LAW QUESTION BANK

LAW QUESTION BANK :The Companies Act, 1956

Question

The object clause of the Memorandum of Association of LSR Private Ltd, Lucknow authorized it to do trading in fruits and vegetables. The company, however, entered into a Partnership with Mr. J and traded in steel and incurred liabilities to Mr. J. The Company, subsequently, refused to admit the liability to J on the ground that the deal was ‘Ultra Vires’ the company. Examine the validity of the company’s refusal to admit the liability to J. Give reasons in support of your answer. (May 2007)

Question

VRS Company Ltd. is holding 45% of total equity shares in SV Company Ltd. The Board of Directors of SV Company Ltd. (incorporated on January 1, 2004) decided to raise the share capital by issuing further Equity shares. The Board of Directors resolved not to offer any shares to VRS Company Ltd, on the ground that it was already holding a high percentage of the total number of shares already issued, in SV Company Ltd. The Articles of Association of SV Company Ltd. provide that the new shares be offered to the existing shareholders of the company. On March 1, 2007 new shares were offered to all the shareholders except VRS Company Ltd. Referring to the provisions of the Companies Act, 1956 examine the validity of the decision of the Board of Directors of SV Company Limited of not offering any further shares to VRS Company Limited.(May 2007)

Question

X, a registered shareholder of Y Limited left his share certificates with his broker. A forged the transfer deed in favour of Z, accompanied by these share certificates lodged the transfer deed alongwith the share certificates with the company for registration. The Company Secretary who had certain doubts, wrote to X informing him of the proposed transfer and in the absence of a reply from him (X) within the stipulated time, registered the transfer of shares in the name of Z. Subsequently, Z sold the shares to J and J’s name was placed in the register of shareholders. Later on, X discovered that forgery has taken place.

Referring to the provisions of the Companies Act, 1956, state the remedy available to X and Z in the given case. Explain. (May 2007)

Question

The paid-up Share Capital of AVS Private Limited is Rs. 1 crore, consisting of 8 lacs Equity Shares of Rs. 10 each, fully paid-up and 2 lacs Cumulative Preference Shares of Rs. 10 each, fully paid-up. XYZ Private Limited and BCL Private Limited are holding 3 lacs Equity Shares and 1,50,000 Equity Shares respectively in AVS Private Limited.

XYZ Private Limited and BCL Private Limited are the subsidiaries of TSR Private Limited.

With reference to the provisions of the Companies Act, 1956, examines whether AVS Private Limited is a subsidiary of TSR Private Limited ? Would your answer be different if TSR Private Limited has 8 out of total 10 directors on the Board of Directors of AVS Private Limited? (May 2007)

Question

State the purposes for which the object clause of the Memorandum of Association of a public limited company, registered under the Companies Act, 1956, can be altered. (May 2007)

Question

Explain the provisions of the Companies Act, 1956 relating to the ‘Service of Documents’ on a company and the members of the company. When is service of document deemed to be effective in case the document is sent by post ?Explain. (May 2007)

Question

State any six charges which are required to be registered under the provisions of the Companies Act, 1956. What is the effect of non-registration of a charge required to be registered under the Act ? Explain. (May 2007)

Question

Though six out of seven signatures to the Memorandum of Association of a company were forged, the company was registered and the Certificate of Incorporation was issued. Can the registration of the company be challenged subsequently on the ground of forged signatures ?

Question

Who are the persons entitled to receive notice of a general meeting of a company, registered under the Companies Act, 1956 ? Shall the non-receipt of notice of the general meeting by any member invalidate the proceedings of the meeting ? Explain. (May 2007)

Question

ABC Limited served a notice of a general meeting upon its members. The notice stated that a resolution to increase the Share Capital of the company would be considered at the meeting. A member complains to the company that the amount of the proposed increase was not specified in the notice. In the light of the provisions of the Companies Act, 1956, examine the validity of the notice. (May 2007)

Question

XYZ Limited held its Annual General Meeting on September 15, 2006. The meeting was presided over by Mr. V, the Chairman of the Company’s Board of Directors. On September 17, 2006, Mr. V, the Chairman, without signing the minutes of the meeting, left India to look after his father who fell sick in London. Referring to the provisions of the Companies Act, 1956, state the manner in which the minutes of the above meeting are to be signed in the absence of Mr. V and by whom. (May 2007)

Question

A limited company is formed with its Articles stating that one Mr. X shall be the solicitor for the company, and that he shall not be removed except on the ground of misconduct. Can the company remove Mr. X from the position of solicitor even though he is not guilty of misconduct? (November 2007)

Question

For a special resolution in a Company's general meeting, 10 voted in favour, 2 against and 4 abstained. The chairman declared the resolution as passed. Is it a valid resolution as per the provisions of the Companies Act, 1956. (November 2007)

Question

While sanctioning working capital limit of a company, the rate of interest has been fixed at a specified percentage above the bank rate as notified by the Reserve Bank of India. There was a change in the interest rate due to RBI notification issued later. The bank insisted on filing a return of modification of charges. Is the stand of the bank correct? Discuss this in the light of the provisions of the Companies Act, 1956. (November 2007)

Question

Under what circumstances a company can reduce its share capital? (November 2007)

Question

What is the concept of proxy in relation to the meetings of a Company? Decide the appointment and rights of a proxy, under the Companies Act, 1956, in the following cases:

(i) When a body corporate is a member in the company.

(ii) When a foreign company is a member in the company. (November 2007)

Question

X, a chemical manufacturing company distributed 20 lac (Rs. Twenty Lac) to scientific institutions for furtherance of scientific education and research. Referring to the provisions of the Companies Act, 1956 decide whether the said distribution of money was "Ultra vires' the company? (November 2007)

Question

How nomination facility shall operate in case of transmission of shares under the provisions of the Companies Act, 1956? (November 2007)

Question

Sunrise Limited submitted the documents for incorporation on 5th October, 2006. It was incorporated and certificate of incorporation of the company was issued by the Registrar on 20th October, 2006. The company on 14th October, 2006 entered into a contract which created its contractual liabilities. The company denies the said liability on the ground that company is not bound by the contract entered into prior to issuing of certificate of incorporation. Decide under the provisions of the Companies Act, 1956, whether the company can be exempted from the said contractual liability. (November 2007)

Question

P the secretary of a XYZ Limited issues a Share certificate in favour of A purporting to be signed by the directors and the secretary and the seal of the company affixed to it. In fact the secretary forged the signature of the directors and has affixed the seal without authority. Can A hold the company liable for the shares covered by the share certificate, under the provisions of the Companies Act, 1956? (November 2007)

Question

Examine the validity of the following with reference to the relevant provisions of the Companies Act, 1956:

(i) The Board of Directors of a company refuse to convene the extraordinary general meeting of the members on the ground that the requisitionists have not given reasons for the resolution proposed to be passed at the meeting.

(ii) The Board of Directors refuse to convene the extraordinary general meeting on the ground that the requisitions have not been signed by the joint holder of the shares.

(iii) Adjournment of extraordinary general meeting called upon the requisition of members on the ground that the quorum was not present at the meeting. (November 2007)

Question

What are the differences between "Share certificate and Share warrant"? (November 2007)

Question

ABC Pvt. Ltd., Company is a Private Company having five members only. All the members of the company were going by car to Mumbai in relation to some business. An accident took place and all of them died. Answer with reasons, under the Companies Act, 1956 whether existence of the company has also come to the end? (May 2008)

Question

Before the incorporation of the company, the promoters of the company entered into an agreement with Mr. Jainson to buy an immovable property on behalf of the company. After incorporation, the company refused to buy the said property. Advise Mr. Jainson whether he has any remedy under the provisions of the Companies Act, 1956? (May 2008)

Question

Explain the doctrine of “Ultra-vires”. What are the legal effects of ultra-vires transactions under the Companies Act, 1956? (May 2008)

Question

Under the Articles of Association of Sunshine Ltd. Company, directors had power to borrow up to Rs.10,000 without the consent of the general meeting. The Directors themselves lent Rs.35,000 to the company without such consent and took debentures of the Company. Decide under the provisions of the Companies Act, 1956, whether the company is liable? If so, what is the extent of liability of the company in this case? (May 2008)

Question

Explain the provisions and main contents of “Return of Allotment” under the Companies Act, 1956. (May 2008)

Question

Explain the concept of “Sweat Equity Shares”. Point out, under provisions of the Companies Act, 1956, the conditions of issuing of such shares and their position in the Share-capital of the Company. (May 2008)

Question 151

Peek Ltd. Co. issued and published its prospectus to invite the investors to purchase its shares. The said prospectus contained false statement. Mr. X purchased some partly paid shares of the company in good faith on the Stock Exchange. Subsequently, the company was wound up and the name of Mr. X was in the list of contributors. Decide:

(i) Whether Mr. X is liable to pay the unpaid amount?

(ii) Can Mr. X sue the directors of the company to recover damages? (May 2008)

Question

The Articles Association of PQR Ltd. provided that documents upon the company may be served only through E-mail. Arvind sent a document to the company by registered post. The company did not accept the document on the ground that sending documents to the company by post was in violation of the Articles. As a result Arvind suffered loss. Decide the validity of argument of the company and claim of Arvind for damages in the light of provisions of the Companies Act, 1956. (May 2008)

Question

The Directors of Mars India Ltd. desire to alter capital clause of Memorandum of Association of their company. Advise them, under the provisions of the Companies Act, 1956 about the ways in which the said clause may be altered and the procedure to be followed for the said alteration. (May 2008)

Question

The Chairman of the meeting of a company received a Proxy 54 hours before the time fixed for the start of the meeting. He refused to accept the Proxy on the ground that the Articles of the company provided that a Proxy must be filed 60 hours before the start of the meeting. Decide, under the provisions of the Companies Act, 1956 whether the Proxy holder can compel the Chairman to admit the Proxy? (May 2008)

Question

Ramesh, who is a resident of New Delhi, sent a transfer deed, for registration of transfer of shares to the company at the address of its Registered Office in Mumbai. He did not receive the shares certificates even after the expiry of four months from the date of dispatch of transfer deed. He lodged a criminal complaint in the Court at New Delhi. Decide, under the provisions of the Companies Act, 1956, whether the Court at New Delhi is competent to take action in the said matter? (May 2008)

Question

A company was started with the object of building ‘A mall with shops’. The building was destroyed by fire and the company wanted to alter the objects clause in the memorandum by substituting the words ‘A mall with shops’ with the words “Shops, Residential buildings and Warehouses for letting purposes.’ Will this alteration of the memorandum for the purpose be permissible? Decide referring to the provisions of the companies Act, 1956. (November 2008)

Question

The Memorandum of Association of a company was presented to the Registrar of Companies for registration and the Registrar issued the certificate of incorporation. After complying with all the legal formalities a company started a business according to the object clause, which was clearly an illegal business. The company contends that the nature of the business cannot be gone into as the certificate of incorporation is conclusive. Answer the question whether company’s contention is correct or not. (November 2008)

Question

M applies for share on the basis of a prospectus which contains mis–statement. The shares are allotted to him, who afterwards transfers them to N. Can N bring an action for a rescission on the ground of mis-statement? Decide under the provisions of the Companies Act, 1956.

(November 2008)

Question

What is meant by a floating charge? State the characteristics of a floating charge. When does a floating charge crystallise? (November 2008)

Question

Discuss the concept of shelf prospectus, the provisions for issue and filing of such prospectus under the Companies (Amendment) Act, 2000 (November 2008)

Question

A public limited company has only seven shareholders, all the shares being fully paid–up. All the shares of one such shareholder are sold by the court in an auction and purchased by another shareholder. The company continues to carry on business thereafter. Discuss the liabilities of the shareholders of the company under the Companies Act, 1956.

Question

What are the conditions for the company for the buy–back of its own shares? Whether there is any time limit for the completion of buy–back of its shares? (November 2008)

Question

Apex Metals Limited wants to provide financial assistance to its employees, to enable them to subscribe for certain number of fully paid shares. Considering the provision of the Companies Act, 1956, what advice would you give to the company in this regard? (November 2008)

Question

State whether the following statements are correct or incorrect. Give reasons:

(i) Right shares means shares which are issued by a newly formed company.

(ii) A company should file its annual return within six month of the close of the financial year.

(iii) A bearer of a share warrant of a company is not member of the company.

(iv The shareholder of the company is general meeting can increase the rate of dividend recommended by the Board of Directors.

(v) Debenture with voting rights can be issued only if permitted by the Articles of Association.

(November 2008)

Question

State the legal position in the following circumstances with reference to the provisions in the Companies Act, 1956.

At an adjourned extraordinary general meeting of a Public Ltd. Company adjourned for want of quorum, only 3 members are personally present. (November 2008)

Question

What do you mean by Transmission of shares? Differentiate between Transfer of shares and Transmission of shares. (November 2008)

Question

A owes a certain sum of money to B. A does not know the exact amount and hence he makes out a blank cheque in favour of B, signs and delivers it to B with a request to fill up the amount due, payable by him. B fills up fraudulently the amount larger than the amount due, payable by A and endorses the cheque to C in full payment of dues of B. Cheque of A is dishonoured. Referring to the provisions of the Negotiable Instruments Act, 1881, discuss the rights of B and C. (May 2007)

Question

Referring to the provisions of the Negotiable Instruments Act, 1881, examine the validity of the following:

(i) A bill of Exchange originally drawn by M for a sum of Rs. 10,000, but accepted by R only for Rs.7,000.

(ii) A cheque marked ‘Not Negotiable’ is not transferable. (May 2007)

Question

What are the essential elements of a "Promissory note" under the Negotiable Instruments Act, 1881? Whether the following notes may be considered as valid Promissory notes:

(i) "I promise to pay Rs. 5,000 or 7,000 to Mr. Ram."

(ii) I promise to pay to Mohan Rs. 500, if he secures 60% marks in the examination.

(iii) I promise to pay Rs. 3,000 to Ravi after 15 days of the death of A. (November 2007)

Question

What do you understand by "Material alteration” under the Negotiable Instruments Act, 1881? State whether the following alterations are material alterations under the Negotiable Instruments Act, 1881?

(i) The holder of the bill inserts the word "or order” in the bill,

(ii) The holder of the bearer cheque converts it into account payee cheque,

(iii) A bill payable to ' is converted into a bill payable to X and Y. (November 2007)

Question

Bharat executed a promissory note in favour of Bhushan for Rs. 5 crores. The said amount was payable three days after sight. Bhushan, on maturity, presented the promissory note on 1st January, 2008 to Bharat. Bharat made the payments on 4th January, 2008. Bhushan wants to recover interest for one day from Bharat. Advise Bharat, in the light of provisions of the Negotiable Instruments Act, 1881, whether he is liable to pay the interest for one day? (May 2008)

Question

X draws a cheque in favour of Y. After having issued the cheque he informs Y not to present the cheque for payment. He also informs the bank to stop payment. Decide, under provisions of the Negotiable Instruments Act, 1881, whether the said acts of X constitute an offence against him ? (May 2008)

Question 48

Discuss with reasons, whether the following persons can be called as a ‘holder’ under the Negotiable Instruments Act, 1881:

(i) X who obtains a cheque drawn by Y by way of gift.

(ii) A, the payee of the cheque, who is prohibited by a court order from receiving the amount of the cheque.

(iii) M, who finds a cheque payable to bearer, on the road and retains it.

(iv) B, the agent of C, is entrusted with an instrument without endorsement by C, who is the payee.

(v) B, who steals a blank cheque of A and forges A’s signature. (November 2008)

Question

X draws a bill on Y but signs it in the fictitious name of Z. The bill is payable to the order of Z. The bill is duly accepted by Y. M obtains the bill from X thus becoming its holder in due course. Can Y avoid payment of the bill? Decide in the light of the provisions of the Negotiable Instruments Act, 1881. (November 2008)

Question

Examine whether the Payment of Bonus Act, 1965 be applicable to the following cases:

(i) J, who is working in a social welfare organization.

(ii) D, an employee employed by an establishment engaged in an industry carried on by a department of the Central Government. (May 2007)

Question

During the accounting year 2005-06, XYZ Limited to which the Payment of Bonus Act, 1965 applies, suffered heavy losses. The Board of Directors of the company decided not to pay any bonus to its employees. The employees moved the Court for relief. Referring to the provisions of the Act, decide whether the employees of the company would be given any relief by the Court? (May 2007)

Question

Decide with reasons in the light of the Payment of Bonus Act, 1965 whether the following persons are entitled for bonus:

(i) A University teacher,

(ii) An employee of the 'NABARD',

(iii) A reinstated employee without wages for the period of dismissal.

(iv) A retrenched employee who worked for 45 days in a year on a salary of Rs. 4,000 per month.

(v) An apprentice. (November 2007)

Question

A is an employee of a company. The amount of the bonus payable to A during the year 2006-07 is Rs. 10,000, but the company paid him Rs. 7,000 only and a sum of Rs. 3,000 was deducted from bonus against the loss suffered by the company due to misconduct of A during the same accounting year. A files a suit against the company for recovery of the deducted amount. Decide whether A would be given any relief by the court under the provisions of the Payment of Bonus Act, 1956? What will be your answer, if the losses are related to the accounting year 2005-06?

(November 2007)

Question

What are the provisions regarding set on and set off of the allocable surplus under the Payment of Bonus Act, 1965 ? (May 2008)

Question

X is an employee in a Company. The amount of bonus payable to him during the year 2007-08 is Rs.14,000. The company deducted a sum of Rs.4,000 against the “Puja Bonus” already paid to him during the said year and paid the remaining amount. X files a suit against the company for recovery of the deducted amount. Decide, under the Payment of Bonus Act, 1965, whether X would be given any relief by the Court? (May 2008)

Question Can the Payment of Bonus Act be made applicable to an establishment in the public sector?

(November 2008)

Question 31

The management of Shakthi Mills Ltd. entered into an agreement with their employees to pay them bonus based on production in lieu of Bonus based on profits, from the accounting year 2007. The employees further agreed to forego their right to receive minimum bonus and instead accept 25% of their salary/wage as bonus based on productivity. Is such an agreement valid? Examine in the light of the provisions of the Payment of Bonus Act, 1965.

(November 2008)

Question

While an employee may increase his contribution to Provident Fund, is an employer also liable to proportionately increase his contribution to the above under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 ? Explain. (May 2007)

Question

Explain the meaning of the term ‘Basic Wages’ under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. (May 2007)

Question

Is the payment of provident fund contribution a preferential payment in case of the employer being insolvent under the Employees Provident Funds and Miscellaneous Provisions Act, 1952? (November 2007)

Question

Explain the salient features of the 'Employee's Deposits Linked Insurance Scheme' as provided under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952.

(November 2007)

Question

Explain the provisions of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 regarding the following:

(i) rate of interest on amount due from the employer under the Act.

(ii) maximum limit of interest rate

(iii) the period for which the employer is liable to pay the said interest. (May 2008)

Question

Vimal is an employee in a Company. The following payments were made to him during the previous year:

(i) Piece rate wages

(ii) Productivity bonus

(iii) Additional dearness allowance

(iv) Value of Puja gift.

Examine as to which of the above payments form part of “Basic Wage”’ of Vimal under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. (May 2008)

Question

What kind of entities fall within the purview of the Employees’ Provident Fund and Miscellaneous Provision Act ,1952 ? (November 2008)

Question

Who is to constitute the Central Board of Trustees? How many persons shall be there in the Central Board? Answer the questions with reference to the Employees Provident Fund and Miscellaneous Provisions Act, 1952. (November 2008)

Question

Y holds agricultural land in Gujarat on a lease granted by X, the owner. The land revenue payable by X to the Government being in arrear, his land is advertised for sale by the Government. Under the Revenue law, the consequence of such sale will be termination of Y’s lease. Y, in order to prevent the sale and the consequent termination of his own lease, pays the Government, the sum due from X. Referring to the provisions of the Indian Contract Act, 1872 decide whether X is liable to make good to Y, the amount so paid ? (May 2007)

Question

Examine whether the following constitute a contract of ‘Bailment’ under the provisions of the Indian Contract Act, 1872:

(i) V parks his car at a parking lot, locks it, and keeps the keys with himself.

(ii) Seizure of goods by customs authorities. (May 2007)

Question

A contracted with B to supply him (B) 500 tons of iron-steel @ Rs. 5,000 per ton, to be delivered at a specified time. Thereafter, A contracts with C for the purchase of 500 tons of iron-steel @ Rs. 4,800 per ton, and at the same time told ‘C’ that he did so for the purpose of performing his contract entered into with B. C failed to perform his contract in due course. Consequently, A could not procure any iron-steel and B rescinded the contract. What would be the amount of damages which A could claim from C in the circumstances ? Explain with reference to the provisions of the Indian Contract, 1872. (May 2007)

Question

‘X' agreed to become an assistant for 5 years to 'Y' who was a Doctor practising at Ludhiana. It was also agreed that during the term of agreement 'X' will not practise on his own account in Ludhiana. At the end of one year, ‘X' left the assistantship of 'Y' and began to practise on his own account. Referring to the provisions of the Indian Contract Act, 1872, decide whether ‘X' could be restrained from doing so? (November 2007)

Question

X transferred his house to his daughter M by way of gift. The gift deed, executed by X, contained a direction that M shall pay a sum of Rs. 5,000 per month to N (the sister of the executant). Consequently M executed an instrument in favour of N agreeing to pay the said sum. Afterwards, M refused to pay the sum to N saying that she is not liable to N because no consideration had moved from her. Decide with reasons under the provisions of the Indian Contract Act, 1872 whether M is liable to pay the said sum to N. (November 2007)

Question

X, Y and Z jointly borrowed Rs.50,000 from A. The whole amount was repaid to A by Y. Decide in the light of the Indian Contract Act, 1872 whether:

(i) Y can recover the contribution from X and Z,

(ii) legal representatives of X are liable in case of death of X,

(iii) Y can recover the contribution from the assets, in case Z becomes insolvent.

(November 2007)

Question

Point out with reasons whether the following agreements are valid or void:

(i) Kamala promises Ramesh to lend Rs. 50,000 in lieu of consideration that Ramesh gets Kamala’s marriage dissolved and he himself marries her.

(ii) Sohan agrees with Mohan to sell his black horse. Unknown to both the parties, the horse was dead at the time of agreement.

(iii) Ram sells the goodwill of his shop to Shyam for Rs. 4,00,000 and promises not to carry on such business forever and anywhere in India.

(iv) In an agreement between Prakash and Girish, there is a condition that they will not institute legal proceeding against each other without consent..

(v) Ramamurthy, who is a citizen of India, enters into an agreement with an alien friend.

(May 2008)

Question

Ravi sent a consignment of goods worth Rs. 60,000 by railway and got railway receipt. He obtained an advance of Rs. 30,000 from the bank and endorsed and delivered the railway receipt in favour of the bank by way of security. The railway failed to deliver the goods at the destination. The bank filed a suit against the railway for Rs. 60,000. Decide in the light of provisions of the Indian Contract Act, 1872, whether the bank would succeed in the said suit?

(May 2008)

Question

R is the wife of P. She purchased some sarees on Credit from Q. Q demanded the amount from P. P refused. Q filed a suit against P for the said amount. Decide in the light of provisions of the Indian Contract Act, 1872, whether Q would succeed? (May 2008)

Question

M lends a sum of Rs.5,000 to B, on the security of two shares of a Limited Company on 1st April 2007. On 15th June, 2007, the company issued two bonus shares. B returns the loan amount of Rs.5,000 with interest but M returns only two shares which were pledged and refuses to give the two bonus shares. Advise B in the light of the provisions of the Indian Contract Act, 1872. (November 2008)

Question

B owes C a debt guaranteed by A. C does not sue B for a year after the debt has become payable. In the meantime, B becomes insolvent. Is A discharged? Decide with reference to the provisions of the Indian Contract Act, 1872. (November 2008)

Question 38

“Good Girl” Soap Co. advertised that it would give a reward of Rs.1,000 who developed skin disease after using, “Good Girl” soap of the company for a certain period according to the printed directions. Miss Rakhi purchased the advertised “Good Girl” and developed skin disease in spite of using this soap according to the printed instructions. She claimed reward of Rs.1,000. The company refused the reward on the ground that offer was not made to her and that in any case she had not communicated her acceptance of the offer. Decide whether Miss Rakhi can claim the reward or not. Refer the relevant case law, if any. (November 2008)