Mock Test Paper - Series I: April, 2024

Date of Paper: 30th April, 2024

FOUNDATION COURSE
PAPER 2: BUSINESS LAWS
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed
by way of note forming part of the answer.
Working Notes should form part of the answer.
(Time allowed: 3 Hours) (100 Marks)

1. (a) Kashish was running a business of artificial jewellery since long. He sold
his business to Naman and promises, not to carry on the business of
artificial jewellery and real diamond jewellery in that area for a period of
next one year. After two months, Kashish opened a show room for real
diamond jewellery. Naman filed a suit against Kashish for closing the
business of real diamond jewellery business as it was against the
agreement. Whether Kashish is liable to close his business of real diamond
jewellery following the provisions of Indian Contract Act, 1872? (7 Marks)
(b) The paid-up capital of Darshan Photographs Private Limited is ` 1 Crores
in the form of 50,000 Equity Shares of ` 100 each and 50,000 Preference
Shares (not carrying any voting rights) of ` 100 each. Shadow Evening
Private Limited is holding 25,000 Equity Shares in Darshan Photographs
Private Limited. State with reason,
(a) Whether Darshan Photographs Private Limited is subsidiary of
Shadow Evening Private Limited?
(b) Whether your answer would be different in case Shadow Evening
Private Limited is holding 25,000 Equity Shares and 5,000
Preference Shares in Darshan Photographs Private Limited?
(7 Marks)
(c) Define partnership and name the essential elements for the existence of
a partnership as per the Indian Partnership Act, 1932. (3+3 = 6 Marks)
2. (a) Kapil entered in a contract with Rahul to purchase 1000 litres of mustard oil
at the price which should be fixed by Akhilesh. Rahul already delivered 600
litres out of 1000 litres to Kapil but when remaining 400 litres was ready to
deliver, Akhilesh denied fixing the price of mustard oil. Rahul asked Kapil
to return the oil already delivered and avoid the delivery of 400 litres. Kapil
sued Rahul for non-delivery of remaining 400 litres mustard oil. Advise in
the light of the Sale of Goods Act, 1930. (7 Marks)

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 (b) Explain the 'Doctrine of ultra vires’ under the Companies Act, 2013. What
are the consequences of 'ultra vires' acts of the company? (7 Marks)
(c) “LLP is an alternative corporate business form that gives the benefits of
limited liability of a company and the flexibility of a partnership”. Explain.
(6 Marks)
3. (a) A and B are partners in M/s Aee Bee & Company. Firm is doing business
of trading of plastic bottles. A is authorised to sell the stock of plastic bottles.
It was decided between them that A should sell the plastic bottles at the
minimum price which they have decided and if A sells at a price less than
minimum price, he should first take the permission of B. Due to sudden
change in government policy, the price of plastic bottles were continuously
declining. To save the loss of firm, A sold the stock at lower price.
Meanwhile, A tried to contact B but could not do so as B was on foreign
trip. Afterwards when B came, he filed the suit to recover the difference of
sale price and minimum price to the firm. Whether B can do so under the
provisions of Indian Partnership Act, 1932? (7 Marks)
(b) (i) Tycoon Private Limited is the holding company of Glassware Private
Limited. As per the last profit and loss account for the year ending
31st March, 2023 of Glassware Private Limited, its turnover was ` 1.80
crore and paid up share capital was ` 80 lakh. The Board of Directors
wants to avail the status of a small company. The Company Secretary
of the company advised the directors that Glassware Private Limited
cannot be categorized as a small company. In the light of the above
facts and in accordance with the provisions of the Companies Act,
2013, you are required to examine whether the contention of
Company Secretary is correct, explaining the relevant provisions of
the Act. (4 Marks)
(ii) In the Flower Fans Private Limited, there are only 5 members. All
of them go in a boat on a pleasure trip into an open sea. The boat
capsizes and all of them died being drowned. Explain with
reference to the provisions of Companies Act, 2013:
(A) Is Flower Fans Private Limited no longer in existence?
(B) Further is it correct to say that a company being an artificial
person cannot own property and cannot sue or be sued?
(3 Marks)
(c) “An anticipatory breach of contract is a breach of contract occurring
before the time fixed for performance has arrived”. Discuss stating also
the effect of anticipatory breach on contracts. (6 Marks)
4. (a) (i) Nitesh Gupta is constructing his house. For this purpose, he entered
in a contract with M/s Baba Brick House to supply of 10,000 bricks on
12th August 2023. M/s Baba Brick House has two Lorries of 5,000
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 brick capacity. On 12th August 2023, one of the Lorries was not in
working condition so M/s Baba Brick House supplied only 5,000 bricks
and promised Nitesh Gupta to supply rest 5,000 bricks on next day.
Nitesh Gupta wants to cancel the contract, as M/s Baba Brick House
did not supply the bricks as per the contract. M/s Baba Brick House
gave the plea that no fault has been made from its part, hence
contract should not be cancelled. In this situation, whether Nitesh
Gupta can avoid the contract under Indian Contract Act, 1872?
(4 Marks)
(ii) Rahul, a transporter was entrusted with the duty of transporting
tomatoes from a rural farm to a city by Aswin. Due to heavy rains,
Rahul was stranded for more than two days. Rahul sold the
tomatoes below the market rate in the nearby market where he was
stranded fearing that the tomatoes may perish. Can Aswin recover
the loss from Rahul on the ground that Rahul had acted beyond his
authority taking into account the provisions of the Indian Contract
Act, 1872? (3 Marks)
(b) What are Negotiable Instruments? Explain its essential characteristics
under the Negotiable Instruments Act, 1881. (7 Marks)
(c) Explain in brief the various types of laws in the Indian Legal System.
(6 Marks)
5. (a) (i) A agrees to sell certain goods to B on a certain date on 10 days credit.
The period of 10 days expired and goods were still in the possession
of A. B has also not paid the price of the goods. B becomes insolvent.
A refuses to deliver the goods to exercise his right of lien on the
goods. Can he do so under the Sale of Goods Act, 1930? (4 Marks)
(ii) AB sold 500 bags of wheat to CD. Each bag contains 50 Kilograms
of wheat. AB sent 450 bags by road transport and CD himself took
remaining 50 bags. Before CD receives delivery of 450 bags sent
by road transport, he becomes bankrupt. AB being still unpaid,
stops the bags in transit. The official receiver, on CD's insolvency
claims the bags. Decide the case with reference to the provisions
of the Sale of Goods Act, 1930. (3 Marks)
(b) (i) When the continuing guarantee can be revoked under the Indian
Partnership Act, 1932? (4 Marks)
(ii) What do you mean by Goodwill as per the provisions of Indian
Partnership Act, 1932? (3 Marks)
(c) Explain any five circumstances under which contracts need not be
performed with the consent of both the parties. (6 Marks)

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6. (a) Priyansh purchased some goods from Sumit. He issued a cheque to Sumit
for the sale price on 14th June, 2023. Sumit presented the cheque in his
bank and his bank informed him on 19 th June, 2023 that cheque was
returned unpaid due to insufficiency of funds in the account of Priyansh.
Sumit sued against Priyansh under section 138 of the Negotiable
Instruments Act, 1881. State with reasons, whether this suit is
maintainable? (7 Marks)
(b) State the essential elements of a contract of bailment. (6 Marks)
(c) State the various essential elements involved in the sale of
unascertained goods and its appropriation as per the Sale of Goods Act,
1930. (7 Marks)