, below which the property may not be sold;
(d) time and place of public auction or the time after which sale by any other mode shall be
completed;
(e) depositing earnest money as may stipulated by the secured creditor;
(f) any other thing which the authorised officer considers it material for a purchaser to know in
order to judge the nature and value of the property. [Rule 8(6)]
All the other steps are followed by the authorised officer as mentioned above. Lets see whether
the publication in newspaper is according to the steps prescribed above.
As per the decided Case Law of Anil Kumar Batla v. Allahabad Bank, W.P. (C) No. 1135 of 2014 dated
19th August, 2014), (High Court of Delhi), the property was situated in Faridabad. The question raised
before the Appellate Tribunal was whether the newspaper namely 'Economic Times' (in English) and
'Bharat Sahara' (in Hindi) had sufficient circulation in Faridabad. In so far as the 'Economic Times' is
concerned, there was nothing on record that it has sufficient circulation in Faridabad. There is some
merit in the submission of respondent No. 2 that the newspaper 'Economic Times' is generally purchased
by a specific class of people who are interested in financial matters. The intent of sub-rule (6) of rule 8
of the Enforcement Rules, is to ensure a widest publicity in order to get a best price for the property.
The word "sufficient" has been defined in the Oxford Dictionary to mean 'adequate' (esp. in qua ntity or
extent) for a certain purpose; enough (for a person or thing, to do something). There is no evidence on
record that there is sufficient or adequate circulation of this newspaper (Economic Times) in Faridabad.
Further, the property in question is a residential house and not a commercial property. However, one
would not primarily rest its finding for publication in the Economic Times. There is a specific finding that
'Bharat Sahara' has an independent edition for the State of Haryana. There is also a finding that the
public notice was published in the Delhi Edition of 'Bharat Sahara', that too, on a page which was meant
for 'East Delhi'. It is a matter of knowledge that East Delhi is a Trans Yamuna area, abutting the city of
Ghaziabad and Noida in UP, and is in the other direction to Faridabad which abuts Badarpur, South East
Delhi.
It was held by the High Court of Delhi that auction sale on the basis of notice published in n ewspaper
having low circulation in locality where property was situated was not valid.
Thus, in the instant case, the act of authorised officer to put the notice for auction as well as
possession notice for sale of residential properties was invalid and not in compliance as per the
legal requirements.
1.7 Section 14 of the Real Estate (Regulation and Development) Act, 2016 requires a promoter to adhere
to the sanctioned plans and the project specifications.
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(1) Promoter to adhere to the approved plans: The proposed project shall be developed and
completed by the promoter in accordance with the sanctioned plans, layout plans and
specifications as approved by the competent authorities.
(2) Disclosure of approved plans to the purchaser: Notwithstanding anything contained in any law,
contract or agreement, after the sanctioned plans, layout plans and specifications and the nature
of the fixtures, fittings, amenities and common areas, of the apartment, plot or building, as the case
may be, as approved by the competent authority, are disclosed or furnished to the person who
agree to take one or more of the said apartment, plot or building, as the case may be, the promoter
shall not make—
(i) any additions and alterations in the sanctioned plans, layout plans and specifications and the
nature of fixtures, fittings and amenities described therein in respect of the apartment, plot or
building, as the case may be, which are agreed to be taken, without the previous consent of
that person.
Provided that the promoter may make such minor additions or alterations as may be required
by the allottee, or such minor changes or alterations as may be necessary due to architectural
and structural reasons duly recommended and verified by an authorised Architect or Engineer
after proper declaration and intimation to the allottee.
Explanation.—For the purpose of this clause, "minor additions or alterations" excludes
structural change including an addition to the area or change in height, or the removal of part
of a building, or any change to the structure, such as the construction or removal or cutting
into of any wall or a part of a wall, partition, column, beam, joist, floor including a mezzanine
floor or other support, or a change to or closing of any required means of access ingress or
egress or a change to the fixtures or equipment, etc.
(ii) any other alterations or additions in the sanctioned plans, layout plans and specifications of
the buildings or the common areas within the project without the previous written consent of
at least two-thirds of the allottees, other than the promoter, who have agreed to take
apartments in such building.
Explanation.—For the purpose of this clause, the allottees, irrespective of the number of
apartments or plots, as the case may be, booked by him or booked in the name of his family,
or in the case of other persons such as companies or firms or any association of individuals,
etc., by whatever name called, booked in its name or booked in the name of its associated
entities or related enterprises, shall be considered as one allottee only.
The type of alterations which DBBI Developers Ltd intends to carry fall under Section 14(2)(ii)
of the Real Estate (Regulation and Development) Act, 2016 which requires written consent of
the 2/3rd of the total allottees.
The written consent of the allotee obtained is as under:
Out of the 5 approvals obtained from Mr. Aamir for 5 different flats booked by them, only
following will be counted for the purpose of counting the number of allotees:
• 1 flat in the name of Mr. Aamir will be counted.
• 1 flat in the name of Mr. Adir, son of Mr. Aamir who is settled in USA will be counted
since he will not be counted under the family as per Section 2(x) of Real Estate
(Regulation and Development) Act,2016,”family" includes husband, wife, minor son and
unmarried daughter wholly dependent on a person. Since Mr. Adir is independent, he
will not be counted under the definition of family.

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• 1 flat in the name of Aamir Industries Ltd and one partnership firm where Mr. Aamir is
10% partner will not be counted as per Section 14 (2) of Real Estate (Regulation and
Development) Act, 2016.
• 1 flat in the name of Mr. Aamir’s wife who works in TCS will not be counted as Mr. Aamir’s
wife is counted under the definition of family and thus on a combined reading of Section
14(2) and Section 2(x) of Real Estate (Regulation and Development) Act, 2016, this flat
will not be counted for the number of allottee.
Thus, out of above 5 flats, only 2 flats will be counted for the purpose of allottee. Thus, in all 42
allottees plus 2 allottees = 44 allottees gave their approval. Approval of 2/3 rd number of allottees is
a must for making any alterations in the layout of the plan. Thus, out of 70 allottees, 2/3*70=47
allottees should grant their approval. Since only 44 allottees have given their appr oval, it does not
meet the 2/3rd criteria required for changes in layout of the plan.
Since the 2/3rd criteria is not met, DBBI Developers Ltd. cannot undertake the changes in the layout
of the plan.
So the procedure followed by DBBI Developers Ltd. to obtain the written consent is correct
but without obtaining the 2/3 rd consent, it undertook the changes in the layout of the plan is
incorrect.
1.8 Section 15(2) of Real Estate (Regulation and Development) Act, 2016 deals with the responsibilities of
Vishwas Developers Ltd in respect of Exulus Towers.
New Promoter to comply the pending obligations: On the transfer or assignment being permitted by
the allottees and the Authority under sub-section (1), the intending promoter shall be required to
independently comply with all the pending obligations under the provisions of this Act or the rules and
regulations made thereunder, and the pending obligations as per the agreement for sale entered into by
the erstwhile promoter with the allottees.
It is provided that any transfer or assignment permitted under provisions of this section shall not result
in extension of time to the intending promoter to complete the real estate project and he shall be required
to comply with all the pending obligations of the erstwhile promoter, and in case of default, such intending
promoter shall be liable to the consequences of breach or delay, as the case may be, as provided under
this Act or the rules and regulations made thereunder.
Thus, as per above, Vishwas Developers can’t seek for extension of the project “Exulus Towers”.
It is bound to complete the project within the time frame committed by the DBBI Developers Ltd.
Answer to Case Study 2
2.1 (b)
2.2 (b)
2.3 (a)
2.4 (b)
2.5 (c)
2.6 As per Section 5A(1) of the SARFAESI Act, 2002, if an Asset Reconstruction Company (ARC) acquires
a financial asset that comprises secured debts from more than one bank or financial institution, and
each of those banks or financial institutions has filed applications before two or mo re Debt Recovery
Tribunals (DRTs), the ARC has the authority to file an application to the Debt Recovery Appellate
Tribunal (DRAT). The purpose of this application is to request the transfer of all pending applications
related to the financial asset to any one of the DRTs as deemed fit by the ARC.

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Upon receiving such an application, the DRAT, in accordance with Section 5A(2) of the SARFAESI Act,
will provide an opportunity for all the parties involved to be heard. After considering the arguments and
representations, the DRAT may pass an order for the transfer of all the pending applications to any one
of the DRTs.
Section 5A(3) of the said Act, provides that, notwithstanding anything contained in the RDB Act, 1993,
any order passed by the DRAT shall be binding on all the DRTs, as if such order had been passed by
the DRAT having jurisdiction on each such DRT.
Further, as per Section 5A(4) of the said act, any recovery certificate, issued by the DRT to which all the
pending applications are transferred, shall be executed in accordance with the provisions contained in
section 19(23) and other provisions of the RDB Act, 1993 shall, accordingly, apply to such execution.
Thus, Dravin ARC Pvt. Ltd. needs to make an application to the DRAT for making such transf er of
pending applications and the DRAT will pass an order for such transfer after providing an opportunity
for all the parties involved to be heard.
2.7 The Adjudicating Authority needs to consider two key factors before approving the resolution plan unde r
Section 30(4) of the IBC, 2016. Firstly, the Authority must be satisfied that the resolution plan meets the
requirements as per Section 30(2) of the IBC. Secondly, the Authority must ensure that the resolution
plan has provisions for its effective implementation.
Once the Adjudicating Authority approves the resolution plan, it becomes binding on various
stakeholders involved in the resolution process. These stakeholders include the corporate debtor, its
employees, members, creditors (including the Central Government, State Government, or any local
authority to whom a debt is owed), statutory authorities to whom dues are owed, guarantors, and other
stakeholders involved in the resolution plan.
2.8 According to Section 50(1)(a) of the RERA Act, 2016, a Chairperson, Judicial Member, Technical
Member, or Administrative Member, upon cessation of office, is restricted from accepting any
employment in, or connected with, the management or administration of any person or organization
associated with any work under the RERA Act.
While there is an exception stated in Section 50(1)(a), which allows employment under the appropriate
Government, local authority, statutory authority, or certain specified entities, this exception does not
apply to employment with a real estate developer like Uttung Builders Pvt. Ltd. Accepting employment
with Uttung Builders Pvt. Ltd. would be considered in violation of the restrictions imposed by Section 50
of the RERA Act.
Therefore, based on the provisions mentioned, Mr. Sharma is restricted from accepting the employment
offer from Uttung Builders Pvt. Ltd. due to his previous role as a Judicial Member in the State RERA and
the potential conflict of interest that may arise.
2.9 According to Section 57 of RERA, 2016, every order made by the Appellate Tribunal under this Act shall
be executable as a decree of civil court, and for this purpose, the Appellate Tribunal shall have all the
powers of a civil court.
Further, the Appellate Tribunal may also transmit any order made by it to a civil court having local
jurisdiction and such civil court shall execute the order as if it were a decree made by the court.
Thus, the order made in favor of Mr. Deepak shall be mandatorily executed as decree of civil court either
the Appellate Tribunal itself executes it is a decree or get it done from the civil court having local
jurisdiction.

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2.10 To qualify for a lesser penalty under the Competition Commission of India (Lesser Penalty) Regulations,
2009, CMS Corp. Ltd. must comply with the conditions outlined in Regulation 3. These conditions are
as follows:
1. Cease participation in the cartel: CMS Corp. Ltd. must immediately stop any further participation
in the cartel from the time of its disclosure, unless otherwise directed by the Commission.
2. Provide vital disclosure: CMS Corp. Ltd. is required to provide essential disclosure regarding the
contravention of the provisions of Section 3 of the Act.
3. Provide all relevant information, documents, and evidence: CMS Corp. Ltd. must furnish all
relevant information, documents, and evidence as may be requested by the Commission during
the investigation and other proceedings.
4. Genuine and continuous cooperation: CMS Corp. Ltd. should genuinely, fully, continuously, and
expeditiously cooperate with the Commission throughout the investigation and other proceedings.
5. Preservation of relevant documents: CMS Corp. Ltd. must not conceal, destroy, manipulate, or
remove any relevant documents that may contribute to establishing the existence of the cartel.
Additionally, if CMS Corp. Ltd. is an enterprise, it must provide the names of individuals involved in the
cartel on its behalf, seeking a lesser penalty for those individuals.
Failure to comply with the aforementioned conditions may result in the Commission freely using the
information and evidence submitted by CMS Corp. Ltd., as per Section 46 of the Act.
Furthermore, the Commission has the discretion to impose additional restrictions or conditions on CMS
Corp. Ltd. based on the facts and circumstances of the case.
The Commission's exercise of discretion in reducing the monetary penalty will consider factors such as
the timing of CMS Corp. Ltd.'s disclosure, the evidence already in possession of the Commission, the
quality of the information provided, and the overall facts and circumstances of the case.
Thus, CMS Corp. Ltd., to avail the benefit of a lesser penalty under the Competition Commission of India
(Lesser Penalty) Regulations, 2009, must adhere to the conditions specified in Regulation 3. Compliance
with these conditions, including ceasing participation in the cartel, providing vital disclosure, cooperating
genuinely, and preserving relevant documents, is crucial for CMS Corp. Ltd. to be eligible for a reduced
penalty.
Answer to Case study 3
3.1 (a)
3.2 (c)
3.3 (b)
3.4 (b)
3.5 (c)
3.6 As per the provision given under Section 9 of the Prevention of Money Laundering Act, 2002, where an
order of confiscation has been made in respect of any property of a person, all the rights and title in
such property shall vest absolutely in the Central Government free from all encumbrances.
Further section 10 of the Prevention of Money Laundering provides of m anagement of confiscated
properties –

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(1) The Central Government may, by order published in the Official Gazette, appoint as many of its
officers (not below the rank of a Joint Secretary to the Government of India) as it think fit to perform
the functions of an Administrator.
(2) The Administrator appointed by Central Government, shall manage the property in relation to which
an order has been made in such manner and subject to such conditions as may be prescribed.
(3) The Administrator shall also take such measures, as the Central Government may direct, to dispose
of the property, which is vested in the Central Government under Section 9.
Thus, the statement “Properties confiscated under the provisions of the Prevention of Money Laundering
Act, 2002, shall be available for disposal by the Ministry of Finance (i.e. Central Government) as and
when necessary”, is correct.
3.7 According to the scheduled offence given under the Prevention of Money Laundering Act, 2002 (PMLA),
under the Paragraph 22 of Part A which deals with the offences related to breach of confidentiality and
privacy under the Information Technology Act, 2000, the employee is liable.
The employee of R.S. Construction Ltd. in the given case, without the consent of Mr. Rajesh, accessed
the electronic records and passed on the official information to the vendor without permission.
This information tends to produce large profits to employee and legitimize the ill-gotten gains through
money laundering. It is punishable under Section 72 of the Information Technology Act, 2000 and hence,
as mentioned above, the employee is liable under PMLA.
3.8 As per the judgment given in Dalmia Cement Bharat Ltd. Vs State of AP, Hyderabad, under the PMLA,
a person is required to give truthful statement if such person is summoned by the Director. This power
to the director is given under section 50(2) of PMLA which provides that Director (or additional director,
joint director, deputy director or assistant director) has the power to summon any person whose
attendance he considers necessary whether to give evidence or to produce any records during the
course of any investigation or proceeding. All such summoned persons are bound to state the truth or
make statements, and produce such documents as may be required [Section 50(3) of PMLA].
Furthermore, the court held that “The protection under Article 20(3) of the Constitution of India is
available at the stage of investigation, the court held that the provisions of Section 50 of PMLA are
required to be read down so as to ensure that petitioners are not prejudiced in the CBI case as well as
under PMLA.”
In line with said judgement, a statement made before ED, is binding on the accused without proof as
admission.
3.9 According to Section 6 (4) of the FEMA, 1999 read with the Foreign Exchange Management (Overseas
Investment) Rules, 2022, a person resident in India may hold, own, transfer or invest in foreign currency,
foreign security or any immovable property situated outside India if such currency, security or proper ty
was acquired, held or owned by such person when he was resident outside India or inherited from a
person who was resident outside India.
Further, as per Overseas Investment Rules, 2022, a person resident in India may acquire immovable
property outside India from a person resident outside India jointly with a relative who is a person resident
outside India.
For the purposes of these regulations, 'relative' in relation to an individual means husband, wife, brother
or sister or any lineal ascendant or descendant of that individual.
In the instance, Mr. Rajesh jointly bought a mansion with his cousin in London. Jointly purchasing of
mansion with the cousin is not included in the scope of relative as provided for the purpose of this
section.

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So the acquisition of the immovable property outside India (Mansion in London), jointly with Mr. Rajesh
is not valid.
Legal Consequences: As per Section 13 (1A) and (1C) of the FEMA, if any person is found to have
acquired any immovable property, situated outside India, of the aggregate value exceeding the threshold
prescribed under the proviso to Section 37A(1)-
• he shall be liable to a penalty up to three times the sum involved in such contravention a nd
confiscation of the value equivalent, situated in India from the immovable property.
• also punishable with imprisonment for a term which may extend to five years and with fine.
Answers to Case Study 4
4.1 (c)
4.2 (b)
4.3 (b)
4.4 (c)
4.5 (c)
4.6 As per Section 21(6A) of the Insolvency and Bankruptcy Code, 2016:-
(i) Where the financial debt of Alark Ltd. is in the form of securities or deposits (debentures, in the
given case) and the terms of the financial debt provide for the appointment of a trustee or agent
as the authorized representative, such trustee or agent would act on behalf of all the financial
creditors.
(ii) Where Alark Ltd. has a class of creditors exceeding the specified number, but their terms do
not provide for the appointment of a trustee or agent as the authorized representative for such
creditors, the interim resolution professional (IRP), Mr. Surya, is required to make an a pplication
to the Adjudicating Authority. The application should include a list of all financial creditors, along
with the name of an insolvency professional (other than the IRP) proposed to act as their authorized
representative who shall be appointed by the Adjudicating Authority prior to the first meeting of the
committee of creditors.
(iii) Where Alark Ltd. has a financial creditor represented by a guardian, executor, or administrator,
such individuals act as authorized representatives on behalf of the financial creditors. The
appointed representative attends committee of creditors meetings, represents the interests of the
financial creditors they represent, and exercises voting rights on their behalf, proportionate to their
respective voting share.
4.7 The following SOP has to be followed by designated AD Category-I banks in case of untraceable entities
who are found to be in contravention of reporting provisions for ECB by failing to submit prescribed
return(s) under the ECB framework, either physically or electronically, for past eight quarters or more.
i. Definition: Any borrower who has raised ECB will be treated as ‘untraceable entity’, if
entity/auditor(s)/director(s)/ promoter(s) of entity are not reachable/responsive/reply in negative
over email/letters/phone for a period of not less than two quarters with documented communication/
reminders numbering 6 or more and it fulfills both of the following conditions:
(a) Entity not found to be operative at the registered office address as per records available with
the AD Bank or not found to be operative during the visit by the officials of the AD Bank or
any other agencies authorised by the AD bank for the purpose;
(b) Entities have not submitted Statutory Auditor’s Certificate for last two years o r more
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ii. The bank should undertake the following actions:
(a) File a revised Form ECB, if required, and the last Form ECB 2 Return without certification
from the company, clearly marking it as 'UNTRACEABLE ENTITY' on top. The outstanding
amount will be treated as written-off from the external debt liability of the country but may be
retained by the lender for potential recovery through legal or non -legal means.
(b) The bank should not process any fresh ECB applications from Adhruti Ltd.
(c) The Directorate of Enforcement should be informed about the designation of Adhruti Ltd. as
an 'UNTRACEABLE ENTITY.'
(d) No inward remittance or debt servicing will be permitted for Adhruti Ltd. under the automatic
route.
In the case of Adhruti Ltd. being designated as an 'UNTRACEABLE ENTITY,' KL Wise Bank must
follow the SOP outlined in the reporting requirements for ECBs. This involves filing revised forms,
informing the Directorate of Enforcement, and restricting further ECB applications and transactions
for the entity. These measures are taken to address non-compliance with reporting provisions and
unresponsiveness of the borrower. The bank can retain the outstanding amount in its books for
recovery through judicial or non-judicial means.
4.8 According to Rule 19(1)(a) of the Foreign Exchange Management (Overseas Investment) Rules, 2022,
unless otherwise provided, no person resident in India can make an ODI in a foreign entity engaged in
real estate activity without specific approval from the Reserve Bank. Howe ver, it is important to
understand the definition of "real estate activity" as provided in the explanation to the sub -rule.
"Real estate activity" refers to the buying and selling of real estate or trading in Transferable
Development Rights (TDR). However, it explicitly excludes the development of townships, construction
of residential or commercial premises, roads, or bridges for selling or leasing.
Further, Rules 19(2) and 19(3) of the said rules, provides that any ODI in start-ups recognised under the
laws of the host country or host jurisdiction as the case may be, shall be made by an Indian entity only
from the internal accruals whether from the Indian entity or group or associate companies in India and
in case of resident individuals, from own funds of such an individual.
No person resident in India shall make financial commitment in a foreign entity that has invested or
invests into India, at the time of making such financial commitment or at any time thereafter, either
directly or indirectly, resulting in a structure with more than two layers of subsidiaries:
Based on this provision, the representative of KL Wise Bank would advise Aamnay Ltd. that if the foreign
entity's activities fall within the definition of "real estate activity" as defined in the regulations, specific
approval from the Reserve Bank would be required to proceed with the ODI. However, if the foreign
entity's activities involve the development of townships, construction of residential or commercial
premises, roads, or bridges for selling or leasing, the ODI may be permissible without the need for
specific approval.
Further, if the foreign entity, All Blossom Inc., is a start up then the ODI shall be made only from the
internal accruals and also it should also be checked that the said foreign entity has not invested or
invests into India which results in a structure with more than two layers of subsidiaries, at the time of
making such financial commitment of ODI by Aamnay Ltd. or at any time thereafter, either directly or
indirectly.

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4.9 The bankruptcy proceedings against Mr. Saurabh Kapadiya, the personal guarantor, should be
transferred to the NCLT in Mumbai, where the insolvency proceedings against the corporate debtor
(Alark Ltd.) are already pending.
The Supreme Court clarified in the case of State Bank of India Vs. V. Ramakrishnan & Anr. [CA No. 3595
of 2018, dated 14.08.2018] held that the insolvency resolution and liquidation for both CDs and personal
guarantors, the AA for which shall be the NCLT having territorial jurisdiction over the place where the
registered office of the corporate person is located. The scheme of section 60(2) and (3) is clear that
the moment there is a proceeding against the CD pending under the Code, any bankruptcy proceeding
against the individual personal guarantor will, if already initiated before the proceeding against the CD,
be transferred to the NCLT or, if initiated after such proceedings had been commenced against the CD,
be filed only in the NCLT.
Thus, to conclude, any bankruptcy proceeding against the personal guarantor should either be initiated
in the NCLT if it was initiated after the proceedings against the corporate debtor commenced, or
transferred to the NCLT if it was initiated before the proceedings against the corporate debtor.
Answers to Case Study 5
5.1 (a)
5.2 (a)
5.3 (d)
5.4 (b)
5.5 (a)
5.6 (i) Whether ACS holds a dominant position in the relevant market
As per explanation (a) to section 4 of the Competition Act, 2002, “dominant position” means a
position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to
(i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its
competitors or consumers or the relevant market in its favour.
ACS didn’t enjoy dominance when it came up initially with the testing software, but after few years
of success, ACS truly acquired the dominant position. Quite a large share i.e. 45% of the segment
of the market, is a clear indicator of their dominance in the relevant market online testing. In the
journey of being zero to acquiring 45% market share, ACS has affected the competitors particularly,
those who are small and in early years of operation, who can’t sustain the heat of low price
competition. ACS has captured the market by its own penetration strategy, independent of market
forces. Here, it is to be mentioned that maintaining of the dominant position in the relevant market
is not prohibited, but abuse of the dominant position in the relevant market is prohibited.
(ii) Whether its actions tantamount to abuse of dominant position.
Further, Section 4(2)(a)(ii) says, there shall be an abuse of dominant position under sub-section
(1) of section 4, if an enterprise or a group directly or indirectly, impo se unfair or discriminatory
prices in purchase or sale.
ACS increased the prices to ` 825/- and `525/- per candidate for online test at the centre and remote
respectively. Even then, ACS successfully managed to retain 40% of the market share (reduced from
45%). The loss of market share was compensated by high profits due to enhanced prices, hence the
bottom line improved a bit. However, one of the reasons that ACS was able to substantially retain its
existing market share is the fact that it offers better technology i.e. Software that is AI-equipped, that
gives its additional competitive advantage and leverage over others and such better technology can
be considered as a justifiable reason for such increase in prices which have also not crossed the
market prices that prevailed when ACS had entered the market of online testing.
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According, it does not amount to an abuse of the dominant position.
5.7 The provision relating to Prohibition of Anti-Competitive Agreements has been defined under the
Competition Act, 2002 as under:
Prohibition of Anti-Competitive Agreements [Section 3(1)]
No enterprise or association of enterprises or person or association of persons shall enter into any
agreement in respect of production, supply, distribution, storage, acquisition; or control of goods; or
provision of services, which causes or is likely to cause an appreciable adverse effect on competition
within India.
The clause Appreciable Adverse Effect on Competition (AAEC) has been defined under the
Competition Act as under:
The probable factors mentioned under section 19(3) of the Act, that need to be looked into whilst
determining whether or not an agreement is likely to have an AAEC in the market are provided in the
Act.
These factors mentioned under section 19(3) of the Act, provide that the Commission while deciding
whether or not an agreement is likely to have an AAEC in the market shall bring into consideration any
or all of the following factors:
• creation of barriers to new entrants in the market;
• driving existing competitors out of the market;
• foreclosure of competition by hindering entry into the market;
• accrual of benefits to consumers;
• improvements in production or distribution of goods or provision of services; and
• promotion of technical, scientific and economic development by means of production or distribution
of goods or provision of services.
Further Anti-Competitive Agreements are Void Agreements – Section 3(2), the provision is mentioned
as under:
Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void.
(3) Any agreement entered into between enterprises or associations of enterprises or persons or
associations of persons or between any person and enterprise or practice carried on, or decision taken
by, any association of enterprises or association of persons, including cartels, engaged in identical or
similar trade of goods or provision of services, which—
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development, investment or provision of
services;
(c) shares the market or source of production or provision of services by way of allocation of
geographical area of market, or type of goods or services, or number of customers in the market
or any other similar way;
(d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an
appreciable adverse effect on competition: Provided that nothing contained in this sub-section shall
apply to any agreement entered into by way of joint ventures if such agreement increases efficiency
in production, supply, distribution, storage, acquisition or control of goods or provision of services.
Explanation.—For the purposes of this sub-section, "bid rigging" means any agreement, between
enterprises or persons referred to in sub-section.

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Analysis of the given case and conclusion: In the instant case, ACS (Started by Mr. Arvind along with
Mr. Pandu) in order to penetrate in the market and capture reasonable share, entered a Platform as a
Service (PAAS) agreement with the top universities in different cities to use their respective computer
lab facilities for running LMS. They reduced the price of online test at the centre and remote and offered
the charges of ` 700 and ` 400 respectively against the prevailing market prices of ` 850 and ` 550.
This resulted that after few years of the success of testing LMS in the market, ACS market share reached
45% in the online testing segment. Due to this, many small and standalone players in the industry had
to quit. During this time Pandu (of ACS) decided to increase the prices to ` 825 and ` 525 per candidate
for online tests at the centre and remote respectively and ACS successfully managed to retain a 40%
market share. Using its PAAS with the one of the top universities ACS came up with dynamic pricing
algorithm based on which the fee for the course was decided in a way that it could retain 20% of the fee
as their revenue and remitted the balance to the university (as their internal arrangements although both
the university and the student did not have a role in the pricing model).
In the above manner ACS limited controlled the markets by first reducing their AI-equipped testing
services first by reducing their penetrating prices lower than the market price and the n increasing their
prices but were still lower than the market prices. This resulted many small and standalone players in
the industry to quit and only those who reduced their prices (and were able to cover their operating costs
with such reduced prices) were able to survive. This amounts to AAEC in violation to section 3(3) (b)
and NOT in terms of section 3(3)(a) as cited in the question.
Therefore, these acts of ACS have caused appreciable adverse effect on competition in violation to the
section 3(3)(b) and not section 3(3)(a).
5.8 As per Section 5(6) of the Insolvency and Bankruptcy Code, 2016, dispute includes a suit or arbitration
proceedings relating to—
(a) the existence of the amount of debt;
(b) the quality of goods or service; or
(c) the breach of a representation or warranty;
In the given case, ACS sent an email for dispute, post the time period for submitting a notice of dispute
under section 8 of the code. In terms of section 8(2)(a), which states that the corporate debtor shall
within a period of 10 days of the receipt of the demand notice or copy of invoice bring to the notice of
the operational creditor existence of a dispute. The ACS had not replied to the aforesaid notice. ACS
sent mail only after the initiation of the CIRP by the operational creditor. This reflects that dispute was
not pre- existing and was thought afterwards.
In the case of Mobilox Innovations (P.) Ltd. Vs Kirusa Software (P.) Ltd. [Civil Appeal No. 9405 of 2017],
the Supreme Court of India, dated 21.09.2017, the court decided that the dispute must truly exist in fact
and is not spurious, hypothetical or illusory.
Conclusion:
Thus, in the given case, the adjudicating authority cannot reject the application of S&N on the ground
that the amount claimed is under dispute.
5.9 As per Section 9 of the Insolvency and Bankruptcy Code, 2016, the operational creditor shall, along with
the application filed in the prescribed form, furnish, interalia,-

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A copy of the certificate from the financial institutions maintaining accounts of the operational creditor
confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available;
The words ‘if available’ used in section 9(3) make it evident that such certificate shall only be submitted
if such a copy is available.
Hence, the application of S & N cannot be rejected on the grounds of the non-availability of a ‘Certificate
from a financial institution’. Hence, the non-availability of the certificate from a financial institution does
not impact the CIRP.
In the case of Macquarie Bank Limited Vs. Shilpi Cable Technologies Ltd. [Civil Appeal No. 15135 of
2017] the Supreme Court of India, dated 15.12.2017, opined that Section 9(3) of The Insolvency and
Bankruptcy Code, 2016 is directory in nature.

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