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CAFCLAW & BCR

Timing : 3 hrs. PRILIMINARY TEST PAPER – 3 Marks : 100

SECTION ‘A’ : BUSINESS LAW [60 Marks]Q.1 (a) Breach of Contract : Damages-

(1) Section 73 of the Indian Contract Act, 1872 lays down that when a contract has been broken the party who suffers by such breach is entitled to receive from the party who has broken the contract compensation for any loss or damage caused to him thereby which naturally arose in the usual course of things from such breach or which the parties knew when they made the contract to be likely to result from the breach of it.The leading case on this point is “Hadley v. Baxendale” in which it was decided by the Court that the special circumstances under which the contract was actually made were communicated by the plaintiff to the defendant, and thus known to both the parties to the contract, the damages resulting from the breach of such contract which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from the breach of contract under these special circumstances so known and communicated.

(2) The problem asked in this question is based on the provisions of Section 73 of the Indian Contract Act, 1872. In the instant case ‘X’ had intimated to ‘Z’ that he was purchasing water bottles from him for the purpose of performing his contract with ‘Y’.

(3) Thus, ‘Z’ had the knowledge of the special circumstances. Therefore, ‘X’ is entitled to claim from ‘Z’ for 500 rupees at the rate of 0.50 paise i.e. 1000 water bottles x 0.50 paise (difference between the procuring price of water bottles and contracted selling price to ‘Y’) being the amount of profit ‘X’ would have made by the performance of his contract with ‘Y’.

(4) If ‘X’ had not informed ‘Z’ of ‘Y’s contract then the amount of damages would have been the difference between the contract price and the market price on the day of default. In other words, the amount of damages would be Rs.750/- (i.e. 1000 water bottles x 0.75paise).

(b) Meaning of Undue Influence:(1) Section 16 of the Indian Contract Act, 1872, states that a contract is said

to be induced by undue influence where the relations subsisting between the parties are such that the parties are in a position to dominate the will of the other and used that position to obtain an unfair advantage over the other.

(2) A person is deemed to be in that position:a) where he holds real or apparent authority over the other or

stands in a fiduciary relation to him;

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SOLUTIONS Date : 29.10.2019


CAFCb) where he makes a contract with a person whose mental

capacity is temporarily or permanently affected by reason of old age, illness or mental or bodily distress.

c) where a man who is in position to dominate the will of the other enters into contract with him and the

(3) transaction appears to be unconscionable, the burden of proving that it is fair, is on him, who is in such a position.When one of the parties who has obtained the benefits of a transaction is in a position to dominate the will of the other, and the transaction between the parties appears to be unconscionable, the law raises a presumption of undue influence [section 16(3)]. Every transaction where the terms are to the disadvantage of one of the parties need not necessarily be considered to be unconscionable. If the contract is to the advantage of one of the parties but the same has been made in the ordinary course of business the presumption of under influence would not be raised.In the given problem,

(4) Aakash applies to the banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. Aakash accepts the loan on these terms. This is a transaction in the ordinary course of business, and the contract is not induced by undue influence. As between parties on an equal footing, the court will not hold a bargain to be unconscionable merely on the ground of high interest. Only where the lender is in a position to dominate the will of the borrower, the relief is granted on the ground of undue influence. But this is not the situation in this problem, and therefore, there is no undue influence.

(c) According to section 37,(1) Where any member of a firm has died or otherwise ceased to be

partner, and the surviving or continuing partners carry on the business of the firm with the property of the firm without any final settlement of accounts as between them and

(2) the outgoing partner or his estate, then, in the absence of a contract to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since he ceased to be a partner as may be attributable to the use of his share of the property of the firm or

(3) to interest at the rate of six per cent per annum on the amount of his share in the property of the firm:

(4) Provided that whereby contract between the partners, an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the deceased partner, or the outgoing partner or his estate, as the case may be, is not entitled to any further or other share of profits; but if any partner

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CAFCassuming to act in exercise of the option does not in all material respects comply with the terms thereof, he is liable to account under the foregoing provisions of this section.

Example 1: A, B and C are partners in a manufacture of machinery. A is entitled to three-eighths of the partnership property and profits. A becomes bankrupt whereas B and C continue the business without paying out A’s share of the partnership assets or settling accounts with his estate. A’s estate is entitled to three-eighths of the profits made in the business, from the date of his bankruptcy until the final liquidation of the partnership affairs.

Q.2 (a) Sometimes, a debtor owes several debts to the same creditor and makes payment, which is not sufficient to discharge all the debts. In such cases, the payment is appropriated (i.e. adjusted against the debts) as per Section 59 to 61 of the Indian Contract Act.(i) Application of payment where debt to be discharged is indicated

(Section 59): Where a debtor, owing several distinct debts to one person, makes a payment to him either with express intimation or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.

(ii) a) Application of payment where debt to be discharged is not indicated (Section 60): Where the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor,

b) where its recovery is or is not barred by the law in force for the time being as to the limitation of suits.

(iii) a) Application of payment where neither party appropriates (Section 61): Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits.

b) If the debts are of equal standing, the payments shall be applied in discharge of each proportionately.

(b) Right of re-sale [Section54] : The right of resale is a very valuable right given to an unpaid seller. In the absence of this right, the unpaid seller’s other rights against the goods that is lien and the stoppage in transit would not have been of much use because these rights only entitled the unpaid seller to retain the goods until paid by the buyer.The unpaid seller can exercise the right to re-sell the goods under the following conditions:(i) Where the goods are of a perishable nature: In such a case the buyer

need not be informed of the intention of resale.(ii) Where he gives notice to the buyer of his intention to re-sell the

goods : If after the receipt of such notice the buyer fails within a reasonable time to pay or tender the price, the seller may resell

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CAFCthe goods.It may be noted that in such cases, on the resale of the goods, the seller is also entitled to:a) Recover the difference between the contract price and

resale price, from the original buyer, as damages.b) Retain the profit if the resale price is higher than the contract price.It may also be noted that the seller can recover damages and retain the profits only when the goods are resold after giving the notice of resale to the buyer. Thus, if the goods are resold by the seller without giving any notice to the buyer, the seller cannot recover the loss suffered on resale. Moreover, if there is any profit on resale, he must return it to the original buyer, i.e. he cannot keep such surplus with him [Section 54(2)].

(iii) Where an unpaid seller who has exercised his right of lien or stop page in transit resells the goods: The subsequent buyer acquires the good title thereof as against the original buyer, despite the fact that the notice of re-sale has not been given by the seller to the original buyer.

(iv) Are-sale by the seller where a right of re-sale is expressly reserved in a contract of sale: Sometimes, it is expressly agreed between the seller and the buyer that in case the buyer makes default in payment of the price, the seller will resell the goods to some other person. In such cases, the seller is said to have reserved his right of resale, and he may resell the goods on buyer’s default.It may be noted that in such cases, the seller is not required to give notice of resale. He is entitled to recover damages from the original buyer even if no notice of resale is given.

(v) Where the property in goods has not passed to the buyer: the unpaid seller has in addition to his remedies a right of withholding delivery of the goods. This right is similar olien and is called “quasi-lien”.

(c) (i) Mode of giving public notice (Section 72): A public notice under this Act is given-Where it relates to the retirement or expulsion of a partner from a registered firm, or to the dissolution of a registered firm, or to the election to become or not to become a partner in a registered firm by a person attainting majority who was admitted as a minor to the benefits of partnership, by notice to the Registrar of Firms under section63,(1) and by publication in the Official Gazette and in at least one

vernacular newspaper circulation in the district where the firm to which it relates has its place or principal place of business, and

(2) in any other case, by publication in the Official Gazette and in at least one vernacular newspaper circulating in the district where the firm to which it relates has its place or principal place of business.

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CAFC(ii) Conditions for an institution to be notified as PFI: No institution

shall be so notified unless—(1) it has been established or constituted by or under any

Central or State Act; or(2) not less than fifty-one per cent of the paid-up share capital

is held or controlled by the Central Government or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments.

Q.3 (a) Associate company [Section 2(6)]:(1) In relation to another company, means a company in which that

other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.

(2) The term “significant influence” means control of at least 20% of total share capital, or of business decisions under an agreement. [Section 2(6)]

(3) The term “Total Share Capital”, means the aggregate of the–a) Paid-up equity share capital; andb) Convertible preference share capital. This is a new definition

inserted in the 2013Act.Vide General Circular no. 24/2014 dated 25th of June 2014, the Ministry of Corporate Affairs has clarified that the shares held

(4) by a company in another company in a ‘fiduciary capacity’ shall not be counted for the purpose of determining the relationship of ‘associate company’ under section 2(6) of the Companies Act,2013.

(b)S. No.

Basis Void Contract Voidable Contract

1 Meaning A Contract ceases to be enforceable by law becomes void when it ceases to be enforceable.

An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.

2 Cause A contract becomes void due to change in law or change in circumstances beyond the contemplation of parties.

A contract becomes avoidable contract if the consent of a party was not free.

3 Performance of contract

Avoid contract cannot be performed.

If the aggrieved party does not, within reasonable time, exercise his right to avoid the contract, any party can sue the

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CAFCother for claiming the performance of the contract.

4 Rights A void contract does not grant any right to any party.

The party whose consent was not free has the right to rescind the contract.

(c) (1) In case of sale of goods, the doctrine ‘Caveat Emptor’ means ‘let the buyer beware’. When sellers display their goods in the open market, it is for the buyers to make a proper selection or choice of the goods. If the goods turn out to be defective he cannot hold the seller liable. The seller is in no way responsible for the bad selection of the buyer. The seller is not bound to disclose the defects in the goods which he is selling. It is the duty of the buyer to satisfy himself before buying the goods that the goods will serve the purpose for which they are being bought. If the goods turn out to be defective or do not serve his purpose or if he depends on his own skill or judgment, the buyer cannot hold the seller responsible.

(2) The rule of Caveat Emptor is laid down in the Section 16, which states that, “subject to the provisions of this Act or of any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale”.

Following are the conditions to be satisfied:- if the buyer had made known to the seller the purpose of his

purchase, and- the buyer relied on the seller’s skill and judgment, and- seller’s business to supply goods of that description (Section

16).Example 1: A sold pigs to B. These pigs being infected, caused typhoid to other healthy pigs of the buyer. It was held that the seller was not bound to disclose that the pigs were unhealthy. The rule of the law being “Caveat Emptor”.Example 2: A purchases a horse from B. A needed the horse for riding but he did not mention this fact to B. The horse is not suitable for riding but is suitable only for being driven in the carriage. Caveat emptor rule applies here and so A can neither reject the horse nor can claim compensation from B.Exceptions: The doctrine of Caveat Emptor is, however, subject to the following exceptions;

(1) Fitness as to quality or use: Where the buyer makes known to the seller the particular purpose for which the goods are required, so as to show that he relies on the seller’s skill or judgment and the goods are of a description which is in the course of seller’s business to supply, it is the duty of the seller to supply such goods as are reasonably fit for that purpose [Section 16(1)].Example: An order was placed for some trucks to be used for heavy

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CAFCtraffic in a hilly country. The trucks supplied by the seller were unfit for this purpose and broke down. There is a breach of condition as to fitness.In Priest vs. Last,

P, a draper, purchased a hot water bottle from a retail chemist, P asked the chemist if it would stand boiling water. The Chemist told him that the bottle was meant to hold hot water. The bottle burst when water was poured in to it and injured his wife. It was held that the chemist shall be liable to pay damages to P, as he knew that the bottle was purchased for the purpose of being used as a hot water bottle.Where the article can be used for only one particular purpose, the buyer need not tell the seller the purpose for which he required the goods. But where the article can be used for a number of purposes, the buyer should tell the seller the purpose for which he requires the goods, if he wants to make the seller responsible.In Bombay Burma Trading Corporation Ltd. vs. Aga Muhammad, timber was purchased for the express purpose of using it as railways sleepers and when it was found to be unfit for the purpose, the Court held that the contract could be avoided.

(2) Goods purchased under patent or brand name: In case where the goods are purchased under its patent name or brand name, there is no implied condition that the goods shall be fit for any particular purpose [Section 16(1)].

(3) Goods sold by description: Where the goods are sold by description there is an implied condition that the goods shall correspond with the description [Section 15]. If it is not so then seller is responsible.

(4) Goods of Merchantable Quality : Where the goods are bought by description from a seller who deals in goods of that description there is an implied condition that the goods shall be of merchantable quality. The rule of Caveat Emptor is not applicable. But where the buyer has examined the goods this rule shall apply if the defects were such which ought to have not been revealed by ordinary examination [Section 16(2)].

(5) Sale by sample: Where the goods are bought by sample, this rule of Caveat Emptor does not apply if the bulk does not correspond with the sample [Section 17].

(6) Goods by sample as well as description: Where the goods are bought by sample as well as description, the rule of Caveat Emptor is not applicable in case the goods do not correspond with both the sample and description or either of the condition [Section 15].

(7) Trade Usage: An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade and if the seller deviates from that, this rule of Caveat Emptor is not applicable [Section16(3)].Example: In readymade garment business, there is an implied condition by usage of trade that the garments shall be reasonably fit on the buyer.

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CAFC(8) Seller actively conceals a defect or is guilty of fraud: Where the

seller sells the goods by making some misrepresentation or fraud and the buyer relies on it or when the seller actively conceals some defect in the goods so that the same could not be discovered by the buyer on a reasonable examination, then the rule of Caveat Emptor will not apply. In such a case the buyer has a right to avoid the contract and claim damages.

Q.4 (a) Though under the Indian Contract Act, 1872, the consideration for an agreement may proceed from a third party, the third party cannot sue on contract. Only a person who is party to a contract can sue on it.Thus, the concept of stranger to consideration is a valid and is different from stranger to a contract.Example: P who is indebted to Q, sells his property to R and R promises to pay off the debt amount to Q. If R fails to pay, then in such situation Q has no right to sue, as R is a stranger to contract.The aforesaid rule, that stranger to a contract cannot sue is known as a “doctrine of privity of contract”, is however, subject to certain exceptions. In other words, even a stranger to a contract may enforce a claim in the following cases:(1) In the case of trust, a beneficiary can enforce his right under the trust,

though he was not a party to the contract between the settler and the trustee.

(2) In the case of a family settlement, if the terms of the settlement are reduced into writing, the members of family who originally had not been parties to the settlement may enforce the agreement.

(3) In the case of certain marriage contracts, a female member can enforce a provision for marriage expenses made on the partition of the Hindu Undivided Family.

(4) In the case of assignment of a contract, when the benefit under a contract has been assigned, the assignee can enforce the contract.

(5) Acknowledgement orestoppel – where the promisor by his conduct acknowledges himself as an agent of the third party, it would result into a binding obligation towards third party. For example, if L gives to M Rs.20,000 to be given to N, and M informs N that he is holding the money for him, but afterwards M refuses to pay the money. N will be entitled to recover the same from the former i.e. M.

(6) In the case of covenant running with the land, the person who purchases land with notice that the owner of land is bound by certain duties affecting land, the covenant affecting the land may been forced by the success or of the seller.

(7) Contracts entered into through an agent: The principal can enforce the contracts entered by his agent where the agent has acted within the scope of his authority and in the name of the principal.

(b) Sale by person not the owner (Section 27):(1) Subject to the provisions of this Act and of any other law for the

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CAFCtime being in force, where goods are sold by a person who is not the owner there of and who does not sell them under the authority or with the consent of the owner,

(2) The buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell.Exceptions: In the following cases, a non-owner can convey better title to the bonafide purchaser of goods for value.

(3) Sale by a Mercantile Agent: A sale made by a mercantile agent of the goods for document of title to goods would pass a good title to the buyer in the following circumstances; namely;(a) If he was in possession of the goods or documents with the

consent of the owner;(b) If the sale was made by him when acting in the ordinary

course of business as a mercantile agent; and(c) If the buyer had acted in good faith and has at the time of

the contract of sale, no notice of the fact that the seller had no authority to sell (Proviso to Section 27).

(4) Sale by one of the joint owners (Section 28): If one of several joint owners of goods has the sole possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them of such joint owner in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell.Example: A, B and C are three brothers and joint owners of a T.V and VCR and with the consent of B and C, the VCR was kept in possession of A. A sells the T.V and VCR to P who buys it in good faith and without notice that A had no authority to sell. P gets a good title to VCR and TV.

(5) Sale by a person in possession under voidable contract: A buyer would acquire a good title to the goods sold to him by a seller who had obtained possession of the goods under a contract voidable on the ground of coercion, fraud, misrepresentation or undue influence provided that the contract had not been rescinded until the time of the sale (Section 29).Example: X fraudulently obtains a diamond ring from Y. This contract is voidable at the option of Y. But before the contract could be terminated, X sells the ring to Z, an innocent purchaser. Z gets the good title and Y cannotrecovertheringfromZevenifthecontractissubsequentlysetaside.

(6) Sale by one who has already sold the goods but continues in

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CAFCpossession thereof : If a person has sold goods but continues to be in possession of them or of the documents of title to them, he may sell them to a third person, and if such person obtains the delivery thereof in good faith and without notice of the previous sale, he would have good title to them, although the property in the goods had passed to the first buyer earlier. A pledge or other disposition of the goods or documents of title by the seller in possession are equally valid [Section 30(1)].Example: During ICL matches, P buys a TV set from R. R agrees to deliver the same to P after some days. In mean while R sells the same to S, at a higher price, who buys in good faith and without knowledge about the previous sale. S gets a good title.

(7) Sale by buyer obtaining possession before the property in the goods has vested in him: Where a buyer with the consent of the seller obtains possession of the goods before the property in them has passed to him, he may sell, pledge or otherwise dispose of the goods to a third person, and if such person obtains delivery of the goods in good faith and without notice of the lien or other right of the original seller in respect of the goods, he would get a good title to them [Section 30(2)].However, a person in possession of goods under a ‘hire-purchase’ agreement which gives him only an option to buy is not covered within the section unless it amounts to a sale.Example: A took a car from B on this condition that A would pay a monthly installment of Rs.5,000 as hire charges with an option to purchase it by payment of Rs.1,00,000 in 24 installments.After the payment of few installments, A sold the car to C. B can recover the car from C since A had neither bought the car, nor had agreed to buy the car. He had only an option to buy the car.

(8) Effect of Estoppel: Where the owner is estopped by the conduct from denying the seller’s authority to sell, the transferee will get a good title as against the true owner. But before a good title by estoppel can be made, it must be shown that the true owner had actively suffered or held out the other person in question as the true owner or as a person authorized to sell the goods.Example: ‘A’ said to ‘B’, a buyer, in the presence of ‘C’ that he (A) is the owner of the horse. But ‘C’ remained silent though the horse belonged to him. ‘B’ bought the horse from ‘A’. Here the buyer (B) will get a valid title to the horse even though the seller (A) had not title to the horse. In this case, ‘C’, by his own conduct, is prevented from denying ‘A’s authority to sell the horse.

(9) Sale by an unpaid seller: Where an unpaid seller who had exercised his right of lien or stoppage in transit resells the goods, the buyer acquires a good title to the goods as against the original buyer [Section 54(3)].

(10) Sale under the provisions of other Acts:(i) Sale by an Official Receiver or Liquidator of the Company will

give the purchase ravalid title.

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CAFC(ii) Purchase of goods from a finder of goods will get a valid title

under circumstances [Section 169 of the Indian Contract Act,1872]

(iii) A sale by pawnee can convey a good title to the buyer [Section 176 of the Indian Contract Act,1872]

Q.5 (a) The problem is related with the communication and time of acceptance and its revocation. As per Section 4 of the Indian Contract Act, 1872,(1) The communication of an acceptance is a complete as against the

acceptor when it comes to the knowledge of the proposer.(2) An acceptance may be revoked at any time before the

communication of the acceptance is complete as against the acceptor, but not afterwards.Referring to the above provisions

(3) Yes, the revocation of acceptance by Rajan (the acceptor) is valid.(4) If Rishi opens the telegram first (and this would be normally so in

case of a rational person) and reads it, the acceptance stands revoked.

(5) If he opens the letter first and reads it, revocation of acceptance is not possible as the contract has already been concluded.

(b) In terms of section 4(1)(c) of the Companies Act, 2013, the powers of the company are limited to:(1) Powers expressly given in the “Objects Clause” of the

Memorandum (which is popularly known as ‘express’ power), or conferred by the Companies Act, or by any other statute and

(2) Powers reasonably incidental or necessary to the company’s main objects (termed as “Implied’ powers).

(3) The Act further provides that the acts beyond the powers of a company are ultra vires and void and cannot be ratified even though every member of the company may give his consent [Ashbury Railway Carriage Company Vs Richee]

(4) The objects clause enables the shareholders, creditors or others to know what its powers are and what is the range of its activities. The objects clause therefore is of fundamental importance to the shareholders, creditors and every other person who deals with the company in any manner what so ever. A company being an artificial legal person can act only within the ambit of the powers conferred upon it by the Memorandum through the “Objects Clause”.

(5) Every person who enters into a contractual relationship with a company on any matter is presumed to be aware of its objects and is supposed to have examined the Memorandum of Articles of the company to ensure proper contractual agreement. If a person fails to do so, it is entirely at his own peril. It is also pertinent to note that the objects of a company may be changed by following the provisions for the change of Memorandum as laid out in section 13 of the said Act.

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CAFC(6) M/s LSR Pvt. Ltd is authorised to trade directly on fruits and

vegetables. It has no power to enter into a partnership for Iron and steel with Mr. J. Such act cannot be treated as being within either the ‘express’ or ‘implied’ powers of the company. Mr. J who entered into partnership is deemed to be aware of the lack of powers of M/s LSR (Pvt) Ltd. In the light of the above, Mr. J cannot enforce the agreement or liability against M/s LSR Pvt. Ltd under the Companies Act. Mr. J should be advised accordingly. This conclusion is supported by the decision reported in the case of the ‘Ganga Mata Refinery Company (Pvt) Ltd CIT’.However, under the Indian Contract Act, 1872 where a person derives any benefit either in the absence of a contract or under a void agreement, will be liable to make a reasonable payment for the value of such benefit.(Please refer to Quasi Contracts and Void Agreements)

Q.6 (a) (1) This given problem is related to the Bailment given in the Indian Contract Act, 1872.

(2) The provision lays down that where the bailee has rendered any service involving the exercise of labour /skill in respect of the goods bailed, there he has a right to retain such goods in his possession until he receives due remuneration for the services, he has rendered in respect of them.

(3) This right of bailee is termed as particular lien.This right can be exercised when the services have been performed entirely and the remuneration has become due.

(4) Bailee’s particular lien in contracts of service may be lost if he does not complete the work within the agreed time or reasonable time.

(5) Accordingly in the given case, it is clearly expressed by the shopkeeper to repair the watch on the payment of Rs.100. However later his refusal to repair the watch, does not complete the work for which he has promised and therefore he losses his right to exercise particular lien and nothing could be claimed under it.

(6) Thus, the shopkeeper was not entitled to retain the watch.(b) Distinction between LLP and Limited Liability Company (LLC)

Basis LLP LLC1. Regulating Act The LLP Act, 2008. The Companies Act, 2013.2. Members / Partners The persons who

contribute to LLP are known as partners of the LLP.

The persons who invest the money in the shares are known as members of the company.

3. Internal governance structure

The internal governance structure of a LLP is governed by agreement between the partners.

The internal governance structure of a company is regulated by statute (i.e., Companies Act, 2013).

4. Name Name of the LLP to contain Name of the public company to 12


CAFCthe word “Limited Liability partnership” or “LLP” as suffix.

contain the word “limited” and Private company to contain the word “Private limited” as suffix.

5. Number of members / partners

Minimum – 2 membersMaximum – No such limit on the members in the Act. The members of the LLP can be individuals/or body corporate through the nominees.

Private company:Minimum – 2 members Maximum – 200 membersPublic company:Minimum – 7 membersMaximum – No such limit on the members.Members can be organizations, trusts, another business form or individuals.

6. Liability of members / partners

Liability of a partners is limited to the extent of agreed contribution except in case of willful fraud.

Liability of a member is limited to the amount unpaid on the shares held by them.

7. Management The business of the company managed by the partners including the designated partners authorized in the agreement.

The affairs of the company are managed by board of directors elected by the shareholders.

8. Minimum number of directors / designated partners

Minimum 2 designated partners.

Private Co. – 2 directorsPublic Co. – 3 directors

(c) Promoter - According to section 2 (69) of the Companies Act, 2013, Promoter means a person -who has been named as such(1) in a prospectus or is identified by the company in the annual

return referred to in section 92;or(2) who has control over the affairs of the company, directly or indirectly

whether as a shareholder, director or otherwise; or(3) in accordance with whose advice, directions or instructions the Board

of Directors of the company is accustomed to act. Provided that nothing in sub clause (c) shall apply to a person who is acting merely in a professional capacity.

SECTION ‘B’ : [40 Marks]BUSINESS CORRESPONDENCE AND REPORTING

Q.7 (a) (i) According to Nehruji the 'service of India' consist of eradicating poverty, ignorance and disease.

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CAFC(ii) The ideals which India has never forgotten is to wipe every tear from

every eye.(iii) The responsibilities of freedom and power are to serve millions who suffer.(iv) Nerhuji appeals to his listeners by exhorting them with hope and bright

future. The motive of service to mankind urges Nehruji to rouse the India of today to action.

(v) "The ambition of the greatest man of our generation has been to wipe every tear from every eye"

(b) (1) Know your target audiencea) Identify b) Understand

(2) Design an irresistible offer(3) Approach the target audience

a) Marketing b) SalesSummary

Effective marketing involves three key Areas. First know your target audience, so you can take decision for them. Second you have to prepare a investible offer to your customer. That you customer will attach with it. Third the offer creates interest in the customer brain. Finally this will increase in sales and generates more revenue to the firm.

Q.8 (a) (1) This is an organization where there is a single controlling authority who gives instructions and orders to all employees working under him/her.

(2) All employees get instructions directly from the leader and report back to him/her.It is direct and efficient for a small business/company, but inappropriate way of communication in a large organization with many people.

(3) A company with many employees needs more decision makers or nothing would get done. Can a large conglomerate like Reliance or Tata Sons have one person making decisions? Moreover, if the central figure is not competent, the entire business will suffer.

E B

F A C

G DWheel and Spoke Network

(b) a) (B) Secretlyb) (A) Indecencyc) The commander ordered the Jatregimat to charge for the machineguns.

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CAFC(c) Potato and Its Related Issues

Potato is a staple food which provides food security and eradicate poverty, so UN declared Next year as International year of the Potato. Its utility & Significance is indispensable. Its value is accepted by large political leader & celebrities also. Potatoes are the Part and Parcel of Every cooking. In the Market new varieties of potatoes are available. We can prepare alternative dishes from potatoes like a creamy dish of mashed potatoes. If we cannot take it into solid form, we take it into liquid form also.

Q.9 (a) Attitude barriers-(1) Personal attitudes of employees can affect communication within

the organization.(2) A proactive, motivated worker will facilitate the communication process,

whereas(3) a dissatised, disgruntled, shy, introvert or lazy employee can(4) delay, hesitate in taking the initiative, or refuse to communicate.(5) Attitude problems can be addressed by good management and regular

interaction with staff members.(b) a) disastrous

b) catch upc) The student exclaimed with joy that their school would be closed the next

day.(c) Neerja Modi School

Shipra Path, Mansarovar, Jaipur 12 August 2018Arihant Publishers & Distributors Vilas Nagar. New DelhiSubject : Order of books Dear Sir,As desired "We selected four reference books from your catalogue. Please provide us specimen copies of these books. So, we wish to place an order for the following books:

Sr. No. Reference Books Writer1. Accountancy Dr. V.K. Goel2. Economics Dr. S.B. Gupta3. Business Studies Dr. Ramesh Singh4. Mathematics Dr. P.K. Seth

We wish to place 500 copies of each books. The delivery should be made within one week. Please send the bill after deducting the discount as applicable. Payment of the bill will be made by cheque in favour of the firm within 10 days after the delivery.

Thanking you.Yours Sincerely

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CAFCMr Rajesh Kumar Academic Convenor

Q.10 (a) Focus and Attention:(1) Everyday work environment has multiple activities going on

simultaneously.(2) The ringing of the phone, an incoming email, or a number of tasks

requiring your attention, anxiety related to work, emotional distress etc. can distract you.

(3) Such distractions are detrimental to the communication process with an individual or a group of people.

(4) You may overlook or completely miss important points or cues in the interaction.

(5) Thus, keeping your focus and attention during the communiqué is imperative for effective communication.

ORQ.10 (a) Visual Communication:

(1) Visual communication through visual aids such as signs, typography, drawing, graphic design, illustration, color and other electronic resources usually reinforces written communication. Sometimes, it may replace written communicational together.

(2) Visual communication is powerful medium.(3) It is the reason that the print and audio-visual media makes

effective use of visuals to convey their message.(4) Visuals like graphs, pie charts and other diagrammatic

presentations convey clearly and concisely a great deal of information. They are an essential part of official presentations these days.

(b) a) (B)Inflexibleb) Why was your servant being shouted at by you.c) Not a single rupee will be lent to you by me.

(c) BEAUTY AID LIMITED65, Nehru Nagar, New DelhiREPORT ON LABOUR UNREST AT NAGDA PLANTTo : Mr. S.C. Jain, Managing DirectorFrom : The Labour Unrest Investigation CommitteeTERMS OF REFERENCETo Investigate into the workers' unrest and make recommendation to restore peace.ACTION TAKENThe Committee met the manager of the Nagda Plant twice and detailed discussions were held. Subsequently tow meetings were held with the foremen.

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CAFCThe workers selected at random were interviewed personally. The President and the Secretary of the labour union in the plant were also consulted.Finding and Conclusionsa) The unrest is widespread involving all sections of the factory. The unrest

was observed in March 2001 for the first time. In the beginning there were occasional outbursts of ill-temper. Later groups of workers discussed the problems. In December 2001 a meeting of the plant union was held and a memorandum was submitted to the plant manager. The plant sent a report to the General Manager without enclosing the memorandum of the plant union. Most of the foremen felt that unless immediate remedial action was taken, the situation might get out of hand with the possibility of total strike.

b) Workers made the following complaints:(i) The plant canteen does not provide wholesome refreshments and

the prices charged are high.(ii) There was no suitable bus service from the railway station to the

factory.(iii) The plant manager behaved like a dictator.

Recommendationsa) The canteen contractor should be asked to improve the quality of

refreshment and reduce the rates.b) A bus service should be introduced between the factory and the railway

station, to be run four times daily to coincide with the two shifts.c) The plant manager should be advised to be more humane in dealing with

workers and union leaders.M.C. Goel Chairman of the Committee Rahul Banerjee (Member)P. Majumdar (Member)Encls. : The plan of the Midnapore Industrial Area showing the exact situation of the three industries being set up by some NRI groups and the shopping complex under development

Q.11 (a) Nonverbal Communication:Nonverbal communication is the process of communicating by sending and receiving wordless messages. These messages can aid verbal communication, convey thoughts and feelings contrary to the spoken words or express ideas and emotions on their own. Some of the functions of nonverbal communication in humans are to complement and illustrate, to reinforce and emphasize, to replace and substitute, to control and regulate, and to contradict the denoted message.• Physical nonverbal communication : An individual’s body language that

is, facial expressions, stance, gestures, tone of voice, touch, and other physical signals constitute this type of communication. For example, leaning forward may mean friendliness, acceptance and interest, while crossing arms can be interpreted as antagonistic or defensive posture.Research estimates that physical, non-verbal communication accounts for 55

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CAFCpercent of all communication. Smiles, frowns, pursing of lips, clenching of hands etc. transmit emotions which are not expressed through verbal communication.

• Paralanguage : The way you say something, more than the actual words used, reveal the intent of the message, The voice quality, intonation, pitch, stress, emotion, tone, and style of speaking, communicates approval, interest or the lack of it. Research estimates that tone of the voice accounts for 38 percent of all communications.

• Aesthetic communication : Art forms such as dancing, painting, sculptor, music are also means of communication. They distinctly convey the ideas and thoughts of the artist.

• Appearance : Appearance is usually the first thing noticed about a person. A well dressed and groomed person is presumed to be organized and methodical, whereas a sloppy or shabby person fails to make a favourable impression. Therefore, dressing appropriately in all formal interactions is emphasized.The dress code in office is generally formal. It constitutes of formal suits, trousers with plain white or light coloured shirts and leather shoes. Bright colours, jeans, T- shirts, especially with slogans and other informal wear are frowned upon. For women formal two-piece trouser or skirt sets or formal ethnic wear like sarees, is permissible.

• Symbols : such as religious, status, or ego-building symbols(b) (i) (D) make a big issue of a small thing

(ii) (C) best of health(iii) The joke was laughed at by us.

(c) The Requisites for a Meeting are:(1) Select the Right Participants : The participants in the meeting have to

be chosen with extreme care. Often people are included because they belong to the department or are a part of the team, or because you don’t want to offend anyone. To engage in a purposeful meeting, participants must have a reason for attending; a point of view about the issue, the need to know, the authority to make a decision, or any useful information, that will dd value to the discussion and lead to some conclusion.

(2) Send Intimation to all participants: The notice for the meeting should be sent by a proper authority at least 2-3 days before the meeting so that participants have time to gather information and data required for it. It must have information about date, time, venue, names of participants and the agenda of the meeting.

(3) Set an Agenda: An agenda must be provided before the meeting. Agendas are the framework on which the meeting stands. It communicates the subject of the meeting, the speakers, time allotted to each speaker etc.

(4) Appoint a Facilitator: A facilitator is appointed to guide the meeting to its logical conclusion. His task is to aid the group in reaching a consensus in taking a decision. The members of the group are accountable and

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CAFCcommitted to the resolution taken by them. He ensures that the meeting stays on track, helps by providing a structure to a process, and enables cooperative decision- making without conflict.

(5) Arrive at Clear Conclusions and Formulate Next Steps: Many times meetings fail to come to clear and unambiguous conclusions about the points under consideration. After deliberation on an agenda topic, it is necessary to summarize what was discussed; state lucidly the deductions arrived at, and decide on the future steps that need to be taken. At the conclusion of the meeting a briey recount the proceedings and summarize the future course of action.

(6) Create Opportunities For Creativity and Participation: In most meetings the structure is top- centric, that is, the senior management speaks and the juniors only contribute when asked to give their input. When there is lack of free flow of ideas, information and opportunities to speak, the members fail to contribute perspective, curiosity, and creativity. In such a scenario the purpose of the meeting is defeated. A meetings should be opportunity to bring multiple perspectives into the room in order to collaborate, debate, decide, and perform the real work of a team.

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