Chapter 11: Companies Incorporated Outside India - Test 2: answer key

Question 1 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Rheinwerk Precision GmbH, a company incorporated in Stuttgart, Germany, manufactures industrial cutting tools. It established a branch office in Pune on 1st January 2026. The branch commenced operations on the same date. For the financial year ended 31st December 2025, the company prepared financial statements for its Indian business operations. The company appointed a practicing Chartered Accountant in India to audit these accounts. On 15th May 2026, Rheinwerk filed its financial statements with the Registrar of Companies, New Delhi in Form FC-3, along with a list of places of business in India. However, the financial statements were prepared in accordance with German GAAP and did not include the statement of related party transactions or the statement of repatriation of profits, on the ground that the company had no such transactions during the year. The Registrar issued a notice seeking clarification. Meanwhile, Rheinwerk also displayed its name and the words 'Stuttgart, Germany' outside its Pune office in English and Marathi. It did not display any notice regarding the limited liability of its members. The company's Indian authorised representative, Mr. Sameer Kulkarni, was served with a legal notice by a supplier on 2nd June 2026. The company claims that service on Mr. Kulkarni is invalid because the notice should have been sent to its registered office in Stuttgart. Rheinwerk is also exploring the possibility of issuing Indian Depository Receipts (IDRs) to raise funds from Indian investors. Its pre-issue paid-up capital and free reserves are USD 48 million, and its average market capitalisation in Germany over the last three years is USD 90 million.

Rheinwerk Precision GmbH filed its financial statements in Form FC-3 on 15th May 2026 for the financial year ended 31st December 2025. Whether the filing was within the prescribed time, and whether the omission of the statements of related party transactions and repatriation of profits is permissible on the ground that there were no such transactions?

1. The filing was beyond time, and the omission is impermissible; the company must file the statements even if they are 'Nil' statements, and the Registrar may extend the filing period by up to three months only on a written application. (correct answer)
2. The filing was within time, and the omission is permissible because the company had no related party transactions or repatriation of profits during the year.
3. The filing was within the extended period available to foreign companies, and the omission is permissible as the statements are required only if the amounts exceed the prescribed threshold.
4. The filing was beyond time, but the omission is curable by filing a revised Form FC-3 within thirty days of the Registrar's notice without any additional fee.

Answer: A — The filing was beyond time, and the omission is impermissible; the company must file the statements even if they are 'Nil' statements, and the Registrar may extend the filing period by up to three months only on a written application.

Explanation. Under Section 381 read with Rule 6, every foreign company must file financial statements in Form FC-3 within six months of the close of the financial year. The Registrar may extend this period by up to three months only on a written application. The financial year ended 31st December 2025, so the six-month period expired on 30th June 2026. Filing on 15th May 2026 was within time. However, the statements of related party transactions, repatriation of profits, and transfer of funds are mandatory attachments. Where there are no such transactions, 'Nil' statements must still be filed. Option (b)) wrongly validates the omission. Option (c) invents a threshold-based exemption. Option (d) wrongly treats the filing as delayed and invents a cure mechanism.

Where it goes wrong. Students may think that 'Nil' statements need not be filed or may miscalculate the six-month period from the date of establishment (1st January 2026) rather than from the close of the financial year (31st December 2025).

Authority. Section 381 of the Companies Act, 2013; Rule 6 of the Companies (Registration of Foreign Companies) Rules, 2014; Form FC-3 Instruction Kit

Question 2 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

Rheinwerk displayed its name and 'Stuttgart, Germany' outside its Pune office in English and Marathi, but did not display any notice regarding the limited liability of its members. Whether this display complies with Section 382 of the Companies Act, 2013?

1. The display is fully compliant because the name and country of incorporation have been exhibited in English and the local language, and a limited liability notice is optional for foreign companies.
2. The display is non-compliant only if the members' liability is unlimited; since Rheinwerk is a GmbH (limited liability), it must conspicuously exhibit a notice of limited liability outside its office in English and the local language. (correct answer)
3. The display is compliant because Section 382 requires only the name and country of incorporation to be displayed, and the limited liability notice is required only in business letters, not outside the office.
4. The display is non-compliant because the name and country must be displayed in English only, and the use of Marathi is an unnecessary addition that does not cure the omission.

Answer: B — The display is non-compliant only if the members' liability is unlimited; since Rheinwerk is a GmbH (limited liability), it must conspicuously exhibit a notice of limited liability outside its office in English and the local language.

Explanation. Section 382(c) requires that if the liability of the members of a foreign company is limited, notice of that fact must be conspicuously exhibited on the outside of every office or place where it carries on business in India, in legible English characters and also in the characters of the language generally used in the locality. Rheinwerk Precision GmbH is a limited liability entity. Therefore, it was required to display a limited liability notice outside its Pune office in English and Marathi. Option (a) wrongly treats the notice as optional. Option (c) wrongly restricts the notice requirement to business letters. Option (d) wrongly prohibits the use of the local language, whereas Section 382 expressly requires it.

Where it goes wrong. Students may overlook Section 382(c) and assume that displaying the name and country is sufficient, or may wrongly think that the local language requirement applies only to Indian companies.

Authority. Section 382 of the Companies Act, 2013

Question 3 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

A supplier served a legal notice on Mr. Sameer Kulkarni, Rheinwerk's authorised representative in India, on 2nd June 2026. Rheinwerk contends that service is invalid because the notice was not sent to its registered office in Stuttgart. Whether the service on Mr. Kulkarni is valid under Section 383?

1. The service is invalid because a foreign company can only be served at its registered office outside India, and service on a representative in India is not recognised.
2. The service is valid only if Mr. Kulkarni holds a power of attorney authenticated by the Indian embassy, which is not stated in the facts.
3. The service is valid because Section 383 deems service to be sufficiently made if it is addressed to a person whose name and address have been delivered to the Registrar under Section 380 and left at, or sent by post to, that address or by electronic mode. (correct answer)
4. The service is invalid because the supplier should have served the notice on the Registrar of Companies, who would then forward it to the foreign company.

Answer: C — The service is valid because Section 383 deems service to be sufficiently made if it is addressed to a person whose name and address have been delivered to the Registrar under Section 380 and left at, or sent by post to, that address or by electronic mode.

Explanation. Section 383 provides that any process, notice, or other document required to be served on a foreign company shall be deemed to be sufficiently served if addressed to any person whose name and address have been delivered to the Registrar under Section 380 and left at, or sent by post to, that address, or by electronic mode. Mr. Kulkarni is the authorised representative whose details would have been delivered to the Registrar. Therefore, service on him is valid. Option (a) ignores the statutory facility. Option (b) adds a non-existent authentication requirement. Option (d) wrongly routes service through the Registrar.

Where it goes wrong. Students may think that service on a foreign company always requires transmission to its overseas registered office, overlooking the specific facility under Section 383 for service on the authorised resident person.

Authority. Section 383 of the Companies Act, 2013

Question 4 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Rheinwerk Precision GmbH wants to issue Indian Depository Receipts (IDRs). Its pre-issue paid-up capital and free reserves are USD 48 million, and its average market capitalisation in Germany over the last three years is USD 90 million. Whether Rheinwerk is eligible to issue IDRs under Rule 13 of the Companies (Registration of Foreign Companies) Rules, 2014?

1. Rheinwerk is eligible because its paid-up capital and free reserves exceed USD 40 million and its market capitalisation exceeds USD 80 million.
2. Rheinwerk is eligible if it obtains a special exemption from the Reserve Bank of India, as the shortfall is marginal.
3. Rheinwerk is eligible because the eligibility criteria apply only to companies that have already established a place of business in India, and Rheinwerk can issue IDRs through its Pune branch regardless of its financials.
4. Rheinwerk is not eligible because Rule 13 requires pre-issue paid-up capital and free reserves of at least USD 50 million and average market capitalisation of at least USD 100 million; Rheinwerk falls short on both counts. (correct answer)

Answer: D — Rheinwerk is not eligible because Rule 13 requires pre-issue paid-up capital and free reserves of at least USD 50 million and average market capitalisation of at least USD 100 million; Rheinwerk falls short on both counts.

Explanation. Rule 13(2)(a) requires the issuing company to have pre-issue paid-up capital and free reserves of at least USD 50 million and a minimum average market capitalisation in its parent country of at least USD 100 million during the last three years. Rheinwerk has USD 48 million and USD 90 million respectively, falling short on both thresholds. Therefore, it is not eligible to issue IDRs. Option (a) invents lower thresholds. Option (b) wrongly assumes that RBI can grant a marginal exemption. Option (c)) misstates the applicability of the eligibility criteria.

Where it goes wrong. Students may misremember the IDR eligibility thresholds as USD 40 million/80 million or assume that having an Indian branch automatically qualifies a foreign company to issue IDRs.

Authority. Rule 13 of the Companies (Registration of Foreign Companies) Rules, 2014; Section 390 of the Companies Act, 2013

Question 5 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

Scenario. Kaveri Aerospace Components Ltd. is a company incorporated in Singapore with a branch office in Bengaluru. On 10th August 2026, it received a show-cause notice from the Registrar of Companies for multiple contraventions under Chapter XXII of the Companies Act, 2013. The alleged contraventions are: (i) failure to file its annual return in Form FC-4 within the prescribed period for the financial year ended 31st March 2026; (ii) failure to conspicuously exhibit the name of the company and the country of incorporation outside its Bengaluru office in the language generally used in the locality; and (iii) failure to intimate an alteration in its charter documents within the prescribed time. The company had filed its annual return on 15th June 2026. Its financial year is the calendar year, ending on 31st December. The Registrar has initiated penalty proceedings under Section 392. Kaveri Aerospace Components Ltd. contends that the delay in filing the annual return was due to technical glitches in the MCA portal and that it should be excused. The company also argues that even if penalties are imposed, it can continue to enforce a supply contract it entered into with an Indian vendor during the period of non-compliance, and can sue the vendor for breach without any restriction. The company's Indian branch manager, Ms. Priya Nair, has been authorised to accept service of process. A dispute has arisen with the vendor, and Kaveri wants to initiate legal proceedings against the vendor.

Kaveri Aerospace Components Ltd. filed its annual return in Form FC-4 on 15th June 2026 for the financial year ended 31st March 2026. Whether the filing was within the prescribed period under Section 384 read with the Companies (Registration of Foreign Companies) Rules, 2014?

1. The filing was within time because the annual return is required to be filed within 60 days from the last day of the financial year, and 15th June 2026 is within 60 days from 31st March 2026. (correct answer)
2. The filing was beyond time because the annual return must be filed within 30 days from the last day of the financial year.
3. The filing was beyond time because the annual return must be filed within 60 days, and 15th June 2026 exceeds 60 days from 31st March 2026.
4. The filing was within time because a foreign company may file its annual return within 90 days from the last day of the financial year.

Answer: A — The filing was within time because the annual return is required to be filed within 60 days from the last day of the financial year, and 15th June 2026 is within 60 days from 31st March 2026.

Explanation. Section 384(2) read with Rule 7 requires every foreign company to prepare and file an annual return in Form FC-4 within 60 days from the last day of its financial year. The financial year ended on 31st March 2026. The 60-day period expired on 30th May 2026. Filing on 15th June 2026 was therefore beyond the prescribed period. Option (a) miscalculates the 60-day period from 31st March to 15th June as being within time, but it is actually 76 days. Option (b) wrongly applies a 30-day timeline. Option (d) wrongly applies a 90-day timeline.

Where it goes wrong. Students may miscalculate the 60-day period or confuse the annual return timeline (60 days from the last day of the financial year) with the financial statement timeline (six months from the close of the financial year).

Authority. Section 384(2) of the Companies Act, 2013; Rule 7 of the Companies (Registration of Foreign Companies) Rules, 2014

Question 6 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

The Registrar has initiated penalty proceedings against Kaveri Aerospace Components Ltd. under Section 392 for contraventions of Chapter XXII. Which of the following correctly states the penalty that may be imposed on the foreign company and its officers in default?

1. A fine of ₹50,000 to ₹1,00,000 on the company and ₹10,000 to ₹25,000 on every officer in default, with no continuing penalty.
2. A fine of ₹1,00,000 to ₹3,00,000 on the company, plus an additional fine of up to ₹50,000 per day for a continuing offence, and a fine of ₹25,000 to ₹5,00,000 on every officer in default. (correct answer)
3. A fine of ₹2,00,000 to ₹5,00,000 on the company and ₹50,000 to ₹2,00,000 on every officer in default, with a continuing penalty of ₹25,000 per day.
4. A fine of ₹1,00,000 to ₹3,00,000 on the company only, with no personal liability for officers in default.

Answer: B — A fine of ₹1,00,000 to ₹3,00,000 on the company, plus an additional fine of up to ₹50,000 per day for a continuing offence, and a fine of ₹25,000 to ₹5,00,000 on every officer in default.

Explanation. Section 392 provides that the foreign company shall be punishable with fine of not less than ₹1,00,000 but which may extend to ₹3,00,000, and in the case of a continuing offence, with an additional fine which may extend to ₹50,000 for every day after the first during which the contravention continues. Every officer of the foreign company who is in default shall be punishable with fine of not less than ₹25,000 but which may extend to ₹5,00,000. Option (a) understates the penalties. Option (c) misstates the ranges. Option (d) wrongly excludes officer liability.

Where it goes wrong. Students may misremember the penalty ranges or overlook the separate liability of officers in default, and may forget the continuing offence component of ₹50,000 per day.

Authority. Section 392 of the Companies Act, 2013

Question 7 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Kaveri Aerospace Components Ltd. wants to initiate legal proceedings against its Indian vendor for breach of a supply contract entered into during the period of its non-compliance with Chapter XXII. The company argues that under Section 393, non-compliance does not affect the validity of the contract, and therefore it can sue the vendor without any restriction. Whether this argument is correct?

1. The argument is correct because Section 393 preserves the validity of the contract and places no restriction on the foreign company's right to sue.
2. The argument is correct only if the vendor had knowledge of the company's non-compliance, in which case the contract becomes voidable at the vendor's option.
3. The argument is incorrect because Section 393 provides that while the contract remains valid and the company may be sued, the company cannot bring any suit, claim any set-off, or institute any legal proceeding in respect of the contract until it has complied with Chapter XXII. (correct answer)
4. The argument is incorrect because Section 393 renders the contract void ab initio, and therefore neither party can sue on it.

Answer: C — The argument is incorrect because Section 393 provides that while the contract remains valid and the company may be sued, the company cannot bring any suit, claim any set-off, or institute any legal proceeding in respect of the contract until it has complied with Chapter XXII.

Explanation. Section 393 provides that any failure by a company to comply with Chapter XXII shall not affect the validity of any contract, dealing, or transaction entered into by the company or its liability to be sued in respect thereof. However, the company shall not be entitled to bring any suit, claim any set-off, make any counter-claim, or institute any legal proceeding in respect of such contract until it has complied with the applicable provisions of the Act. Therefore, the contract remains valid, but the company's right to sue is suspended until compliance. Option (a) ignores the restriction on the company's right to sue. Option (b)) invents a knowledge-based voidability rule. Option (d) wrongly treats the contract as void.

Where it goes wrong. Students may read the first part of Section 393 (preservation of contract validity) and overlook the second part (restriction on the company's right to sue until compliance).

Authority. Section 393 of the Companies Act, 2013

Question 8 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Lombardy Fashion S.p.A., an Italian company with a branch in Delhi, displayed its name and the country of incorporation outside its Delhi office only in English. The language generally used in the locality is Hindi. Which of the following statements is correct under Section 382?

Lombardy Fashion S.p.A., an Italian company with a branch in Delhi, displayed its name and the country of incorporation outside its Delhi office only in English. The language generally used in the locality is Hindi. Which of the following statements is correct under Section 382?

1. Display in English alone is sufficient because English is the official language for corporate compliance.
2. Display outside the office is optional if the company displays its name in all business letters and billheads.
3. Display in Hindi alone would be sufficient, as the local language takes precedence over English for foreign companies.
4. Display in English alone is not sufficient; Section 382 requires the name and country of incorporation to be exhibited in English characters and also in the characters of the language generally used in the locality. (correct answer)

Answer: D — Display in English alone is not sufficient; Section 382 requires the name and country of incorporation to be exhibited in English characters and also in the characters of the language generally used in the locality.

Explanation. Section 382(a) requires every foreign company to conspicuously exhibit on the outside of every office or place where it carries on business in India, the name of the company and the country in which it is incorporated, in letters easily legible in English characters, and also in the characters of the language or one of the languages in general use in the locality. Display in English alone is therefore insufficient; Hindi, being the language generally used in Delhi, is also required. Option (a) ignores the local language requirement. Option (c) wrongly displaces English. Option (b)) wrongly treats external display as optional.

Where it goes wrong. Students may think that English compliance is sufficient for foreign companies or that the local language is required only for Indian companies, overlooking the dual-language mandate in Section 382(a).

Authority. Section 382(a) of the Companies Act, 2013

Question 9 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

Scenario. Nordic Wind Energy AS, a Norwegian company with a project office in Gujarat, raised funds by issuing Indian Depository Receipts (IDRs). It appointed a Domestic Depository and an Overseas Custodian Bank. The IDRs were denominated in Norwegian Kroner. Which of the following statements is correct under Rule 13 of the Companies (Registration of Foreign Companies) Rules, 2014?

Nordic Wind Energy AS, a Norwegian company with a project office in Gujarat, raised funds by issuing Indian Depository Receipts (IDRs). It appointed a Domestic Depository and an Overseas Custodian Bank. The IDRs were denominated in Norwegian Kroner. Which of the following statements is correct under Rule 13 of the Companies (Registration of Foreign Companies) Rules, 2014?

1. The IDRs must be denominated in Indian Rupees, irrespective of the denomination of the underlying securities, and must be listed on recognised stock exchanges in India. (correct answer)
2. The IDRs may be denominated in any foreign currency at the option of the issuing company.
3. The IDRs must be denominated in the currency of the issuing company's home country and need not be listed in India.
4. The IDRs may be denominated in Indian Rupees only if the underlying shares are also denominated in Indian Rupees.

Answer: A — The IDRs must be denominated in Indian Rupees, irrespective of the denomination of the underlying securities, and must be listed on recognised stock exchanges in India.

Explanation. Rule 13(7)(c) provides that notwithstanding the denomination of securities of the issuing company, the IDRs issued by it shall be denominated in Indian Rupees. Rule 13(7)(d) requires the IDRs to be listed on recognised stock exchanges in India. Option (b) wrongly permits foreign currency denomination. Option (c) wrongly ties the denomination to the home country and dispenses with Indian listing. Option (d) wrongly conditions the Rupee denomination on the underlying shares being Rupee-denominated.

Where it goes wrong. Students may assume that IDRs follow the denomination of the underlying foreign shares, overlooking the express requirement in Rule 13(7)(c) that IDRs be denominated in Indian Rupees.

Authority. Rule 13(7)(c) and Rule 13(7)(d) of the Companies (Registration of Foreign Companies) Rules, 2014

Question 10 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Helvetia Robotics AG, a Swiss company with a branch in Chennai, failed to file its financial statements in Form FC-3 within six months of the close of its financial year. It applied to the Registrar for an extension of three months on 1st July 2026, citing delays in receiving consolidated accounts from its parent. The Registrar has not yet responded. The statutory six-month period expired on 30th June 2026. Which of the following statements is correct regarding the extension?

Helvetia Robotics AG, a Swiss company with a branch in Chennai, failed to file its financial statements in Form FC-3 within six months of the close of its financial year. It applied to the Registrar for an extension of three months on 1st July 2026, citing delays in receiving consolidated accounts from its parent. The Registrar has not yet responded. The statutory six-month period expired on 30th June 2026. Which of the following statements is correct regarding the extension?

1. The Registrar has no power to extend the six-month period, and Helvetia is already in default from 1st July 2026.
2. The Registrar may extend the period by a further period not exceeding three months on a written application by the company, and the application made on 1st July 2026 is valid for seeking such extension. (correct answer)
3. The Registrar may extend the period by a further period not exceeding six months on a written application by the company.
4. The extension is automatic upon filing an application, and no penalty applies until the Registrar rejects the application.

Answer: B — The Registrar may extend the period by a further period not exceeding three months on a written application by the company, and the application made on 1st July 2026 is valid for seeking such extension.

Explanation. The Form FC-3 Instruction Kit (issued under Section 381 read with Rule 6) provides that the Registrar may extend the six-month filing period to not more than three months on an application made in writing. Helvetia applied on 1st July 2026, one day after the expiry of the six-month period. The provision does not expressly bar an application made immediately after expiry, and the Registrar has the power to grant an extension up to three months. Option (a) wrongly denies the Registrar's power of extension. Option (c) wrongly states a six-month extension. Option (d) wrongly treats the extension as automatic.

Where it goes wrong. Students may think that the Registrar has no extension power, or may confuse the three-month extension limit with the six-month filing period, or may assume the application must be made before expiry without a clear statutory basis.

Authority. Section 381 of the Companies Act, 2013; Rule 6 of the Companies (Registration of Foreign Companies) Rules, 2014; Form FC-3 Instruction Kit

Question 11 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

Scenario. Baltic Marine Insurance SE, a company incorporated in Estonia, has a liaison office in Mumbai. It displayed its name and country of incorporation on the outside of its office, but its business letters and billheads do not state the name of the company and the country of incorporation. The company argues that Section 382(b) applies only to Indian companies. Which of the following statements is correct?

Baltic Marine Insurance SE, a company incorporated in Estonia, has a liaison office in Mumbai. It displayed its name and country of incorporation on the outside of its office, but its business letters and billheads do not state the name of the company and the country of incorporation. The company argues that Section 382(b) applies only to Indian companies. Which of the following statements is correct?

1. The company's argument is correct because Section 382(b) applies only to companies incorporated in India.
2. The company is required to state only the country of incorporation in its business letters, not the name of the company.
3. The company's argument is incorrect because Section 382(b) requires the name of the company and the country of incorporation to be stated in legible English characters in all business letters, billheads, letter paper, notices, and other official publications. (correct answer)
4. The company is exempt from Section 382(b) because it has a liaison office, which is not a place of business.

Answer: C — The company's argument is incorrect because Section 382(b) requires the name of the company and the country of incorporation to be stated in legible English characters in all business letters, billheads, letter paper, notices, and other official publications.

Explanation. Section 382(b) expressly applies to every foreign company and requires it to cause the name of the company and the country in which it is incorporated to be stated in legible English characters in all business letters, bill-heads, letter paper, notices, and other official publications. Option (a) wrongly limits the provision to Indian companies. Option (b)) omits the requirement to state the company's name. Option (d) wrongly treats a liaison office as exempt from the display requirements.

Where it goes wrong. Students may overlook Section 382(b) and focus only on the external display requirement in Section 382(a), or may think that a liaison office is outside the scope of Chapter XXII.

Authority. Section 382(b) of the Companies Act, 2013

Question 12 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Sierra Leone Mining Ltd., a foreign company with a branch in Odisha, failed to comply with the provisions of Chapter XXII relating to the filing of documents. An Indian creditor obtained a decree against the company and seeks to execute it. The company simultaneously wants to file a counter-claim against the creditor in the same proceedings. Which of the following is correct under Section 393?

Sierra Leone Mining Ltd., a foreign company with a branch in Odisha, failed to comply with the provisions of Chapter XXII relating to the filing of documents. An Indian creditor obtained a decree against the company and seeks to execute it. The company simultaneously wants to file a counter-claim against the creditor in the same proceedings. Which of the following is correct under Section 393?

1. The company can file the counter-claim because Section 393 only restricts the institution of a fresh suit, not a counter-claim in existing proceedings.
2. The company can file the counter-claim only with the leave of the Tribunal, which has discretion to relax Section 393.
3. The company can file the counter-claim because the creditor has already obtained a decree, which waives the restriction under Section 393.
4. The company cannot file the counter-claim until it complies with Chapter XXII, because Section 393 bars the company from claiming any set-off or making any counter-claim in respect of any contract, dealing, or transaction until compliance. (correct answer)

Answer: D — The company cannot file the counter-claim until it complies with Chapter XXII, because Section 393 bars the company from claiming any set-off or making any counter-claim in respect of any contract, dealing, or transaction until compliance.

Explanation. Section 393 expressly bars the company from bringing any suit, claiming any set-off, making any counter-claim, or instituting any legal proceeding in respect of any contract, dealing, or transaction until it has complied with the applicable provisions of the Act. The bar applies not only to fresh suits but also to set-offs and counter-claims. Option (a) wrongly narrows the bar to fresh suits only. Option (c) invents a waiver based on the creditor's decree. Option (b)) invents a discretionary power of the Tribunal to relax the bar, which is not provided in Section 393.

Where it goes wrong. Students may read Section 393 as barring only 'suits' and overlook the express words 'claim any set-off, make any counter-claim', which extend the disability beyond fresh suits.

Authority. Section 393 of the Companies Act, 2013

Question 13 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Aurelia Pharma PLC, a UK-incorporated company, has a branch in Hyderabad. For the financial year ended 31st December 2025, it filed its financial statements in Form FC-3 on 30th June 2026. The Registrar rejected the filing on the ground that it was one day late. Aurelia contends that since 30th June 2026 was a Sunday, the filing on the next working day should be treated as timely. Which of the following is correct?

Aurelia Pharma PLC, a UK-incorporated company, has a branch in Hyderabad. For the financial year ended 31st December 2025, it filed its financial statements in Form FC-3 on 30th June 2026. The Registrar rejected the filing on the ground that it was one day late. Aurelia contends that since 30th June 2026 was a Sunday, the filing on the next working day should be treated as timely. Which of the following is correct?

1. The filing is timely because the General Clauses Act, 1897 provides that where the last day for doing an act is a holiday, the act may be done on the next working day. (correct answer)
2. The filing is beyond the prescribed period because the six-month period under Section 381 read with Rule 6 is mandatory, and the benefit of the General Clauses Act, 1897 is not available to extend the statutory period for foreign company filings.
3. The filing is timely because the Registrar has no power to reject a filing made within seven days after the expiry of the period.
4. The filing is beyond the prescribed period, but the company can cure the delay by paying an additional fee equal to the normal filing fee.

Answer: A — The filing is timely because the General Clauses Act, 1897 provides that where the last day for doing an act is a holiday, the act may be done on the next working day.

Explanation. Section 10 of the General Clauses Act, 1897 provides that where any act or proceeding is directed or allowed to be done or taken in any court or office on a certain day or within a prescribed period, and that day or the last day of the period is a holiday, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards which is not a holiday. The six-month period for filing under Section 381 expired on 30th June 2026. If 30th June 2026 was a Sunday, the filing on the next working day (1st July 2026) would be treated as timely under Section 10 of the General Clauses Act. Option (b) wrongly denies the application of the General Clauses Act. Option (c) invents a seven-day grace period. Option (d) invents a cure by additional fee.

Where it goes wrong. Students may think that statutory filing periods under the Companies Act operate rigidly without the benefit of Section 10 of the General Clauses Act, overlooking the holiday extension principle applicable to acts required to be done in an office.

Authority. Section 381 of the Companies Act, 2013; Rule 6 of the Companies (Registration of Foreign Companies) Rules, 2014; Section 10 of the General Clauses Act, 1897

Question 14 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Dnipro Aviation Technologies LLC, a Ukrainian company, has a place of business in India and raised money from Indian investors through an offer of securities under Chapter XXII. The securities have not been repaid or redeemed. The company now wants to close its place of business in India. Which of the following statements is correct under Section 391(2)?

Dnipro Aviation Technologies LLC, a Ukrainian company, has a place of business in India and raised money from Indian investors through an offer of securities under Chapter XXII. The securities have not been repaid or redeemed. The company now wants to close its place of business in India. Which of the following statements is correct under Section 391(2)?

1. The company can close its place of business by merely giving notice to the Registrar, and no winding-up provisions apply because it is a foreign company.
2. The provisions of Chapter XX relating to winding up shall apply mutatis mutandis for closure of the place of business as if it were a company incorporated in India, because the company has raised monies through securities under Chapter XXII which have not been repaid or redeemed. (correct answer)
3. The company can close its place of business after obtaining the approval of the Reserve Bank of India, and Chapter XX has no application.
4. The company must continue its place of business indefinitely until all investors voluntarily surrender their securities, and closure is prohibited.

Answer: B — The provisions of Chapter XX relating to winding up shall apply mutatis mutandis for closure of the place of business as if it were a company incorporated in India, because the company has raised monies through securities under Chapter XXII which have not been repaid or redeemed.

Explanation. Section 391(2) provides that, subject to Section 376, the provisions of Chapter XX (winding up) shall apply mutatis mutandis for closure of the place of business of a foreign company in India as if it were a company incorporated in India, in case such foreign company has raised monies through offer or issue of securities under Chapter XXII which have not been repaid or redeemed. Option (a) wrongly dispenses with winding-up compliance. Option (c) invents an RBI approval requirement and excludes Chapter XX. Option (d) wrongly imposes an absolute prohibition on closure.

Where it goes wrong. Students may treat closure of a foreign company's Indian place of business as a simple procedural intimation, overlooking the special winding-up requirement under Section 391(2) when Chapter XXII securities remain unredeemed.

Authority. Section 391(2) of the Companies Act, 2013

Question 15 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Caspian Digital Payments Ltd., incorporated in Kazakhstan, has a branch in Noida. It failed to display its name and the country of incorporation outside its Noida office for a period of four months. The Registrar initiated penalty proceedings under Section 392. The company argues that since it has now displayed the required particulars, the continuing offence has ceased and no daily penalty should apply for the period of non-compliance. Which of the following is correct?

Caspian Digital Payments Ltd., incorporated in Kazakhstan, has a branch in Noida. It failed to display its name and the country of incorporation outside its Noida office for a period of four months. The Registrar initiated penalty proceedings under Section 392. The company argues that since it has now displayed the required particulars, the continuing offence has ceased and no daily penalty should apply for the period of non-compliance. Which of the following is correct?

1. The company is liable only for a one-time fine of ₹1,00,000 because the offence is complete on the first day of non-compliance.
2. The company is exempt from any penalty because it has voluntarily complied before the penalty order was passed.
3. The company is liable for a fine of ₹1,00,000 to ₹3,00,000, and because the contravention continued for four months, an additional fine of up to ₹50,000 for each day after the first during which the contravention continued may be imposed, notwithstanding subsequent compliance. (correct answer)
4. The company is liable only for a warning, as display violations are compoundable without any monetary penalty.

Answer: C — The company is liable for a fine of ₹1,00,000 to ₹3,00,000, and because the contravention continued for four months, an additional fine of up to ₹50,000 for each day after the first during which the contravention continued may be imposed, notwithstanding subsequent compliance.

Explanation. Section 392 provides that in the case of a continuing offence, the foreign company shall be liable to an additional fine which may extend to ₹50,000 for every day after the first during which the contravention continues. The offence of non-display under Section 382 is a continuing offence. The company's subsequent compliance does not erase the liability for the period during which the contravention continued. Therefore, the company is liable for the base fine of ₹1,00,000 to ₹3,00,000 and the daily additional fine for the four-month period. Option (a) wrongly treats the offence as complete on the first day. Option (b)) invents a voluntary compliance exemption. Option (d) wrongly reduces the penalty to a warning.

Where it goes wrong. Students may think that remedying the non-compliance before the penalty order absolves the company of the daily continuing penalty, whereas Section 392 expressly provides for an additional fine for each day the contravention continues.

Authority. Section 392 of the Companies Act, 2013