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CA IPCC : Sample / Mock Test Paper (with Model Answers) - BUSINESS LAWS, ETHICS & COMMUNICATION Sep 2014

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Test Series: September, 2014 Mock Test Paper 1 INTERMEDIATE (IPC): GROUP I PAPER 2: BUSINESS LAWS, ETHICS AND COMMUNICATION Question No.1 is compulsory. Attempt any five questions from the remaining six questions. Time Allowed 3 Hours 1. Maximum Marks 100 (a) Mr. X decided to wear his marriage coat in family function. He gave the coat to the laundry for the dryclean. Launderer gives X a receipt for the received clothe with the printed condition on the back side that only 10% of the amount will be paid in case of the damage of the clothes. X, without reading the terms keeps the receipt in the pocket. After taking the delivery, X finds the coat to be damaged. Examine the position of X in the light of the Indian Contract Act,1872? (5 Marks) (b) Explain the power of the company to close the register of members or debenture holders or other security holders as per the Companies Act, 2013. State the manner in which the corresponding provision given under the Companies Act, 1956 differs from the law given under new Act. (5 Marks) (c) State with reasons as to nature of ethics, whether the following statements are correct or incorrect: (i) Ethics is following the law. (ii) Ethics is not science. (d) What are the different ways of non-verbal communication? 2. (a) (i) (5 Marks) (5 Marks) A company employed 20 full time and 5 part-time employees who were drawing salary of less than Rs. 10,000 per month. After completing service of 28 days, in an accounting year, 10 full-time employees submitted their resignations and left the service of the company. The Board of directors of this company decided not to give the bonus to the employees, who resigned the services. Decide, stating the provisions of the Payment of Bonus Act, 1965, whether the employees, who resigned, will get relief. (4 Marks) (ii) Mr. K, an employee in a coal mine with five days working in a week. K was not in continuous service during the financial year 2012-2013. He worked only for 150 days and due to arising out of an accident during working in a mine, he was on leave with full pay for 45 days. Referring to the provisions of the Payment of Gratuity Act, 1972 decide, whether K is entitled to gratuity payable under the Act? (4 Marks) The Institute of Chartered Accountants of India (b) What is the concept behind emphasizing the ecological ethics. (4 Marks) (c) Explain how interpersonal communication is inescapable and irreversible . (4 Marks) 3. (a) (i) Discuss with reasons, in the following given conditions, whether X can be called as a holder under the Negotiable Instruments Act, 1881: (I) X who obtains a cheque drawn by Y by way of gift. (II) X, the payee of the cheque, who is prohibited by a court order from receiving the amount of the cheque. (III) X, finds a cheque payable to bearer, on the road and retains it. (IV) X, the agent of Y, is entrusted with an instrument without endorsement by Y, who is the payee. (V) X, steals a blank cheque of Y and forges Y s signature. (5 Marks) (ii) Referring to the provision of the Negotiable Instruments Act, 1881, examine the validity of the following: A Bill of Exchange originally drawn by M for a sum of Rs. 10,000, but accepted by R only for Rs. 7,000. (3 Marks) (b) Explain communications is another area in which ethical concern may arise . (4 Marks) (c) How negotiations can be approached? 4. (4 Marks) (a) An allottee of shares in a Company brought action against a Director in respect of false statements in prospectus. The director contended that the statements were prepared by the promoters and he has relied on them. Is the Director liable under the circumstances? Decide referring to the provisions of the Companies Act, 2013. (8 Marks) (b) What are the common CSR policies ?. (c) Draft the performa of affidavit for not obtaining Marriage certificate. 5. (4 Marks) (4 Marks) (a) A, the bailor, pledges a cinema projector and other accessories with Cine Association Co-operative Bank Limited, the bailee, for a loan. A requests the bank to allow the pledged goods to remain in his possession and promises to hold the same in trust for the bailee and also further promises to handover the possession of the same to the bank whenever demanded. Examining the provisions of the Indian Contract Act, 1872 decide, whether a valid contract of pledge has been made between A, the bailor and Bank, the bailee? (8 Marks) (b) Write a note on the powers of the Central Government with respect to the Companies Act, 1956 in regard to conversion of debentures and loans into shares of the company under the following heads: The Institute of Chartered Accountants of India (i) When terms of issue of such debenture or terms of loan do not include term providing for an option of conversion; (ii) Matters considered in determining the terms and conditions of such conversion. (4 Marks) (c) State with reason whether the following statement is correct or incorrect: (4 Marks) (i) A good environmental practice improves corporate performance (ii) Business and industry are closely linked with environment and resource utilization . 6. (a) State the procedure for passing a resolution by Postal Ballot as per the Companies Act, 1956. (8 Marks) (b) Draft a letter informing the customer that his cheque has been dishonoured.(4 Marks) (c) State whether the following statements are correct or incorrect: (i) (4 Marks) A proposal may be revoked by the proposer before the posting of the letter of acceptance by the acceptor. (ii) 'An agreement with an alien friend is valid but an agreement with an alien enemy is void'. (iii) Term Significant influence used in the definition of Associate company under the Companies Act, 2013 means control of at least 2% of total share capital, or of business decisions under an agreement. (iv) As per the Companies Act, 2013 , Cash flow statement is the compulsory part of the financial statement of one person company, small company and dormant company. 7. Answer any FOUR of the following: (4 x 4=16 Marks) (a) Examine the law relating to review of order regarding determination of applicability of the EPF & MP Act, 1952 and the money due. (4 Marks) (b) M/s X Ltd. was incorporated on 1.4.2013. No General Meeting of the company has been held so far. Explain the provisions of the Companies Act, 1956 regarding the time limit for holding the first annual general meeting of the Company and the power of the Registrar to grant extension of time for the First Annual General Meeting. (4 Marks) (c) State the purposes for which the Securities Premium Account can be used under the provisions of the Companies Act, 1956. (4 Marks) (d) Explain the pragmatic reasons for maintaining ethical behaviour in marketing through marketing executives. (4 Marks) (e) ABC Ltd. proposes to convene an EGM for changing the name of the company to BCD Ltd. Draft the notice for calling the EGM of the members. (4 Marks) The Institute of Chartered Accountants of India Test Series: September, 2014 MOCK TEST PAPER 1 INTERMEDIATE (IPC): GROUP I PAPER 2 : BUSINESS LAWS, ETHICS AND COMMUNICATION SUGGESTED ANSWERS/HINTS 1. (a) According to the Indian Contract Act, 1872, sometimes there are situation where there are contracts with special conditions. These special conditions are conveyed tacitly and the acceptance of these conditions are also conveyed by the offeree again tacitly or without him even realizing it. Where a launderer gives his customer a receipt for clothe received for drycleaning. The receipt carries special conditions and are to be treated as having been duly communicated to the customer and therein a tacit acceptance of these conditions is implied by the customer s acceptance of the receipt [Lily White vs. R. Muthuswami [1966] A. Mad. 13]. Thus in the given problem, X cannot claim the full cost of the marriage coat and has right to get only 10% of the cost of the clothe. (b) Power to close register of members or debenture holders or other security holders- Section 91 of the Companies Act, 2013 deals with the closing of the register of members. The provision says that(i) Closing of register of members, debenture holders or other security holder by giving previous notice- A company may close the register of members or the register of debenture-holders or the register of other security holders for any period or periods not exceeding in the aggregate forty-five days in each year, but not exceeding thirty days at any one time, subject to giving of previous notice of at least seven days or such lesser period as may be specified by Securities and Exchange Board for listed companies or the companies which intend to get their securities listed, in such manner as may be prescribed. (ii) If the register of members or of debenture-holders or of other security holders is closed without giving the notice or after giving shorter notice than that so provided, or for a continuous or an aggregate period in excess of the limits specified above, the company and every officer of the company who is in default shall be liable to a penalty of 5,000/- for every day subject to a maximum of one lakh rupees during which the register is kept closed. Point of comparison with respect to the Companies Act, 1956 This section of 2013 Act replaces section 154(Power to close register of members or debenture holders) of the 1956 Act. The Institute of Chartered Accountants of India The new Act of 2013 introduces the closure of the Registers of other security holders in the provision. Listed companies or the companies which intend to get their securities listed( i.e., the unlisted companies) close the register of members/ register of debenture-holders / the register of other security holders by giving a previous notice of at least 7 days/ such lesser period as may be specified by Securities and Exchange Board. This law pertaining to listed companies is lacking in the 1956 Act. In case of default with respect to the closure of register of member / register of debenture-holders / the register of other security holders, there the company and every officer of the company who is in default shall be liable to a penalty of five thousand rupees for every day during which register is closed but not exceeding one lakh rupees. This limit of penalty is lacking in 1956 Act. (c) (1) Incorrect: A good system of law does incorporate many ethical standards, but Law can deviate from what is ethical. Law can become ethically corrupt, as some totalitarian regimes have made it. Law can be made to be a function of power alone and designed to serve the interests of narrow groups. Law may have a difficult time designing or enforcing standards in some important areas, and may be slow to address new problems. Hence, Ethics is not following the law. (2) Correct: Social and natural science can provide important data to help us make better ethical choices. But science alone does not tell us what we ought to do. Science may provide an explanation for what humans are like. But ethics provides reasons for how humans ought to act. And just because something is scientifically or technologically possible, it may not be ethical to do it. Hence, Ethics is not science. (d) One may continue to communicate non-verbally through: Kinesics or Body language: All our bodily movements, gestures, postures etc., are guided by our feelings and thought processes. The nodding of our head, blinking of our eyes, waving of our hands, shrugging of our shoulders etc., are expressions of our thought and feelings. All these movements are the signals that our body sends out to communicate. Paralanguage: The term paralanguage is used to describe a wide range of vocal characteristics like tone, pitch, and speed etc vocal cues that accompany spoken language which help to express and reflect the speaker s attitude.Speaker uses a vast range of vocal cues like: (a) Pitch Variation (b) Speaking The Institute of Chartered Accountants of India (c) Pause (d) Volume variation (e) Non fluencies (f) Word Stress Artificial Communication : It is well known that we react to people on the basis of their appearance. The use of personal adornment like clothing , accessories, makeup, hairstyle etc. provides important non verbal cues about one s age, social and economic status, educational level, personality etc. Proxemics : refers to the space that exists between us when we talk or relate to each other as well the way we organize space around us. We can also call it space language . Chronemics or Time language: is the study of how we use time to communicate. Punctuality is an important factor in time communication. Misunderstandings or disagreements involving time can create communication and relationship problems. Haptics : is communication through touch .How we use touch sends important messages about us. It reveals our perceptions of status, our attitudes and even our needs. Silence: The absence of paralinguistic and verbal cues also serves important communicative functions. 2. (a) (i) In accordance with the provisions of Section 2(13) of the Payment of Bonus Act, 1965 any person other than an apprentice employed on a salary or wage not exceeding Rs. 10,000 per month in any industry to do any skilled or unskilled, manual, supervisory, managerial, administrative, technical or clerical work for hire or reward whether the terms of employment be express or implied is eligible for bonus. Further, in accordance with the provisions of Section 8 of the Payment of Bonus Act, 1965 every employee of an establishment covered under the Act is entitled to bonus from his employer in an accounting year provided he has worked in that establishment for not less than thirty working days in the year on a salary less than Rs. 10,000 per month. The problem as asked is based on the above provisions of the Act. According to it, the employees who have resigned are not entitled to bonus because they have given their services only for 28 days in an accounting year although they are drawing salary less than Rs. 10,000 per mensem. (ii) As per Section 2 A of the Payment of Gratuity Act, 1972 an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, lay-off, strike or a lockout or cessation of work not due to any fault of an employee. The Institute of Chartered Accountants of India Where any employee (not being an employee employed in a seasonal establishment) is not in continuous service for any period of one year he shall be deemed to be in continuous service under the employer for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than (i) one hundred and ninety days, in the case of any employee employed below the ground in a mine or in an establishment which works for less than six days in a week, and (ii) two hundred and forty days, in any other case. For the purposes of calculating the number of days on which an employee has actually worked under an employer shall include the days on which the person was absent due to temporary disablement caused by accident arising out and in the course of his employment. Thus, as per the above provisions, K is entitled for gratuity because he was in continuous service (150+45 days) more than 190 days in 2012-2013 and was working in a mine with 5 days in a week(less than six days in a week). (b) Ecological ethics is based on the concept that the environment should be protected not only for the sake of human beings but also for its own sake. The issue of environmental ethics goes beyond the problems relating to protection of environment or nature in terms of pollution, resource utilization or waste disposal. It is the issues of exploitive human nature and attitudes that should be addressed in a rational way. Problems like Global warming, Ozone depletion and disposal of hazardous wastes that concern the entire world. They require International cooperation and have to be tackled at the global level. Unless businesses recognize the interrelationships and interdependencies of the ecological systems within which they operate and unless they ensure that their activities will not seriously injure these systems one cannot hope to deal with the problem of pollution. (c) The following principles are key to interpersonal communication: Interpersonal communication is inescapable: We cannot keep ourselves away from communication. The very attempt not to communicate, communicates something. Not only through words but also through the tone of voice and gestures, postures, facial expressions etc, we constantly communicate to others. Interpersonal communication is irreversible: A Russian proverb says, "Once a word goes out of your mouth, you can never swallow it again." You cannot really take back something once it has been said. The effect will inevitably remain. 3. (i) Person to be called as a holder: As per section 8 of the Negotiable Instruments Act, 1881 holder of a Negotiable Instrument means any person entitled in his own name to the possession of it and to receive or recover the amount due thereon from The Institute of Chartered Accountants of India the parties thereto. On applying the above provision in the given cases(I) Yes, X can be termed as a holder because he has a right to possession and to receive the amount due in his own name. (II) No, X is not a holder because to be called as a holder he must be entitled not only to the possession of the instrument but also to receive the amount mentioned therein. (III) No, X is not a holder of the Instrument though he is in possession of the cheque, so is not entitled to the possession of it in his own name. (IV) No, X is not a holder. While the agent may receive payment of the amount mentioned in the cheque, yet he cannot be called the holder thereof because he has no right to sue on the instrument in his own name. (V) No, X is not a holder because he is in wrongful possession of the instrument (ii) As per the provisions of the Negotiable Instruments Act 1881, acceptance may be either general or qualified. It is qualified when the drawee does not accept the bill according to the apparent tenor of the bill but attaches some condition or qualification which have the effect of either reducing his (acceptor s) liability or acceptance of this liability is subject to certain condition. The holder of the bill is entitled to require an absolute and unconditional acceptance, otherwise he will treat it as dishonoured however, he may agree to qualified acceptance but he does so at his own peril, since he discharges all parties prior to himself, unless he has obtained their consent. Thus in this given case in accordance with the Explanation to Section 86 of the Act, when the drawee undertakes the payment of part only of the sum ordered to be paid, it is a qualified acceptance and the drawer may treat it as dishonoured unless agreed by him. If the Drawer (M) agrees to acceptance, the drawee (R) is responsible for a sum of Rs. 7000 only. (b) Communications is another area in which ethical concerns may arise. False and misleading advertising, as well as deceptive personal-selling tactics, anger consumers and can lead to the failure of a business. Truthfulness about product safety and quality are also important to consumers. The Food and Drug Regulatory authorities need to ensure that customers are told the truth about product safety, quality, and effectiveness claims. Some manufacturers fail to provide enough information to consumers about differences or similarities between products. For example, a lawsuit filed by consumers against Johnson claimed that the company s Acuvue and 1-Day Acuvue contact lenses were actually the same product. Consumers were directed by the company to dispose of the 1-Day Acuvue lenses after one day s use. The suit claims that because the two products were The Institute of Chartered Accountants of India identical, the lenses could have been worn up to two weeks. It is estimated that six million people who used contact lenses spent $1.1 billion on unnecessary replacements because of the company s misleading advertising. Johnson & Johnson agreed to pay up to $860 million to settle the complaints. Another important aspect of communications that may raise ethical concerns relates to product labelling. It is mandatory for cigarette manufacturers to indicate clearly on cigarette packing that smoking cigarettes is harmful to the smoker s health. (c) Negotiation occurs when two or more parties-either individuals or groups discuss specific proposals in order to find a mutually acceptable agreement. Negotiations can be approached in four ways. Each of these approaches produces a different outcome. Win-Lose Orientation : This is the approach taken by competitive communicators. The win-lose orientation is based on the assumption that only one side can reach its goals and that any victory by that party will be matched by the other's loss. Despite the fact that it produces losers as well as winners, a win-lose orientation can sometimes be the best approach to negotiating. Lose-Lose Orientation: With a lose-lose orientation, a conflict plays out in a way that damages both parties to such a degree that everyone feels like a loser. Nobody starts out seeking a lose-lose outcome, of course; but sometimes when people feel that a negotiating partner is blocking them, they wind up seeking revenge. Compromise: Sometimes it seems better to compromise than to fight battles in a competitive manner and risk a lose-lose outcome. There are cases in which compromise is the best obtainable outcome-usually when disputed resources are limited or scarce. Win-Win Orientatio: A win-win approach differs significantly from the preceding negotiating styles. It is a collaborative approach to negotiation and assumes that solutions can be reached that satisfy the needs of all parties . 4. (a) Yes, the Director shall be held liable. A director can escape liability for misstatements in a prospectus only on the grounds specified under Section 34 and 35 of the Companies Act, 2013. Relying on statements prepared by promoters is not a ground included there under. Accordingly, no defence shall be available to the Director. A Director shall not be liable if he puts up the following defences: (i) Such statement or omission in the prospectus was immaterial, or (ii) Director had reasonable grounds to believe, and did up to the time of issue of the prospectus believe, that the statement was true or the inclusion or omission was necessary(Section 34, the Companies Act, 2013) The Institute of Chartered Accountants of India (iii) Where a person having consented to become a director of the company, withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent; or where the prospectus was issued without the knowledge or consent of a person, and that on becoming aware of its issue, he forthwith gave a reasonable public notice that it was issued without his knowledge or consent (Section 35, the Companies Act, 2013). (b) CSR Policies : Corporate Social Responsibility (CSR) refers to operating a business in a manner that accounts for the social and environmental impact created by the business. CSR means a commitment to developing policies that integrate responsible practices into daily business operations, and to reporting on progress made toward implementing these practices. Common CSR policies include: Adoption of internal controls reform in the wake of Enron and other accounting scandals; Commitment to diversity in hiring employees and barring discrimination; Management teams that view employees as assets rather than costs; High performance workplaces that integrate the views of line employees into decision-making processes; Adoption of operating policies that exceed compliance with social and environmental laws; Advanced resource productivity, focused on the use of natural resources in a more productive, efficient and profitable fashion (such as recycled content and product recycling); and Taking responsibility for conditions under which goods are produced directly or by contract employees domestically or abroad. (c) Affidavit I, .................S/o.............R/o..............................do hereby solemnly affirm and declare an oath as under: That the marriage between......(name of spouses with details) solemnized with the Hindu rituals on.......... at.......(Name of place) .That due to inadvertence, I did not register my marriage with the concerned department. Date: .. Place: . 5. Signature Deponent (a) Delivery to pawnee under Indian Contract Act, 1872: The problem as asked in the question is based on the provisions of the Indian Contract Act, 1872 as The Institute of Chartered Accountants of India contained in Section 149 (delivery to bailee and pledgee). The Section provides that the delivery of the goods to the bailee may be made by actual or constructive delivery or delivery by attornment to the bank. In such a case there is change in the legal character of the possession of goods though not in the actual or physical custody. Though the bailor continues to be in possession of the goods, it is the possession of the bailee. In the given problem the delivery of the goods is constructive i.e. delivery by attornment to the bailee (pawnee) and the possession of the goods by A, the bailor is construed as possession by bailee/pawnee, the Bank. A constructive pledge comes into existence as soon as the pawnor, without actually delivering the goods, promises to deliver them on demand. The transaction was, therefore, a valid pledge. On this point, the decision given by the Andhra Pradesh High Court in Bank of Chittur Ltd. vs. Narasimhulu AIR 1966 AP 163 is relevant. (b) (i) Under Section 81 of the Companies Act, 1956 where any debentures have been issued to or loans have been obtained from the Government by a company, whether such debentures have been issued or loans have obtained before or after the commencement of Companies Amendment Act, 1963 (w.e.f. 1.1.1964), the Central Government may, if in its opinion it is necessary in the public interest so to do, by order direct that such debentures or loans or any part thereof shall be converted into shares in the company on such terms and conditions as appear to that Government to be reasonable in the circumstances of the case, even if the terms of issue of such debentures or the terms of such loans do not include term providing for an option for such conversion. (ii) In determining the terms and conditions of such conversion, the Central Government shall have due regard to the following circumstances: (1) The financial position of the company; (2) The terms of issue of the debentures or the terms of the loans, as the case may be; (3) The rate of interest payable on the debentures or the loans; (4) The capital of the company, its loan liability, its reserves, its profits during the preceding five years; and (5) The current market price of the shares in the company. A copy of every order proposed to be issued by the Central Government shall be laid in draft before each House of Parliament. (c) (i) Correct: Environmental consideration have become a part of corporate strategy, which means incorporating environmental issues in the process of developing a product, in new investments and in the organisational set up. A The Institute of Chartered Accountants of India good environmental practice improves corporate performance. In many industries it has been found that environmental friendly practices have resulted in more saving; for example the process of recycling the waste. Thus environmental considerations play a key role in corporate strategy. Markets of new millennium will be able to create wealth if they respond to the challenges of sustainable development, as unsustainable products will become obsolete. (ii) Correct: Business and industry are closely linked with environment and resource utilization. Production process and strategy for eco-friendly technologies throughout the product life cycle and minimization of waste play a major role in the protection of the environment and conservation of resources. Business, industry and multinational corporations have to recognize environmental management as the priority area and a key determinant to sustainable development. 6. (a) A listed public company and in case of resolutions relating to such business as the Central Government may, by notification, declare to be conducted only by postal ballot, shall get any resolution passed by means of a postal ballot, instead of transacting the business in general meeting of the company. The term Postal Ballot includes voting by electronic mode. The procedure laid down in Section 192A of the Companies Act, 1956 is as under: (i) Notice to shareholders : Where a company decides to pass any resolution by resorting to postal ballot, it shall send a notice to all the shareholders, along with a draft resolution explaining the reasons therefore and requesting them to send their assent within a period of 30 days from the date of posting of the letter; (ii) Notice shall be sent by registered post acknowledgement: The notice shall be sent by registered post acknowledgement due or by any other method as may be prescribed by the Central Government in this behalf, and shall be annexed with the notice a postage pre-paid envelope for facilitating the communication of the assent or dissent of the shareholder to the resolution within the said period; (iii) Appointment of scrutinizer: The board of directors shall appoint one scrutinizer, who is not in employment of the company, may be a retired judge or any person of repute, who, in the opinion of the board can conduct the postal ballot voting process in a fair and transparent manner; (iv) Submission of report by the scrutinizer: The scrutinizer will be in position for 35 days (excluding holidays) from the date of issue of notice for annual general meeting. He is required to submit his final report on or before the said period. The Institute of Chartered Accountants of India (v) Resolution assented by majority: If a resolution is assented to by a requisite majority of the shareholders by means of postal ballot, it shall be deemed to have been passed at a general meeting convened in that behalf. For this purpose the scrutinizer willing to be appointed is available at the registered office of the company for ascertaining the requisite majority. (vi) Fraudulent defence or destroy of postal ballot: If a shareholder sends his assent or dissent in writing on a postal ballot and thereafter any person fraudulently defences or destroys the ballot paper or declaration of the identity of shareholder, such person shall be punishable with imprisonment for a term which may extend to six months or with fine or both; (vii) Maintenance of register by scrutinizer: The scrutinizer shall maintain a register to record the consent received, including electronic media, mentioning the particulars of name, address, folio number, number of shares, nominal value of shares, whether the shares have voting, differential voting or non-rights and the scrutinizer shall also maintain record for postal ballot which are received in defaced or mutilated form. The postal ballot and all other papers relating to postal ballot will be under the safe custody of the scrutinizer till the Chairman considers, approves and signs the minutes of the meeting. Thereafter, the scrutinizer shall return the ballot papers and other related papers/register to the company so as to preserve such ballot papers and other related papers/registers safely till the resolution is given effect to. (b) -----------Bank Ltd ----------Branch, New Delhi To, -------Date Regarding: Dishonour of cheque no.-------drawn on ----------, dated-------Dear Sir, We inform you that your above cheque due to insufficient fund in your account was not clear and was received back by us. The cheque has been sent to you by registered post dated --------- at your residential address. Sd/Manager of the Bank (c) (i) Correct (ii) Correct The Institute of Chartered Accountants of India (iii) Incorrect (iv) Incorrect 7. (a) Any person aggrieved by order under Section 7A(1) can make application for review of the order in following cases (a) if new and important evidence is discovered which could not be produced earlier as it was not within his knowledge even after due diligence (b) there is some mistake or error apparent on the records or (c) any other sufficient reason. No application for review can be made if appeal was filed. The officer can himself review the order on his own motion. [Section 7B(1)]. The officer can either reject the application for review if there are not sufficient grounds for review, or he can grant the review. [Section 7B(4)]. Appeal cannot be filed against order rejecting the application for review. However, if fresh order is passed after the review, appeal can be filed against such order [Section 7B(5)].Application for review should be made within such form and manner and in time as may be specified in the Scheme. In Balu Fire Clay Niwas v. U.O.I., 2003 LLR 578 (Jhar HC), it was held that when statute provides for review, it cannot be contended that petitioner should have filed appeal against the order. It was also held that review petition should be disposed of by a speaking order. (b) According to Section 166 of the Companies Act, 1956, every company shall hold its first annual general meeting within a period of 18 months from the date of incorporation. Since M/s X Ltd was incorporated on 1.4.2013, the first annual general meeting of the company should be held on or before 30th September, 2014. Even though the Registrar of Companies is empowered to grant extension of time for a period not exceeding 3 months for holding the annual general meeting, such a power is not available to the Registrar in the case of the first annual general meeting. Thus, the company and its directors will be liable for the default if the annual general meeting is held after 30th September. 2014. (c) Issue of securities at premium (Section 78 of the Companies Act, 1956): If the market exists, a company may issue its securities at premium i.e. the price higher than their nominal value. There is no restriction contained in the Companies Act, 1956 on the sale of shares at a premium. But SEBI guidelines have to be observed as they indicate when an issue has to be at par and when premium is chargeable. Premium may be received in cash or kind. Where the value of assets received by a company as a consideration for allotment is greater than the nominal value of shares, it is in essence an allotment at a premium. An amount equal to extra value of the assets would have to be carried to the securities premium account. The amount to the credit of share premium account has to be maintained with the same sanctity as share capital and can be reduced only in the manner of share capital. The Institute of Chartered Accountants of India The Act does regulate the disbursement of the amount collected as premium. Such account be used in the following ways be the company. (I) it may be applied to issue to the members as fully paid by way of bonus the unissued shares of the company. (II) it may be used to write off preliminary expenses. (III) it may be used to write off the expenses of commission paid or discount allowed. (IV) it may be spent in providing for the premium payable on the redemption of any redeemable preference shares or debentures of the company. (d) Pragmatic reasons for maintaining ethical behaviour: Marketing executives should practice ethical bahaviour because it is morally correct. To maintain ethical behaviour in marketing, the following positive reasons may be useful to the marketing executives: 1. To reverse declining public confidence in marketing: Sometime misleading package labels, false claim in advertisement, phony list prices, infringement of trademarks pervert the market trends and such behaviour damages the marketers reputation. To reverse this situation, business leaders must demonstrate convincingly that they are aware of their ethical responsibility and will fulfill it. Companies must set high ethical standards and enforce them. Moreover, it is in management s interest to be concerned with the well being of consumers, since they are the lifeblood of a business. 2. To avoid increase in government regulation: Business apathy, resistance, or token responses to unethical behaviour increase the probability of more governmental regulation. The governmental limitations may also result from management s failure to live up to its ethical responsibilities. Moreover, once the government control is introduced, it is rarely removed. 3. To retain power granted by society: Marketing executives wield a great deal of social power as they influence markets and speak out on economic issues. However, there is a responsibility tied to that power. If marketers do not use their power in a socially acceptable manner, that power will be lost in the long run. 4. To protect the image of the organisation: Buyers often form an impression of an entire organisation based on their contact with one person. That person represents the marketing function. Some times a single sales clerk may pervert the market opinion in relation to that company which he represents. Therefore, the ethical behaviour in marketing may be strengthened only through the behaviour of the marketing executives. The Institute of Chartered Accountants of India (e) Notice for Extraordinary General Meeting of the Members Notice is hereby given that extraordinary General Meeting of the members of ABC Limited will be held on Monday, the day of 2014, at the registered office of the company at .Mumbai at ..P.M. to transact the following business. Special Business To consider and if thought fit, to pass with or without modification the following resolution as special resolution. Resolved that, subject to the approval of the Central Government under section 21 of the Companies Act,1956, the name of the company be and is changed from ABC to BCD Limited and that consequent to this change clause I of the Memorandum and Articles of Association of the company be altered accordingly. By order of the Board of Directors of ABC Limited. Secretary . Place: Date: . The Institute of Chartered Accountants of India

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