Gurukripa’s Guideline Answers for May 2014 CA Inter (IPC) Law, Ethics, and Communication

Important Announcement – Companies Act 2013

As per ICAI Announcement dated 15.03.2014, only 53 Sections from
Companies Act, 2013 is applicable for Nov 2014 CA Inter (IPC) Exams.
(Balance only from Companies Act, 1956)
These 53 Sections are covered from page “FTR.65 to FTR.88” in this Book
with a corresponding Star Mark ( ) against the old Sections.

Gurukripa’s Guideline Answers to May 2014 Exam Questions

CA Inter (IPC) Law, Ethics & Communication
Note: Answers / Reference to Questions pertaining to Notified Sections of the Companies
Act, 2013 (applicable for Nov 2014 Exams) are given based on Companies Act, 2013
Question No.1 is compulsory (4 X 5 = 20 Marks).
Answer any five questions from the remaining six questions (16 X 5 = 80 Marks). [Answer any 4 out of 5 in Q.7]

Note: Page References given here are from the Book

Padhuka’s “Law, Ethics and Communication” – A Ready Referencer – CA Inter (IPC)

Q. Questions Reference/Marks Marks

Sunil borrowed a sum of ` 3 Lakhs from Rajendra. Sunil
appointed Rajendra as his agent to sell his Land, and
authorized him to appropriate the amount of loan out of
1(a)
the sale proceeds. Afterwards, Sunil revoked the agency.
Decide whether the revocation of the said agency by
Sunil is lawful.
Anson Ltd, held Equity Shares in Booban Ltd. Later on,
Anson Ltd, became a Subsidiary Company of Booban
1(b)
Ltd. Decide whether it is necessary for Anson Ltd, to
surrender the Equity Shares of Booban Ltd?
State with reasons whether the following statements are
1(c)
correct or incorrect:
(i) “Consumer Interest” and “Public Interest” are
synonymous.
(ii) The phrase “Iron Law of Responsibility” means that
the institution of business exists only because it
performs invaluable services towards its Promoters.
Page 1.97, Para 1C.4.23
Similar to Q.45, Page 1.103
5
Hint: In this case, the Agency is coupled with
interest of the Agent. So, Sunil cannot revoke
the authority delegated to Rajendra.
Page FTR.70 – Sec. 19 of COA 2013
Hint: Shareholding is permissible, where the
Subsidiary Company is a Shareholder even
5
before it became the Subsidiary. But, the
Subsidiary may not vote at Meetings of Holding
Company or any class of its Members.
Incorrect. Page 16.34, Q.42
3
[See Page 16.26, Para 16.7.10 for differences]
Incorrect. Page 16.9, Para 16.4.3, Point 1
Hint: If a business intends to retain its existing
2
social role and social power, it must respond to
Society’s needs constructively.

What important factors should be considered to make

1(d) Page 17.8, Para 17A.2.3 5
Oral Communication effective?
(i) Nimbaheda Textiles Ltd has 3 separate units at 3 Same as Page 3.22, Q.7
separate places in the country. Every unit of the said
Refer Page 3.5, Para 3.1.7
Company prepares and maintains separate Balance
Sheet and Profit & Loss Account. One of these units
2(a) is incurring continuous losses and hence bonus is Hint: If separate Financial Statements are 4
not paid to the Employees of this Unit. Decide prepared for each unit, they are treated as
whether the Employees of the said Unit can claim separate unit for calculation of Bonus. Hence, in
Bonus on the ground that the Unit incurring loss is a the given case, Employees cannot demand
Bonus. (Sec.3)
part of one single establishment?

May 2014.1
 
 Gurukripa’s Guideline Answers for May 2014 CA Inter (IPC) Law, Ethics, and Communication

Q. Questions Reference/Marks Marks

(ii) Aswani who was an Employee of Sun Television Ltd,
retired on 1st January 2013 after 30 years of
continuous service. The Company did not pay the
amount of Gratuity to Aswani till the end of
December 2013. Now, Aswani claims the amount of
Gratuity along with interest. Decide whether Aswani
will succeed in his claim.
What problems may arise at work place when ethical
2(b)
behaviour is not adopted?
Briefly explain the “Grapevine Chains” propounded by
2(c)
the experts in relation to informal way of communication.
(a) Explain the law relating to liability of Joint
Promisors in a contract. ‘D’, ‘E’ & ‘F’ who are
Partners in a Firm, jointly promised to pay
`1,50,000/– to ‘A’. Later on, ‘F’ became insolvent
and his private assets are sufficient to pay only
1/5th of his share of debt. ‘A’ recovers the whole
amount from ‘D’ through a legal action. Decide the
3 extent to which ‘D’ can recover the amount from ‘E’.
Similar to Page 5.14, Q.11,
Refer Page 5.8, Para 5.3.2 – Point 5
Hint: In case of non–payment of Gratuity within 4
the specified period, the Employer shall pay
simple interest at the rate notified by the Govt.
(not exceeding the rate for repayment of long–
term deposits).
Page 16.14, Para 16.5.2 4
Page 17.4, Para 17A.1.4, Point 6 4
Page 1.50, Para 1B.2.5, Point 3
Similar to Page 1.71, Q.15
Hint: D can recover ` 70,000 from E – being E’s
8
Share of ` 50,000 + E’s Share of loss due to
insolvency of F ` 20,000 [Loss due to insolvency
of F = `50,000 less amount realized from the
estate (1/5th) `10,000 = ` 40,000]

(b) What are the objects of the “Central Consumer Page 16.27, Para 16.7.13
Protection Council” in relation to protection of rights 4
Similar to Page 16.37, Q.86
of the consumers?
(c) Explain those elements which can be used to
Page 17.38, Para 17D.1.2 4
influence an “Organisational Culture”.

(a) State the provisions relating to Information Page FTR.72,

8
Memorandum / Red–Herring Prospectus. Sec.32 of Companies Act 2013

(b) What do you understand by the term “Acid Rain”?

How does it adversely affect the environment?
4 (c) Draft a Notice for calling the Meeting of the Board of
Directors of a Company. In this Meeting the following
transactions have to be proposed:
(i) Mr. X to be co–opted as an Additional Director.
(ii) Decision to be taken to Buy–back Company’s
Equity Shares.
(i) ‘A’ issued a Cheque for ` 5,000/– to ‘B’. ‘B’ did not
present the cheque for payment within reasonable
period. The Bank fails. However, when the Cheque
was ought to be presented to the Bank, there was
sufficient funds to make payment of the Cheque.
Now, ‘B’ demands payment from ‘A’. Decide the
liability of ‘A’.
5(a)
(ii) Ram has ` 2,000/– in his Bank Account and he has
no authority to overdraw. He issued a Cheque for `
5,000/– to Gopal which was dishonoured by the
Bank. Point out whether Gopal must necessarily give
notice of dishonour to Ram.
Page 16.20, Para 16.6.5 4
Page 18.3, Point 18.4
[Note: Student may draft a Notice similar to 4
the one available in Point 18.4]
Similar to Page 2.47, Q. 32
[Refer Case Law in Page 2.27]
Hint: Drawer is discharged from the liability to 4
pay the amount of the Cheque B. However, B
can sue the Bank for the amount of the Cheque.
Page 2.36, Para 2.6.11, Point 2(e)
Hint: In the given case, it is clear that Ram has
no authority to overdraw. So Gopal has to 4
necessarily give notice of dishonor to Ram u/s
138 within 30 days from the date of receipt of
information from the Bank as to dishonour.

May 2014.2
 
 Gurukripa’s Guideline Answers for May 2014 CA Inter (IPC) Law, Ethics, and Communication
Q. Questions
Which matters are considered to be “Ordinary” matters at
the AGM of a Company? What kind of resolution is
5(b)
required to be passed for ‘Ordinary Business’ and for
‘Special Business’ in an AGM?
What do you understand by “Discrimination”? Which
5(c) basic elements are involved in discrimination in
employment?
(a) What restrictions are applicable when Articles of
Association of a Company are altered?
(b) Draft a ‘Gift Deed’ assuming your own facts
regarding parties & subject matter relating to gift.
(c) State whether the following statements are Correct
or Incorrect:
(i) The concept of Legal Personality of a Company
is of absolute nature.
(ii) Contracts entered into by a Company after its
6 incorporation and before it is entitled to
commence business are not binding until the
Company becomes entitled to commence
business.
(iii) A Minor, on his attaining majority, can validate
any agreement which was entered into when he
was minor and which was void.
(iv) Maintenance and Champerty are void in England
but not in India, till they are not opposed to
public policy.
(a) Solar Industries Ltd sold its unit to Mars Industries
Ltd and contributed 30% Contribution in the Pension
7 Scheme. The Transferee Company refused to bear
the balance 70% contribution in the Pension Scheme.
Decide the liability of remaining contribution.
May 2014.3
Reference/Marks Marks
Issue 1: Ordinary Business in AGM: Refer
Page FTR.79, Sec.102(2) of Companies Act 2013
Issue 2: (a) Nature of Business depends upon
the Meeting in which the business is taken for
resolution. (b) Nature of Resolution is expressly
provided in the relevant section.
There may be Ordinary Business which requires
Special Resolution. Likewise, some Special
Business may require Ordinary Resolutions Only. 4
Example 1: A Company in which 25% of
Subscribed Capital is held by Govt / PFI / Banks
/ Insurance Co’s requires a Special Resolution
for appointment of Auditors, though the business
is Ordinary, in an AGM.
Example 2: Proposal for increase on Authorized
Capital requires an Ordinary Resolution,
though the business is “Special” in an AGM.
Page 16.16, Para 16.5.7, Points 1 & 2 4
Page 8.10, Para 8.2.5, Item B 8
Refer Page 18.20 [Student may draft a Gift
4
Deed similar to the one available in Page 18.20]
Correct. Refer Page 6.2, Para 6.1.2
Point 2 – Separate Legal Entity & Point 3 –
Perpetual Succession
Correct. Refer Provisional Contract in
Page 7.7, Para 7.3.2 4
Incorrect. Minor cannot ratify any contract on
attaining majority. Page 1.14, Para 1A.4.3,
Point 1
Correct.
Refer Page 1.44, Para 1B.1.11, Point 5
Similar to Page 4.23, Q.3
Hint: The Transferor Company and Transferee
Company shall be jointly and severally liable for
the remaining contribution of 70%. However, 4
the liability of the Transferee Company shall be
limited to the value of assets obtained pursuant
to transfer.
 Gurukripa’s Guideline Answers for May 2014 CA Inter (IPC) Law, Ethics, and Communication

Q. Questions Reference/Marks Marks

(b) What is “Return of Allotment”? List the documents
which have to be enclosed when Shares are allotted
on discount.
(c) Decide whether Mr. Prabhu can incorporate a new
Company using the phrase “Electoral Trust” with the
name of the Company.
Issue 1: Meaning of Return of Allotment:
Refer Page FTR.74 and also Page 10.28
Issue 2: Refer Page 10.28, Para 10.4.10, 4
Point 3. However under the Companies Act,
2013, no Company can issue shares at a
discount, and hence the situation does not arise.
The phrase “Electoral Trust” may be allowed for
registration of Companies to be formed u/s 8 of
Companies Act, 2013 (Section 25 of COA 1956)
under the Electoral Trust Scheme 2013 as
notified by Central Board of Direct Taxes
(CBDT). However the Company to be formed
shall be a new Company which shall also comply
with other provisions of the Act, accompanied by
an affidavit to the effect that name shall be used
only for registration of Companies to be formed 4
under Electoral Trust Scheme. [MCA Circular
No.12/2013 dt.28.6.13]

Hint: In the given case Mr. Prabhu can use the

phrase “Electoral Trust” only for the purpose of
incorporating a New Company u/s 8 of
Companies Act, 2013 complying with the
Electoral Trust Scheme issued by CBDT.

(d) What are the guidelines for “Active Listening”? Page, 17.19, Para 17B.2.2 4

Page: 16.19 [Para: 16.6.2 to 16.6.8]

(e) Which threats are existing in environment which
adversely affects the fundamental principles of
ethics?
[A brief overview of various threats like Water 4
Pollution, Air Pollution, etc and its effects shall
be given in the answer.]

Important Announcement – Companies Act 2013

As per ICAI Announcement dated 15.03.2014, only 53 Sections from
Companies Act, 2013 is applicable for Nov 2014 CA Inter (IPC)
Examinations. (Balance only from Companies Act, 1956)
These 53 Sections are covered from page “FTR.65 to FTR.88” in the Book
Padhuka’s Law, Ethics and Communication – A Referencer – CA Inter (IPC)
with a corresponding Star Mark ( ) against the old sections.

May 2014.4