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

 Page 1


MODEL TEST PAPER 7 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
Wherever necessary, suitable assumptions should be made and disclosed 
by way of note forming part of the answer. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) Rahul owns an electronics store. Pankaj visited the store to buy a water
purifier priced at ` 54,000/-. He specifically requested Rahul for a purifier 
with a copper filter. As Pankaj wanted to buy the purifier on credit, with 
the intention of paying in 9 equal monthly instalments, Rahul demands a 
guarantor for the transaction. Sooraj (a friend of Pankaj) came forward 
and gave the guarantee for payment of water purifier. Rahul sold Pankaj, 
a water purifier of a specific brand. Pankaj made payment for 4 monthly 
instalments and after that became insolvent. Explain with reference to 
the Indian Contract Act, 1872, the liability of Sooraj as a guarantor to pay 
the balance price of water purifier to Rahul. 
What will be your answer, if Rahul sold the water purifier misrepresenting 
it as having a copper filter, while it actually has a normal filter? Neither 
Pankaj nor Sooraj was aware of this fact and upon discovering the truth, 
Pankaj refused to pay the price. In response to Pankaj 's refusal, Rahul 
filed the suit against Sooraj, the guarantor. Explain with reference to the 
Indian Contract Act, 1872, whether Sooraj is liable to pay the balance 
price of water purifier to Rahul?  (7 Marks) 
(b) A company, DEF limited as on 31.03.2024 had a paid-up capital of ` 1
lakh (10,000 equity shares of ` 10 each). In June 2024, DEF limited
issued additional 10,000 equity shares of ` 10 each which was fully
subscribed. Out of 10,000 shares, 5,000 of these shares were issued to
MNO private limited company. MNO is a holding company of JKL private
limited by having control over the composition of its board of directors.
Now, JKL private limited claims the status of being a subsidiary of DEF
limited as being a subsidiary of its subsidiary i.e. MNO private limited.
Examine the validity of the claim of JKL private limited.
State the relationship if any, between DEF limited & MNO Private Limited
as per the provisions of the Companies Act, 2013.  (7 Marks)
106
Page 2


MODEL TEST PAPER 7 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
Wherever necessary, suitable assumptions should be made and disclosed 
by way of note forming part of the answer. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) Rahul owns an electronics store. Pankaj visited the store to buy a water
purifier priced at ` 54,000/-. He specifically requested Rahul for a purifier 
with a copper filter. As Pankaj wanted to buy the purifier on credit, with 
the intention of paying in 9 equal monthly instalments, Rahul demands a 
guarantor for the transaction. Sooraj (a friend of Pankaj) came forward 
and gave the guarantee for payment of water purifier. Rahul sold Pankaj, 
a water purifier of a specific brand. Pankaj made payment for 4 monthly 
instalments and after that became insolvent. Explain with reference to 
the Indian Contract Act, 1872, the liability of Sooraj as a guarantor to pay 
the balance price of water purifier to Rahul. 
What will be your answer, if Rahul sold the water purifier misrepresenting 
it as having a copper filter, while it actually has a normal filter? Neither 
Pankaj nor Sooraj was aware of this fact and upon discovering the truth, 
Pankaj refused to pay the price. In response to Pankaj 's refusal, Rahul 
filed the suit against Sooraj, the guarantor. Explain with reference to the 
Indian Contract Act, 1872, whether Sooraj is liable to pay the balance 
price of water purifier to Rahul?  (7 Marks) 
(b) A company, DEF limited as on 31.03.2024 had a paid-up capital of ` 1
lakh (10,000 equity shares of ` 10 each). In June 2024, DEF limited
issued additional 10,000 equity shares of ` 10 each which was fully
subscribed. Out of 10,000 shares, 5,000 of these shares were issued to
MNO private limited company. MNO is a holding company of JKL private
limited by having control over the composition of its board of directors.
Now, JKL private limited claims the status of being a subsidiary of DEF
limited as being a subsidiary of its subsidiary i.e. MNO private limited.
Examine the validity of the claim of JKL private limited.
State the relationship if any, between DEF limited & MNO Private Limited
as per the provisions of the Companies Act, 2013.  (7 Marks)
106
(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) Ashish, a trader, delivered a camera to Mohan on 'sale or return' 
basis. Mohan delivers the camera to Raj on the terms of 'sale for 
cash only or return'. Afterward, Raj delivered it to Vikas on a 'sale 
or return' basis without paying cash to Mohan. The camera, which 
was in possession of Vikas, was lost by theft though he exercised 
due care for its safety. Referring to the provisions of the Sale of 
Goods Act, 1930, analyse the situation and advise whether Mohan, 
Raj or Vikas are, jointly or severally, liable to pay the price of the 
camera to Ashish.      (4 Marks) 
(ii) Akash of Jaipur sold 100 smart TV set @ ` 50,000/- per set to Barun 
of Delhi. He delivered the TV sets to Chirag, a transport carrier for 
transmission to Barun. Barun further sold these 100 TV sets to 
Sarthak @ ` 60,000/- per set. On reaching the goods at the 
destination, Barun demanded the delivery but Chirag, wrongfully, 
refused to deliver the goods to Barun. That is why; he failed to 
deliver TV sets to Sarthak and suffered a huge loss on account of 
non-delivery. Akash came to know about this. He directed Chirag 
to stop the delivery to Barun and re-deliver the goods to him at 
Jaipur. 
 Answer the following questions under the provisions of the Sale of 
Goods Act, 1930: 
(A) Whether Akash has the right to stop the goods in transit? 
(B) Whether Barun can claim loss suffered due to non-delivery 
from Akash? (3 Marks) 
(b)  Ram wants to incorporate a company in which he will be the only 
member. According to provisions of the Companies Act, 2013, what type 
of company can be incorporated? What are the salient features of this 
type of company?       (7 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) 
  
107
Page 3


MODEL TEST PAPER 7 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
Wherever necessary, suitable assumptions should be made and disclosed 
by way of note forming part of the answer. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) Rahul owns an electronics store. Pankaj visited the store to buy a water
purifier priced at ` 54,000/-. He specifically requested Rahul for a purifier 
with a copper filter. As Pankaj wanted to buy the purifier on credit, with 
the intention of paying in 9 equal monthly instalments, Rahul demands a 
guarantor for the transaction. Sooraj (a friend of Pankaj) came forward 
and gave the guarantee for payment of water purifier. Rahul sold Pankaj, 
a water purifier of a specific brand. Pankaj made payment for 4 monthly 
instalments and after that became insolvent. Explain with reference to 
the Indian Contract Act, 1872, the liability of Sooraj as a guarantor to pay 
the balance price of water purifier to Rahul. 
What will be your answer, if Rahul sold the water purifier misrepresenting 
it as having a copper filter, while it actually has a normal filter? Neither 
Pankaj nor Sooraj was aware of this fact and upon discovering the truth, 
Pankaj refused to pay the price. In response to Pankaj 's refusal, Rahul 
filed the suit against Sooraj, the guarantor. Explain with reference to the 
Indian Contract Act, 1872, whether Sooraj is liable to pay the balance 
price of water purifier to Rahul?  (7 Marks) 
(b) A company, DEF limited as on 31.03.2024 had a paid-up capital of ` 1
lakh (10,000 equity shares of ` 10 each). In June 2024, DEF limited
issued additional 10,000 equity shares of ` 10 each which was fully
subscribed. Out of 10,000 shares, 5,000 of these shares were issued to
MNO private limited company. MNO is a holding company of JKL private
limited by having control over the composition of its board of directors.
Now, JKL private limited claims the status of being a subsidiary of DEF
limited as being a subsidiary of its subsidiary i.e. MNO private limited.
Examine the validity of the claim of JKL private limited.
State the relationship if any, between DEF limited & MNO Private Limited
as per the provisions of the Companies Act, 2013.  (7 Marks)
106
(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) Ashish, a trader, delivered a camera to Mohan on 'sale or return' 
basis. Mohan delivers the camera to Raj on the terms of 'sale for 
cash only or return'. Afterward, Raj delivered it to Vikas on a 'sale 
or return' basis without paying cash to Mohan. The camera, which 
was in possession of Vikas, was lost by theft though he exercised 
due care for its safety. Referring to the provisions of the Sale of 
Goods Act, 1930, analyse the situation and advise whether Mohan, 
Raj or Vikas are, jointly or severally, liable to pay the price of the 
camera to Ashish.      (4 Marks) 
(ii) Akash of Jaipur sold 100 smart TV set @ ` 50,000/- per set to Barun 
of Delhi. He delivered the TV sets to Chirag, a transport carrier for 
transmission to Barun. Barun further sold these 100 TV sets to 
Sarthak @ ` 60,000/- per set. On reaching the goods at the 
destination, Barun demanded the delivery but Chirag, wrongfully, 
refused to deliver the goods to Barun. That is why; he failed to 
deliver TV sets to Sarthak and suffered a huge loss on account of 
non-delivery. Akash came to know about this. He directed Chirag 
to stop the delivery to Barun and re-deliver the goods to him at 
Jaipur. 
 Answer the following questions under the provisions of the Sale of 
Goods Act, 1930: 
(A) Whether Akash has the right to stop the goods in transit? 
(B) Whether Barun can claim loss suffered due to non-delivery 
from Akash? (3 Marks) 
(b)  Ram wants to incorporate a company in which he will be the only 
member. According to provisions of the Companies Act, 2013, what type 
of company can be incorporated? What are the salient features of this 
type of company?       (7 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) 
  
107
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 named as RS & 
Co. (the firm). Gaurav, a renowned businessman, is their common 
friend. Ram introduced Gaurav to Sahil, a supplier to the firm, as 
his newly joined partner. Gaurav knowing that he is not a partner 
preferred to keep quiet on such an introduction. This information 
about Gaurav, being a partner of the firm, was shared by Sahil with 
another businessman Madhav. Next day, Sahil supplied the raw 
material on credit and Madhav lent ` 5 lakhs to the firm for a short 
period on the understanding that Gaurav is a partner of the firm. On 
due dates, the firm failed to discharge its liability towards both. 
Advise Gaurav, whether he is liable to Sahil and Madhav for the 
aforesaid liability of the firm. (4 Marks) 
(ii) On admission as a new partner, Ashwin agreed to be liable for the 
existing debts (referred to as the old debts) of the firm by an 
agreement signed by all partners including Ashwin. Examine, 
whether Ashwin 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. (3 Marks) 
 (b) (i) MN 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 
accounts show that the company has utilized the loan amount of  
` 3 crore for repayment of its lawful debts. The utilization 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 Unique Private Limited (the company) on  
15
th
 May, 2024 the share certificates were issued to Arnav, Sohail 
and Suman being subscribers to the Memorandum of Association 
of the company without affixing the common seal thereon and 
under the signature of Arnav and Sohail, the directors of the 
company. The company has yet to appoint a company secretary. 
On objection raised by Suman, a director, about the validity of the 
share certificate signed by other two directors, Arnav and Sohail, 
clarified that since the company has opted not to have the common 
108
Page 4


MODEL TEST PAPER 7 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
Wherever necessary, suitable assumptions should be made and disclosed 
by way of note forming part of the answer. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) Rahul owns an electronics store. Pankaj visited the store to buy a water
purifier priced at ` 54,000/-. He specifically requested Rahul for a purifier 
with a copper filter. As Pankaj wanted to buy the purifier on credit, with 
the intention of paying in 9 equal monthly instalments, Rahul demands a 
guarantor for the transaction. Sooraj (a friend of Pankaj) came forward 
and gave the guarantee for payment of water purifier. Rahul sold Pankaj, 
a water purifier of a specific brand. Pankaj made payment for 4 monthly 
instalments and after that became insolvent. Explain with reference to 
the Indian Contract Act, 1872, the liability of Sooraj as a guarantor to pay 
the balance price of water purifier to Rahul. 
What will be your answer, if Rahul sold the water purifier misrepresenting 
it as having a copper filter, while it actually has a normal filter? Neither 
Pankaj nor Sooraj was aware of this fact and upon discovering the truth, 
Pankaj refused to pay the price. In response to Pankaj 's refusal, Rahul 
filed the suit against Sooraj, the guarantor. Explain with reference to the 
Indian Contract Act, 1872, whether Sooraj is liable to pay the balance 
price of water purifier to Rahul?  (7 Marks) 
(b) A company, DEF limited as on 31.03.2024 had a paid-up capital of ` 1
lakh (10,000 equity shares of ` 10 each). In June 2024, DEF limited
issued additional 10,000 equity shares of ` 10 each which was fully
subscribed. Out of 10,000 shares, 5,000 of these shares were issued to
MNO private limited company. MNO is a holding company of JKL private
limited by having control over the composition of its board of directors.
Now, JKL private limited claims the status of being a subsidiary of DEF
limited as being a subsidiary of its subsidiary i.e. MNO private limited.
Examine the validity of the claim of JKL private limited.
State the relationship if any, between DEF limited & MNO Private Limited
as per the provisions of the Companies Act, 2013.  (7 Marks)
106
(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) Ashish, a trader, delivered a camera to Mohan on 'sale or return' 
basis. Mohan delivers the camera to Raj on the terms of 'sale for 
cash only or return'. Afterward, Raj delivered it to Vikas on a 'sale 
or return' basis without paying cash to Mohan. The camera, which 
was in possession of Vikas, was lost by theft though he exercised 
due care for its safety. Referring to the provisions of the Sale of 
Goods Act, 1930, analyse the situation and advise whether Mohan, 
Raj or Vikas are, jointly or severally, liable to pay the price of the 
camera to Ashish.      (4 Marks) 
(ii) Akash of Jaipur sold 100 smart TV set @ ` 50,000/- per set to Barun 
of Delhi. He delivered the TV sets to Chirag, a transport carrier for 
transmission to Barun. Barun further sold these 100 TV sets to 
Sarthak @ ` 60,000/- per set. On reaching the goods at the 
destination, Barun demanded the delivery but Chirag, wrongfully, 
refused to deliver the goods to Barun. That is why; he failed to 
deliver TV sets to Sarthak and suffered a huge loss on account of 
non-delivery. Akash came to know about this. He directed Chirag 
to stop the delivery to Barun and re-deliver the goods to him at 
Jaipur. 
 Answer the following questions under the provisions of the Sale of 
Goods Act, 1930: 
(A) Whether Akash has the right to stop the goods in transit? 
(B) Whether Barun can claim loss suffered due to non-delivery 
from Akash? (3 Marks) 
(b)  Ram wants to incorporate a company in which he will be the only 
member. According to provisions of the Companies Act, 2013, what type 
of company can be incorporated? What are the salient features of this 
type of company?       (7 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) 
  
107
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 named as RS & 
Co. (the firm). Gaurav, a renowned businessman, is their common 
friend. Ram introduced Gaurav to Sahil, a supplier to the firm, as 
his newly joined partner. Gaurav knowing that he is not a partner 
preferred to keep quiet on such an introduction. This information 
about Gaurav, being a partner of the firm, was shared by Sahil with 
another businessman Madhav. Next day, Sahil supplied the raw 
material on credit and Madhav lent ` 5 lakhs to the firm for a short 
period on the understanding that Gaurav is a partner of the firm. On 
due dates, the firm failed to discharge its liability towards both. 
Advise Gaurav, whether he is liable to Sahil and Madhav for the 
aforesaid liability of the firm. (4 Marks) 
(ii) On admission as a new partner, Ashwin agreed to be liable for the 
existing debts (referred to as the old debts) of the firm by an 
agreement signed by all partners including Ashwin. Examine, 
whether Ashwin 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. (3 Marks) 
 (b) (i) MN 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 
accounts show that the company has utilized the loan amount of  
` 3 crore for repayment of its lawful debts. The utilization 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 Unique Private Limited (the company) on  
15
th
 May, 2024 the share certificates were issued to Arnav, Sohail 
and Suman being subscribers to the Memorandum of Association 
of the company without affixing the common seal thereon and 
under the signature of Arnav and Sohail, the directors of the 
company. The company has yet to appoint a company secretary. 
On objection raised by Suman, a director, about the validity of the 
share certificate signed by other two directors, Arnav and Sohail, 
clarified that since the company has opted not to have the common 
108
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) Explain the term Wagering agreement in the light of the Indian Contract 
Act, 1872. Also, explain some transactions resembling wagering 
transaction but which are not void.  (6 Marks) 
4. (a)  (i) Mr. R extended a loan to Mr. D with X, Y, and Z as sureties. Each 
surety executed a bond with varying penalty amounts, X with a 
penalty of ` 10,000, Y with ` 20,000 and Z with ` 40,000, in the 
event of Mr. D's failure to repay the borrowed money to Mr. R. 
Examine the liabilities of the sureties in accordance with the Indian 
Contract Act, 1872, when Mr. D defaults to the tune of ` 42,000. 
Additionally, assess the situation, if there is no contractual 
arrangement among the sureties.  (4 Marks) 
(ii)  X agrees to pay Y ` 1,00,000, if Y kills Z. To pay Y, X borrows  
` 1,00,000 from W, who is also aware of the purpose of the loan. Y 
kills Z but X refuses to pay. X also to repay the loan to W. Explain 
the validity of the contract. 
(A)  Between X and Y 
(B) Between X and W  (3 Marks) 
(b) A promissory note, payable at a certain period after sight, must be 
presented to the maker thereof for payment. Under which scenarios, 
presentment for payment is not necessary and the instrument is 
dishonoured at the due date for presentment according to the provisions 
of the Negotiable Instrument Act, 1881?         (7 Marks) 
(c)  What do you understand by Law? Also, elaborate the procedure for 
making a law.   (6 Marks)  
5. (a) (i)  Karan agreed to sell his laptop to Vishal for a price to be fixed by 
Kiran a hardware engineer. However, before the delivery of the 
laptop, Karan changed his mind and did not share any particulars 
and configuration of the laptop with Kiran, which made her unable 
to do the valuation. Kiran refused to do valuation. 
 Vishal needed laptop for his project, so he promised Karan that, if 
the laptop is delivered to him, he would pay a reasonable price for 
it However, Karan decided not to sell his laptop to Vishal. Now, 
Vishal wants to know from you, being a legal expert, whether Karan 
is bound by his promise as he agreed earlier to deliver his laptop 
109
Page 5


MODEL TEST PAPER 7 
FOUNDATION COURSE 
PAPER – 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
Wherever necessary, suitable assumptions should be made and disclosed 
by way of note forming part of the answer. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) Rahul owns an electronics store. Pankaj visited the store to buy a water
purifier priced at ` 54,000/-. He specifically requested Rahul for a purifier 
with a copper filter. As Pankaj wanted to buy the purifier on credit, with 
the intention of paying in 9 equal monthly instalments, Rahul demands a 
guarantor for the transaction. Sooraj (a friend of Pankaj) came forward 
and gave the guarantee for payment of water purifier. Rahul sold Pankaj, 
a water purifier of a specific brand. Pankaj made payment for 4 monthly 
instalments and after that became insolvent. Explain with reference to 
the Indian Contract Act, 1872, the liability of Sooraj as a guarantor to pay 
the balance price of water purifier to Rahul. 
What will be your answer, if Rahul sold the water purifier misrepresenting 
it as having a copper filter, while it actually has a normal filter? Neither 
Pankaj nor Sooraj was aware of this fact and upon discovering the truth, 
Pankaj refused to pay the price. In response to Pankaj 's refusal, Rahul 
filed the suit against Sooraj, the guarantor. Explain with reference to the 
Indian Contract Act, 1872, whether Sooraj is liable to pay the balance 
price of water purifier to Rahul?  (7 Marks) 
(b) A company, DEF limited as on 31.03.2024 had a paid-up capital of ` 1
lakh (10,000 equity shares of ` 10 each). In June 2024, DEF limited
issued additional 10,000 equity shares of ` 10 each which was fully
subscribed. Out of 10,000 shares, 5,000 of these shares were issued to
MNO private limited company. MNO is a holding company of JKL private
limited by having control over the composition of its board of directors.
Now, JKL private limited claims the status of being a subsidiary of DEF
limited as being a subsidiary of its subsidiary i.e. MNO private limited.
Examine the validity of the claim of JKL private limited.
State the relationship if any, between DEF limited & MNO Private Limited
as per the provisions of the Companies Act, 2013.  (7 Marks)
106
(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) Ashish, a trader, delivered a camera to Mohan on 'sale or return' 
basis. Mohan delivers the camera to Raj on the terms of 'sale for 
cash only or return'. Afterward, Raj delivered it to Vikas on a 'sale 
or return' basis without paying cash to Mohan. The camera, which 
was in possession of Vikas, was lost by theft though he exercised 
due care for its safety. Referring to the provisions of the Sale of 
Goods Act, 1930, analyse the situation and advise whether Mohan, 
Raj or Vikas are, jointly or severally, liable to pay the price of the 
camera to Ashish.      (4 Marks) 
(ii) Akash of Jaipur sold 100 smart TV set @ ` 50,000/- per set to Barun 
of Delhi. He delivered the TV sets to Chirag, a transport carrier for 
transmission to Barun. Barun further sold these 100 TV sets to 
Sarthak @ ` 60,000/- per set. On reaching the goods at the 
destination, Barun demanded the delivery but Chirag, wrongfully, 
refused to deliver the goods to Barun. That is why; he failed to 
deliver TV sets to Sarthak and suffered a huge loss on account of 
non-delivery. Akash came to know about this. He directed Chirag 
to stop the delivery to Barun and re-deliver the goods to him at 
Jaipur. 
 Answer the following questions under the provisions of the Sale of 
Goods Act, 1930: 
(A) Whether Akash has the right to stop the goods in transit? 
(B) Whether Barun can claim loss suffered due to non-delivery 
from Akash? (3 Marks) 
(b)  Ram wants to incorporate a company in which he will be the only 
member. According to provisions of the Companies Act, 2013, what type 
of company can be incorporated? What are the salient features of this 
type of company?       (7 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) 
  
107
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 named as RS & 
Co. (the firm). Gaurav, a renowned businessman, is their common 
friend. Ram introduced Gaurav to Sahil, a supplier to the firm, as 
his newly joined partner. Gaurav knowing that he is not a partner 
preferred to keep quiet on such an introduction. This information 
about Gaurav, being a partner of the firm, was shared by Sahil with 
another businessman Madhav. Next day, Sahil supplied the raw 
material on credit and Madhav lent ` 5 lakhs to the firm for a short 
period on the understanding that Gaurav is a partner of the firm. On 
due dates, the firm failed to discharge its liability towards both. 
Advise Gaurav, whether he is liable to Sahil and Madhav for the 
aforesaid liability of the firm. (4 Marks) 
(ii) On admission as a new partner, Ashwin agreed to be liable for the 
existing debts (referred to as the old debts) of the firm by an 
agreement signed by all partners including Ashwin. Examine, 
whether Ashwin 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. (3 Marks) 
 (b) (i) MN 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 
accounts show that the company has utilized the loan amount of  
` 3 crore for repayment of its lawful debts. The utilization 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 Unique Private Limited (the company) on  
15
th
 May, 2024 the share certificates were issued to Arnav, Sohail 
and Suman being subscribers to the Memorandum of Association 
of the company without affixing the common seal thereon and 
under the signature of Arnav and Sohail, the directors of the 
company. The company has yet to appoint a company secretary. 
On objection raised by Suman, a director, about the validity of the 
share certificate signed by other two directors, Arnav and Sohail, 
clarified that since the company has opted not to have the common 
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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) Explain the term Wagering agreement in the light of the Indian Contract 
Act, 1872. Also, explain some transactions resembling wagering 
transaction but which are not void.  (6 Marks) 
4. (a)  (i) Mr. R extended a loan to Mr. D with X, Y, and Z as sureties. Each 
surety executed a bond with varying penalty amounts, X with a 
penalty of ` 10,000, Y with ` 20,000 and Z with ` 40,000, in the 
event of Mr. D's failure to repay the borrowed money to Mr. R. 
Examine the liabilities of the sureties in accordance with the Indian 
Contract Act, 1872, when Mr. D defaults to the tune of ` 42,000. 
Additionally, assess the situation, if there is no contractual 
arrangement among the sureties.  (4 Marks) 
(ii)  X agrees to pay Y ` 1,00,000, if Y kills Z. To pay Y, X borrows  
` 1,00,000 from W, who is also aware of the purpose of the loan. Y 
kills Z but X refuses to pay. X also to repay the loan to W. Explain 
the validity of the contract. 
(A)  Between X and Y 
(B) Between X and W  (3 Marks) 
(b) A promissory note, payable at a certain period after sight, must be 
presented to the maker thereof for payment. Under which scenarios, 
presentment for payment is not necessary and the instrument is 
dishonoured at the due date for presentment according to the provisions 
of the Negotiable Instrument Act, 1881?         (7 Marks) 
(c)  What do you understand by Law? Also, elaborate the procedure for 
making a law.   (6 Marks)  
5. (a) (i)  Karan agreed to sell his laptop to Vishal for a price to be fixed by 
Kiran a hardware engineer. However, before the delivery of the 
laptop, Karan changed his mind and did not share any particulars 
and configuration of the laptop with Kiran, which made her unable 
to do the valuation. Kiran refused to do valuation. 
 Vishal needed laptop for his project, so he promised Karan that, if 
the laptop is delivered to him, he would pay a reasonable price for 
it However, Karan decided not to sell his laptop to Vishal. Now, 
Vishal wants to know from you, being a legal expert, whether Karan 
is bound by his promise as he agreed earlier to deliver his laptop 
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to him at a reasonable price. If he does not agree to deliver what is 
the other remedy available to Vishal? Advise, referring to the 
provisions of the Sale of Goods Act, 1930. (3 Marks) 
(ii)  Mrs. Meenu went to the local rice and wheat wholesale shop and 
asked for 100 kgs of Basmati rice. The Shopkeeper quoted the 
price of the same as ` 125 per kg to which she agreed. Mrs. Meenu 
insisted that she would like to see the sample of what would be 
provided to her by the shopkeeper before she agreed upon such a 
purchase. 
The shopkeeper showed her a bowl of rice as a sample. The 
sample exactly corresponded to the entire lot. 
Mrs. Meenu examined the sample casually without noticing the fact 
that even though the sample was that of Basmati Rice, but it 
contained a mix of long and short grains. 
The cook on opening the bags complained that the dish if prepared 
with the rice would not taste the same as the quality of rice was not 
as per the requirement of the dish.   
Now Mrs. Meenu wants to file a suit for fraud against the seller 
alleging him of selling a mix of good and cheap quality rice. Will she 
be successful? 
Decide the fate of the case and options open to Mrs. Meenu for 
grievance redressal as per the provisions of Sale of Goods Act, 
1930? 
What would be your answer in case Mrs. Meenu specified her exact 
requirement as to the length of rice? (4 Marks) 
(b) “Indian Partnership Act, 1932 does not make the registration of firms 
compulsory nor does it impose any penalty for non-registration.” In light 
of the given statement, discuss the consequences of non-registration of 
the partnership firms in India?  (7 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) 
  
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