MCQ Booklet

MODEL TEST PAPER
Self-Paced Online Modules

Set- A- Corporate and Economic Laws
Time Allowed: 3 Hours Maximum Marks: 100

All Questions are compulsory. Each questions are of 2 Marks Each.
Section A-Company Law (50 Marks)
1. Pharma Limited is a company listed with Bombay Stock Exchange. The company is having 500 small
shareholders. 50 shareholders with shareholding of 1200 equity shares of Rs. 10 each, have proposed
to appoint Amar as a Director as their representative on the Board of Directors of the company. One
of the director of the Board contended that appointment of Amar is not valid due to lack of holding of
any shares in the company.
Based on the above details and referring to the provisions of the Companies Act, 2013, you are
requested to answer the following MCQs: (4 Marks)
1.1 Whether the proposal to appoint Amar as a Small Shareholders’ Director can be adopted?
(a) The said proposal cannot be adopted as notice for his appointment shall be given by
1000 small shareholders.
(b) The said proposal cannot be adopted as notice for his appointment shall be given by
more than 1/10 of total small shareholders and no shareholding of Amar is not in
compliance.
(c) The said proposal can be adopted as 1/10th of 500 small shareholders comes to 50 and
his holding in Pharma Limited is not necessitated mandatorily.
(d) The said proposal cannot be adopted as no nominal value of Rs. 20,000 shares held by
Amar in Pharma Limited.
1.2 If there is no such proposal moved by the small shareholders, can Pharma Limited appoint
Small Shareholders' Director on its own?
(a) No, Pharma Limited cannot appoint a small shareholder director on its own.
(b) Yes, Pharma Limited can suo moto appoint small shareholders' director, even if there is
no such proposal moved by the small shareholders.
(c) No, for appointment of small shareholders director, notice must come from atleast 1000
small shareholders.
(d) No, for the appointment of small shareholders director, notice must come from 1/10 of
total small shareholders.
2. PCR Limited has appointed Mr. Vivek, a person resident in India, as a Managing Director who has
taken a charge of the post on 1 st June, 2021. The remuneration package sanctioned to him is as below:
Sr. No. Particulars Amount
1 Salary 60,00,000
2 Rent free accommodation 6,00,000
3 Children education allowance 3,00,000
4 Leave Travel Concession Package 3,00,000
5 Premium in respect of insurance taken for indemnification 5,00,000
It has, further, been informed that-

(a) Mr. Vivek has availed the Leave Travel Concession Package which will not be pro -rated for
2021-22.
(b) Mr. Vivek is not proved guilty during the financial year 2021-22 with respect to the above
insurance policy.
Based on the above details and referring to the provisions of the Companies Act, 2013, you are
requested to answer the following MCQs: (6 Marks)
2.1 What would be the amount of yearly remuneration for FY 2021-22 paid by PCR Ltd. to Mr.
Vivek, the managing director who is appointed on 1 st June, 2021?
(a) Rs. 65,50,000
(b) Rs. 60,50,000
(c) Rs. 60,00,000
(d) Rs. 77,00,000
2.2 If PCR Limited has incurred losses during the financial years 2020-21 and 2021-22 and the
effective capital of the company as on 31st March 2021 is in negative, is there any excess
remuneration paid to Mr. Vivek and if yes, what would be that excess remuneration?
(a) Yes, excess remuneration is there of Rs.10,00,000
(b) Yes, excess remuneration is there of Rs. 10,50,000
(c) Yes, excess remuneration is there of Rs. 15,50,000
(d) Yes, excess remuneration is there of Rs. 27,00,000
2.3 Under what circumstances, PCR Limited can waive the excess remuneration paid to Mr. Vivek
(if any)?
(a) A waiver is approved by an ordinary resolution passed by the company within 1 year
from the date the sum becomes refundable.
(b) A waiver is approved by a special resolution passed by the company within 1 year from
the date the sum becomes refundable.
(c) A Waiver is approved by an ordinary resolution passed by the company within 2 years
from the date the sum becomes refundable.
(d) A Waiver is approved by a special resolution passed by the company within 2 years from
the date the sum becomes refundable.
3. Daily Needs Ltd. is a unlisted public company, engaged in the business of supplying the daily needs
of the house hold. It receives orders, on online basis and make supplies to the customers at their door
steps.
As on 31.03.2021, the total number of shareholders were 500. The share capital of the company is
100 lakh rupees.
Gyan Singh is the Managing Director of the company. He joined this company in April 2020. Prior to
joining this company, Gyan Singh was the General Manager in a NBFC. From the media sources, it
came into picture that Gyan Singh was involved in sanctioning the proposal of big loans without
insisting the security from the borrowers and many of the loan accounts during his tenure turned into
NPA. It shows the intention of Gyan Singh that he might have been involved in accepting the bribe in
sectioning the clean loans.
After joining this company, Gyan Singh started ordering his employees to supply the goods at the
shops of the retailers also on credit. Whereas the company’s policy was to supply the essential daily
needs at the door steps of consumers only. Many of retailers used to visit the MD’s office to supply
the goods on credit. In some of the cases the recovery from that retailers became difficult and the
company had to write-off these debts while finalising the annual accounts as of 31.03.2021.
Aggrieved from this, some 10 members of the company made an application before the Tribunal
making the company and its MD as respondents, that the affairs of the company are being conducted
in a manner prejudicial to the public interest and requested for removal of the Managing Director.
The Tribunal turned down the application of the members mentioning therein that the members who
applied for are not eligible to apply.
When Dharmesh, one of the shareholder came into the knowledge that the Tribunal has turned down
the application of 10 member, he himself alone applied to the Tribunal making the company and its
MD as respondent. Dharmesh is holding 2 lakh of shares, consisting the face value of Rs 20 lakh. He
is also the Member of the Parliament.
After accepting the application, the Tribunal heard both the parties and observed that Gyan Singh was
involved in mal-practices, on the basis of his past track record and the present working. It opined that
this person is not a fit and proper person to continue as MD of the company and ordered for removal
of Gyan Singh from the post of Managing Director. The Managing Director claimed for the
compensation for removal of the office from the company, from the date of removal to the remaining
period.
Based on the above scenario, answer the following questions: (10 Marks)
3.1 In case of oppression and mismanagement, how many members can apply to the Tribunal:
(a) Not less than 100 members are required to file an application with the Tribunal.
(b) Not less than one-tenth of the total number of members i.e. 50 members (500/10= 50)
are required to file an application with the Tribunal
(c) Not less than 100 members of the company or not less than one-tenth of the total
number of its members, whichever is less. i.e. 50 members are required to file an
application with the Tribunal.
(d) Not less than 100 members of the company or not less than one-tenth of the total
number of its members, whichever is higher i.e. 100 members are required to file an
application with the Tribunal.
3.2 On what grounds the application of Dharmesh was accepted by the Tribunal:
(a) Dharmesh is one of the shareholder of the Company.
(b) Dharmesh is having the majority of shares in the company.
(c) Dharmesh is having more than one-tenth share in the share capital of the company.
(d) Dharmesh is Member of Parliament.
3.3 Whether Tribunal have powers to remove the Managing Director, who was appointed by the
Board and the shareholders in the General Meeting:
(a) No, Tribunal do not have the powers to remove any official.
(b) The Tribunal can only order for the winding up of the company if it is just and equitable
for the company.
(c) The Tribunal may after observing the mal-practices of the MD, can ask not to repeat it.
(d) The Tribunal can terminate the service agreement arrived at between the company and
the MD.
3.4 Whether Gyan Singh, the Managing Director can demand compensation from the company from
the date of removal to the remaining period:
(a) The MD can demand the compensation from the date of removal to the remaining period.
(b) The MD can be relieved by notice with three month’s salary.
(c) The MD can be relieved by notice with one month’s salary.
(d) The MD cannot demand any compensation for loss of office.
3.5 Whether Gyan Singh after being terminated from this company, can apply to any other company
for the post of director or any other office:
(a) After termination from this company, Gyan Singh can apply to any other company for the
post of director or any other office.
(b) After termination from this company, Gyan Singh cannot apply to any other company
for the post of director or any other office, a period of one year.
(c) After termination from this company, Gyan Singh cannot apply to any other company
for the post of director or any other office, a period of three years.
(d) After termination from this company, Gyan Singh cannot apply to any other company
for the post of director or any other office, a period of five years.
4. Based at Shivamogga, Karnataka, Lotus Switchgears Limited (LSL) is a noted manufacturer, exporter
and supplier of electrical products like Miniature Circuit Breakers (MCBs), Molded Case Circuit
Breakers (MCCBs), Residual Current Circuit Breakers (RCCBs), Electric Leakage Circuit Breakers
(ELCBs), Solar water Pumping Systems, Wires and Cables, etc. and has a good network of factories
and distribution channels. The business grew by leaps and bounds due to the sincere and dedicated
efforts of the said founding directors in the following capacity:
Arjun Managing Director
Ramakrishnan Promoter
Ravi Bhatt Promoter
Ramesh Whole-time Director
Ripudaman Whole-time Director
However, the company is facing some difficult times for the past four years or so.
In a quest to overcome the difficulties faced by the company, Raghuram, a visionary, was appointed
as the Executive Director at the EGM held on 12th January, 2020.
Shruthi Components Private Limited (SCPL) is one of the subsidiaries of LSL. The Board of Directors
of LSL wished to exercise the power to dispose of its whole investment in SCPL. Accordingly,
Mahadevan, whole-time Company Secretary of the company was directed to ascertain the procedure
for disposing of company’s investment in SCPL.
Following data was extracted from the Audited Financial Statements of LSL for the year ending
31.03.2023:
S. No. Description Amount
(Rs. in Crore)
1 Paid -up Capital 50
2 General Reserves 54
3 Securities Premium Account 5
4 Accumulated Losses 7
5 Revaluation Reserves created out of revaluation of assets 30
6 Deferred Revenue Expenditure & Miscellaneous Expenditure not 2
written off
7 Investment in SCPL 25
Based on the above data and considering Section 2 (57) of the Companies Act, 2013, Mahadevan
calculated the ‘net worth’ of LSL as under:
Particulars Amount
(Rs. in Crore)
Paid-up Capital 50
Add: General Reserves 54
Add: Securities Premium Account 5
Less: Accumulated Losses 7
Less: Deferred Revenue Expenditure & Miscellaneous Expenditure not written 2
off
Net Worth 100
In view of the ‘net worth’ of Rs. 100 crore, Mahadevan informed the Board that as per the relevant
provisions, SCPL was an undertaking of LSL.
Earlier during April, 2022, in the course of normal business, LSL entered into a contract for the
continuous supply of some consumables and components with Anant Supplies Private Limited (ASPL)
for a period of 3 years to be renewed with mutual consent thereafter. Ramesh, the Whole-time Director
of LSL, was not an interested party at the time of entering into this Supply Contract with ASPL.
However, during the second year of the Supply Contract, Rajesh, son of Ramesh, purchased about
30% of the equity shares of ASPL through one of his family owned business entities and also lent
Rs.25 lakh as unsecured loan to ASPL. Ramesh did not inform LSL or the Board of Directors regarding
the new developments since he was of the opinion that there was no need for such d isclosure.
However, the Company Secretary and the Board had their own reservations, after the matter came to
their knowledge from a third party.
During the statutory audit for the F.Y. 2022-23, while verifying the earlier years’ documents in
connection with certain matter, the newly appointed auditors observed that the appointment of
Raghuram as an Executive Director was invalid by reason of certain defects and also disqualification.
During the month of August, 2023, the statutory auditors discussed the issue of irregular appointment
with the Board of Directors of LSL.
The Board apprised the auditors that since his appointment as Executive Director of the company,
Raghuram had participated in several Board Meetings and assented to various decisions, which had
both pecuniary and operational impact. In addition, the Board had also passed several resolutions
during that period. Accordingly, the Board, in one of its meetings, decided by passing a resolution that
the wrongfully appointed Director Raghuram shall make good the losses, if any, for the period he
remained Executive Director but all the resolutions passed during his period shall be valid and stand
good.
One of the investors, Raman had invested substantially in the equity shares of LSL. However, he was
quite worried about his investment after going through the latest Audited Financial Statements of 2022-
23, for he found that there was continuous downward trend in earning per share (EPS). He was of the
opinion that the Directors of LSL have been getting exorbitant remuneration, resulting in lesser profits
for the company.
Accordingly, he approached the Registered Office of the company at Shivamogga and requested for
inspection of the copies of the recent Service Contracts of Arjun, the Managing Director as well as
Ramesh and Ripudaman, the Whole-time Directors of the company. He was utterly surprised when he
was informed by the official concerned that the Service Contracts with Arjun, Ramesh and Ripudaman
were not in writing and therefore, could not be produced for inspection. However, he was also informed
that only copies of the written Memorandum setting out the terms and conditions of the service could
be provided for inspection. Raman was not convinced and thought it to be a fraudulent practice for
which the company and every defaulting officer of the company must be pu nished.
LSL, after complying with the required legal formalities, had made some political contributions and had
incurred certain expenses during the financial year 2022-23. The details are as under:
(a) Payment of Rs.10,00,000 as contributions to LMS party.
(b) Donation of Rs.2,00,000 for a public function and a dance program of Ravi Shankar, a film star
and it can be reasonably presumed that his activities support Janta Welfare Party.
(c) Publication cost of Rs. 1,00,000 incurred for inserting an advertisement in the Souvenir
published on behalf of Janta Welfare Party.
(d) Publication of pamphlets costing Rs.1,00,000 though not meant for any political party but
incurred for promoting a candidate of political party who is going to contest in upcoming
elections.
LSL disclosed in its financial statements Rs.11,00,000 as political contributions and Rs.3,00,000 as
‘Advertisement and Business Promotion Expenses’.
Multiple Choice Questions [10 Marks]
4.1 Raman, who had invested substantially in LSL, was informed that only copies of the written
Memorandum setting out the terms and conditions of the service could be provided for
inspection as no written Service Contracts with Arjun (Managing Director) as well as Ramesh
and Ripudaman (Whole-time Directors) were available. Raman was not convinced and thought
it to be a fraudulent practice for which the company and every defaulting officer of the company
must be punished.
In the light of the requirement of the relevant legal provisions under the given circumstances,
choose the most appropriate remedy available to Raman as per the Companies Act, 2013:
(a) Raman can hold liable to the Company and its every officer who is in default, for non-
production of Written Service Contracts for inspection.
(b) Raman finds that availability of only copies of the written Memorandum setting out the
terms and conditions of the service, for inspection, is in order.
(c) Raman have remedy only against Arjun, Ramesh and Ripudaman, for non-production of
Service Contracts for inspection.
(d) Raman have no remedy, as to production of Service Contracts for inspection, as it is
not necessitated.
4.2 According to Mahadevan, whole-time Company Secretary, SCPL was an undertaking of LSL. If
the Board of Directors of LSL decided to dispose of its investment in SCPL, considering SCPL
as an undertaking of LSL, which of the following options shall be applic able:
(a) The Board of Directors of LSL shall exercise the power of disposing of its investment in
SCPL, considering SCPL as an undertaking of LSL, by means of a Board Resolution
assented to by all the Directors present at a duly convened Board Meeting.
(b) The Board of Directors of LSL shall exercise the power of disposing of its investment in
SCPL, considering SCPL as an undertaking of LSL, only with the consent of the company
by an Ordinary Resolution.
(c) The Board of Directors of LSL shall exercise the power of disposing of its investment in
by a Special Resolution and thereafter, by seeking approval of the jurisdictional Registrar
of Companies.
(d) The Board of Directors of LSL shall exercise the power of disposing of its investment in
by a Special Resolution.
4.3 According to the case scenario, the Board of Directors of LSL stated that since January, 2020
Raghuram had participated in several Board Meetings and assented to various decisions, which
had both pecuniary and operational impact. In addition, the Board had passed several
resolutions during that period. Accordingly, the Board, in one of its meetings, decided by
passing a resolution that the wrongfully appointed Director, Raghuram shall make good the
losses, if any, over the period he remained Executive Director and all the resolutions passed
during his period and assented to by him shall be valid and stand good.
Specify which amongst the following decision taken by the Board is valid as per the requirement
of the Companies Act, 2013:
(a) The decision of the Board is correct because no act done by a person as a Director shall
be deemed to be invalid if it was subsequently noticed that his appointment was invalid
by reason of any defect or disqualification, etc.
(b) The Board is required to get all the resolutions passed during the tenure of Raghuram
and assented by him, ratified by an Ordinary Resolution at a General Meeting of the
shareholders.
(c) The Board is required to get all the resolutions passed during the tenure of Raghuram
and assented by him, ratified by a Special Resolution passed at a General Meeting of
the shareholders.
(d) The Board is required to cancel all the resolutions passed during the tenure of Raghuram
and assented by him since they were void and inoperative ab-initio.
4.4 The case scenario states that LSL, after complying with the required legal formalities, made
some political contributions and incurred some expenses during the financial year 2022 -23. LSL
showed in its financial statements Rs.11,00,000 as political contributions and Rs.3,00,000 as
‘Advertisement and Business Promotion Expenses’. From the following options choose the
correct statement as regards the disclosure of political contribution :
(a) The disclosure made by LSL in its financial statements showing Rs. 11,00,000 as
political contributions and Rs. 3,00,000 as ‘Advertisement and Business Promotion
Expenses’ is correct.
(b) LSL was required to disclose Rs. 10,00,000 as political contributions and Rs. 4,00,000
as ‘Advertisement and Business Promotion Expenses’.
(c) LSL was required to disclose all the sums totaling Rs. 14,00,000 as political
contributions.
(d) LSL was required to disclose Rs.12,00,000 as political contributions and Rs. 2,00,000
as ‘Advertisement and Business Promotion Expenses’.
4.5 Ramesh, the Whole-time Director of LSL, was not an interested party at the time of entering
into this Supply Contract with ASPL. However, during the second year of the Supply Contract,
Rajesh, (son of Ramesh) purchased about 30% of the equity shares of ASP L through one of
his family owned business entities and also lent Rs.25 lakh as unsecured loan to ASPL. Then
also Ramesh did not inform LSL or the Board of Directors regarding the new developments
since he was of the opinion that there was no need for such disclosure.
Comment upon the validity of the statement as to the non- disclosure of interest of Ramesh in
compliance with the Companies Act, 2013:
(a) Ramesh opinion is correct stating that there is no need for such disclosure of the interest
of his son, Rajesh, as compliance is only w.r.t the director of the company.
(b) Ramesh need to disclose as he is indirectly (due to his shareholding and granting of loan
by his son) concerned in a Supply Contract with ASPL at the meeting of the Board in
which the contract or arrangement is discussed forthwith when he becomes concerned
or interested. Statement of Ramesh as to non-disclosure is invalid.
(c) Ramesh was not interested or concerned in a Supply Contract with ASPL at the time of
entering into this Supply Contract. A non –disclosure of interest by him is the valid
statement.
(d) As Rajesh is the concerned or interested person in the Supply Contract to ASPL, being
a shareholder of ASPL and also indebted Rs.25 lakh as unsecured loan to ASPL. A non
-disclosure of interest is the invalid statement.
5. Paavan Nidhi Limited having its Registered Office at Karol Bagh, New Delhi, has been declared as
Nidhi by notification published in the Official Gazette. The company is incorporated with the object of
cultivating the habit of thrift and savings among its members, receiving deposit from, and lending to,
its members only, for their mutual benefit.
Paavan Nidhi Limited has six Directors, namely, Padam, Prakash, Puneet, Pratima, Poorva and Piyush
and two hundred fifty members. All the Directors are shrewd businessmen having full dedication to the
cause of the company. They are committed to run the company in accordance w ith the Nidhi Rules,
2014 and being law-abiding persons shall not do anything which is not permitted in case of a Nidhi like
carrying on the business of chit fund or hire-purchase finance or leasing finance or insurance, etc.
Padam is the senior-most Director with vast experience in the field of finance and therefore, he has
been honoured by the company to hold Directorship for a term up to ten consecutive years.
The company offers following services for the benefit of its members:
1. Fixed Deposit Plans of different maturities;
2. Recurring Deposit Plans for members who do not wish to deposit lump-sum;
3. Opening of Savings Accounts in the name of members;
4. Gold Loans to the needy members on easy terms;
5. Mortgage Loans, etc.
PQR Traders Private Limited, having its Registered Office at Munirka, New Delhi, was incorporated
last year. It had a chance to go through the operations of Paavan Nidhi Limited and finding them to be
on sound footing, it applied for becoming its member. The Nidhi company is analysing the proposals
received.
During the current year, Mr. Kshitij, a member of Paavan Nidhi Limited deposited ` 1,00,000 in the
name of his minor son Rudra who is of 12 years of age. Mr. Kshitij also desires that Rudra becomes a
member of Paavan Nidhi and for that purpose he is negotiating with the company. As regards the
validity of this matter, Piyush, one of the Directors has raised certain objections. The company wants
to sort out the issue amicably.
Multiple Choice Questions: (10 Marks)
5.1 From the case scenario, it is observed that PQR Traders Private Limited has applied for
becoming a member of Paavan Nidhi Limited. From the following options, choose the one which
is applicable in such a situation:
(a) PQR Traders Private Limited cannot become a member of Paavan Nidhi Limited.
(b) PQR Traders Private Limited can become a member of Paavan Nidhi Limited by investing
minimum ` 5,00,000 as capital.
(c) PQR Traders Private Limited can become a member of Paavan Nidhi Limited by
including a clause in its Articles of Association which permits it to become a member of
a Nidhi company.
(d) PQR Traders Private Limited must be in existence for a minimum period of three years
to be eligible for becoming member of a Nidhi company.
5.2 Piyush, one of the Directors of Paavan Nidhi Limited has raised objection on acceptance of
deposit amounting to ` 1,00,000 in the name of Rudra, a minor, and negotiations initiated by
his father Mr. Kshitij to make him a member of the Paavan Nidhi. From the following options
choose the one which is applicable in the given situation:
(a) Paavan Nidhi Limited can neither accept deposit in the name of Rudra, a minor, nor can
make him a member.
(b) Paavan Nidhi Limited may accept deposit in the name of Rudra, a minor, since it is made
by Mr. Kshitij, a member and the father of Rudra but being minor, he cannot be made a
member.
(c) Paavan Nidhi Limited cannot accept deposit in the name of Rudra exceeding ` 25,000
but he can become a member by contributing minimum amount.
(d) Paavan Nidhi Limited can accept deposit in the name of Rudra up to ` 2,00,000 and he
can become a member of the company.
5.3 From the case scenario, it is evident that Padam, the senior-most Director, has been honoured
by Paavan Nidhi Limited to hold Directorship for a term up to ten consecutive years. After
relinquishing his office as Director at the expiry of ten years, when can Padam be re-appointed
as Director of the company.
(a) Padam shall be eligible for re-appointment only after the expiry of two years of ceasing
to be a Director.
(b) Padam shall be eligible for re-appointment only after the expiry of one year of ceasing
to be a Director.
(c) Padam shall be eligible for re-appointment only after the expiry of six months of ceasing
to be a Director.
(d) Padam shall not be eligible for re-appointment once he ceases to be a Director.
5.4 If M/s A & A Associates, a firm of auditors, has been appointed as auditors of Paavan Nidhi
Limited for a term of five years commencing from FY 2016-17 to FY 2020-21 and if the company
is desirous of re-appointing the said firm of auditors for another term of five years commencing
from FY 2021-22, then which of the following options is applicable in such an eventuality:
(a) M/s A & A Associates cannot be re-appointed as auditors for another term of five years
since no Nidhi company shall appoint or reappoint any auditing firm for two terms of five
consecutive years.
(b) M/s A & A Associates can be re-appointed as auditors for another term of five years
since a Nidhi company is permitted to appoint or reappoint any auditing firm for two terms
of five consecutive years.
(c) M/s A & A Associates cannot be re-appointed as auditors for another term of five years
since no Nidhi company is permitted to re-appoint any auditing firm before the expiry of
two years if an auditing firm ceases to be its auditors after completion of the term of five
years.
(d) M/s A & A Associates cannot be re-appointed as auditors for another term of five years
since no Nidhi company is permitted to re-appoint any auditing firm before the expiry of
one year if an auditing firm ceases to be its auditors after completion of the term of five
years.
5.5 The rate of interest charged on loan given by Nidhi can be;
(a) Five per cent above the highest rate of interest offered on deposits by Nidhi and shall
be calculated on reducing balance method
(b) Five per cent above the highest rate of interest offered on deposits by Nidhi and shall
be calculated on as flat rate basis
(c) Seven and half per cent above the highest rate of interest offered on deposits by Nidhi
and shall be calculated on reducing balance method
(d) Seven and half per cent above the highest rate of interest offered on deposits by Nidhi
and shall be calculated on as flat rate basis
6. GenTech Engineering and Consultancy Limited (GECL), having its Registered Office in Kolkata, West
Bengal, was incorporated way back in January, 2011. The Central Government holds 21% of its paid -
up share capital while the State Government of Gujarat and Navyug Engineering Limited, a
government company, hold 23% and 10% respectively.
As GECL was interested in ascertaining the market value of its assets, it invited tenders and after
thorough scrutiny it shortlisted the following Registered Valuers:
(1) Mr. Anant: He has set up his valuation practice in London for the last 5 years. He came to visit
India on December 24, 2021, for a short span of around one month during which, in terms of
the tender submitted by him, he was proposed by GECL to undertake the assignmen t relating
to valuation of its assets.
(2) Mr. Aloknath: He is a valuer member of a registered valuers’ organisation and is one of the
partners of M/s ALP & Associates, a Kolkata based valuation firm. Mr. Aloknath was given
second preference by GECL if Mr. Anant refused the assignment relating to the valuation of
assets.
(3) M/s MNC Valuers & Associates, LLP: It is a Limited Liability Partnership, based at Kolkata,
and all the partners of the firm are valuer members of a registered valuers’ organisation. It was
given third preference by GECL for undertaking the valuation of its assets.
GECL holds 15% paid-up share capital of Prayas Marketing Limited (PML). However, the jurisdictional
Registrar of Companies (RoC), having reasonable cause to believe that the PML was not carrying on
any business or operations, ordered a physical verification of the Registered Office of PML.
After physical verification of the Registered Office of PML, the Registrar formed an opinion that the
company, in actuality, was not carrying on any business or operations and therefore, he issued a
notice to the company and all of its Directors indicating his intention to remove the name of the
company from the Register of Companies, if no explanation along with copies of relevant documents
were filed within a period of 30 days from the date of the notice. Since no cause to the contrary was
shown by the company and its Directors, the Registrar, after following the requisite procedure,
removed the name of the PML from the Register of Companies and a notice dated 30.10.2021 to this
effect was published in the Official Gazette. On publication of this notice i n the Official Gazette and
also its placement on the official website of the Ministry of Corporate affairs, PML was dissolved.
After dissolution as above of the PML effective from 30.10.2021 under Section 248 of the Companies
Act, 2013, it ceased to operate as a company and Certificate of Incorporation was deemed to have
been cancelled from such date.
6.1 From the case scenario, it is observed that the share of the Central Government in the paid -up
share capital of GECL is 21% while the State Government of Gujarat and Navyug Engineering
Limited, a government company, respectively hold 23% and 10% of its paid-up capital. Which
one of the following options is applicable in such a situation:
(a) GECL is a Government Company since both the Central Government and the State
Government of Gujarat hold more than 25% of its paid-up share capital.
(b) GECL is not a Government Company since the Central Government, the State
Government of Gujarat and Navyug Engineering Limited, a Government Company, hold
only 54% of its paid-up share capital which is less than the threshold limit of 55%.
(c) GECL is a Government Company since the Central Government, the State Government
of Gujarat and Navyug Engineering Limited, a Government Company, hold 54% of its
paid-up share capital which is more than the threshold limit of 51%.
(d) GECL is not a Government Company since the Central Government and the State
Government of Gujarat together hold 44% of its paid-up share capital which is less than
the threshold limit of 51%.
6.2 Which one of the following options is applicable in case Mr. Anant was preferred to be given
the valuation assignment of valuing the assets of GECL.
(a) Mr. Anant cannot act as a valuer being a person not resident in India.
(b) Mr. Anant cannot act as a valuer since process of valuation of goodwill is a tedious and
time-consuming task.
(c) Mr. Anant can act as a valuer being a valuer member of a registered valuers’
organisation in London and is more knowledgeable than others.
(d) Mr. Anant can act as a valuer being a valuer member of a registered valuers’
organisation in London and is out of India for less than seven years.
6.3 In case PML is aggrieved by the order dated 30-10-2021 of the Registrar of Companies that led
to the removal of its name from the Register of Companies and its dissolution and therefore, it
desires to file an appeal to the National Company Law Tribunal (NCLT), which one of the
following options shall be applicable in such a situation:
(a) PML is permitted to file an appeal to the National Company Law Tribunal (NCLT) within
a period of one year from the date of the order of the Registrar of Companies.
(b) PML is permitted to file an appeal to the National Company Law Tribunal (NCLT) within
a period of two years from the date of the order of the Registrar of Companies.
(c) PML is permitted to file an appeal to the National Company Law Tribunal (NCLT) within
a period of three years from the date of the order of the Registrar of Companies.
(d) PML is permitted to file an appeal to the National Company Law Tribunal (NCLT) within
a period of five years from the date of the order of the Registrar of Companies.
7. Mr. Atul is an employee of the company ABC Limited, and an investigation is going on him under the
provisions of Companies Act, 2013. The company wants to terminate Mr. Atul as investigation is going
against him. The company has filed the application with the Tribunal for approval of Mr. Atul’s
termination. The company has not received any reply from the Tribunal within 30 days of filling an
application. After expiry of 30 days, the company considered it as deemed approval and terminated
Mr. Atul.
On the basis of the Companies Act, 2013, answer the following questions: (4 Marks)
7.1 Can ABC Limited terminate Mr. Atul, an employee of the company, if no reply is received from
the Tribunal?
(a) No, the termination of Mr. Atul is not valid, and company has attracted penal provisions
under the Law.
(b) No, the termination of Mr. Atul is not valid because the company cannot consider the
non-reply of the Tribunal as deemed approval.
(c) Yes, the termination of Mr. Atul made by the company is totally valid in law and the
company can do so by considering deemed approval of tribunal.
(d) Yes, the termination of Mr. Atul made by the company is totally valid in law as filing an
application to the Tribunal is not required in this case and the company on its own can
terminate Mr. Atul.
7.2 Regarding termination of employment of Mr. Atul by ABC Limited, what is the remedy available
with Mr. Atul?
(a) Mr. Atul can file an appeal to the Appellate Tribunal within 30 days of his termination.
(b) Mr. Atul can file an appeal to the Appellate Tribunal within 45 days of his termination.
(c) Mr. Atul can file an appeal to the Court having jurisdiction within 30 days of his
termination.
(d) Mr. Atul has no remedy available to him.
Section B: Securities Laws
8. FLY-FISH Limited is a listed company provided the following month-wise grievance position of the
investors' complaints for the financial year 2022-2023.
Nos. Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
22 22 22 22 22 22 22 22 22 23 23 23
Opening unresolved 12 10 18 15 20 8 6 15 18 20 24 12
grievances
Grievances received 16 14 12 14 18 12 20 17 15 14 15 14
during the month
Grievances redressed 18 6 15 9 30 14 11 14 13 10 27 20
during the month
Closing unresolved 10 18 15 20 8 6 15 18 20 24 12 6
grievances
Requirement: Referring to the applicable Regulation made under the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015, advise the Company about the grievance redressal
position of investors' complaints to be filed during the month of April 2023 w ith the recognised stock
exchanges where the securities of the Company are listed by answering the following Multiple Choice
Questions: (4 Marks)
8.1 State within how many days FLY-FISH Limited is required to file a statement giving the status
relating to Quarter 4 of the financial year 2022-2023 as to the investors complaints- mentioning
number of complaints, pending complaints, disposed complaints and those remaining
unresolved at the end of each quarter-
(a) It has to file the detailed status as to the investors complaints, by 30 th day of April, 2023.
(b It has to file the detailed status as to the investors complaints for the financial year 2022-
2023 within 3 months from the end of the financial year.
(c) It has to file the detailed status as to the investors complaints relating to the each Quarter
of the financial year 2022-2023 within 15th day of the next quarter, hence for quarter 4
by 15th day of April, 2023.
(d) It has to file the detailed status as to the investors complaints relating to Quarter 4 of the
financial year 2022-2023 within 21st day of April, 2023.
8.2 Ascertain how many complaints redressed during the relevant quarter of the financial year
2022-2023 as per the requirements of the mentioned quarter in above question -
(a) 10
(b) 20
(c) 27
(d) 57
9. Pawan Limited operates in the aerospace segment and is planning to roll out an Initial Public Offer.
One of its 12 directors was barred from assessing the capital market by SEBI. Though restrictions
were imposed upon the promoter group as well, they were later removed after representations made
by them in this regard. A subsidiary company of Pawan Limited, Vayu Limited, defaulted on the
repayment of the deposit around nine months ago, which is now rectified.
Fire Limited is among the major suppliers of Pawan Limited. It also offers consultancy services on
energy management and space shuttle technology, in addition to trading in solar energy -based
devices. Mr. Alok, CFO of Fire Limited, which is a listed entity, heard from someone that composite
issues can be made on the Indian Stock Market.
He seeks input from Mr. Bhavesh, the Company Secretary, regarding the type of securities specified
to be issued in this way and what nature of issue or placement can be composed together. He is also
not sure and has promised to revert after consulting the expert on the matter.
Finally, Fire Limited issued the red prospectus on the stock exchange, where its securities were not
listed earlier. But made revisions to the price band notified earlier. Mr. Bhavesh suggests to the Board
that they need to extend the bidding period from the current tenor of 5 days. Mr. Alok asked him to do
the needful to extend the bidding.
Unfortunately, Fire Limited fails to obtain listing or trading permission from the stock exchanges where
the specified securities were to be listed. Mr. Bhavesh is aware of the regulation that it shall refund
through verifiable means the entire monies received upon receipt of the intimation from stock
exchanges rejecting the application for listing of the specified securities, hence, he started making the
necessary arrangements.
You are an expert on Securities Laws, and are professionally engaged to answer the following
questions by identifying the most appropriate option based upon provisions contained in the Securities
and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.
9.1 In regards to intent of Fire Limited which is listed issuer, to proceed with composite issue of
specified securities. Advise Mr. Bhavesh and Mr. Alok what type of issue or placement can be
composed together.
(a) Public cum private placement
(b) Public cum right allotment
(c) Bonus cum right allotment
(d) Public cum preferential allotment
9.2 Which of the following options is representing the correct set of reasons or disqualifications due
to which Pawan Limited become ineligible to make an initial public offer?
i. if the issuer or any of its promoters or directors is a wilful defaulter or a fraudulent
borrower.
ii. if the issuer, any of its promoters, promoter group or directors or selling shareholders
are debarred from accessing the capital market by the SEBI.
iii. if any of the promoters or directors of the issuer is a promoter or director of any other
company which is debarred from accessing the capital market by the SEBI.
(a) i and ii only
(b) ii only
(c) ii and iii only
(d) All of i, ii, and iii
9.3 Regarding the revision made by Fire Limited in the price band, it shall extend the bidding (issue)
period disclosed in the red herring prospectus for;
(a) A minimum period of five working days
(b) A minimum period of three working days
(c) A minimum period of two working days
(d) No extension is required
10. Venus Limited is a listed company that manufactures and trades in perfumes, attars, essential oils,
natural extracts, and fragrance-based cosmetic and personal care items. It has the largest
manufacturing plant for rose water extractions in Kannauj, the pe rfume capital of India and often
referred to as the Grasse (France) of the East.
Venus Limited has 12 directors on its board, and Mr. Vinod Kapadia was appointed as managing
director just a month ago. Mars Limited, another listed company, holds 12% of the equity shares and
paid-up share capital of Venus Limited.
An Audit Committee was constituted, consisting of six directors, of whom three are independent and
one is non-executive. Ms. Krishna, who is an independent director, was appointed as the chairperson
of the Audit Committee. The Audit Committee of Venus Limited during 2021–22 and 2022–23 met on
following dates:
Meeting Date & Place of the meeting No. of member of committee, who attended the
meeting
A 18th May 2021, RO All 6 members
B 10th August 2021, RO All 6 members
C 30th October 2021, RO 5 members including 3 independent directors
D 10th Jan 2022, RO All 6 members
E 15th March 2022, RO All 6 members
1 12th April 2022, RO All 6 members
2 17th June 2022, RO 5 members including 3 independent directors
3 8th July 2022, Shimla (HP, India) 4 members including 2 independent directors
5 members including 2 independent and 1 non-
4 11th Nov 2022, RO
executive directors
28th December 2022, Kannuaj 3 director including 1 independent and 1 non-
5
(UP, India) executive directors
6 13th Jan 2023, Grasse (France) All 6 members
7 10th March 2023, RO 1 independent and 1 non-executive director only
Since Mr. Vinod Kapadia is appointed as MD recently hence he is willing to know about the time within
which the quarterly results need to be reported from end of the quarter in ordinary course of business.
You are an expert on securities laws, who is being professionally engaged to answer the following
questions (specified as MCQs) by identifying the most appropriate option based upon provisions
contained in the Securities and Exchange Board of India (Listing Obligation and Disclosure
Requirements) Regulations, 2015.
10.1. Whether Mars Limited and Venus Company are related parties to each other?
(a) No, because Mars Limited is not a related party as defined under sub -section (76) of
section 2 of the Companies Act, 2013.
(b) No, because Mars Limited is not a related party to Venus limited under the applicable
accounting standards.
(c) No, because equity shares held by Mars Limited in Venus Limited is less than the
threshold of 20%.
(d) Yes
10.2 Whether constitution of Audit Committee is in order in case of Venus Limited?
(a) No, because Audit Committee shall consist of at least 3 directors with independent
directors forming a majority.
(b) No, because Audit Committee shall consist of at least 3 directors out of which at least
2/3 shall be independent directors.
(c) Yes, because Audit Committee shall consist of at least 3 directors out of which at least
1/3 shall be independent directors.
(d) Yes, because Audit Committee shall consist of at least 3 directors with at -least 2
independent directors and/or non-executive directors.
10.3 Which of following is the correct option that represents those meetings of audit committee
convened during 2022-23, which was supposed to be adjourned for want of quorum?
(a) Only 7th meeting.
(b) 5th and 7th meetings only.
(c) 3rd, 5th and 7th meeting only.
(d) None of the meeting.
10.4 How many instances of default by Venus Limited in context to number of meetings of audit
committee and time gap between such meetings took place during 2021-22 and 2022-23;
(a) Not even once in both the years
(b) Once each during 2021-22 and 2022-23
(c) Once only in 2021-22
(d) Once only in 2022-23
10.5 Financial results of first quarter of 2023-24 need to be reported to stock exchange by Venus
Limited within;
(a) 15th July, 2023
(b) 30th July, 2023
(c) 14th August, 2023
(d) 29th August, 2023
Section C: Economic Laws (30 Marks)
11. Mr. Raman resident in India had gone to London [UK] on a temporary visit in August 2022 and to
Bhutan in February 2023. He brought in India at the time of his return, currency notes of Government
of India and RBI Notes Rs. 20,000 from London in the denomination of Rs. 200 and Rs. 1,00,000 from
Bhutan in the denomination of Rs. 500.
Referring to the provisions of the Foreign Exchange Management Act, 1999, answer the following
questions: (4 Marks)
11.1 Whether import of Indian currency of Rs. 20,000 in the denomination of Rs. 200 from London
by Mr. Raman is permissible under the provisions of FEMA?
(a) lmport of currency notes of Government of India and RBI notes of Rs. 20,000 is not
permissible as it exceeds the limit of Rs. 10,000, denomination of currency is immaterial.
(b) lmport of currency notes of Government of India and RBI notes of Rs. 20,000 is
permissible as it does not exceeds the limit of Rs. 25000, denomination of currency is
immaterial.
(c) lmport of currency notes of government of India and RBI notes of Rs. 20,000 is not
permissible as import of Indian currency can be done of denomination only upto Rs. 100.
(d) lmport of currency notes of government of India and RBI notes of Rs. 20,000 is not
permissible as no import of Indian currency is allowed as per Regulations.
11.2 Whether import of Indian currency of Rs. 1,00,000 in the denomination of Rs. 500 from Bhutan
by Mr. Raman is prohibited under the provisions of FEMA?
(a) lmport of currency notes of government of India and RBI notes of Rs. 1,00,000 is not
prohibited as there is no ceiling limit as per Regulations
(b) lmport of currency notes of government of India and RBI notes of Rs. 1,00,000 is
prohibited as import of Indian currency can be done of denomination only upto Rs. 100.
(c) lmport of currency notes of government of India and RBI notes of Rs. 1,00,000 is not
prohibited as denomination of currency is immaterial.
(d) lmport of currency notes of government of India and RBI notes from Bhutan is prohibited.
12. Upalayam Old Student Association was formed with the object of providing Coaching & Hostel facilities
to the students studying in the government school. Mr. Murugan, an Indian Origin, acquired American
citizenship and settled in USA. However, he is an overseas citizen of India cardholders. Mr. Murugan
donated Rs. 10 Lakh to the said Association from his personal savings earned in USA through the
normal banking channel. Referring to the provisions of the Foreign Contribution (Regulation) Act, 2010,
answer the following: (4 Marks)
12.1 Whether the donation made by Mr. Murugan is a Foreign Source?
(a) No, as Mr. Murugan is a person of Indian Origin, the donation made by him is not a
foreign source.
(b) No, as Mr. Murugan is an overseas citizen of India cardholders, the donation made by
him is not a foreign source.
(c) No, as he has donated his personal savings, it is not a foreign source.
(d) Yes, Donation from Mr. Murugan, a Person of Indian origin who has acquired American
citizenship and also is an Overseas Citizen of India cardholder, will be treated as foreign
contribution.
12.2 In case Mr. Murugan still holds Indian Citizenship, state whether the donation made by Mr.
Murugan is a Foreign Source?
(a) The said donation will be treated as foreign contribution as Mr. Murugan is settled in
USA and he is a foreigner.
(b) The said donation will not be treated as foreign contribution as Mr. Murugan holds Indian
citizenship and he is not a foreigner.
(c) The said donation will be treated as a foreign contribution as Mr. Murugan has donated
from his personal savings earned in USA.
(d) The said donation will be treated as a foreign contribution as it is received from any
country other than India.
13. Narsee Monjee is among the leading management institute of country. It offers state of art facilities in
addition to global learning opportunities to its pupils through students exchange programme, wherein
student has option to complete maximum upto two final semesters of their study program from any
one of Ivy League foreign universities with which it has MOUs. Even faculty exchange program also
in place to offer best blend of knowledge and teaching.
Ramesh Dayal and Manish Kandpal, two students (who are friends as well) of master level
management program decided to complete final semester of their degree from one such foreign
university under student exchange program. Therefore both of them left India on 23rd December, 2021.
Despite earlier they have plan to come back to mother land by the June 30 th of 2022 i.e. after the end
of the final semester, but Manish got good job placement there and decided to start working there only.
He returned to India in X-mas holidays in 2022 to meet his family, while Mr. Ramesh Dayal who also
got placement offer, denied to employment there and returned to India as per plan.
To support studies of his son, the father of Manish remit him USD 64,000 during 2021-22 and USD
17,800 during 2022-23, while his tuition fee at such Higher Educational Institutions (HEI) is only USD
27,500 (including all).
Canada chapter of alumni association of Narsee Monjee organised a re-union function. Narsee
Monjee’s alumni club (constituted internally as part of university organisation structure) remit
sponsorship (100000 Canadian dollars approximately equal to USD 75,000) of cultural evening as part
of such re-union function.
Narsee Monjee’s faculty of management also offers consultancy and Ministry of Defence
Polices (MDPs). Recently (11 th May to 20th May 2022) it delivered one such professional development
in UAE to train the professionals their prior to roll out of Direct Tax. The invoice raised by MDP
department on 22 nd May for USD 10,000. (8 Marks)
Multiple Choice Questions
13.1 In regard to remittance of an amount equivalent to USD 81,800 (USD 64,000 in 2021-22 and
USD 17,800 in 2022-23) against the tuition fee of only USD 27,500 (including all), by father of
Mr. Manish in foreign currency to his son (Mr. Manish), identify the correct option as per
applicable law;
(a) Violate the permissible limit during 2021-22
(b) Violate the permissible limit during 2022-23
(c) Violation in both the years 2021-22 as well as 2022-23
(d) There is no violation, neither in 2021-22 nor 2022-23
13.2 Regarding the realisation of proceed of Development Program Conducted in UAE the proceed
of export of services (professional development program), in view of the changed economic
scenario in the country, Vasuki, one of the Executive Directors of PISCO Electronics, requested
the company for change in his borrowing terms i.e. to reduce the interest rate to 8% per annum
from the existing 9% per annum and to increase the period of repayment from the present 20
instalments to 30 instalments. Which of the following options is applicable in such a situation:
(a) The amount representing the full export value of services exported shall be realised
within six months or within such period as may be specified by the Reserve Bank, in
consultation with the Government, from time to time, from the date of export.
(b) The amount representing the full export value of services exported shall be realised and
repatriated to India within six months or within such period as may be specified by the
Reserve Bank, in consultation with the Government, from time to time, from the date of
export.
(c) The amount representing the full export value of services exported shall be realised
within nine months or within such period as may be specified by the Reserve Bank, in
consultation with the Government, from time to time, from the date of export.
(d) The amount representing the full export value of services exported shall be realised and
repatriated to India within nine months or within such period as may be specified by the
Reserve Bank, in consultation with the Government, from time to time, from the date of
export.
13.3 Quantify the amount of penalty, if applicable, if father of Ramesh, Mr. Narottam remit him USD
275,000 in 2021-22 through authorised dealer. Ramesh also studied in same HEI, where his
friend Manish did and required to pay same amount of tuition fee:
(a) Mr. Narottam doesn’t violate any provision, because he remitted the amount through
authorised dealer.
(b) Mr. Narottam violates the provisions, therefore liable for penalty up to USD 25000.
(c) Mr. Narottam violates the provisions, therefore liable for penalty up to USD 75000.
(d) Mr. Narottam violates the provisions, therefore liable for penalty up to USD 247500.
13.4 Regarding the residential status of Mr. Ramesh Dayal identify the correct statement out of
following;
(a) Mr. Ramesh is person resident in India for both FY 2021-22 and 2022-23.
(b) Mr. Ramesh is person resident outside India for both FY 2021-22 but person resident in
India for FY 2022-23.
(c) Mr. Ramesh is person resident in India for FY 2021-22 but person resident outside India
for FY 2022-23.
(d) Mr. Ramesh is person resident outside India for both FY 2021-22 and 2022-23.
14. Amol Open University of Languages, is a private university established under a State Act. The
objective behind the establishment of university was to provide degree/ diploma/ certificate course to
the students, an online leaning platform to learn all the prominent languages, which are being spoken
in the major part of the world. This will generate to the employability of the students in different part of
the world, since they are familiar with the language of that country. Since this being an online lea rning
platform, the students can pursue the programme simultaneously with doing their regular academic /
professional course. The examination will also be held online, by sitting at home, through their PC/
Laptop in a protected environment, after completing certain hours of learning modules.
The University has made a tie up arrangements with experts in the foreign languages. They guide the
students online and also through the pre-recorded videos.
Several Foreign Governments intend to offer donations / contributions for the development of their
language. The respective countries have offered to give foreign currency contribution for the promotion
of these languages.
Based on the above scenario, answer the following questions: (4 Marks)
14.1 The Certificate of Registration to the University was given only for the purpose of preparing the
educational material (print or soft copy), paying of honorarium to teachers and IT related
infrastructure for online classes only. Whether Certificate of Registration can be used for
receiving foreign contribution for building the infrastructure of the University Campus:
(a) The funds once received can be utilised for any other purposes.
(b) The funds are being utilised for building construction i.e. for University’s objective so it
can be used.
(c) No, the purpose for which the Certificate of Registration has been granted, cannot be
diverted. The end use of the funds has to ensured to utilise in that purpose only.
(d) It is on the discretion of the University Officials, how to utilise it.
14.2 Whether Foreign contribution so received by the University can be invested in any Mutual Fund
Scheme:
(a) Mutual Fund Scheme are safe, hence can be invested
(b) All Mutual Fund Schemes are not safe and very volatile in nature.
(c) The surplus funds can invested only debt based secure investments
(d) It depends upon the discretion of the University officials.
15. Hangout Casa was a very prominent chain of Chinese restaurant with presence all around the nation.
Most of its outlets/restaurants are operating on franchise model, but some are company owned as well
and operating at lease-hold premises. Hangout Casa had a great reputation, its outlets have award-
winning chefs and tastefully designed interiors. Much of its business came from weekend parties and
get-to-gathers.
Due to health–related-awareness among the people at large, the consumption level of fast food is
declining. Covid also jolted the liquidity position badly. The competition from low price alternative
options also dented the sales revenue of almost all the retail outlets. It tried to widen the range of item
offered, likewise recently it started selling ice creams of Rim Jim Brand. Effort to negotiate with lessor
to reduce the rent were largly unsuccessful. Eventually the business became insolvent.
Suppliers of food, beverages and utilities were unpaid for supplies provided in the previous 45 -60
days, amounting to around Rs. 9,50,000. There were lease rental arrears that included the rent for
one month amounting to Rs. 50,000 towards landlord, Mr. Deepak (the landlord had received advance
rent for three months, lease deed provided for one-month rent as security and one-month rent as
advance). Amount of Rs. 78,000 is also due towards Rim Jim Limited, whose ice-cream it sells. Though
somehow it managed to pay bank dues to avoid any legal actions.
Hangout Casa also had a secured creditor, ‘Punji Bank’. The bank indicated that it did not wish to
appoint a receiver/ file for insolvency as the accounts were regularly maintained. For most of its own
outlets the salaries due to employees (chef, assistant chef, waiters and house-keeping staff) were paid
in half since the past three months.
Hangout Casa went insolvent and CIRP was initiated. Ms. Naziya Khatoon was appointed as interim
resolution professional and later as resolution professional. Ms. Naziya while forming committee of
creditor was not sure about inclusion and exclusion of certain creditors who own both operational and
financial debt.
Rim Jim Limited a cash rich outlet chain of Ice-cream Parlors is currently looking for expansion of their
business and diversification thereof. Board of Rim Jim, decided to submit a resolution plan and being
resolution applicant it submitted a resolution plan along with an affidavit stating that he is eligible under
section 29A of the IBC, to the resolution plan prepared on the basis of the information memorandum.
Some resolution plans also received by Resolution Professional.
A meeting of committee of creditor was convened a week later, wherein the selected resolution plans
that confirm the conditions referred to in sub-section (2) to section 30 were to be considered. Rim Jim
Limited is of view that it can through its representative attend such meeting of committee of creditor
and is allowed to vote as well.
15.1 Regarding the view point of Rim Jim Limited, that it’s representative shall also be allowed to
attend the meeting of the committee of creditors in which the resolution plan of the applicant is
considered. Identify the correct statement in the light of the Insolvency and Bankruptcy Code,
2016:
(a) Rim Jim Limited may attend the meeting of the committee of creditors in which the
resolution plan of the applicant is considered and allowed to vote.
(b) Rim Jim Limited may attend the meeting of the committee of creditors in which the
resolution plan of the applicant is considered, but not allowed to vote.
(c) Rim Jim Limited shall not attend the meeting of the committee of creditors in which the
resolution plan of the applicant is considered.
(d) Rim Jim Limited may attend the meeting of the committee of creditors in which the
resolution plan of the applicant is considered, and vote if allowed by resolution
professional.
15.2 Under IBC there are two types of debt, Operational and Financial. Identify the correct statement
regarding the nature of lease rental arrears:
(a) Lease rental arrear is financial debt in all cases, for the purpose of IBC, 2016.
(b) Lease rental arrear is financial debt only if lease period is more than 3 years, for the
purpose of IBC, 2016.
(c) Lease rental arrear is operational debt in all cases, for the purpose of IBC, 2016.
(d) Lease rental arrear can be operational or financial debt as per mutual understanding
between lessor and lessee, for the purpose of IBC, 2016.
15.3 It is specified in the fact of case scenario that the suppliers of food, beverages and utilities were
unpaid for supplies provided in the previous 45-60 days, amounting to around Rs. 9,50,000.
Largest among such suppliers is Man Mohan Diary to whom Rs. 2,11,390 is due, who gave
notice two week back for payment but no payment was made by Hangout Casa. Can Man
Mohan Diary file an application under section 9 of the Code?
(a) Yes, because amount outstanding or in default is more than Rs.1 lakh.
(b) Yes, because he served the notice and 10 days has been elapsed but no payment has
been made.
(c) No, because amount outstanding or in default is less than Rs. 10 lakh.
(d) No, because amount outstanding or in default is less than Rs. 100 lakh.
15.4 For most of its own-run (Owned and Operated Hangout Casa; other than franchised) outlets
the salaries due to employees (chef, assistant chef, waiters and house-keeping staff) were paid
in half since the past three months. What is nature of outstanding empl oyee’s dues?
(a) These are neither operational debt nor financial debt
(b) These are financial debt in all the case for the purpose of IBC
(c) These are operational debt in all the case for the purpose of IBC
(d) These are operational debt if is in arrear for less than 3 month and beyond, classified as
financial debt.
15.5 Ms. Naziya Khatoon, Resolution Professional for Hangout Casa, need your advice regarding
constitution of committee of creditors. Advise her regarding correctness of following statements
pertaining to committee of creditors.
i. Committee of creditor shall be constituted by interim resolution professional after
collation of all the claim received against corporate debtor and determination of financial
position.
ii. Committee of creditor shall comprise of all the creditors.
iii. Related party shall not have right to representation at committee of creditors.
iv. Those who own both financial as well operational debt, shall also, included in committee
of creditors; but only to the extent of financial debt owed by Hangout Casa to such
creditors.
(a) Only statement i, ii and iii are correct
(b) Only statement ii, iii and iv are correct
(c) Only statement i, iii and iv are correct
(d) All the statements are correct
Set- A- Corporate and Economic Laws
Answers
Answer Key 1
Question Answer Reasoning
No.
1.1 (c) According to Section 151 of the Companies Act, 2013 read with Rule 7 of
the Companies (Appointment and Qualification of Directors) Rules, 2014,
A listed company may, upon notice of not less than:
(a) one thousand small shareholders; or
(b) 1/10th of the total number of such shareholders,
whichever is lower, have a small shareholders' director elected by the small
shareholders.
However, a listed Company may opt to have a director on suo moto
representing small shareholders.
The term "small shareholders" means a shareholder holding shares of
nominal value of not more than Rs. 20,000 or such other sum as may be
prescribed.
According to Rule 7, no holding of shares is necessitated for the proposed
person to be appointed as SSD.
Proposal to appoint Mr. Amar as a Small Shareholders' Director
In the instant case, since 50 small shareholders have proposed to appoint
Amar as their representative, the said proposal is valid and can be adopted
as 1/10th of 500 small shareholders comes to 50 and also no holding of
shares is necessitated for appointment of Mr. Amar as SSD.
1.2 (b) According to Section 151 of the Companies Act, 2013 read with Rule 7 of
the Companies (Appointment and Qualification of Directors) Rules, 2014,
A listed Company may opt to have a director on suo moto representing
small shareholders.
Answer Key 2

No.
2.1 (b) As per Section 2(78) of the Companies Act, 2013, (the Act) the term
"Remuneration "means any money or its equivalent given or passed to any
person for services rendered by him and includes perquisites as defined
under the Income Tax Act, 1961.
Further, as per Section 197(13) of the Act, where any indemnification
insurance is taken by a Company on behalf of Managing Director or other
managerial personnel, the premium therefor paid by the Company shall not
form part of the remuneration payable to any such personnel, if that person
is proved not to be guilty during the year of insurance coverage.
In the light of the provided information in the problem and as per Section 197
read with Schedule V to the Companies Act, 2013, the computation of the
amount that would constitute the yearly remuneration of Mr. Vivek in PCR
Limited for the FY 2021-2022 will be as under:
Sl.No. Particulars In `
(proportionate
to 10 months as
the MD has
taken charge of
the post w.e.f.
01.06.2021)
1. Salary 50,00,000
2. Rent Free Accommodation 5,00,000
3. Children Education Allowance 2,50,000
4 Leave Travel Concession Package (not pro- 3,00,000
rated for 2021-22 as per the question)
Total yearly remuneration of Mr. Vivek 60,50,000
2.2 (b) Computation of excess Remuneration paid to Mr. Vivek
It is provided that the Company has suffered losses during the FY 2020-
2021 and 2021-2022 and the effective capital of the Company as at 31 st
March, 2021 is in negative. So, as per the Act read with Schedule V, the
maximum yearly managerial remuneration payable to Mr. Vivek shall be `60
Lakhs including perquisites.
From the above table of computation, the total yearly remuneration of Mr.
Vivek is arrived `60,50,000 (pro-rated) and whereas, for the year 2021-2022,
Mr. Vivek will be entitled for maximum remuneration payable not exceeding `
50 lakhs per annum (pro-rated for 10 months).
Thus, the excess remuneration paid to Mr. Vivek is Rs. 10,50,000/- [i.e.Rs.
60,50,000 (-) Rs.50,00,000].
2.3 (d) As per Sections 197(9) and 197(10) of the Companies Act, 2013, where the
remuneration received by any director is in excess of the limit it shall be
refunded to the Company by such director and till that time he holds it in trust
for the Company.
The Company shall not waive the recovery of any sum which is refundable to
it unless the waiver is approved by a Special Resolution passed by the
Company within two years from the date the sum becomes refundable.
Answer Key 3

No.
3.1 (c) As per section 244 of the Companies Act, 2013-
(1) provides that the following members of a company shall have the right to
apply under section 241, namely:—
(a) in the case of a company having a share capital, not less than one
hundred members of the company or not less than one-tenth of the total
number of its members, whichever is less, or
any member or members holding not less than one tenth of the issued share
capital of the company, subject to the condition that the applicant or applicants
has or have paid all calls and other sums due on his or their shares.
3.2 (c) Again coming to section 244(1) which provides that-
The following members of a company shall have the right to apply

under section 241, namely:—
(a) in the case of a company having a share capital, not less than one
hundred members of the company or not less than one-tenth of the total
number of its members, whichever is less, or
any member or members holding not less than one tenth of the issued share
capital of the company, subject to the condition that the applicant or applicants
has or have paid all calls and other sums due on his or their shares.
Here, Dharmesh alone is having more than one-tenth share capital i.e. 2 lakh
shares of having the face value of Rs 20 lakh, hence he is eligible to apply to
the Tribunal.
3.3 (d) Section 242(2) provides that –
(2) Without prejudice to the generality of the powers under sub-section (1), an
order under that sub-section may provide for—
(e) the termination, setting aside or modification, of any agreement, howsoever

arrived at, between the company and the managing director, any
other director or manager, upon such terms and conditions as may, in the
opinion of the Tribunal, be just and equitable in the circumstances of the case;
(f) the termination, setting aside or modification of any agreement between

the company and any person other than those referred to in clause (e):
Provided that no such agreement shall be terminated, set aside or modified

except after due notice and after obtaining the consent of the party concerned.
3.4 (d) Section 243 (1) provides that-
Where an order made under section 242 terminates, sets aside or modifies an
agreement such as is referred to in sub-section (2) of that section,—
(a) such order shall not give rise to any claims whatever against
the company by any person for damages or for compensation for loss of office
or in any other respect either in pursuance of the agreement or otherwise.
3.5 (d) Section 243 (1A) provides that the person who is not a fit and proper person
pursuant to sub-section (4A) of section 242 shall not hold the office of
a director or any other office connected with the conduct and management of
the affairs of any company for a period of five years from the date of the said
decision.
Section 242(4A) provides that at the conclusion of the hearing of the case in
respect of sub-section (3) of section 241, the Tribunal shall record its decision
stating therein specifically as to whether or not the respondent is a fit and
proper person to hold the office of director or any other office connected with
the conduct and management of any company.
Answer Key 4
No.
4.1 (b) (b) It shall be in order, if the Company provides copies of the written
Memorandum setting out the terms and conditions of the services for
inspection.
Reason – Section 190 (1)
Every company shall keep at its registered office a contract of service with a
managing or whole-time director is in writing, a copy of the contract; and
where such a contract is not in writing, a written memorandum setting out
its terms.
It is worth noting that the copies of the contract or the memorandum kept
under sub-section (1) shall be open to inspection by any member of the
company without payment of fee.
4.2 (d) The Board of Directors of SL shall exercise the power of disposing of its
investment in SCPL, considering SCPL as an undertaking of LSL, only with
the consent of the company by a Special Resolution.
Reason – Section 180(1)(a)
The Board of Directors of a company shall exercise the powers to sell,
lease or otherwise dispose of the whole or substantially the whole of
the undertaking of the company or where the company owns more than
one undertaking, of the whole or substantially the whole of any of such
undertakings only with the consent of the company by a special
resolution.
4.3 ((a) (a) The decision of the Board is correct because no act done by a person as
a Director shall be deemed to be invalid if it was subsequently noticed that
his appointment was invalid by reason of any defect or disqualification, etc.
Reason – Section 176
No act done by a person as a director shall be deemed to be invalid,
notwithstanding that it was subsequently noticed that his appointment was
invalid by reason of any defect or disqualification or had terminated by
virtue of any provision contained in this Act or in the articles of the
company.
4.4 (c) SL was required to disclose all the sums totaling Rs. 14,00,000 as political
contributions.
Reason – Section 182 (2)
Political Contribution shall include a donation or subscription or payment
caused to be given by a company on its behalf or on its account to a person
who, to its knowledge, is carrying on any activity which, at the time at which
such donation or subscription or payment was given or made, can
reasonably be regarded as likely to affect public support for a political party
shall also be deemed to be contribution of the amount of such donation,
subscription or payment to such person for a political purpose; or/and The
amount of expenditure incurred, directly or indirectly, by a company on an
advertisement in any publication, being a publication in the nature of a
souvenir, brochure, tract, pamphlet or the like, shall also be deemed, where
such publication is by or on behalf of a political party, and where such
publication is not by or on behalf of, but for the advantage of a political
party.
4.5 (a) Ramesh opinion is correct stating that there is no need for such disclosure
of the interest of his son, Rajesh, as compliance is only w.r.t the director
of the company.
Reason: As per section 184 of the Companies Act, every director of a
company who is in any way, whether directly or indirectly, concerned or
interested in a contract or arrangement or proposed contract or
arrangement entered into or to be entered into—
(a) with a body corporate in which such director or such director in
association with any other director, holds more than two per cent
shareholding of that body corporate, or is a promoter, manager, Chief
Executive Officer of that body corporate; or
(b) with a firm or other entity in which, such director is a partner, owner or
member, as the case may be,
shall disclose the nature of his concern or interest at the meeting of the
Board in which the contract or arrangement is discussed and shall not
participate in such meeting.
Answer Key 5
No.
5.1 (a) PQR Traders Private Limited cannot become a member of Paavan Nidhi
Limited.
Reason – Rule 8 (1) of Nidhi Rules 2014
A Nidhi shall not admit a body corporate or trust as a member. Therefore
PQR Traders Private Limited (being body corporate) cannot become a
member of Paavan Nidhi Limited.
5.2 (b ) (b) Paavan Nidhi Limited may accept deposit in the name of Rudra, a minor,
since it is made by Mr. Kshitij, a member and the father of Rudra but being
minor, he cannot be made a member.
Reason – Rule 8 (3) of Nidhi Rules 2014
A minor shall not be admitted as a member of Nidhi.
Further proviso to said rule suggests that deposits may be accepted in the
name of a minor, if they are made by the natural or legal guardian who is
a member of Nidhi.
5.3 Padam shall be eligible for re-appointment only after the expiry of two years
(a) of ceasing to be a Director.
Reason - Rule 17 (3) of Nidhi Rules 2014
The Director of Nidhi shall be eligible for re-appointment only after the
expiration of two years of ceasing to be a Director.
5.4 M/s A & A Associates can be re-appointed as auditors for another term of
(b) five years since a Nidhi company is permitted to appoint or reappoint any
auditing firm for two terms of five consecutive years.
Reason - Rule 19 (2) of Nidhi Rules 2014
No Nidhi shall appoint or re-appoint an audit firm as auditor for more than
two terms of five consecutive years.
It is worth noting that an auditor (whether an individual or an audit firm) shall
be eligible for subsequent appointment after the expiration of two years from
the completion of his or its term.
5.5 (c) Seven and half per cent above the highest rate of interest offered on
deposits by Nidhi and shall be calculated on reducing balance method.
Reason - Rule 16 of Nidhi Rules 2014
The rate of interest to be charged on any loan given by a Nidhi shall not
exceed seven and half per cent above the highest rate of interest offered
on deposits by Nidhi and shall be calculated on reducing balance method.
Answer keys 6

No.
6.1 (d) GECL is not a Government Company since the Central Government and the
State Government of Gujarat together hold 44% of its paid-up share capital
which is less than the threshold limit of 51%.
Reason - Section 2(45) of the Companies Act, 2013
Government company means any company in which not less than fifty-
one percent of the paid-up share capital is held by the
 Central Government, or
 Any State Government or Governments, or
 Partly by the Central Government and partly by one or more State
Governments,
and
Includes a company which is a subsidiary company of such a Government
company.
Since Union Government (21%) and Government of Gujarat (23%) together
hold only 44% of paid-up share capital, which less than 51%; hence not a
government company.
6.2 (a) Mr. Anant cannot act as a valuer being a person not resident in India.
Reason – Rule 3(1)(h) of Companies (Registered Valuers and
Valuation) Rules, 2017
A person shall be eligible to be a registered valuer if he is a person resident
in India.
It is worth noting that for the purposes of these rules ‘person resident in
India’ shall have the same meaning as defined in clause (v) of section 2 of
the Foreign Exchange Management Act, 1999 (42 of 1999) as far as it is
applicable to an individual;
6.3 (c) PML is permitted to file an appeal to the National Company Law Tribunal
(NCLT) within a period of three years from the date of the order of the
Registrar of Companies.
Reason – Section 252(1)
Any person aggrieved by an order of the Registrar, notifying a company as
dissolved under section 248, may file an appeal to the Tribunal within a
period of three years from the date of the order of the Registrar
Answer keys 7
No.
7.1 (c) The provision of Section 218 states that, the company shall require to take
approval of the tribunal before taking action against the employee if there is any
pendency of any proceedings against any person concerned in the conduct and
management of the affairs of the company.
The company shall require approval in the following circumstances:
discharge or suspension of an employee; or
punishment to an employee by dismissal, removal, reduction in rank or
otherwise; or
change in the terms of employment to the disadvantage of employee(s);
The Tribunal shall notify its objection to the action proposed in writing.
In case, the company, other body corporate or person concerned does not
receive the approval of the Tribunal within 30 days of making the application, it
may proceed to take the action proposed against the employee. That means it
can be considered as a deemed approval by the tribunal.
7.2 (d) Mr. Atul has not any remedy available. As per the provision of the law, appeal
to the appellate tribunal can be made only if the person is dissatisfied with the
objection raised by the tribunal. Hence, in this case the tribunal has not replied
Mr. Atul cannot refer to an appeal to Appellate Tribunal.
Answer keys 8
No.
8.1 (d) As per the Regulation 13(3) of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, the listed companies are required to file
with the recognized stock exchange(s) on a quarterly basis, within 21 days
from the end of each quarter a statement giving the number of investors
complaints pending at the beginning of the quarter, disposed of during the
quarter and those remaining unresolved at the end of each quarter. In terms
of the above Regulation, FLY-FISH Limited has to file the following details
relating to Quarter 4 of the financial year 2022-2023 within 21st day of April,
2023 with the recognised stock exchange(s) with which its securities are
listed.
8.2 (d) No. of Complaints redressed during the 4 quarter of the Financial year 2022-
2023 is 57.
Answer Key 9
Question No. Answer Reasoning
9.1 (b) Clause (h) to regulation 2(1) of the Securities and Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations, 2018
“composite issue” means an issue of specified securities by a listed
issuer on public-cum-rights basis, wherein the allotment in both public
issue and rights issue is proposed to be made simultaneously.
9..2 (d) Regulation 5(1) of the Securities and Exchange Board of India (Issue of
Capital and Disclosure Requirements) Regulations, 2018
An issuer shall not be eligible to make an initial public offer
1. If the issuer, any of its promoters, promoter group or directors or selling
shareholders are debarred from accessing the capital market by the Board.
2. If any of the promoters or directors of the issuer is a promoter or
director of any other company which is debarred from accessing the capital
market by the Board
3. If the issuer or any of its promoters or directors is a wilful defaulter or
a fraudulent borrower.
4. If any of its promoters or directors is a fugitive economic offender.
9.3 (b) Regulation 46(2) of the Securities and Exchange Board of India (Issue
of Capital and Disclosure Requirements) Regulations, 2018
Regulation 46 deals with period of subscription
Sub-regulation 2 provides in case of a revision in the price band, the issuer shall
extend the bidding (issue) period disclosed in the red herring prospectus, for a
minimum period of three working days, subject to the provisions of sub-
regulation (1).
Here it is important to note that sub-regulation 1 provides except as otherwise
provided in these regulations, an initial public offer shall be kept open for at
least three working days and not more than ten working days.
Answer Key 10
No.
10.1 (d) First proviso to the Regulation 2(1) (zb) of the Securities and Exchange
Board of India (Listing Obligation and Disclosure Requirements)
Regulations, 2015
Related party means a related party as defined under sub-section (76)
of section 2 of the Companies Act, 2013 or under the applicable
accounting standards
First proviso provided that following shall be deemed to be related party
(a) any person or entity forming a part of the promoter or promoter
group of the listed entity; or
(b) any person or any entity, holding equity shares (i) of twenty per cent
or more; or (ii) of ten per cent or more, with effect from April 1, 2023; in
the listed entity either directly or on a beneficial interest basis as
provided under section 89 of the Companies Act, 2013, at any
time, during the immediate preceding financial year.
10.2 (b) No, because audit committee shall consist of at least 3 directors out of
which 2/3 shall be independent directors.
Reason – Regulation 18(1) of the Securities and Exchange Board of
India (Listing Obligation and Disclosure Requirements) Regulations,
2015
Every listed entity shall constitute a qualified and independent audit
committee in accordance with the terms of reference, subject to the
following
The audit committee shall have minimum three directors as members.
At least two-thirds of the members of audit committee shall be
independent directors
While in given case 3 out of 6 audit committee members are
independent directors that amounts to ½ only, whereas requirement is
of at least 2/3rd.
10.3 (b) Regulation 18(2)(b) of the Securities and Exchange Board of India
(Listing Obligation and Disclosure Requirements) Regulations, 2015
The quorum for audit committee meeting shall either be two members
or one third of the members of the audit committee, whichever is
greater, with at least two independent directors.
In case of both 5th and 7th two independent directors were not present,
hence these two meetings was supposed to be adjourned for want of
quorum.
10.4 (d) Regulation 18(2)(a) of the Securities and Exchange Board of India
The audit committee shall meet at least four times in a year and not
more than one hundred and twenty days shall elapse between two
meetings.
The time gap between 3th (8th July 2022) and 4th meeting (11th Nov
2022) is more than 120 days.
10.5 (c) Regulation 33(3)(a) of the Securities and Exchange Board of India
The listed entity shall submit quarterly and year-to-date standalone
financial results to the stock exchange within forty-five days of end of
each quarter, other than the last quarter.
Forty five days from end of first quarter i.e. 30th June 2023 last on 14th
August 2023.
Answer Key 11
No.
11.1 (b) As per Regulations related to Import of goods and services under
FEMA:
Any person resident in India who had gone out of India on a temporary
visit, may bring into India at the time of his return from any place outside
India (other than from Nepal and Bhutan), currency notes of
Government of India and Reserve Bank of India notes up to an amount
not exceeding ` 25,000 (Rupees Twenty Five Thousand only).
11.2 (b) As per Regulations related to Import of goods and services under
FEMA, A person may bring into India from Nepal or Bhutan, currency
notes of Government of India and Reserve Bank of India for any amount
in denominations up to ` 100/- without any ceiling.
Answer Key 12
No.
12.1 (d) Foreign Contribution is defined under Section 2(1)(h) of the Foreign
Contribution (Regulation) Act, 2010 (FCRA, 2010), to mean the
donation, delivery or transfer made by any foreign source. Section
2(1)(j) only speaks about citizen of a foreign country while inclusively
defining foreign source. A donation, delivery or transfer of any article,
currency or foreign security by any person who has received it from any
foreign source, either directly or through one or more persons is a
foreign contribution.
Donation from Mr. Murugan, a Person of Indian origin who has acquired
American citizenship and also is an Overseas Citizen of India
cardholder, will be treated as foreign contribution.
12.2 (b) Contributions made by a citizen of India living in another country i.e.
'Non-resident Indians' from his personal savings through normal
banking channels is not to be treated as foreign contribution. In case if
Mr. Murugan holds Indian citizenship, he is not a foreigner and
therefore, donation given by Mr. Murugan, will not be treated as foreign
contribution.
Answer Key 13
No.
13.1 (d) As per item number viii in part 1 to schedule III of Foreign Exchange
Management (Current Account Transactions) Rules 2000 individual can
avail foreign exchange facility within a limit of USD 250000 without prior
approval of RBI for the purpose of studies abroad.
It is worth noting that the Liberalised Remittance scheme, allow
remittance more than UDS 250000 for the purpose of study abroad (if
fee of such academic institute is higher than threshold of USD 250,000).
Since in none of the years, the amount of remittance above the
threshold, hence provisions not violated.
13.2 (d) The amount representing the full export value of services exported shall
be realised and repatriated to India within nine months or within such
period as may be specified by the Reserve Bank, in consultation with the
Government, from time to time, from the date of export.
Reason – Rule 9(1) of the Foreign Exchange Management (Export
of Goods & Services) Regulations, 2015
The amount representing the full export value of goods / software/
services exported shall be realised and repatriated to India within nine
months or within such period as may be specified by the Reserve Bank,
in consultation with the Government, from time to time, from the date of
export.
13.3 (c) Mr. Narottam violates the provisions, therefore liable for penalty up to
USD 75000.
Reason - As per item number viii in part 1 to schedule III of Foreign
Exchange Management (Current Account Transactions) Rules 2000
individual can avail foreign exchange facility within a limit of USD 250000
without prior approval of RBI for the purpose of studies abroad.
Further sub-section 1 to section 13 of the Foreign Exchange
Management Act 1999, provides if any person contravenes any provision
of this Act, or contravenes any rule, regulation, notification, direction, or
order issued in exercise of the powers under this Act, or contravenes any
condition subject to which an authorisation is issued by the Reserve
Bank, he shall, upon adjudication, be liable to a penalty up to thrice the
sum involved in such contravention where such amount is quantifiable,
or up to two lakh rupees where the amount is not quantifiable, and where
such contravention is a continuing one, a further penalty which may
extend to five thousand rupees for every day after the first day during
which the contravention continues.
Here in present case since the amount involved in the contravention is
quantifiable, which arrives at USD 25000, because the amount
permissible by Schedule III is USD 250000. Hence amount of penalty
can be up to USD 75000 (i.e. 3 times of USD 25000)
Note - Since university fee was a mere USD 27500 hence, the
Liberalised Remittance scheme has no importance here, which
otherwise, allow remittance more than UDS 250000 for the purpose of
study abroad.
13.4 (a) Section 2(v) of FEMA 1999
Ramesh Stays more than 182 in each of FY 2021-22 and 2022-23
therefore person resident in India for both the FY 2022-23 and 2023-24.
Answer Key 14
No.
14.1 (c) Section 8(1) of The FCRA, 2010 provides that every person, who is
registered and granted a certificate or given prior permission under this Act
and receives any foreign contribution,—
(a) shall utilise such contribution for the purposes for which the
contribution has been received.
Provided that any foreign contribution or any income arising out of it shall
not be used for speculative business:
Provided further that the Central Government shall, by rules, specify the
activities or business which shall be construed as speculative business for
the purpose of this section;
(b) shall not defray as far as possible such sum, not exceeding twenty
per cent. of such contribution, received in a financial year, to meet
administrative expenses:
Provided that administrative expenses exceeding twenty per cent. of

such contribution may be defrayed with prior approval of the Central
Government.
(2) The Central Government may prescribe the elements which shall be
included in the administrative expenses and the manner in which the
administrative expenses referred to in sub-section (1) shall be calculated.
14.2 (c) No. Speculative activities have been defined in Rule 4 of FCRR – 2011
as under:-
1. (a) any activity or investment that has an element of risk of appreciation

or depreciation of the original investment, linked to marked forces, including
investment in mutual funds or in shares;
(b) participation in any scheme that promises high returns like investment in
chits or land or similar assets not directly linked to the declared aims and
objectives of the organization or association.
(2) A debt-based secure investment shall not be treated as speculative

investment.
Answer Key 15
No.
15.1 (d) (d) Rim Jim Limited may attend the meeting of the committee of
creditors in which the resolution plan of the applicant is considered, but not
allowed to vote.
Reason – Section 30(5) of IBC 2016
The resolution applicant may attend the meeting of the committee of
creditors in which the resolution plan of the applicant is considered.
But the resolution applicant shall not have a right to vote at the meeting of
the committee of creditors unless such resolution applicant is also a
financial creditor.
Mind it Rim-Jim Limited is an operational creditor not the financial creditor.
15.2 (c) Section 5 (21) of IBC 2016
Operational debt means a claim in respect of the provision of goods or
services including employment or a debt in respect of the repayment
payment of dues arising under any law for the time being in force and
payable to the Central Government, any State Government or any local
authority
Lease is service, and the lessor who rents out space to an entity is an
operational creditor to whom the entity owes rent; therefore lease rentals
for business purposes fall under the definition of 'Operational Debt' as per
Section 5(21) of the IBC.
15.3 (d) Section 4 of IBC 2016
The Part II of code (i.e. Insolvency resolution and liquidation for corporate
persons) shall apply to matters relating to the insolvency and liquidation of
corporate debtors where the minimum amount of the default is one lakh
crore:
Note - Earlier (till 24.03.2020) the threshold was one lac.
But proviso to section empower the Central Government to specify the
minimum amount of default of higher value which shall not be more than
one crore rupees, by notification in this regard.
In exercise of the powers conferred by such proviso, the Central
Government through Notification No. SO 1205(E) dated 24 th March 2020,
specifies one crore rupees as the minimum amount of default for the
purposes of the said section.
15.4 (c) Section 5 (21) of IBC 2016
Operational debt means a claim in respect of the provision of goods or
services including employment or a debt in respect of the repayment
payment of dues arising under any law for the time being in force and
payable to the Central Government, any State Government or any local
authority
15.5 (b) Sub-section 1, 2 and 4 of section 21 of IBC, 2016
Sub-section 1 requires interim resolution professional shall after collation
of all claims received against the corporate debtor and determination of the
financial position of the corporate debtor constitute a committee of
creditors.
Sub-section 2 provides the committee of creditors shall comprise all
financial creditors of the corporate debtor, but the proviso further read as
"a financial creditor or the authorized representative of the financial creditor
referred to in subsection (6) or sub-section (6A) or sub-section (5) of
section 24, if it is a related party of the corporate debtor, shall not have any
right of representation, participation or voting in a meeting of the committee
of creditors.
Sub-section 4 (a) further provides that where any person is a financial
creditor as well as an operational creditor, then such person shall be a
financial creditor to the extent debt owed by corporate debtor, and shall be
included in the committee of creditors, with voting share proportionate to
the extent of financial debts owed to such creditor.
MODEL TEST PAPER
Self-Paced Online Modules
SET-B: Strategic Cost & Performance Management
Time Allowed: 3 Hours Maximum Marks: 100
All Questions are compulsory. Each questions are of 2 Marks Each.
Section -A
Case Scenario A1
Art Décor is a marble sculpture making company based out of Jaipur, Rajasthan. It has been making
miniature figurines (small statues) for the past many years. It now plans to foray into making larger
sizes statues that can be displayed in gardens, resorts or large corporate offices. As a trial it has
asked its main designer Raj to come up with an appropriate design model that would appeal to such
customers. There is already a competitive market for such larger size statues. However, the
management of Art Décor has a skilled artist like Raj who can come up with attractive designs for
customers. Within the month, Raj has come up with the appropriate design. Jay is the product
manager who likes the design but wants to price it competitively in the market. The costing for 200
statues is as below:
Cost Amount (₹)
Design cost 5,00,000
Direct materials 20,00,000
Direct manufacturing labour 25,00,000
Variable manufacturing overhead 20,00,000
Fixed manufacturing overhead 5,00,000
Marketing 10,00,000
MCQ 1
The target profit required is 25% of revenue. If the sale price per statue is ₹45,000 what is the target cost per
statue?
Options
(a) ₹33,750 per statue
(b) ₹36,000 per statue
(c) ₹42,000 per statue
(d) ₹56,250 per statue
MCQ 2
What is the cost estimate per unit as per the cost information given above?
Options
Page 1 of 18
MCQ 3
During the course of discussions, Jay the product manager found that the designer Raj plans to use high
quality marble for these statues. Jay suggests that he use a much lower quality marble material for the
statues. This would reduce the material cost by 60%. Skilled labour hours required will also be reduced
resulting in direct manufacturing labour to reduce by 50%. Accordingly, what would the revised estimate cost
per unit be if value engineering is applied?
Options
MCQ 4
Raj the designer does not agree with Jay’s proposition given in (3) above. He feels that inferior quality material
would affect the durability of the statue and hence would affect the demand for it in the long run. Instead of
value engineering, he feels that 10% increased spending in marketing can increase the selling price per
statue to ₹50,000 per statue. The target profit required is 25% of revenue. Given this scenario, what is the
target cost per statue?
Options
MCQ 5
Given the situation in (4) what would be revised estimated cost per statue after increasing the spend on
marketing?
Options
MCQ 6
What is the estimate profit earned per statue as per (3) (adopting value engineering) and (4) (increasing
marketing spend)?
Options Profit per statue with value Profit per statue after increased
engineering as per (3) marketing spend as per (4)
(a) ₹14,750 ₹7,000
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(b) ₹2,500 ₹7,000
(c) ₹11,250 ₹12,500
Case Scenario A2
Fix It is a company that provides home services to clients within few urban cities like Mumbai, Delhi
and Kolkata. These services include (1) home repairs like plumbing, electrical etc. and (2) appliance
repair services.
The company receives enquiries at its call centre for the specific service required. The call centre
assistants log the enquiry and provide a quote for the specific service. If acceptable to the customer,
the enquiry is then converted into a service request (sales) and is attended to by professionals
employed by the company for these various services. A request can have multiple requirements
included, for example a single request can include both plumbing and electrical work. The company
has a huge turnover due to the high demand for such services in urban areas. The company has been
in operation for the last 2 years. The management wishes to assess current performance in order to
set targets and benchmarks for future use. They wish to concentrate on both fi nancial and non-
financial information. The Building Block model suggested by Fitzgerald and Moon has been identified
as the framework that will be used to prepare a performance evaluation report.
Given below are certain financial and non-financial information for the current year.
Enquiries received from customers Current year numbers
(i) From existing customers 12,000
(ii) From new customers 8,000
Number of services requested lodged from these enquiries
(i) From existing customers 10,000
(ii) From new customers 7,500
(iii) Total clients serviced last year (both existing and new) 11,000
Volume of activity
(i) Home repairs 14,000
(ii) Appliance repair 5,000
Number of Employees
(i) Home repairs 200
(ii) Appliance repair 50
Complaints
Number of complaints received 2,000
(Last year 1,600 complaints were received)
Number of complaints resolved 1,900
(Last year 1,520 complaints were resolved)
Gross profit on annual sales 30%
MCQ 1
Which of the following is true regarding conversion rate of inquiries into service requests?
i. Conversion rate of existing customers is more than that of new customers
ii. Conversion rate of existing customers is less than that of new customers
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iii. Conversion rate is calculated as [ service requests lodged / enquiries received] × 100
iv. Conversion rate is calculated as [ enquiries received / service requests lodged] ×100
Options
(a) (i) and (iv)
(b) (ii) and (iii)
(c) (i) and (iii)
(d) (ii) and (iv)
MCQ 2
To which dimension do conversion rate of inquiries into service requests and retention of existing customers
fall into?
Options
(a) Flexibility
(b) Resource utilization
(c) Quality control
(d) Competitiveness
MCQ 3
Which of the following is true regarding complaints received?
i. Complaints received is a measure of quality of service dimension
ii. Complaints received is a measure of flexibility dimension
iii. The complaints received have increased by 25% over last year
iv. Complaints received can be a reason for the lower retention of existing customers this year
Options
(a) i and iii
(b) i, iii and iv
(c) ii, iii and iv
(d) iii and iv
MCQ 4
Which of the following is true regarding complaints resolved?
i. Complaints resolved is a measure of quality of service dimension
ii. Complaints resolved is a measure of flexibility dimension
iii. The ratio of complaints resolved to complaints received has remained the same as last year
iv. Inability to resolve complaints can affect competitiveness of business
Options
(a) i, iii and iv
(b) i and iv
(c) iii and iv
(d) ii, iii and iv
Page 4 of 18
MCQ 5
Which of the following is true about average service performed by an employee?
i. Average service performed by an employee is a measure of resource utilization
ii. Average service performed by an employee is a measure of flexibility
iii. Average service performed for home services is more than that for appliance repair
iv. Average service performed for home services is less than that for appliance repair
Options
(a) i and iv
(b) i and iii
(c) ii and iv
(d) ii and iii
MCQ 6
Which dimension does gross profit on annual sales indicate?
Options
(a) Competitiveness
(b) Financial
(c) Resource utilization
(d) Quality of service
Case Scenario A3
JPY Motors Corp. is a race car manufacturer based in Iwaki (city name). The company manufactures
cars primarily for professional car racers who participate in championships held all across the world.
Race cars need high grade fuel that is specially used in high performance engines. The company has
many engineers from allied fields who constantly research on ways to improve performance. They
have recently proposed a change to the fuel composition that will make a marked improvement to the
performance of the engine. This will have a direct and immediate impact on the training and career
performance of the customers of JPY Ltd, who are all professional car racers.
Improved engine performance has a direct bearing on the careers of professional car racers. Improved
engine performance will enable JPY Ltd to improve its market share in this niche market. This will
have substantial impact on the financials of the company. Changing the fuel composition also
requires the company to get approvals from the Government for meeting emission standards as well
as safety standards for the car. Many environmental groups have hailed this change as the new fuel
composition is made from more sustainable source of fuel, moving away from fossil fuels.
The adoption of new fuel composition will require a change in the engine design and components.
Hence, material requirement for the new model will require changes to the procurement function of
the supply chain. Currently, suppliers for key components like engine and its parts are based in the
vicinity of JPY Motors’s factory in Iwaki. However, the proposed changes will require the company to
purchase the key engine component from suppliers based in Yokohama.
Page 5 of 18
While manufacturing process undergoes a change due to change in engine design, there will be no
significant variation in the assembly line operations for the new model. Most of the employees in the
assembly line are hired on contractual basis and do not have any union to represent them.
The above consideration to change the fuel composition is being viewed a decision that will affect the
company’s strategic position. Before making their decision public, the senior management wants to
first assess the power and interest of various stakeholders who can influence this decision. As a
management accountant, you need to assist the senior management to understand the type of
information to be given to each stakeholder depending on their power to influence and their interest
in the objective to change fuel composition.
MCQ 1
Which of the following stakeholders are in the high interest and high -power group?
Options
(a) Customers and Government regulators
(b) Customers and Board of Directors
(c) Government Regulators and Current Suppliers of key components
(d) Suppliers of key components and Employees at assembly line operations
MCQ 2
Which of the following stakeholders are in the high interest and low power group?
Options
(a) Current suppliers of key components and Environment activist groups
(b) Government regulators and Environment activist groups
(c) Employees at the assembly line and Current suppliers of key components
(d) Customers and Environment activist groups
MCQ 3
Which of the following stakeholders are in the high power and low interest group?
Options
(a) Employees at the assembly line
(b) Customers
(c) Current suppliers of key components
(d) Government regulators
MCQ 4
Which of the following stakeholders are in the low power and low interest group?
Options
(a) Employees at the assembly line
(b) Customers
(c) Current suppliers of key components
(d) Government regulators
Page 6 of 18
MCQ 5
With which stakeholders should the company keep informed while implementing the change?
Options
(a) High power and low interest group, because they can be impacted by the decision
(b) Low power and high interest group, because they can join forces with a more powerful stakeholder to
influence the decision
(c) High power and high interest group, because cannot influence the decision
(d) Low power and low interest group, because it is very relevant decision for them
MCQ 6
With which stakeholder should the company ensure that they are satisfied while implementing the change?
Options
(a) High power and low interest group
(b) Low power and high interest group
(c) High power and high interest group
(d) Low power and low interest group
Case Scenario A4
Speed Auto-mobile Limited (SAL) is recently formed Indian automobile company with aspiration to be
global brand in upcoming decade. It enters into strategic alliance with enterprises based in Japan,
Germany, and France for R&D support apart from sharing of latest technologies. SAL striving towards
effectiveness and efficiency by better correlate system, strategy, staff, skill etc.
Mr. Gupta, the Management Accountant of SAL had experience of using 7-S framework in his previous
job and willing to apply the same framework at SAL to support the drive for efficiency and
effectiveness. He made presentation to C-suite. CEO is convinced with utility that 7-S framework is
capable to produce. But she and some of officers have queries regarding the application of Mckinsey’s
7-S; moreover, sceptic about; how SAL going to get maximum out of 7-S?
Mr. Gupta explained that 7-S are divided into two sets i.e., Soft and Hard elements based upon ease
in their identification and degree of influence that management can exercise. He also explained the
successful cases of US companies which used 7-S in drive towards efficiency and effectiveness.
Since concept is new for many of C-suite members, hence, MD-cum-CEO Ms. Catz asked Mr. Gupta to
list out the 7-S with classification into Soft and Hard S elements and also stating reason and
implications thereof.
Chief Strategic Officer Ms. Karen argues that business environment of US and India is not same,
hence not wise to opt and implement 7-S framework applied by US firms. She asked Mr. Gupta to
explain the steps that are involved in implementation of 7-S framework, so that a caution list can be
prepared if it is decided to go ahead. She further raises the issue of change resistance.
HR head Mr. Ajai Singh asked, whether HR practices also covered by any one out of 7 -S, or
combination thereof. He took reference of role a leader play, stories and belief prevailing among
employees, etc.
Chief marketing officer Mr. Andrew extended the point raised by Mr. Ajai and ask whether 7 -S has
bearing on generic strategies adopted by business. He took reference of various automobile
Page 7 of 18
companies to understand how these companies with different generic strategies get advantage from
7-S framework.
Then, Chief Operating Officer Ms. Anjum Aggarwal whose KRA includes designing and
implementation of SOPs willing to know whether adjustment can be made to all the S elements or only
in some of them.
Some of question posed by C-suite are specified ahead, you are required to select most appropriate
option for each of MCQ.
Students may take note, the C-suite refers to a company's top management positions, where the "C"
stands for "chief." Various chief officers (e.g., CEO, CIO, CFO, etc.) are the occupants of the C -suite.
MCQ 1
In context to question posed by Ms. Anjum, which of the following statement are correct –
i. If one area of the 7-S framework needs adjusting or tweaking for business success, the other S elements
are presumed to be stable or remain constant i.e., ceteris paribus
ii. If one area of the 7-S framework needs adjusting or tweaking for business success, the other S elements
are need adjusting too
iii. Hard S elements are easily identified and influenced by management comparing to Soft S
iv. Soft S elements are easily identified and influenced by management comparing to Hard S
Options
(a) Only statement i and iii are correct
(b) Only statements ii and iii are correct
(c) Only statement i and iv are correct
(d) Only statements ii and iv are correct
MCQ 2
In context of requirement to list out Hard and Soft S elements by Ms. Catz, the ‘hard’ elements of the 7-S
framework include all of the following except which –
Options
(a) Strategy
(b) Structure
(c) Systems
(d) Style
MCQ 3
The McKinsey 7-S Framework is useful in which of these situations?
i. Improving overall business performance
ii. Understanding worker termination process
iii. Examining effects of future change
iv. Aligning departments during a merger
Options
(a) i and iii only
Page 8 of 18
(b) i and iv only
(c) i, ii and iii only
(d) i, iii and iv only
MCQ 4
In context of requirement to list out Hard and Soft S elements by Ms. Catz, the ‘soft’ elements of the 7 -S
framework include all of the following except –
Options
(a) Skills
(b) Shared values
(c) Systems
(d) Style
MCQ 5
In context of relation among the elements of 7-S framework and with the strategy which of following are
incorrect:
i. Strategy is one among the 7 elements of 7S framework that is core to all remaining elements of 7S
ii. All the element of 7S framework have equal importance
iii. Hard S elements have more important than Soft S elements
Options
(a) i and ii
(b) ii and iii
(c) i and iii
(d) None of the i, ii and iii
MCQ 6
Regarding concern highlighted by Ms. Karen in context to implementation of 7 -S framework and change
resistance, which of following statement are incorrect?
i. Change agents can effectively implement the McKinsey 7-S model using a top-bottom approach
ii. Organisation should identify internal change agents or hire change consultants best suited to implement
your changes.
Options
(a) Statement i only
(b) Statement ii only
(c) Both of the statement i and ii
(d) None of the statement i and ii
Section- B
Case Scenario B1
A company has a division A producing three products called X, Y, Z. Each product can be sold in the
open market in the following manner.
Page 9 of 18
Maximum external sales are X 800 units, Y 500 units, Z 300 units.
Particulars X Y Z
Selling price per unit ( ` ) 96 92 80
Variable Cost of production in Division A ( ` ) 33 24 28
Labour Hours required per unit in Division A 6 8 4

Product Y can be transferred to Division B, but the maximum quantity that might be required for
transfer is 300 units of Y.
Division B could buy similar product in the open market at a price of ` 45 per unit.
The number of hours needed for external sales are 10,000.
MCQ 1
When Division A has capacity of 8,000 hours, which of the following statements are true?
i. There is a shortfall 4,400 hours to meet both external production and request of 300 units of Y from
Division B
ii. The constraining factor is labour hours, which needs to be utilized optimally
iii. Contribution per hour of X is `10.50, Y is `8.50 and Z is `13
iv. Due to limited capacity Division A will incur an opportunity cost due to lost sales if it caters to the request
of Division B
Options
(a) i and ii
(b) ii, iii and iv
(c) i, iii and iv
(d) all of the above
MCQ 2
When Division A has capacity of 8,000 hours, what will be optimum mix of production for external sales?
Options
(a) X - 800 units, Y - 500 units and Z - 300 units
(b) X - 800 units, Y - 600 units and Z - 300 units
(c) X - 800 units, Y - 250 units and Z - 300 units
(d) X - 733 units, Y - 500 units and Z - 300 units
MCQ 3
Given that Division A has a capacity of 8,000 hours. If Division A accepts to produce 300 units of Y for Division
B, what will be the contribution lost from reduced sales?
Options
(a) Contribution lost from reduced sales of X - `8,400 and Z - `3,900
Page 10 of 18
(b) Contribution lost from reduced sales of Y - `17,000 and Z - `3,900
(c) Contribution lost from reduced sales of Y - `17,000 and X - `8,400
(d) Contribution lost from reduced sales of Y - `17,000 and X - `4,200
MCQ 4
Given that Division A has a capacity of 8,000 hours. If Division A accepts to produce 300 units of Y for Division
B, what should be the transfer price that should be charged to Division B?
(a) `24 per unit
(b) `45 per unit
(c) `94.66….. per unit
(d) `92 per unit
Case Scenario B2
PowerOn manufactures batteries that power medical devices like medical imaging systems,
defibrillators, ventilators and monitoring devices. PowerOn has customers who are medical
equipment manufacturers who use these while making medical devices and machines. Bata id is the
latest model of battery that PowerOn has developed. It is safe, stable and longer lasting. These are
very important attributes since the performance of medical devices can get affected by them.
PowerOn wishes to arrive at a price for Bataid batteries. The market has many similar batteries
available. However, Bataid is of a much higher quality as compared with the rest. The nearest
comparable battery is Bat 1.
Particulars Bataid Bat 1
Operating cost per hour `2 per hour `1 per hour
Probability of battery failing 1% 11%
Price of a battery per unit ? `20,000

Due to the critical nature of the medical devices in which it is used, the cost of a battery failing to the
buyer has been arrived as `1,00,000. Both batteries Bataid and Bat 1 can be used for an average of
8,000 hours.
Note- True economic value/ Objective value to be determined in this scenario from the point of view
of PowerOn, the battery manufacturer.
MCQ 1
Calculate the difference in operating cost (in `) per battery.
Options
(a) 2,000
(b) 4,000
(c) 6,000
Page 11 of 18
(d) 8,000
MCQ 2
Calculate the savings (in `) to buyer due to more stable performance of battery.
Options
(a) 4,000
(b) 6,000
(c) 8,000
(d) 10,000
MCQ 3
Calculate the value differential (in `) of using Bataid.
Options
(a) 1,000
(b) 2,000
(c) 4,000
(d) 6,000
MCQ 4
Calculate the probable price (in `) PowerOn can charge the medical equipment manufacturer based on the
True Economic Value method.
Options
(a) 38,000
(b) 18,000
(c) 23,000
(d) 22,000
Case Scenario B3
A1 is an organization that does trading of milk and milk products and operates within a large district
in Uttar Pradesh, India. Milk producers (dairy farmers) sell quality milk and milk products which is
then sent to retailers to be sold to customers. Each day the milk producers get the milk to the
collection centre in the village. A sample of milk is drawn from individual lots to test the milk for
quality. Once the quality check is passed, measurement of milk is done carefully, and the milk
collected is recorded in the name of the individual milk producer. The milk is then brought to the main
collection centre where further quality check is done. Once the quality test is passed, the milk is then
packaged and dispatched in specially designed vans with coolers to retailers spread across various
locations within the district. Consumers get their daily milk supplies from the retailers.
MCQ 1
From the viewpoint of A1, procurement of good quality milk from dairy farmers best describes which of the
following situations?
Options
(a) Value chain management
(b) Upstream supply chain management
Page 12 of 18
(c) Downstream supply chain management
(d) Triple Bottom Line
MCQ 2
From the viewpoint of A1, ensuring distribution of milk packets to retailers well within the expiry date (milk
being a perishable commodity) best describes which of the following situations?
Options
MCQ 3
In the recent years, A1 has been battling complaints about decreasing quality of products. Hence it is thinking
of taking strategic decisions. One among them is to own dairy farms where the livestock are kept, instead of
procuring the milk from dairy farmers individually. It is felt that this would standardize the rearing the livestock
cattle (breed of cattle, their feed, milk collection procedure etc). This will also give better control over milk
production and therefore improve quality of milk output. Which scenario best describes this scenario?
Options
MCQ 4
The decision enumerated in (iii) above has raised concerns with the dairy farmers who stand to lose their
livelihood. A1 has assured them that all the dairy farmers will be given employment within the dairy farms
owned by the organization. Moreover, milk production will be based on sustainable methods which will ensure
the good health of the livestock cattle as also that of the environment. The customers also benefit by getting
farm fresh milk. A happy customer will be a loyal customer, thus ensuring the sustainability of business. A1
aims to develop a framework that will monitor and ensure the well being of the livestock cattle and its dairy
farmers, ensure sustainability practices that ensure that production is done is an eco -friendly manner. Which
scenario best describes this scenario?
Options
Case Scenario B4
Nova Automobile Limited (NAL) is an Indian bike manufacturer that specializes in environmentally
friendly 'hybrid' bikes. Its bikes are powered by both electric batteries and CNG. Despite being in its
initial years, NAL has already earned a good reputation for the quality and dependability of its bikes.
Page 13 of 18
NAL has made significant investments in the development of hybrid engines and is now looking to
expand its market reach to nearby countries. The majority of shares in NAL are held by two venture
capital firms that are supporting the company's growth plans……continue….…
MCQ 1
Which of the following option allow the Nova to expand its market reach without sparing any of its resources,
rather its will generating cash inflows –
Options
(a) Joint venture
(b) Strategic Alliance
(c) Setting-up plant in those countries
(d) Licensing
MCQ 2
Since brand is big resource to attain and sustain competitive advantage, hence Nova don’t want to
compromise with quality that may harm the repute which it earns; therefore, intended to keep control over
quality through active participation while preserving it independence in addition to least possible resource
application, then which form is best for Nova.
Options
(a) Joint venture
(b) Strategic Alliance
(c) Setting-up plant in other countries
(d) Licensing
MCQ 3
NAL's board of directors is considering a joint venture with Country B's Anumaj Automobiles Limited (AAL),
because Country B, which is a neighbouring country to India has a rapidly growing market for environmentally
friendly bikes. Though AAL does not currently produce hybrid vehicles, but it does have excess capacity in
its factory.
AAL is also interested in proposal because their sale during proceeding three years has been declining due
to the safety issued in their bikes. Even couple of blast issues report in their bike in recent past, engine caught
fire in both the cases; resultantly petrol tank bust results in blast.
Managing performance of Joint-venture is difficult due to which of the following limitations.
i. Difference in Culture and management styles in both the companies (JV partners)
ii. Difference in financial reporting framework in both the countries
iii. Difference in attitude towards risk and quality in both the companies (JV partners)
Options
(a) i and ii only
(b) i and iii only
(c) ii and iii only
(d) All i, ii and iii
MCQ 4
Which of the following primary activity shall be substantial source of enlarged value for proposed JV of Nova
and AAL.
Page 14 of 18
Options
(a) Inbound logistics
(b) Outbound logistics
(c) Marketing and sales
(d) After sale services
Section- C
Case Scenario C1
Following are the scores of six firms as per Argenti's A score model.
Firm Defects Mistake Symptoms of trouble
i 10 0 4
ii 2 15 0
iii 10 15 0
iv 15 0 0
v 0 30 0
MCQ 1
You are required to identify healthy firms –
Options
(a) i and ii only
(b) i and iii only
(c) ii and iii only
(d) All i, ii and iii
MCQ 2
You are required to identify firms at Risk –
Options
(a) ii and iii only
(b) i and iii only
(c) i and ii only
(d) All i, iv and v
MCQ 3
Argenti's A score model has following dimensions or group –
i. Defects
ii. Mistakes
iii. Warning
Page 15 of 18
iv. symptoms of failure
Options
(a) i, ii and iii
(b) ii, iii and iv
(c) i, ii and iv
(d) All i, ii, iii and iv
Case Scenario C2
Nutty Bites produces many edible snacks that are very popular especially among children. Peanuts,
Peanut oil are essential ingredients in many of its products. They are currently facing this ethical
issue: Medical studies have indicated peanut allergic reactions are on the rise. The prevalence is more
profound among children. Reactions can range from hives around the mouth to potentially life-
threatening reactions when exposed even to the slightest trace of peanuts. There is growing media
campaign to force companies like Nutty Bites to make disclosure about the presen ce of peanut on its
package labelling.
Nutty Bites is a mid-size company that has a growing market. Risk to peanut exposure can come not
just from the presence of peanuts in its products. Some of its bought-in ingredients (raw material
input) are cooked in peanut oil. There are risks of “cross-contamination” amongst products. Let us
say, an equipment has been used produce cookies that has peanuts. Next, the equipment is used,
without being cleaned, to produce chips that does not have peanuts as an ingredient. Some portion
of the peanuts / peanut oil could contaminate that specific batch of chips produced. Since labels of
chips would not mention “peanuts” as an ingredient, it poses a potential risk of causing allergic
reaction to a customer unaware of this contamination. Management of Nutty Bites has called for a
meeting to discuss this issue. “The issue need not be addressed at all. After-all Nutty Bites is doing
nothing against the law” is the opinion of many members on the board of the company.
MCQ 1
Would you agree with the popular opinion with the management of Nutty Bites that “The issue need not be
addressed at all. After-all Nutty Bites is doing nothing against the law”?
Options
(a) Yes, the health and safety of consumers cannot be the responsibility of Nutty Bites. Hence, the issue
need not be addressed at all.
(b) No, food safety is a fiduciary duty that Nutty Bites owes to the society. Corporate Social Responsibility
(CSR) is the duty an organization has towards a wider community. Hence, Nutty Bites has to take steps
to address the problem.
(c) Yes, Nutty Bites is doing nothing against the law. Hence the issue need not be addressed at all.
(d) Yes, Nutty Bites need not take any action as there is no lawsuit filed against the company from the
customers.
Page 16 of 18
MCQ 2
Which of the following scenarios has a less chance of happening if Nutty Bites does not take any action?
Options
(a) On consuming the product, if the consumer faces a medical issue that gets traced back to the product
manufactured by Nutty Bites, it could result in bad publicity that could damage its brand value
(b) It can increase the risk of potential legal action for tort or committing a civil wrong
(c) Operating in an ethical environment can increase employee morale and well being
(d) Profitability from sale of the products for the current month (short run) will be impacted
MCQ 3
Which is not a non-financial consideration while considering any potential responses to address the health
and safety issue?
Options
(a) Disclosure about the presence of peanut on its package labelling
(b) Machine sanitization to remove traces of peanut oil
(c) Increase in selling price of products to recoup the cost of making proposed changes
(d) Audit of upstream supply chain to get information of which bought in ingredients (raw material input) are
cooked in peanut oil.
Case Scenario C3
NEC is a multiple product manufacturer. NEC produces the unit, and all overheads are associated with the
delivery of units to its customers:
Particulars Budget Actual
Overheads (`) 4,000 3,900
Output (units) 2,000 2,100
Customer Deliveries (no.’s) 20 19
MCQ 1
Efficiency Variance by adopting ABC approach in ` are –
Options
(a) 400 (F)
(b) 100 (A)
(c) 100 (F)
(d) 400 (A)
MCQ 2
Expenditure Variance by adopting ABC approach in ` are –
Options
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(a) 100 (A)
(b) 400 (F)
(c) 400 (A)
(d) 100 (F)
Case Scenario C4
Medicare produces specialized medical equipment used by a number of medical practitioners. It has
identified a Critical Success Factor (CSF) “Customers should find zero defects with the medical
equipment. Aim for zero defective sale units.”
MCQ 1
The Critical Success Factor identified above aims to reduce which of the following Cost of Quality (COQ) to
the very minimum:
Options
(a) Cost of External Failure
(b) Cost of Internal Failure
(c) Preventive cost
(d) Appraisal cost
MCQ 2
Which of the following would be a Key Performance Indicator that directly relates the “zero defective sale
“CSF identified above?
Options
(a) Training hours imparted to manufacturing staff about in quality control for manufacturing process
(b) Cost of product returns and replacement cost
(c) Cost of inspection and testing
(d) Quality certifications from external agencies
Page 18 of 18
A1 1 (a)
Reason – Target profit per statue is 25% of ₹45,000. Therefore, target profit is ₹11,250 per
statue. Hence, target cost = selling price – target profit = ₹45,000 - ₹11,250 = ₹33,750 per
statue. Option (b) ₹36,000 calculates that cost by taking profit to be 25% of cost i.e. 20% of
selling price. Therefore, target cost is ₹45,000 - ₹9,000 = ₹36,000 per statue. Options (c) and
(d) are incorrect options.
2 (b)
Reason – Option (b) ₹42,500 per statue is the correct option. The calculation is given:
Cost Amount (₹)
Marketing 10,00,000
Total Estimated Cost 8,500,000
Es mated Cost per statue = ₹85,00,000 / 200 statues = ₹42,500 per statue.
3 (c)
Reason – With 60% saving in direct material cost and 50% saving in direct manufacturing
labour, the revised estimate cost per statue if value engineering is adopted would be:
Cost Amount (₹)
Marketing 10,00,000
Es mated Cost per statue = ₹60,50,000 / 200 statues = ₹30,250 per statue.
4 (b)
Reason – The target profit per statue is 25% of ₹50,000. Therefore, target profit is ₹12,500
per statue. Hence, target cost = selling price – target profit = ₹50,000 - ₹12,500 = ₹37,500
per statue.
5 (d)
Reason – The revised estimate cost per statue would be:
Cost Amount (₹)
Marketing 11,00,000
Estimated Cost per statue = ₹86,00,000 / 200 statues = ₹43,000 per statue.
6 (a)
Reason – Refer below given calculations. Jay the product manager’s proposal of adopting
value engineering as per (4) is more profitable as compared to Raj the designer’s proposal.
Adopting value engineering may be encouraged. At the same time, designer Raj’s opinion is
also critical since it affects the durability of the product, which also impacts the long run
demand for these products. Hence, the management of Art Décor has to take strategic
decisions on the quality of statues it wants to launch. Pricing will also be affected by the
external competitive market conditions.
Particulars Estimates as per value Estimates as per
engineering (3) marketing spend (4)
Selling price per statue ₹45,000 ₹50,000
Estimated cost per statue ₹30,250 ₹43,000
Profit per statue ₹14,750 ₹7,000
A2 1 (b)
The correct answer is statements ii and iii are true.
Conversion rate is calculated as [service requests lodged / enquiries received] * 100
Conversion rate of enquiries into requests Existing New Existing plus new
customers
Enquiries 12,000 8,000 20,000
Requests 10,000 7,500 17,500
Conversion rate of enquiries into requests 83.33% 93.75% 87.50%
2 (d)
The correct answer is the conversion rate of inquiries into service requests and retention of
existing customers fall into the Competitiveness dimension.
3 (b)
The correct answer is statements i, iii and iv are true regarding customer complaints.
The number of complaints received is a measure of quality of service, higher the complaints
lower the quality of service. The company received 2,000 complaints this year as against 1,600
last year. This is a 25% (400/ 1,600) increase. It is possible that lower quality of service resulted
in a lower retention due to which the number of existing customers fell by 1,000 this year.
4 (d)
The correct answer is statements ii, iii and iv are true regarding resolution of customer
complaints.
Resolution of customer complaints is a measure of flexibility in the operations of the company.
Ability to handle and resolve multiple complaints builds flexibility. The ratio of complaints
resolved to total complaints has remained 95% (this year 1,900 / 2000 complaints and last year
1,520 / 1,600 complaints).
5 (a)
The correct answer is i and iv. Average service performed by an employee is a measure of
resource utilization. It shows efficiently the human resource is being used. The average service
performed for home repairs is 70 per employee (14,000 activities / 200 employees) while the
average service performed for appliance repair is 100 per employee (5,000 activities / 50
employees).
6 (b)
The correct answer is the gross profit over annual sales is measure for financial dimension.
A3 1 (b)
The correct answer is Customers and Board of Directors. Customers who are professional car
racers will be directly impacted by JPY’s decision as it affects both their training and career
performance. JPY Motors manufactures cars primarily for professional car racers, hence
customers have both high power and high influence over this objective. The change will
improve market share in this niche market segment and will have substantial financial impact
on the company. The Board of Directors as stakeholders will have high power and high
influence over this objective.
2 (a)
The correct answer is Current suppliers of key components and Environment activist groups.
Current suppliers of key components will be adversely impacted by this decision since
procurement for the new engine model will happen from Yokohama. However, despite having
high interest, they do not have the power to influence this decision directly. Environment activist
groups have a high interest since the fuel composition impacts the environment directly, which
in the case of this change will be a positive impact due to the sustainable nature of the fuel.
However, they too do not have the power to influence the decision directly.
3 (d)
The correct answer is Government regulators. They have high power since the fuel
composition change can be implemented only with their approval. However, they are not
directly interested in the objective.
4 (a)
The correct answer is Employees at the assembly line. While manufacturing process
undergoes a change due to change in engine design, there will be no significant variation in
the assembly line operations for the new model. Most of the employees in the assembly line
are hired on contractual basis and do not have any union to represent them. Hence assembly
line employees have low power and low interest in this decision.
5 (b)
The correct answer is low power and high interest group. This group will comprise of current
suppliers of key components and environment activist groups. While they have low power, they
can join more powerful groups like the customers (professional car racers) and then try to
influence the decision. By keeping the group informed, the company is showing consideration
towards this group. This may make them less inclined to try to indirectly influence by joining
forces with other groups. Similarly, environment activist groups do not have direct power to
influence the decision. However, they are in a position to influence indirectly say by influencing
the news media perception about the change. Hence, this group should also be given
consideration and be kept informed about the change while it is being implemented.
6 (a)
The correct answer is high power and low interest group. These would be the government
regulators who need to give approval for the fuel composition change. They have high power
since the fuel composition change can be implemented only with their approval. While they are
not directly interested in this decision, they have the power to influence it. Hence, the company
should ensure that relevant information is provided to keep them satisfied while implementing
the change.
A4 1 (b)
The goal of the 7-S framework is to depict how effectiveness can be achieved in an
organization through the interactions of seven key and interconnected elements that are
Structure, Strategy, Skill, System, Shared Values, Style, and Staff. Since all the S of 7-S impact
each other due to interconnectedness, hence if one area of the 7-S framework needs adjusting
or tweaking for business success, the other S elements are need adjusting too.
The seven components of McKinsey's 7-S model are divided into two groups: hard S and soft
S. The Hard S elements are Strategy, Structure, and Systems. The Soft S elements are Style,
Staff, Skills, and Shared values. Since there is substantial involvement of human element in
Soft S elements, which make change management relatively difficult; further Soft S elements
are highly intangible and invisible in nature hence identification of underlying sub-set of Soft S
elements are relatively difficult. Therefore, Hard S elements are easily identified and influenced
by management comparing to Soft S.
2 (d)
Strategy, Structure, and Systems are feasible and easy to identify. These can be found in
strategy statements, corporate plans, organizational charts, and other documentations. They
are easier to change than the others. Therefore, called Hard S elements.
While Skills, Staff, Style, and Shared Values are called Soft S elements.
3 (d)
Reason - Understanding worker termination process is not covered by any S element of the
7-S Framework. While rest three are objectives or use-cases of 7-S.
4 (c)
Reason - Strategy, Structure, and Systems are feasible and easy to identify. These can be
found in strategy statements, corporate plans, organizational charts, and other
documentations. They are easier to change than the others. Therefore, called hard S elements.
While Skills, Staff, Style, and Shared Values are not change-feasible. These are harder to
describe since capabilities, values and elements of corporate culture are continuously
developing and changing. They are highly determined by the people at work in the
organization. Hence these are harder to change directly, and typically take longer to do so.
Therefore, called soft S elements.
Note - Effective companies, however, tend to pay as much attention to these soft S factors as
to the hard S’s.
5 (c)
All the elements of 7S framework have equal importance, while shared values are core to rest
of elements. Hard and Soft S are different from each other only in respect to identification and
influence that can be exercised by the management.
6 (d)
Reason - The change implementation stage is the most critical stage of any change initiative,
and only well-implemented changes will avoid resistance to change and prevent overall change
failures. Hence change agents can effectively implement the McKinsey 7-S model using a top-
bottom approach. Moreover, the organisation should identify internal change agents or hire
change consultants best suited to implement your changes.
Note - A change agent, or agent of change, is someone who promotes and enables change to
happen within any group or organization. In business, a change agent is an individual who
promotes and supports a new way of doing something within the company.
B1 1 (d)
The correct answer is all of the above are true when Division A has 8,000 hours of actual
capacity.
Division A needs 10,000 hours for external sales and 2,400 hours for meeting Division B’s
request. Hence the total hours required is 12,400. Actual capacity is 8,000 hours. Hence there
is a shortfall of 4,400 hours.
Since labour hours is the constraint, it should be used optimally for which the contribution per
labour hour has to be calculated.
If Division A has to cater to the request from Division B, it has to account for opportunity cost
from lost sales.
Particulars X Y Z
Selling Price per unit ₹96 ₹92 ₹80
Less: Variable Cost per unit ₹33 ₹24 ₹28
Contribution per unit ₹63 ₹68 ₹52
Labour hours per unit 6 8 4
Contribution per hour ₹10.50 ₹8.50 ₹13.00
Ranking high to low II III I
2 (c)
The correct answer is X - 800 units, Y - 250 units and Z - 300 units. The optimum production
mix for external sales is calculated as –
Total hours available = 8,000 hours. The products are ranked as per their contribution per hour.
Product Z yields the maximum contribution per labour hour, followed by X and Y (Refer to
earlier part). Hence, hours will first be allotted to Z, then to X and the last to Y.
Priority External Quantity units Hours per Total Hours Remaining
Sales unit needed hours
1 Z 300 4 1,200 6,800
2 X 800 6 4,800 2,000
3 Y 250 8 2,000 NIL
The entire demand of Product Z will be produced first. This requires 1,200 hours. Out of the
balance 6,800 hours, Product X will require 4,800 hours. This leaves a balance of 2,000 hours
for Product Y. Product Y requires 8 hours per unit. Hence, maximum production of product Y =
2,000 hours/ 8 = 250 units.
3 (d)
Contribution lost from reduced sales of Y = ₹17,000 and X = ₹4,200.
If Division A accepts to produce 300 units of Y for Division B, the total hours required for internal
sales would be 2,400 hours. This can be catered to by curtailing its external sales. 2,000 hours
from production of external sales of Product Y is first diverted and the balance 400 hours are
diverted from production of Product X. Hence this results in lost contribution, an opportunity
cost that has to be included in transfer pricing.
Contribution Lost from Reduced External Sales –
= Product Y (2,000 hours × contribution per hour of ₹8.5) + Product X (400 hours × contribution
per hour of ₹10.5)
= ₹17,000 + ₹4,200 = ₹21,200
4 (c)
If Division A accepts to produce 300 units of Y for Division B, what should be the transfer price
range that can be charged to Division B would be ₹94.66 per unit.
On a per unit basis, lost contribution works out to ₹21,200/ 300 units = ₹70.66. Please refer
to earlier parts for explanation for lost contribution.
Transfer Price = Marginal Cost p.u. + Contribution Lost from Reduced External Sales
= ₹24 + ₹70.66 = ₹94.66
Since Division B can buy at ₹45, it would be cheaper to purchase the component from outside.
B2 1 (d)
Particulars Amount `
Difference in Operating Cost per battery 8,000
(higher expense incurred by buyer)
Bataid = `2 per hour
Bat 1 = `1 per hour
For 8,000 hours = 8,000 × (`2 - `1)
2 (d)
Savings to buyer due to more stable performance of battery 10,000
Cost of battery failing = `1,00,000
Difference in probability of battery failure (1% vs 11%) = 10%
Lower cost of failure to buyer = 10% × `1,00,000
3 (b)
Value Differential of using Bataid 2,000
(MCQ 2 – MCQ 1)
4 (d)
1. Difference in Operating Cost per battery 8,000

(higher expense incurred by buyer)
Bataid = `2 per hour
Bat 1 = `1 per hour
For 8,000 hours = 8,000 × (`2 - `1)
2. Savings to buyer due to more stable performance of 10,000

battery
Cost of battery failing = `1,00,000
Difference in probability of battery failure (1% vs 11%) = 10%
Lower cost of failure to buyer = 10% × `1,00,000
3. Value Differential of using Bataid 2,000

(Step 2 – Step 1)
4. Price of per unit Bat 1 battery 20,000

(cost of next best alternative)
5. True economic value of per unit Bataid 22,000
B3 1 (b)
The correct answer is upstream supply chain management. Procurement of good quality milk
from dairy farmers refers to procurement of raw materials from suppliers, which is upstream
supply chain management.
2 (c)
The correct answer is downstream supply chain management. Distribution of milk within
expiry date is a post-manufacturing activity that deals with the movement of finished goods to
the retailer and therefrom the final customer.
3 (a)
The correct answer is value chain management. A 1 essentially wants to do vertical
integration to ensure that the quality of milk produced can be controlled. This decision relates
to the procurement function of Porter’s Value Chain Analysis.
4 (d)
The correct answer is Triple Bottom Line. This is framework that organizations can adopt to
ensure that their operations are being carried out in sustainable manner with respect to
Profit, People and the Planet.
B4 1 (d)
Licensing involves obtaining permission from an entity (licensor) to manufacture and sell one
or more of its products (or even rendering services on behalf of said licensor) within a defined
market area for a set period in return for a royalty.
Hence if Nova decides to be licensor of their hybrid-bikes by allowing other automobile
manufacturers to manufacture and sell its bikes, may expand its market reach without sparing
any of its resources. Instead, they will get royalty payment (undoubtedly there will no control
on quality directly and technology is also transferred to licensees).
2 (b)
Reason - A strategic alliance is an arrangement between two or more enterprises to undertake
a mutually beneficial project while each retains its independence.
Strategic Alliance agreement is less complex and less binding than a joint venture. In joint
venture two businesses pool resources to create a separate business entity, whereas in case
strategic alliance they retain their independence. So NAL through strategic alliance can control
the quality while.
On the other hand, setting up plants in other countries would require huge capital outlay,
whereas licensing lead not control of NAL over quality.
Note - Since independence is retained under the Strategic Alliance, hence it become difficult
to put common performance measures in place and to collect and analyse management
information for same because security of confidential information is a concern.
3 (b)
Reason – Limitations that become root cause of problems in measuring and managing the
performance of JV.
 Establishing objective in is never easy, because the parties involved in complex business
structures may have different values, vision, risk appetites and timescales. This
shortcoming highlights the inevitable need of goal congruence.
 The approaches and attitude of parties towards factors that are critical for performance
such as quality, control and risk, etc. may be different, hence a common minimum
programme needs to be devised.
 Since different sets of resources, skills and knowledge contributed by parties, hence
assigning accountability for performance is key issue. Accountability shall be clearly
established and communicated at the outset.
 Lack of trust is a critical aspect, because for performance measurement and evaluation
detailed information is required, whereas parties of complex business structures may be
hesitant to share information freely if they lack trust in each other. Control and reporting
framework shall be mutually decided and climate of trust shall be foster by opting
compatible management style.
 Cultural conflicts may result in poor performance, hence shared values shall be redefined
so that they may be more liberal and serve the purpose.
4 (c)
Reason – Bangladesh has a rapidly growing market for environmentally friendly bikes, hence
managing marketing mix to drive higher margin (through high perceived value) will be easy for
JV of PAL and AAL; therefore, marketing and sales activities shall be substantial source of
enlarged value.
C1 1 (c)
Reason – The maximum score allotted is 100 (being 43 from Defects, 45 from Mistake and 12 from
Symptoms of trouble). For a firm to be cleared as healthy, its overall score must be less than the
maximum acceptable score of 25 (with 10 and 15 being the maximum acceptable scores in defects
and mistakes respectively). If a firm scores anything in Symptoms of trouble this is immediately
seen as an indicator that the firm is at risk. A firm that scores more than 25 overall, even if it scores
below the individual thresholds in either of Defects (10) or Mistake (15), would still be considered
at risk. In case of 1st (i) firm Symptoms of trouble score is 4, while in case 4th (iv) firm Defects
score is more than 10 whereas in case of 5th (v) firm Mistake scores are 30, which more than
acceptable limit of 15, hence Firm 1 (i), 4 (iv) and 5 (v) are at risk. On contrary firm 2 (ii) and 3 (iii)
are healthy.
2 (d)
Reason – The maximum score allotted is 100 (being 43 from Defects, 45 from Mistake and 12 from
Symptoms of trouble). For a firm to be cleared as healthy, its overall score must be less than the
maximum acceptable score of 25 (with 10 and 15 being the maximum acceptable scores in defects
and mistakes respectively). If a firm scores anything in Symptoms of trouble this is immediately
seen as an indicator that the firm is at risk. A firm that scores more than 25 overall, even if it scores
below the individual thresholds in either of Defects (10) or Mistake (15), would still be considered
at risk. In case of 1st (i) firm Symptoms of trouble score is 4, while in case 4th (iv) firm Defects
score is more than 10 whereas in case of 5th (v) firm Mistake scores are 30, which more than
acceptable limit of 15, hence Firm 1 (i), 4 (iv) and 5 (v) are at risk. On contrary firm 2 (ii) and 3 (iii)
are healthy.
3 (c) by definition. Warning ins not a dimension of this model.
C2 1 (b)
The correct answer is No, food safety is a fiduciary duty that Nutty Bites owes to the society.
Corporate Social Responsibility (CSR) is the duty an organization has towards a wider
community. Hence, Nutty Bites has to take steps to address the problem.
2 (d)
The correct answer is Profitability from sale of the products for the current month (short run)
will be impacted. In the very immediate future, as mentioned the span of current month, it is
unlikely that the profit will be impacted. However, in the long-term health and safety concerns
about the product can lead to potential financial penalties, legal issues that can impact the
brand image.
3 (c)
The correct answer is Increase in selling price of products to recoup the cost of making
proposed changes is a financial consideration. The rest are non-financial considerations.
C3 1 (a)
Efficiency Variance = Cost Impact of undertaking activities more/ less than standard = (21
deliveries* – 19 deliveries) × ₹200 = ₹400 F
2 (a)
Expenditure Variance = Cost impact of paying more/ less than standard for actual activities
undertaken = 19 deliveries × ₹200 – ₹3,900 = ₹100 (A) * 20 deliveries/ 2,000 units × 2,100 units
C4 1 (a)
Medicare aims to have zero defective unit sales. This implies that they wish to reduce cost of
sale returns, warranty costs, cost of product recalls and any other cost incurred due to a
complaint from the customer. The other costs namely internal failure costs, preventive costs
and appraisal costs are costs incurred at the discretion of Medicare. Taking sufficient
preventive and appraisal measures and also ensuring that defects are detected before the
products reach customers by reworking on defects or scrapping them altogether, would all put
together ensure that cost incurred on defective goods due to customer complaints is kept at
minimum.
2. (b)
The correct option is cost of product returns and replacement. Where the sales to customers
are expected to be of zero defects, there should ideally be no cost of product returns and
replacement cost. Any such incidence captured in the KPI Dashboard should then be
investigated by Medicare to detect any weakness in the area identified as critical to success.
Training hours imparted to manufacturing staff about quality control is a preventive cost, not
directly related to zero defective sales, although it aims at reducing defects by imparting
appropriate training to the staff. Cost of inspection and testing aims to find out defects before
the product reaches the customer, it is an appraisal cost. Quality certifications from external
agencies is an appraisal cost incurred to improve customer perception about the quality of the
product. Quality certification by itself does not prevent defects or ensures zero defective sales.

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MODEL TEST PAPER

Self-Paced Online Modules

Time Allowed: 3 Hours Maximum Marks: 100

It has, further, been informed that-

Question Answer Reasoning

Question Answer Reasoning

3.2 (c) Again coming to section 244(1) which provides that-

The following members of a company shall have the right to apply

3.3 (d) Section 242(2) provides that –

(e) the termination, setting aside or modification, of any agreement, howsoever

(f) the termination, setting aside or modification of any agreement between

Provided that no such agreement shall be terminated, set aside or modified

Question Answer Reasoning

Provided that administrative expenses exceeding twenty per cent. of

1. (a) any activity or investment that has an element of risk of appreciation

(2) A debt-based secure investment shall not be treated as speculative

All Questions are compulsory. Each questions are of 2 Marks Each.

(a) ₹14,750 ₹7,000

(c) ₹11,250 ₹12,500

Variable Cost of production in Division A ( ` ) 33 24 28

Labour Hours required per unit in Division A 6 8 4

(c) Contribution lost from reduced sales of Y - `17,000 and X - `8,400

(d) Contribution lost from reduced sales of Y - `17,000 and X - `4,200

(b) `45 per unit

(c) `94.66….. per unit

(d) `92 per unit

Particulars Bataid Bat 1

Operating cost per hour `2 per hour `1 per hour

Probability of battery failing 1% 11%

Price of a battery per unit ? `20,000

Firm Defects Mistake Symptoms of trouble

Particulars Budget Actual

Overheads (`) 4,000 3,900

Output (units) 2,000 2,100

Customer Deliveries (no.’s) 20 19

Difference in Operating Cost per battery 8,000

(higher expense incurred by buyer)

Bataid = `2 per hour

Bat 1 = `1 per hour

For 8,000 hours = 8,000 × (`2 - `1)

Savings to buyer due to more stable performance of battery 10,000

Cost of battery failing = `1,00,000

Difference in probability of battery failure (1% vs 11%) = 10%

Lower cost of failure to buyer = 10% × `1,00,000

Value Differential of using Bataid 2,000

1. Difference in Operating Cost per battery 8,000

2. Savings to buyer due to more stable performance of 10,000

3. Value Differential of using Bataid 2,000

4. Price of per unit Bat 1 battery 20,000

5. True economic value of per unit Bataid 22,000

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