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Question Paper

CORPORATE AND ECONOMICS LAW Duration: 80

Details: Test – 4 Marks: 45

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Q-1 Bharat Computer Hardware Ltd. received an advance -payment for export of high-tech
hardware to a business concern in Singapore by entering into an export agreement to supply
the hardware within six months from the date of receipt of advance payment. The shipment of
hardware was made after 9 months and the documents covering the shipment were routed
through an authorized dealer through whom the advance payment was received.

Examine whether Bharat Computer Hardware Ltd. has discharged its obligation in accordance
with the provisions of the Foreign Exchange Management Act, 1999?

Is it possible to receive advance payment where the export agreement provides for shipment of
goods within 15 months from the date of receipt of advance payment? Also identify the
maximum rate of interest payable on the advance payment under the said Act

(5 marks)

Q-2(A) Mr. Sugam resided in India during the Financial Year 2016-17. He left India on 15th July,
2017 for Australia for pursuing higher studies in Biotechnology for 2 years. What would be his
residential status under the Foreign Exchange Management Act, 1999 during the Financial Years
2017 -18?

(B) Mr. Sugam requires every year USD 25,000 towards tuition fees and USD 30,000 for
incidental and stay expenses for studying abroad. Is it possible for Mr. Sugam to get the
required Foreign Exchange and, if so, under what conditions?

(6 marks)

Q-3 (A) PQR Finance Ltd. is a NBFC company with total assets of 550 crore, and an NPA of 50
crore in its balance sheet. The 50 crore loan consists of 9 cases of 5 crore each and 10 cases of
50 lakhs each. The management of the company wants to sell bad loans worth 50 crore to an
ARC. Of the Rs 50 crore, 45 crore is secured against various properties, while one case of 5 crore
is unsecured.

During detailed discussion with the legal counsel, it came to light that 2 crore of the secured
bad loan has not been registered with the central registry CERSAI, however this was not
informed to the buyer in the preliminary discussion. Analyse and advise the CEO of PQR Finance
Ltd. how much bad loan can he sell to the ARC under the SARFAESI, Act, 2002?

(4 marks)

(B) SUN Ltd. failed to repay the amount borrowed from RDB Bank Ltd. in accordance with the
terms of lending. The loan was granted against the mortgage of its Building. The Bank issued
notice as required under Section 13 of the SARFAESI Act, 2002. It was decided by the bank to
take possession of the Building after getting necessary assistance from the judicial authority.
State the provisions enumerated under Section 14 of the SARFAESI Act, 2002 in this regard.

(4 marks)

Q-4 (i) An Appellate Tribunal consisting of two members was formed to hear the appeal
preferred by Mr. Hari, being aggrieved by an Order made by the Adjudicating Authority under
the Prevention of Money Laundering Act, 2002. Two members of the Bench differ in their
opinion on a particular point referred in the appeal.

Explain the next course of action to be followed by the Bench members under the said Act.

(ii) Mr. Narayan willfully gives false information, refuses to give evidence and to sign statement
made by him in the course of proceedings under the provisions of Prevention of Money
Laundering Act, 2002. Explain the penal provisions and mode of recovery of fine or penalty
enumerated under the said Act.

(6 marks)

Q-5 Info-tech Overtrading Ltd. was ordered to be compulsory wound up by an order dated 10th
March, 2019 by the Tribunal. The official liquidator who has taken control of the assets and
other records of the company has noticed that :

(i) One of the contributory whose calls are pending to be paid is about to leave India for evading
payment of calls and;

(ii) A person having books of accounts of the company his possession may abscond to avoid
examination of books of accounts in respect of the affairs of the company.

Apprehending such possibilities, Tribunal detained such contributory for next 6 month
disallowing him to leave India as well as arrest & seized books of accounts from the person
which may possibly abscond to avoid examination of the affairs of the company.

Referring to the provisions of Companies Act, 2013, answer the following in current scenario:

(i) What is the validity of Tribunal's order for detention of contributory disallowing him to leave
India?

(ii) Is it correct from Tribunal's part to arrest and seize books of accounts from the person
planning to abscond to avoid examination of books of accounts in respect of the affairs of the
company?

(4 marks)
Q-6 (A) LED Bulb Ltd., has made default in filing financial statements and annual returns for a
continuous period of 4 financial years ending on 31st March, 2019. The Registrar of Companies
having jurisdiction approached the Central Government to accord sanction to present a petition
to Tribunal (NCLT) for the winding up of the company on the above ground under Section 272
of the Companies Act, 2013

Examine the validity of the ROC move, explaining the relevant provisions of the Companies Act,
2013. State the time limit for passing an order by the Tribunal under Section ·273 of the
Companies Act, 2013?

(3 marks)

(b) Toy Ltd. is a Japanese company having several business units all over the world. It has a
robotic unit with its head quarter in Mumbai and has a branch in Singapore. Headquarter at
Mumbai controls the branch of robotic unit. What would be the residential status of robotic
unit in Mumbai and that of the Singapore branch?

(3 marks)

Q-7 CASE STUDY MCQS

Excel bank has provided term loan of Rs 10 crores to ABC Limited, a steel manufacturing
company at an interest rate of 9% per annum and principal amount is to be payable in equal
half yearly installments within five years from the date of disbursement of loan. The loan is fully
secured against plant and machinery. The Company successfully repaid 4 installments along
with interest during the first and second year. From the beginning of the third year the profits
of the company fell drastically due to multiple factors including crash in steel prices, rise of coal
and iron ore prices and demand by the labours to increase their wage rate. The company
therefore could not repay the 5th installment but it paid the interest amount as and when due.
After the end of 60 days from the due date of the fifth installment the current manager of the
bank decided to sell the loan to XYZ limited, an asset reconstruction company, along with the
over due loan of 2 crores to another textile company, which was classified as NPA six months
ago, and a loan of Rs. 2 crores to a farmer Mr. Kishan, secured against agriculture land.

Excel bank has a business associate KN Ltd, which operates as an asset reconstruction
company.KN Ltd got a proposal to takeover ABC limited, an NBFC company. ABC Ltd has total
assets of rupees 500 crores, and NPA of Rs. 50 crores in its balance sheet. The loan of Rs. 50
crores consists of 9 cases of Rs. 5 crores each and 10 cases of Rs. 50 lakhs each.

The management of the ABC Ltd wants to sell bad loans worth Rs. 50 crores to KN Ltd.Of the Rs.
50 crore, Rs. 45 crore is secured against various properties, while one case of Rs. 8 crores is
unsecured. During detailed discussion with the legal counselor, it came to know that one case
of Rs. 5 crores of the secured bad loan has not been registered with the central registry,
however this was not informed to the buyer in the preliminary discussion.

Based on the above mentioned facts, you are required to answer the following questions

Q 1. SARFAESI Act, 2002 is applicable to only those notified NBFC which has an asset base of:

A) Rs. 500 crores.

B) Rs. 1,000 crores.

C) Rs. 5,000 crores.

D) Rs. 2,000 crores.

(2 Marks)

Q 2. How many cases of bad loans can ABC Ltd sell to asset reconstruction company KN Ltd –

A) 9 cases.
B) 7 cases.

C) 5 cases.

D) 8 cases.

(2 Marks)

Q 3. The loan given to the farmer Mr. Kishan against secured agriculture land be sold –

A) Can be sold only to asset reconstruction company (ARC).

B) Can be sold after being declared as NPA but only after expiry of 90 days (to ARC or other
person).

C) Cannot be sold.

D) Both A and B.

(2 Marks)

Q 4. Mr. Ram had resided in India during the Financial Year 2017-2018 for less than 183 days.
He again came to India on 1st May, 2018 for higher studies and business and stayed up to 15th
July, 2019. State the correct answer as to the residential status of Mr. Ram in the light of the
given fact as per the Foreign Exchange Management Act, 1999

(1) Mr. Ram can be considered as 'Person resident in India' during the financial year 2018-2019

(2) Mr. Ram cannot be considered as ‘Person resident in India' during the financial year 2018-
2019

(3) Mr. Ram can be considered as ‘Person resident in India' during the financial year 2019- 2020

(a) Both the statement (1) & (3) are correct

(b) Both the statement (2) & (3) are correct

(c) Only statement (1) is correct

(d) Only statement (2) is correct

(1 Mark)

Q-5 Mr. Ram gave two of his friends’ cash amount of two lakh each in case of dire necessity for
their business purposes. Later at the time of return, he asked both of them, in lieu of the same,
to buy his product via credit card and online transfers in installments through next couple of
months’ time for which he issued bills to adjust the amount in his account books.

Does this payment system through credit card and online transfer mode are covered under
money laundering act?

(a) No, payment are made through credit cards & online transfers hence all the transaction are
genuine

(b) Yes, money laundering transactions done via credit card and online payments comes under
the Prevention of Money Act

(c) No, it is not money laundering as none of Mr. Ram friends are benefiting from this
transaction.

(d) No, because the transactions are not done with shell companies.

(1 Mark)

Q-6 When can an application be made to Tribunal for constitution of a winding up committee
to assist and monitor the progress of liquidation proceedings by the Company Liquidator in
carrying out the function?

(a) Within two weeks from the date of passing of winding up order
(b) Within three weeks from the date of passing of winding up order

(c) Within four weeks from the date of passing of winding up order

(d) None of the above.

(1 Mark)

Q-7 Who shall make an application to the Tribunal for constitution of a winding up committee
to assist and monitor the progress of liquidation proceedings by the Company Liquidator in
carrying out the function?

a) No application required

b) Company Liquidator

c) Management

d) Members

(1 Mark)