Business Laws Model Test Paper - 7 (Answers) | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


ANSWER S OF MODEL TEST PAPER 7 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
ANSWERS 
1. (a) As per section 126 of the Indian Contract Act, 1872, the contract of
guarantee is defined as a contract to perform the promise or discharge the 
liability of a third person in case of his default.  
In this case, Sooraj has given a guarantee for Pankaj 's payment 
obligation towards Rahul. When Pankaj defaulted after making four 
monthly instalments and became insolvent, Sooraj 's liability as a 
guarantor will come into existence.  
According to Section 128 of the Act, the liability of the surety is co-
extensive with that of the principal debtor, unless it is otherwise provided 
by the contract. 
Since Pankaj failed to pay the remaining instalments due to insolvency, 
Sooraj, as the guarantor, is liable to pay the balance price of the water 
purifier to Rahul. In the given situation, Sooraj will have to pay the 
balance amount of ` 30,000 to Rahul. [54,000-(4x6,000)] 
In the second situation, Rahul sold the water purifier misrepresenting 
it as having a copper filter, while it actually has a normal filter; this 
changes the situation significantly. 
According to Section 142 of the Act, any guarantee which has been 
obtained by means of misrepresentation made by the creditor, or with 
his knowledge and assent, concerning a material part of the transaction, 
is invalid. Here, guarantee is obtained by means of misrepresentation 
made by the creditor (Rahul), and therefore the guarantee is invalid.  
Furthermore, under Section 143, any guarantee which the creditor has 
obtained by means of keeping silence as to material circumstances, is 
invalid. 
Here Rahul misrepresented the filter type and both Pankaj and Sooraj 
were unaware of this fact. The creditor (Rahul) has obtained the 
guarantee by remaining silent as to material circumstances. Therefore, 
the guarantee obtained from Sooraj will be considered to be invalid. 
Consequently, Sooraj cannot be held liable to pay the balance price of 
the water purifier to Rahul. 
711
Page 2


ANSWER S OF MODEL TEST PAPER 7 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
ANSWERS 
1. (a) As per section 126 of the Indian Contract Act, 1872, the contract of
guarantee is defined as a contract to perform the promise or discharge the 
liability of a third person in case of his default.  
In this case, Sooraj has given a guarantee for Pankaj 's payment 
obligation towards Rahul. When Pankaj defaulted after making four 
monthly instalments and became insolvent, Sooraj 's liability as a 
guarantor will come into existence.  
According to Section 128 of the Act, the liability of the surety is co-
extensive with that of the principal debtor, unless it is otherwise provided 
by the contract. 
Since Pankaj failed to pay the remaining instalments due to insolvency, 
Sooraj, as the guarantor, is liable to pay the balance price of the water 
purifier to Rahul. In the given situation, Sooraj will have to pay the 
balance amount of ` 30,000 to Rahul. [54,000-(4x6,000)] 
In the second situation, Rahul sold the water purifier misrepresenting 
it as having a copper filter, while it actually has a normal filter; this 
changes the situation significantly. 
According to Section 142 of the Act, any guarantee which has been 
obtained by means of misrepresentation made by the creditor, or with 
his knowledge and assent, concerning a material part of the transaction, 
is invalid. Here, guarantee is obtained by means of misrepresentation 
made by the creditor (Rahul), and therefore the guarantee is invalid.  
Furthermore, under Section 143, any guarantee which the creditor has 
obtained by means of keeping silence as to material circumstances, is 
invalid. 
Here Rahul misrepresented the filter type and both Pankaj and Sooraj 
were unaware of this fact. The creditor (Rahul) has obtained the 
guarantee by remaining silent as to material circumstances. Therefore, 
the guarantee obtained from Sooraj will be considered to be invalid. 
Consequently, Sooraj cannot be held liable to pay the balance price of 
the water purifier to Rahul. 
711
(b) As per Section 2(46) of the Companies Act, 2013, holding company in
relation to one or more other companies, means a company of which
such companies are subsidiary companies.
Section 2(87) defines “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, as on 31.03.2024, DEF Limited had a paid-up capital 
of ` 1 lakh (10,000 equity shares of ` 10 each). In June 2024, DEF 
Limited issued an additional 10,000 equity shares, which was fully 
subscribed. Post-issue, the total paid-up capital of DEF Limited is ` 2 
lakhs (20,000 equity shares of `10 each).  
Of these, 5,000 shares were issued to MNO Private Limited. Since MNO 
Private Limited holds only 25% of the shares in DEF Limited, it does not 
have control of more than one-half of the total voting power of DEF 
Limited. Hence, MNO Private Limited cannot be considered as a 
subsidiary company of DEF Limited in terms of the second criteria stated 
above, that of controlling of voting power. 
MNO Private Limited is the holding company of JKL Private Limited, 
having control over the composition of its Board of Directors. But since 
MNO Private Limited cannot be termed as a subsidiary company of DEF 
Limited, JKL Private Limited cannot claim the status of being a subsidiary 
of DEF Limited in terms of the first criteria, that of controlling the 
composition of directors. 
As per section 2(6) of the Act, Associate Company in relation to another 
company, means a company in which that other company has a 
significant influence, but which is not a subsidiary company of the 
company having such influence and includes a joint venture company.  
The expression “significant influence” means control of at least twenty 
per cent of total voting power, or control of or participation in business 
decisions under an agreement. 
In terms of the above provision, the relationship between DEF Limited 
and MNO Private Limited can be of an Associate Company.  
Since MNO Private Limited holds more than 20 percent of voting power 
in DEF Limited, it can be considered as an Associate Company of DEF 
Limited.  
(c) (i) If a partner is otherwise expelled, the expulsion is null and void.
According to Section 33 of the Indian Partnership Act, 1932 
(i) the power of expulsion must have existed in a contract between
the partners;
712
Page 3


ANSWER S OF MODEL TEST PAPER 7 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
ANSWERS 
1. (a) As per section 126 of the Indian Contract Act, 1872, the contract of
guarantee is defined as a contract to perform the promise or discharge the 
liability of a third person in case of his default.  
In this case, Sooraj has given a guarantee for Pankaj 's payment 
obligation towards Rahul. When Pankaj defaulted after making four 
monthly instalments and became insolvent, Sooraj 's liability as a 
guarantor will come into existence.  
According to Section 128 of the Act, the liability of the surety is co-
extensive with that of the principal debtor, unless it is otherwise provided 
by the contract. 
Since Pankaj failed to pay the remaining instalments due to insolvency, 
Sooraj, as the guarantor, is liable to pay the balance price of the water 
purifier to Rahul. In the given situation, Sooraj will have to pay the 
balance amount of ` 30,000 to Rahul. [54,000-(4x6,000)] 
In the second situation, Rahul sold the water purifier misrepresenting 
it as having a copper filter, while it actually has a normal filter; this 
changes the situation significantly. 
According to Section 142 of the Act, any guarantee which has been 
obtained by means of misrepresentation made by the creditor, or with 
his knowledge and assent, concerning a material part of the transaction, 
is invalid. Here, guarantee is obtained by means of misrepresentation 
made by the creditor (Rahul), and therefore the guarantee is invalid.  
Furthermore, under Section 143, any guarantee which the creditor has 
obtained by means of keeping silence as to material circumstances, is 
invalid. 
Here Rahul misrepresented the filter type and both Pankaj and Sooraj 
were unaware of this fact. The creditor (Rahul) has obtained the 
guarantee by remaining silent as to material circumstances. Therefore, 
the guarantee obtained from Sooraj will be considered to be invalid. 
Consequently, Sooraj cannot be held liable to pay the balance price of 
the water purifier to Rahul. 
711
(b) As per Section 2(46) of the Companies Act, 2013, holding company in
relation to one or more other companies, means a company of which
such companies are subsidiary companies.
Section 2(87) defines “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, as on 31.03.2024, DEF Limited had a paid-up capital 
of ` 1 lakh (10,000 equity shares of ` 10 each). In June 2024, DEF 
Limited issued an additional 10,000 equity shares, which was fully 
subscribed. Post-issue, the total paid-up capital of DEF Limited is ` 2 
lakhs (20,000 equity shares of `10 each).  
Of these, 5,000 shares were issued to MNO Private Limited. Since MNO 
Private Limited holds only 25% of the shares in DEF Limited, it does not 
have control of more than one-half of the total voting power of DEF 
Limited. Hence, MNO Private Limited cannot be considered as a 
subsidiary company of DEF Limited in terms of the second criteria stated 
above, that of controlling of voting power. 
MNO Private Limited is the holding company of JKL Private Limited, 
having control over the composition of its Board of Directors. But since 
MNO Private Limited cannot be termed as a subsidiary company of DEF 
Limited, JKL Private Limited cannot claim the status of being a subsidiary 
of DEF Limited in terms of the first criteria, that of controlling the 
composition of directors. 
As per section 2(6) of the Act, Associate Company in relation to another 
company, means a company in which that other company has a 
significant influence, but which is not a subsidiary company of the 
company having such influence and includes a joint venture company.  
The expression “significant influence” means control of at least twenty 
per cent of total voting power, or control of or participation in business 
decisions under an agreement. 
In terms of the above provision, the relationship between DEF Limited 
and MNO Private Limited can be of an Associate Company.  
Since MNO Private Limited holds more than 20 percent of voting power 
in DEF Limited, it can be considered as an Associate Company of DEF 
Limited.  
(c) (i) If a partner is otherwise expelled, the expulsion is null and void.
According to Section 33 of the Indian Partnership Act, 1932 
(i) the power of expulsion must have existed in a contract between
the partners;
712
(ii) the power has been exercised by a majority of the partners; and
(iii) it has been exercised in good faith.
If all these conditions are not present, the expulsion is not deemed 
to be in bona fide interest of the business of the firm. 
The test of good faith as required under Section 33(1) includes 
three things:  
(i) The expulsion must be in the interest of the partnership.
(ii) The partner to be expelled is served with a notice.
(iii) He is given an opportunity of being heard.
Hence, it is correct to say that, if a partner is otherwise expelled, the 
expulsion is null and void.  
(ii) “The partner who is expelled will cease to be liable to the third
party for the act of the firm done after expulsion”
According to Section 32(3) of the Indian Partnership Act, 1932,
notwithstanding the expulsion a partner from a firm, he and the
partners continue to be liable as partners to third parties for any act
done by any of them which would have been an act of the firm if
done before the expulsion, until public notice is given of the
expulsion.
However, an expelled partner is not liable to any third party who
deals with the firm without knowing that he was a partner.
Hence, the statement given is partially correct.
2. (a) (i) As per the provisions of section 24 of the Sale of Goods Act, 1930,
when goods are delivered to the buyer on approval or “on sale or 
return" or other similar terms, the property therein passes to the buyer 
when he does something to the good which is equivalent to accepting 
the goods e.g. he pledges or sells the goods.   
Referring to the above provisions, we can analyse the situation 
given in the question.  
Since, Mohan, who had taken delivery of the camera on Sale or 
Return basis and delivers the same to Raj on sale for cash only or 
return, has attracted the third condition that he has done something 
to the good which is equivalent to accepting the goods e.g. he 
pledges or sells the goods. Therefore, the property therein 
(Camera) passes to Mohan.  
Now, Raj delivered it to Vikas on a sale or return without paying 
cash to Mohan.  
Since Raj did not pay cash and had not exercised the option to 
purchase, ownership of the camera did not pass to Raj. Therefore, 
Raj is not liable to pay the price of the camera either. 
713
Page 4


ANSWER S OF MODEL TEST PAPER 7 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
ANSWERS 
1. (a) As per section 126 of the Indian Contract Act, 1872, the contract of
guarantee is defined as a contract to perform the promise or discharge the 
liability of a third person in case of his default.  
In this case, Sooraj has given a guarantee for Pankaj 's payment 
obligation towards Rahul. When Pankaj defaulted after making four 
monthly instalments and became insolvent, Sooraj 's liability as a 
guarantor will come into existence.  
According to Section 128 of the Act, the liability of the surety is co-
extensive with that of the principal debtor, unless it is otherwise provided 
by the contract. 
Since Pankaj failed to pay the remaining instalments due to insolvency, 
Sooraj, as the guarantor, is liable to pay the balance price of the water 
purifier to Rahul. In the given situation, Sooraj will have to pay the 
balance amount of ` 30,000 to Rahul. [54,000-(4x6,000)] 
In the second situation, Rahul sold the water purifier misrepresenting 
it as having a copper filter, while it actually has a normal filter; this 
changes the situation significantly. 
According to Section 142 of the Act, any guarantee which has been 
obtained by means of misrepresentation made by the creditor, or with 
his knowledge and assent, concerning a material part of the transaction, 
is invalid. Here, guarantee is obtained by means of misrepresentation 
made by the creditor (Rahul), and therefore the guarantee is invalid.  
Furthermore, under Section 143, any guarantee which the creditor has 
obtained by means of keeping silence as to material circumstances, is 
invalid. 
Here Rahul misrepresented the filter type and both Pankaj and Sooraj 
were unaware of this fact. The creditor (Rahul) has obtained the 
guarantee by remaining silent as to material circumstances. Therefore, 
the guarantee obtained from Sooraj will be considered to be invalid. 
Consequently, Sooraj cannot be held liable to pay the balance price of 
the water purifier to Rahul. 
711
(b) As per Section 2(46) of the Companies Act, 2013, holding company in
relation to one or more other companies, means a company of which
such companies are subsidiary companies.
Section 2(87) defines “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, as on 31.03.2024, DEF Limited had a paid-up capital 
of ` 1 lakh (10,000 equity shares of ` 10 each). In June 2024, DEF 
Limited issued an additional 10,000 equity shares, which was fully 
subscribed. Post-issue, the total paid-up capital of DEF Limited is ` 2 
lakhs (20,000 equity shares of `10 each).  
Of these, 5,000 shares were issued to MNO Private Limited. Since MNO 
Private Limited holds only 25% of the shares in DEF Limited, it does not 
have control of more than one-half of the total voting power of DEF 
Limited. Hence, MNO Private Limited cannot be considered as a 
subsidiary company of DEF Limited in terms of the second criteria stated 
above, that of controlling of voting power. 
MNO Private Limited is the holding company of JKL Private Limited, 
having control over the composition of its Board of Directors. But since 
MNO Private Limited cannot be termed as a subsidiary company of DEF 
Limited, JKL Private Limited cannot claim the status of being a subsidiary 
of DEF Limited in terms of the first criteria, that of controlling the 
composition of directors. 
As per section 2(6) of the Act, Associate Company in relation to another 
company, means a company in which that other company has a 
significant influence, but which is not a subsidiary company of the 
company having such influence and includes a joint venture company.  
The expression “significant influence” means control of at least twenty 
per cent of total voting power, or control of or participation in business 
decisions under an agreement. 
In terms of the above provision, the relationship between DEF Limited 
and MNO Private Limited can be of an Associate Company.  
Since MNO Private Limited holds more than 20 percent of voting power 
in DEF Limited, it can be considered as an Associate Company of DEF 
Limited.  
(c) (i) If a partner is otherwise expelled, the expulsion is null and void.
According to Section 33 of the Indian Partnership Act, 1932 
(i) the power of expulsion must have existed in a contract between
the partners;
712
(ii) the power has been exercised by a majority of the partners; and
(iii) it has been exercised in good faith.
If all these conditions are not present, the expulsion is not deemed 
to be in bona fide interest of the business of the firm. 
The test of good faith as required under Section 33(1) includes 
three things:  
(i) The expulsion must be in the interest of the partnership.
(ii) The partner to be expelled is served with a notice.
(iii) He is given an opportunity of being heard.
Hence, it is correct to say that, if a partner is otherwise expelled, the 
expulsion is null and void.  
(ii) “The partner who is expelled will cease to be liable to the third
party for the act of the firm done after expulsion”
According to Section 32(3) of the Indian Partnership Act, 1932,
notwithstanding the expulsion a partner from a firm, he and the
partners continue to be liable as partners to third parties for any act
done by any of them which would have been an act of the firm if
done before the expulsion, until public notice is given of the
expulsion.
However, an expelled partner is not liable to any third party who
deals with the firm without knowing that he was a partner.
Hence, the statement given is partially correct.
2. (a) (i) As per the provisions of section 24 of the Sale of Goods Act, 1930,
when goods are delivered to the buyer on approval or “on sale or 
return" or other similar terms, the property therein passes to the buyer 
when he does something to the good which is equivalent to accepting 
the goods e.g. he pledges or sells the goods.   
Referring to the above provisions, we can analyse the situation 
given in the question.  
Since, Mohan, who had taken delivery of the camera on Sale or 
Return basis and delivers the same to Raj on sale for cash only or 
return, has attracted the third condition that he has done something 
to the good which is equivalent to accepting the goods e.g. he 
pledges or sells the goods. Therefore, the property therein 
(Camera) passes to Mohan.  
Now, Raj delivered it to Vikas on a sale or return without paying 
cash to Mohan.  
Since Raj did not pay cash and had not exercised the option to 
purchase, ownership of the camera did not pass to Raj. Therefore, 
Raj is not liable to pay the price of the camera either. 
713
Since Vikas did not accept the goods and the camera was lost by 
theft (despite his due care), Vikas is not liable for the price of the 
camera as ownership had not passed to him. 
Therefore, Mohan is solely liable to pay the price of the camera to 
Ashish, as he accepted the camera on a "sale or return" basis and 
did not return it within a reasonable time. 
(ii) According to Section 51 of the Sale of Goods Act, 1930, when the
carrier wrongfully refuses to deliver the goods to buyer, the right of
stoppage in transit is lost and transit comes to an end.
On the other hand, according to section 57 of the Sale of Goods
Act, 1930, where buyer suffers losses due to non-delivery, he can
sue seller for damages on account of non-delivery.
In the instant case, the transit came to an end when Chirag
wrongfully refused to deliver the goods to Barun, and he suffered a
huge loss due to non- delivery. Hence, Akash cannot exercise the
right of stoppage of goods in transit as the transit has already come
to an end.
Barun can claim loss suffered due to non-delivery from Akash.
(b) Section 2(62) of the Companies Act, 2013 defines one person company
(OPC) as a company which has only one person as a member.
Ram wants to incorporate a company in which he will be the only
member. Hence, he can incorporate an One person Company.
According to section 3(1)(c) of the Companies Act, 2013, OPC is a
private limited company with the minimum paid up share capital as may
be prescribed and having one member.
OPC (One Person Company) – salient features
? Only one person as member.
? Minimum paid up capital – no limit prescribed. 
? The memorandum of OPC shall indicate the name of the other 
person, who shall, in the event of the subscriber’s death or his 
incapacity to contract, become the member of the company. 
? The other person whose name is given in the memorandum shall 
give his prior written consent in prescribed form and the same shall 
be filed with Registrar of companies at the time of incorporation. 
? Such other person may be given the right to withdraw his consent. 
? The member of OPC may at any time change the name of such 
other person by giving notice to the company and the company 
shall intimate the same to the Registrar. 
? Any such change in the name of the person shall not be deemed to 
be an alteration of the memorandum. 
714
Page 5


ANSWER S OF MODEL TEST PAPER 7 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
ANSWERS 
1. (a) As per section 126 of the Indian Contract Act, 1872, the contract of
guarantee is defined as a contract to perform the promise or discharge the 
liability of a third person in case of his default.  
In this case, Sooraj has given a guarantee for Pankaj 's payment 
obligation towards Rahul. When Pankaj defaulted after making four 
monthly instalments and became insolvent, Sooraj 's liability as a 
guarantor will come into existence.  
According to Section 128 of the Act, the liability of the surety is co-
extensive with that of the principal debtor, unless it is otherwise provided 
by the contract. 
Since Pankaj failed to pay the remaining instalments due to insolvency, 
Sooraj, as the guarantor, is liable to pay the balance price of the water 
purifier to Rahul. In the given situation, Sooraj will have to pay the 
balance amount of ` 30,000 to Rahul. [54,000-(4x6,000)] 
In the second situation, Rahul sold the water purifier misrepresenting 
it as having a copper filter, while it actually has a normal filter; this 
changes the situation significantly. 
According to Section 142 of the Act, any guarantee which has been 
obtained by means of misrepresentation made by the creditor, or with 
his knowledge and assent, concerning a material part of the transaction, 
is invalid. Here, guarantee is obtained by means of misrepresentation 
made by the creditor (Rahul), and therefore the guarantee is invalid.  
Furthermore, under Section 143, any guarantee which the creditor has 
obtained by means of keeping silence as to material circumstances, is 
invalid. 
Here Rahul misrepresented the filter type and both Pankaj and Sooraj 
were unaware of this fact. The creditor (Rahul) has obtained the 
guarantee by remaining silent as to material circumstances. Therefore, 
the guarantee obtained from Sooraj will be considered to be invalid. 
Consequently, Sooraj cannot be held liable to pay the balance price of 
the water purifier to Rahul. 
711
(b) As per Section 2(46) of the Companies Act, 2013, holding company in
relation to one or more other companies, means a company of which
such companies are subsidiary companies.
Section 2(87) defines “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, as on 31.03.2024, DEF Limited had a paid-up capital 
of ` 1 lakh (10,000 equity shares of ` 10 each). In June 2024, DEF 
Limited issued an additional 10,000 equity shares, which was fully 
subscribed. Post-issue, the total paid-up capital of DEF Limited is ` 2 
lakhs (20,000 equity shares of `10 each).  
Of these, 5,000 shares were issued to MNO Private Limited. Since MNO 
Private Limited holds only 25% of the shares in DEF Limited, it does not 
have control of more than one-half of the total voting power of DEF 
Limited. Hence, MNO Private Limited cannot be considered as a 
subsidiary company of DEF Limited in terms of the second criteria stated 
above, that of controlling of voting power. 
MNO Private Limited is the holding company of JKL Private Limited, 
having control over the composition of its Board of Directors. But since 
MNO Private Limited cannot be termed as a subsidiary company of DEF 
Limited, JKL Private Limited cannot claim the status of being a subsidiary 
of DEF Limited in terms of the first criteria, that of controlling the 
composition of directors. 
As per section 2(6) of the Act, Associate Company in relation to another 
company, means a company in which that other company has a 
significant influence, but which is not a subsidiary company of the 
company having such influence and includes a joint venture company.  
The expression “significant influence” means control of at least twenty 
per cent of total voting power, or control of or participation in business 
decisions under an agreement. 
In terms of the above provision, the relationship between DEF Limited 
and MNO Private Limited can be of an Associate Company.  
Since MNO Private Limited holds more than 20 percent of voting power 
in DEF Limited, it can be considered as an Associate Company of DEF 
Limited.  
(c) (i) If a partner is otherwise expelled, the expulsion is null and void.
According to Section 33 of the Indian Partnership Act, 1932 
(i) the power of expulsion must have existed in a contract between
the partners;
712
(ii) the power has been exercised by a majority of the partners; and
(iii) it has been exercised in good faith.
If all these conditions are not present, the expulsion is not deemed 
to be in bona fide interest of the business of the firm. 
The test of good faith as required under Section 33(1) includes 
three things:  
(i) The expulsion must be in the interest of the partnership.
(ii) The partner to be expelled is served with a notice.
(iii) He is given an opportunity of being heard.
Hence, it is correct to say that, if a partner is otherwise expelled, the 
expulsion is null and void.  
(ii) “The partner who is expelled will cease to be liable to the third
party for the act of the firm done after expulsion”
According to Section 32(3) of the Indian Partnership Act, 1932,
notwithstanding the expulsion a partner from a firm, he and the
partners continue to be liable as partners to third parties for any act
done by any of them which would have been an act of the firm if
done before the expulsion, until public notice is given of the
expulsion.
However, an expelled partner is not liable to any third party who
deals with the firm without knowing that he was a partner.
Hence, the statement given is partially correct.
2. (a) (i) As per the provisions of section 24 of the Sale of Goods Act, 1930,
when goods are delivered to the buyer on approval or “on sale or 
return" or other similar terms, the property therein passes to the buyer 
when he does something to the good which is equivalent to accepting 
the goods e.g. he pledges or sells the goods.   
Referring to the above provisions, we can analyse the situation 
given in the question.  
Since, Mohan, who had taken delivery of the camera on Sale or 
Return basis and delivers the same to Raj on sale for cash only or 
return, has attracted the third condition that he has done something 
to the good which is equivalent to accepting the goods e.g. he 
pledges or sells the goods. Therefore, the property therein 
(Camera) passes to Mohan.  
Now, Raj delivered it to Vikas on a sale or return without paying 
cash to Mohan.  
Since Raj did not pay cash and had not exercised the option to 
purchase, ownership of the camera did not pass to Raj. Therefore, 
Raj is not liable to pay the price of the camera either. 
713
Since Vikas did not accept the goods and the camera was lost by 
theft (despite his due care), Vikas is not liable for the price of the 
camera as ownership had not passed to him. 
Therefore, Mohan is solely liable to pay the price of the camera to 
Ashish, as he accepted the camera on a "sale or return" basis and 
did not return it within a reasonable time. 
(ii) According to Section 51 of the Sale of Goods Act, 1930, when the
carrier wrongfully refuses to deliver the goods to buyer, the right of
stoppage in transit is lost and transit comes to an end.
On the other hand, according to section 57 of the Sale of Goods
Act, 1930, where buyer suffers losses due to non-delivery, he can
sue seller for damages on account of non-delivery.
In the instant case, the transit came to an end when Chirag
wrongfully refused to deliver the goods to Barun, and he suffered a
huge loss due to non- delivery. Hence, Akash cannot exercise the
right of stoppage of goods in transit as the transit has already come
to an end.
Barun can claim loss suffered due to non-delivery from Akash.
(b) Section 2(62) of the Companies Act, 2013 defines one person company
(OPC) as a company which has only one person as a member.
Ram wants to incorporate a company in which he will be the only
member. Hence, he can incorporate an One person Company.
According to section 3(1)(c) of the Companies Act, 2013, OPC is a
private limited company with the minimum paid up share capital as may
be prescribed and having one member.
OPC (One Person Company) – salient features
? Only one person as member.
? Minimum paid up capital – no limit prescribed. 
? The memorandum of OPC shall indicate the name of the other 
person, who shall, in the event of the subscriber’s death or his 
incapacity to contract, become the member of the company. 
? The other person whose name is given in the memorandum shall 
give his prior written consent in prescribed form and the same shall 
be filed with Registrar of companies at the time of incorporation. 
? Such other person may be given the right to withdraw his consent. 
? The member of OPC may at any time change the name of such 
other person by giving notice to the company and the company 
shall intimate the same to the Registrar. 
? Any such change in the name of the person shall not be deemed to 
be an alteration of the memorandum. 
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? Only a natural person who is an Indian citizen whether resident in
India or otherwise and has stayed in India for a period of not less 
than 120 days during the immediately preceding financial year. 
? shall be eligible to incorporate an OPC;
? shall be a nominee for the sole member of an OPC.
? No person shall be eligible to incorporate more than one OPC or
become nominee in more than one such company.
? No minor shall become member or nominee of the OPC or can hold
share with beneficial interest.
? Such Company cannot be incorporated or converted into a
company under section 8 of the Act. Though it may be converted
to private or public companies in certain cases.
? Such Company cannot carry out Non-Banking Financial Investment
activities including investment in securities of any body-corporate.
? If One Person Company or any officer of such company 
contravenes the provisions, they shall be punishable with fine 
which may extend to ten thousand rupees and with a further fine 
which may extend to one thousand rupees for every day after the 
first during which such contravention continues. 
Here the member can be the sole member-cum-director. 
(c) (i) Change of name of LLP (Section 17 of Limited Liability
Partnership Act, 2008): 
(1) Notwithstanding anything contained in sections 15 and 16, if
through inadvertence or otherwise, a LLP, on its first
registration or on its registration by a new body corporate, its
registered name, is registered by a name which is identical
with or too nearly resembles to —
(a) that of any other LLP or a company; or
(b) a registered trade mark of a proprietor under the Trade
Marks Act, 1999, as is likely to be mistaken for it,
then on an application of such LLP or proprietor referred to in 
clauses (a) and (b) respectively or a company,  
the Central Government may direct that such LLP to change its 
name or new name within a period of 3 months from the date of 
issue of such direction. 
(2) Where a LLP changes its name or obtains a new name under
sub-section (1), it shall within a period of 15 days from the
date of such change, give notice of the change to Registrar
along with the order of the Central Government, who shall
carry out necessary changes in the certificate of incorporation
and within 30 days of such change in the certificate of
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