Mock Test Paper - Series I: November, 2025

Date of Paper: 20th November, 2025

Time of Paper: 10 A.M. to 1 P.M.
INTERMEDIATE COURSE: GROUP – I
PAPER – 2: CORPORATE AND OTHER LAWS
ANSWER TO PART – I CASE SCENARIO BASED MCQS
1. (c)
2. (b)
3. (b)
4. (c)
5. (d)
6. (a)
7. (a)
8. (d)
9. (b)
10. (a)
11. (b)
12. (c)
13. (d)
14. (b)
15. (a)
ANSWERS OF PART – II DESCRIPTIVE QUESTIONS
1. (a) Section 127 of the Companies Act, 2013 lays down the penalty for non-payment
of dividend within the prescribed time period of 30 days. According to this section
where a dividend has been declared by a company but has not been paid or the
warrant in respect thereof has not been posted within 30 days from the date of
declaration of dividend to any shareholder entitled to the payment of dividend:
(1) every director of the company shall, if he is knowingly a party to the default,
be punishable with imprisonment maximum up to two years and with

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 minimum fine of rupees one thousand for every day during which such
default continues; and
(2) the company shall be liable to pay simple interest at the rate of 18% per
annum during the period for which such default continues.
In the given question, the company was unable to post dividend warrant within 30
days from the date of declaration of dividend. Thus, the directors will be liable as
per the above provisions and the company is liable to pay simple interest.
However, Mr. Trishul will not succeed if he claims interest at 20% per annum
interest as the limit prescribed under section 127 is 18% per annum.
(b) According to section 19 of the Companies Act, 2013 a company shall not hold any
shares in its holding company either by itself or through its nominees. Also,
holding company shall not allot or transfer its shares to any of its subsidiary
companies and any such allotment or transfer of shares of a company to its
subsidiary company shall be void.
Following are the exceptions to the above rule—
(a) where the subsidiary company holds such shares as the legal
representative of a deceased member of the holding company; or
(b) where the subsidiary company holds such shares as a trustee; or
(c) where the subsidiary company is a shareholder even before it became a
subsidiary company of the holding company but in this case, it will not have
a right to vote in the meeting of holding company.
In the given case, one of the shareholders of holding company (Vivek Limited) has
transferred his shares in the holding company to a trust where the shares will be
held by subsidiary company (Brain Limited). It means now subsidiary will hold
shares in the holding company. But it will hold shares in the capacity of a trustee.
Therefore, we can conclude that in the given situation Brain Limited can hold
shares in Vivek Limited.
(c) According to section 2(v) of the Foreign Exchange Management Act, 1999,
“Person resident in India” means a person residing in India for more than 182 days
during the course of the preceding financial year but does not include a person
who has gone out of India or who stays outside India, for or on taking up
employment besides with the other specified purposes, outside India.
In the given question, Mr. Gagan will be treated as a person resident outside from
2.4.2025 till the time he works in Jeff Bakers Ltd. in Rome, as he has gone out of
India for or on taking up employment outside India.

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 His return to India for 10 days to attend a family function, will not alter his
residential status.
2. (a) According to section 103 of the Companies Act, 2013, unless the articles of the
company provide for a larger number in case of a public company, five members
personally present if the number of members as on the date of meeting is not
more than one thousand, shall be the quorum.
In this case the quorum for holding a general meeting is 7 members to be
personally present (higher of 5 or 7). For the purpose of quorum, only those
members are counted who are entitled to vote on resolution proposed to be
passed in the meeting.
Again, only members present in person and not by proxy are to be counted.
Hence, proxies whether they are members or not will have to be excluded for the
purposes of quorum.
If a company is a member of another company, it may authorize a person by
resolution to act as its representative at a meeting of the latter company, then
such a person shall be deemed to be a member present in person and counted
for the purpose of quorum. Where two or more companies which are members of
another company, appoint a single person as their representative then each such
company will be counted as quorum at a meeting of the latter company.
Further the President of India or Governor of a State, if he is a member of a
company, may appoint such a person as he thinks fit, to act as his representative
at any meeting of the company. A person so appointed shall be deemed to be a
member of such a company and thus considered as member personally present.
In view of the above there are only three members personally present.
‘A’ will be included for the purpose of quorum. B & C have to be excluded for the
purpose of quorum because they represent the preference shares and since the
agenda being the appointment of Managing Director, their rights cannot be said
to be directly affected and therefore, they shall not have voting rights. D will have
two votes for the purpose of quorum as he represents two companies Green
Limited and Blue Limited. E, F, G and H are not to be included as they are not
members but representing as proxies for the members.
Thus, it can be said that the requirement of quorum has not been met and it shall
not constitute a valid quorum for the meeting.

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 (b) The following class of companies shall be required to appoint an internal auditor
which may be either an individual or a partnership firm or a body corporate,
namely:
(1) every listed company;
(2) every unlisted public company having-
(A) paid up share capital of 50 crore rupees or more during the
preceding financial year; or
(B) turnover of 200 crore rupees or more during the preceding financial
year; or
(C) outstanding loans or borrowings from banks or public financial
institutions exceeding 100 crore rupees or more at any point of time
during the preceding financial year; or
(D) outstanding deposits of 25 crore rupees or more at any point of time
during the preceding financial year.
(c) Gender and number
According to section 13 of the General Clauses Act, 1897, in all legislations and
regulations, unless there is anything repugnant in the subject or context:
(1) Words importing the masculine gender shall be taken to include females,
and
(2) Words in singular shall include the plural and vice versa.
In accordance with the rule that the words importing the masculine gender are to
be taken to include females, the word men may be properly held to include women,
and the pronoun ‘he’ and its derivatives may be construed to refer to any person
whether male or female. So, the words ‘his father and mother’ as they occur in
section 125(1)(d) of the CrPC, 1973 have been construed to include ‘her father
and mother’ and a daughter has been held to be liable to maintain her father
unable to maintain himself.
Where a word connoting a common gender is available but the word used conveys
a specific gender, there is a presumption that the provisions of General Clauses
Act, 1897 do not apply.
3. (a) According to section 103(1) of the Companies Act, 2013, unless the articles of the
company provide for a larger number, in case of a public company:
(1) five members personally present if the number of members as on the date
of meeting is not more than one thousand,

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 (2) fifteen members personally present if the number of members as on the
date of meeting is more than one thousand but up to five thousand,
(3) thirty members personally present if the number of members as on the date
of the meeting exceeds five thousand,
shall be the quorum for a meeting of the company.
The term ‘members personally present’ as mentioned above refers to the
members entitled to vote in respect of the items of business on the agenda of the
meeting.
(b) (i) In terms of Rule 2 (1) (c) (iii) of the Companies (Acceptance of Deposits)
Rules, 2014, any amount received as a loan or facility from any banking
company shall not be considered as ‘deposit’.
In view of the above, the contention of Mr. Atanu that the term loan of
` 10,00,000 availed by the company from Y Bank Limited shall be
considered as ‘deposit’ is not correct.
(ii) As per Rule 3 (5) of the Companies (Acceptance of Deposits) Rules 2014,
a Government Company is not eligible to accept or renew deposits
under section 76, if the amount of such deposits together with the amount
of other deposits outstanding as on the date of acceptance or renewal
exceeds thirty five per cent of the aggregate of its paid-up share capital,
free reserves and securities premium account.
Therefore, the given statement where the limit of 25% has been stated for
acceptance of deposits is not correct.
(c) Rule that suggests ‘Plain Word requires no explanation’
This Rule is called “Rule of Literal Construction”.
It is a cardinal rule of construction that a statute must be construed literally and
grammatically giving the words their ordinary and natural meaning. Therefore, the
language used in the statute must be construed in its grammatical sense. The
correct course is to take the words themselves and arrive if possible, at their
meaning without reference to cases, in the first instance.
If the phraseology of a statute is clear and unambiguous and capable of one and
only one interpretation, then it would not be correct to extrapolate these words out
of their natural and ordinary sense. When the language of a statute is plain and
unambiguous it is not open to the courts to adopt any other hypothetical
construction simply with a view to carrying out the supposed intention of the
legislature.

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 This principle is contained in the Latin maxim “absoluta sententia expositore non
indiget” which literally means “an absolute sentence or preposition needs not an
expositor”. In other words, plain words require no explanation.
Sometimes, occasions may arise when a choice has to be made between two
interpretations– one narrower and the other wider or bolder. In such a situation, if
the narrower interpretation would fail to achieve the manifest purpose of the
legislation, one should rather adopt the wider one.
4. (a) Under section 20 of the Companies Act, 2013 a document may be served on a
company or an officer thereof by sending it to the company or the officer at the
registered office of the company by registered post or by speed post or by courier
service or by leaving it at its registered office or by means of such electronic or
other mode as may be prescribed. However, in case where securities are held
with a depository, the records of the beneficial ownership may be served by such
depository on the company by means of electronic or other mode.
Under section 20 (2), save as provided in the Act or the rule thereunder for filing
of documents with the registrar in electronic mode, a document may be served on
Registrar or any member by sending it to him by post or by registered post or by
speed post or by courier or by delivering at his office or address, or by such
electronic or other mode as may be prescribed. However, a member may request
for delivery of any document through a particular mode, for which he shall pay
such fees as may be determined by the company in its annual general meeting.
(b) Limited Liability Partnership (LLP) is an alternative corporate business form that
gives the benefits of limited liability of a company and the flexibility of a
partnership.
Limited Liability: Every partner of a LLP is, for the purpose of the business of
LLP, the agent of the LLP, but not of other partners (Section 26 of the LLP Act,
2008). The liability of the partners will be limited to their agreed contribution in
the LLP, while the LLP itself will be liable for the full extent of its assets.
Flexibility of a partnership: The LLP allows its members the flexibility of
organizing their internal structure as a partnership based on a mutually arrived
agreement. The LLP form enables entrepreneurs, professionals and enterprises
providing services of any kind or engaged in scientific and technical disciplines,
to form commercially efficient vehicles suited to their requirements. Owing to
flexibility in its structure and operation, the LLP is a suitable vehicle for small
enterprises and for investment by venture capital.

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 (c) Restrictive and extensive definitions: The definition of a word or expression in
the definition section may either be restricting of its ordinary meaning or may be
extensive of the same.
When a word is defined to ‘mean’ such and such, the definition is ‘prima facie’
restrictive and exhaustive, we must restrict the meaning of the word to that given
in the definition section.
But where the word is defined to ‘include’ such and such, the definition is ‘prima
facie’ extensive: here the word defined is not restricted to the meaning assigned
to it but has extensive meaning which also includes the meaning assigned to it in
the definition section.
We may also find a word being defined as ‘means and includes’ such and such.
In this case, the definition would be exhaustive.
On the other hand, if the word is defined ‘to apply to and include’, the definition is
understood as extensive.
5. (a) Directors’ Responsibility Statement: According to section 134(5) of the
Companies Act, 2013, the Directors’ Responsibility Statement referred to in
134(3)(c) shall state that:
(1) in the preparation of the annual accounts, the applicable accounting
standards had been followed along with proper explanation relating to
material departures;
(2) the directors had selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
company at the end of the financial year and of the profit and loss of the
company for that period;
(3) the directors had taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of this Act
for safeguarding the assets of the company and for preventing and
detecting fraud and other irregularities;
(4) the directors had prepared the annual accounts on a going concern basis;
and
(5) the directors, in the case of a listed company, had laid down internal
financial controls to be followed by the company and that such internal
financial controls are adequate and were operating effectively.
Here, the term “internal financial controls” means the policies and
procedures adopted by the company for ensuring the orderly and efficient

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 conduct of its business, including adherence to company’s policies, the
safeguarding of its assets, the prevention and detection of frauds and
errors, the accuracy and completeness of the accounting records, and the
timely preparation of reliable financial information;
(6) the directors had devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems were adequate and
operating effectively.
(b) According to section 7 of the Limited Liability Partnership Act, 2008, every Limited
Liability Partnership shall have at least two designated partners who are
individuals and at least one of them shall be a resident in India. In the given case,
Manu John LLP intends to appoint Mr. John and Ms. Kate (both are non- resident
Indians) as the only designated partners. This is not in consonance with provisions
of the Limited Liability Partnership Act, 2008, as at least one of the designated
partners should be a resident in India.
(c) According to section 5 of the FEMA, 1999, any person may sell or draw foreign
exchange to or from an authorized person if such a sale or drawal is a current
account transaction. Provided that Central Government may, in public interest and
in consultation with the reserve bank, impose such reasonable restrictions for
current account transactions as may be prescribed.
As per the rules, drawal of foreign exchange for current account transactions are
categorized under three headings:
1. Transactions for which drawal of foreign exchange is prohibited,
2. Transactions which need prior approval of appropriate government of India
for drawal of foreign exchange, and
3. Transactions which require RBI's prior approval for drawl of foreign
exchange.
“Remittance of foreign exchange for medical treatment abroad” requires prior
permission or approval of RBI where the individual requires withdrawal of foreign
exchange exceeding USD 250,000. The Schedule also prescribes that for the
purpose of expenses in connection with medical treatment, the individual may
avail of exchange facility for an amount in excess of the limit prescribed under the
Liberalized Remittance Scheme, if so required by a medical institute offering
treatment.
Therefore, Mr. Zeus can draw foreign exchange up to the USD 250,000 and no
prior permission/ approval of RBI will be required. For amount exceeding the

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 above limit, authorised dealers may release foreign exchange based on the
estimate from the doctor in India or hospital or doctor abroad.
6. (a) Persons responsible to maintain books: As per section 128 (6) of the
Companies Act, 2013, the person responsible to take all reasonable steps to
secure compliance by the company with the requirement of maintenance of books
of account etc. shall be:
(a) Managing Director,
(b) Whole-Time Director, in charge of finance
(c) Chief Financial Officer
(d) Any other person of a company charged by the Board with duty of
complying with provisions of section 128.
(b) As per section 71 (5) of the Companies Act, 2013, no company shall issue a
prospectus or make an offer or invitation to the public or to its members exceeding
five hundred for the subscription of its debentures, unless the company has,
before such issue or offer, appointed one or more debenture trustees and the
conditions governing the appointment of such trustees shall be such as may be
prescribed.
Rule 18 (2) of the Companies (Share Capital and Debentures) Rules,
2014, framed under the Companies Act for the issue of secured debentures
provide that before the appointment of debenture trustee or trustees, a written
consent shall be obtained from such debenture trustee or trustees proposed to
be appointed and a statement to that effect shall appear in the letter of offer
issued for inviting the subscription of the debentures.
Further according to the provided rules inter-alia, no person shall be appointed as
a debenture trustee, if he-
(1) beneficially holds shares in the company;
(2) is beneficially entitled to moneys which are to be paid by the company
otherwise than as remuneration payable to the debenture trustee.
Thus, based on the above provisions answers to the given questions are as
follows:
(i) A shareholder who has holds shares of ` 10,000, cannot be appointed as
a debenture trustee.
(ii) A creditor whom company owes ` 999 cannot be appointed as a debenture
trustee. The amount owed is immaterial.

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(c) The list of permissible classes of transactions made by persons resident in India
is:
(a) Investment by a person resident in India in foreign securities.
(b) Foreign currency loans raised in India and abroad by a person resident in
India.
(c) Transfer of immovable property outside India by a person resident in India.
(d) Guarantees issued by a person resident in India in favour of a person
resident outside India.
(e) Export, import and holding of currency/currency notes.
(f) Loans and overdrafts (borrowings) by a person resident in India from a
person resident outside India.
(g) Maintenance of foreign currency accounts in India and outside India by a
person resident in India.
(h) Taking out of insurance policy by a person resident in India from an
insurance company outside India.
(i) Loans and overdrafts by a person resident in India to a person resident
outside India.
(j) Remittance outside India of capital assets of a person resident in India.
(k) Undertake derivative contracts.

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