Saturday, December 29, 2007

The touchstone

When the great library of Alexandria burned, the story goes, one book was saved. But it was not a valuable book; and so a poor man, who could read a little, bought it for a few coppers. The book wasn't very interesting, but between its pages there was something very interesting indeed. It was a thin strip of vellum on which was written the secret of the "Touchstone"!

The touchstone was a small pebble that could turn any common metal into pure gold. The writing explained that it was lying among thousands and thousands of other pebbles that looked exactly like it. But the secret was this: The real stone would feel warm, while ordinary pebbles are cold. So the man sold his few belongings, bought some simple supplies, camped on the seashore, and began testing pebbles. He knew that if he picked up ordinary pebbles and threw them down again because they were cold, he might pick up the same pebble hundreds of times. So, when he felt one that was cold, he threw it into the sea.

He spent a whole day doing this but none of them was the touchstone. Yet he went on and on this way. Pick up a pebble. Cold - throw it into the sea. Pick up another. Throw it into the sea. The days stretched into weeks and the weeks into months. One day, however, about midafternoon, he picked up a pebble and it was warm. He threw it into the sea before he realized what he had done. He had formed such a strong habit of throwing each pebble into the sea that when the one he wanted came along, he still threw it away.

So it is with opportunity. Unless we are vigilant, it's asy to fail to recognize an opportunity when it is in hand and it's just as easy to throw it away.

Thursday, December 27, 2007

Tuesday, December 25, 2007

Do Dreams Count? By Byron Pulsifer

Did you ever have a dream? I'm not talking about a dream you have when you sleep. I'm talking about a conscious dream where you would like to see a new future, a different choice of employment, and a business of you own. How many times have you wished that you could be living a different existence than the one you are currently experiencing?

Dreams. No doubt we've all had them from time to time in our lives. Did you fulfill your dream? If not, why not? Did you start on your way to fulfilling a dream only to be derailed by letting other life's events get in the way? Did you make some initial first steps only to find roadblocks in your way that convinced you to give up? Or, if you fulfilled some aspects of your dream, did you find that you had limited success, and, therefore gave in to a negative view that you weren't meant to succeed?

Several years ago, I had a dream about inventing a board game that would change my life's fortunes. Along with a partner, who also had a similar dream, those dreams were turned into goals that were translated to action steps. After many long hours and many revisions, a board game was developed. Then came issues of financing. Not to be defeated by this obstacle, a plan was developed and carried out that saw shares being offered, all sold to a group of supporters, and a real live company created. Then, came marketing strategies, T.V. appearances, newspaper articles, trade show attendance, weekend promotional appearances, magazine advertising, and spot radio commercials.

It was an exciting time. The one time dream seemed to take off with sales starting to accumulate, a potential sale to a large and established game board company, and inroads to large chain stores. Then, it happened. Introduced to the board game market came one of the biggest hits never seen before. In short, their sales blew us out of the water, our distributor failed to pay us, and the business, once dreamed of, came to a screeching halt.

To make a long story short, the company was dissolved having dashed our dreams, and those of our shareholders. How devastating after all the hours of work, the hours of marketing, promotion, not to mention the loss of our own financial investment. It wasn't meant to be. The same old job, the same old daily grind loomed larger than ever.
Is that the end of the story? Well, it was for one of the game developers; the negative emotions, "it never was meant to be" thoughts dominated any future dreams of a different life. This person returned to the daily grind of a nine to five job always cynical, always jealous of those who had succeeded.

But, did it mean being unsuccessful to me? I didn't succeed to the level I wanted or desired, but, to me, at the very least I lived my dream by turning it into a reality. If I had never turned my dream into goals and then to action, I would have always wondered - what if. Was it then a failure? No, it wasn't. Was it the flaming success I'd hoped for - no. But, there were valuable lessons to be learned. After all, how many successful business people, inventors, authors, artists, etc. had immediate success in their first attempt? Probably none. Failure is our greatest teacher as long as the experience is viewed as lessons, and those lessons are internalized to provide fruits for greater achievements later.

It may take a few more attempts, or many attempts but success is only achieved once dreams are put into action, where failure becomes the launching pad for smarter choices, or better action plans in future endeavors. Will success come on the next adventure, or the next one after that, or will it take many more? Who is to say? The important point here is that success only comes by turning dreams into reality and realizing that obstacles are only stepping-stones to final success.

For those who are wondering about my own eventual success, I'll tell you this.
After many attempts, many failures, many lessons, and many false starts, success arrived but only through believing in what I've said earlier. Learn valuable lessons from failure; turn dreams into action plans, and don't let a dream only be that - a dream!

Friday, December 21, 2007

Law ethic & Comminication PCC Paper May 07

Question Nos. 1 and 2 are compulsory. Attempt any eight questions from rest
Question 1.
(a) Mr. Ramaswamy of Chennai placed an order with Mr. Shah of Ahmedabad for supply of Urid Dhall on 10.11.2006 at a contracted price of Rs. 40 per kg. The order was for the supply of 10 tonnes within a month’s time viz. before 09.12.2006. On 04.12.2006 Mr. Shah wrote a letter to Mr. Ramashwmy stating that the price of Urid Dhall was sky rocketing to Rs. 20 Per. Kg. and he would not be able to supply as per original contract. The price of Urid Dhall rose to Rs. 53 on 09.12.06 Advise Mr. Ramaswamy citing the legal position. (5 Marks)

(b) Each subdivision carries one mark. Pick-up the correct answer from the following:
(i) In a contract of guarantee a person, who promises to discharge another’s liability is called
(a) Principal Debtor (b) Creditor
(c) Indemnifier (d) Surety.
(ii) The Delivery of goods by one person to another as security for the payment of a debt is called
(a) Bailment (b) Pledge
(d) Mortgage (e) Hypothecation.
(iii) Which of the following is not applicable to negotiable Instrument?
(a) It must be in writing
(b) It must be transferable
(c) It must be registered
(d) It must be signed.
Answer ‘Yes’ or ‘No’ to the following:
(iv) In case of joint promise, the liability to pay the promise will devolve on any one or more promisors.
(v) Deposit of money in a Bank Amounts to Bailment. (5 x 1=5 Marks)
(a) The stated problem falls under the head ‘anticipatory breach of contract’ defined in
Section 39 of the Indian Contract Act, 1872. In this type of case, the promisee will be
entitled to various damages namely:
1. Nominal damages
2. Special damages
3. Damages for deterioration due to delay in performance
4. Exemplary damages.
The case law applicable here in Fross vs. Knight. As per details in the problem, price as
contracted Rs. 40 per kg. on 10.11. 2006 rose to Rs. 50 per kg. as on 4.12.2006 and
finally to Rs. 53 per kg, on 09.12.2006.
The answer to the problem is that
1. Mr. Ramaswamy can repudiate the contract on 04.12.2006 and can claim damages
of Rs. 10 per kg viz. Rs. 1,00,000.
2. He could wait till 09.12.2006 and claim Rs. 1,30,000 i.e. Rs. 13 per kg.
3. If the Government imposes a ban on the movement of unit shall due to rise of
prices, the contract becomes void and Mr. Ramaswamy will not be able to recover
any damages whatsoever.
(b) (i) In a contract of guarantee, a person who promises to discharge another’s liability to
pay is called: (d) surety
(ii) The delivery of goods by one person to another as a security for the payment of a
debt is called: (b) pledge
(iii) The Negotiable Instrument need not to be registered
Option (c)
(iv) In case of joint promise, the liability to pay the promise will devolve on any one or
more promisors. Yes
(v) Deposit of money in a Bank amounts to bailment. No
Question 2
(a) German Pharmaceuticals Limited is a zero debt company having 10 lakhs Equity shares of Rs. 10 each. The Directors desire to buy back its own shares. Can it do so? If so, how? (5 Marks)
(b) Each subdivision carries one mark. Answer ‘Yes’ or ‘No’ to the following:
(5 x1= 5 Marks)
(i) A minor also can become a member of a Company.
(ii) New shares cannot be issued to outsiders without prior offer to the existing
Pick-up the correct answer from the following:
(iii) As per Companies Amendment Act, 2000 a Private Company and Public Company must have a minimum paid-up capital of
(a) Rs. 1 lakh and Rs. 2 lakhs respectively
(b) Rs. 3 lakhs and Rs. 5 lakhs respectively
(c) Rs. 2 lakhs and Rs. 3 lakhs respectively
(d) None of the above.
(iv) A model form of Articles contained in Table ‘A’ relates to a Company limited by
(a) Shares
(b) Guarantee
(c) Shares and Guarantee
(d) None of the above.
(v) Dividend can be declared out of
(a) Capital reserve
(b) Revaluation reserve
(c) Debenture Redemption reserve
(d) Earlier year’s reserve brought forward.
(a) Section 77A of the Companies Act, 1956 permits company to purchase its own securities.
Thus, directors can buy back its own shares subject to sub-section (2) of Section 77A
and 77B of the Act. The company can buy-back its own shares out of free reserve or
securities premium or proceeds of any shares or other specified securities.
No buy-back of any kind of shares or other specified securities shall be made out of the
proceeds of an earlier issue of the same mind of shares or shame kind of other specified
No company shall purchase its own shares or other specified securities under subsection
(1) unless –
(a) The buy-back is authorised by its articles
(b) A special resolution has been passed in general meeting of the company authorising the buy-back. But it is not necessary where the buy-back is or less than 10% of total paid-up equitable capital and free reserve of the company and such buy-back has been authorised by the Board by mans of a resolution passed at its meeting. N offer of buy-back is made within a period of 365 days reckoned from the date of the preceding offer of buy-back if any.
(c) The buy back is or less than 25% of the total paid-up capital and free reserve of the
company. The buy-back of equity share in any financial year shall not exceed 25% of its total
paid-up-equity capital in that financial year.
(d) The ratio of the debt owned by the company is not more than twice the capital and its free reserves after such buy-back.
(e) All the shares or other specified securities for buy-back are fully paid-up;
(f) The buy-back of the shares or other specified securities listed on any recognised stock exchange is in accordance with the regulations made by the Securities and Exchange Board of India in this behalf. Before making such buy-back, file with the Registrar and Securities and Exchange board of India, a declaration of solvency in the form as may be prescribed and
notified by an affidavit of the effect that the Board has made a full inquiry into the affairs of the Company that it is capable of meeting its liabilities and will not be rendered insolvent.
(b) (i) No, a minor can not become a member of a company.
(ii) Yes, new shares cannot be issued to outsides without prior offer to existing shareholder.
(iii) As per companies Amendment Act, 2000 a private company and public company
should have a paid up capital of 1 lac and 5 lacs respectively. Therefore option (d) is correct.
(iv) option (a) is correct.
(v) option (d) is correct.
Question 3
Mr. ‘E’ joined as supervisor on monthly salary of Rs. 3,400 on 1.02.2007 and resigned from his job on 28.022007. The company declared a bonus of 20% to all eligible employees and paid it on time. Mr. ‘E’ knowing the facts made a claim to HRD, which in turn rejected the claim. Examine the validity in the light of the provisions of the payment of Bonus Act, 1965. (5 Marks)
As per proviso of Section 2(13) of The Payment of Bonus Act, 1965 an employee means only
person on a salary or wage not exceeding three thousand and five hundred rupees per member.
Further, Section 8 provides that an employee to be entitled for bonus in the accounting year
should has worked in the establishment for not less than thirty working days in that year.
Thus, in view of the above Mr. ‘E’ is not entitled for Bonus, as he has not worked for 30 days
in the accounting year.
Question 4
PQR Limited received a cheque for Rs. 50,000 from its customer Mr. LML After a week company came to know that the proceeds were not credited to the account of PQR Limited due to some ‘defects’, as informed by the Banker. What according to you are the possible effects? (5 Marks)
A Cheque is a Bill of Exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand and it includes the electronic image of a truncated cheque and a
cheque in electronic form. Possible defects are;
1. Cheque undated.
2. Cheque becomes stale
3. Instrument inchoate
4. Cheque may be post dated
5. inadequate funds position of the customer
6. Customer might have credit in one branch and cheque drawn on another branch.
7. Bank might have received insolvency/lunacy of customer.
8. Counter-manding / stop payment instruction of customer.
9. Bank receiving attachment order by a court
10. Bank receiving notice of customers death
11. Closure of account by customer.
12. Material alterations like irregular signature, difference of amount in words and figure etc.
Question 5
Define the term ‘Employer’ under the Provident Fund and Miscellaneous Provisions Act, 1952. (5 Marks)
Section 2(e) read with Section 2(k) of the Employees Provident Fund and Miscellaneous Provisions Act 1952 defines employer means –
(i) in relation to an establishment which is a factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and where a person has been named as a manager of the factory, and
(ii) in relation to any establishment, the person who, or the authority which has ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager, Managing Director, managing agent, such manager, MD or Managing agent shall be treated employer.
Question 6
State the circumstances under which the drawer of a cheque will be liable for an offence relating to dishonour of the cheque under the Negotiable Instrument Act, 1881. Examine, whether there is an offence under the Negotiable Instrument Act, 1881, if a Drawer of a cheque after having issued the cheque, informs the Drawee not to present the cheque as well as informs the Bank to stop the payment. (5 Marks)
Dishonour of cheque: On dishonour of a cheque the drawer is punishable with imprisonment
for a term not exceeding two years or with a fine not exceeding twice the amount of a cheque
or with both of the following conditions are fulfilled:
(i) If the cheque is returned by the bank unpaid due to insufficiency of funds in the account
of drawer
(ii) If the cheque was drawn to discharge a legally enforceable debt or other liability.
(iii) If the cheque has been presented to the bank within a period of six months from the date
on which it is drawn on or within the period of its validity, whichever is earlier.
(iv) if the payee or the holder in due course of the cheque has given a written notice demanding payment within 30 days from the drawer on receipt of information of dishonour of cheque from the bank.
(v) If the drawer has failed to make payment within 15 days of the receipt of the said notice.
(Section 138)
(vi) If the payee or a holder in due course has made a complaint within one moth of cause of
action arising under Section 138 (Section 142)
The Supreme Court held in Modi Cements ltd. Vs. Kuchil Kumar Nandi held that once a
cheque is issued by the drawer, a presumption under Section 139 follows (i.e. the cheque has
been issued for the discharge of any debt or other liability) and merely because the drawer
issued a notice thereafter to the drawee as to the bank for stoppage of payment, it will not
preclude an action under Section 138. Hence, the drawer of the cheque will be liable for the
offence under Section 138 for dishonour of cheque.
Question 7
Explain the provisions of the Payment of Gratuity Act, 1972 relating to ‘forfeiture of the amount of Gratuity’ payable to an employee. (5 Marks)
Forfeiture of gratuity: Section 4(6) of Payment of Gratuity Act, 1972 deals with cases in which gratuity payable to an employee may be forfeited.
According to it, the gratuity of an employee whose service have been terminated for any act,
wilful omission or negligence causing any damage or loss to, or destruction of, property
belonging to the employer, shall be forfeited to the extent of the damage or loss so caused.
The gratuity payable to an employee may be wholly or partially forfeited if the services of such
employee have been terminated for –
(i) his riotous or disorderly conduct or any other act of violence on his part or
(ii) any act which constitutes an offence involving moral turpitude, provided that such offence
is committed by him in the course of his employment.
Question 8
Briefly discuss the provisions relating to constitution of National Company Law Tribunal and National Company Law Appellate Tribunal. (5 Marks)
Part VI-A has been introduced into the Companies Act, 1956 by the Companies (Second
Amendment Act, 2002). Its enforcement will mean repeal of the Sick Industrial Companies
(Special provisions) Act, 1985 and also abolition of the Board of Industrial and Financial
Reconstruction (BIFR). Such cases will go before the National Company Law Tribunal.
Section 424A provides for such reference. The Board of Directors of a sick industrial company
have to make a reference to the Tribunal. They have to prepare a scheme for its revival and
rehabilitation and submit to the tribunal along with an application containing such particulars
as may be prescribed. The Tribunal thereafter has to enquire with working of sick industrial
companies. The Tribunal is empowered to make suitable orders on completion of the Enquiry.
The National Company Law Appellate Tribunals have been constituted by central Government
by notification with official gazette. Any person aggrieved by an order of the Tribunal, can
within 45 days file an appeal before the National Company Law Appellate Tribunal, which will
pass orders after giving opportunity of hearing to the aggrieved party.
Question 9
What is E filing? List at least five advantages of E filing under MCA 21. (5 Marks)
The term E-filing indicates the process of getting services electronically with a comprehensive
on-line portal. The advantages are:
1. Instant registration of companies;
2. Simplified and more facile method of filing documents;
3. Total transparency;
4. Easier and better compliance of regulations;
5. Utmost customer care
6. Authentic and reliable filling of forms / returns through professionals;
7. Centralised database management;
8. Better service availability;
9. Filing of and inspection of documents anywhere and anytime.
10. Quick redressal of investor grievances
11. Supervisor and monitoring of compliance made easier.
Question 10
Mr. Ram Lal and his friend desire to incorporate a Public Company and approach you for help. Advise. ( 5 Marks)
1. A name must got allotted out of a choice of three.
2. Seven members (minimum) must beready to sign as subscribers to the MOA and AOA.
3. MOA and AOA with necessary objects and clauses should be prepared on stamp paper
according to State Stamp Act.
4. Consent must be given in Form No. 32 for becoming a Director. List of directors must
also be filed.
5. Form No. 18 showing address of the registered office is also another document.
6. Form No. I – Declaration by a Professional or Director is also necessary on the requisite
stamp paper.
7. The name available letter should be filed in Original.
8. A power of attorney on non-judicial stamp paper for making corrections and receiving
Incorporation Certificate is necessary.
9. Fees for registration of a company depending upon the authorised capital must also be paid.
After satisfaction of the above requirements, the ROC issues a certificate staling that the public company has been incorporated.
Question 11
Explain the doctrine of ‘Indoor management’ in brief.
The Secretary of a Company issued a share certificate to ‘A’ under the Company’s seal with his own signature and the signature of a Director forged by him. ‘A’ borrowed money from ‘B’ on the strength of this certificate. ‘B’ wanted to realise the security and requested the company to register him as a holder of the shares. Explain whether ‘B’ will succeed in getting the share registered in his name. (5 Marks)
The doctrine of Indoor Management as discussed in the Royal British Bank vs. Turquand. In this case the directors of RBB also gave a bond to T. The Article empowered the directors to issue such bonds under the authority of a proper resolution. In fact no such resolution was passed. Notwithstanding that, it was held that T could sue on the bonds on the ground that he was entitled to assume that the resolution had been duly passed.
Thus the persons dealing with the company are entitled to assume that the acts of the directors or the officers of the company are validly performed, if they are within the scope of their apparent authority. But this doctrine is not applicable where the person dealing with the company has notice of irregularity or where the person dealing with the company is put upon
on inquiry or when an instrument purporting to be enacted on behalf of the company is a forgery.
In the instant problem the doctrine of indoor management can apply only in case of
irregularities which might otherwise affect the transaction, but it cannot apply to forgery which
must be regarded as nullity. Hence ‘B’ will not succeed in getting the share registered in his
Question 12
Explain in brief ‘Equity Share Capital’ and ‘Preference Share Capital’. (5 Marks)
As per the Section 85 and 86 of the Companies Act 1956, there will now be two types of share
capital as under:
Share Capital:
The share capital of a company limited by shares shall be of two kinds only, namely –
(i) equity share capital and
(ii) preferential share capital.
Equity Share Capital shall be:
(i) with voting rights
(ii) with differential rights. The expression ‘Shares with differential voting rights” is defined
as a share that is issued in accordance with the provisions of Section 86.
Equity shares carry voting rights on the ground meetings of the company and have the
right to control the management of the company. They have right to share in the profits
of the company in the form of distribution of dividend and bonus shares. In the event of
winding up of the company, equity shares capital is repayable only after repayment of the
claims of the creditors and preference share capital.
Preference share capital means that part of share capital which fulfils both the following
requirements, namely
(a) as respects dividend it carries or will carry a preferential right to be paid a fixed
amount or an amount calculated at a fixed rate, and
(b) as respect, it carries or will carry on the winding up or repayment of capital, a preferential right to be repaid the amount of the capital paid up on demand to have been paid up whether or not there is a preferential right to the payment of either or both of the following amounts namely –
(i) any money remaining unpaid in respect of amount specified in clause (a), upto the
date of winding up or repayment of capital
(ii) any fixed premium, any fixed scale specified in the memorandum or article of the
company (see Section 85).
Question No. 13. is compulsory. Attempt any two questions of the rest.
Question 13
(a) What is Corporate Social Responsibility? Why it is needed in Indian Business
environment? (5 Marks)
(b) Explain briefly the matters to be considered and the steps that may be taken by a Finance and Accounting professional when he is required to resolve an ethical conflict in the application of Fundamental principles. (5 Marks)
(a) The concept of Corporate Social Responsibility (CSR) focuses on the idea that beyond making profit, a business has social obligations. It is the responsibility of the companies to produce an overall positive impact on the society. CSR is pursued by business to balance their economic, environmental and social objectives which at the same time addressing stakeholder’s expectations and enhancing shareholders values.Shareholders, including shareholders, analysts, regulations, labour unions, employees, community organisations and mass media are assign companies to be accountable not only for their own performance but for the performance of their entire supply chain. Issues such as peace, sustainable development, security poverty allocation, environmental quality and human rights are having a performed effect on business and its environment.
Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.

Need for social responsibility:
1. The iron law of responsibility
2. To fulfil long term self-interest
3. To establish a better public image
4. To avoid government regulation and control
5. To avoid misuse of Nation al Resources and Economic Power
6. To convert Resistances into Resources
7. To minimise Environmental damage.
(b) Conflict Resolution: While evaluating compliance with the fundamental principles, a finance and accounting profession may be required to resolve a conflict on the application of fundamental principles. The following needs to be considered, either individually or together with others, during a conflict resolution process
(a) Relevant facts
(b) Ethical issues involved
(c) Fundamental principles related to the mater in question
(d) Established internal proceedings and
(e) Alternative course of action
Having considered these issues, the professional should determine the appropriate course of action that is consistent with the fundamental principles identified. The professional should weigh the consequences of each possible course of action. If the matter remains unresolved, the professional should consult other appropriate persons within the firm or employing organization for help in obtaining resolution. During times where a matter involves a conflict with or within an organization, finance and accounting professional should also consider consulting with those charged with governance of the oganisation, such as the Board of Directors.
It may be in the best interests of the professional to document the substance of the issues and details of any discussions held or decisions taken, concerning that issue. If a significant conflict cannot be resolved, a professional may also obtain professional advice from the relevant professional body or legal advisors and thereby obtain guidance on ethical issues without breaching confidentiality.

If, after enhancing all strategies, if the ethical conflict remain unresolved, a professional should try to disassociate from the conflict resolution of the organisation concerned.

Question 14
What is meant by ‘Sustainable Development’? State the special responsibilities of the industries that are based on natural resources. How the adoption of Green Accounting System. helps in avoiding policy decisions which are non-sustainable for the country? (5 Marks)
SUSTAINABLE DEVELOPMENT: Literally sustainable development refers to maintaining
development over time. It may be defined as development that meets the needs of the
present without compromising the ability of future generations to meet their own needs. A
nation or society should satisfy its requirements – social, economic and others – without
jeopardizing the interests of future generations.
Special responsibilities of industries base on mutual resources : Industries that are
based on natural resources, like minerals, timber, fibre, and foodstuffs etc. have a special
responsibility for :
(1) adopting practices that have built in environmental consideration
(2) introducing processes that minimize the use of natural resources and energy, reduce
waste, and prevent pollution.
(3) making products that are ‘environment-friendly’, with minimum impact on people and
Green accounting systems: Conventional accounts may result on policy decisions which are
non-sustainable for the country. Green accounting on the other hand is, focused on addressing such deficiencies in convention accounts with respect to environment. If the environmental costs are properly reflected in the process paid for goods and services these companies and ultimately the consumer would adjust market behaviour in a way that would reduce damage to environment, pollution and waste production, price signed will influence behaviour to avoid exploitation or excessive utilization of natural resources. Such resources would facilitate the approach of ‘polluter pay principle’. Removing subsidies that encourage environment damage is another measure.
Question 15
Answer any two out of four in ‘yes’ or ‘no’ with brief reasons:
(a) Knowledge without morality is a social sin.
(b) Consumer purchases goods and health services for personal purposed only.
(c) Consumer and Public interest are both synonymous.
(d) Ethics are necessary in marketing to build Brand image only. (5 Marks)
(a) Yes, knowledge without morality is a social sin. The obvious reason is that a number of companies are emerging in various fields with sound technologies, but they are hurting the sentiments of the community at large. Therefore, new scientific and technological methods should be adopted keeping in mind the public sentiments and ethical values.

(b) No, The consumer do not purchases goods and health services for personal purposesonly, because in certain occasions various items are purchased for public welfare and development of the society as a whole.
(c) No, the consumer and public interest are not synonymous, because whatever is done inpublic interest is to protect the larger interest of the society that may or may not be a consumer.
(d) No, the ethics are not necessary in marketing only to build image, but ethics are necessary for sustainable development of business, and ultimately for transparency and
good corporate governance in the country.
Question 16
Explain in brief the measures to ensure ethics in the Work place. (5 Marks)
The focus on core values and sound ethics, the hallmark of ethical management, is being
recognized as an important way to ensure the long-term effectiveness of governance
structures and procedures and avoid the need for whistle-blowing. Employers who understand
the importance of work place ethics, provide their workforce with an effective framework and
guiding principles to identify and address ethics issues as they rise. Measures to ensure
ethics in the workplace :
1. code of conduct and ethics
2. establish open communication
3. make ethics decisions in group and make decision public as appropriate
4. integer ethics management with other management practices.
5. use of cross-functional terms when developing and implementing the ethics management
6. Appointing an ombuds man.
7. Creating an atmosphere of trust
8. Regularly updating of policies and procedures
9. include a grievance policy for employees
10. set an example from the top.
Question No. 17 is compulsory and attempt any tow question of the rest.
Question 17
(a) What is meant by ‘Emotional Intelligence’ and ‘Emotional Quotient’? State any six social competencies associated with Emotional Intelligence. (5 Marks)
(b) Draft a ‘Power of Attorney’ by subscribers of Memorandum of Association of the Company authorising a Chartered Accountant to appear before the Registrar of Companies to do the needful for the purpose of incorporation of the company.
(5 Marks)
(a) Emotional Intelligence: Emotional intelligence refers to the capacity to recognizing your own feelings and those of others, for motivating yourself, and for managing emotions well in yourself and in your relationships. It describes abilities distinct from but complementary to academic intelligence, the purely cognitive capabilities measured by IQ. Many people who are look smart but lack emotional intelligence end up working for people who have lower IQs than they but who excel in emotional intelligence skills.

Emotional quotient inventory is designed to measure a nature of constructs related to emotional intelligence. EQ is the ability to make and deeper connections at three levels: with ourselves (personal mastery), with another person (one-to-one) and within groups/teams. Our EQ or emotional intelligence is the capacity for effectively recognizing and managing our own emotions and those of others. The wonderful thing about EQ, unlike IQ which stabilizing when a person is around 18 years of age is that it can change. A person today with a low EQ score on ‘empathy’ can have a higher ‘empathy’ score in the future – if that person recognizes his/her limitation changes attitude, adopts a learning strategy, and practices key listening and empathy skills.
Social competencies associated with emotional intelligence are as follows:
Social Awareness:
1. Empathy: Sensing others emotions, understanding their perspective and taking active interest in their concerns .
2. Organizational awareness: Leading the currents decision, networks and politics at
the organizational level.
3. Service: Recognizing and meeting follower, client or customer needs.
Relationship Management :
1. Inspirational leadership: Guiding and motivating with a compelling vision.
2. Influence: wielding a range of tactics for persuasions
3. Developing others: Bolstering others’ abilities through coaching, feedback and
4. Change catalyst: Initiating managing and leading in a new direction.
5. Conflict management resolving disagreements.
6. Building bonds: Cultivating and maintaining a web of relationships.
7. Teamwork and collaboration: Cooperate and team building.
(b) Before Registrar of Companies: We the subscribers of the Memorandum and Article of
Association of the Proposed Company, hereby authorize to present the memorandum of
Article of Association and other connected documents for the registration of the said
company before the registrar of companies, Karnataka, Bangalore and to make such
corrections / Alterations/deletions/Additions as may be required to be done by the
Registrar in the documents and also to receive the certificate of incorporation.
General Power of Attorney: Know we all men by their present we do hereby appoint
and constitute ……… son of ………………(hereinafter called “chartered Accountant” who
has subscribed his signature hereunder in token of identification) presently residing ……
to my lawful Chartered Accountant in our name and on our behalf do it any one or all the
following acts, deeds, things namely
1. to give all particulars necessary for incorporation of company.
2. to give affidavit to the Registrar of Company for the purpose of incorporation.
3. to do needful acts necessary for incorporation of the company
4. He is authorized to include promissory notes letter of declaration and indemnity for
the purpose of incorporation.
5. to receive documents on behalf of the members of the company.
6. to sign forms, documents and papers required for the purpose of incorporation of
the company.
Dated ……….at this day ……………….of
Specimen signature of the Chartered Accountant above named
Notary Public
Question 18.
Draft a notice for ABC’s Annual General Meeting with four ordinary business. (5 Marks)

Notice is hereby given that the 15th Annual General Meeting of the members of ABC will be
held on Monday the 15th day of September 2006 at the registered office of the Company
………………. At 10 a.m. to present the following business:

Ordinary Business:

1. To Receive, consider and adopt the Audited Balance sheet of the company as on 31st
March, 2006 and the Profit and Loss account for the year ended on that date and Audit’s
and director’s response thereon.
2. To declare dividend for the year ended 31st March, 2006
3. To appoint a director in place of Mr. ……………………..
4. To appoint Statutory Auditors of the Company.

NOTE: A member entitled to attend and vote is entitled to appoint a proxy to attend and vote
instead of himself and proxy need not be a member of the company.

For and on behalf of the Board of Directors
Registered Office

Question 19
What do you understand by Group Dynamics? (5 Marks)

Groups are the basic building blocks of organizations. It is now very common for groups of
employers to make decisions to solve difficult problems that were once the domain of
authoritarian incentives. Given below are the characteristics of Group personality:
1. spirit of conformity
2. respect for group values
3. resistance to change
4. group prejudice
5. collective power

Question 20
Mr. A has not received a dividend warrant of Rs. 1,500 for 150 shares of XYZ Ltd. Draft an indemnity bond, to be given to the company for seeing release of Dividend. (5 Marks)

Indemnity Bond
Mr. A S/o ……………………….. resident ……………………… do hereby agree to indemnify
the XYZ Ltd. for any loss that may occur for seeking release of dividend for 150 shares of Rs.
1500. I further declare that personally I have not received the dividend warrant in question.

Mr. A
Dated: Signature

NI Act_Practical Problems_52

A cheque is drawn upon Dena Bank. It is stolen by X who hands it over to Y who takes in good faith for valuable consideration. Y deposits the cheque into his own account in Canara Bank who presents it and obtains payment from Dena Bank. Discuss the legal position of paying banker, collecting banker, Y and true owner in each of the following alternative cases:
a. If the cheque is payable to bearer.
b. If the cheque is payable to bearer and is crossed generally.
c. If the cheque is payable to bearer and is crossed generally with words 'not negotiable’.
d. If the cheque is payable to bearer and is crossed specially with words 'Canara Bank'.
e. If the cheque is payable to bearer and is crossed specially with words 'Allahabad Bank’.
f. If the cheque is payable to B or order and X forges B's endorsement.
g. If the drawer's signatures were forged.

NI Act_Practical Problems_51

State with reasons whether each of the following instrument is an Ambiguous Instrument or Fictitious Instrument:

a. A bill is drawn by A, an agent, acting within the scope of his authority, upon his principle P.

b. X draws a bill on Y who is a fictitious person and negotiates it himself.

c. X draws a bill on Y who is a minor.

d. A bill is drawn by Delhi branch of Dena Bank upon its Bombay branch.

e. A bill is drawn upon Y who is a major person payable to Z who is a fictitious person.

f. A bill is drawn upon Y as payable to Z. The drawer is a fictitious person.

Thursday, December 20, 2007


Question No. 13 is compulsory. Attempt any two questions of the rest.
What is meant by 'Corporate Governance'? State the major 'characteristics' of good
corporate governance. (5 marks)
Ans : Refer Q- 9 of Chapter 2

Finance and accounting professional working as an employee in an organisation have to face various threats which make it difficult for them to comply with fundamental principles relating to ethics. Explain the safeguards in the work environment which may be created by a business enterprise to overcome such threats. (5 marks)
Ans : Refer Q-11, Point No. B on page no 55 of Chapter no 6
Explain the meaning of the terms 'ethics' and 'business ethics' and also state the requirements of 'business ethics' (5 marks)
Ans : Refer Q-1 & 2, Chapter no 1
Answer any two out of four. You are required to state whether the statement is correct or
incorrect with brief reasons:
(a) Company management has responsibility only towards its shareholders.-No
(b) Window-dressing of financial statements will not be useful in the long run.-Yes
(c) Ethics and morals are synonymous.-No
(d) Competition Act, 2002 protects the interest of consumers.-Yes (5 marks)

What is meant by 'Environmental ethics'? How does it's non-adoption leads to 3 Ps viz., Polluter, Pay and Principles? Explain. (5 marks)
Ans : Refer Q-12, Chapter no 4
Question No. 17 is compulsory and attempt any two questions of the rest

What is meant by 'Critical thinking? How shall you develop critical thinking? (5 marks)
Ans : Refer Q-9 & 10, Chapter no 8
J desires to gift out her flat to Mumbai in City Cooperative Society registered under the Maharashtra Cooperative Societies Act, 1960, to her brother A. Stating the legal requirements to be complied with, draft a Gift Deed. Take your own data regarding date, flat no., floor area etc. (5 marks)

Third Annual General Meeting of ABC Limited was held on 28th September, 2007. Several business was transacted at the meeting including the adoption of annual accounts for the year ended 31st March, 2007. The meeting was attended by 30 members in person and 5 members in proxy. Draft the minutes of the Annual General meeting indicating how shall the adoption of accounts, being one of the business transacted at the meeting, be recorded. (5 marks)

What do you understand by `Group conflicts'? How shall these be managed effectively? Explain. (5 marks)
Ans : Refer Q-10 & 11, Chapter no 9
You have been assigned the job of composing business messages. What check-list would you prepare for organizing the message?

Ans : While composing business messages i would like to check following things:
  1. The background and educational level of receiver
  2. The understanding level of receiver
  3. The urgency or importance involved with message
  4. The level of secrecy to be maintained with message
  5. The length, fact & figure involves in message
  6. Selection of channel
  7. The amount of noise or barrier present in the channel or path of communication.
  8. Cost & time involved in transmission of message
  9. Custom and culture of organisation and receiver (audience)

Thursday, December 13, 2007

What is innominate Terms ?

Innominate terms - (intermediate terms) Terms of a contract that cannot be classified as conditions or warranties. The parties to a contract may label the terms of the contract as either conditions or warranties and those labels will usually be respected by the courts provided that the result is reasonable. Similarly, certain terms have traditionally been treated as conditions or warranties even though they have not been labelled as such (for example, time clauses in mercantile contracts are to be treated as conditions). Innominate terms are those that will not fit the above categories. The remedy for breach of an innominate term will depend on whether or not the breach is of a fundamental nature, i.e. that the injured party has been deprived of substantially the whole of the benefit of the contract. If the injured party has been so deprived, he will be entitled to treat the contract as repudiated and claim damages. If not, he will be entitled to damages only.

NI Act_Practicle Problems_50

B signs the following endorsements on different negotiable instruments pay­able to bearer. Classify the endorsements with reasons as Blank Endorsement or Full Endorsement or Restrictive Endorsement or Partial Endorsement or Conditional Endorsement. Also, state whether the following Endorsements are valid or invalid.

a. No other words except B's signature.
b. Pay C.
c. Pay C or order.
d. Pay C only.
e. Pay C or order for the account of B.
f. Pay C or order Rs 500 out of Rs.1,000.
g. Pay C or order being the unpaid residue of the bill.
h. Pay C or order on safe receipt of goods.
i. Pay C sans Recourse.
j. Pay C sans Frais.
k. Pay C, notice of dishonour dispensed with.

NI Act_Practicle Problems_49

P, the holder of a bill of exchange, transfers it to Q without consideration. Q also transfers it to R without consideration. R transfers it to X for consideration. X transfers it to Y without consideration. State whether Y can recover the amount of such instrument from X or P.

Tuesday, December 11, 2007

NI Act_Practicle Problems_48

X obtains Y’s acceptance to bill by fraud. X endorses it to Z who takes it as holder in due course. Z endorses the bill to F who knows of the fraud. Can F recover from X?

NI Act_Practicle Problems_47

H is the holder in due course of a bill of which A is the acceptor. D, the drawer of the bill, is fictitious. Can A escape from his liability to H?

NI Act_Practicle Problems_46

A draws a cheque for Rs. 100 and hands it over to B by way of gift. Is B a holder in due course? Explain the nature of his title, interest and rights to receive the proceeds of the cheque.

One of the requirements of Section 9 of the Negotiable Instruments Act to constitute a holder, as holder in due course is that he must have received the instrument for consideration. There are no exceptions to this condition. Thus B can’t be treated as holder in due course. But he is certainly a holder with good title thereto and hence he will have every right to claim payment upon instrument.

Thursday, December 06, 2007

Contract Act_Practical Problems_63

A’ stands surety for ‘B’ for any amount which ‘C’ may lend to B from time to time during the next three months subject to a maximum of Rs. 50,000. One month later A revokes the guarantee, when C had lent to B Rs. 5,000. Referring to the provisions of the Indian Contract Act, 1872 decide whether ‘A’ is discharged from all the liabilities to ‘C’ for any subsequent loan. What would be your answer in case ‘B’ makes a default in paying back to ‘C’ the money already borrowed i.e. Rs. 5,000?

The problem as asked in the question is based on the provisions of the Indian Contract Act 1872,
as contained in Section 130 relating to the revocation of a continuing guarantee as to future
transactions which can be done mainly in the following two ways:

1. By Notice: A continuing guarantee may at any time be revoked by the surety as to future
transactions, by notice to the creditor.
2. By death of surety: The death of the surety operates, in the absence of any contract to the
contrary, as a revocation of a continuing guarantee, so far as regards future transactions.
(Section 131).
The liability of the surety for previous transactions however remains.
Thus applying the above provisions in the given case, A is discharged from all the liabilities
to C for any subsequent loan.
Answer in the second case would differ i.e. A Is liable to C for Rs. 5,000 on default of B
since the loan was taken before the notice of revocation was given to C.

Contract Act_Practical Problems_62

‘A’ applies to a banker for a loan at a time where there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. Whether the contract is induced by undue influence? Decide.
In the given problem, A 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. A 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.

Contract Act_Practical Problems_61

Mr. Dubious textile enters into a contract with Retail Garments Show Room for supply of 1,000 pieces of Cotton Shirts at Rs. 300 per shirt to be supplied on or before 31st December, 2006. However, on 1st November, 2006 Dubious Textiles informs the Retail Garments Show Room that he is not willing to supply the goods as the price of Cotton shirts in the meantime has gone upto Rs. 350 per shirt. Examine the rights of the Retail Garments Show Room in this regard.

In the given problem Dubious Textiles has indicated its unwillingness to supply the cotton shirts
on 1st November 2006 itself when it has time upto 31st December 2006 for performance of the
contract of supply of goods. It is therefore called anticipatory breach of contract. Thus Retail
Garments show room can claim damages from Dubious Textiles immediately after 1st November, 2006, without waiting upto 31st December 2006. The damages will be calculated at the rate of Rs.50 per shirt i.e. the difference between Rs. 350/- (the price prevailing on 1st November) and Rs. 300/- the contracted price.

NI Act_Practicle Problems_45

M a broker draws a cheque in favour of N, a minor. N indorses the cheque in favour of O, who in turn indorses it in favour of P. Subsequently, the bank dishonoured the cheque. State the rights of O and P and whether N, can be made liable?
According to section 26 of the Negotiable Instruments Act, 1881 a minor may draw, indorse,
deliver and negotiate a negotiable instrument to bind all parties except himself. Therefore, O and P cannot claim from B, who being a minor does not incur any liability on the cheque. O can claim payment from M, the Drawer, only and P can claim against O, the indorser and M, the drawer.

Contract Act_Practical Problems_60

Ram, Rahim and Robert are partners of software business and jointly promises to pay Rs.30, 000 to Raheja. Over a period of time Rahim became insolvent, but his assets are sufficient to pay one-forth of his debts. Robert is compelled to pay the whole. Decide whether Robert is required to pay whole amount himself to Raheja in discharging joint promise.

According Section 43 of Indian Contract Act, 1872 when two or more persons make a joint
promise, the promisee may, in absence of express agreement to the contrary, compel any one or
more of such joint promisers or perform the whole of the promise. Further, if any one of two or
more joint promisers makes default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares. Therefore, in this case, Robert is entitled to receive 2,500 from Rahims assets and 13,750 from Ram.

Contract Act_Practical Problems_59

Miss.Chitra, a singer, enters in to a contract with the manager of Bangalore Gate Club, to sing in the Club for two concerts every week during the next two months and the club agrees to pay her at the rate of Rs.2000 for each concert. On the seventh concert Miss.Chitra willfully absents herself. With the assent of the manager of the club, Miss.Chitra sings for the eighth concert. But on the following day, the club, puts an end to the contract. Can Miss.Chitra claim damages for breach of contract? Advise .

On the seventh Concert when Miss.Chitra willfully absents herself, the club is at liberty to put an end to the contract. If Miss.Chitra sings on the eighth Concert with the consent of the club. The club has signified its acquiescence in the continuance of the contract and cannot now put an end to it. The club is entitled to compensation for the damage sustained because of Miss.Chitra’s
failure to sing on the seventh concert. If the club puts an end to the contract, Miss.Chitra can
claim damages for breach of contract [Section 39 of The Indian Contract Act, 1872)].

Contract Act_Practical Problems_58

Mr. X, is employed as a cashier on a monthly salary of Rs.2,000 by ABC bank for a period of three years. Y gave surety for X’s good conduct. After nine months, the financial position of the bank deteriorates. Then X agrees to accept a lower salary of Rs.1,500/- per month from Bank. Two months later, it was found that X has misappropriated cash since the time of his appointment. What is the liability of Y?

If the creditor makes any variance (i.e. change in terms) without the consent of the surety, then
surety is discharged as to the transactions subsequent to the change. In the instant case Y is
liable as a surety for the loss suffered by the bank due to misappropriation of cash by X during the first nine months but not for misappropriations committed after the reduction in salary. [Section 133, Indian Contract Act, 1872].

NI Act_Practicle Problems_44

Can an acceptor of a bill avoid his liability against a person who is a holder in due course or who derives his title from a holder in due course, on the following grounds:

a. That the instrument has not been filled in accordance with the authority given by him.
b. That the other parties to the bill were fictitious.
c. That the instrument was drawn without consideration.
d. That the delivery of the instrument was conditional.
e. That the instrument had been lost.
f. That the instrument was obtained from him by means of fraud.
g. That the instrument was obtained from him for an unlawful consideration.
h. That his signature was forged.That payee had no capacity to endorse.

Thursday, November 29, 2007

NI Act_Practicle Problems_43

Promissory note dated 1st February, 2001 payable two months after date was presented to the maker for payment 10 days after maturity. What is the date of Maturity? Explain with reference to the relevant provisions of the Negotiable Instruments Act, 1881 whether the endorser and the maker will be discharged by reasons of such delay.

NI Act_Practicle Problems_42

S writes "I promise to pay 'B' a sum of Rs.500, seven days after my marriage with 'C"'. Is this a promissory note?
Promissory note can be based on future event. The event should be certain, but date on which it will happen need not be certain. In this case, the event of S's marriage with 'C' is not certain, as S may not marry or marry some other person. Hence, this is not a promissory note.

Friday, November 23, 2007

How to draft resolution ?

It is a general practice to start a resolution with the words “Resolved that………, but strictly speaking it is not compulsory. It denotes that the text of the resolution is decided formally.

If a resolution runs into paragraphs then it is conventional to split the resolution into different parts eg: “Resolved further that……..

Usually surplus or meaningless words are not included in the resolutions.

The language used should be direct and simple, because it is meant for reading by the common shareholders etc.

Reference to documents approved at a meeting should be included. For eg: Appointment of MD – Draft agreement.

Must indicate the relevant Section pursuant to which that resolution is passed eg: “Resolved that pursuant to Section……of the Companies Act 1956……… This is preferably be included in beginning part of the resolution. If more than one provision is hit then, include the words “and any other applicable provisions in the Companies Act, 1956”.

Approvals required for the resolution should be mentioned. For eg: subject to the approval of Central Government or subject to the confirmation of Company Law Board……….
With effect from date of the resolution may be indicated. For eg: Appointment of sole selling agent.

It is conventional to write a preamble to resolution. For eg:

Kind of meeting: Board/GeneralType of resolution: Simple/ordinary/special
Connecting words like, be and is hereby (denoting one concept) or be and are hereby (denoting more than one concept) is conventional. For eg: “Mr…….., director of the company be and is hereby appointed…….”

“Mr……. and Mr……. be and are hereby appointed…….”

Provident Fund Act_Practicle Problems_5

Mrs. Tsunami who was an employee of M/s. Backbone Ltd. died in a sudden accident. She had taken a loan from a bank for purchasing a house and the loan was still out standing. After her death her legal representative applied for payment of her P.F dues. The bank lodged a claim with the authorities for payment of its balance loan amount from the P.F dues. Explain with reference to the provisions of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952

i) Whether the bank can recover the loan amount from the P.F. dues and
ii) If, Instead of the bank, Mrs. Tsunami had taken any loan from her legal representative what would have been the answer?

Provident Fund Act_Practicle Problems_4

M/s Harsh Ltd. has been regularly depositing the P.F. contributions to the Government in respect of the company's contribution as well the employees' contribution. The company is doing well and earning huge profit. But due to reverse market conditions the company suffered loss for the last two years. The management is thinking to reduce the salary/wages of the employees to reduce the company's contribution to P.F. and instead, to pay certain compensatory allowance so that the employee's pay packet remains same. Explain in terms of the provisions of Employee's Provident Fund and Miscellaneous Provisions Act, 1952 whether the company can reduce the salary/wages.

Provident Fund Act_Practicle Problems_3

M/S Atwal & Co. Pvt. Ltd. is engaged by M/s. Mine managers Ltd. for doing operational work at its mines. There are about 300 employees employed by M/s Atwal & Co. Pvt. Ltd. to do the mining operation. M/s Minemanagers Ltd. deducted from the amount payable to M/s Atwal & Co. Pvt. Ltd. a sum of Rs.2,00,000 being the P.F. contribution of the employees engaged by it. M/s Atwal in response to such deduction, deducted from the employees the entire amount of Rs. 2,00,000 in two installments to which the employees protested. Explain in terms of the provisions of Employees' Provident Fund and Miscellaneous Provisions Act, 1952.

i) Whether M/s Atwal & Co. Ltd. Can deduct from the salary/wages of the employee;
ii) Whether it can deduct the employee's contribution from the salary/wages paid to the employees in one installment.
iii) Can it recover the amount from the employees by entering into an agreement with employees?

Provident Fund Act_Practicle Problems_2

Manorama Group of Industries sold its textile unit to Giant Group of Industries. Manorama Group contributed 25% of the total contribution in pension scheme, which was due before sale under the provisions Employees' Provident Fund and Miscellaneous Provisions Act, 1952. The transferee company (Giant Group of Industries) refused to bear the remaining 75% contribution in the Pension Scheme. Decide in the light of the Employee's Provident Fund and Miscellaneous Provisions Act, 1952, who will be liable to pay for the remaining contribution in case of transfer of establishment and upto what extent?

As per Sec.17B of Employees' Provident Fund and Miscellaneous Provisions Act, 1952, Both Manorama Group of industries and giant Group of industries are liable to bear the amount of contribution. However, Giant Group of industries will bear only upto the value of the assets obtained by it.

Provident Fund Act_Practicle Problems_1

The P. F. authorities passed an order in 2000 determining dues from Feedback Co. Ltd. in July 2003 the concerned officer who passed the order issued a notice to the company as to why the amount determined earlier should not be re-determined. Explain in terms of the Employee's Provident Fund and Miscellaneous Provisions Act, 1952 as to power of the concerned officer to re-open the case if any amount hand been escaped his determination.

Friday, November 16, 2007

Bonus Act_Practical Problems_19

Sri Bholanath, an employee of Newtele Ltd. destroyed some electronic machines in the company premises after taking alcoholic with his friends in the company premises. He was found guilty and punished under the industrial Disputes Act, 1947. The Company loose huge amount due to break down of the machines. When the company paid bonus in that year to its employees it deducted the amount from the bonus payable to Sri Bholanath and he did not get any bonus in that year. Did the company violate any provisions of the Payment of Bonus Act, 1965 in not paying bonus to Sri Bholanath?

Bonus Act_Practical Problems_18

Sri. Sanjib is an employee of the Megatele Co. Ltd. There are three trade unions in the company. One of the unions prevented the workers belonging to the workers of another union and as a result Sri Sanjib was prevented from attending to his work for few days. The company paid bonus to its employees during the year 2003-04 but refused to pay full bonus to Sri Sanjib because of his not attending office during the period he was prevented from attending office. Explain in terms of the Payment of Bonus Act, 1965 whether Sri Sanjib would be entitled to bonus for those days.

Bonus Act_Practical Problems_17

Sri. K. Mukherjee, an employee of Bigboss Ltd. left the company on 30.11.04 on health ground. He was on sick leave since 5th August 2004 and did not work from that date. There was an agreement by the company with its worker in 1998 for payment of bonus to employees. The company refused to pay the bonus for the year 2003-04 and threatened the employees of retrenchment in case of any labour trouble in connection with the bonus issue. Explain in terms of the payment of Bonus Act, 1965

i) What remedy is available to the workers,
ii) Can Sri Mukherjee after leaving the company move to recover amt from company?
iii) What is the power of the appropriate Government to recover the amount?

Bonus Act_Practical Problems_16

State with reference to provisions of the Payment of Bonus Act, 1965 whether the following employees are eligible to payment of bonus in terms of provisions of said Act.
a) An employee working in Life Insurance Corporation of India.
b) Employees of a university or college.
c) Employees employed though contractors on building operation.
d) Employees of National Housing Bank.
e) Employee of Reserve Bank of India.
f) Employees of a Municipal Corporation.

Bonus Act_Practical Problems_15

For the financial years 2001-02, 2002-03 and 2003-04 the amount of available surplus allocable as bonus to all employees of the company were Rs. 6,35,000, Rs. 2,20,000 and Rs. 3,75,000 respectively. Maximum amount of bonus payable to all employee of the company as per the Payment of Bonus Act, 1965 is Rs. 2,50,000 for each of the said years. In terms of the provisions of the said Act calculate the amount a company can pay as bonus to its employees, the amount set on in such year and the cumulative set on amount at the end of the year 2003-04.

Bonus Act_Practical Problems_14

Mr. K, Who is a casual employee of PQR Company actually worked in a year for 27days. However, he was absent due to temporary disablement caused by an accident arising out of and in the course of his employment for 7 days and has been laid off for 2 days as per the service agreement. Is he eligible to bonus under the Payment of Bonus Act, 1965?

Bonus Act_Practical Problems_13

In an accounting year, A company to which the Payment of Bonus Act, 1965 applies, suffered heavy loss. The B.O.D of the Company decided not to give bonus to the employees. The employees of the company move to the court for relief. Decide in the light of the provisions of the said Act, whether the employee will get relief

The employees are entitled to get minimum bonus even if the company suffered any loss. As per Sec.10 of Act, Every employer shall bound to pay to every employee a minimum bonus which shall be 8.33% of salary/wages earned by the employee during the accounting year or Rs. 100 whichever is higher, whether or not the company has allocable surplus. In case of an employee who has not completed 15 years of age, such min. bonus would be Rs. 60 or 8.33% of the salary/wages, whichever is higher. In the present problem, Employer is liable to pay minimum bonus to the employee.

Bonus Act_Practical Problems_12

State whether an employee is eligible for payment of bonus for the following period -

a) An employee laid off under an agreement.
b) An employee on casual leave for 5 days in a year.
c) A woman employee on maternity leave.
d) An employee absent due to temporary disablement.
e) An employee prevented from working by reason of legal order of termination.

Bonus Act_Practical Problems_11

T Ltd. Carried on three business ventures viz., manufacturing sugar, cement and heavy engineering machinery, locating them in three different places in North India. They employed workmen on different terms in the different units. One of these units was financially feeling ill. The workers of this unit demanded bonus on the basis of treating these three units as one composite establishment. Can the workmen succeed in getting bonus?

Bonus Act_Practical Problems_10

S joins as a worker with Gokale Sugar Factory on 2nd February, 04. Will he be eligible for Bonus for the financial year 2003- 04?

Bonus Act_Practical Problems_9

A Company could not pay bonus to its employees even after the expiry of six months from the close of its accounting year. Can the employees sue the employer for this reason?

All amounts payable to an employee by way of bonus shall be paid in cash by his employer, within a period of 8 months from the close of the accounting year. This period of 8 months may be extended upto a maximum of 2 years by the appropriate government, on an application being made by the employer. Since the periods of 8 months have not expired, employees cannot sue the employer.

Bonus Act_Practical Problems_8

Mr. Sharma is a supervisor in a factory drawing a salary of Rs.3,500 per month. In a particular accounting year he was on one month leave with salary. His employer declared minimum bonus as per the Payment of Bonus Act, to all eligible employees. State in this connection:

a. What shall be the salary that shall be taken into account for the purpose of calculating bonus payable to him?

b. What shall be the total bonus payable to him in that accounting year?

c. What would be your answer if the company suffers losses in that accounting year?

d. Is bonus payable to him if he was illegally terminated?

Bonus Act_Practical Problems_7

In an accounting year, a company to which the payment of Bonus Act, applies, suffered heavy losses. The Board of Directors of the said company decided not to give bonus to the employees. The employees of the company move to the Court for relief. Decide in the light of the provisions of the said Act whether the employees will get relief ?

As per the act, minimum bonus is payable whether or not the employer has any allocable surplus in the accounting year i.e. even if the employer suffers losses during the accounting year he is bound to pay this (Sec.10). Applying the provisions of as contained in Section 10 the employees shall succeed and they are entitled to be paid minimum bonus at rate 8.33% of the salary or wage earn during the accounting year or Rs. 100 (Rs. 60 in case of employees below 15 Years of age), whichever is higher.

Bonus Act_Practical Problems_6

A Company in a particular accounting year suffered losses and hence was not able to pay even the minimum bonus to its workmen. State in this connection, whether the minimum bonus is payable irrespective of losses and any circumstances that the Company may get exemption under the Payment of Bonus Act, 1965.

Bonus Act_Practical Problems_5

X, a temporary employee drawing a salary of Rs.3,000 per month, in an establishment to which the Payment of Bonus Act, applies was prevented by the employers from working in the establishment for two months during the financial year 2001-2002, pending certain inquiry. Since there were no adverse findings ‘X’ was re-instated in service. Later, when the bonus was paid to other employees, the employers refuse to pay bonus to ‘X’, even though he has worked for the remaining ten months in the year. Examine the validity of employer’s refusal?

Bonus Act_Practical Problems_4

A person has worked only for 35 days in an accounting year. Is he eligible or entitled to be paid bonus by his employer for that year?

Bonus Act_Practical Problems_3

An employer had been paying to his employees every year at the time of Deepawali one month’s basic wages as Deepawali Bonus for the last 10 years, in addition to the bonus payable under the Payment of Bonus Act. The bonus had been paid even in those years when there were losses. The employer now wants to adjust Deepawali Bonus paid by him for the current accounting year against the bonus payable by him under the Act, for the current accounting year. State whether it is possible for the employer to make the above adjustments.

NI Act_Practicle Problems_41

Promissory Note dated 1st February 2001 payable two months after date was presented to the maker for payment 10 days after maturity. What is the date of maturity?

The date of maturity is 4th April, 2001 (1-4-2001 plus three days of grace).

Thursday, November 15, 2007

NI Act_Practicle Problems_40

A promissory note, executed on 31stJuly, 1997, is made payable 'One month after date. When does the note become payable?

3rd September, 1997. It is calculated in the following manner: Date of Execu­tion-31st July, 1997. Date of maturity-31st August + 3 days of grace = 3rd September, 1997.

NI Act_Practicle Problems_39

Ascertain the date of maturity of a bill payable 100 days after sight and which is presented for sight on 4th May, 2000.

In case of bill payable after a certain period after sight, the date of maturity is calculated by adding three days of grace to the period after which the bill is payable. In case of bills payable after sight, the period is calculated from the date when the bill is presented for sight. In case the date of maturity happens to be a public holiday including Sunday, the bill falls due for payment on the day preceding the public holiday. In the given case, the bill is made payable 100 days after sight and the same was sighted on 4th May, 2000. 100 days from 4th of May, 2000 works out to 12th of August, 2000, adding three days of grace makes the bill due for payment on 15th of August, 2000 which happens to be a public holiday. Thus, the date of maturity of the bill shall be 14th of August, 2000 unless the same is also a public holiday (including Sunday).­

NI Act_Practicle Problems_38

A of Calcutta drew a bill of exchange on B of Honkong payable sixty days after sight. The holder C kept the bill with him for five months and then presents it for acceptance before B. B in the meanwhile becomes insolvent. C sues A for payment. Will he succeed?

Monday, November 12, 2007

NI Act_Practical Problem_40

Distinguish between 'at sight', 'on presentment' and 'after sight' bill of exchange.

Section 21 of the NI Act explains the terms 'at sight', 'on presentment' and 'after sight' promissory note and bill of exchange.
It states that
In a promissory note or bill of exchange the expressions "at sight" and "on presentment" means on demand.
The expression "after sight" means, in a promissory note, after presentment for sight, and, in a bill of exchange after acceptance, or noting for non-acceptance, or protest for non-acceptance.

NI Act_Practical Problem_39

Mr X draws a promissory note to pay Rs. 10,000/- to Mr B or order on which no time or date for payment is specified. Validate the status of the bill of exchange.

As per Section 19 of the NI Act, "A promissory note or bill of exchange, in which no time for payment is specified, and a cheque, are payable on demand." Therefor, in this case, the promissory note is payable to B or order on demand.

NI Act_Practical Problem_38

State whether the following instruments are valid promissory notes:

(i) Mr. X issues a promissory note to pay Rs. 500 to the bearer on demand.
(ii) Mr. X issues a promissory note to pay Rs. 500 to the bearer after sight.

In case (i) , the promissory note is not a valid negotiable instrument, while in case (ii), the promissory note is a valid negotiable instrument. Section 31 of the RBI Act, 1934 restricts any person other than a Bank or a Central Government Authority to issue a negotiable instrument payable to bearer on demand. The reason being, a promissory note payable to a bearer on demand is like a currency note, which can be issued only by Central Government. However, RBI Act does not restrict for the issue of a negotiable instrument payable to a bearer after sight. The After sight promissory notes need to be accepted by the drawer and do not amount to be a currency note.

Section 31 of the RBI Act, 1934 reads as:

(1) No person in India other than the Bank, or, as expressly authorised by this Act the Central Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of money payable to bearer on demand, or borrow, owe or take up any sum or sums of money on the bills, hundis or notes payable to bearer on demand of any such person:

PROVIDED that cheques or drafts, including hundis, payable to bearer on demand or otherwise may be drawn on a person's account with a banker, shroff or agent.

(2) Notwithstanding anything contained in the Negotiable Instrument Act, 1881 (26 of 1881), no person in India other than the Bank or, as expressly authorised by this Act, the Central Government shall make or issue any promissory note expressed to be payable to the bearer of the instrument.

Wednesday, November 07, 2007

NI Act_Practicle Problems_37

What is meant by “Payment of Due Course” in respect of a negotiable instrument? A cheque originally expressed payable to bearer is subsequently made payable to order by endorsement in full. Is it in order for the drawee bank to pay the amount to the bearer of the cheque?

In the cases of an instrument payable to order the drawee of a bill or maker of a note is discharged by payment in due course if it is indorsed by or on behalf of the payee. But, in the case of a cheque there is an exception. The rule is once a bearer instrument is always a bearer instrument. Hence the banker will be discharged by payment in due course to the bearer of a cheque which was originally expressed payable to bearer even though it was subsequently endorsed in full [Section 85(2)].

NI Act_Practicle Problems_36

X needs Rs.10,000 but cannot raise this amount because his credit is not good enough. Y whose credit is good, accomodates X by giving him a pronote made out in favour of X, though Y owes no money to X. X endorses the pronote to Z for value received. Z who is a holder in due course, demands payment from Y. Can Y refuse and plead the arrangement between him and X?

NI Act_Practicle Problems_35

A owes money to B. A makes a promissory note for the amount in favour of B. For safety of transmission he cuts the note in two halves and posts one half to B. He then changes his mind and calls upon B to return the half of the note which he had sent. B requires A to send the other half of the promissory note. Decides as to how the rights of the parties are to be adjusted.

The relevant question in the given situation is whether the making of the promissory note is complete when one half of the note was delivered to B. Under Section 46 of the Negotiable Instruments Act, 1881, the making of a promissory note is completed by delivery, actual or constructive. Delivery, of course, refers to the delivery of the whole of the instrument and not merely a part of it. Delivery of half instrument cannot be treated as constructive delivery of the whole. Therefore, the claim of B to have the other half of the Promissory note sent to him is not maintainable. Thus A is justified in demanding the return of the first half sent by him.

NI Act_Practicle Problems_34

X accepts a bill for the accommodation of A (drawer). A transfers it to B for value after maturity. B becomes the holder in good faith. Discuss the rights of A and B.

NI Act_Practicle Problems_33

X accepts a bill for the accommodation of A (drawer), A transfers it to B for value. The bill is dishonoured by X on the due date. B collects the amount from A. Can A sue X for the recovery of the amount?

In general, accommodating parties are liable on the bill to the same extent as that of an ordinary bill. However, they are not liable to the accommodated party - the person for whose benefit they signed the instrument. So, A cannot sue X for the recovery of the amount in view of the specific provision to that effect provided in Explanation I to section 43.

NI Act_Practicle Problems_32

X accepts a bill for the accommodation of A (drawer). A transfers it to B, without consideration. B transfers it to C without consideration. C transfers it to D for value. D transfers it to E, without consideration. On the due date, the bill dishonored by X. Discusse the rights of A, B, C, D and E.

Tuesday, November 06, 2007

NI Act_Practicle Problems_31

‘A’ signs, as maker, a blank stamped paper and gives it to ‘B’, and authorises him to fill it as a note for Rs. 500, to secure an advance which ‘C’ is to make to ‘B’. ‘B’ fraudulently fills it up as a note for Rs.2,000, payable to ‘C’, who has in good faith advanced Rs. 2,000. Decide, with reasons, whether ‘C’ is entitled to recover the amount, and if so, up to what extent?

NI Act_Practicle Problems_30

Which of the following is a bill of exchange? Give reasons.

a. “To Anderson, Dear Sir, We hereby authorise you to pay on our account, to the order of Wolf, the sum of six thousand rupees.”
b. “Rs. 500.” “Pay to my order the sum of five hundred rupees, for value received.” It is neither signed by any person as drawer nor addressed to any person as drawee. It is accepted by Lam.

Sec.5 of the Negotiable Instruments Act reads as “A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money, only to, or to the order of a certain person or to the bearer of the instrument.”
a. In the given case there is no definite order to pay the sum of money. So, it is not a bill of exchange.
b. In the given case, drawee is neither named nor indicated with certainty. So, it is not a bill of exchange.

NI Act_Practicle Problems_29

A bill is drawn as "Pay to X or order the sum of ten thousand rupees". In the margin the amount stated is Rs 1,000. Discuss the legal position.

NI Act_Practicle Problems_28

State, giving reasons, whether the following instruments are valid promissory notes - (i) X promises to pay Y, by a promissory note, a sum of Rs.5,000, fifteen days after the death of B. (ii) X promises to pay Y, by a promissory note, Rs.500 and all other sums, which shall be due.

a. The future event i.e. death of B is certain, though date is uncertain. The instrument is valid.

b. The sum payable is not certain. Hence, it is not a negotiable instrument.

Monday, November 05, 2007

NI Act_Practicle Problems_27

A bill is payable to X or order, X endorses the bill in blank. The bill is there after lost and comes into the hands of Y. Discuss the legal position in each of the following alternative cases:

a. If Y receives the payment of the bill.
b. If Y passes the bill by simple delivery to Z as a gift.
c. If Y passes the bill after maturity by simple delivery to Z who takes the bill in good faith for valuable consideration.If Y passes the bill before maturity by simple delivery to Z who takes the bill in good faith for valuable consideration.

NI Act_Practicle Problems_26

State whether the following alterations are material or not:
a. The holder of a bill inserts the words 'or order'.
b. A bill was dated 1989 instead of 1999 & subsequently the agent of the drawer corrected the mistake.
c. A cheque payable to bearer was converted into a cheque payable to order.
d. Crossing a cheque.

NI Act_Practicle Problems_25

State whether the following alterations are material or not:

a. A bill for Rs.1,000 is changed into a bill for Rs.2,000.
b. A bill is accepted payable at Dena Bank is changed to a bill accepted pay­able at Canara Bank.
c. A bill payable to P is changed into a bill payable to P and Q.
d. A bill was endorsed in blank and handed over to Y, who endorsed as 'Pay to Z or order’.