CA Inter Corporate and Other Laws MCQ Test 3: answer key

Question 1 · 2 marks · Audit and Auditors (Chapter 10) · medium

Scenario. Arunika Components Private Limited was incorporated on 1 May 2026 and is not a Government company. The Board did not appoint its first auditor within 30 days of registration. On the 35th day, it nevertheless passed a resolution appointing M/s Veda & Co. The company secretary recorded the objection and informed members; at an extraordinary general meeting held on the 75th day, members made a fresh appointment of M/s Veda & Co. as first auditor. The first annual general meeting is scheduled for 30 September 2026. In preparation for that meeting, the company is considering M/s Nair & Rao, a different audit firm, for the subsequent appointment. One partner of Nair & Rao has a spouse holding equity shares of Arunika with face value ₹64,000 and a mother holding shares with face value ₹43,000. Each individual holding is below ₹1 lakh, and the firm says the two holdings should be tested separately. Separately, an entity controlled by the same partner, which uses the audit firm's trade name, has been engaged to design and implement a financial information system for Arunika's wholly-owned subsidiary. The Board is told that the work is not being contracted directly by the audit firm and that the subsidiary is a separate legal entity. The Board seeks legal advice on the first-auditor appointment, the proposed firm's eligibility and the indirect service arrangement. Based on the facts above, answer MCQs q01-q03.

Which statement correctly describes the validity of the first-auditor appointments made by Arunika Components Private Limited?

1. The Board's appointment on the 35th day is invalid; after its failure within 30 days, members may appoint the first auditor at an EGM within 90 days, and that auditor holds office until the conclusion of the first AGM. (correct answer)
2. The Board's appointment on the 35th day is valid because the Board has 90 days from registration to appoint the first auditor.
3. The members' appointment at the EGM is invalid because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, only the Board or the Central Government can appoint the first auditor of a private company.
4. The Board's appointment on the 35th day is valid if the resolution is unanimous, and the auditor automatically receives a five-year term.

Answer: A — The Board's appointment on the 35th day is invalid; after its failure within 30 days, members may appoint the first auditor at an EGM within 90 days, and that auditor holds office until the conclusion of the first AGM.

Working. Board appointment: 35th day, beyond 30 days. Members' EGM appointment: 75th day, within 90 days. The first auditor's term ends at the conclusion of the first AGM.

Explanation. Section 139(6) gives the Board 30 days from registration to appoint the first auditor. If the Board fails, it must inform the members, who may appoint the auditor at an EGM within 90 days. The member-appointed auditor holds office until the conclusion of the first AGM. The Board's appointment after the 30-day period cannot be sustained merely because it passed a resolution. The five-year tenure relates to subsequent appointments, not this first appointment.

Where it goes wrong. Confusing the Board's 30-day period with the members' 90-day appointment period and applying the subsequent auditor's tenure to the first auditor.

Authority. Companies Act, 2013, section 139(6)

Question 2 · 2 marks · Audit and Auditors (Chapter 10); Share Capital and Debentures (Chapter 4) · hard

Can M/s Nair & Rao be appointed as Arunika's auditor when the two relatives of one of its partners continue to hold the stated shares?

1. Yes, because each relative individually holds shares with a face value below ₹1 lakh.
2. Yes, because the relevant threshold is determined by the market value of the shares rather than their face value.
3. No, because the holdings of the partner's relatives are aggregated and their combined face value exceeds ₹1 lakh. (correct answer)
4. No, because any holding by any relative of an audit firm partner disqualifies the firm, irrespective of its value.

Answer: C — No, because the holdings of the partner's relatives are aggregated and their combined face value exceeds ₹1 lakh.

Working. ₹64,000 + ₹43,000 = ₹1,07,000. Permitted maximum: ₹1,00,000. Excess: ₹7,000.

Explanation. Section 141(3)(d)(i), read with Rule 10(1), permits a relative of an auditor to hold securities or an interest only up to the prescribed face-value threshold of ₹1 lakh. The study material clarifies that holdings of the relatives together are considered. Here, ₹64,000 plus ₹43,000 equals ₹1,07,000, which exceeds the permitted amount. The fact that each relative individually holds less than ₹1 lakh does not preserve the firm's eligibility.

Where it goes wrong. Testing each relative's holding separately instead of aggregating their holdings and applying the threshold to face value.

Authority. Companies Act, 2013, section 141(3)(d)(i); Companies (Audit and Auditors) Rules, 2014, Rule 10(1)

Question 3 · 2 marks · Audit and Auditors (Chapter 10) · hard

May M/s Nair & Rao provide the financial information system design and implementation service through the controlled entity to Arunika's subsidiary and still accept appointment as statutory auditor?

1. Yes, because the subsidiary is a separate legal entity and the restriction applies only to services contracted directly by the auditor.
2. No, because design and implementation of a financial information system is a prohibited service, and the restriction extends to indirect services to a subsidiary through an entity connected with the audit firm. (correct answer)
3. Yes, because the Board may approve every service that is commercially useful to the company and its subsidiaries.
4. No, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, only bookkeeping and internal audit services are prohibited, while financial information system design falls outside the restricted services.

Answer: B — No, because design and implementation of a financial information system is a prohibited service, and the restriction extends to indirect services to a subsidiary through an entity connected with the audit firm.

Working. Restricted service: design and implementation of a financial information system. Recipient: subsidiary. Delivery: through a controlled entity using the audit firm's trade name. The indirect-service restriction applies.

Explanation. Section 144 specifically prohibits an auditor from providing design and implementation of any financial information system. The restriction covers services rendered directly or indirectly to the company, its holding company or subsidiary. For an audit firm, indirect services include services through an entity in which the firm or a partner has significant influence or control, or where the firm's name or trade name is used. Board approval cannot make a prohibited service permissible.

Where it goes wrong. Assuming the prohibition does not apply because the engagement is through a separate entity and the recipient is a subsidiary.

Authority. Companies Act, 2013, section 144

Question 4 · 2 marks · Share Capital and Debentures (Chapter 4); Preliminary (Chapter 1) · hard

Scenario. Prakriti Gridworks Private Limited has 120 members; its articles restrict share transfers and prohibit public invitations to subscribe. On 4 August 2026, the Board approved a pro-rata rights issue to existing equity shareholders. The offer remained open for acceptance for nine days. The notice was dispatched electronically with proof of delivery only two days before the opening date. Of the 120 members, 108 gave written or electronic consent to the shortened dispatch interval; together they hold 74% of the paid-up share capital. The company secretary therefore counted member numbers rather than voting or shareholding percentage. At the same meeting, the Board recommended a bonus issue funded from the securities premium account, and members authorised it in general meeting. The articles permit the issue, and the company has paid all interest and principal on deposits and debt securities. However, on the proposed allotment date, 800 equity shares remain partly paid and a contribution to employees' provident fund is overdue. The company also plans a secured debenture issue with a 24-year tenor to finance a transmission project; it is engaged in setting up that infrastructure project. A debenture trustee has been appointed before the prospectus, and a debenture trust deed is scheduled within three months after the issue closes. The Board seeks advice on the rights issue timetable, bonus-share conditions and secured-debenture tenor. Based on the facts above, answer MCQs q04-q06.

Which assessment of Prakriti Gridworks Private Limited's rights issue timetable is correct?

1. The timetable is invalid because every rights issue must remain open for at least 15 days and notice must always be dispatched three days before opening without exception.
2. The timetable is invalid because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, the shorter notice requires consent from members holding at least 90% of the paid-up share capital, and the consenting members hold only 74%.
3. The timetable is valid because a private company may use any offer period and dispatch interval whenever the Board approves the proposal.
4. The timetable is valid because the nine-day offer period satisfies Rule 12A, while a private company may use a shorter dispatch interval when at least 90% of its members consent; here, 108 of 120 members have consented. (correct answer)

Answer: D — The timetable is valid because the nine-day offer period satisfies Rule 12A, while a private company may use a shorter dispatch interval when at least 90% of its members consent; here, 108 of 120 members have consented.

Working. 108 ÷ 120 × 100 = 90% of members. Nine-day acceptance period is at least seven days. The two-day dispatch interval is supported by the private-company consent exception.

Explanation. Rule 12A prescribes a minimum acceptance period of seven days for a rights offer, so the nine-day period is within the permitted range. Section 62(2) normally requires dispatch at least three days before opening, but the supplied material permits a shorter period for a private company where 90% of members consent in writing or electronically. The test is the number of members, not their percentage of share capital. Here, 108 out of 120 members is 90%.

Where it goes wrong. Confusing the earlier 15-day period with the prescribed seven-day minimum and measuring the private-company consent threshold by shareholding instead of the number of members.

Authority. Companies Act, 2013, section 62(1)(a) and section 62(2); Companies (Share Capital and Debentures) Rules, 2014, Rule 12A

Question 5 · 2 marks · Share Capital and Debentures (Chapter 4) · hard

Can Prakriti Gridworks proceed with the proposed bonus allotment on the stated date without first addressing the two outstanding matters?

1. No, because statutory dues of employees must not be in default and the outstanding partly paid shares must be made fully paid before the bonus allotment. (correct answer)
2. No, because securities premium account cannot be used for issuing fully paid bonus shares.
3. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, authorisation by the Board and members in general meeting cures any outstanding employee-dues default and partly paid share balance.
4. Yes, because the only relevant restriction is default in payment of interest or principal on deposits and debt securities.

Answer: A — No, because statutory dues of employees must not be in default and the outstanding partly paid shares must be made fully paid before the bonus allotment.

Working. Outstanding employee provident fund contribution: statutory-dues default. Outstanding partly paid shares: must be made fully paid before allotment. Both conditions remain unsatisfied.

Explanation. Section 63(2) prescribes conditions for issuing fully paid bonus shares. The company must not have defaulted in payment of statutory dues of employees, including provident fund contributions. Further, partly paid shares outstanding on the date of allotment must first be made fully paid. Both conditions remain unsatisfied here. The use of the securities premium account is an admissible source, but that does not remove the other statutory conditions.

Where it goes wrong. Assuming that Board recommendation and general meeting authorisation override the separate conditions relating to employee dues and partly paid shares.

Authority. Companies Act, 2013, section 63(1) and section 63(2)

Question 6 · 2 marks · Share Capital and Debentures (Chapter 4) · medium

Is the proposed 24-year tenor for Prakriti Gridworks Private Limited's secured debentures permissible under the applicable provisions?

1. No, because secured debentures cannot have a tenor exceeding ten years in any circumstances.
2. Yes, because a company engaged in setting up infrastructure projects may issue secured debentures for up to 30 years, and the proposed 24-year tenor is within that limit. (correct answer)
3. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, every unlisted company may issue secured debentures for up to 30 years without satisfying any further condition.
4. No, because the maximum tenor permitted for a secured debenture issued by a private company is twenty years.

Answer: B — Yes, because a company engaged in setting up infrastructure projects may issue secured debentures for up to 30 years, and the proposed 24-year tenor is within that limit.

Working. General maximum: 10 years. Infrastructure-project exception: up to 30 years. Proposed tenor: 24 years, which is within the exception.

Explanation. Rule 18(1) of the Companies (Share Capital and Debentures) Rules, 2014 generally restricts the tenor of secured debentures to ten years. The material provides an exception for companies engaged in setting up infrastructure projects, for which the tenor may extend up to thirty years. Since Prakriti is engaged in setting up the stated infrastructure project, a 24-year tenor falls within the permitted exception. The exception is not available to every issuer merely because it is unlisted.

Where it goes wrong. Applying the general ten-year restriction without considering the infrastructure-project exception.

Authority. Companies Act, 2013, section 71(3); Companies (Share Capital and Debentures) Rules, 2014, Rule 18(1)(a)

Question 7 · 2 marks · Preliminary (Chapter 1); Share Capital and Debentures (Chapter 4) · medium

Scenario. At incorporation on 12 January 2024, Darpan One Person Company Limited had Ira as its only member. It had three directors, but no other person was entered in the register of members. On 15 June 2026, following a special resolution, the company allotted shares for cash to Dev and Naina under a further issue authorised for persons who were not existing members. The register then recorded Ira, Dev and Naina as members. The directors nevertheless continued to describe Darpan as an OPC in contracts and tax correspondence, arguing that Ira remained its principal shareholder. In a separate group matter, Vistara Mobility Private Limited has 48 members, articles restricting transfers, and a prohibition on public invitations to subscribe. Its paid-up share capital is ₹3.8 crore and its turnover in the immediately preceding financial year is ₹39 crore. However, Ardent Public Limited holds 55% of its total voting power and can appoint a majority of its directors. Vistara wants to claim small-company treatment because both monetary figures fall below the prescribed caps, while retaining the private-company label in its articles. It also proposes a rights issue to existing shareholders under section 62. The promoters seek advice on Darpan's OPC definition and Vistara's status for the Act's classification provisions. Based on the facts above, answer MCQs q07-q08.

After allotting shares to Dev and Naina, does Darpan continue to meet the definition of a One Person Company under the Companies Act, 2013?

1. No, because an OPC is a company having only one person as a member, and the allotment has resulted in three members. (correct answer)
2. Yes, because an OPC may have up to 200 members as long as its articles restrict share transfers.
3. Yes, because Ira continues to control the majority of the paid-up share capital and directors determine the member count.
4. No, because an OPC must have only one director rather than one member.

Answer: A — No, because an OPC is a company having only one person as a member, and the allotment has resulted in three members.

Working. Members after allotment: Ira + Dev + Naina = 3. Section 2(62) requires only one member.

Explanation. Section 2(62) defines a One Person Company as a company having only one person as a member. The definition concerns the number of members, not the number of directors or the proportion of share capital held by the original member. Following the allotment, Ira, Dev and Naina are all entered as members. The company therefore no longer satisfies the stated definition merely because Ira remains its principal shareholder.

Where it goes wrong. Confusing control over share capital or the number of directors with the statutory requirement of having only one member.

Authority. Companies Act, 2013, section 2(62); Companies Act, 2013, section 62(1)(c)

Question 8 · 2 marks · Preliminary (Chapter 1) · hard

Can Vistara Mobility Private Limited qualify as a small company under section 2(85) on the basis of its paid-up share capital and turnover?

1. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, its paid-up share capital and turnover are below the prescribed small-company limits, so its subsidiary status is irrelevant.
2. Yes, because the private-company restrictions in its articles override the classification of its parent company.
3. No, because a company can be treated as a small company only when it has fewer than 50 members.
4. No, because it is a subsidiary of a public company and is deemed to be a public company for the Act; a subsidiary company is also excluded from the small-company definition. (correct answer)

Answer: D — No, because it is a subsidiary of a public company and is deemed to be a public company for the Act; a subsidiary company is also excluded from the small-company definition.

Working. 55% voting power exceeds one-half, establishing the stated subsidiary relationship. Small-company monetary limits: ₹4 crore paid-up share capital and ₹40 crore turnover. The subsidiary/public-company exclusions nevertheless apply.

Explanation. Although Vistara's paid-up share capital of ₹3.8 crore and turnover of ₹39 crore fall within the prescribed monetary limits, section 2(85) excludes a holding company and a subsidiary company from the small-company definition. Further, section 2(71) deems a subsidiary of a company that is not a private company to be a public company for the purposes of the Act, even if its articles continue to describe it as private. The monetary limits cannot overcome these exclusions.

Where it goes wrong. Applying only the monetary thresholds while ignoring the public-company deeming provision and the subsidiary-company exclusion.

Authority. Companies Act, 2013, sections 2(71), 2(85) and 2(87); Companies (Specification of Definitions Details) Rules, 2014

Question 9 · 2 marks · Foreign Exchange Management Act, 1999 · medium

Scenario. BluePeak Exports Private Limited, based in Pune, sells precision valves and provides technical services to overseas customers. On 8 July 2026, it dispatched a consignment of valves from Mundra to a buyer in Oman; the goods crossed out of India the following day. Under a separate contract, its engineers in Bengaluru prepared data dashboards and provided maintenance support from India to a customer established in Singapore. The same company also arranged for its Dubai branch team to provide remote support to a customer in Kuwait, and its Pune team delivered training to an Indian customer who chose to pay in euros. The Oman buyer paid its invoice in US dollars into an overseas collection account maintained by the company, while the Singapore service invoice remained payable. The finance committee is unsure whether the goods movement, the India-based service and the other two arrangements fall within the statutory meaning of export. It is also concerned that receiving export funds into an overseas collection account may be treated as the end of the matter. The Board asks which events qualify as exports under FEMA and what broad requirement the Act identifies for export proceeds. The company has separately requested its compliance team to confirm the applicable realisation time window before acting on any overdue invoice. Based on the facts above, answer MCQs q09-q11.

Does the consignment of precision valves dispatched from Mundra and taken out of India to Oman qualify as an export of goods under FEMA?

1. Yes, because export includes the taking out of India to a place outside India of any goods. (correct answer)
2. No, because goods qualify as exports only when the buyer pays for them in foreign currency before shipment.
3. No, because the definition requires the goods to be manufactured outside India before they are sent to another country.
4. Yes, because every sale made by an Indian company is an export even when the goods remain within India.

Answer: A — Yes, because export includes the taking out of India to a place outside India of any goods.

Working. Goods were taken out of India and delivered to a destination outside India. This satisfies the goods limb of section 2(l).

Explanation. Section 2(l) defines export to include the taking out of India to a place outside India of any goods. BluePeak's consignment physically crossed out of India and was sent to Oman. The definition does not make the physical movement dependent on whether payment is received before shipment or whether the invoice is denominated in a particular currency. A sale delivered within India would not satisfy this goods-export definition merely because the seller is Indian.

Where it goes wrong. Confusing the statutory definition of export with the separate payment and foreign-exchange requirements applicable to export proceeds.

Authority. Foreign Exchange Management Act, 1999, section 2(l)(i)

Question 10 · 2 marks · Foreign Exchange Management Act, 1999 · hard

Considering the place from which the service is provided and the location of the recipient, which of BluePeak's arrangements qualifies as an export of services under FEMA?

1. The Dubai-to-Kuwait support qualifies because BluePeak is incorporated in India, even though the service is provided from Dubai.
2. The Pune-to-Indian-client training qualifies because payment in euros changes the location of the recipient.
3. The Bengaluru-to-Singapore dashboard service qualifies because the service is provided from India to a person outside India. (correct answer)
4. None of the arrangements qualifies because the definition of export under FEMA covers goods but does not include services.

Answer: C — The Bengaluru-to-Singapore dashboard service qualifies because the service is provided from India to a person outside India.

Working. Bengaluru to Singapore: from India to a person outside India. Dubai to Kuwait: from outside India. Pune to Indian client: recipient is in India.

Explanation. Section 2(l)(ii) includes the provision of services from India to any person outside India within the meaning of export. The Bengaluru team provides the dashboard service from India to a Singapore customer, satisfying both elements. The Dubai branch service is provided from outside India, while the Pune training is provided to an Indian recipient. Payment in euros does not convert a domestic service into an export of services.

Where it goes wrong. Considering only the Indian incorporation of the service provider or the currency of payment while ignoring both the place of provision and the recipient's location.

Authority. Foreign Exchange Management Act, 1999, section 2(l)(ii)

Question 11 · 2 marks · Foreign Exchange Management Act, 1999 · medium

Which statement correctly describes the broad FEMA requirement applicable to BluePeak's export proceeds received into its overseas collection account?

1. No repatriation requirement arises once the overseas buyer deposits foreign currency into an account outside India, as specifically evaluated under the mandatory statutory framework and applicable regulatory guidelines.
2. FEMA identifies a requirement for realisation of export proceeds and repatriation to India; receiving payment abroad does not remove that broad requirement. (correct answer)
3. Repatriation applies only to proceeds from goods and does not extend to services provided from India.
4. Export proceeds are treated as capital contributions and may remain abroad without any further action.

Answer: B — FEMA identifies a requirement for realisation of export proceeds and repatriation to India; receiving payment abroad does not remove that broad requirement.

Working. The supplied chapter expressly identifies realisation of export proceeds and repatriation to India as a FEMA requirement. No specific period is stated in the supplied material.

Explanation. The supplied FEMA chapter identifies the requirement for realisation of export proceeds and their repatriation to India as a salient feature of the Act. The fact that the buyer pays in foreign currency or credits an overseas collection account does not remove that broad requirement. The supplied material does not set out the operative time period, extension procedure or detailed repatriation mechanism, so no particular deadline can be concluded from it.

Where it goes wrong. Treating receipt into an overseas account as equivalent to satisfying the stated requirement for repatriation to India.

Authority. Foreign Exchange Management Act, 1999, chapter introduction (salient feature concerning realisation of export proceeds and repatriation to India); operative section: check

Question 12 · 2 marks · The Limited Liability Partnership Act, 2008 · hard

Scenario. Meridian Studio LLP was formed under a written agreement by four partners. The agreement records that Raghav will contribute ₹6 lakh in cash and a contract to provide software implementation services over nine months valued at ₹4 lakh; the amount of his contribution is accounted for and disclosed in the LLP's accounts. Farhan's agreed contribution is ₹8 lakh in cash. On 10 April 2026, the partners sign a private side letter reducing Farhan's obligation to ₹3 lakh, but they neither amend the filed LLP agreement nor notify North Bank. On 25 April, North Bank extends credit to the LLP after reviewing the original agreement and relying on Farhan's ₹8 lakh commitment; it has no knowledge of the side letter. On 15 May, Nila transfers 25% of her right to share profits and distributions to Meera. Meera then demands access to transaction records and permission to vote at partner meetings. The LLP agreement says nothing about cessation of partnership. On 1 June, Nila gives all other partners a written notice of her intention to resign, and she stops being a partner after the 30-day notice period. The LLP does not file the cessation notice with the Registrar within the next 30 days, and North Bank is not separately informed. Nila had also incurred a separate obligation to North Bank while she was a partner. The partners seek advice on contributions, the assignee's rights and Nila's cessation. Based on the facts above, answer MCQs q12-q13.

Which statement correctly describes the contribution arrangements and North Bank's rights against Farhan?

1. No, because an LLP partner's contribution is confined to money and tangible property, so future services cannot be accepted as contribution.
2. Yes, because a partner may promise services, but a creditor can never enforce an obligation once the partners privately amend it.
3. No, because the service must already have been performed and Farhan's private side letter binds the bank even without notice.
4. Yes, because future services may form part of a partner's contribution, and a creditor that relied on Farhan's original agreed obligation without notice of the compromise may enforce that original obligation. (correct answer)

Answer: D — Yes, because future services may form part of a partner's contribution, and a creditor that relied on Farhan's original agreed obligation without notice of the compromise may enforce that original obligation.

Working. Raghav's future service contract is an admissible form of contribution. Farhan's original obligation: ₹8 lakh. North Bank relied on that obligation and had no notice of the later reduction to ₹3 lakh.

Explanation. Section 32 permits a partner's contribution to include contracts for services performed or to be performed, and its monetary value must be accounted for and disclosed. Under section 33, the contribution obligation is governed by the LLP agreement. Where a creditor extends credit in reliance on that original obligation without notice of a compromise between partners, it may enforce the original obligation against the partner. North Bank had no notice of the private side letter and relied on the original ₹8 lakh commitment.

Where it goes wrong. Assuming that only cash or tangible property can form contribution, or that a private compromise automatically binds a creditor that relied on the original obligation without notice.

Authority. Limited Liability Partnership Act, 2008, sections 32(1), 32(2), 33(1) and 33(2)

Question 13 · 2 marks · The Limited Liability Partnership Act, 2008 · hard

Which statement correctly describes the legal consequences of Nila's transfer of rights and subsequent cessation from Meridian Studio LLP?

1. Nila ceased to be a partner as soon as she sent notice, and cessation releases her from obligations incurred before that notice.
2. Meera becomes a full partner upon assignment and can vote, inspect records and manage the LLP without admission under the agreement.
3. Meera receives only the transferable economic rights, not management or information rights; Nila's transfer does not itself end her partnership, and after cessation the bank may still treat her as a partner until it or the Registrar receives notice, while obligations incurred earlier remain. (correct answer)
4. The transfer dissolves the LLP unless all partners unanimously accept Meera as a partner.

Answer: C — Meera receives only the transferable economic rights, not management or information rights; Nila's transfer does not itself end her partnership, and after cessation the bank may still treat her as a partner until it or the Registrar receives notice, while obligations incurred earlier remain.

Working. Transfer under section 42: economic rights only; no automatic dissociation or management rights. Cessation: 30-day written notice. Third-party position continues until notice to that party or delivery of notice to the Registrar. Prior obligations remain.

Explanation. Section 42 permits transfer of a partner's rights to profits, losses and distributions, but the transfer does not itself dissociate the partner or give the transferee management or information rights. Since the LLP agreement is silent on cessation, section 24 permits cessation through written notice of at least 30 days to the other partners. A former partner remains regarded as a partner for a person dealing with the LLP until that person has notice or notice is delivered to the Registrar. Earlier obligations also continue after cessation.

Where it goes wrong. Confusing transfer of economic rights with admission as a partner and assuming that cessation immediately removes third-party exposure or earlier liabilities.

Authority. Limited Liability Partnership Act, 2008, sections 24(1), 24(3) and 24(4); Limited Liability Partnership Act, 2008, section 25(2)(a); Limited Liability Partnership Act, 2008, section 42(1), 42(2) and 42(3)

Question 14 · 2 marks · The General Clauses Act, 1897 · medium

Scenario. An enactment governing an application before the Registrar requires the applicant to file it within ten days from 5 November 2026, with the permitted window described in the notice as running from 5 November to 15 November. The Registrar's office is closed on Sunday, 15 November, and is next open on Monday, 16 November. The applicant submits the papers at the office on 16 November. A separate notice to a company relates to a hearing. The specific rule governing that hearing directs service by registered post acknowledgement due. The authority prepares the notice, addresses it correctly to the company's registered address, prepays the postage and posts it by registered post on 20 November, but does not request acknowledgement due. The letter would ordinarily be delivered on 23 November and is later returned marked not claimed. The company argues that the notice was never personally received; the authority argues that Section 27 of the General Clauses Act makes any registered letter effective once posted. The Registrar seeks advice on the filing deadline and the postal-service presumption, including how the words from and to affect the count. Based on the facts above, answer MCQs q14-q15.

Is the applicant's filing on 16 November 2026 within the permitted time under the General Clauses Act, 1897?

1. No, because 5 November is included and 15 November is excluded when a period is expressed using the words from and to.
2. No, because a closed office does not extend a statutory filing period, even when the last day is Sunday.
3. Yes, because 5 November is excluded and 15 November is included; since the office is closed on the last day, filing on the next open day, 16 November, is timely. (correct answer)
4. Yes, because an applicant may file on any later working day after a Sunday without any time restriction.

Answer: C — Yes, because 5 November is excluded and 15 November is included; since the office is closed on the last day, filing on the next open day, 16 November, is timely.

Working. 5 November excluded. 6-15 November = 10 days, with 15 November included. Office closed on 15 November; next open day is 16 November.

Explanation. Section 9 provides that the word from excludes the first day in a series, while the word to includes the last day. Accordingly, 5 November is excluded and 15 November is included as the tenth day. Under section 10, where the last day of a prescribed period falls on a day when the relevant office is closed, the act is considered duly performed when done on the next day on which the office is open. Filing on 16 November is therefore timely.

Where it goes wrong. Including the first day or excluding the last day, and overlooking the extension where the office is closed on the last day.

Authority. General Clauses Act, 1897, sections 9 and 10

Question 15 · 2 marks · The General Clauses Act, 1897 · hard

Can the authority rely on the presumption of service under section 27 of the General Clauses Act, 1897 when it sent the notice by registered post without acknowledgement due?

1. Yes, because proper addressing and prepayment satisfy section 27 even when the governing rule prescribes a more specific postal mode.
2. No, because section 27 applies only to ordinary post and never to registered post.
3. Yes, because service is deemed only after the recipient actually signs an acknowledgement and returns it.
4. No, because the specific rule requires registered post acknowledgement due; registered post without that additional mode does not attract the section 27 presumption. (correct answer)

Answer: D — No, because the specific rule requires registered post acknowledgement due; registered post without that additional mode does not attract the section 27 presumption.

Working. Required mode: registered post acknowledgement due. Mode used: registered post only. The specific requirement is not met; section 27 does not cure that failure.

Explanation. Section 27 generally provides a presumption of service where a document is properly addressed, postage is prepaid and it is posted by registered post, unless a different intention appears. However, the supplied study material explains that where the governing statutory rule specifically requires registered post acknowledgement due, sending registered post alone does not comply with that requirement. The general presumption cannot replace the more specific mode prescribed by the applicable rule.

Where it goes wrong. Applying the general registered-post presumption despite the governing rule specifying registered post acknowledgement due.

Authority. General Clauses Act, 1897, section 27