Business Laws Model Test Paper - 6 (Answers) | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


ANSWERS OF MODEL TEST PAPER 6 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS 
ANSWERS 
1. (a) (i) An invitation to offer is different from offer. Quotations, menu
cards, price tags, advertisements in newspaper for sale are not offer. 
These are merely invitations to public to make an offer.  An invitation 
to offer is an act precedent to making an offer. Acceptance of an 
invitation to an offer does not result in the contract and only an offer 
emerges in the process of negotiation. 
In the instant case, Ashok reaches to super market and selects a 
Air Conditioner with a discounted price tag of ` 40,000 but cashier 
denied to sell at discounted price by saying that discount is closed 
from today and request to make full payment. But Ashok insists to 
purchase at discounted price. 
On the basis of above provisions and facts, the price tag with Air 
Conditioner was not offer. It is merely an invitation to offer. Hence, 
it is the Ashok who is making the offer not the super market. 
Cashier has right to reject the Ashok’s offer. Therefore, Ashok 
cannot enforce cashier to sell at discounted price.  
(ii) Agent's authority in an emergency (Section 189 of the Indian
Contract Act, 1872): An agent has authority, in an emergency, to
do all such acts for the purpose of protecting his principal from
loss as would be done by a person of ordinary prudence, in his
own case, under similar circumstances.
In the instant case, Rahul, the agent, was handling perishable
goods like ‘tomatoes’ and can decide the time, date and place of
sale, not necessarily as per instructions of the Aswin, the
principal, with the intention of protecting Aswin from losses.
Here, Rahul acts in an emergency as a man of ordinary prudence,
so Aswin will not succeed against him for recovering the loss.
(b) (i)  Doctrine of Indoor Management:  The Doctrine of Indoor
Management is the exception to the Doctrine of Constructive Notice. 
The Doctrine of Constructive Notice does not mean that outsiders 
are deemed to have notice of the internal affairs of the company. For 
instance, if an act is authorised by the Articles or Memorandum, an 
outsider is entitled to assume that all the detailed formalities for 
doing that act have been observed.  
The doctrine of Indoor Management is important to persons 
dealing with a company through its directors or other persons. 
699
Page 2


ANSWERS OF MODEL TEST PAPER 6 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS 
ANSWERS 
1. (a) (i) An invitation to offer is different from offer. Quotations, menu
cards, price tags, advertisements in newspaper for sale are not offer. 
These are merely invitations to public to make an offer.  An invitation 
to offer is an act precedent to making an offer. Acceptance of an 
invitation to an offer does not result in the contract and only an offer 
emerges in the process of negotiation. 
In the instant case, Ashok reaches to super market and selects a 
Air Conditioner with a discounted price tag of ` 40,000 but cashier 
denied to sell at discounted price by saying that discount is closed 
from today and request to make full payment. But Ashok insists to 
purchase at discounted price. 
On the basis of above provisions and facts, the price tag with Air 
Conditioner was not offer. It is merely an invitation to offer. Hence, 
it is the Ashok who is making the offer not the super market. 
Cashier has right to reject the Ashok’s offer. Therefore, Ashok 
cannot enforce cashier to sell at discounted price.  
(ii) Agent's authority in an emergency (Section 189 of the Indian
Contract Act, 1872): An agent has authority, in an emergency, to
do all such acts for the purpose of protecting his principal from
loss as would be done by a person of ordinary prudence, in his
own case, under similar circumstances.
In the instant case, Rahul, the agent, was handling perishable
goods like ‘tomatoes’ and can decide the time, date and place of
sale, not necessarily as per instructions of the Aswin, the
principal, with the intention of protecting Aswin from losses.
Here, Rahul acts in an emergency as a man of ordinary prudence,
so Aswin will not succeed against him for recovering the loss.
(b) (i)  Doctrine of Indoor Management:  The Doctrine of Indoor
Management is the exception to the Doctrine of Constructive Notice. 
The Doctrine of Constructive Notice does not mean that outsiders 
are deemed to have notice of the internal affairs of the company. For 
instance, if an act is authorised by the Articles or Memorandum, an 
outsider is entitled to assume that all the detailed formalities for 
doing that act have been observed.  
The doctrine of Indoor Management is important to persons 
dealing with a company through its directors or other persons. 
699
They are entitled to assume that the acts of the directors or other 
officers of the company are validly performed, if they are within 
the scope of their apparent authority. So long as an act is valid 
under the Articles, if done in a particular manner, an outsider 
dealing with the company is entitled to assume that it has been 
done in the manner required.  
In the given question, Mr. Mohan has made payment to 
Mr. Ramesh and he (Mr. Ramesh) gave to receipt of the same to 
Mr. Mohan. Thus, it will be rightful on part of Mr. Mohan to 
assume that Mr. Ramesh was also authorised to receive money 
on behalf of the company. Hence, Mr. Mohan will be free from 
liability for payment of goods purchased from Sunflower Limited, 
as he has paid amount due to an employee of the company.  
(ii) Foreign Company [Section 2(42) of the Companies Act, 2013]:
It means any company or body corporate incorporated outside
India which—
(i) has a place of business in India whether by itself or through
an agent, physically or through electronic mode; and
(ii) conducts any business activity in India in any other manner.
Since Mike Limited is a company incorporated in India, hence, it 
cannot be called as a foreign company. Even though, Liaison 
Office was officially established at Singapore, it would not be 
called as a foreign company as per the provisions of the 
Companies Act, 2013.  
(c) A minor cannot be bound by a contract because a minor’s contract is
void and not merely voidable. Therefore, a minor cannot become a
partner in a firm because partnership is founded on a contract. Though
a minor cannot be a partner in a firm, he can nonetheless be admitted
to the benefits of partnership under Section 30 of the Indian
Partnership Act, 1932. In other words, he can be validly given a share
in the partnership profits. When this has been done and it can be done
with the consent of all the partners then the rights of such a partner will
be governed under Section 30 as follows:
Rights:
(i) A minor partner has a right to his agreed share of the profits and
of the firm.
(ii) He can have access to, inspect and copy the accounts of the firm.
(iii) He can sue the partners for accounts or for payment of his share
but only when severing his connection with the firm, and not
otherwise.
(iv) On attaining majority he may within 6 months elect to become a
partner or not to become a partner. If he elects to become a
partner, then he is entitled to the share to which he was entitled
700
Page 3


ANSWERS OF MODEL TEST PAPER 6 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS 
ANSWERS 
1. (a) (i) An invitation to offer is different from offer. Quotations, menu
cards, price tags, advertisements in newspaper for sale are not offer. 
These are merely invitations to public to make an offer.  An invitation 
to offer is an act precedent to making an offer. Acceptance of an 
invitation to an offer does not result in the contract and only an offer 
emerges in the process of negotiation. 
In the instant case, Ashok reaches to super market and selects a 
Air Conditioner with a discounted price tag of ` 40,000 but cashier 
denied to sell at discounted price by saying that discount is closed 
from today and request to make full payment. But Ashok insists to 
purchase at discounted price. 
On the basis of above provisions and facts, the price tag with Air 
Conditioner was not offer. It is merely an invitation to offer. Hence, 
it is the Ashok who is making the offer not the super market. 
Cashier has right to reject the Ashok’s offer. Therefore, Ashok 
cannot enforce cashier to sell at discounted price.  
(ii) Agent's authority in an emergency (Section 189 of the Indian
Contract Act, 1872): An agent has authority, in an emergency, to
do all such acts for the purpose of protecting his principal from
loss as would be done by a person of ordinary prudence, in his
own case, under similar circumstances.
In the instant case, Rahul, the agent, was handling perishable
goods like ‘tomatoes’ and can decide the time, date and place of
sale, not necessarily as per instructions of the Aswin, the
principal, with the intention of protecting Aswin from losses.
Here, Rahul acts in an emergency as a man of ordinary prudence,
so Aswin will not succeed against him for recovering the loss.
(b) (i)  Doctrine of Indoor Management:  The Doctrine of Indoor
Management is the exception to the Doctrine of Constructive Notice. 
The Doctrine of Constructive Notice does not mean that outsiders 
are deemed to have notice of the internal affairs of the company. For 
instance, if an act is authorised by the Articles or Memorandum, an 
outsider is entitled to assume that all the detailed formalities for 
doing that act have been observed.  
The doctrine of Indoor Management is important to persons 
dealing with a company through its directors or other persons. 
699
They are entitled to assume that the acts of the directors or other 
officers of the company are validly performed, if they are within 
the scope of their apparent authority. So long as an act is valid 
under the Articles, if done in a particular manner, an outsider 
dealing with the company is entitled to assume that it has been 
done in the manner required.  
In the given question, Mr. Mohan has made payment to 
Mr. Ramesh and he (Mr. Ramesh) gave to receipt of the same to 
Mr. Mohan. Thus, it will be rightful on part of Mr. Mohan to 
assume that Mr. Ramesh was also authorised to receive money 
on behalf of the company. Hence, Mr. Mohan will be free from 
liability for payment of goods purchased from Sunflower Limited, 
as he has paid amount due to an employee of the company.  
(ii) Foreign Company [Section 2(42) of the Companies Act, 2013]:
It means any company or body corporate incorporated outside
India which—
(i) has a place of business in India whether by itself or through
an agent, physically or through electronic mode; and
(ii) conducts any business activity in India in any other manner.
Since Mike Limited is a company incorporated in India, hence, it 
cannot be called as a foreign company. Even though, Liaison 
Office was officially established at Singapore, it would not be 
called as a foreign company as per the provisions of the 
Companies Act, 2013.  
(c) A minor cannot be bound by a contract because a minor’s contract is
void and not merely voidable. Therefore, a minor cannot become a
partner in a firm because partnership is founded on a contract. Though
a minor cannot be a partner in a firm, he can nonetheless be admitted
to the benefits of partnership under Section 30 of the Indian
Partnership Act, 1932. In other words, he can be validly given a share
in the partnership profits. When this has been done and it can be done
with the consent of all the partners then the rights of such a partner will
be governed under Section 30 as follows:
Rights:
(i) A minor partner has a right to his agreed share of the profits and
of the firm.
(ii) He can have access to, inspect and copy the accounts of the firm.
(iii) He can sue the partners for accounts or for payment of his share
but only when severing his connection with the firm, and not
otherwise.
(iv) On attaining majority he may within 6 months elect to become a
partner or not to become a partner. If he elects to become a
partner, then he is entitled to the share to which he was entitled
700
as a minor. If he does not, then his share is not liable for any acts 
of the firm after the date of the public notice served to that effect. 
2. (a) (i) According to Section 64 of the Sale of Goods Act, 1930, the sale is
complete when the auctioneer announces its completion by the fall 
of hammer or in any other customary manner.  
In the given question, the auction sale is completed on 7
th
 March, 
2024. 
(ii) As per the provisions of Sub-Section (2) of Section 17 of the Sale
of Goods Act, 1930, in a contract of sale by sample, there is an
implied condition that:
(a) the bulk shall correspond with the sample in quality;
(b) the buyer shall have a reasonable opportunity of comparing
the bulk with the sample.
In this case, M received the goods by sample from L but since the 
goods were not according to the sample, M can reject the goods 
and can sue L.  
With regard to K and L, L can recover damages from K and K can 
recover damages from J. But, for both K and L, it will not be 
treated as a breach of implied condition as to sample as they 
have accepted and sold the goods according to Section 13(2) of 
the Sale of Goods Act, 1930.   
(b) The House of Lords in Salomon Vs. Salomon & Co. Ltd. laid down that
a company is a person distinct and separate from its members, and
therefore, has an independent separate legal existence from its
members who have constituted the company. But under certain
circumstances the separate entity of the company may be ignored by
the courts. When that happens, the courts ignore the corporate entity of
the company and look behind the corporate facade and hold the
persons in control of the management of its affairs liable for the acts of
the company. Where a company is incorporated and formed by certain
persons only for the purpose of evading taxes, the courts have
discretion to disregard the corporate entity and tax the income in the
hands of the appropriate assessee.
1. The problem asked in the question is based upon the aforesaid
facts. The three companies were formed by the assessee purely
and simply as a means of avoiding tax and the companies were
nothing more than the facade of the assessee himself. Therefore,
the whole idea of Mr. Rajeev was simply to split his income into
three parts with a view to evade tax. No other business was done
by the company.
2. The legal personality of the three private companies may be
disregarded because the companies were formed only to avoid
tax liability. It carried on no other business, but was created
simply as a legal entity to ostensibly receive the dividend and
701
Page 4


ANSWERS OF MODEL TEST PAPER 6 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS 
ANSWERS 
1. (a) (i) An invitation to offer is different from offer. Quotations, menu
cards, price tags, advertisements in newspaper for sale are not offer. 
These are merely invitations to public to make an offer.  An invitation 
to offer is an act precedent to making an offer. Acceptance of an 
invitation to an offer does not result in the contract and only an offer 
emerges in the process of negotiation. 
In the instant case, Ashok reaches to super market and selects a 
Air Conditioner with a discounted price tag of ` 40,000 but cashier 
denied to sell at discounted price by saying that discount is closed 
from today and request to make full payment. But Ashok insists to 
purchase at discounted price. 
On the basis of above provisions and facts, the price tag with Air 
Conditioner was not offer. It is merely an invitation to offer. Hence, 
it is the Ashok who is making the offer not the super market. 
Cashier has right to reject the Ashok’s offer. Therefore, Ashok 
cannot enforce cashier to sell at discounted price.  
(ii) Agent's authority in an emergency (Section 189 of the Indian
Contract Act, 1872): An agent has authority, in an emergency, to
do all such acts for the purpose of protecting his principal from
loss as would be done by a person of ordinary prudence, in his
own case, under similar circumstances.
In the instant case, Rahul, the agent, was handling perishable
goods like ‘tomatoes’ and can decide the time, date and place of
sale, not necessarily as per instructions of the Aswin, the
principal, with the intention of protecting Aswin from losses.
Here, Rahul acts in an emergency as a man of ordinary prudence,
so Aswin will not succeed against him for recovering the loss.
(b) (i)  Doctrine of Indoor Management:  The Doctrine of Indoor
Management is the exception to the Doctrine of Constructive Notice. 
The Doctrine of Constructive Notice does not mean that outsiders 
are deemed to have notice of the internal affairs of the company. For 
instance, if an act is authorised by the Articles or Memorandum, an 
outsider is entitled to assume that all the detailed formalities for 
doing that act have been observed.  
The doctrine of Indoor Management is important to persons 
dealing with a company through its directors or other persons. 
699
They are entitled to assume that the acts of the directors or other 
officers of the company are validly performed, if they are within 
the scope of their apparent authority. So long as an act is valid 
under the Articles, if done in a particular manner, an outsider 
dealing with the company is entitled to assume that it has been 
done in the manner required.  
In the given question, Mr. Mohan has made payment to 
Mr. Ramesh and he (Mr. Ramesh) gave to receipt of the same to 
Mr. Mohan. Thus, it will be rightful on part of Mr. Mohan to 
assume that Mr. Ramesh was also authorised to receive money 
on behalf of the company. Hence, Mr. Mohan will be free from 
liability for payment of goods purchased from Sunflower Limited, 
as he has paid amount due to an employee of the company.  
(ii) Foreign Company [Section 2(42) of the Companies Act, 2013]:
It means any company or body corporate incorporated outside
India which—
(i) has a place of business in India whether by itself or through
an agent, physically or through electronic mode; and
(ii) conducts any business activity in India in any other manner.
Since Mike Limited is a company incorporated in India, hence, it 
cannot be called as a foreign company. Even though, Liaison 
Office was officially established at Singapore, it would not be 
called as a foreign company as per the provisions of the 
Companies Act, 2013.  
(c) A minor cannot be bound by a contract because a minor’s contract is
void and not merely voidable. Therefore, a minor cannot become a
partner in a firm because partnership is founded on a contract. Though
a minor cannot be a partner in a firm, he can nonetheless be admitted
to the benefits of partnership under Section 30 of the Indian
Partnership Act, 1932. In other words, he can be validly given a share
in the partnership profits. When this has been done and it can be done
with the consent of all the partners then the rights of such a partner will
be governed under Section 30 as follows:
Rights:
(i) A minor partner has a right to his agreed share of the profits and
of the firm.
(ii) He can have access to, inspect and copy the accounts of the firm.
(iii) He can sue the partners for accounts or for payment of his share
but only when severing his connection with the firm, and not
otherwise.
(iv) On attaining majority he may within 6 months elect to become a
partner or not to become a partner. If he elects to become a
partner, then he is entitled to the share to which he was entitled
700
as a minor. If he does not, then his share is not liable for any acts 
of the firm after the date of the public notice served to that effect. 
2. (a) (i) According to Section 64 of the Sale of Goods Act, 1930, the sale is
complete when the auctioneer announces its completion by the fall 
of hammer or in any other customary manner.  
In the given question, the auction sale is completed on 7
th
 March, 
2024. 
(ii) As per the provisions of Sub-Section (2) of Section 17 of the Sale
of Goods Act, 1930, in a contract of sale by sample, there is an
implied condition that:
(a) the bulk shall correspond with the sample in quality;
(b) the buyer shall have a reasonable opportunity of comparing
the bulk with the sample.
In this case, M received the goods by sample from L but since the 
goods were not according to the sample, M can reject the goods 
and can sue L.  
With regard to K and L, L can recover damages from K and K can 
recover damages from J. But, for both K and L, it will not be 
treated as a breach of implied condition as to sample as they 
have accepted and sold the goods according to Section 13(2) of 
the Sale of Goods Act, 1930.   
(b) The House of Lords in Salomon Vs. Salomon & Co. Ltd. laid down that
a company is a person distinct and separate from its members, and
therefore, has an independent separate legal existence from its
members who have constituted the company. But under certain
circumstances the separate entity of the company may be ignored by
the courts. When that happens, the courts ignore the corporate entity of
the company and look behind the corporate facade and hold the
persons in control of the management of its affairs liable for the acts of
the company. Where a company is incorporated and formed by certain
persons only for the purpose of evading taxes, the courts have
discretion to disregard the corporate entity and tax the income in the
hands of the appropriate assessee.
1. The problem asked in the question is based upon the aforesaid
facts. The three companies were formed by the assessee purely
and simply as a means of avoiding tax and the companies were
nothing more than the facade of the assessee himself. Therefore,
the whole idea of Mr. Rajeev was simply to split his income into
three parts with a view to evade tax. No other business was done
by the company.
2. The legal personality of the three private companies may be
disregarded because the companies were formed only to avoid
tax liability. It carried on no other business, but was created
simply as a legal entity to ostensibly receive the dividend and
701
interest and to hand them over to the assessee as pretended 
loans. The same was upheld in Re Sir Dinshaw Maneckjee Petit 
and Juggilal vs. Commissioner of Income Tax. 
(c) 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.  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.
3. (a) As per Section 4 of the Indian Partnership Act, 1932, "Partnership" is the
relation between persons who have agreed to share the profits of a 
business carried on by all or any of them acting for all.  
(i) Yes, it is a case of partnership.
Reason: The sharing of profits is an essential feature of
partnership.  There can be no partnership where only one of the
partners is entitled to the whole of the profits of the business.
Partners must agree to share the profits in any manner they
choose.  But an agreement to share losses is not an essential
requirement. It is open to one or more partners to agree to share
all the losses.
(ii) No, it is not a case of partnership
Reason: Sharing of profit, which is a prima facie evidence, exists
but mutual agency among X and Y, which is an essential element,
does not exist here. Since there is no partnership, the third party
i.e. paper dealer cannot make Y liable for the paper supplied by
him to X.
(iii) No, it is not a case of partnership
Reason: Persons who share amongst themselves the rent
derived from a piece of land are not partners, rather they are co-
owners. Because, neither there is existence of business, nor
mutual agency is there.
702
Page 5


ANSWERS OF MODEL TEST PAPER 6 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS 
ANSWERS 
1. (a) (i) An invitation to offer is different from offer. Quotations, menu
cards, price tags, advertisements in newspaper for sale are not offer. 
These are merely invitations to public to make an offer.  An invitation 
to offer is an act precedent to making an offer. Acceptance of an 
invitation to an offer does not result in the contract and only an offer 
emerges in the process of negotiation. 
In the instant case, Ashok reaches to super market and selects a 
Air Conditioner with a discounted price tag of ` 40,000 but cashier 
denied to sell at discounted price by saying that discount is closed 
from today and request to make full payment. But Ashok insists to 
purchase at discounted price. 
On the basis of above provisions and facts, the price tag with Air 
Conditioner was not offer. It is merely an invitation to offer. Hence, 
it is the Ashok who is making the offer not the super market. 
Cashier has right to reject the Ashok’s offer. Therefore, Ashok 
cannot enforce cashier to sell at discounted price.  
(ii) Agent's authority in an emergency (Section 189 of the Indian
Contract Act, 1872): An agent has authority, in an emergency, to
do all such acts for the purpose of protecting his principal from
loss as would be done by a person of ordinary prudence, in his
own case, under similar circumstances.
In the instant case, Rahul, the agent, was handling perishable
goods like ‘tomatoes’ and can decide the time, date and place of
sale, not necessarily as per instructions of the Aswin, the
principal, with the intention of protecting Aswin from losses.
Here, Rahul acts in an emergency as a man of ordinary prudence,
so Aswin will not succeed against him for recovering the loss.
(b) (i)  Doctrine of Indoor Management:  The Doctrine of Indoor
Management is the exception to the Doctrine of Constructive Notice. 
The Doctrine of Constructive Notice does not mean that outsiders 
are deemed to have notice of the internal affairs of the company. For 
instance, if an act is authorised by the Articles or Memorandum, an 
outsider is entitled to assume that all the detailed formalities for 
doing that act have been observed.  
The doctrine of Indoor Management is important to persons 
dealing with a company through its directors or other persons. 
699
They are entitled to assume that the acts of the directors or other 
officers of the company are validly performed, if they are within 
the scope of their apparent authority. So long as an act is valid 
under the Articles, if done in a particular manner, an outsider 
dealing with the company is entitled to assume that it has been 
done in the manner required.  
In the given question, Mr. Mohan has made payment to 
Mr. Ramesh and he (Mr. Ramesh) gave to receipt of the same to 
Mr. Mohan. Thus, it will be rightful on part of Mr. Mohan to 
assume that Mr. Ramesh was also authorised to receive money 
on behalf of the company. Hence, Mr. Mohan will be free from 
liability for payment of goods purchased from Sunflower Limited, 
as he has paid amount due to an employee of the company.  
(ii) Foreign Company [Section 2(42) of the Companies Act, 2013]:
It means any company or body corporate incorporated outside
India which—
(i) has a place of business in India whether by itself or through
an agent, physically or through electronic mode; and
(ii) conducts any business activity in India in any other manner.
Since Mike Limited is a company incorporated in India, hence, it 
cannot be called as a foreign company. Even though, Liaison 
Office was officially established at Singapore, it would not be 
called as a foreign company as per the provisions of the 
Companies Act, 2013.  
(c) A minor cannot be bound by a contract because a minor’s contract is
void and not merely voidable. Therefore, a minor cannot become a
partner in a firm because partnership is founded on a contract. Though
a minor cannot be a partner in a firm, he can nonetheless be admitted
to the benefits of partnership under Section 30 of the Indian
Partnership Act, 1932. In other words, he can be validly given a share
in the partnership profits. When this has been done and it can be done
with the consent of all the partners then the rights of such a partner will
be governed under Section 30 as follows:
Rights:
(i) A minor partner has a right to his agreed share of the profits and
of the firm.
(ii) He can have access to, inspect and copy the accounts of the firm.
(iii) He can sue the partners for accounts or for payment of his share
but only when severing his connection with the firm, and not
otherwise.
(iv) On attaining majority he may within 6 months elect to become a
partner or not to become a partner. If he elects to become a
partner, then he is entitled to the share to which he was entitled
700
as a minor. If he does not, then his share is not liable for any acts 
of the firm after the date of the public notice served to that effect. 
2. (a) (i) According to Section 64 of the Sale of Goods Act, 1930, the sale is
complete when the auctioneer announces its completion by the fall 
of hammer or in any other customary manner.  
In the given question, the auction sale is completed on 7
th
 March, 
2024. 
(ii) As per the provisions of Sub-Section (2) of Section 17 of the Sale
of Goods Act, 1930, in a contract of sale by sample, there is an
implied condition that:
(a) the bulk shall correspond with the sample in quality;
(b) the buyer shall have a reasonable opportunity of comparing
the bulk with the sample.
In this case, M received the goods by sample from L but since the 
goods were not according to the sample, M can reject the goods 
and can sue L.  
With regard to K and L, L can recover damages from K and K can 
recover damages from J. But, for both K and L, it will not be 
treated as a breach of implied condition as to sample as they 
have accepted and sold the goods according to Section 13(2) of 
the Sale of Goods Act, 1930.   
(b) The House of Lords in Salomon Vs. Salomon & Co. Ltd. laid down that
a company is a person distinct and separate from its members, and
therefore, has an independent separate legal existence from its
members who have constituted the company. But under certain
circumstances the separate entity of the company may be ignored by
the courts. When that happens, the courts ignore the corporate entity of
the company and look behind the corporate facade and hold the
persons in control of the management of its affairs liable for the acts of
the company. Where a company is incorporated and formed by certain
persons only for the purpose of evading taxes, the courts have
discretion to disregard the corporate entity and tax the income in the
hands of the appropriate assessee.
1. The problem asked in the question is based upon the aforesaid
facts. The three companies were formed by the assessee purely
and simply as a means of avoiding tax and the companies were
nothing more than the facade of the assessee himself. Therefore,
the whole idea of Mr. Rajeev was simply to split his income into
three parts with a view to evade tax. No other business was done
by the company.
2. The legal personality of the three private companies may be
disregarded because the companies were formed only to avoid
tax liability. It carried on no other business, but was created
simply as a legal entity to ostensibly receive the dividend and
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interest and to hand them over to the assessee as pretended 
loans. The same was upheld in Re Sir Dinshaw Maneckjee Petit 
and Juggilal vs. Commissioner of Income Tax. 
(c) 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.  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.
3. (a) As per Section 4 of the Indian Partnership Act, 1932, "Partnership" is the
relation between persons who have agreed to share the profits of a 
business carried on by all or any of them acting for all.  
(i) Yes, it is a case of partnership.
Reason: The sharing of profits is an essential feature of
partnership.  There can be no partnership where only one of the
partners is entitled to the whole of the profits of the business.
Partners must agree to share the profits in any manner they
choose.  But an agreement to share losses is not an essential
requirement. It is open to one or more partners to agree to share
all the losses.
(ii) No, it is not a case of partnership
Reason: Sharing of profit, which is a prima facie evidence, exists
but mutual agency among X and Y, which is an essential element,
does not exist here. Since there is no partnership, the third party
i.e. paper dealer cannot make Y liable for the paper supplied by
him to X.
(iii) No, it is not a case of partnership
Reason: Persons who share amongst themselves the rent
derived from a piece of land are not partners, rather they are co-
owners. Because, neither there is existence of business, nor
mutual agency is there.
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(b) According to Section 2(45) of the Companies Act, 2013,
Government Company means any company in which not less than
51% of the paid-up share capital is held by-
(i) the Central Government, or
(ii) by any State Government or Governments, or
(iii) partly by the Central Government and partly by one or more State
Governments,
and the section includes a company which is a subsidiary company of 
such a Government company.  
As per Section 2(87) of the Companies Act, 2013, “subsidiary 
company” in relation to any other company (that is to say the holding 
company), means a company in which the holding company—  
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total voting power
either at its own or together with one or more of its subsidiary
companies.
In the instant case, the State Government of X, a state in the country is 
holding 48 Lakh shares in Y Limited which is below 51% of the paid up 
share capital of Y Limited i.e. 48.45 Lakh shares (51% of 95 Lakh 
shares). Hence Y Limited is not a Government Company.  
Further, Y Limited directly holds 2,50,600 shares in Z Private Limited, 
which is more than one-half of the total shares of Z Limited i.e. 
2,50,000 shares (50% of 5 Lakh shares). Thus, the company controls 
more than one-half of the total voting power of Z Limited. Hence Z 
Private Limited is a subsidiary of Y Limited.  
Therefore, we can conclude that Z Private Limited is a subsidiary of Y 
Limited but not a Government Company since Y Limited is not a 
Government Company.  
(c) An anticipatory breach of contract is a breach of contract occurring
before the time fixed for performance has arrived. When the promisor
refuses altogether to perform his promise and signifies his
unwillingness even before the time for performance has arrived, it is
called Anticipatory Breach.
Effect of Anticipatory Breach: The promisee is excused from
performance or from further performance. Further he gets an option:
(1) To either treat the contract as rescinded and sue the other party
for damages for breach of contract immediately without waiting
until the due date of performance; or
(2) He may elect not to rescind but to treat the contract as still
operative, and wait for the time of performance and then hold the
other party responsible for the consequences of non-performance.
But in this case, he will keep the contract alive for the benefit of
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