Business Laws Model Test Paper - 9 (Qestions) | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


MODEL TEST PAPER 9 
FOUNDATION COURSE 
PAPER 2 : BUSINESS LAWS 
Question No. 1 is compulsory. 
Attempt any four questions from the remaining five questions. 
Working notes should form part of the answers 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) R owns an electronics store. P visited the store to buy a water purifier 
priced at `54,000/-. He specifically requested R for a purifier with a copper 
filter. As P wanted to buy the purifier on credit, with the intention of paying 
in 9 equal monthly instalments, R demands a guarantor for the 
transaction. S (a friend of P) came forward and gave the guarantee for 
payment of water purifier. R sold P, a water purifier of a specific brand. P 
made payment for 4 monthly instalments and after that became insolvent. 
Explain with reference to the Indian Contract Act, 1872, the liability of S as 
a guarantor to pay the balance price of water purifier to R. 
 What will be your answer, if R sold the water purifier misrepresenting it 
as having a copper filter, while it actually has a normal filter? Neither P 
nor S was aware of this fact and upon discovering the truth, P refused 
to pay the price. In response to P's refusal, R filed the suit against S, 
the guarantor. Explain with reference to the Indian Contract Act 1872, 
whether S is liable to pay the balance price of water purifier to R? 
 (7 Marks) 
(b) A company, ABC limited as on 31.03.2023 had a paid-up capital of ` 1 
lakh (10,000 equity shares of ` 10 each). In June 2023, ABC limited 
had 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 XYZ private limited company. XYZ is a holding company of 
PQR private limited by having control over the composition of its board 
of directors. 
 Now, PQR private limited claims the status of being a subsidiary of 
ABC limited as being a subsidiary of its subsidiary i.e. XYZ private 
limited. Examine the validity of the claim of PQR private limited. 
 State the relationship if any, between ABC limited & XYZ private limited 
as per the provisions of the Companies Act, 2013.  (7 Marks) 
(c) The Indian Partnership Act does not make the registration of firms 
compulsory, yet the consequences or disabilities of non-registration 
have a persuasive pressure for their registration. Still, there are come 
cases where non-registration of firm does not affect certain rights. 
Explain with reference to the provisions of the Indian Partnership Act, 
1932.  (6 Marks) 
  
117
Page 2


MODEL TEST PAPER 9 
FOUNDATION COURSE 
PAPER 2 : BUSINESS LAWS 
Question No. 1 is compulsory. 
Attempt any four questions from the remaining five questions. 
Working notes should form part of the answers 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) R owns an electronics store. P visited the store to buy a water purifier 
priced at `54,000/-. He specifically requested R for a purifier with a copper 
filter. As P wanted to buy the purifier on credit, with the intention of paying 
in 9 equal monthly instalments, R demands a guarantor for the 
transaction. S (a friend of P) came forward and gave the guarantee for 
payment of water purifier. R sold P, a water purifier of a specific brand. P 
made payment for 4 monthly instalments and after that became insolvent. 
Explain with reference to the Indian Contract Act, 1872, the liability of S as 
a guarantor to pay the balance price of water purifier to R. 
 What will be your answer, if R sold the water purifier misrepresenting it 
as having a copper filter, while it actually has a normal filter? Neither P 
nor S was aware of this fact and upon discovering the truth, P refused 
to pay the price. In response to P's refusal, R filed the suit against S, 
the guarantor. Explain with reference to the Indian Contract Act 1872, 
whether S is liable to pay the balance price of water purifier to R? 
 (7 Marks) 
(b) A company, ABC limited as on 31.03.2023 had a paid-up capital of ` 1 
lakh (10,000 equity shares of ` 10 each). In June 2023, ABC limited 
had 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 XYZ private limited company. XYZ is a holding company of 
PQR private limited by having control over the composition of its board 
of directors. 
 Now, PQR private limited claims the status of being a subsidiary of 
ABC limited as being a subsidiary of its subsidiary i.e. XYZ private 
limited. Examine the validity of the claim of PQR private limited. 
 State the relationship if any, between ABC limited & XYZ private limited 
as per the provisions of the Companies Act, 2013.  (7 Marks) 
(c) The Indian Partnership Act does not make the registration of firms 
compulsory, yet the consequences or disabilities of non-registration 
have a persuasive pressure for their registration. Still, there are come 
cases where non-registration of firm does not affect certain rights. 
Explain with reference to the provisions of the Indian Partnership Act, 
1932.  (6 Marks) 
  
117
2. (a) Sony, a friend of Priya wanted to buy her two-wheeler. Priya agreed to 
sell her two-wheeler to Sony and it was decided that price of her two-
wheeler will be fixed by Priya's father, who is an auto dealer. Priya 
immediately handed over the keys to Sony. However, Priya's father 
refused to fix the price as he did not want Priya to sell her vehicle. Priya 
expressed her inability to sell the two-wheeler to Sony and asked for 
return, but Sony refused to return the same. Explain- 
(i)  Can Priya take-back the vehicle from Sony? 
(ii)  Will your answer be different, if Priya had not handed over the 
vehicle to Sony? (7 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) A LLP is a new form of legal business entity with limited liability. It's an 
alternative corporate business vehicle that only gives the benefits of 
limited liability at low compliance cost but allows its partners the 
flexibility of organizing their internal structure as a traditional 
partnership. Keeping in view of above, define the following 
characteristics of LLP. 
(i)  Body Corporate 
(ii)  Mutual Agency 
(iii)  Foreign LLPs 
(iv)  Artificial legal person (6 Marks) 
3. (a) (i) P, Q and R formed a partnership agreement to operate motor buses 
along specific routes for a duration of 12 years. After operating the 
business for four years, it was observed that the business incurred 
losses each year. Despite this, P is determined to continue the 
business for the remaining Period. Examine with reference to the 
Indian Partnership Act, 1932, can P insist to continue the business? 
If so, what options are available to Q and R who are reluctant to 
continue operating the business?  (4 Marks)   
(ii) A and B operate a textile merchant business in partnership. Mr. A 
finances the business and is a sleeping partner. In the regular 
course of business, B acquires certain fabric goods belonging to 
C. However, B is aware that these goods are stolen property. 
Despite this knowledge, B proceeds to purchase and sell some of 
these stolen goods. Moreover, B records proceeds from these 
sales in the firm’s books. Now, A wants to avoid the liability 
towards C, on the grounds of misconduct by B. In the light of the 
provisions of the Indian Partnership Act, 1932 discuss the liability 
of A and B towards C.  (3 Marks) 
  
118
Page 3


MODEL TEST PAPER 9 
FOUNDATION COURSE 
PAPER 2 : BUSINESS LAWS 
Question No. 1 is compulsory. 
Attempt any four questions from the remaining five questions. 
Working notes should form part of the answers 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) R owns an electronics store. P visited the store to buy a water purifier 
priced at `54,000/-. He specifically requested R for a purifier with a copper 
filter. As P wanted to buy the purifier on credit, with the intention of paying 
in 9 equal monthly instalments, R demands a guarantor for the 
transaction. S (a friend of P) came forward and gave the guarantee for 
payment of water purifier. R sold P, a water purifier of a specific brand. P 
made payment for 4 monthly instalments and after that became insolvent. 
Explain with reference to the Indian Contract Act, 1872, the liability of S as 
a guarantor to pay the balance price of water purifier to R. 
 What will be your answer, if R sold the water purifier misrepresenting it 
as having a copper filter, while it actually has a normal filter? Neither P 
nor S was aware of this fact and upon discovering the truth, P refused 
to pay the price. In response to P's refusal, R filed the suit against S, 
the guarantor. Explain with reference to the Indian Contract Act 1872, 
whether S is liable to pay the balance price of water purifier to R? 
 (7 Marks) 
(b) A company, ABC limited as on 31.03.2023 had a paid-up capital of ` 1 
lakh (10,000 equity shares of ` 10 each). In June 2023, ABC limited 
had 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 XYZ private limited company. XYZ is a holding company of 
PQR private limited by having control over the composition of its board 
of directors. 
 Now, PQR private limited claims the status of being a subsidiary of 
ABC limited as being a subsidiary of its subsidiary i.e. XYZ private 
limited. Examine the validity of the claim of PQR private limited. 
 State the relationship if any, between ABC limited & XYZ private limited 
as per the provisions of the Companies Act, 2013.  (7 Marks) 
(c) The Indian Partnership Act does not make the registration of firms 
compulsory, yet the consequences or disabilities of non-registration 
have a persuasive pressure for their registration. Still, there are come 
cases where non-registration of firm does not affect certain rights. 
Explain with reference to the provisions of the Indian Partnership Act, 
1932.  (6 Marks) 
  
117
2. (a) Sony, a friend of Priya wanted to buy her two-wheeler. Priya agreed to 
sell her two-wheeler to Sony and it was decided that price of her two-
wheeler will be fixed by Priya's father, who is an auto dealer. Priya 
immediately handed over the keys to Sony. However, Priya's father 
refused to fix the price as he did not want Priya to sell her vehicle. Priya 
expressed her inability to sell the two-wheeler to Sony and asked for 
return, but Sony refused to return the same. Explain- 
(i)  Can Priya take-back the vehicle from Sony? 
(ii)  Will your answer be different, if Priya had not handed over the 
vehicle to Sony? (7 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) A LLP is a new form of legal business entity with limited liability. It's an 
alternative corporate business vehicle that only gives the benefits of 
limited liability at low compliance cost but allows its partners the 
flexibility of organizing their internal structure as a traditional 
partnership. Keeping in view of above, define the following 
characteristics of LLP. 
(i)  Body Corporate 
(ii)  Mutual Agency 
(iii)  Foreign LLPs 
(iv)  Artificial legal person (6 Marks) 
3. (a) (i) P, Q and R formed a partnership agreement to operate motor buses 
along specific routes for a duration of 12 years. After operating the 
business for four years, it was observed that the business incurred 
losses each year. Despite this, P is determined to continue the 
business for the remaining Period. Examine with reference to the 
Indian Partnership Act, 1932, can P insist to continue the business? 
If so, what options are available to Q and R who are reluctant to 
continue operating the business?  (4 Marks)   
(ii) A and B operate a textile merchant business in partnership. Mr. A 
finances the business and is a sleeping partner. In the regular 
course of business, B acquires certain fabric goods belonging to 
C. However, B is aware that these goods are stolen property. 
Despite this knowledge, B proceeds to purchase and sell some of 
these stolen goods. Moreover, B records proceeds from these 
sales in the firm’s books. Now, A wants to avoid the liability 
towards C, on the grounds of misconduct by B. In the light of the 
provisions of the Indian Partnership Act, 1932 discuss the liability 
of A and B towards C.  (3 Marks) 
  
118
 (b) (i) XYZ is a company incorporated under the Companies Act, 2013. 
 The paid up share capital of the company is held by others as on 
31.03.2024 in as under: 
(1)  Government of India               20% 
(2)  Life Insurance Corporation of India (Public Institution) 8% 
(3)  Government of Tamil Nadu             10% 
(4)  Government of Rajasthan             10% 
(5)  ABC Limited (owned by Government Company)         15% 
 As per above shareholding, state whether XYZ limited be called a 
government company under the provisions of the Companies Act, 
2013. (4 Marks) 
(ii)  M and N holding 70% and 30% of the shares in the company. 
Both died in an accident. Answer with reference to the provisions 
of the Companies Act, 2013, what will be the legal effect on the 
company as both the members have died? (3 Marks) 
(c)  Explain in brief with reference to the provisions of the Indian Contract 
Act, 1872, what are the rights enjoyed by Surety against the Creditor, 
the Principal Debtor and Co-Sureties?  (6 Marks) 
4. (a)  (i) Mr. J entered into an agreement with Mr. S to purchase his house 
for ` 20 lakh, within three months. He also paid ` 50,000/- as token 
money. In the meanwhile, in an anti-encroachment drive of the local 
administration, Mr. S's house was demolished. When Mr. J was 
informed about the incident he asked for the refund of token money. 
 Referring to the relevant provisions of the Indian Contract Act, 
1872 state whether Mr. J is entitled to the refund of the amount 
paid.  (4 Marks) 
(ii) Rama directs Shyam to sell laptops for him and agrees to give 
Shyam eleven percent (11%) commission on the sale price fixed 
by Rama for each laptop. As Government of India put restrictions 
on import of Laptops, Rama thought that the prices of laptops 
might go up in near future and he revokes Shyam's authority for 
any further sale. Shyam, before receiving the letter at his end sold 
5 laptops at the price fixed by Rama. Shyam asked for 11% 
commission on the sale of 5 Laptops for ` 1 lakh each. Explain 
under the provisions of the Indian Contract Act, 1872: 
(1)  Whether sale of laptops after revoking Shyam's authority is 
binding on Rama? 
(2)  Whether Shyam will be able to recover his commission from 
Rama, if yes, what will be the amount of such commission? 
 (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 
119
Page 4


MODEL TEST PAPER 9 
FOUNDATION COURSE 
PAPER 2 : BUSINESS LAWS 
Question No. 1 is compulsory. 
Attempt any four questions from the remaining five questions. 
Working notes should form part of the answers 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) R owns an electronics store. P visited the store to buy a water purifier 
priced at `54,000/-. He specifically requested R for a purifier with a copper 
filter. As P wanted to buy the purifier on credit, with the intention of paying 
in 9 equal monthly instalments, R demands a guarantor for the 
transaction. S (a friend of P) came forward and gave the guarantee for 
payment of water purifier. R sold P, a water purifier of a specific brand. P 
made payment for 4 monthly instalments and after that became insolvent. 
Explain with reference to the Indian Contract Act, 1872, the liability of S as 
a guarantor to pay the balance price of water purifier to R. 
 What will be your answer, if R sold the water purifier misrepresenting it 
as having a copper filter, while it actually has a normal filter? Neither P 
nor S was aware of this fact and upon discovering the truth, P refused 
to pay the price. In response to P's refusal, R filed the suit against S, 
the guarantor. Explain with reference to the Indian Contract Act 1872, 
whether S is liable to pay the balance price of water purifier to R? 
 (7 Marks) 
(b) A company, ABC limited as on 31.03.2023 had a paid-up capital of ` 1 
lakh (10,000 equity shares of ` 10 each). In June 2023, ABC limited 
had 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 XYZ private limited company. XYZ is a holding company of 
PQR private limited by having control over the composition of its board 
of directors. 
 Now, PQR private limited claims the status of being a subsidiary of 
ABC limited as being a subsidiary of its subsidiary i.e. XYZ private 
limited. Examine the validity of the claim of PQR private limited. 
 State the relationship if any, between ABC limited & XYZ private limited 
as per the provisions of the Companies Act, 2013.  (7 Marks) 
(c) The Indian Partnership Act does not make the registration of firms 
compulsory, yet the consequences or disabilities of non-registration 
have a persuasive pressure for their registration. Still, there are come 
cases where non-registration of firm does not affect certain rights. 
Explain with reference to the provisions of the Indian Partnership Act, 
1932.  (6 Marks) 
  
117
2. (a) Sony, a friend of Priya wanted to buy her two-wheeler. Priya agreed to 
sell her two-wheeler to Sony and it was decided that price of her two-
wheeler will be fixed by Priya's father, who is an auto dealer. Priya 
immediately handed over the keys to Sony. However, Priya's father 
refused to fix the price as he did not want Priya to sell her vehicle. Priya 
expressed her inability to sell the two-wheeler to Sony and asked for 
return, but Sony refused to return the same. Explain- 
(i)  Can Priya take-back the vehicle from Sony? 
(ii)  Will your answer be different, if Priya had not handed over the 
vehicle to Sony? (7 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) A LLP is a new form of legal business entity with limited liability. It's an 
alternative corporate business vehicle that only gives the benefits of 
limited liability at low compliance cost but allows its partners the 
flexibility of organizing their internal structure as a traditional 
partnership. Keeping in view of above, define the following 
characteristics of LLP. 
(i)  Body Corporate 
(ii)  Mutual Agency 
(iii)  Foreign LLPs 
(iv)  Artificial legal person (6 Marks) 
3. (a) (i) P, Q and R formed a partnership agreement to operate motor buses 
along specific routes for a duration of 12 years. After operating the 
business for four years, it was observed that the business incurred 
losses each year. Despite this, P is determined to continue the 
business for the remaining Period. Examine with reference to the 
Indian Partnership Act, 1932, can P insist to continue the business? 
If so, what options are available to Q and R who are reluctant to 
continue operating the business?  (4 Marks)   
(ii) A and B operate a textile merchant business in partnership. Mr. A 
finances the business and is a sleeping partner. In the regular 
course of business, B acquires certain fabric goods belonging to 
C. However, B is aware that these goods are stolen property. 
Despite this knowledge, B proceeds to purchase and sell some of 
these stolen goods. Moreover, B records proceeds from these 
sales in the firm’s books. Now, A wants to avoid the liability 
towards C, on the grounds of misconduct by B. In the light of the 
provisions of the Indian Partnership Act, 1932 discuss the liability 
of A and B towards C.  (3 Marks) 
  
118
 (b) (i) XYZ is a company incorporated under the Companies Act, 2013. 
 The paid up share capital of the company is held by others as on 
31.03.2024 in as under: 
(1)  Government of India               20% 
(2)  Life Insurance Corporation of India (Public Institution) 8% 
(3)  Government of Tamil Nadu             10% 
(4)  Government of Rajasthan             10% 
(5)  ABC Limited (owned by Government Company)         15% 
 As per above shareholding, state whether XYZ limited be called a 
government company under the provisions of the Companies Act, 
2013. (4 Marks) 
(ii)  M and N holding 70% and 30% of the shares in the company. 
Both died in an accident. Answer with reference to the provisions 
of the Companies Act, 2013, what will be the legal effect on the 
company as both the members have died? (3 Marks) 
(c)  Explain in brief with reference to the provisions of the Indian Contract 
Act, 1872, what are the rights enjoyed by Surety against the Creditor, 
the Principal Debtor and Co-Sureties?  (6 Marks) 
4. (a)  (i) Mr. J entered into an agreement with Mr. S to purchase his house 
for ` 20 lakh, within three months. He also paid ` 50,000/- as token 
money. In the meanwhile, in an anti-encroachment drive of the local 
administration, Mr. S's house was demolished. When Mr. J was 
informed about the incident he asked for the refund of token money. 
 Referring to the relevant provisions of the Indian Contract Act, 
1872 state whether Mr. J is entitled to the refund of the amount 
paid.  (4 Marks) 
(ii) Rama directs Shyam to sell laptops for him and agrees to give 
Shyam eleven percent (11%) commission on the sale price fixed 
by Rama for each laptop. As Government of India put restrictions 
on import of Laptops, Rama thought that the prices of laptops 
might go up in near future and he revokes Shyam's authority for 
any further sale. Shyam, before receiving the letter at his end sold 
5 laptops at the price fixed by Rama. Shyam asked for 11% 
commission on the sale of 5 Laptops for ` 1 lakh each. Explain 
under the provisions of the Indian Contract Act, 1872: 
(1)  Whether sale of laptops after revoking Shyam's authority is 
binding on Rama? 
(2)  Whether Shyam will be able to recover his commission from 
Rama, if yes, what will be the amount of such commission? 
 (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 
119
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)  Describe in brief about the following Regulatory bodies of the 
Government of India: - 
(i)  Securities and Exchange Board of India 
(ii)  Reserve Bank of India 
(iii)  Insolvency and Bankruptcy Board of India (6 Marks) 
5. (a) PTC Hotels in Bombay decided to sell their furniture by auction sale. For 
this purpose, they appointed RN & Associates as auctioneer. They invited 
top ten renowned Architects in Bombay for bidding. A right to bid was not 
notified by them. Furniture was put up in lots for sale. It was decided that 
for every lot of furniture there will be a reserve price. On 25th Feb 2024, 
Auction sale was started at 10.am in the lawn of PTC Hotels Bombay. For 
a special lot of furniture three parties came for bidding Mr. Neel, Mr. Raj 
and Mr. Dev on behalf of their respective companies. Bidding was as 
follows: 
Mr. Neel  ` 5.70 lakh 
Mr. Raj ` 4.85 lakh 
Mr. Dev ` 6.10 lakh 
 The sale was completed in favour of Mr. Neel by RN & Associates by 
fall of hammer. Mr. Dev's Bid was rejected on ground that Right to bid 
was reserved and company of Mr. Dev was not invited to bid. 
 For another bid of Italian Furniture was made by two parties as follows: 
Mr. Dheer ` 15 lakh 
Mr. Madhu (on behalf of R N & Associates) ` 15.20 lakh 
 Sale was completed in favour of Mr. Dheer instead of Mr. Madhu. 
 Mr. Dev and Mr. Madhu argued that auction sale was not lawful. Give 
your opinion with reference to provisions of the Sale of Goods Act, 
1930 whether Auction Sale will be considered lawful or not? (7 Marks) 
(b)  "Dissolution of partnership doesn't mean dissolution of firm". Do you 
agree with this statement? State any three situations where court can 
dissolve the partnership firm. (7 Marks) 
(c) Where a party to a contract refuses altogether to perform, or is 
disabled from performing his part of it, the other party has a right to 
rescind it. Discuss this statement and the effects of such refusal under 
the provisions of The Indian Contract Act, 1872.  (6 Marks) 
6. (a) Mr. Y issued a cheque for ` 10,000 to Mr. Z which was dishonoured by 
the Bank because Y did not have enough funds in his account and has no 
authority to overdraw. Examine as per the provisions of the Negotiable 
Instruments Act, 1881 whether- 
120
Page 5


MODEL TEST PAPER 9 
FOUNDATION COURSE 
PAPER 2 : BUSINESS LAWS 
Question No. 1 is compulsory. 
Attempt any four questions from the remaining five questions. 
Working notes should form part of the answers 
(Time allowed: 3 Hours) (100 Marks) 
1. (a) R owns an electronics store. P visited the store to buy a water purifier 
priced at `54,000/-. He specifically requested R for a purifier with a copper 
filter. As P wanted to buy the purifier on credit, with the intention of paying 
in 9 equal monthly instalments, R demands a guarantor for the 
transaction. S (a friend of P) came forward and gave the guarantee for 
payment of water purifier. R sold P, a water purifier of a specific brand. P 
made payment for 4 monthly instalments and after that became insolvent. 
Explain with reference to the Indian Contract Act, 1872, the liability of S as 
a guarantor to pay the balance price of water purifier to R. 
 What will be your answer, if R sold the water purifier misrepresenting it 
as having a copper filter, while it actually has a normal filter? Neither P 
nor S was aware of this fact and upon discovering the truth, P refused 
to pay the price. In response to P's refusal, R filed the suit against S, 
the guarantor. Explain with reference to the Indian Contract Act 1872, 
whether S is liable to pay the balance price of water purifier to R? 
 (7 Marks) 
(b) A company, ABC limited as on 31.03.2023 had a paid-up capital of ` 1 
lakh (10,000 equity shares of ` 10 each). In June 2023, ABC limited 
had 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 XYZ private limited company. XYZ is a holding company of 
PQR private limited by having control over the composition of its board 
of directors. 
 Now, PQR private limited claims the status of being a subsidiary of 
ABC limited as being a subsidiary of its subsidiary i.e. XYZ private 
limited. Examine the validity of the claim of PQR private limited. 
 State the relationship if any, between ABC limited & XYZ private limited 
as per the provisions of the Companies Act, 2013.  (7 Marks) 
(c) The Indian Partnership Act does not make the registration of firms 
compulsory, yet the consequences or disabilities of non-registration 
have a persuasive pressure for their registration. Still, there are come 
cases where non-registration of firm does not affect certain rights. 
Explain with reference to the provisions of the Indian Partnership Act, 
1932.  (6 Marks) 
  
117
2. (a) Sony, a friend of Priya wanted to buy her two-wheeler. Priya agreed to 
sell her two-wheeler to Sony and it was decided that price of her two-
wheeler will be fixed by Priya's father, who is an auto dealer. Priya 
immediately handed over the keys to Sony. However, Priya's father 
refused to fix the price as he did not want Priya to sell her vehicle. Priya 
expressed her inability to sell the two-wheeler to Sony and asked for 
return, but Sony refused to return the same. Explain- 
(i)  Can Priya take-back the vehicle from Sony? 
(ii)  Will your answer be different, if Priya had not handed over the 
vehicle to Sony? (7 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) A LLP is a new form of legal business entity with limited liability. It's an 
alternative corporate business vehicle that only gives the benefits of 
limited liability at low compliance cost but allows its partners the 
flexibility of organizing their internal structure as a traditional 
partnership. Keeping in view of above, define the following 
characteristics of LLP. 
(i)  Body Corporate 
(ii)  Mutual Agency 
(iii)  Foreign LLPs 
(iv)  Artificial legal person (6 Marks) 
3. (a) (i) P, Q and R formed a partnership agreement to operate motor buses 
along specific routes for a duration of 12 years. After operating the 
business for four years, it was observed that the business incurred 
losses each year. Despite this, P is determined to continue the 
business for the remaining Period. Examine with reference to the 
Indian Partnership Act, 1932, can P insist to continue the business? 
If so, what options are available to Q and R who are reluctant to 
continue operating the business?  (4 Marks)   
(ii) A and B operate a textile merchant business in partnership. Mr. A 
finances the business and is a sleeping partner. In the regular 
course of business, B acquires certain fabric goods belonging to 
C. However, B is aware that these goods are stolen property. 
Despite this knowledge, B proceeds to purchase and sell some of 
these stolen goods. Moreover, B records proceeds from these 
sales in the firm’s books. Now, A wants to avoid the liability 
towards C, on the grounds of misconduct by B. In the light of the 
provisions of the Indian Partnership Act, 1932 discuss the liability 
of A and B towards C.  (3 Marks) 
  
118
 (b) (i) XYZ is a company incorporated under the Companies Act, 2013. 
 The paid up share capital of the company is held by others as on 
31.03.2024 in as under: 
(1)  Government of India               20% 
(2)  Life Insurance Corporation of India (Public Institution) 8% 
(3)  Government of Tamil Nadu             10% 
(4)  Government of Rajasthan             10% 
(5)  ABC Limited (owned by Government Company)         15% 
 As per above shareholding, state whether XYZ limited be called a 
government company under the provisions of the Companies Act, 
2013. (4 Marks) 
(ii)  M and N holding 70% and 30% of the shares in the company. 
Both died in an accident. Answer with reference to the provisions 
of the Companies Act, 2013, what will be the legal effect on the 
company as both the members have died? (3 Marks) 
(c)  Explain in brief with reference to the provisions of the Indian Contract 
Act, 1872, what are the rights enjoyed by Surety against the Creditor, 
the Principal Debtor and Co-Sureties?  (6 Marks) 
4. (a)  (i) Mr. J entered into an agreement with Mr. S to purchase his house 
for ` 20 lakh, within three months. He also paid ` 50,000/- as token 
money. In the meanwhile, in an anti-encroachment drive of the local 
administration, Mr. S's house was demolished. When Mr. J was 
informed about the incident he asked for the refund of token money. 
 Referring to the relevant provisions of the Indian Contract Act, 
1872 state whether Mr. J is entitled to the refund of the amount 
paid.  (4 Marks) 
(ii) Rama directs Shyam to sell laptops for him and agrees to give 
Shyam eleven percent (11%) commission on the sale price fixed 
by Rama for each laptop. As Government of India put restrictions 
on import of Laptops, Rama thought that the prices of laptops 
might go up in near future and he revokes Shyam's authority for 
any further sale. Shyam, before receiving the letter at his end sold 
5 laptops at the price fixed by Rama. Shyam asked for 11% 
commission on the sale of 5 Laptops for ` 1 lakh each. Explain 
under the provisions of the Indian Contract Act, 1872: 
(1)  Whether sale of laptops after revoking Shyam's authority is 
binding on Rama? 
(2)  Whether Shyam will be able to recover his commission from 
Rama, if yes, what will be the amount of such commission? 
 (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 
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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)  Describe in brief about the following Regulatory bodies of the 
Government of India: - 
(i)  Securities and Exchange Board of India 
(ii)  Reserve Bank of India 
(iii)  Insolvency and Bankruptcy Board of India (6 Marks) 
5. (a) PTC Hotels in Bombay decided to sell their furniture by auction sale. For 
this purpose, they appointed RN & Associates as auctioneer. They invited 
top ten renowned Architects in Bombay for bidding. A right to bid was not 
notified by them. Furniture was put up in lots for sale. It was decided that 
for every lot of furniture there will be a reserve price. On 25th Feb 2024, 
Auction sale was started at 10.am in the lawn of PTC Hotels Bombay. For 
a special lot of furniture three parties came for bidding Mr. Neel, Mr. Raj 
and Mr. Dev on behalf of their respective companies. Bidding was as 
follows: 
Mr. Neel  ` 5.70 lakh 
Mr. Raj ` 4.85 lakh 
Mr. Dev ` 6.10 lakh 
 The sale was completed in favour of Mr. Neel by RN & Associates by 
fall of hammer. Mr. Dev's Bid was rejected on ground that Right to bid 
was reserved and company of Mr. Dev was not invited to bid. 
 For another bid of Italian Furniture was made by two parties as follows: 
Mr. Dheer ` 15 lakh 
Mr. Madhu (on behalf of R N & Associates) ` 15.20 lakh 
 Sale was completed in favour of Mr. Dheer instead of Mr. Madhu. 
 Mr. Dev and Mr. Madhu argued that auction sale was not lawful. Give 
your opinion with reference to provisions of the Sale of Goods Act, 
1930 whether Auction Sale will be considered lawful or not? (7 Marks) 
(b)  "Dissolution of partnership doesn't mean dissolution of firm". Do you 
agree with this statement? State any three situations where court can 
dissolve the partnership firm. (7 Marks) 
(c) Where a party to a contract refuses altogether to perform, or is 
disabled from performing his part of it, the other party has a right to 
rescind it. Discuss this statement and the effects of such refusal under 
the provisions of The Indian Contract Act, 1872.  (6 Marks) 
6. (a) Mr. Y issued a cheque for ` 10,000 to Mr. Z which was dishonoured by 
the Bank because Y did not have enough funds in his account and has no 
authority to overdraw. Examine as per the provisions of the Negotiable 
Instruments Act, 1881 whether- 
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(i)  Mr. Y is liable for dishonour of cheque, if yes, what are the 
consequences for such an offence? 
(ii)  What would be your answer if Y issued a cheque as a donation to  
Mr. Z?  (7 Marks) 
(b)  Explain the term Wagering agreement in the light of the Indian Contract 
Act, 1872. Also, explain some transactions resembling with wagering 
transaction but which are not void. 
OR 
(b) What is the meaning of contingent contract? Write briefly its essentials. 
Also, explain any three rules relating to enforcement of a contingent 
contract. (6 Marks) 
(c)  J, a wholesaler of premium Basmati rice delivered on approval 100 
bags of rice of 10 kg each to a local retailer, on sale or returnable basis 
within a month of delivery. The next day the retailer sold 5 bags of rice 
to a regular customer K. A week later K informed the retailer that the 
quality of rice was not as per the price. 
 The retailer now wants to return all the rice bags to J, including the 4 
bags not used by K. Can the retailer do so? 
 Also briefly describe the provisions underlying in this context of the 
Sale of Goods Act, 1930, (7 Marks) 
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