Corporate and Other Laws (Group I) Model Test Paper - 8 (Answers) | Model Test Papers for CA Intermediate PDF Download

 Page 1


ANSWERS OF MODEL TEST PAPER 8 
INTERMEDIATE COURSE: GROUP – I 
PAPER – 2: CORPORATE AND OTHER LAWS 
ANSWER TO PART I- CASE SCENARIO BASED MCQS 
1. ( c)
2. ( d)
3. ( c)
4. ( b)
5. ( a)
6. ( c)
7. ( c)
8. ( b)
9. ( b)
10. ( a)
11. ( d)
12. ( b)
13. ( b)
14. ( b)
15. ( d)
ANSWER TO PART II- DESCRIPTIVE QUESTIONS 
1. (a) As per section 50 of the Companies Act, 2013, (the Act) a company
may, if so authorized by its Articles, accept from any member the whole 
or a part of the amount remaining unpaid on any shares held by him, 
although no part of that amount has been called up.  
As per section 51 of the Act, a company may, if so authorized by its 
Articles, pay dividends in proportion to the amount paid-up on each 
share. The Board of Directors of a company may decide to pay 
dividends on pro-rata basis if all the equity shares of the company are 
not equally paid-up. 
Interest can be paid on such advance, if permitted by Articles. Here it is 
worth noting that, where the rate of interest is permitted by the Articles 
on such advance payment, same could be varied by shareholders in 
general meeting. 
Further, section 49 of the Act, specifies that calls shall be made on a 
uniform basis on all shares that are falling under the same class. A 
463
Page 2


ANSWERS OF MODEL TEST PAPER 8 
INTERMEDIATE COURSE: GROUP – I 
PAPER – 2: CORPORATE AND OTHER LAWS 
ANSWER TO PART I- CASE SCENARIO BASED MCQS 
1. ( c)
2. ( d)
3. ( c)
4. ( b)
5. ( a)
6. ( c)
7. ( c)
8. ( b)
9. ( b)
10. ( a)
11. ( d)
12. ( b)
13. ( b)
14. ( b)
15. ( d)
ANSWER TO PART II- DESCRIPTIVE QUESTIONS 
1. (a) As per section 50 of the Companies Act, 2013, (the Act) a company
may, if so authorized by its Articles, accept from any member the whole 
or a part of the amount remaining unpaid on any shares held by him, 
although no part of that amount has been called up.  
As per section 51 of the Act, a company may, if so authorized by its 
Articles, pay dividends in proportion to the amount paid-up on each 
share. The Board of Directors of a company may decide to pay 
dividends on pro-rata basis if all the equity shares of the company are 
not equally paid-up. 
Interest can be paid on such advance, if permitted by Articles. Here it is 
worth noting that, where the rate of interest is permitted by the Articles 
on such advance payment, same could be varied by shareholders in 
general meeting. 
Further, section 49 of the Act, specifies that calls shall be made on a 
uniform basis on all shares that are falling under the same class. A 
463
shareholder on whom a regular call for payment has been served may 
choose to pay only a part of the sum due.  
Hence, in the light of the stated provisions, SAB Health Products 
Limited is permitted to do the following acts: 
Is Mr. GH’s claim justified? 
Mr. GH is entitled to claim interest on money advanced by him and also 
dividend in proportion to the amount paid-up on each share, if so 
authorized by the Articles of the company.  
In the matter of Mr. LK 
Whereas, with respect to Mr. LK, calls shall be made on a uniform 
basis by the directors, on all shares that are falling under the same 
class as per section 49 of the Act.  A call cannot be made on some of 
the members only, unless they constitute a separate class of 
shareholders. 
Therefore, the action of the Board of Directors of SAB Health Products 
Limited towards Mr. LK for calling to pay the entire amount due by him 
in respect of the shares held by Mr. LK is invalid and not permissible. 
 (b) (i) Voluntary Revision of Financial Statements or Board’s Report on 
the Approval of the Tribunal 
 As per section 131 of the Companies Act, 2013, if it appears to 
the directors of a company that: 
a. the financial statement of the company does not comply with 
the provisions of section 129; or 
b. the report of the Board does not comply with the provisions of 
section 134 
 they may prepare revised financial statement or board’s report in 
respect of any of the 3 preceding financial years after obtaining 
the approval of the Tribunal on an application made by the 
company within fourteen days of the decision taken by the Board.   
 A certified copy of the order of the Tribunal shall be filed with the 
Registrar of Companies within 30 days of the date of receipt of 
the certified copy. 
 In the given question, Mr. C has advised the Board of Right 
Trading Limited to revise the financial statements for the year 
2021-22. The Board of Directors can do so as the said financial 
statements are pertaining to not later than three preceding 
financial years (from 2024- 2025) and by obtaining the approval of 
the Tribunal within fourteen days of the decision taken by the 
Board. 
(ii) As per section 139(2) of the Companies Act, 2013, listed 
companies and such class of companies as prescribed, shall not 
appoint or re- appoint an audit firm as auditor for more than two 
terms of five consecutive years. 
464
Page 3


ANSWERS OF MODEL TEST PAPER 8 
INTERMEDIATE COURSE: GROUP – I 
PAPER – 2: CORPORATE AND OTHER LAWS 
ANSWER TO PART I- CASE SCENARIO BASED MCQS 
1. ( c)
2. ( d)
3. ( c)
4. ( b)
5. ( a)
6. ( c)
7. ( c)
8. ( b)
9. ( b)
10. ( a)
11. ( d)
12. ( b)
13. ( b)
14. ( b)
15. ( d)
ANSWER TO PART II- DESCRIPTIVE QUESTIONS 
1. (a) As per section 50 of the Companies Act, 2013, (the Act) a company
may, if so authorized by its Articles, accept from any member the whole 
or a part of the amount remaining unpaid on any shares held by him, 
although no part of that amount has been called up.  
As per section 51 of the Act, a company may, if so authorized by its 
Articles, pay dividends in proportion to the amount paid-up on each 
share. The Board of Directors of a company may decide to pay 
dividends on pro-rata basis if all the equity shares of the company are 
not equally paid-up. 
Interest can be paid on such advance, if permitted by Articles. Here it is 
worth noting that, where the rate of interest is permitted by the Articles 
on such advance payment, same could be varied by shareholders in 
general meeting. 
Further, section 49 of the Act, specifies that calls shall be made on a 
uniform basis on all shares that are falling under the same class. A 
463
shareholder on whom a regular call for payment has been served may 
choose to pay only a part of the sum due.  
Hence, in the light of the stated provisions, SAB Health Products 
Limited is permitted to do the following acts: 
Is Mr. GH’s claim justified? 
Mr. GH is entitled to claim interest on money advanced by him and also 
dividend in proportion to the amount paid-up on each share, if so 
authorized by the Articles of the company.  
In the matter of Mr. LK 
Whereas, with respect to Mr. LK, calls shall be made on a uniform 
basis by the directors, on all shares that are falling under the same 
class as per section 49 of the Act.  A call cannot be made on some of 
the members only, unless they constitute a separate class of 
shareholders. 
Therefore, the action of the Board of Directors of SAB Health Products 
Limited towards Mr. LK for calling to pay the entire amount due by him 
in respect of the shares held by Mr. LK is invalid and not permissible. 
 (b) (i) Voluntary Revision of Financial Statements or Board’s Report on 
the Approval of the Tribunal 
 As per section 131 of the Companies Act, 2013, if it appears to 
the directors of a company that: 
a. the financial statement of the company does not comply with 
the provisions of section 129; or 
b. the report of the Board does not comply with the provisions of 
section 134 
 they may prepare revised financial statement or board’s report in 
respect of any of the 3 preceding financial years after obtaining 
the approval of the Tribunal on an application made by the 
company within fourteen days of the decision taken by the Board.   
 A certified copy of the order of the Tribunal shall be filed with the 
Registrar of Companies within 30 days of the date of receipt of 
the certified copy. 
 In the given question, Mr. C has advised the Board of Right 
Trading Limited to revise the financial statements for the year 
2021-22. The Board of Directors can do so as the said financial 
statements are pertaining to not later than three preceding 
financial years (from 2024- 2025) and by obtaining the approval of 
the Tribunal within fourteen days of the decision taken by the 
Board. 
(ii) As per section 139(2) of the Companies Act, 2013, listed 
companies and such class of companies as prescribed, shall not 
appoint or re- appoint an audit firm as auditor for more than two 
terms of five consecutive years. 
464
  Further, on the date of appointment, an audit firm shall not have 
any partner or partners who are/were also the partner/s to the 
other audit firm, whose tenure has been expired in a company 
immediately preceding the financial year.  
  It means, if a partner (common partner), who is in charge of an audit 
firm and also certifies the financial statements of the company, 
retires from the said firm and joins another firm of Chartered 
Accountants, such other firm shall also be ineligible to be appointed 
as succeeding auditor of same company after two terms of five 
consecutive years. i.e. cooling period. [Rule 6(3) of Companies 
(Audit and Auditors) Rules, 2014] 
  The audit of Right Trading Limited was conducted by M/s DEF 
and after expiry of two consecutive terms, it is proposed to 
appoint  
M/s XYZ.  Mr. F is the common partner in M/s DEF and M/s XYZ, 
hence, the appointment of M/s XYZ is not valid. 
 (c) (i) Can Ms. Rose purchase the house in USA and continue to 
retain it even after returning to India? 
According to section 6(4) of the Foreign Exchange Management 
Act, 1999, (the Act) a person resident in India may hold, own, 
transfer or invest in foreign currency, foreign security or any 
immovable property situated outside India if such currency, 
security or property was acquired, held or owned by such person 
when he was resident outside India or inherited from a person 
who was resident outside India. 
 Ms. Rose stayed in USA for 12 years, hence she must have 
become a non–resident for those years. She purchased a house 
during this time.  
 As per the above provisions, Ms. Rose can rightfully purchase the 
house in USA and continue to retain it after returning to India. 
(ii) Can Ms. Rose purchase another house in USA after returning 
to India? 
 Ms. Rose deposited the amount of rent from the house to her 
account in USA. Out of that amount she purchased another house 
in USA after returning to India. Ms. Rose is a person resident in 
India due to joining an employment in India.  
 As per section 6(4)(iv) of the Foreign Exchange Management Act, 
1999 (FEMA), a person resident in India may freely utilize all their 
eligible assets abroad as well as income on such assets or sale 
proceeds thereof received after their return to India for making 
any payments or to make any fresh investments abroad without 
approval of Reserve Bank, provided the cost of such investments 
and/or any subsequent payments received therefor are met 
exclusively out of funds forming part of eligible assets held by her 
465
Page 4


ANSWERS OF MODEL TEST PAPER 8 
INTERMEDIATE COURSE: GROUP – I 
PAPER – 2: CORPORATE AND OTHER LAWS 
ANSWER TO PART I- CASE SCENARIO BASED MCQS 
1. ( c)
2. ( d)
3. ( c)
4. ( b)
5. ( a)
6. ( c)
7. ( c)
8. ( b)
9. ( b)
10. ( a)
11. ( d)
12. ( b)
13. ( b)
14. ( b)
15. ( d)
ANSWER TO PART II- DESCRIPTIVE QUESTIONS 
1. (a) As per section 50 of the Companies Act, 2013, (the Act) a company
may, if so authorized by its Articles, accept from any member the whole 
or a part of the amount remaining unpaid on any shares held by him, 
although no part of that amount has been called up.  
As per section 51 of the Act, a company may, if so authorized by its 
Articles, pay dividends in proportion to the amount paid-up on each 
share. The Board of Directors of a company may decide to pay 
dividends on pro-rata basis if all the equity shares of the company are 
not equally paid-up. 
Interest can be paid on such advance, if permitted by Articles. Here it is 
worth noting that, where the rate of interest is permitted by the Articles 
on such advance payment, same could be varied by shareholders in 
general meeting. 
Further, section 49 of the Act, specifies that calls shall be made on a 
uniform basis on all shares that are falling under the same class. A 
463
shareholder on whom a regular call for payment has been served may 
choose to pay only a part of the sum due.  
Hence, in the light of the stated provisions, SAB Health Products 
Limited is permitted to do the following acts: 
Is Mr. GH’s claim justified? 
Mr. GH is entitled to claim interest on money advanced by him and also 
dividend in proportion to the amount paid-up on each share, if so 
authorized by the Articles of the company.  
In the matter of Mr. LK 
Whereas, with respect to Mr. LK, calls shall be made on a uniform 
basis by the directors, on all shares that are falling under the same 
class as per section 49 of the Act.  A call cannot be made on some of 
the members only, unless they constitute a separate class of 
shareholders. 
Therefore, the action of the Board of Directors of SAB Health Products 
Limited towards Mr. LK for calling to pay the entire amount due by him 
in respect of the shares held by Mr. LK is invalid and not permissible. 
 (b) (i) Voluntary Revision of Financial Statements or Board’s Report on 
the Approval of the Tribunal 
 As per section 131 of the Companies Act, 2013, if it appears to 
the directors of a company that: 
a. the financial statement of the company does not comply with 
the provisions of section 129; or 
b. the report of the Board does not comply with the provisions of 
section 134 
 they may prepare revised financial statement or board’s report in 
respect of any of the 3 preceding financial years after obtaining 
the approval of the Tribunal on an application made by the 
company within fourteen days of the decision taken by the Board.   
 A certified copy of the order of the Tribunal shall be filed with the 
Registrar of Companies within 30 days of the date of receipt of 
the certified copy. 
 In the given question, Mr. C has advised the Board of Right 
Trading Limited to revise the financial statements for the year 
2021-22. The Board of Directors can do so as the said financial 
statements are pertaining to not later than three preceding 
financial years (from 2024- 2025) and by obtaining the approval of 
the Tribunal within fourteen days of the decision taken by the 
Board. 
(ii) As per section 139(2) of the Companies Act, 2013, listed 
companies and such class of companies as prescribed, shall not 
appoint or re- appoint an audit firm as auditor for more than two 
terms of five consecutive years. 
464
  Further, on the date of appointment, an audit firm shall not have 
any partner or partners who are/were also the partner/s to the 
other audit firm, whose tenure has been expired in a company 
immediately preceding the financial year.  
  It means, if a partner (common partner), who is in charge of an audit 
firm and also certifies the financial statements of the company, 
retires from the said firm and joins another firm of Chartered 
Accountants, such other firm shall also be ineligible to be appointed 
as succeeding auditor of same company after two terms of five 
consecutive years. i.e. cooling period. [Rule 6(3) of Companies 
(Audit and Auditors) Rules, 2014] 
  The audit of Right Trading Limited was conducted by M/s DEF 
and after expiry of two consecutive terms, it is proposed to 
appoint  
M/s XYZ.  Mr. F is the common partner in M/s DEF and M/s XYZ, 
hence, the appointment of M/s XYZ is not valid. 
 (c) (i) Can Ms. Rose purchase the house in USA and continue to 
retain it even after returning to India? 
According to section 6(4) of the Foreign Exchange Management 
Act, 1999, (the Act) a person resident in India may hold, own, 
transfer or invest in foreign currency, foreign security or any 
immovable property situated outside India if such currency, 
security or property was acquired, held or owned by such person 
when he was resident outside India or inherited from a person 
who was resident outside India. 
 Ms. Rose stayed in USA for 12 years, hence she must have 
become a non–resident for those years. She purchased a house 
during this time.  
 As per the above provisions, Ms. Rose can rightfully purchase the 
house in USA and continue to retain it after returning to India. 
(ii) Can Ms. Rose purchase another house in USA after returning 
to India? 
 Ms. Rose deposited the amount of rent from the house to her 
account in USA. Out of that amount she purchased another house 
in USA after returning to India. Ms. Rose is a person resident in 
India due to joining an employment in India.  
 As per section 6(4)(iv) of the Foreign Exchange Management Act, 
1999 (FEMA), a person resident in India may freely utilize all their 
eligible assets abroad as well as income on such assets or sale 
proceeds thereof received after their return to India for making 
any payments or to make any fresh investments abroad without 
approval of Reserve Bank, provided the cost of such investments 
and/or any subsequent payments received therefor are met 
exclusively out of funds forming part of eligible assets held by her 
465
and the transactions is not in contravention to extant FEMA 
provisions. 
 In view of the above, Ms. Rose can rightfully purchase another 
house in USA after returning to India. 
2. (a) Whether Stuti Ceramic Pvt Ltd (SCPL) can raise funds through 
Private Placement? 
Yes, SCPL can raise funds through the private placement of shares.  
Section 23(2)(b) of the Companies Act, 2013 (the Act) provides that a 
private company may issue securities through private placement by 
complying with the provisions specified in section 42 of the Act in 
supplement with those stated under Rule 14 of the Companies 
(Prospectus and Allotment of Securities) Rules, 2014. 
Meaning of Private Placement 
According to the Explanation I to section 42(3) of the Act, “private 
placement" means any offer or invitation to subscribe or issue of 
securities to a select group of persons by a company (other than by 
way of public offer) through private placement offer- cum-application, 
which satisfies the conditions specified in this section. 
Offer to be made only to a select group of persons  
A private placement shall be made only to a select group of not more 
than two hundred (200) persons (referred to as “identified persons”) in 
a financial year who have been identified by the Board after passing a 
special resolution [Section 42(2) read with Rule 14(1) of the 
Companies (Prospectus and Allotment of Securities), Rules 2014]. 
Limit on Fresh Offer 
As per section 42(5) of the Act, no fresh offer or invitation under this 
section shall be made unless the allotments with respect to any offer or 
invitation made earlier have been completed or that offer or invitation 
has been withdrawn or abandoned by the company. 
Thus, Stuti Ceramic Pvt. Ltd. can raise further funds through private 
placement issue after the allotments with respect to right issue for  
` 100 lakh have been completed and subject to the maximum number 
of 200 persons (identified persons) under section 42(2) and by 
complying with the procedures stated in Rule 14 of the Companies 
(Prospectus and Allotment of Securities) Rules, 2014. 
Time Limit for Allotment of Securities 
As per section 42(6) of the Companies Act, 2013, a company making 
an offer or invitation under this section shall allot its securities within 60 
days from the date of receipt of the application money for such 
securities and if the company is not able to allot the securities within 
that period, it shall repay the application money to the subscribers 
within 15 days from the expiry of 60 days and if the company fails to 
repay the application money within the aforesaid period, it shall be 
466
Page 5


ANSWERS OF MODEL TEST PAPER 8 
INTERMEDIATE COURSE: GROUP – I 
PAPER – 2: CORPORATE AND OTHER LAWS 
ANSWER TO PART I- CASE SCENARIO BASED MCQS 
1. ( c)
2. ( d)
3. ( c)
4. ( b)
5. ( a)
6. ( c)
7. ( c)
8. ( b)
9. ( b)
10. ( a)
11. ( d)
12. ( b)
13. ( b)
14. ( b)
15. ( d)
ANSWER TO PART II- DESCRIPTIVE QUESTIONS 
1. (a) As per section 50 of the Companies Act, 2013, (the Act) a company
may, if so authorized by its Articles, accept from any member the whole 
or a part of the amount remaining unpaid on any shares held by him, 
although no part of that amount has been called up.  
As per section 51 of the Act, a company may, if so authorized by its 
Articles, pay dividends in proportion to the amount paid-up on each 
share. The Board of Directors of a company may decide to pay 
dividends on pro-rata basis if all the equity shares of the company are 
not equally paid-up. 
Interest can be paid on such advance, if permitted by Articles. Here it is 
worth noting that, where the rate of interest is permitted by the Articles 
on such advance payment, same could be varied by shareholders in 
general meeting. 
Further, section 49 of the Act, specifies that calls shall be made on a 
uniform basis on all shares that are falling under the same class. A 
463
shareholder on whom a regular call for payment has been served may 
choose to pay only a part of the sum due.  
Hence, in the light of the stated provisions, SAB Health Products 
Limited is permitted to do the following acts: 
Is Mr. GH’s claim justified? 
Mr. GH is entitled to claim interest on money advanced by him and also 
dividend in proportion to the amount paid-up on each share, if so 
authorized by the Articles of the company.  
In the matter of Mr. LK 
Whereas, with respect to Mr. LK, calls shall be made on a uniform 
basis by the directors, on all shares that are falling under the same 
class as per section 49 of the Act.  A call cannot be made on some of 
the members only, unless they constitute a separate class of 
shareholders. 
Therefore, the action of the Board of Directors of SAB Health Products 
Limited towards Mr. LK for calling to pay the entire amount due by him 
in respect of the shares held by Mr. LK is invalid and not permissible. 
 (b) (i) Voluntary Revision of Financial Statements or Board’s Report on 
the Approval of the Tribunal 
 As per section 131 of the Companies Act, 2013, if it appears to 
the directors of a company that: 
a. the financial statement of the company does not comply with 
the provisions of section 129; or 
b. the report of the Board does not comply with the provisions of 
section 134 
 they may prepare revised financial statement or board’s report in 
respect of any of the 3 preceding financial years after obtaining 
the approval of the Tribunal on an application made by the 
company within fourteen days of the decision taken by the Board.   
 A certified copy of the order of the Tribunal shall be filed with the 
Registrar of Companies within 30 days of the date of receipt of 
the certified copy. 
 In the given question, Mr. C has advised the Board of Right 
Trading Limited to revise the financial statements for the year 
2021-22. The Board of Directors can do so as the said financial 
statements are pertaining to not later than three preceding 
financial years (from 2024- 2025) and by obtaining the approval of 
the Tribunal within fourteen days of the decision taken by the 
Board. 
(ii) As per section 139(2) of the Companies Act, 2013, listed 
companies and such class of companies as prescribed, shall not 
appoint or re- appoint an audit firm as auditor for more than two 
terms of five consecutive years. 
464
  Further, on the date of appointment, an audit firm shall not have 
any partner or partners who are/were also the partner/s to the 
other audit firm, whose tenure has been expired in a company 
immediately preceding the financial year.  
  It means, if a partner (common partner), who is in charge of an audit 
firm and also certifies the financial statements of the company, 
retires from the said firm and joins another firm of Chartered 
Accountants, such other firm shall also be ineligible to be appointed 
as succeeding auditor of same company after two terms of five 
consecutive years. i.e. cooling period. [Rule 6(3) of Companies 
(Audit and Auditors) Rules, 2014] 
  The audit of Right Trading Limited was conducted by M/s DEF 
and after expiry of two consecutive terms, it is proposed to 
appoint  
M/s XYZ.  Mr. F is the common partner in M/s DEF and M/s XYZ, 
hence, the appointment of M/s XYZ is not valid. 
 (c) (i) Can Ms. Rose purchase the house in USA and continue to 
retain it even after returning to India? 
According to section 6(4) of the Foreign Exchange Management 
Act, 1999, (the Act) a person resident in India may hold, own, 
transfer or invest in foreign currency, foreign security or any 
immovable property situated outside India if such currency, 
security or property was acquired, held or owned by such person 
when he was resident outside India or inherited from a person 
who was resident outside India. 
 Ms. Rose stayed in USA for 12 years, hence she must have 
become a non–resident for those years. She purchased a house 
during this time.  
 As per the above provisions, Ms. Rose can rightfully purchase the 
house in USA and continue to retain it after returning to India. 
(ii) Can Ms. Rose purchase another house in USA after returning 
to India? 
 Ms. Rose deposited the amount of rent from the house to her 
account in USA. Out of that amount she purchased another house 
in USA after returning to India. Ms. Rose is a person resident in 
India due to joining an employment in India.  
 As per section 6(4)(iv) of the Foreign Exchange Management Act, 
1999 (FEMA), a person resident in India may freely utilize all their 
eligible assets abroad as well as income on such assets or sale 
proceeds thereof received after their return to India for making 
any payments or to make any fresh investments abroad without 
approval of Reserve Bank, provided the cost of such investments 
and/or any subsequent payments received therefor are met 
exclusively out of funds forming part of eligible assets held by her 
465
and the transactions is not in contravention to extant FEMA 
provisions. 
 In view of the above, Ms. Rose can rightfully purchase another 
house in USA after returning to India. 
2. (a) Whether Stuti Ceramic Pvt Ltd (SCPL) can raise funds through 
Private Placement? 
Yes, SCPL can raise funds through the private placement of shares.  
Section 23(2)(b) of the Companies Act, 2013 (the Act) provides that a 
private company may issue securities through private placement by 
complying with the provisions specified in section 42 of the Act in 
supplement with those stated under Rule 14 of the Companies 
(Prospectus and Allotment of Securities) Rules, 2014. 
Meaning of Private Placement 
According to the Explanation I to section 42(3) of the Act, “private 
placement" means any offer or invitation to subscribe or issue of 
securities to a select group of persons by a company (other than by 
way of public offer) through private placement offer- cum-application, 
which satisfies the conditions specified in this section. 
Offer to be made only to a select group of persons  
A private placement shall be made only to a select group of not more 
than two hundred (200) persons (referred to as “identified persons”) in 
a financial year who have been identified by the Board after passing a 
special resolution [Section 42(2) read with Rule 14(1) of the 
Companies (Prospectus and Allotment of Securities), Rules 2014]. 
Limit on Fresh Offer 
As per section 42(5) of the Act, no fresh offer or invitation under this 
section shall be made unless the allotments with respect to any offer or 
invitation made earlier have been completed or that offer or invitation 
has been withdrawn or abandoned by the company. 
Thus, Stuti Ceramic Pvt. Ltd. can raise further funds through private 
placement issue after the allotments with respect to right issue for  
` 100 lakh have been completed and subject to the maximum number 
of 200 persons (identified persons) under section 42(2) and by 
complying with the procedures stated in Rule 14 of the Companies 
(Prospectus and Allotment of Securities) Rules, 2014. 
Time Limit for Allotment of Securities 
As per section 42(6) of the Companies Act, 2013, a company making 
an offer or invitation under this section shall allot its securities within 60 
days from the date of receipt of the application money for such 
securities and if the company is not able to allot the securities within 
that period, it shall repay the application money to the subscribers 
within 15 days from the expiry of 60 days and if the company fails to 
repay the application money within the aforesaid period, it shall be 
466
liable to repay that money with interest at the rate of 12% per annum 
from the expiry of the sixtieth day. 
 (b) (i)  Whether Dolls Toys Limited is permitted to accept deposits 
from Public other than its members? 
 Section 76 of the Companies Act, 2013 read with Companies 
(Acceptance of Deposits) Rules, 2014 deal with acceptance of 
deposits from public other than its members by ‘eligible 
companies’. 
 Accordingly, a public company, having net worth of not less than  
` 100 crore or turnover of not less than ` 500 crore, and which 
has obtained the prior consent by a special resolution and filed it 
with the Registrar of Companies before making any invitation to 
the Public for acceptance of deposit can accept deposits from 
persons other than its members. 
 Eligible Company: As per Rule 2(1)(e) of the Companies 
(Acceptance of Deposits) Rules, 2014, a public company, having 
net worth of not less than one hundred crore rupees or a turnover 
of not less than five hundred crore rupees, may accept deposits 
from persons other than its members. Such type of public 
company is known as ‘eligible company’. 
 In the given question, Dollys Toys Limited has a net-worth of  
` 310 crore and turnover of ` 300 crore.  
 Since at least one condition is satisfied that is net worth is ` 310 
crore which is more than the prescribed limit, and assuming it has 
obtained the prior consent by a special resolution and filed it with 
the Registrar of Companies, it is permitted to accept deposits from 
public other than its members. 
 Thus, Dollys Toys Limited is an eligible company and hence can 
accept deposits from public other than its members. 
(ii)  Whether Dolls Toys Limited permitted to accept deposits with 
repayment period of 4 months? 
 As per Rule 3(1) of the Companies (Acceptance of Deposits) 
Rules, 2014, a company is not permitted to accept or renew 
deposits (whether secured or unsecured) which is repayable on 
demand or in less than six months. Further, the maximum period 
of acceptance of deposits cannot exceed thirty- six months.  
 Exception to the rule of tenure of six months: For the purpose of 
meeting any of its short-term requirements of funds, a company may 
accept or renew deposits for repayment earlier than six months 
subject to the condition that: 
(i) such deposits shall not exceed ten per cent of the aggregate 
of the paid-up share capital, free reserves and securities 
premium account of the company; and 
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