CA Inter Corporate and Other Laws MCQ Test 7: answer key

Question 1 · 2 marks · Chapter 4 – Share Capital and Debentures · hard

Scenario. Meridian Grid Limited is an unlisted public company limited by shares. Its articles authorise redeemable preference shares. A transmission-storage project undertaken by the company is one of the infrastructure projects specified in Schedule VI. On 15 December 2024, the members passed a special resolution approving a 30-year redeemable preference issue for that project. The terms provide for redemption of at least 10% of the shares annually from the 21st year onwards, or earlier on a proportionate basis at the option of preference shareholders. No redemption or dividend default was subsisting on the issue date. The company had earlier failed to pay a declared dividend on its preference shares. It cleared the arrears on 20 December 2020. At the date of the proposed DVR issue, there is no subsisting default in declared dividends, matured deposits, preference-share or debenture redemption, or interest payments; there is also no default in the specified term-loan repayments, employee statutory dues or IEPF credits. No Court or Tribunal penalty for an offence under the RBI Act, SEBI Act, Securities Contracts (Regulation) Act, FEMA or a sectoral regulatory statute was imposed during the preceding three years. Its annual accounts and annual returns for FY 2023-24, FY 2024-25 and FY 2025-26 have been filed. On 15 October 2026, the Board proposed equity shares carrying differential voting rights. The articles permit the issue; an ordinary resolution was passed at a general meeting; and the proposed shares would carry 73.5% of the company's total voting power. On 1 September 2026, Meridian also closed an issue of ₹12 crore partly convertible debentures, of which ₹7 crore is non-convertible. The company is neither a banking company, an All India Financial Institution nor a registered NBFC or HFC. The Board seeks advice on the preference-share tenure, the timing and conditions for differential-rights shares, and the reserve required for the debentures.

Does the proposed 30-year tenure for the redeemable preference shares comply with the Companies Act, 2013?

1. No, because every redeemable preference share must be redeemed within 20 years from the date of issue.
2. Yes, because the project is an infrastructure project specified in Schedule VI and the shares will be redeemed within 30 years, with at least 10% redeemed annually from the 21st year onwards or earlier at the option of preference shareholders. (correct answer)
3. Yes, because any company may issue preference shares for 30 years if its members pass a special resolution.
4. No, because the infrastructure-project exception requires the company to redeem at least 10% of the shares in each of the first 20 years.

Answer: B — Yes, because the project is an infrastructure project specified in Schedule VI and the shares will be redeemed within 30 years, with at least 10% redeemed annually from the 21st year onwards or earlier at the option of preference shareholders.

Working. Schedule VI project; 30-year tenure is within the 30-year ceiling; annual redemption of at least 10% begins in year 21; articles, special resolution and no subsisting default are satisfied.

Explanation. Section 55(2) sets the ordinary maximum at 20 years, but its infrastructure-project proviso permits a tenure exceeding 20 years and not exceeding 30 years when at least 10% is redeemed annually from the 21st year onwards or earlier, at the option of preference shareholders. The facts also satisfy the article-authorisation, special-resolution and no-subsisting-default safeguards. Option a applies the general limit without the exception.

Where it goes wrong. Applying the general 20-year ceiling without considering the infrastructure-project exception and its annual redemption condition.

Authority. Companies Act, 2013, section 55(2), first and second provisos; Rule 9 of the Companies (Share Capital and Debentures) Rules, 2014. ; ICAI Study Material, Chapter 4, infrastructure-project exception and redemption conditions.

Question 2 · 2 marks · Chapter 4 – Share Capital and Debentures (related: Chapter 9 – Accounts of Companies) · hard

Is Meridian eligible to issue the proposed equity shares with differential rights on 15 October 2026, having regard to the earlier preference-dividend default?

1. No, because a company that has ever defaulted in payment of preference dividend is permanently barred from issuing equity shares with differential rights.
2. Yes, because the five-year period is counted from 20 December 2020, the date on which the arrears were cleared, and that period has expired.
3. Yes, because five years have expired from the end of FY 2020-21, the voting power will be 73.5% of total voting power, and the ordinary-resolution and filing conditions are satisfied. (correct answer)
4. No, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, equity shares with differential rights can be issued only after a special resolution and only where their voting power exceeds 74% of total voting power.

Answer: C — Yes, because five years have expired from the end of FY 2020-21, the voting power will be 73.5% of total voting power, and the ordinary-resolution and filing conditions are satisfied.

Working. Default made good in FY 2020-21, which ended on 31-03-2021. Five years expired by 31-03-2026. The proposed issue date, 15-10-2026, is later; 73.5% does not exceed 74%.

Explanation. Rule 4 requires an ordinary resolution, caps the voting power attached to differential-rights shares at 74%, and imposes specified filing and default conditions. Where a preference-dividend default is made good, the study material permits issue after five years from the end of the financial year in which it was made good. That year ended on 31 March 2021, so the period had expired before 15 October 2026. Option b wrongly counts from the payment date.

Where it goes wrong. Counting five years from the date arrears were paid rather than from the end of the financial year in which the default was made good.

Authority. Rule 4(1) of the Companies (Share Capital and Debentures) Rules, 2014, including the 74% ceiling, three-year filing condition and five-year post-cure note.

Question 3 · 2 marks · Chapter 4 – Share Capital and Debentures · medium

What amount should Meridian credit to its Debenture Redemption Reserve in respect of the partly convertible debentures?

1. ₹1.20 crore, because 10% must be calculated on the entire ₹12 crore issue.
2. ₹70 lakh, because the 10% reserve is calculated only on the ₹7 crore non-convertible portion. (correct answer)
3. ₹50 lakh, because the reserve is calculated only on the ₹5 crore convertible portion.
4. Nil, because every privately placed debenture issue by an unlisted company is exempt from the reserve requirement.

Answer: B — ₹70 lakh, because the 10% reserve is calculated only on the ₹7 crore non-convertible portion.

Working. Non-convertible portion = ₹7 crore. DRR = 10% × ₹7 crore = ₹0.70 crore = ₹70 lakh.

Explanation. The study material requires an unlisted company outside the specified exempt classes to create a Debenture Redemption Reserve equal to 10% of outstanding debentures. For partly convertible debentures, the reserve is created in respect of the non-convertible portion. Accordingly, ₹7 crore × 10% = ₹70 lakh. Option a is tempting because it uses the total issue size, but it wrongly includes the convertible portion.

Where it goes wrong. Calculating the reserve on the full issue instead of only the non-convertible portion of partly convertible debentures.

Authority. Section 71(4) of the Companies Act, 2013 read with Rule 18(7) of the Companies (Share Capital and Debentures) Rules, 2014; DRR table and partly convertible debenture note.

Question 4 · 2 marks · Chapter 9 – Accounts of Companies · hard

Scenario. Aranya Components Limited manufactures industrial equipment and maintains a branch in Dubai. The branch keeps proper books for its transactions, but sends summarised returns to the registered office in Bengaluru only once every four months. The company's accounting records are also maintained through a service provider in Singapore. Staff in India cannot access those electronic records; the records can be retrieved only through the Singapore portal. Back-up copies are stored on servers physically located in India. For FY 2023-24, Aranya had a net worth of ₹480 crore, turnover of ₹940 crore and net profit of ₹15 crore. Its net profits for FY 2021-22, FY 2022-23 and FY 2023-24 were ₹35 crore, ₹25 crore and ₹15 crore respectively. The company earmarked ₹50 lakh for CSR expenditure in FY 2024-25. By 31 March 2025, it had spent ₹30 lakh. The remaining ₹20 lakh comprised ₹8 lakh for a multi-year project approved as an ongoing project and ₹12 lakh for a project that was not ongoing. Separately, Aranya completed an issue of equity shares with differential rights on 12 February 2025. While preparing the Board's Report for FY 2024-25, the company secretary noticed that the prescribed particulars of that issue had not been included. The Board seeks advice on the branch and electronic books, the treatment of the unspent CSR amounts, and the disclosures required in its report.

Do Aranya's branch and electronic-book arrangements comply with the requirements relating to maintenance of books of account?

1. Yes, because a branch outside India may keep its transaction books there and send summarised returns at any interval selected by the Board.
2. No, because branch summarised returns must be sent to the registered office at quarterly intervals, and electronic records must remain accessible in India; an India-based back-up alone does not cure the access defect. (correct answer)
3. Yes, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, storing back-up copies on servers in India makes the underlying electronic records accessible in India even when the company cannot retrieve them from India.
4. No, because every transaction recorded at a foreign branch must be transferred physically to the registered office every month.

Answer: B — No, because branch summarised returns must be sent to the registered office at quarterly intervals, and electronic records must remain accessible in India; an India-based back-up alone does not cure the access defect.

Working. Branch books may remain at the Dubai branch, but the summarised returns must be sent quarterly, not every four months. Electronic records must also be accessible in India. Both stated arrangements fail a distinct requirement.

Explanation. Section 128(2) permits proper books relating to branch transactions to be kept at a branch in or outside India, provided summarised returns are sent periodically to the registered office. Rule 4(1) specifies quarterly intervals, so four-monthly returns are insufficient. Separately, electronic records must remain accessible in India for subsequent reference. The India-based back-up does not overcome the stated inability to access the records from India.

Where it goes wrong. Treating the presence of India-based back-up servers as equivalent to the statutory requirement that electronic records themselves remain accessible in India.

Authority. Companies Act, 2013, section 128(2), and Rule 4(1) of the Companies (Accounts) Rules, 2014, on branch books and quarterly summarised returns. ; Rule 3 of the Companies (Accounts) Rules, 2014, requiring electronic records to remain accessible in India and addressing back-ups. ; Rule 3 of the Companies (Accounts) Rules, 2014, requirement concerning back-up servers physically located in India.

Question 5 · 2 marks · Chapter 9 – Accounts of Companies · hard

Which treatment of the ₹20 lakh unspent CSR amount is required at the end of FY 2024-25?

1. The ₹8 lakh for the ongoing project must be transferred to a Schedule VII Fund within six months, while the ₹12 lakh for the non-ongoing project must be transferred to the Unspent CSR Account within 30 days, as specifically evaluated under the mandatory statutory framework and applicable regulatory guidelines.
2. Both amounts must be transferred to the Unspent CSR Account within 30 days from the end of the financial year, irrespective of the nature of the projects.
3. The ₹8 lakh for the ongoing project must be transferred to the Unspent CSR Account within 30 days from the end of the financial year, while the ₹12 lakh for the non-ongoing project must be transferred to a Schedule VII Fund within six months from the expiry of the financial year. (correct answer)
4. Both amounts must be transferred directly to a Schedule VII Fund within six months from the expiry of the financial year, because no distinction is made between ongoing and other projects.

Answer: C — The ₹8 lakh for the ongoing project must be transferred to the Unspent CSR Account within 30 days from the end of the financial year, while the ₹12 lakh for the non-ongoing project must be transferred to a Schedule VII Fund within six months from the expiry of the financial year.

Working. Ongoing project: ₹8 lakh → Unspent CSR Account within 30 days of 31-03-2025 (by 30-04-2025). Other project: ₹12 lakh → Schedule VII Fund within six months of FY-end (by 30-09-2025).

Explanation. Section 135(6) distinguishes unspent CSR amounts by project type. The ₹8 lakh relating to an ongoing project must be transferred to the Unspent CSR Account within 30 days from the financial year-end, i.e. by 30 April 2025. The ₹12 lakh for a project that is not ongoing must be transferred to a Schedule VII Fund within six months from the expiry of the financial year, i.e. by 30 September 2025. Option a reverses both destinations and deadlines.

Where it goes wrong. Reversing the destination account and transfer deadline for ongoing and non-ongoing projects.

Authority. Section 135(6) of the Companies Act, 2013 read with the CSR Rules, treatment of unspent amounts for ongoing and other than ongoing projects.

Question 6 · 2 marks · Chapter 9 – Accounts of Companies (related: Chapter 4 – Share Capital and Debentures) · medium

In which Board's Report must the prescribed particulars of the differential-rights share issue completed on 12 February 2025 be disclosed?

1. In the Board's Report for FY 2024-25, being the financial year in which the issue was completed. (correct answer)
2. Only in the Board's Report for FY 2025-26, because disclosure is required in the year after allotment.
3. In the Board's Reports for FY 2024-25 and every later financial year until the shares are converted.
4. No Board's Report disclosure is required because the company is not listed.

Answer: A — In the Board's Report for FY 2024-25, being the financial year in which the issue was completed.

Working. Issue completed on 12-02-2025; the relevant financial year is 01-04-2024 to 31-03-2025 (FY 2024-25).

Explanation. Rule 4(4) of the Companies (Share Capital and Debentures) Rules, 2014 requires the Board to disclose the specified particulars in its report for the financial year in which the issue of equity shares with differential rights was completed. The issue was completed on 12 February 2025, during FY 2024-25. Option b incorrectly shifts the disclosure to the following financial year.

Where it goes wrong. Using the financial year after completion of the issue rather than the financial year in which the issue was completed.

Authority. Rule 4(4) of the Companies (Share Capital and Debentures) Rules, 2014, disclosure in the Board's Report for the financial year in which issue is completed.

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

Scenario. Nordhaven Mobility GmbH is incorporated in Germany and sells navigation software to Indian customers through a digital platform and a Bengaluru branch office. Its paid-up capital consists of equity and preference shares. Indian citizens hold 31% of the equity share capital, while a company incorporated in India holds 19% of the preference share capital; the remaining paid-up capital is held by German investors. Nordhaven established its place of business in India on 1 July 2026 and delivered its initial documents to the Registrar within the prescribed period. On 18 September 2026, Nordhaven amended its constitutional instrument in Germany. The company is preparing the return relating to that alteration and has asked whether the same filing framework applies as for its initial establishment. Its Bengaluru branch has also prepared financial statements for its Indian business operations in accordance with the Companies (Registration of Foreign Companies) Rules, 2014, together with the latest consolidated financial statements of its German parent. For CSR applicability, the branch's internal management statement shows a net profit of ₹7.2 crore, while the financial statements prepared for the foreign company under the Companies Act show a different figure. The company wants to use the correct statutory basis when applying the CSR thresholds. The directors seek advice on the effect of the Indian shareholding and the basis for determining the foreign company's CSR financial figures.

Does the Indian shareholding trigger the additional application of Chapter XXII and the prescribed Companies Act provisions to Nordhaven's business in India under section 379(2)?

1. Yes, because eligible Indian holders together hold 50% of the paid-up share capital, counting equity and preference shares in aggregate. (correct answer)
2. No, because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, Indian citizens and Indian-incorporated companies must each independently hold at least 50% of the paid-up share capital.
3. No, because the threshold must be more than 50%, whereas Nordhaven's eligible Indian holding is 50%.
4. No, because only equity share capital is counted and the Indian company's preference-share holding is excluded.

Answer: A — Yes, because eligible Indian holders together hold 50% of the paid-up share capital, counting equity and preference shares in aggregate.

Working. Indian citizen holding 31% + Indian-incorporated company holding 19% = 50% of total paid-up capital. Section 379(2) uses 'not less than 50%' and aggregates the eligible holders.

Explanation. Section 379(2) applies where not less than 50% of the paid-up share capital of a foreign company is held by one or more Indian citizens, Indian-incorporated companies or a combination of them. The provision expressly counts equity, preference, or partly equity and partly preference capital. Nordhaven's eligible holdings aggregate to 50%, which meets the inclusive threshold. Option c wrongly changes 'not less than' to 'more than'.

Where it goes wrong. Treating the 50% threshold as requiring more than 50%, or excluding preference capital from the calculation.

Authority. Companies Act, 2013, section 379(2), including aggregation of Indian citizen and Indian body-corporate holdings and inclusion of equity and preference capital. ; Companies Act, 2013, section 2(42), meaning of foreign company and place of business through electronic mode. ; Companies Act, 2013, section 2(42), foreign-company definition and related electronic-mode provisions.

Question 8 · 2 marks · Chapter 11 – Companies Incorporated Outside India (related: Chapter 9 – Accounts of Companies) · medium

For determining Nordhaven's net worth, turnover or net profit for CSR applicability, which financial basis is to be used?

1. The German parent's global consolidated financial statements alone, without regard to the foreign company's statutory financial statements, as specifically evaluated under the mandatory statutory framework and applicable regulatory guidelines.
2. Only the Bengaluru branch's internal management statement, even where it differs from the financial statements prepared under section 381.
3. The balance sheet and profit and loss account of the foreign company prepared in accordance with section 381(1)(a) and section 198 of the Companies Act, 2013. (correct answer)
4. The financial figures of the Indian shareholders, because they hold at least 50% of the foreign company's paid-up share capital.

Answer: C — The balance sheet and profit and loss account of the foreign company prepared in accordance with section 381(1)(a) and section 198 of the Companies Act, 2013.

Working. Use the foreign company's balance sheet and profit and loss account prepared under section 381(1)(a), read with section 198.

Explanation. The CSR Rules state that the net worth, turnover or net profit of a foreign company is computed in accordance with its balance sheet and profit and loss account prepared under section 381(1)(a), read with section 198 of the Companies Act, 2013. The internal management statement is not the stated statutory basis. Option a is tempting because the parent also prepares consolidated accounts, but the material specifies the foreign company's section 381 financial statements.

Where it goes wrong. Substituting parent-group consolidated figures or branch management accounts for the financial basis stated for a foreign company under the CSR Rules.

Authority. CSR Rules, Rule 3(1), read with section 135 of the Companies Act, 2013; foreign-company computation of net worth, turnover and net profit by reference to section 381(1)(a) and section 198.

Question 9 · 2 marks · Foreign Exchange Management Act, 1999 – section 6(4) · hard

Scenario. Dev Malhotra moved to Singapore on 10 May 2019 to take up employment there and remained a person resident outside India during that period. On 1 August 2021, while resident outside India, he purchased a residential apartment in Singapore. He returned to India on 2 January 2024 to take up employment with an Indian company and is now a person resident in India. He continues to own the Singapore apartment and is considering buying another apartment in London in 2026. Dev's sister, Ria Malhotra, moved to Canada on 15 April 2022 for employment and is now a person resident outside India. Before leaving India, while she was a person resident in India, Ria purchased an apartment in Mumbai in 2018. In July 2025, she inherited a second apartment in Mumbai from her mother, who was a person resident in India when she died. Ria continues to hold both Mumbai properties. The siblings have received differing advice about whether the time and capacity in which a property was acquired or inherited affects their ability to hold it after a change in residential status. They also wish to understand how a proposed purchase abroad by a person resident in India is classified under the permissible capital account transaction framework. They seek advice on the three property transactions described above.

May Dev continue to hold, own or transfer the Singapore apartment after becoming a person resident in India?

1. Yes, because he acquired the apartment when he was a person resident outside India. (correct answer)
2. No, because section 6(4) protects only immovable property inherited from a person resident outside India and not property purchased by the holder.
3. No, because a person resident in India cannot retain immovable property situated outside India after returning to India.
4. Yes, but only because the apartment is situated in the country where he was last employed, regardless of when he acquired it.

Answer: A — Yes, because he acquired the apartment when he was a person resident outside India.

Working. Dev acquired the Singapore apartment in 2021 while he was a person resident outside India. His later change of residential status does not remove the section 6(4) basis for holding it.

Explanation. Section 6(4) permits a person resident in India to hold, own, transfer or invest in immovable property situated outside India where that property was acquired, held or owned by that person while resident outside India, or was inherited from a person resident outside India. Dev purchased the Singapore apartment during his employment abroad. Option b wrongly narrows the provision to inherited property alone.

Where it goes wrong. Ignoring the statutory exception for property acquired while the holder was a person resident outside India.

Authority. FEMA, 1999, section 6(4), holding of immovable property outside India by a person resident in India where acquired, held or owned while resident outside India or inherited from a person resident outside India.

Question 10 · 2 marks · Foreign Exchange Management Act, 1999 – section 6(5) · medium

Which of Ria's Mumbai properties falls within the holding provision in section 6(5) of FEMA?

1. Both properties, because one was acquired while she was a person resident in India and the other was inherited from a person resident in India. (correct answer)
2. Only the inherited property, because a property purchased while Ria was resident in India is excluded once she becomes a person resident outside India.
3. Only the property purchased after she moved to Canada, because section 6(5) applies to acquisitions made by a person resident outside India.
4. Neither property, because section 6(5) does not extend to immovable property situated in India.

Answer: A — Both properties, because one was acquired while she was a person resident in India and the other was inherited from a person resident in India.

Working. Mumbai flat 1: acquired while Ria was resident in India. Mumbai flat 2: inherited from her mother, who was resident in India. Each independently satisfies section 6(5).

Explanation. Section 6(5) permits a person resident outside India to hold, own, transfer or invest in immovable property situated in India if the property was acquired, held or owned by that person when resident in India, or inherited from a person resident in India. Ria satisfies both routes: she bought one flat while resident in India and inherited the other from her mother, who was resident in India. Option b overlooks the first route.

Where it goes wrong. Assuming that the inheritance route is the only basis for a person resident outside India to continue holding Indian immovable property.

Authority. FEMA, 1999, section 6(5), holding of immovable property situated in India by a person resident outside India.

Question 11 · 2 marks · Foreign Exchange Management Act, 1999 – section 2(ze), section 6 and Schedule I · hard

How is Dev's proposed purchase of another apartment outside India to be classified under the study material's permissible capital account transaction framework?

1. It is excluded from Schedule I because the FEMA definition of transfer covers only a sale and not a purchase.
2. It falls within Schedule II because every acquisition of immovable property outside India is treated as a transaction by a person resident outside India.
3. It falls within the Schedule I class relating to transfer of immovable property outside India by a person resident in India, because 'transfer' includes purchase; the transaction remains subject to applicable limits and conditions. (correct answer)
4. It is automatically authorised by section 6(4), which removes the need to consider the permissible capital account transaction framework for any new purchase, as specifically evaluated under the mandatory statutory framework and applicable regulatory guidelines.

Answer: C — It falls within the Schedule I class relating to transfer of immovable property outside India by a person resident in India, because 'transfer' includes purchase; the transaction remains subject to applicable limits and conditions.

Working. Purchase is included in 'transfer' by section 2(ze). Schedule I lists transfer of immovable property outside India by a person resident in India; it is a permissible class, subject to applicable limits and conditions.

Explanation. The FEMA definition of transfer includes purchase. Schedule I to the Permissible Capital Account Transactions Regulations lists transfer of immovable property outside India by a person resident in India as a permissible class. The material also states that such transactions remain subject to the Act, rules, regulations, directions and any applicable limits or conditions. Option a uses an artificially narrow meaning of transfer, while option d wrongly treats section 6(4) as blanket authority for a new purchase.

Where it goes wrong. Reading 'transfer' in its everyday narrow sense and overlooking that it expressly includes purchase, while ignoring the continuing limits and conditions.

Authority. FEMA, 1999, section 2(ze), definition of transfer includes purchase. ; FEMA (Permissible Capital Account Transactions) Regulations, 2000, Schedule I, transfer of immovable property outside India by a person resident in India; transactions subject to applicable limits and conditions.

Question 12 · 2 marks · Limited Liability Partnership Act, 2008 – winding up and dissolution · hard

Scenario. BlueOak Creative LLP was incorporated in 2018 with three partners. Two partners retired with effect from 31 March 2025, leaving only one partner. The LLP continued its business with that single partner until at least 10 October 2025, when the partner shortfall had continued for more than six months. The sole continuing partner knew that the LLP was carrying on business with only one partner. The LLP also failed to file its Statement of Account and Solvency with the Registrar for each of the five consecutive financial years from FY 2020-21 through FY 2024-25. The defaults remained outstanding on 20 November 2025. The LLP had not filed an application seeking any extension in relation to those statements. On 25 November 2025, the partners initiated a voluntary winding-up process. On the following day, the remaining partner circulated a notice stating that the LLP stood dissolved immediately, although bank liabilities and receivables were still being dealt with. A creditor has separately asked whether the partner shortfall and filing history permit the Tribunal to wind up the LLP. The partners seek advice on the statutory grounds for Tribunal winding up and the legal effect of the voluntary winding-up process on dissolution.

Which statement correctly describes the grounds available for winding up BlueOak Creative LLP by the Tribunal?

1. The Tribunal may wind up the LLP only if it first concludes that the LLP's conduct makes winding up just and equitable, because the other grounds are not independent.
2. The Tribunal may wind up the LLP only if both the partner shortfall and the five-year filing default continue for at least ten consecutive years.
3. The Tribunal cannot wind up the LLP on the filing default because under the explicit statutory framework and mandatory procedural requirements of the governing legislation, section 64 refers only to five consecutive annual-return defaults and excludes the Statement of Account and Solvency.
4. The Tribunal may wind up the LLP because the partner count remained below two for more than six months and the LLP also defaulted in filing its Statement of Account and Solvency for five consecutive financial years; either ground is independently sufficient. (correct answer)

Answer: D — The Tribunal may wind up the LLP because the partner count remained below two for more than six months and the LLP also defaulted in filing its Statement of Account and Solvency for five consecutive financial years; either ground is independently sufficient.

Working. Partner count below two for more than six months: section 64(b). Statement of Account and Solvency default for five consecutive financial years: section 64(d). Both are separate Tribunal grounds.

Explanation. Section 64 separately permits Tribunal winding up where the number of partners has remained below two for more than six months, and where the LLP has defaulted in filing its Statement of Account and Solvency or annual return for any five consecutive financial years. BlueOak's facts satisfy both grounds. Option c is wrong because the provision uses 'or' and expressly includes the Statement of Account and Solvency.

Where it goes wrong. Reading the five-year default ground as applying only to annual returns, or treating the listed grounds as cumulative rather than independent.

Authority. LLP Act, 2008, sections 63 and 64(b), 64(d) and 64(e), winding up and dissolution.

Question 13 · 2 marks · Limited Liability Partnership Act, 2008 – section 63 · medium

Does the partners' decision to commence voluntary winding up dissolve BlueOak Creative LLP immediately?

1. Yes, because a voluntary winding-up resolution itself brings the LLP's legal existence to an end, whether or not its affairs have been wound up.
2. No, because an LLP can be dissolved only by an order of the Tribunal and cannot be wound up voluntarily.
3. Yes, but only when every partner signs a separate dissolution instrument on the same date as the winding-up resolution.
4. No, because section 63 recognises voluntary or Tribunal winding up, and an LLP so wound up may then be dissolved; the commencement of winding up is not itself the stated dissolution event. (correct answer)

Answer: D — No, because section 63 recognises voluntary or Tribunal winding up, and an LLP so wound up may then be dissolved; the commencement of winding up is not itself the stated dissolution event.

Working. Section 63 identifies two winding-up routes—voluntary or by the Tribunal—and contemplates dissolution of an LLP so wound up.

Explanation. Section 63 provides that an LLP may be wound up either voluntarily or by the Tribunal and that an LLP so wound up may be dissolved. The provision distinguishes the winding-up route from dissolution. The partners' announcement does not, by itself, establish that winding up has been completed. Option b is incorrect because the section expressly recognises voluntary winding up as well as winding up by the Tribunal.

Where it goes wrong. Treating the commencement of voluntary winding up as identical to the later dissolution of the LLP.

Authority. LLP Act, 2008, section 63, winding up and dissolution; section 65, rule-making power.

Question 14 · 2 marks · General Clauses Act, 1897 – powers and appointment by office · medium

Scenario. The Central Waterways Access Act, 2012, establishes a National Permits Board and vests in the Director, Inland Waterways, the power to appoint a person to chair each technical inquiry. The Act does not require an appointee to be identified by personal name. The Board's rules permit the Director to appoint the person holding the office of Chief Engineer, Inland Region by virtue of that office. In 2023, the then Director, Raghav Menon, appointed Anil Deshmukh, then Chief Engineer, to chair an inquiry concerning a river terminal project estimated at ₹8 crore. The appointment instrument identified the appointee by reference to the office of Chief Engineer rather than by Anil's personal name. With effect from 1 July 2025, an amendment renamed the statutory post of Director, Inland Waterways as Regional Director and transferred the same functions and powers to the new post. No provision of the amendment cancelled existing appointments. On 15 August 2025, Kavita Sen, the person then holding the successor post, suspended Anil from the inquiry, stating that the appointment power was currently vested in her office. Anil objected that he had been appointed by the previous holder and that the Act originally referred to the Director, Inland Waterways. A second inquiry, concerning a project estimated at ₹3 crore, began on 1 September 2025. The Regional Director again used the office-based appointment method for the person holding the Chief Engineer post. The Board seeks advice on whether the appointment power may be exercised again, whether an appointment by virtue of office is permissible, and whether the successor authority may suspend a person appointed by its predecessor.

May the Regional Director make a fresh appointment for the second inquiry and designate the person holding the Chief Engineer office by virtue of that office, rather than by personal name?

1. Yes, but only if the Regional Director first obtains approval from the Tribunal for each appointment made by virtue of office.
2. No, because once the appointment power has been exercised for one inquiry, section 14 prevents its further exercise during the same calendar year.
3. No, because section 15 requires the appointee to be identified by personal name whenever the appointing authority is a statutory functionary.
4. Yes, because section 14 permits the appointment power to be exercised from time to time as occasions arise, and section 15 permits appointment by virtue of office unless a contrary intention is expressed. (correct answer)

Answer: D — Yes, because section 14 permits the appointment power to be exercised from time to time as occasions arise, and section 15 permits appointment by virtue of office unless a contrary intention is expressed.

Working. The September inquiry is a separate occasion for exercise of the appointment power (section 14). The rules allow the incumbent Chief Engineer to be appointed by reference to that office (section 15).

Explanation. Section 14 allows a power conferred by a Central Act or Regulation to be exercised from time to time as occasion requires, unless a different intention appears. Section 15 permits an appointment to be made either by name or by virtue of office unless expressly provided otherwise. The second inquiry is a fresh occasion, and the stated rules do not require personal naming. Option b wrongly treats the power as a one-time authority.

Where it goes wrong. Treating a statutory appointment power as exhausted after one use, or assuming an appointee must always be named personally.

Authority. General Clauses Act, 1897, sections 14 and 15, power exercisable from time to time and appointment by virtue of office.

Question 15 · 2 marks · General Clauses Act, 1897 – successors and powers of appointing authorities · hard

Can Kavita, as the successor authority now empowered to make the appointment, suspend Anil even though Anil was appointed by the previous holder of the post?

1. No, because the power to suspend or dismiss is reserved exclusively to the individual who originally made the appointment.
2. Yes, because section 14 treats every power conferred by legislation as an unrestricted power to suspend any person, whether or not the authority has appointment power.
3. No, because a change in the designation of an office automatically cancels every appointment made by the earlier holder.
4. Yes, because section 18 recognises successors to functionaries and section 16 gives the authority for the time being empowered to appoint the power to suspend or dismiss a person appointed by itself or another authority exercising that appointment power. (correct answer)

Answer: D — Yes, because section 18 recognises successors to functionaries and section 16 gives the authority for the time being empowered to appoint the power to suspend or dismiss a person appointed by itself or another authority exercising that appointment power.

Working. The same appointment power was transferred to the successor post. Section 18 covers successors; section 16 permits the authority for the time being holding the appointment power to suspend or dismiss qualifying appointees.

Explanation. Section 18 provides that a statutory reference to a functionary is sufficient to include that functionary's successors. Section 16 further provides that the authority having for the time being the power to make the appointment also has power to suspend or dismiss a person appointed in exercise of that power, whether by itself or another authority. The amendment transferred the same appointment function to the successor post. Option a wrongly confines the power to the original appointer.

Where it goes wrong. Ignoring the statutory effect of succession and reading the suspension power as personal to the original appointer.

Authority. General Clauses Act, 1897, section 16, power to appoint includes power to suspend or dismiss; section 18, successors.