Chapter 14: Interpretation of Statutes - Test 2: answer key

Question 1 · 2 marks · Chapter 14: Interpretation of Statutes · hard

Scenario. Suryodaya Microfinance Ltd, a non-banking financial company (NBFC) registered with RBI, accepted ₹12 crore from 400 individuals by issuing secured non-convertible debentures. It also borrowed ₹5 crore from a scheduled commercial bank and ₹3 crore from another NBFC. The company filed its return under the Companies (Acceptance of Deposits) Rules, 2014, treating all three receipts as exempt. The ROC issued a show-cause notice alleging that the ₹12 crore from individuals is a 'deposit' because the exemption for amounts received from a 'bank or financial institution' does not apply to an NBFC. The company argued that an NBFC is a financial institution, so the ₹3 crore from the other NBFC is exempt; and the ₹12 crore from individuals is also exempt because it was raised by private placement of debentures. The ROC relied on the mischief rule, saying the Deposits Rules were framed to protect small depositors after the Sahara case, and a narrow reading would defeat that object. The company's counsel invoked noscitur a sociis, arguing that 'bank' and 'financial institution' in the exclusion clause must be read together as entities of the same kind, and an NBFC is not a bank. The board seeks advice on the interpretation of 'financial institution' and 'deposit', and on whether the debenture issue falls within the exclusion.

Which rule is most appropriate for interpreting the phrase 'bank or financial institution' in the exclusion clause?

1. Ejusdem generis, because the specific word 'bank' is followed by the general word 'financial institution'. (correct answer)
2. Noscitur a sociis, because the two words are associated and take colour from each other.
3. Expressio unius est exclusio alterius, because mentioning a bank excludes all other entities.
4. Mischief rule, because the exclusion clause has no ordinary meaning.

Answer: A — Ejusdem generis, because the specific word 'bank' is followed by the general word 'financial institution'.

Explanation. The clause 'bank or financial institution' places a specific word (bank) before a general word (financial institution). Under ejusdem generis, the general word is limited to things of the same kind as the specific word. Therefore, 'financial institution' takes colour from 'bank' and may not automatically include every NBFC. Noscitur a sociis is broader, but ejusdem generis is the precise rule where a general word follows an enumeration. The trap is to treat the two words as fully interchangeable without genus limitation.

Where it goes wrong. Ignoring the specific-general structure and treating 'financial institution' as unlimited.

Authority. Rule of Ejusdem Generis; Companies (Acceptance of Deposits) Rules, 2014

Question 2 · 2 marks · Chapter 14: Interpretation of Statutes · medium

The ROC invokes the mischief rule. What was the mischief the Deposits Rules sought to suppress?

1. Delay in filing annual returns with the Registrar of Companies.
2. Unregulated acceptance of deposits from the public without adequate safeguards. (correct answer)
3. Non-payment of dividend to shareholders within thirty days.
4. Failure to appoint independent directors on the Board.

Answer: B — Unregulated acceptance of deposits from the public without adequate safeguards.

Explanation. Under the mischief rule, the court identifies the defect or mischief the statute was enacted to remedy. The Deposits Rules were framed to protect depositors after instances of unregulated acceptance of public funds. The remedy is a tightly regulated deposit framework. The trap is to confuse the mischief with unrelated compliance failures such as delayed returns or dividend defaults, which are governed by different provisions.

Where it goes wrong. Mixing up the specific mischief of deposit regulation with unrelated company law defaults.

Authority. Rule in Heydon's Case; Companies (Acceptance of Deposits) Rules, 2014

Question 3 · 2 marks · Chapter 14: Interpretation of Statutes · hard

The company claims that the ₹12 crore raised by private placement of debentures is exempt. Which rule would the ROC use to reject a narrow literal reading of the exemption?

1. Literal construction, because the words of the exemption are clear.
2. Noscitur a sociis, because debenture and deposit are associated words.
3. Mischief rule, because a narrow reading would defeat the object of protecting depositors. (correct answer)
4. Expressio unius, because debentures are specifically mentioned and deposits are not.

Answer: C — Mischief rule, because a narrow reading would defeat the object of protecting depositors.

Explanation. The mischief rule permits the court to look beyond the literal words to the defect the rules were meant to cure. If a literal reading of the debenture exemption allowed companies to evade deposit safeguards, the court would prefer an interpretation that suppresses that mischief and advances the remedy. The trap is to rely only on the literal words of an exemption without considering whether that reading defeats the statutory purpose.

Where it goes wrong. Applying literal construction to an exemption clause without checking the statutory object.

Authority. Rule in Heydon's Case; Companies (Acceptance of Deposits) Rules, 2014

Question 4 · 2 marks · Chapter 14: Interpretation of Statutes · medium

The company contends that because the exclusion clause specifically mentions 'bank', it impliedly excludes NBFCs. Which maxim supports this contention?

1. Noscitur a sociis
2. Ejusdem generis
3. Rule of beneficial construction
4. Expressio unius est exclusio alterius (correct answer)

Answer: D — Expressio unius est exclusio alterius

Explanation. Expressio unius est exclusio alterius means the express mention of one thing implies the exclusion of another. If the clause mentions only 'bank', the company argues that NBFCs are excluded. Whether that argument ultimately succeeds depends on context, but the maxim itself supports the contention. The trap is to confuse this maxim with ejusdem generis, which extends a general word rather than excluding unmentioned items.

Where it goes wrong. Confusing expressio unius with ejusdem generis when the argument is about exclusion by specific mention.

Authority. Maxim Expressio Unius Est Exclusio Alterius

Question 5 · 2 marks · Chapter 14: Interpretation of Statutes · hard

Scenario. Nirvaan Green Energy Ltd, a listed company, entered into a contract for supply of solar modules with Sunlight Traders LLP. The company's director, Ms. Meera, is a designated partner in Sunlight Traders LLP and holds 30% of its profit-sharing rights. Under Section 2(76)(iv) of the Companies Act, 2013, a 'related party' includes a public company in which a director or manager is a director and holds along with his relatives more than two per cent of its paid-up share capital. Sunlight is an LLP, not a public company. The company's counsel argued that the definition uses the specific word 'public company' and the general phrase 'and any other company' in clause (vii), and therefore an LLP is excluded by expressio unius. The ROC contended that the definition must be read beneficially to cover entities where directors have substantial interest, and that ejusdem generis would extend 'public company' to any body corporate of similar nature. The board also noted that the term 'relative' is defined in Section 2(77) to include specific relations, and the company's counsel argued that because the definition lists specific relations, it excludes a 'step-sister'. The audit committee wants advice on the interpretation of the definition of related party and the term relative.

Which rule most suitable supports the ROC's argument that an LLP should be treated as a related party?

1. Ejusdem generis, because the general words may extend to a body corporate of a similar nature. (correct answer)
2. Literal construction, because 'public company' cannot include an LLP.
3. Expressio unius, because only public companies are mentioned.
4. Noscitur a sociis, because LLP and company are associated words.

Answer: A — Ejusdem generis, because the general words may extend to a body corporate of a similar nature.

Explanation. The ROC wants to extend the specific expression 'public company' to a similar body corporate. Ejusdem generis allows general words following specific words of the same class to take colour from the specific words. If the definition contains a genus of corporate entities, an LLP may be brought within it. The trap is to treat 'public company' as an exhaustive category and ignore the general words in the definition.

Where it goes wrong. Reading the specific words as exhaustive and ignoring the general words in the definition.

Authority. Rule of Ejusdem Generis; Section 2(76) of the Companies Act, 2013

Question 6 · 2 marks · Chapter 14: Interpretation of Statutes · medium

The company's counsel argues that because clause (iv) mentions 'public company', it excludes an LLP. Which maxim supports this argument?

1. Noscitur a sociis
2. Expressio unius est exclusio alterius (correct answer)
3. Ejusdem generis
4. Mischief rule

Answer: B — Expressio unius est exclusio alterius

Explanation. The company relies on the express mention of 'public company' to argue that other entities, such as an LLP, are excluded. That is the maxim expressio unius est exclusio alterius. The trap is to assume that the maxim is conclusive; it is only a guide and yields to context and legislative intent.

Where it goes wrong. Treating expressio unius as an absolute rule rather than a contextual aid.

Authority. Maxim Expressio Unius Est Exclusio Alterius

Question 7 · 2 marks · Chapter 14: Interpretation of Statutes · hard

The definition of 'relative' lists specific relations. If a step-sister is not listed, which rule would exclude her?

1. Noscitur a sociis
2. Ejusdem generis
3. Expressio unius est exclusio alterius (correct answer)
4. Rule of beneficial construction

Answer: C — Expressio unius est exclusio alterius

Explanation. When a definition enumerates specific relations and does not include a step-sister, expressio unius suggests that unlisted relations are excluded. The maxim operates here because the list is specific and the statute does not use a general catch-all phrase. The trap is to extend the definition by analogy to unlisted relations without a general word that permits extension.

Where it goes wrong. Adding unlisted relations to a specific statutory list without any general inclusive phrase.

Authority. Section 2(77) of the Companies Act, 2013; Maxim Expressio Unius Est Exclusio Alterius

Question 8 · 2 marks · Chapter 14: Interpretation of Statutes · medium

The ROC argues that the related-party definition should be read to advance the object of regulating transactions where directors have substantial interest. Which rule is the ROC invoking?

1. Literal construction
2. Expressio unius
3. Noscitur a sociis
4. Mischief rule (correct answer)

Answer: D — Mischief rule

Explanation. The ROC is looking beyond the literal words to the object of regulating related-party transactions and preventing evasion. That is the mischief rule, which suppresses the defect and advances the remedy. The trap is to label any purposive reading as beneficial construction; beneficial construction is typically for underprivileged classes, whereas here the focus is on closing a regulatory gap.

Where it goes wrong. Confusing mischief rule with beneficial construction when the object is regulatory rather than welfare-oriented.

Authority. Rule in Heydon's Case; Section 2(76) of the Companies Act, 2013

Question 9 · 2 marks · Chapter 14: Interpretation of Statutes · hard

Scenario. Vayu Renewables Ltd failed to file its annual return for FY 2025-26 within sixty days of its AGM. The adjudicating officer under Section 454 imposed a penalty of ₹5 lakh on the company, ₹1 lakh on director Mr. Arvind, and ₹50,000 on the Chief Financial Officer, Ms. Nandini, treating her as an 'officer in default' under Section 2(60). The company paid the penalty. Ms. Nandini challenged the order, arguing that Section 2(60) defines 'officer in default' to include a 'director, manager, secretary or other officer', and that the general words 'other officer' must be read ejusdem generis with the specific words 'director, manager, secretary', which are all top-level managerial personnel. She contended that as CFO, she is not of the same genus. The adjudicating officer argued that the pre-amendment law had no adjudication mechanism, and the Companies (Amendment) Act, 2019 introduced it to speed up penalties; a narrow reading would defeat that remedy. The company also noted that Section 2(60) uses the word 'includes', making the definition exhaustive. The board seeks advice on the interpretation of 'other officer' and the effect of 'includes'.

Which rule is Ms. Nandini invoking to exclude the CFO from the expression 'other officer'?

1. Ejusdem generis (correct answer)
2. Noscitur a sociis
3. Expressio unius
4. Mischief rule

Answer: A — Ejusdem generis

Explanation. Ms. Nandini argues that 'other officer' must take colour from the specific words 'director, manager, secretary'. That is ejusdem generis, where a general word following specific words of the same class is limited to that class. She claims the CFO is not of the same genus. The trap is to treat 'other officer' as an unlimited catch-all phrase.

Where it goes wrong. Reading 'other officer' in isolation without limiting it to the class of the preceding specific words.

Authority. Section 2(60) of the Companies Act, 2013; Rule of Ejusdem Generis

Question 10 · 2 marks · Chapter 14: Interpretation of Statutes · medium

The adjudicating officer relies on the 2019 amendment introducing adjudication to argue against a narrow reading. Which rule is being invoked?

1. Literal construction
2. Mischief rule (correct answer)
3. Beneficial construction
4. Ejusdem generis

Answer: B — Mischief rule

Explanation. The officer points to the defect in the pre-amendment law (no adjudication mechanism) and the remedy introduced in 2019. That is the mischief rule: suppress the mischief and advance the remedy. The trap is to call it beneficial construction; beneficial construction is for underprivileged persons, not for regulatory enforcement.

Where it goes wrong. Mislabelling a regulatory remedial argument as beneficial construction.

Authority. Rule in Heydon's Case; Section 454 of the Companies Act, 2013

Question 11 · 2 marks · Chapter 14: Interpretation of Statutes · medium

The word 'includes' in Section 2(60) makes the definition:

1. Restrictive and exhaustive
2. Ambiguous and void
3. Extensive and prima facie not exhaustive (correct answer)
4. Directory rather than mandatory

Answer: C — Extensive and prima facie not exhaustive

Explanation. When a word is defined to 'include' something, the definition is prima facie extensive. It does not restrict the word to the listed meaning but extends it. The trap is to read 'includes' as if it were 'means', which would make the definition restrictive and exhaustive.

Where it goes wrong. Treating 'includes' as an exhaustive definition when it is prima facie extensive.

Authority. Section 2(60) of the Companies Act, 2013; Definitional Sections

Question 12 · 2 marks · Chapter 14: Interpretation of Statutes · hard

If the definition lists 'director, manager, secretary' and then 'other officer', which rule requires the general words to be limited to the same class?

1. Noscitur a sociis
2. Mischief rule
3. Expressio unius
4. Ejusdem generis (correct answer)

Answer: D — Ejusdem generis

Explanation. The rule that limits general words following an enumeration to the same class is ejusdem generis. The specific words director, manager and secretary form a genus of top managerial officers, and 'other officer' is read within that genus. The trap is to choose noscitur a sociis, which is broader and does not require a preceding enumeration of the same genus.

Where it goes wrong. Choosing noscitur a sociis when the precise rule for general words after an enumeration is ejusdem generis.

Authority. Rule of Ejusdem Generis; Section 2(60) of the Companies Act, 2013

Question 13 · 2 marks · Chapter 14: Interpretation of Statutes · medium

Scenario. A company's legal team argues that because Section 185(1) specifically prohibits a loan to a 'director', it impliedly permits a loan to a director's spouse. Which maxim supports this argument?

A company's legal team argues that because Section 185(1) specifically prohibits a loan to a 'director', it impliedly permits a loan to a director's spouse. Which maxim supports this argument?

1. Expressio unius est exclusio alterius (correct answer)
2. Ejusdem generis
3. Noscitur a sociis
4. Rule of beneficial construction

Answer: A — Expressio unius est exclusio alterius

Explanation. The argument is that the express mention of 'director' excludes the spouse. That is expressio unius est exclusio alterius. The maxim supports the contention, though the court may still examine the context and object of Section 185. The trap is to treat the maxim as conclusive, but the question only asks which maxim supports the argument.

Where it goes wrong. Confusing expressio unius with ejusdem generis when the claim is about exclusion by specific mention.

Authority. Section 185 of the Companies Act, 2013; Maxim Expressio Unius Est Exclusio Alterius

Question 14 · 2 marks · Chapter 14: Interpretation of Statutes · hard

Scenario. A rule says: 'The company shall maintain books of account, registers, minutes and other records.' A company argues that 'other records' is unlimited and includes casual emails. Which rule would the court use to limit 'other records'?

A rule says: 'The company shall maintain books of account, registers, minutes and other records.' A company argues that 'other records' is unlimited and includes casual emails. Which rule would the court use to limit 'other records'?

1. Expressio unius, because emails are not mentioned.
2. Ejusdem generis, because 'other records' takes colour from the specific items. (correct answer)
3. Mischief rule, because the rule aims to protect shareholders.
4. Noscitur a sociis, because all words are in one sentence.

Answer: B — Ejusdem generis, because 'other records' takes colour from the specific items.

Explanation. The specific items books of account, registers and minutes form a genus of formal corporate records. The general phrase 'other records' is limited to records of the same nature. That is ejusdem generis. The trap is to read 'other records' as an unlimited residual category.

Where it goes wrong. Giving a general residual phrase an unlimited meaning despite a preceding enumeration.

Authority. Rule of Ejusdem Generis; Section 128 of the Companies Act, 2013

Question 15 · 2 marks · Chapter 14: Interpretation of Statutes · medium

Scenario. A provision states: 'No person shall be appointed as a director who is of unsound mind and stands so declared by a competent court.' A company appoints a person of unsound mind who has not been declared by a court. The company argues that 'and' is disjunctive. Which rule would the court apply to read 'and' as conjunctive?

A provision states: 'No person shall be appointed as a director who is of unsound mind and stands so declared by a competent court.' A company appoints a person of unsound mind who has not been declared by a court. The company argues that 'and' is disjunctive. Which rule would the court apply to read 'and' as conjunctive?

1. Ejusdem generis, because director and court are associated.
2. Mischief rule, because the provision protects shareholders.
3. Literal construction, because 'and' is ordinarily conjunctive. (correct answer)
4. Expressio unius, because only declared persons are mentioned.

Answer: C — Literal construction, because 'and' is ordinarily conjunctive.

Explanation. The word 'and' is ordinarily conjunctive, joining both requirements. Literal construction reads it in its natural sense unless context requires otherwise. The company's disjunctive reading would defeat the provision. The trap is to casually convert 'and' into 'or' without a clear contextual justification.

Where it goes wrong. Reading 'and' as 'or' without a contextual basis.

Authority. Section 164 of the Companies Act, 2013; Rule of Literal Construction

Question 16 · 2 marks · Chapter 14: Interpretation of Statutes · medium

Scenario. A statute provides: 'The company shall file the return with the Registrar and the stock exchange.' A company files only with the Registrar and argues that filing with one is sufficient. Which rule would the court use to reject the argument?

A statute provides: 'The company shall file the return with the Registrar and the stock exchange.' A company files only with the Registrar and argues that filing with one is sufficient. Which rule would the court use to reject the argument?

1. Mischief rule, because the object is transparency.
2. Noscitur a sociis, because Registrar and stock exchange are associated.
3. Ejusdem generis, because both are regulatory bodies.
4. Literal construction, because 'and' is conjunctive and requires both filings. (correct answer)

Answer: D — Literal construction, because 'and' is conjunctive and requires both filings.

Explanation. The word 'and' is conjunctive unless context indicates otherwise. The court would read the requirement literally to require both filings. The trap is to treat 'and' as 'or' merely because compliance with one authority might seem sufficient.

Where it goes wrong. Reading 'and' as 'or' to avoid compliance with both requirements.

Authority. Rule of Literal Construction

Question 17 · 2 marks · Chapter 14: Interpretation of Statutes · hard

Scenario. A provision says: 'The Board may appoint a managing director, whole-time director, manager or other principal executive officer.' A company appoints a Chief Financial Officer as 'other principal executive officer'. The CFO argues she is not of the same genus. Which rule applies?

A provision says: 'The Board may appoint a managing director, whole-time director, manager or other principal executive officer.' A company appoints a Chief Financial Officer as 'other principal executive officer'. The CFO argues she is not of the same genus. Which rule applies?

1. Ejusdem generis, because 'other principal executive officer' takes colour from the specific offices. (correct answer)
2. Expressio unius, because CFO is not mentioned.
3. Mischief rule, because the provision aims at governance.
4. Noscitur a sociis, because all words are in one list.

Answer: A — Ejusdem generis, because 'other principal executive officer' takes colour from the specific offices.

Explanation. The specific offices managing director, whole-time director and manager form a genus of top executive offices. The general phrase 'other principal executive officer' is limited to offices of the same nature. That is ejusdem generis. The trap is to read the general phrase broadly without limiting it to the preceding class.

Where it goes wrong. Treating 'other principal executive officer' as an open-ended category.

Authority. Section 2(51) of the Companies Act, 2013; Rule of Ejusdem Generis

Question 18 · 2 marks · Chapter 14: Interpretation of Statutes · hard

Scenario. A statute provides: 'No company shall give a loan to a director, manager or other officer.' A company gives a loan to a consultant who is not an officer. The company argues that 'other officer' is unlimited. Which rule would limit 'other officer'?

A statute provides: 'No company shall give a loan to a director, manager or other officer.' A company gives a loan to a consultant who is not an officer. The company argues that 'other officer' is unlimited. Which rule would limit 'other officer'?

1. Expressio unius, because consultant is not mentioned.
2. Ejusdem generis, because the general words take colour from director and manager. (correct answer)
3. Mischief rule, because the object is to prevent diversion of funds.
4. Beneficial construction, because directors are powerful.

Answer: B — Ejusdem generis, because the general words take colour from director and manager.

Explanation. The specific words director and manager indicate a class of persons holding office in the company. 'Other officer' is read within that class, not as any consultant. Ejusdem generis limits the general phrase. The trap is to extend 'other officer' to persons outside the corporate office genus.

Where it goes wrong. Extending a general phrase to persons outside the class indicated by the specific words.

Authority. Rule of Ejusdem Generis; Section 185 of the Companies Act, 2013

Question 19 · 2 marks · Chapter 14: Interpretation of Statutes · medium

Scenario. A provision says: 'The company shall keep a register of directors, managers and secretaries and other officers.' A company argues that 'other officers' includes a casual consultant. Which rule would the court use to reject this?

A provision says: 'The company shall keep a register of directors, managers and secretaries and other officers.' A company argues that 'other officers' includes a casual consultant. Which rule would the court use to reject this?

1. Mischief rule, because the object is transparency.
2. Expressio unius, because consultant is not listed.
3. Noscitur a sociis, because 'other officers' takes colour from the associated words. (correct answer)
4. Beneficial construction, because consultants need protection.

Answer: C — Noscitur a sociis, because 'other officers' takes colour from the associated words.

Explanation. Noscitur a sociis means a word takes colour from the words associated with it. 'Other officers' is associated with directors, managers and secretaries, so it is limited to officers of similar nature. The trap is to give the general phrase a standalone dictionary meaning without reference to its company.

Where it goes wrong. Interpreting a general word in isolation without considering the associated words.

Authority. Doctrine of Noscitur a Sociis; Section 170 of the Companies Act, 2013

Question 20 · 2 marks · Chapter 14: Interpretation of Statutes · hard

Scenario. A rule says: 'Every company shall file a return containing the particulars of its directors, key managerial personnel and other persons.' A company omits a key managerial person, arguing that 'other persons' is optional. Which rule would require inclusion?

A rule says: 'Every company shall file a return containing the particulars of its directors, key managerial personnel and other persons.' A company omits a key managerial person, arguing that 'other persons' is optional. Which rule would require inclusion?

1. Mischief rule, because the object is disclosure.
2. Expressio unius, because only listed persons are required.
3. Noscitur a sociis, because 'other persons' is vague.
4. Ejusdem generis, because 'other persons' includes persons of the same class. (correct answer)

Answer: D — Ejusdem generis, because 'other persons' includes persons of the same class.

Explanation. The specific persons directors and key managerial personnel form a genus of managerial persons. 'Other persons' is limited to persons of the same class, and a key managerial person falls within that class. The trap is to read 'other persons' as excluding necessary persons within the same genus.

Where it goes wrong. Treating a general residual phrase as optional rather than as extending the same class.

Authority. Rule of Ejusdem Generis; Rule 12 of the Companies (Management and Administration) Rules, 2014