CHAROTAR UNIVERSITY OF SCIENCE & TECHNOLOGY (CHARUSAT)

FACULTY OF MANAGEMENT STUDIES (FMS)

Indukaka Ipcowala Institute of Management (I2IM)
MBA / PGDM Programme, Semester III

Assignment - 1
MB802.2 Legal Environment and Public Systems
1

XYZ Ltd. was registered in the year 2013 under Companies Act. There are allegations
that the three directors who manage the affairs of the company are siphoning the funds
of the company. The company has not declared any dividends on the ground that
company is incurring losses. Mr. A, who controls 51% of the share capital of the
company sends a notice to the management that he will inspect the books of account to
verify the illegations. Examine the right of Mr. A to carry out the inspection. State the
persons who have the right to carry out the inspection under the Companies Act, 2013.

The Board of directors of Bharat Ltd. has a practical problem. The registered office of
the company is situated in a classified backward area of Maharashtra. The Board wants
to keep its books of account at its corporate office in Mumbai which is conveniently
located. The Board seeks your advice about the feasibility of maintaining the accounting
records at a place other than the registered office of the company. Advise.

Define the expression Accounting Standards within the meaning of Companies Act,
2013.

XYZ Limited did not prepare its Balance Sheet as at 31st March, 2015 and the Profit and
Loss Account for the year ended on that date in conformity with some of the mandatory
Accounting Standards issued by the Institute of Chartered Accountants of India. You are
required to state with reference to the provisions of the Companies Act, 2013, the
responsibilities of directors and statutory auditor of the company in this regard.

Mr. White is working as Chief Accountant in White Metal Limited. The Board of
Directors of the said company propose to charge him with the duty of ensuring
compliance with the provisions of the Co Act, 2013 so that books of account can be
properly maintained and Balance Sheet and Profit and Loss Account can be prepared as
per the provisions of law. Draft a "Board Resolution" for the said purpose. Also point out
the consequences in case of default; when such a resolution is passed Answer Board
Resolution for charging Mr. White, Chief Accountant, with the duty of Compliance with
the requirements of Sections 129 & 134 of the Companies Act, 2013. Resolved that Mr.
White, Chief Accountant of the company be and is hereby charged with the duty of
seeing that the requirements of Sections 129 and 134 of the Companies Act, 2013 are
duly and fully complied with. Resolved further that the said Mr. White is hereby
entrusted with the authority to do such Acts or deeds as may be necessary or expedient
for the purpose of discharging his above referred duties. Consequences of
contravention: Section 128(6) provides that if the managing director, the whole-time

director in charge of finance, the Chief Financial Officer or any other person of a
company charged by the Board with the duty of complying with the provisions of this
section, contravenes such provisions, such managing director, whole-time director in
charge of finance, Chief Financial officer or such other person of the company shall be
6punishable with imprisonment for a term which may extend to one year or with fine
which shall not be less than fifty thousand rupees but which may extend to five lakh
rupees or with both. Do Mr. White is liable for punishment as referred above?
6

Mr. Ramanujam, one of the Directors in Debari Food Processing Limited was not
satisfied with the performance of the company in financial matters. He requested Mr.
Anandaraja, a Chartered Accountant, to inspect the books of accounts of the company on
his behalf. Decide, under the provisions of the Companies Act, 2013 whether the said
company can refuse to allow Mr. Anandaraja to inspect the books of accounts?

Gujarat Textiles Limited is having a foreign subsidiary company. The said Indian
holding company failed to furnish particulars of its foreign subsidiary company in its
Balance Sheet. Decide the liability of Gujarat Textiles Limited under the Companies Act,
2013.

State giving reasons whether the following are true or false under the provisions of the
Companies Act, 2013? The Board of Directors of ABC Ltd. wants to circulate unaudited
accounts before the Annual General Meeting of the shareholders of the Company.
Justify.

A company wants to include the following clause in its Articles of Association: Each
director shall be entitled to be paid out of the funds of the company for attending
meetings of the Board or a Committee thereof including adjourned meeting such sum as
sitting fees as shall be determined from time to time by the Directors but not exceeding a
sum of `30,000 for each such meeting to be attended by the Director. You are required
to advise the company as to the validity of such a clause and the correct legal position
under the provisions of the Companies Act, 2013

10 A complaint was received by the Central Government from some shareholders of a

public company that a person had been appointed as the Managing Director of the
company without seeking the approval of the Central Government when such approval
was required. State as to what action can be taken by the C.G. under the Co Act, 2013.
Also examine the validity of the acts of the Managing Director, if the complaint is found
true.
11 Directors of ABC Limited have been given the following remuneration -- Guarantee
Commission has been paid to them for having guaranteed the term loans obtained from a
financial institution. Examine the validity of the above payment in the light of the
provisions of the Co Act, 2013.
12 M/s Star Health Specialities Ltd. owns a Multi-specialty Hospital in Chennai. Dr.

Hamilton, a practising Heart Surgeon, has been appointed by the company as its director
and it wants to pay him fee, on case to case basis, for surgery performed on the patients
at the hospital. A question has arisen whether payment of such fee to him would amount
to payment of managerial remuneration to a director subject to any restriction under the
Companies Act, 2013. Advise the company, which seeks to ensure that the same does not
contravene any provision of the Co Act, 2013.
13
Advise M/s Super Specialities Ltd. in respect of the following proposals under
consideration of its Board of directors:
(i)

Appointment of Managing Director who is more than 70 years of age;

(ii)

Payment of commission of 4% of the net profits per annum to the directors of the
company;

(iii)

Payment of remuneration of `40,000 per month to the whole time director of the
company running in loss and having an effective capital of `95.00 lacs.

14 X, a Director of MJV Ltd., was appointed on 1st April, 2011, one of the terms of
appointment was that in the absence of adequacy of profits or if the company had no
profits in a particular year, he will be paid remuneration in accordance with Schedule V.
For the financial year ended 31st March, 2014, the company suffered heavy losses. The
company was not in a position to pay any remuneration but he was paid `50 lacs for the
year, as paid to other directors. The effective capital of the company is `150 crores.
Referring to the provisions of Companies Act, 2013, as contained in Schedule V,
examine the validity of the above payment of remuneration to X.
15 Can a company pay compensation to its directors for loss of office? Explain briefly the
relevant provisions of the Companies Act, 2013 in this regard?
16 Mr. Doubtful was appointed as Managing Director of Carefree Industries Ltd. for a
period of five years with effect from 1.4.2011 on a salary of `12 lakhs per annum with
other perquisites. The Board of directors of the company on coming to know of certain
questionable transactions, terminated the services of the Managing Director from
1.3.2014. Mr. Doubtful termed his removal as illegal and claimed compensation from the
company. Meanwhile the company paid a sum of `5 lakhs on ad hoc basis to Mr.
Doubtful pending settlement of his dues. Discuss whether:
(i) The company is bound to pay compensation to Mr. Doubtful and, if so, how much.
(ii) The company can recover the amount of `5 lakhs paid on the ground that Mr.
Doubtful is not entitled to any compensation, because he is guiding of corrupt practice.
17 One Shri Dwarkadas Laxmichand Modi executed a family Trust Deed on 06.04.1983
forming a trust in favour of six minors, including Vimal Kishor Shah and Jayesh Dinesh
Shah. Clause 20 of the Trust Deed provided that if any dispute arise then it would be

resolved in pursuance of the provisions of the Indian Arbitration Act, and the decision of
the arbitrators would be binding on the parties to the arbitration.
But soon after the formation of the trust, differences cropped up between the
beneficiaries and one of the trustees resigned from the trusteeship. Finally a demand was
made to amicably resolve the disputes/differences by referring them to the arbitrator as
per Clause 20 of the Trust Deed. As the parties could not settle the differences and could
not also appoint an arbitrator, one set of beneficiaries filed an application under Section
11 of the Arbitration and Conciliation Act, in the High Court.
Can the beneficiary filed an complaint / Case? Justify the provision for the given
situation
18 Applicant and his mother were Directors of the Respondent Company. On 28 th May,
2016, applicant received a notice for a Board Meeting of the Company to be held on
4th June, 2016 having agenda item of selection of a Company Secretary and to deal with
other matters with permission of the Chair. As the selection of Company Secretary is a
major item for the Company, applicant and his mother were desirous of attending the
Board Meeting. However, they had scheduled for foreign visit for the period ranging
from 1st June, 2016 to 14th June, 2016 and because of this reason applicant and his
mother requested for rescheduling of the Meeting either on or before 1 st June, 2016 or
after 14th June, 2016. In return, Respondent Director assured for rescheduling and fixed
the date on 1st June, 2016.
But on 30th day of May, 2016, another notice for the Board meeting was sent to the
applicant about rescheduling the Board Meeting from 1st June, 2016 to 4th June, 2016.
The reason communicated to the Applicant was that the candidates who had applied for
the post of Company Secretary would not be able to come for an interview on 1 st June,
2016 and thus meeting to be held on 4th June, 2016.
Owing to the importance concerning the position of Company Secretary in the
Company, the Applicant requested for facility to participate in the Board meeting
through video conferencing and the Respondent assured that the same would be
provided. The Applicant and his mother, trusted the Respondent Directors assurance,
and left for their scheduled trip.
The Respondent Director, on 3rd June, 2016, sent the Applicant an email informing him
that he and his mother would not be permitted to participate in the meeting through
video conferencing in order to comply with Rule 3(3)(e) of Companies (Meetings of
Board and its Powers) Rules, 2014.
Even though Applicant sent his staff to arrange for video conferencing through Skype,
the Respondent Director disconnected the Skype facility to prevent the Applicant and his
mother from participating in the Board Meeting.
In the same Board Meeting they appointed an Independent Director (Additional
Director) of the Company. Further on 22nd June, 2016 another Board Meeting was held
and the minutes of the Board Meeting held on 4 th June, 2016 were considered to give
effect to the resolution passed in the Meeting held on 4th June, 2016.
In defence, Respondent Director cited Rule 3(3)(e) of the Companies (Meetings of
Board and its Powers) Rules, 2014. For ease of reference the said Rule 3(3)(e) is

reproduced below:
"Rule 3(3)(e) - The director, who desires, to participate may intimate his intention of
participation through the electronic mode at the beginning of the calendar year and such
declaration shall be valid for one calendar year."
The Respondents contended that there being no prior intimation from the Applicant at
the beginning of the calendar year for participation in the Board Meetings through
video-conferencing, the Applicant and his mother were barred by the fetters of Rule 3(3)
(e) of the Companies (Meetings of Board and its Powers) Rules, 2014, and, thus, could
not be permitted to participate in the Company's Board Meeting via video-conferencing.
DO DIRECTORS RIGHT OF DIGITAL PRESENCE IN BOARD MEETINGS?
19
The information in the present was filed by Actuate Business Consulting Pvt. Ltd.
(Informant No. 1) and Abha Kathuria Kohli (Informant No. 2) [collectively,
Informants] under Competition Act, 2002 (the Act) against Ambika Trading &
Construction Co. Pvt. Ltd. (Opposite Party) alleging, inter alia, contravention of the
provisions of Section 4 of the Act.
Briefly stated, the Informants have booked two cottages i.e., A1 & A2, admeasuring
2500 sq. ft. each, in Deodar Cottages; a residential project developed by the Opposite
Party at Saattaal in Nainital, Uttarakhand (Project) for a total sale consideration of Rs.
1 crore. The Informants have paid 95% of the total sale consideration to the Opposite
Party and remaining 5% was agreed to be paid at the time of handing over of the
possession of the cottages and execution of sale deed. It is stated that initially Informant
No. 1 and Ambika Construction Pvt. Ltd. (sister concern of the Opposite Party) signed a
Memorandum of Understanding (MOU) on 13.03.2008 and subsequently, they entered
into an allotment agreement on 20.08.2008 (Agreement) in this regard.
As per the said Agreement, in the event of any delay in giving possession of the
cottages beyond the committed period of two years from the date execution of
Agreement i.e. by 20.08.2010, Ambika Construction Pvt. Ltd. would be liable to pay a
penalty of Rs. 10/- per sq. ft. per month. It is averred that even after a lapse of more than
five years from the committed date, the Opposite Party has not handed over the cottages.
BASED ON GIVEN SITUATION CAN THEY APPROPRIATELY PUNISH THE
OPPOSITE PARTY FOR ABUSE DISCUSS PROVISIONS OF CONTRAVENTION
FOR GIVEN SITUATION
20 The Appellant, trading as M/s. Om Perfumery, made an application to the Registrar of
Trade Marks to register a trade mark by name RAMAYAN with the device of crown in
class 3 in respect of incense sticks (agarbattis, dhoops) and perfumeries etc., The
Respondent was a dealer for sale of the products of the Appellant and was also trading as
M/s. Badshah Industries. The Respondent filed a Notice of Opposition to oppose the
registration of aforesaid trademark claiming that the impugned mark, being the name of

a religious book, cannot become the subject matter of monopoly for an individual.
Can M/s. Badshah Industries sue/file case / complain / Notice against the OM
Perfumery.

1. Right of Registrar or Inspector to take copies of books of account

The Registrar or Inspector making an inspection or inquiry under section may do
the following in the course of inspection or inquiry:
(a) to make copies of books of account and other books and papers; or
(b) to place marks of identification on the books in token of inspection having
been made.
PERSON WHO HAVE RIGHT OF INSPECTION
2.

Board Of Director
Registrar of the company
Creaditor and contributiers
Advisory committee
Tribunal
As per new Companies Act, 2013, if a company maintains its books of accounts at
any other place, the same should be reported to RoC by way of filing of Form AOC5(Earlier it was Form 23AA under Companies Act, 1956). Non-compliance can result
into heavy monetary penalty as well as imprisonment of Directors/MD/CFO.

Any or all such accounting records may also be kept at any other place in
India as decided by BoD

Form AOC-5 must be filed mentioning the full address of place within 7
days of decision made by BoD to keep the books of accounts at any other
place in India alongwith copy of board resolution as an attachment. The form
is not required to be digitally signed by practising CA/CS/CMA. (Kindly note
that proof of address where books are kept is not required to be attached)

3. as per companys act 2013, Accounting standards means standard of

accounting or and addendum thereto for companies or class of companies as
specified in rules 3.

5. yes, Mr. white is liable for punishment as referred above.