Business Laws Model Test Paper - 10 (Qestions) | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


MODEL TEST PAPER 10 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Attempt any four questions from the remaining five questions. 
Working notes should form part of the Answers. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) (i) Mr. L let out his residential house to Mr. M for ` 50,000 p.m. for a 
period of one year. According to the Rent agreement, electricity bill 
will be paid by Mr. L. But Mr. L could not pay electricity dues up to 5 
months, due to his financial hardships. The Electricity Board sent the 
notice of disconnection, if it is not paid within a week's time. To avoid 
all this, Mr. M paid the electricity bill of ` 50,000 with penalty. Later 
on, L refused to reimburse ` 50,000 and argued that he has paid bill 
voluntarily because of his own interest. Decide with reference to 
provisions of the Indian Contract Act, 1872 whether Mr. M is entitled 
to be reimbursed by Mr. L? (3 Marks) 
(ii) Mr. A offered to sell 25 chairs to Mr. B @ ` 1,500 per chair on 
12.02.2024. A promised B that he would keep the offer open till 
15.02.2024. However, on 13.02.2024, he sold those chairs to Mr. 
C @ ` 1,700 per chair without the knowledge of B. Mr. B 
communicated the acceptance of the above offer on 14.02.2024. 
 Advise, with reference to provisions of the Indian Contract Act, 
1872 whether Mr. B can claim damages from Mr. A? (2 Marks) 
(iii) Mr. A was running an orphanage.  His friend Mr. S, a 
philanthropist agreed to donate ` 2 lakh for treatment of a child, 
who was suffering from cancer. On emergency, Mr. A incurred  
` 1.5 lakh on treatment of child. Now, Mr. S refused to pay. 
Whether Mr. A can claim ` 1.5 lakh from Mr. S with reference to 
provisions of the Indian Contract Act, 1872? (2 Marks) 
 (b) (i) Kamal, a Chartered Accountant started his e-commerce business by 
incorporating a One Person Company (the OPC) on 1
st
 October, 
2023. He, being a sole member of the OPC named his brother 
Sudhakar, with his consent, as his nominee in the Memorandum of 
Association of the OPC. Now, Kamal intends to replace Sudhakar 
and to nominate any one of the following short- listed friends as a 
nominee with effect from 1
st
 January, 2024. 
(1) Robert, an Indian citizen, and a resident in India shifted his 
residence to the USA on 31
st
 May, 2022 and has not returned 
to India till 1
st
 January, 2024. 
(2) Dinkar, an Indian citizen, and non-resident in India came for 
employment in India on 1
st
 April, 2023 and have been 
continuously staying in India since then. 
122
Page 2


MODEL TEST PAPER 10 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Attempt any four questions from the remaining five questions. 
Working notes should form part of the Answers. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) (i) Mr. L let out his residential house to Mr. M for ` 50,000 p.m. for a 
period of one year. According to the Rent agreement, electricity bill 
will be paid by Mr. L. But Mr. L could not pay electricity dues up to 5 
months, due to his financial hardships. The Electricity Board sent the 
notice of disconnection, if it is not paid within a week's time. To avoid 
all this, Mr. M paid the electricity bill of ` 50,000 with penalty. Later 
on, L refused to reimburse ` 50,000 and argued that he has paid bill 
voluntarily because of his own interest. Decide with reference to 
provisions of the Indian Contract Act, 1872 whether Mr. M is entitled 
to be reimbursed by Mr. L? (3 Marks) 
(ii) Mr. A offered to sell 25 chairs to Mr. B @ ` 1,500 per chair on 
12.02.2024. A promised B that he would keep the offer open till 
15.02.2024. However, on 13.02.2024, he sold those chairs to Mr. 
C @ ` 1,700 per chair without the knowledge of B. Mr. B 
communicated the acceptance of the above offer on 14.02.2024. 
 Advise, with reference to provisions of the Indian Contract Act, 
1872 whether Mr. B can claim damages from Mr. A? (2 Marks) 
(iii) Mr. A was running an orphanage.  His friend Mr. S, a 
philanthropist agreed to donate ` 2 lakh for treatment of a child, 
who was suffering from cancer. On emergency, Mr. A incurred  
` 1.5 lakh on treatment of child. Now, Mr. S refused to pay. 
Whether Mr. A can claim ` 1.5 lakh from Mr. S with reference to 
provisions of the Indian Contract Act, 1872? (2 Marks) 
 (b) (i) Kamal, a Chartered Accountant started his e-commerce business by 
incorporating a One Person Company (the OPC) on 1
st
 October, 
2023. He, being a sole member of the OPC named his brother 
Sudhakar, with his consent, as his nominee in the Memorandum of 
Association of the OPC. Now, Kamal intends to replace Sudhakar 
and to nominate any one of the following short- listed friends as a 
nominee with effect from 1
st
 January, 2024. 
(1) Robert, an Indian citizen, and a resident in India shifted his 
residence to the USA on 31
st
 May, 2022 and has not returned 
to India till 1
st
 January, 2024. 
(2) Dinkar, an Indian citizen, and non-resident in India came for 
employment in India on 1
st
 April, 2023 and have been 
continuously staying in India since then. 
122
 Referring to the provisions of the Companies Act, 2013, advise 
Kamal regarding eligibility of his short-listed friends to be 
appointed nominee and the procedure to be followed for changing 
the name of the nominee as per the provisions of the Companies 
Act, 2013. (4 Marks) 
(ii)  XYZ Ltd. was incorporated to hold the patent for a new product. 
The company is expecting to start its commercial production 
within the next two years. In the meanwhile, for timely installation, 
the company has placed the purchase order for plant and 
machinery with a down payment of ` 1 crore. Referring to the 
provisions of the Companies Act, 2013 examine, whether the 
company can go for acquiring the status of a dormant company? 
       (3 Marks) 
(c) Referring to the provisions of the Indian Partnership Act, 1932, answer 
the following: 
(i) "If a partner is otherwise expelled; the expulsion is null and void." 
Discuss. (4 Marks) 
(ii) "The partner who is expelled will cease to be liable to the third 
party for the act of the firm done after expulsion." Analyse. 
 (2 Marks) 
2. (a) (i) M/s RK Traders (Buyer) made a contract with M/s CK Traders 
(Seller) for purchase of 2000 kg of basmati rice specifically grown in 
Chhattisgarh State should be packed in pink colour bags of 25 kg 
each to identify the place of origin by specifying the mode of packing 
of basmati rice. The seller agreed for specific packing of rice grown 
in Chhattisgarh State. However, by misunderstanding, staff of seller 
packed the quantity of 1800 kg of basmati rice grown in the State of 
Maharashtra in white colour bags of 30 kg each and the remaining 
quantity of 200 kg, grown in Chhattisgarh State, in pink colour bags 
of 25 kg each. Referring to the provisions of the Sale of Goods Act, 
1930 analyse, whether the buyer has the right to reject the entire 
quantity of basmati rice supplied by the seller. 
  On the other hand what is the remedy available to buyer if he has 
to accept the entire quantity to fulfil his other contracts with other 
parties? (4 Marks) 
(ii)  Kartik agreed to sell his laptop to Vasant for a price to be fixed by 
Kusum a hardware engineer. However, before the delivery of the 
laptop, Kartik changed his mind and did not share any particulars 
and configuration of the laptop with Kusum, which made her 
unable to do the valuation. Kusum refused to do valuation. 
  Vasant needed laptop for his project, so he promised Kartik that, if 
the laptop is delivered to him, he would pay a reasonable price for 
it However, Kartik decided not to sell his laptop to Vasant. Now, 
Vasant wants to know from you, being a legal expert, whether 
Kartik is bound by his promise as he agreed earlier to deliver his 
123
Page 3


MODEL TEST PAPER 10 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Attempt any four questions from the remaining five questions. 
Working notes should form part of the Answers. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) (i) Mr. L let out his residential house to Mr. M for ` 50,000 p.m. for a 
period of one year. According to the Rent agreement, electricity bill 
will be paid by Mr. L. But Mr. L could not pay electricity dues up to 5 
months, due to his financial hardships. The Electricity Board sent the 
notice of disconnection, if it is not paid within a week's time. To avoid 
all this, Mr. M paid the electricity bill of ` 50,000 with penalty. Later 
on, L refused to reimburse ` 50,000 and argued that he has paid bill 
voluntarily because of his own interest. Decide with reference to 
provisions of the Indian Contract Act, 1872 whether Mr. M is entitled 
to be reimbursed by Mr. L? (3 Marks) 
(ii) Mr. A offered to sell 25 chairs to Mr. B @ ` 1,500 per chair on 
12.02.2024. A promised B that he would keep the offer open till 
15.02.2024. However, on 13.02.2024, he sold those chairs to Mr. 
C @ ` 1,700 per chair without the knowledge of B. Mr. B 
communicated the acceptance of the above offer on 14.02.2024. 
 Advise, with reference to provisions of the Indian Contract Act, 
1872 whether Mr. B can claim damages from Mr. A? (2 Marks) 
(iii) Mr. A was running an orphanage.  His friend Mr. S, a 
philanthropist agreed to donate ` 2 lakh for treatment of a child, 
who was suffering from cancer. On emergency, Mr. A incurred  
` 1.5 lakh on treatment of child. Now, Mr. S refused to pay. 
Whether Mr. A can claim ` 1.5 lakh from Mr. S with reference to 
provisions of the Indian Contract Act, 1872? (2 Marks) 
 (b) (i) Kamal, a Chartered Accountant started his e-commerce business by 
incorporating a One Person Company (the OPC) on 1
st
 October, 
2023. He, being a sole member of the OPC named his brother 
Sudhakar, with his consent, as his nominee in the Memorandum of 
Association of the OPC. Now, Kamal intends to replace Sudhakar 
and to nominate any one of the following short- listed friends as a 
nominee with effect from 1
st
 January, 2024. 
(1) Robert, an Indian citizen, and a resident in India shifted his 
residence to the USA on 31
st
 May, 2022 and has not returned 
to India till 1
st
 January, 2024. 
(2) Dinkar, an Indian citizen, and non-resident in India came for 
employment in India on 1
st
 April, 2023 and have been 
continuously staying in India since then. 
122
 Referring to the provisions of the Companies Act, 2013, advise 
Kamal regarding eligibility of his short-listed friends to be 
appointed nominee and the procedure to be followed for changing 
the name of the nominee as per the provisions of the Companies 
Act, 2013. (4 Marks) 
(ii)  XYZ Ltd. was incorporated to hold the patent for a new product. 
The company is expecting to start its commercial production 
within the next two years. In the meanwhile, for timely installation, 
the company has placed the purchase order for plant and 
machinery with a down payment of ` 1 crore. Referring to the 
provisions of the Companies Act, 2013 examine, whether the 
company can go for acquiring the status of a dormant company? 
       (3 Marks) 
(c) Referring to the provisions of the Indian Partnership Act, 1932, answer 
the following: 
(i) "If a partner is otherwise expelled; the expulsion is null and void." 
Discuss. (4 Marks) 
(ii) "The partner who is expelled will cease to be liable to the third 
party for the act of the firm done after expulsion." Analyse. 
 (2 Marks) 
2. (a) (i) M/s RK Traders (Buyer) made a contract with M/s CK Traders 
(Seller) for purchase of 2000 kg of basmati rice specifically grown in 
Chhattisgarh State should be packed in pink colour bags of 25 kg 
each to identify the place of origin by specifying the mode of packing 
of basmati rice. The seller agreed for specific packing of rice grown 
in Chhattisgarh State. However, by misunderstanding, staff of seller 
packed the quantity of 1800 kg of basmati rice grown in the State of 
Maharashtra in white colour bags of 30 kg each and the remaining 
quantity of 200 kg, grown in Chhattisgarh State, in pink colour bags 
of 25 kg each. Referring to the provisions of the Sale of Goods Act, 
1930 analyse, whether the buyer has the right to reject the entire 
quantity of basmati rice supplied by the seller. 
  On the other hand what is the remedy available to buyer if he has 
to accept the entire quantity to fulfil his other contracts with other 
parties? (4 Marks) 
(ii)  Kartik agreed to sell his laptop to Vasant for a price to be fixed by 
Kusum a hardware engineer. However, before the delivery of the 
laptop, Kartik changed his mind and did not share any particulars 
and configuration of the laptop with Kusum, which made her 
unable to do the valuation. Kusum refused to do valuation. 
  Vasant needed laptop for his project, so he promised Kartik that, if 
the laptop is delivered to him, he would pay a reasonable price for 
it However, Kartik decided not to sell his laptop to Vasant. Now, 
Vasant wants to know from you, being a legal expert, whether 
Kartik is bound by his promise as he agreed earlier to deliver his 
123
laptop to him at a reasonable price. If he does not agree to deliver 
what is the other remedy available to Vasant? Advise, referring to 
the provisions of the Sale of Goods Act, 1930. (3 Marks) 
(b) Referring to the provisions of the Companies Act, 2013, answer the 
following: 
(i) "Corporate veil sometimes fails to protect the members of the 
company from the liability connected to the company's actions." 
Explain any three instances. (5 Marks) 
(ii) What is the effect of Memorandum and Articles when registered?  
(2 Marks) 
(c) Referring to the provisions of the Limited Liability Partnership Act, 
2008, answer the following: 
(i) Under what circumstances a Limited Liability Partnership is 
compulsorily required to change its name? Also, explain the 
compliance requirement following the change of name and the 
consequences, if any, in case of default therein. (4 Marks) 
(ii) What do you mean by a Small Limited Liability Partnership? 
 (2 Marks) 
3. (a) Referring to the provisions of the Indian Partnership Act, 1932, answer the 
following: 
(i) Ram and Shyam are partners in a partnership firm styled as RS & 
Co. (the firm). Gopal, a renowned businessman, is their common 
friend. Ram introduced Gopal to Sundar, a supplier to the firm, as 
his newly joined partner. Gopal knowing that he is not a partner 
preferred to keep quiet on such an introduction. This information 
about Gopal, being a partner of the firm, was shared by Sundar 
with another businessman Madhav. Next day, Sundar supplied 
the raw material on credit and Madhav lent ` 5 lakhs to the firm 
for a short period on the understanding that Gopal is a partner of 
the firm. On due dates, the firm failed to discharge its liability 
towards both. Advise Gopal, whether he is liable to Sundar and 
Madhav for the aforesaid liability of the firm. (3 Marks) 
(ii) On admission as a new partner, Amar agreed to be liable for the 
existing debts (referred to as the old debts) of the firm by an 
agreement signed by the all partners including Amar. Examine, 
whether Amar will be liable in a suit filed by the creditor against 
the firm and all existing partners for recovery of the old debt of the 
firm. (2 Marks) 
(iii) Suman, having 10% share in the property of ` 200 lakh of a firm 
retires from the firm on 31
st
 March, 2023. The firm continues with 
the business thereafter without final settlement of accounts 
between the existing and retired partners and earned profits of  
` 10 lakh during the financial year ending 31
st
 March, 2024. 
Suman, in her own interest and in the absence of any provision in 
124
Page 4


MODEL TEST PAPER 10 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Attempt any four questions from the remaining five questions. 
Working notes should form part of the Answers. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) (i) Mr. L let out his residential house to Mr. M for ` 50,000 p.m. for a 
period of one year. According to the Rent agreement, electricity bill 
will be paid by Mr. L. But Mr. L could not pay electricity dues up to 5 
months, due to his financial hardships. The Electricity Board sent the 
notice of disconnection, if it is not paid within a week's time. To avoid 
all this, Mr. M paid the electricity bill of ` 50,000 with penalty. Later 
on, L refused to reimburse ` 50,000 and argued that he has paid bill 
voluntarily because of his own interest. Decide with reference to 
provisions of the Indian Contract Act, 1872 whether Mr. M is entitled 
to be reimbursed by Mr. L? (3 Marks) 
(ii) Mr. A offered to sell 25 chairs to Mr. B @ ` 1,500 per chair on 
12.02.2024. A promised B that he would keep the offer open till 
15.02.2024. However, on 13.02.2024, he sold those chairs to Mr. 
C @ ` 1,700 per chair without the knowledge of B. Mr. B 
communicated the acceptance of the above offer on 14.02.2024. 
 Advise, with reference to provisions of the Indian Contract Act, 
1872 whether Mr. B can claim damages from Mr. A? (2 Marks) 
(iii) Mr. A was running an orphanage.  His friend Mr. S, a 
philanthropist agreed to donate ` 2 lakh for treatment of a child, 
who was suffering from cancer. On emergency, Mr. A incurred  
` 1.5 lakh on treatment of child. Now, Mr. S refused to pay. 
Whether Mr. A can claim ` 1.5 lakh from Mr. S with reference to 
provisions of the Indian Contract Act, 1872? (2 Marks) 
 (b) (i) Kamal, a Chartered Accountant started his e-commerce business by 
incorporating a One Person Company (the OPC) on 1
st
 October, 
2023. He, being a sole member of the OPC named his brother 
Sudhakar, with his consent, as his nominee in the Memorandum of 
Association of the OPC. Now, Kamal intends to replace Sudhakar 
and to nominate any one of the following short- listed friends as a 
nominee with effect from 1
st
 January, 2024. 
(1) Robert, an Indian citizen, and a resident in India shifted his 
residence to the USA on 31
st
 May, 2022 and has not returned 
to India till 1
st
 January, 2024. 
(2) Dinkar, an Indian citizen, and non-resident in India came for 
employment in India on 1
st
 April, 2023 and have been 
continuously staying in India since then. 
122
 Referring to the provisions of the Companies Act, 2013, advise 
Kamal regarding eligibility of his short-listed friends to be 
appointed nominee and the procedure to be followed for changing 
the name of the nominee as per the provisions of the Companies 
Act, 2013. (4 Marks) 
(ii)  XYZ Ltd. was incorporated to hold the patent for a new product. 
The company is expecting to start its commercial production 
within the next two years. In the meanwhile, for timely installation, 
the company has placed the purchase order for plant and 
machinery with a down payment of ` 1 crore. Referring to the 
provisions of the Companies Act, 2013 examine, whether the 
company can go for acquiring the status of a dormant company? 
       (3 Marks) 
(c) Referring to the provisions of the Indian Partnership Act, 1932, answer 
the following: 
(i) "If a partner is otherwise expelled; the expulsion is null and void." 
Discuss. (4 Marks) 
(ii) "The partner who is expelled will cease to be liable to the third 
party for the act of the firm done after expulsion." Analyse. 
 (2 Marks) 
2. (a) (i) M/s RK Traders (Buyer) made a contract with M/s CK Traders 
(Seller) for purchase of 2000 kg of basmati rice specifically grown in 
Chhattisgarh State should be packed in pink colour bags of 25 kg 
each to identify the place of origin by specifying the mode of packing 
of basmati rice. The seller agreed for specific packing of rice grown 
in Chhattisgarh State. However, by misunderstanding, staff of seller 
packed the quantity of 1800 kg of basmati rice grown in the State of 
Maharashtra in white colour bags of 30 kg each and the remaining 
quantity of 200 kg, grown in Chhattisgarh State, in pink colour bags 
of 25 kg each. Referring to the provisions of the Sale of Goods Act, 
1930 analyse, whether the buyer has the right to reject the entire 
quantity of basmati rice supplied by the seller. 
  On the other hand what is the remedy available to buyer if he has 
to accept the entire quantity to fulfil his other contracts with other 
parties? (4 Marks) 
(ii)  Kartik agreed to sell his laptop to Vasant for a price to be fixed by 
Kusum a hardware engineer. However, before the delivery of the 
laptop, Kartik changed his mind and did not share any particulars 
and configuration of the laptop with Kusum, which made her 
unable to do the valuation. Kusum refused to do valuation. 
  Vasant needed laptop for his project, so he promised Kartik that, if 
the laptop is delivered to him, he would pay a reasonable price for 
it However, Kartik decided not to sell his laptop to Vasant. Now, 
Vasant wants to know from you, being a legal expert, whether 
Kartik is bound by his promise as he agreed earlier to deliver his 
123
laptop to him at a reasonable price. If he does not agree to deliver 
what is the other remedy available to Vasant? Advise, referring to 
the provisions of the Sale of Goods Act, 1930. (3 Marks) 
(b) Referring to the provisions of the Companies Act, 2013, answer the 
following: 
(i) "Corporate veil sometimes fails to protect the members of the 
company from the liability connected to the company's actions." 
Explain any three instances. (5 Marks) 
(ii) What is the effect of Memorandum and Articles when registered?  
(2 Marks) 
(c) Referring to the provisions of the Limited Liability Partnership Act, 
2008, answer the following: 
(i) Under what circumstances a Limited Liability Partnership is 
compulsorily required to change its name? Also, explain the 
compliance requirement following the change of name and the 
consequences, if any, in case of default therein. (4 Marks) 
(ii) What do you mean by a Small Limited Liability Partnership? 
 (2 Marks) 
3. (a) Referring to the provisions of the Indian Partnership Act, 1932, answer the 
following: 
(i) Ram and Shyam are partners in a partnership firm styled as RS & 
Co. (the firm). Gopal, a renowned businessman, is their common 
friend. Ram introduced Gopal to Sundar, a supplier to the firm, as 
his newly joined partner. Gopal knowing that he is not a partner 
preferred to keep quiet on such an introduction. This information 
about Gopal, being a partner of the firm, was shared by Sundar 
with another businessman Madhav. Next day, Sundar supplied 
the raw material on credit and Madhav lent ` 5 lakhs to the firm 
for a short period on the understanding that Gopal is a partner of 
the firm. On due dates, the firm failed to discharge its liability 
towards both. Advise Gopal, whether he is liable to Sundar and 
Madhav for the aforesaid liability of the firm. (3 Marks) 
(ii) On admission as a new partner, Amar agreed to be liable for the 
existing debts (referred to as the old debts) of the firm by an 
agreement signed by the all partners including Amar. Examine, 
whether Amar will be liable in a suit filed by the creditor against 
the firm and all existing partners for recovery of the old debt of the 
firm. (2 Marks) 
(iii) Suman, having 10% share in the property of ` 200 lakh of a firm 
retires from the firm on 31
st
 March, 2023. The firm continues with 
the business thereafter without final settlement of accounts 
between the existing and retired partners and earned profits of  
` 10 lakh during the financial year ending 31
st
 March, 2024. 
Suman, in her own interest and in the absence of any provision in 
124
the partnership firm on this point, claimed ` 3 lakh from the firm 
toward the use of her share in the property and profit of the firm 
which was-rejected by the partners. There is no contract between 
the partners contrary to the provisions of the Act in this regard. 
Examine the validity of the amount claimed by Suman under the 
provisions of the Indian Partnership Act, 1932. (2 Marks) 
 (b) (i) JV Limited borrowed a secured loan of ` 5 crore from Star Bank 
Limited (the bank) to meet its working capital requirement. However, 
the borrowing powers of the company, under its Memorandum of 
Association, were restricted to ` 1 crore. The bank released the loan 
amount in two instalments of ` 1 crore and ` 4 crore. On the due 
date for repayment of the loan, the company refused to accept the 
liability of ` 5 crore on the ground that the borrowing was ultra vires 
the company. The company's books of account show that the 
company has utilised the loan amount of ` 3 crore for repayment of 
its lawful debts. The utilisation of the remaining ` 2 crore cannot be 
traced. Referring to the doctrine of ultra-vires under the Companies 
Act, 2013, examine the validity of the decision of the company 
denying the repayment of the loan and explore the remedy, if any, 
available to the bank for recovery of the loan. (4 Marks) 
(ii) After incorporation of Goodwill Private Limited (the company) on  
15
th
 May, 2024 the share certificates were issued to Amit, Sumit 
and Sumati being subscribers to the Memorandum of Association 
of the company without affixing the common seal thereon and 
under the signature of Amit and Sumit, the directors of the 
company. The company has yet to appoint a company secretary. 
On objection raised by Sumati, a director, about the validity of the 
share certificate signed by other two directors, Amit and Sumit, 
clarified that since the company has opted not to have the 
common seal for the company the share certificates (i.e. the 
document) signed by two directors are valid. Referring to the 
provisions of the Companies Act, 2013, examine the correctness 
of the objection raised by one of the directors and in response, 
the clarification offered by other directors. 
  Would your answer be different, if the company had a company 
secretary? (3 Marks) 
 (c) (i)  In case of breach of contract, the court may award compensation or 
damages. Explain the circumstances when court may award 
ordinary damages, special damages and liquidated damages under 
the provisions of the Indian Contract Act, 1872. (3 Marks) 
(ii) What are the conditions need to be fulfilled to make the following 
agreements valid without consideration as per the provisions of 
the Indian Contract Act, 1872? 
(A) Agreement made based on natural love and affection 
(B) Promise to pay time-barred debts (3 Marks) 
  
125
Page 5


MODEL TEST PAPER 10 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Attempt any four questions from the remaining five questions. 
Working notes should form part of the Answers. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) (i) Mr. L let out his residential house to Mr. M for ` 50,000 p.m. for a 
period of one year. According to the Rent agreement, electricity bill 
will be paid by Mr. L. But Mr. L could not pay electricity dues up to 5 
months, due to his financial hardships. The Electricity Board sent the 
notice of disconnection, if it is not paid within a week's time. To avoid 
all this, Mr. M paid the electricity bill of ` 50,000 with penalty. Later 
on, L refused to reimburse ` 50,000 and argued that he has paid bill 
voluntarily because of his own interest. Decide with reference to 
provisions of the Indian Contract Act, 1872 whether Mr. M is entitled 
to be reimbursed by Mr. L? (3 Marks) 
(ii) Mr. A offered to sell 25 chairs to Mr. B @ ` 1,500 per chair on 
12.02.2024. A promised B that he would keep the offer open till 
15.02.2024. However, on 13.02.2024, he sold those chairs to Mr. 
C @ ` 1,700 per chair without the knowledge of B. Mr. B 
communicated the acceptance of the above offer on 14.02.2024. 
 Advise, with reference to provisions of the Indian Contract Act, 
1872 whether Mr. B can claim damages from Mr. A? (2 Marks) 
(iii) Mr. A was running an orphanage.  His friend Mr. S, a 
philanthropist agreed to donate ` 2 lakh for treatment of a child, 
who was suffering from cancer. On emergency, Mr. A incurred  
` 1.5 lakh on treatment of child. Now, Mr. S refused to pay. 
Whether Mr. A can claim ` 1.5 lakh from Mr. S with reference to 
provisions of the Indian Contract Act, 1872? (2 Marks) 
 (b) (i) Kamal, a Chartered Accountant started his e-commerce business by 
incorporating a One Person Company (the OPC) on 1
st
 October, 
2023. He, being a sole member of the OPC named his brother 
Sudhakar, with his consent, as his nominee in the Memorandum of 
Association of the OPC. Now, Kamal intends to replace Sudhakar 
and to nominate any one of the following short- listed friends as a 
nominee with effect from 1
st
 January, 2024. 
(1) Robert, an Indian citizen, and a resident in India shifted his 
residence to the USA on 31
st
 May, 2022 and has not returned 
to India till 1
st
 January, 2024. 
(2) Dinkar, an Indian citizen, and non-resident in India came for 
employment in India on 1
st
 April, 2023 and have been 
continuously staying in India since then. 
122
 Referring to the provisions of the Companies Act, 2013, advise 
Kamal regarding eligibility of his short-listed friends to be 
appointed nominee and the procedure to be followed for changing 
the name of the nominee as per the provisions of the Companies 
Act, 2013. (4 Marks) 
(ii)  XYZ Ltd. was incorporated to hold the patent for a new product. 
The company is expecting to start its commercial production 
within the next two years. In the meanwhile, for timely installation, 
the company has placed the purchase order for plant and 
machinery with a down payment of ` 1 crore. Referring to the 
provisions of the Companies Act, 2013 examine, whether the 
company can go for acquiring the status of a dormant company? 
       (3 Marks) 
(c) Referring to the provisions of the Indian Partnership Act, 1932, answer 
the following: 
(i) "If a partner is otherwise expelled; the expulsion is null and void." 
Discuss. (4 Marks) 
(ii) "The partner who is expelled will cease to be liable to the third 
party for the act of the firm done after expulsion." Analyse. 
 (2 Marks) 
2. (a) (i) M/s RK Traders (Buyer) made a contract with M/s CK Traders 
(Seller) for purchase of 2000 kg of basmati rice specifically grown in 
Chhattisgarh State should be packed in pink colour bags of 25 kg 
each to identify the place of origin by specifying the mode of packing 
of basmati rice. The seller agreed for specific packing of rice grown 
in Chhattisgarh State. However, by misunderstanding, staff of seller 
packed the quantity of 1800 kg of basmati rice grown in the State of 
Maharashtra in white colour bags of 30 kg each and the remaining 
quantity of 200 kg, grown in Chhattisgarh State, in pink colour bags 
of 25 kg each. Referring to the provisions of the Sale of Goods Act, 
1930 analyse, whether the buyer has the right to reject the entire 
quantity of basmati rice supplied by the seller. 
  On the other hand what is the remedy available to buyer if he has 
to accept the entire quantity to fulfil his other contracts with other 
parties? (4 Marks) 
(ii)  Kartik agreed to sell his laptop to Vasant for a price to be fixed by 
Kusum a hardware engineer. However, before the delivery of the 
laptop, Kartik changed his mind and did not share any particulars 
and configuration of the laptop with Kusum, which made her 
unable to do the valuation. Kusum refused to do valuation. 
  Vasant needed laptop for his project, so he promised Kartik that, if 
the laptop is delivered to him, he would pay a reasonable price for 
it However, Kartik decided not to sell his laptop to Vasant. Now, 
Vasant wants to know from you, being a legal expert, whether 
Kartik is bound by his promise as he agreed earlier to deliver his 
123
laptop to him at a reasonable price. If he does not agree to deliver 
what is the other remedy available to Vasant? Advise, referring to 
the provisions of the Sale of Goods Act, 1930. (3 Marks) 
(b) Referring to the provisions of the Companies Act, 2013, answer the 
following: 
(i) "Corporate veil sometimes fails to protect the members of the 
company from the liability connected to the company's actions." 
Explain any three instances. (5 Marks) 
(ii) What is the effect of Memorandum and Articles when registered?  
(2 Marks) 
(c) Referring to the provisions of the Limited Liability Partnership Act, 
2008, answer the following: 
(i) Under what circumstances a Limited Liability Partnership is 
compulsorily required to change its name? Also, explain the 
compliance requirement following the change of name and the 
consequences, if any, in case of default therein. (4 Marks) 
(ii) What do you mean by a Small Limited Liability Partnership? 
 (2 Marks) 
3. (a) Referring to the provisions of the Indian Partnership Act, 1932, answer the 
following: 
(i) Ram and Shyam are partners in a partnership firm styled as RS & 
Co. (the firm). Gopal, a renowned businessman, is their common 
friend. Ram introduced Gopal to Sundar, a supplier to the firm, as 
his newly joined partner. Gopal knowing that he is not a partner 
preferred to keep quiet on such an introduction. This information 
about Gopal, being a partner of the firm, was shared by Sundar 
with another businessman Madhav. Next day, Sundar supplied 
the raw material on credit and Madhav lent ` 5 lakhs to the firm 
for a short period on the understanding that Gopal is a partner of 
the firm. On due dates, the firm failed to discharge its liability 
towards both. Advise Gopal, whether he is liable to Sundar and 
Madhav for the aforesaid liability of the firm. (3 Marks) 
(ii) On admission as a new partner, Amar agreed to be liable for the 
existing debts (referred to as the old debts) of the firm by an 
agreement signed by the all partners including Amar. Examine, 
whether Amar will be liable in a suit filed by the creditor against 
the firm and all existing partners for recovery of the old debt of the 
firm. (2 Marks) 
(iii) Suman, having 10% share in the property of ` 200 lakh of a firm 
retires from the firm on 31
st
 March, 2023. The firm continues with 
the business thereafter without final settlement of accounts 
between the existing and retired partners and earned profits of  
` 10 lakh during the financial year ending 31
st
 March, 2024. 
Suman, in her own interest and in the absence of any provision in 
124
the partnership firm on this point, claimed ` 3 lakh from the firm 
toward the use of her share in the property and profit of the firm 
which was-rejected by the partners. There is no contract between 
the partners contrary to the provisions of the Act in this regard. 
Examine the validity of the amount claimed by Suman under the 
provisions of the Indian Partnership Act, 1932. (2 Marks) 
 (b) (i) JV Limited borrowed a secured loan of ` 5 crore from Star Bank 
Limited (the bank) to meet its working capital requirement. However, 
the borrowing powers of the company, under its Memorandum of 
Association, were restricted to ` 1 crore. The bank released the loan 
amount in two instalments of ` 1 crore and ` 4 crore. On the due 
date for repayment of the loan, the company refused to accept the 
liability of ` 5 crore on the ground that the borrowing was ultra vires 
the company. The company's books of account show that the 
company has utilised the loan amount of ` 3 crore for repayment of 
its lawful debts. The utilisation of the remaining ` 2 crore cannot be 
traced. Referring to the doctrine of ultra-vires under the Companies 
Act, 2013, examine the validity of the decision of the company 
denying the repayment of the loan and explore the remedy, if any, 
available to the bank for recovery of the loan. (4 Marks) 
(ii) After incorporation of Goodwill Private Limited (the company) on  
15
th
 May, 2024 the share certificates were issued to Amit, Sumit 
and Sumati being subscribers to the Memorandum of Association 
of the company without affixing the common seal thereon and 
under the signature of Amit and Sumit, the directors of the 
company. The company has yet to appoint a company secretary. 
On objection raised by Sumati, a director, about the validity of the 
share certificate signed by other two directors, Amit and Sumit, 
clarified that since the company has opted not to have the 
common seal for the company the share certificates (i.e. the 
document) signed by two directors are valid. Referring to the 
provisions of the Companies Act, 2013, examine the correctness 
of the objection raised by one of the directors and in response, 
the clarification offered by other directors. 
  Would your answer be different, if the company had a company 
secretary? (3 Marks) 
 (c) (i)  In case of breach of contract, the court may award compensation or 
damages. Explain the circumstances when court may award 
ordinary damages, special damages and liquidated damages under 
the provisions of the Indian Contract Act, 1872. (3 Marks) 
(ii) What are the conditions need to be fulfilled to make the following 
agreements valid without consideration as per the provisions of 
the Indian Contract Act, 1872? 
(A) Agreement made based on natural love and affection 
(B) Promise to pay time-barred debts (3 Marks) 
  
125
4. (a) (i)  Raghav found gold and diamond studded wristwatch value 
approximately ` 1,00,000/- on the roadside. He picked it up and then 
advertised in the newspaper that the true owner thereof can take the 
watch after showing proper evidence. After waiting for a certain 
period of time, when the true owner did not tum up, he gifted that 
wristwatch to his son Mahesh. A few days later, Madhav, the true 
owner of watch, somehow noticed his watch on wrist of Mahesh. He 
approached him to collect the same, but Mahesh refused. In the 
evening, Raghav called Madhav and told him that he incurred  
` 20,000 to find the true owner if he fails to reimburse him the lawful 
expenses incurred on finding out the true owner, he will sue him for 
recovery thereof or retain the possession of the watch with him till 
recovery. Even he can sell the watch for recovery of expenses. 
Advise whether the following actions of Raghav were lawful 
according to provisions of The Indian Contract Act, 1872: 
(A) Gifting the wristwatch to his son. 
(B) Warning Madhav to sue for recovery of lawful expenses 
incurred in finding true owner. 
(C) Retaining the possession of wristwatch till recovery of lawful 
expenses. 
(D) Selling of wristwatch for recovery of expenses. (4 Marks) 
(ii) Woollen Garments Limited entered into a contract with a group of 
women in July, 2023 to supply various woollen clothes for men, 
women and kids like sweaters, monkey caps, mufflers; woollen 
coats, hand gloves etc. before the commencement of the winter 
season. The agreement expressly provides that the woollen 
clothes shall be supplied by the end of October, 2023 before 
starting of winter season. However, due to the prolonged strike, 
women group could tender the supplies in March, 2024 when the 
winter season was almost over. Analysing the situation and 
answer the following questions in light of the provisions of the 
Indian Contract Act, 1872: 
(A) Whether company can reject the total supply by women group? 
(B) Whether company can accept the total supply on request of 
women group? (3 Marks) 
 (b) (i) With reference to provisions of the Negotiable Instruments Act, 
1881, tell the instances where a person shall be deemed to have 
committed an offence for dishonour of cheque and what are the 
conditions to be complied with for not constituting such an offence? 
 (4 Marks) 
  (ii)  (A)  All cheques are bills while all bills are not cheques. Explain the 
additional features of a cheque which differentiate a cheque 
from bill as per the Negotiable Instruments Act, 1881. 
(B)  Ambiguous instrument (3 Marks) 
126