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CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES Case No- 1 Mr. Shyam was removed from A Ltd. by the Board in which he was serving as a managing director, a whole - time key managerial personnel, with the condition that he will get compensation for his early vacation of office....

CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES Case No- 1 Mr. Shyam was removed from A Ltd. by the Board in which he was serving as a managing director, a whole - time key managerial personnel, with the condition that he will get compensation for his early vacation of office. The office of Mr. Shyam was vacated on 31.05.2020 and his original tenure of appointment with A Ltd. was up to 31.12.2022. The remuneration drawn by Mr. Shyam since the date of his joining the office is as follows: F.Y. Remuneration (Rs in lakhs) 2018-19 55 2019-20 62 2020-21 (up to 31-05-2020) 13 The data collected from the balance sheet of A Ltd. as on 31.03.2020 is as follows: Particulars (Rs in lakhs) Paid-up Share Capital 1000 Share Application Money 200 General Reserve 500 Revaluation Reserve 250 Securities Premium Account 300 Long term loan 400 Funded Interest Term Loan (Payable after 1 100 Working year) capital loan 200 Mutual Fund Investments 350 Miscellaneous Expenditure not written off 50 Mr. Tushar was appointed as the new managing director of A Ltd. on 1.08.2020 as a replacement of Mr. Shyam. The company decided to pay remuneration to Mr. Tushar as per Section 197(4) of the Companies Act, 2013. It was also decided to pay him following additional perquisites/ remuneration for F.Y. 2020 -21: Particulars (Rs in lakhs) Dearness allowance 7 House Rent Allowance 5 Contribution to annuity fund 6 CA AMIT POPLI 1  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES Reimbursement of direct taxes 4 Additional Remuneration per month* 2 Sitting fees payable for a board meeting # 1 *Remuneration for service to be provided by him in capacity of consultant. Also, he possesses requisite qualification for the same as opined by the Nomination and Remuneration Committee. Company is having inadequate net profit # Mr. Tushar had attended 4 board meetings till 31.03.2021. One of the members of A Ltd., Mr. Jay wanted to inspect contract of service entered into by A Ltd. with Mr. Tushar but Mr. Jay was denied to have such inspection on the grounds that the contract with Mr. Tushar was not in writing. Based on the above case scenario, answer the following questions: 1 The maximum amount of compensation to which Mr. Shyam is entitled for premature termination of his office shall be - a) Rs 1.1194 crores b) Rs 1.51125 crores c) Rs 1.80 crores d) Rs 1.55 crores 2 The ‘effective capital’ of A Ltd. shall be - a) Rs 18 crores b) Rs 21 crores c) Rs 19 crores d) Rs 16 crores 3 The maximum amount that can be paid to Mr. Tushar as per the provisions of Companies Act, 2013 for F.Y. 2020-21 shall be - a) Rs 118 lakhs b) Rs 104 lakhs c) Rs 80 lakhs d) Rs 82 lakhs CA AMIT POPLI 2  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES 4 For removal of Mr. Shyam, which type of resolution was required to be passed and what was the last date till which Mr. Tushar should have been appointed, in case he was not appointed on 1.08.2020? a) Special Resolution and 30.11.2020 respectively b) Board Resolution and 30.11.2020 respectively c) Ordinary Resolution and 30.11.2020 respectively d) Board Resolution and 31.08.2020 respectively Solution 1 D 2 C 3 D 4 B Case No- 2 Read the following case study carefully and answer the following question given at the end: - Senior Ltd is an Indian company registered under the Companies Act, 2013 having two subsidiaries Small Ltd and Junior Limited. Small limited is a wholly owned subsidiary whereas Junior Ltd is 60% owned subsidiary. Mr Raj and Mr Singh are the Managing Directors of Senior Limited. The company has formulated a scheme wherein every employee of the company is entitled to a Loan equelent to 30 times of monthly salary subject to the condition that he has served in the company for a minimum period of 12 months at the time of application for loan further the EMIs of loan shall be deducted from his monthly salary along with interest on loan. Ms Radha, working as Finance Manager in Senior Limited, since 3 years at a monthly salary of Rs 60000/- applied for a loan to the company for Rs 50 Lakh to purchase a house. The management sanctioned the loan of Rs 50 lakh to Ms Radha and just 2 months after Ms Radha got married with Mr Raj. At the time of making the loan by the company there were rumors that Ms Radha and Mr Raj are getting married soon. However, Ms Radha is paying the instalment of loan on time. Soon after marrying with Ms Radha, the company sold one of its flat to Mr Raj for Rs 80 Lakh, 50 lakhs paid in cash and balance 30 lakh was payable in 30 instalments. Some members are of opinion that Rs 50 Lakh paid by Mr Raj is not from his own pocket but taken from the company with an indirect route through Ms Radha. The relevant extracts of Balance Sheet are as under: - Paid up Capital- Equity 100 Crore Paid up Capital- Preference 50 Crore Revaluation reserve 10 Crore Securities Premium Reserve 15 Crore CA AMIT POPLI 3  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES General Reserve 5 Crore Capital Redemption Reserve 2 Crore Equity Investment in Small Ltd 80 Crore Equity Investment in Junior Ltd 60 Crore Outstanding Balance in Loan –Raj 20 Lakh Outstanding Balance in Loan –Radha 30 Lakh Senior Limited wants give a guarantee to HDFC bank in favour of Junior Limited, its subsidiary, for sanctioning a loan of Rs 50 Crore to Junior limited. Small Limited wants to expand its operations and need funds for installing additional capacity. The Company approached SBI for a loan of Rs 50 Crore. Among other conditions, SBI required guarantee from Senior Limited being its holding company before granting the loan. The company issued the guarantee in favour of Small limited for Rs 50 Crore. Based on above case study, answer the following questions in light of applicable laws: - 1. Whether the loan sanctioned to Ms Radha is in contravention of section 185 of Companies Act, 2013 a) Yes, because Ms Radha became specified person soon after sanctioning the loan. b) Yes, because Ms Radha supposed to marry with Mr Raj and rumours were also there, hence it was pre decided that Ms Radha will marry to Ms Raj c) No, Section 185 does not apply retrospectively and there is no contravention of section 185. d) Yes, Section 185 applies to a person till loan amount is outstanding moreover the loan was given beyond the limits which are normally extended to all employees. 2. Whether the sale of flat can be treated as loan to directors under section 185 a) Yes, because director is a specified person and sale of flat on credit is an indirect way of giving loan to director. b) Yes, because Mr Raj paid the upfront amount from the funds indirectly obtained from the company itself threw Ms Radha. c) Both (a) and (b) d) No, sale of flat to a director on instalments cannot be treated as a loan to directors. 3. Suppose the guarantee to be given by Senior Limited in respect of a loan to be given to Junior Limited, being its subsidiary, exceeds the limits specified under section 186, which of the following conditions need to be fulfilled by Senior Limited before giving any guarantee in respect of that guarantee CA AMIT POPLI 4  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES I. Approval of the Board shall be required II. Approval of members via a Special Resolution is Required III. Approval of Public Financial Institution is required whether or not the loan agreement contain such a provision. IV. Approval of Central Government is required before making such loan. a) Only Condition - II b) Condition –II and Condition – IV c) Condition –I, II, and Condition- III d) All the conditions need to be satisfied 4. Whether the company can give guarantee for the loan sanctioned by HDFC Bank to Junior Limited, without obtaining permission via a Special Resolution from members? a) Yes, a holding company can give guarantee in respect of any loan sanctioned to its subsidiary without obtaining permission from members. b) Yes, because this given guarantee is within the limits specified in section 186. c) Both (a) and (b) d) Senior limited can’t give proposed guarantee in respect of a loan to be sanctioned to its subsidiary because it will exceed the limits specified under section 186. 5 Whether the company can give guarantee for the loan sanctioned by ICICI Bank to Small Limited, without obtaining permission via a Special Resolution from members? a) Yes, a holding company can give guarantee in respect of a loan sanctioned to its wholly owned subsidiary without obtaining permission from members. b) Yes, because the given guarantee is in respect of loan that will be utilized by the company for its principal business activities c) Both (a) and (b) d) Senior limited can’t give proposed guarantee in respect of a loan to be sanctioned to its subsidiary otherwise than a special resolution of members. Solution 1 2 3 4 5 Case No- 3 CA AMIT POPLI 5  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES Little Star Private Limited (LSPL) is a fully integrated setup from taking a 3D model as input to the design and manufacturing of tools to the manufacturing of finished products. The Company is also into Engineering Services with headquarters in Mumbai, India managed and run mainly by the promoters Mr. Sharad (Managing Director), Mr. Sanjeev (Director), and Mr. Javed (Director). All three are Indian residents. LSPL has a marketing office with warehouse facility Little Star Trading Spolka Z.O.O (LTS) in Poland, fully owned and controlled by it, to cater to the demands of European customers. LTS has been established with the permission of the Reserve Bank of India, duly complying with the required statutory formalities. On 1st January 2017, LSPL shipped some engineering products with a CIF value of EUR 265,000 to LTS, the cost of the products is EUR 250,000, Insurance EUR 3,000, and Freight EUR 12,000. Also, some of the products worth CIF GBP 126,000 were shipped to one of the customers in the UK on the same date. The total value of Exports of LSPL during the calendar year 2017 from various customers from different countries was USD 12 Million. LSPL during the normal course of business also entered into a Supply (Export) Agreement with one of its customers Drakes Group (DG) in the UK for the supply of two machines, a total export value estimated to be CIF (Crypto Improvement Fund) GBP 4 million. As per the terms of supply: a) Two Machines, as specified, worth about CIF GBP 2 million each are to be exported by LSPL to DG. b) Exact value of each of the Machinery can be ascertained only after the export to the UK since some more processes are involved during installation and commissioning. c) An advance of GBP 1 million is to be remitted to India by DG to LSPL for the purchase or import of critical components required for the manufacture of the said machines. d) Interest shall be payable on Advance payment by LSPL to DG up to the date of bill of lading of the first shipment. e) The first Machinery is to be supplied within 15 months from the date of receipt of advance payment in India, and the second one within a period not exceeding 27 months. Accordingly, as per the terms of supply, a sum of GBP 1 million was received by LSPL from DG on 1st July 2018 as an advance towards exports through the State Bank of India. The First machinery was supplied on time and the relevant export declaration was furnished to the specified authority in a specified manner. Other export formalities were duly complied with. LSPL also established a marketing office in Dubai, UAE - Little Star Emirates LLC (LSEL) for conducting normal business activities of the Indian entity, to cater to the requirements of customers from the Middle East. For promoting business in the Middle East Region, LSPL CA AMIT POPLI 6  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES sponsored a T20 Cricket match in Dubai International Cricket stadium and approached State Bank of India for remittance of USD 250,000 towards sponsorship Fees. LSPL is holding certain properties in the form of some residential flats in UAE ready for sale. Prestige Real Estate LLC (PREL) is a well-reputed real estate agent in UAE and has experience in marketing, advertising, and selling real estate property. While on travel to Dubai, Sharad and Sanjeev, on behalf of LSPL entered into an Agency Agreement PREL for the sale of properties in UAE. As per the Agreement a) LSPL grants PREL the exclusive rights to sell all the residential flats in UAE. b) Any and all offer and negotiations in regards to the said properties shall be conducted by PREL c) PREL shall do everything possible to entertain and vet offers made. It is the Agent’s sole purpose to sell the properties and as so shall be permitted to employ additional Brokers to assist in the selling and advertising process. d) Any offers considered valid should be reported to the Seller within 2 days and it shall be at the discretion of LSPL to accept or decline. e) LSPL agreed to remit PREL a flat commission of a certain percentage of the final sale price, on a case-to-case basis. PREL also authorized to sell one of the commercial plots owned by LSPL in India on similar terms as stated above. For one of the plots owned by LSPL in Pune, PREL finds a buyer from UAE. Because of the efforts of PREL, such a plot could be sold at USD 400,000. PREL transferred USD 400,000 to India, as sale proceeds. As per the Agreement, USD 22,000 is to be transferred as Commission to PREL. Javed wants to remit USD 250,000 under the Liberalized Remittance Scheme (LRS) to buy lottery tickets abroad making use of his business connections. 1. For one of the plots owned by LSPL in Pune, PREL find a buyer from UAE. Because of the efforts of PREL, such a plot could be sold at USD 400,000. PREL transferred USD 400,000 to India, as sale proceeds. As per the Agreement, USD 22,000 is to be transferred as Commission to PREL. In the context of commission which of the following statements is correct: a) Without any pre-approval from the Reserve Bank of India upto USD 100,000 or 5% of the amount remitted, whichever is higher, can be transferred as a commission by LSPL to PREL CA AMIT POPLI 7  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES b) Without any pre-approval from the Reserve Bank of India any amount upto USD 25,000 or 5% of the amount remitted, whichever is higher can be transferred as a commission by LSPL to PREL c) Without any pre-approval from the Reserve Bank of India only USD 20,000 can be transferred as a commission by LSPL to PREL in the given case. d) Without any pre-approval from the Reserve Bank of India upto USD 50,000 or 5% of the amount remitted, whichever is lesser, can be transferred as a commission by LSPL to PREL. 2. The First machinery was supplied on time and the relevant Export Declaration was furnished to the specified authority in a specified manner. In the context of the Export Declaration, which one of the following statements is not correct? a) Export of goods can be made without furnishing the specified Declaration when goods are imported free of cost on a re-export basis; b) Export of goods can be made without furnishing the specified Declaration when goods are sent outside India for testing subject to re-import into India. c) Export of goods can be made without furnishing the specified Declaration when defective goods are sent outside India for repairs at an agreed price with the supplier outside, subject to re-import into India. d) Export of goods can be made without furnishing the specified Declaration in case of unaccompanied personal effects of travelers. 3. LTS (Little Star Trading Spolka Z.O.O) in Poland in the stated case shall be treated as: a) Person resident outside India b) Person resident in India c) Person not ordinary resident in India d) No relevance to LTS of residential status with reference to Indian laws 4. For promoting business in the Middle East Region, LSPL sponsored a T20 cricket match in Dubai International Cricket stadium and approached the State Bank of India for remittance of USD 250,000 towards sponsorship Fees. a) State Bank of India can remit USD 250,000 towards cricket sponsorship without any limits and any pre-approval. b) State Bank of India can remit USD 250,000 with the approval from Reserve Bank of India. CA AMIT POPLI 8  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES c) State Bank of India can remit USD 250,000 with prior approval from the appropriate ministry of the Government of India. d) Remittance by State Bank of India of USD 250,000 towards T20 cricket sponsorship in Dubai is a transaction for which remittance of foreign exchange is prohibited. 5. Javed wants to remit USD 250,000 under the Liberalized Remittance Scheme (LRS) to buy lottery tickets abroad making use of his business connections. a) Remittance to buy lottery tickets abroad is a prohibited item under LRS b) Remittance of more than USD 100,000 for buy lottery tickets abroad is prohibited under LRS c) Remittance upto USD 250,000 per financial year is permitted to buy lottery tickets abroad under LRS d) Remittance only upto USD 150,000 per financial year is permitted to buy lottery tickets abroad under LRS Solution 1 2 3 4 5 Case No- 4 WRPC Limited (WRPC) is a Mumbai-based company, in which the Central Government holds 35% of share capital while the Governments of Maharashtra and Karnataka hold 15% and 10% of share capital respectively. WRPC manufactures corrosion resistant overhead transmission and distribution products. The internal auditors of the company had raised serious concerns in respect of certain internal control irregularities. During the year 2018- 19, WRPC also defaulted in complying with statutory requirements pertaining to filing of its financial statements under Section 137 and Annual Return under Section 92. Consequently, the company received a notice from the Registrar of Companies, Mumbai-Maharashtra, to rectify the default. The Company was also served Show Cause Notices (SCN) by the Revenue Officials on certain GST and Income-tax related issues. The Board of Directors of WRPC consisted of 14 Directors. Due to the increased volume of business, alleged internal control irregularities and lack of professional skills needed for the statutory compliances, the company felt the necessity of inclusion of some senior professionals CA AMIT POPLI 9  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES on its Board. Accordingly, it was thought of inducting Rajan, a Chartered Accountant and Sanjay, a Company Secretary, as the Executive Directors. Circuit Board Private Limited (CBPL), a Delhi-based company and PISCO Electronics Limited (PISCO Electronics), a Pune-based company, are the two major component suppliers to WRPC. CBPL is a family managed business with fifty-seven shareholders and PISCO Electronics is yet to be a listed company but in near future it intends to get listed. As per the audited financial statements, the paid-up capital and turnover of CBPL and PISCO Electronics were as under: Paid-up Capital (₹ in Turnover (₹ in Crore) Crore) (as on (as on (F.Y. (F.Y. 31.03.2019) 31.03.2020) 2018-19) 2019-20) CBPL 100 100 315 350 PISCO 50 50 275 305 Electronics CBPL had 4 Directors as on 31.03.2019 and 5 as on 31.03.2020. In case of PISCO Electronics, there were 7 Directors as on 31.03.2019 and 6 as on 31.03.2020. However, none of the companies had appointed any woman Director during these two years. Ajay Prakash is the Chairman and Managing Director (CMD) of CBPL. Considering his old age and other health related issues, he wants to retire from the company. Accordingly, he discussed the matter in a Board Meeting and also proposed to explore the possibilities of appointing his eldest son Pranav Prakash (MBA from FMS, University of Delhi) as the Managing Director of the company for a period of 10 years from 1.1.2021 onwards. The Board Meetings of PISCO Electronics were convened five times during the calendar year 2019. No Board Meeting was held in January or February 2020 but thereafter, six Board Meetings were held during the remaining part of the calendar year 2020. Vasuki is one of the executive Directors appointed by the PISCO Electronics. He had taken a loan of ₹ 70 lacs from the company on 1.1.2019 after fulfilling the required formalities. The terms and conditions on which the loan was granted specified that Vasuki shall repay the principal amount in 5 years (i.e. 20 quarterly installments of equal amount) and the interest @9% per annum (to be charged at monthly rests on the reducing balance) shall also be paid as and when due. However, due to the changed economic scenario during 2020, there was a drastic reduction in the normal borrowing rates. Accordingly, Vasuki requested the company for change in his borrowing CA AMIT POPLI 10  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES 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 installments to 30 installments. Multiple Choice Questions 1. From the case scenario, it is observed that WRPC had 14 Directors but due to increased volume of business, alleged internal control irregularities and professional skills, etc., required for the statutory compliances, the company intended to induct Rajan, a Chartered Accountant and Sanjay, a Company Secretary, as the Executive Directors. Which of the following options is best suited to such a situation: a) WRPC could appoint either Rajan or Sanjay as Executive Director because in no case the statutory limit of 15 Directors was to be crossed. b) WRPC increased the total number of Directors to 16 by passing an Ordinary Resolution in a General Meeting of shareholders with a view to appoint both Rajan and Sanjay. c) WRPC increased the total number of Directors to 16 by passing a Special Resolution in a General Meeting of shareholders with a view to appoint both Rajan and Sanjay. d) Being a government company, since WRPC is exempt from passing the Special Resolution in a General Meeting of shareholders for increasing the number of Directors to 16, it increased the total number of Directors to 16 from the existing 14 without passing a Special Resolution and appointed both Rajan and Sanjay. 2. From the case scenario, it is noticed that none of the companies had appointed any woman Director though CBPL had 4 Directors as on 31.03.2019 and 5 as on 31.03.2020 and PISCO had 7 Directors as on 31.03.2019 and 6 as on 31.03.2020. Which of the following option is applicable in the given situation: a) CBPL should appoint at least one-woman Director based on audited financial statements as on 31.03.2019. b) PISCO Electronics should appoint at least one-woman Director based on audited financial statements as on 31.03.2019. c) PISCO Electronics should appoint at least one-woman Director based on audited financial statements as on 31.03.2020. d) CBPL should appoint at least one-woman Director based on audited financial statements as on 31.03.2020. 3. Which of the following Whole-time Key-Managerial Personnel (KMP), both CBPL and PISCO Electronics are mandatorily required to appoint: a) A Whole-time Chief Financial Officer. CA AMIT POPLI 11  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES b) A Whole-time Company Secretary. c) Both the Whole-time Chief Financial Officer and Whole- time Company Secretary. d) All the Whole-time Key Managerial Personnel as prescribed by the Companies Act, 2013. 4. 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 installments to 30 installments. Which of the following options is applicable in such a situation: a) The company is permitted to alter the existing terms and conditions relating to outstanding loan of Vasuki in a duly convened Board Meeting where all the Directors present except Vasuki must consent to the proposal. b) The company is permitted to alter the terms and conditions relating to outstanding loan of Vasuki in a duly convened Board Meeting where majority of the Directors present except Vasuki must consent to the proposal. c) The company is permitted to alter the terms and conditions relating to outstanding loan of Vasuki in a duly convened General Meeting by passing a Special Resolution. d) The company is permitted to alter the terms and conditions relating to outstanding loan of Vasuki in a duly convened General Meeting by passing an Ordinary Resolution. 5. Ajay Prakash, the Chairman and Managing Director of CBPL, desiring to retire due to his old age and health related issues, wants to appoint his eldest son Pranav Prakash as the Managing Director of the CBPL for a period of 10 years from 1.1.2021 onwards. From the following options choose the correct one: a) Pranav Prakash can be appointed as the Managing Director for a term not exceeding 5 years at a time. b) Pranav Prakash can be appointed as the Managing Director for maximum upto 10 years without any restrictions. c) Pranav Prakash can be appointed as the Managing Director for maximum upto 15 years without any restrictions. d) Pranav Prakash can be appointed as the Managing Director for any period without any restrictions since CBPL is a private company. Solution 1 C 2 C 3 B 4 C 5 A CA AMIT POPLI 12  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES Case No- 5 Ullal Pharma Limited (UPL) is an unlisted company, with its Registered Office at Baidebettu, District Udupi, Karnataka. In addition to being the market leader in semi-synthetic penicillin, UPL has a presence in key therapeutic segments such as neurosciences, cardiovascular, anti- retroviral, anti-diabetics, gastroenterology and anti-biotics, among others. UPL also has three group companies. From time to time, UPL had duly filed its Annual Accounts, Annual Returns and other documents, if required to be filed, with the jurisdictional Registrar of Companies (ROC). The ROC had the whistle-blower information that the business of UPL is being carried on for fraudulent and unlawful purposes. There was also an allegation that some illegal secret drug dealings were being carried out by the UPL in the disguise of pharma business. Year-wise comparison of data extracted from the Annual Accounts and Annual Returns filed by UPL indicated the possibilities of huge diversion of funds to the related parties and related entities. Questions were also raised within the company on the correctness of the accounts maintained by UPL. Consequently, UPL received a written notice from the ROC on 10.06.2020 asking for the following information/explanations/papers. The notice required the UPL to produce the following documents before the Registrar in his office at Bengaluru within 30 days from the date of receiving the notice. (a) Hard and soft copies of ‘Books of Accounts’ from the years 2017-18 onwards up to date. (b) Ledger abstracts of all Inter-Company Accounts. (c) All the documents relating to sales. (d) All the ‘Bank Statements’ and ‘Cash Books’. The Registrar duly followed all other processes to call for the information, inspection of books and papers and conduct enquiries relating to UPL as specified under the Companies Act 2013. It is to be noted that Rajeev, Director (Finance) had the exclusive responsibilities to supervise both ‘sales accounts’ and ‘inter-company transactions. The information which Rajeev shared with ROC could not, to his dismay, convince the Registrar. He was also found to be evasive and willfully disobeying the directions given by the ROC. The ROC also issued separate notices to Venkatesh, ex-Whole-time Director and Lokesh, ex-Chief Financial Officer (CFO) of the company. Both Venkatesh and Lokesh were in the employment of the UPL only up to 15.12.2018. Both of them through their separate representatives informed the ROC that the notice served on them was not valid since they are no longer associated with the company and while in service they had acted only in their capacity as the officers of the company. CA AMIT POPLI 13  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES It was argued by both of them that they were independent of any obligations relating to the company and hence, not bound to furnish any information/explanations to the ROC. The accounts of UPL were outsourced and maintained by a Chartered Accountant firm M/s Ajay Jyotsana & Co. The accounts were maintained in Tally system by three staff members under the supervision of Ajay. The ‘Reports’ were periodically submitted to Rajeev in the required formats. Rajeev, in turn, submitted the requisite information to the Board of Directors of UPL. Based on the information in his possession, the Registrar had reasonable ground to believe that the books and papers relating to UPL were likely to be either destroyed, mutilated, altered, falsified or secreted. Accordingly, the ROC decided to enter into the premises of M/s Ajay Jyotsana & Co. with the required assistance and seized the books and papers which he considered necessary for inspection. However, before seizure, ROC allowed the CA firm to take copies of such books and papers. The Registrar retained all the required books and papers for a period of 110 days from the date of seizure and ensured the necessary inspection. Before returning the said books and papers, ROC took copies of them and placed necessary identification marks on some of the papers. After the inspection of the books of accounts and other books and papers of UPL and after the requisite inquiries, ROC submitted a report in writing to the Central Government along with the necessary documents and recommendations. Consequently, the necessary actions were taken. Rajeev, Director (Finance) was convicted and punished with imprisonment for a period of six months and also with fine of ₹ 70,000 under Section 207 (4) (i). It may be noted that Rajeev was also holding Directorships in two more companies as on that date. Multiple Choice Questions 1. From the case scenario, it is noticed that the concerned Registrar of Companies (ROC) issued separate notices to Venkatesh, ex- Whole-Time Director and Lokesh, ex-Chief Financial Officer (CFO) of UPL. Both Venkatesh and Lokesh through their separate representatives presented that they were in employment of UPL only up to 15.12.2018 and therefore, the notice issued to them was not valid since they are no longer associated with UPL and while in service they had acted only in their capacity as the officers of the Company. It was argued by both of them that they were independent of any obligations relating to the Company and hence, not bound to furnish any information/explanation to the ROC. a) Contention of both Venkatesh and Lokesh is valid since both of them are no longer associated with UPL. CA AMIT POPLI 14  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES b) Venkatesh and Lokesh can only voluntarily furnish information/explanations to the ROC, but they are under no legal obligation to do so. c) Venkatesh and Lokesh are under legal obligation to furnish to the best of their knowledge the required information or explanation as asked by the ROC through respective notices. d) Venkatesh and Lokesh being the past employees of UPL shall furnish information or explanation only through UPL after obtaining written consent of the Company to respond to the Registrar and not directly to the ROC. 2. According to the case scenario, Rajeev, the Director (Finance) of UPL, was convicted and punished with imprisonment for a period of six months and with fine of ₹ 70,000 under 207(4) (i). It is further informed that Rajeev was also holding Directorships in two more other companies as on that date. From the following options, choose the correct one which suitably applies to the given situation: a) Rajeev can continue to hold the office of Director (Finance) of UPL, since he has acted as per the instructions of the company and he can also continue Directorships in other two companies of which he is currently Director. b) Rajeev shall be deemed to have vacated the office of Director (Finance) of UPL from the date he is so convicted, but can continue as a Director in the other two companies. c) Rajeev can continue to hold the office of Director (Finance) of UPL, but shall be disqualified from holding Directorship in any other company. d) Rajeev shall be deemed to have vacated the office of Directorship of UPL from the date he is so convicted and on such vacation of office, shall also be disqualified from holding an office in any other company. 3. From the case scenario, it is revealed that the Registrar, on the basis of information in his possession, had reasonable ground to believe that the books and papers relating to UPL were likely to be either destroyed, mutilated, altered, falsified or secreted. Accordingly, ROC entered the premises of M/s Ajay Jyotsana & Co. with the required assistance and seized such books and papers as he considered necessary. Which of the following options best suits the given situation: a) The Registrar had obtained an order from the Central Government before seizure of the books and papers. b) The Registrar had obtained an order from the Special Court before seizure of the books and papers. c) The Registrar had suo motu proceeded with search and seizure of the books and papers. CA AMIT POPLI 15  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES d) The Registrar had obtained an order of a Civil Court before seizure of the books and papers. 4. From the case scenario, it is observed that the Registrar seized the books and papers of UPL from the premises of M/s Ajay Jyotsana & Co. and retained them for a period of 110 days from the date of seizure and returned them thereafter. What is the maximum time limit within which the Registrar is required to return the seized books and papers. a) The Registrar is required to return the seized books and papers maximum within 120 days from the date of seizure. b) The Registrar is required to return the seized books and papers maximum within 150 days from the date of seizure. c) The Registrar is required to return the seized books and papers maximum within 180 days from the date of seizure. d) The Registrar is required to return the seized books and papers maximum within 270 days from the date of seizure. 5. The above case scenario states that the Registrar, after the inspection of the books of accounts and other books and papers of UPL and after the requisite inquiries, submitted a report in writing to the Central Government along with the necessary documents and recommendations. What action is contemplated under Section 210 of the Companies Act, 2013, that the Central Government may initiate in such a situation: a) On receipt of a report of the Registrar, the Central Government may order an investigation into the affairs of the company by the Serious Fraud Investigation Office (SFIO). b) On receipt of a report of the Registrar, the Central Government may order an investigation into the affairs of the company by the Inspectors appointed by it. c) On receipt of a report of the Registrar, the Central Government may order an investigation into the affairs of the Company by a Criminal Court. d) On receipt of a report of the Registrar, the Central Government may order an investigation into the affairs of the Company by the jurisdictional Tribunal. 6 The case scenario states that the Registrar retained all the required accounts and papers for a period of 110 days from the date of seizure, ensured the necessary inspection and returned them to the UPL. After so return, if the Registrar again calls for the books and papers, then for maximum how many days he can retain them. CA AMIT POPLI 16  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES a) The Registrar cannot call for the books and papers once again since he has already returned them after seizure. b) If the Registrar again calls for the books and papers, then he can retain them maximum for a period of 120 days. c) If the Registrar again calls for the books and papers, then he can retain them maximum for a period of 180 days. d) If the Registrar again calls for the books and papers, then he can retain them maximum for a period of 210 days. Solution 1 C 2 D 3 B 4 C 5 B 6 C Case No- 6 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 founding Directors, Arjun, Ramakrishnan, Ravi Bhatt, Ramesh and Ripudaman. However, the company is facing some difficult times for the past four years or so. Arjun is the Managing Director while Ramesh and Ripudaman are the Whole-time Directors. 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, 2018. 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 31.03.2021: S. No Description Amount (₹ in Crore) 1 Paid -up Capital 50 2 General Reserves 54 CA AMIT POPLI 17  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES 3 Securities Premium Account 5 4 Accumulated Losses 7 5 Revaluation Reserves created out of 30 revaluation of assets 6 Deferred Revenue Expenditure & 2 Miscellaneous Expenditure not written off 7 Investment in SCPL 25 Based on the above data and considering Section 2 (57)1 of the Companies Act, 2013, Mahadevan calculated the ‘net worth’ of LSL as under: Particulars Amount (₹ in Crores) Paid-up Capital 50 According to Section 2 (57) of the Companies Act, 2013, ‘Net Worth’ means the aggregate value of the paid-up share capital and all reserves created out of the profits, securities premium account and debit or credit balance of profit and loss account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation. Add: General Reserves 54 Add: Securities Premium Account 5 Less: Accumulated Losses 7 Less: Deferred Revenue Expenditure 2 & Miscellaneous Expenditure not written Net Worth 100 off In view of the ‘net worth’ of ₹ 100 crore, Mahadevan informed the Board that as per the relevant provisions SCPL was an undertaking of LSL. Earlier during April, 2020, in the course of normal business, LSL entered into a contract for the continuous supply of some consumables and components with Swastik Supplies Private Limited (SSPL) 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 SSPL. However, during the second year of the Supply Contract, Rajesh, son of Ramesh, purchased about 30% of the equity shares of SSPL through one of his family-owned business entities and also lent ₹ 25 lakh as unsecured loan to SSPL. 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 CA AMIT POPLI 18  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES for such disclosure. 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. 2020-21, 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, 2021, 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 Lotus Switchgears Limited. However, he was quite worried about his investment after going through the latest audited financial statements of 2020-21, 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 punished. LSL, after complying with the required legal formalities, had made some political contributions and had incurred certain expenses during the financial year 2020-21. The details are as under: a) Payment of ₹ 10,00,000 as contributions to LMS party. b) Donation of ₹ 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 ₹ 1,00,000 incurred for inserting an advertisement in the Souvenir published on behalf of Janta Welfare Party. CA AMIT POPLI 19  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES d) Publication of pamphlets costing ₹ 1,00,000 though not meant for any political party but incurred for promoting a candidate for the next state elections. LSL disclosed in its financial statements ₹ 11,00,000 as political contributions and ₹ 3,00,000 as ‘Advertisement and Business Promotion Expenses’. Multiple Choice Questions 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. From the following options, choose the most appropriate one: a) The Company shall be liable to a penalty of ₹ 25,000 and every officer of the Company, who is in default, shall be liable to a penalty of ₹ 5000 for each default for non- production of Service Contracts for inspection. 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. c) The Company shall be liable to a penalty of ₹ 50,000 and every officer of the Company, who is in default, shall be liable to a penalty of ₹ 10,000 for each default for non- production of Service Contracts for inspection. d) The Company shall be liable to a penalty of ₹ 1,00,000 and every officer of the Company, who is in default, shall be liable to a penalty of ₹ 25,000 for each default for non- production of Service Contracts for inspection. 2. According to Mahadevan, whole-time Company Secretary, SCPL was an undertaking of LSL. If the Board of Directors of LSL decides to dispose of its investment in SCPL, considering SCPL as an undertaking of LSL, which of the following options shall be applicable: 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. CA AMIT POPLI 20  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES c) 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 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 SCPL, considering SCPL as an undertaking of LSL, only with the consent of the company by a Special Resolution. 3. According to the case scenario, the Board of Directors of LSL stated that since January, 2018 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. 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 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. 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 2019-20. LSL showed in its financial statements ₹ 11,00,000 as political contributions and ₹ 3,00,000 as ‘Advertisement and Business Promotion Expenses’. From the following options choose the correct one: a) The disclosure made by LSL in its financial statements showing ₹ 11,00,000 as political contributions and ₹ 3,00,000 as ‘Advertisement and Business Promotion Expenses’ is correct. CA AMIT POPLI 21  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES b) LSL was required to disclose ₹ 10,00,000 as political contributions and ₹4,00,000 as ‘Advertisement and Business Promotion Expenses’. c) LSL was required to disclose all the sums totaling ₹ 14,00,000 as political contributions. d) LSL was required to disclose ₹12,00,000 as political contributions and ₹ 2, 00,000 as ‘Advertisement and Business Promotion Expenses’. Solution 1 B 2 D 3 A 4 C Case No- 7 Kumar Beverages Limited (KBL), a 10-year-old listed company, is a leading beverage manufacturer and trader who’s all the brands are popular household names in India, Middle East, Europe and Africa. Being a fast-growing company, the turnover of KBL was ₹ 300 crore during the financial year 2019-20. The Registered Office and manufacturing plants of KBL are situated at Kolluru, Karnataka. Akshay Beverages Limited (ABL), an 18-year-old unlisted company, is one among the leading competitors of KBL and has market presence mainly in South Asia, South East Asia, Japan as well as Australia. It had turnover of ₹ 700 crore during the financial year 2019-20. The Registered Office of ABL is in Kundapura and manufacturing units are in Hattiangadi, Karnataka. Considering various factors like elimination of competition, scaling up of operations for competitive advantages, economies of large-scale business, increase in market share, cost reduction by reducing overheads, increasing the efficiencies of operations, tax benefits, access to foreign markets etc., both the companies have been in negotiation for the last several months and a proposal to merge KBL with ABL is in the waiting. It is proposed that KBL shall transfer all of its assets and liabilities to ABL. It is estimated that around 95% of equity shareholders of KBL shall become shareholders of ABL Further, purchase consideration shall be discharged wholly by issuing equity shares of ABL. The beverage business shall continue as earlier. The assets and liabilities taken over from KBL shall be recorded at existing carrying amounts except where adjustment is required to ensure uniformity of Accounting Policies. The ‘object clauses’ contained in the Memorandums of Association of ABL and KBL empower both the companies to undergo merger. All the required Institutional and statutory approvals were taken for merger. A Draft Scheme of merger was approved in the Board Meetings of both the companies. CA AMIT POPLI 22  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES Both ABL and KBL filed an application for merger in the form of petition along with the necessary documents and information as required under the Companies Act 2013 read with the relevant Rules, with the jurisdictional National Company Law Tribunal (NCLT) [in short ‘Tribunal’] for the purpose of sanctioning the Scheme of Merger. The Tribunal ordered for the required meeting and gave such directions as it felt necessary for conducting the meeting. For the purposes of the meeting, merging companies also circulated some additional documents/information, as required under the Companies Act 2013. The Tribunal satisfied itself with the procedure followed including filing of the Auditor’s Certificate on accounting treatment proposed in the Scheme of Merger certifying that it was in conformity with the prescribed Accounting Standards. The Tribunal by Order sanctioned the arrangement leading to merger and made provisions for all the required matters which, inter-alia, included valuation of shares and payment to such shareholders of KBL, who decided to opt out of the transferee company ABL. A certified copy of the Order was also filed with the Registrar of Companies for registration within the due date. One of the earlier Directors of KBL, contended that the Scheme shall be effective from the date the certified copy is registered by the Registrar of Companies. However, the Scheme had indicated an ‘appointed date’ being the completion of 15 days from the date of receipt of the certified copy of the Order of the Tribunal, from which the merger shall be effective. It is expected that the actual implementation of the Scheme of merger is going to take some time. The Board of Directors of ABL wanted to understand the implementation monitoring procedure by the authorities and the Company Secretary was directed to explain the same. It was decided that once the required implementation procedure of merger is completed, the manner of disposing of the books and papers of KBL shall be discussed. It came to light that Neelesh, one of the Directors of KBL, had committed various offences by contravening different provisions of the Companies Act, 2013. On merger with ABL, it was contended by Neelesh that the wrongful acts were committed before the merger and therefore, he should be relieved from all the liabilities, punishments and penalties for the offences earlier committed. Multiple Choice Questions 1. From the case scenario, it is observed that KBL, a listed company is being merged with ABL which is an unlisted company and under the scheme of merger, the KBL shall transfer all of its assets and liabilities to ABL. From the following four options, choose the one which indicates as to when the ABL shall become a listed company after KBL is merged with it. a) ABL shall remain an unlisted company until it on its own becomes a listed company. CA AMIT POPLI 23  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES b) ABL shall immediately become a listed company after merger since KBL, a listed company is being merged with it. c) ABL shall become a listed company after merger of KBL, a listed company, with it once the certified copy of the merger is registered with ROC. d) ABL shall become a listed company once the application for sanctioning the merger is filed with the Tribunal since the merger is proposed with KBL, a listed company. 2. According to the case scenario, the Tribunal by Order sanctioned the arrangement leading to merger and made provisions for all the required matters which, inter-alia, included valuation of shares and payment to such shareholders of KBL, who decided to opt out of the transferee company ABL. From the following options choose the appropriate one: a) Amount of payment or valuation for any share shall not be less than what has been specified by the Registrar of Companies. b) Amount of payment or valuation for any share shall not be less than what has been specified by the Reserve Bank of India (RBI). c) Amount of payment or valuation for any share shall not be less than what has been specified by the Securities and Exchange Board of India (SEBI). d) Amount of payment or valuation for any share shall not be less than what has been specified in the Valuation Report of the Registered Valuer. 3. According to the contention of one of the earlier Directors of KBL, the Merger Scheme shall be effective from the date the certified copy is registered by the Registrar of Companies. From the following options you are required to choose the one which indicates the correct ‘effective date’: a) The Merger Scheme shall be deemed to be effective from the date of passing of an Order by the Tribunal. b) The Merger Scheme shall be deemed to be effective from the date of receipt by ABL the certified copy of the Order as passed by the Tribunal. c) The Merger Scheme, as contended by an earlier Director of KBL, shall be deemed to effective from the date the certified copy is registered by the Registrar of Companies. d) The scheme shall be deemed to be effective from the ‘appointed date’ being the completion of 15 days from the date of receipt of the certified copy of the Order of the Tribunal. 4. It is expected that the actual implementation of the Scheme of merger is going to take some time. The Board of Directors of ABL wanted to understand the implementation CA AMIT POPLI 24  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES monitoring procedure by the authorities and the Company Secretary was directed to explain the same. Which of the following options, do you think, the Company Secretary might have suggested: a) ABL shall, until the completion of the scheme, file a statement in such form and within such time as may be prescribed, with the Tribunal every year, duly certified by a Chartered Accountant or a Cost Accountant or a Company Secretary in practice indicating whether the scheme is being complied with in accordance with the orders of the Tribunal or not b) ABL shall, until the completion of the scheme, file a statement in such form and within such time as may be prescribed, with the Registrar every year duly certified by a Chartered Accountant or a Cost Accountant or a Company Secretary in practice indicating whether the scheme is being complied with in accordance with the orders of the Tribunal or not c) ABL shall, only on completion of the implementation of the scheme, file a statement in such form and within such time as may be prescribed, with the Registrar, duly certified by a Chartered Accountant or a Cost Accountant or a Company Secretary in practice indicating whether the implementation of the scheme is complied with in accordance with the orders of the Tribunal or not d) ABL shall, only on completion of the implementation of the scheme, file a statement in such form and within such time as may be prescribed, with the Tribunal, duly certified by a Chartered Accountant or a Cost Accountant or a Company Secretary in practice indicating whether the implementation of the scheme is complied with in accordance with the orders of the Tribunal or not. 5. According to the case scenario, Neelesh, one of the Directors of KBL, had committed various offences by contravening different provisions of the Companies Act, 2013. On merger with ABL, it was contended by Neelesh that the wrongful acts were committed before the merger and therefore, he should be relieved from all the liabilities, punishments and penalties for the offences earlier committed. From the following options choose the correct one: a) The contention of Neelesh is not correct since the liability in respect of offences committed under the Companies Act 2013 by the officers in default, of the transferor company prior to its merger, amalgamation or acquisition shall continue after such merger, amalgamation or acquisition. b) The contention of Neelesh is correct since the liability in respect of offences committed under the Companies Act 2013 by the officers in default, of the transferor company prior CA AMIT POPLI 25  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES to its merger, amalgamation or acquisition shall not be continued after such merger, amalgamation or acquisition. c) The contention of Neelesh is partially correct since he is liable only for the wrongful acts which have a bearing on the merger. d) The Board of Directors of ABL are permitted to relieve Neelesh from the liabilities in respect of offences committed earlier in KBL by passing a Board Resolution with the consent of all the Directors present at a duly convened Board Meeting. 6. According to the case scenario, once the required implementation procedure of merger is complete, the manner of disposing of the books and papers of KBL shall be discussed. From the given options, choose the appropriate one: a) The books and papers of KBL can be disposed of immediately on merger of KBL with ABL. b) The books and papers of KBL can be disposed of not earlier than 8 years from the financial year to which they relate. c) The books and papers of KBL can be disposed of only after obtaining permission from the Central Government. d) The books and papers of KBL can be disposed of only after obtaining permission from the Tribunal, which had sanctioned the merger. Solution 1 A 2 C 3 D 4 B 5 A 6 C Case No- 8 Lagus Transport Services Limited (LTSL) is operating in the domain of logistics and public transport. The company has pan-India presence. As per its Articles of Association, the company can appoint a maximum of 15 Directors and all of them shall be rotational Directors. Presently, the company has a strength of 14 Directors, of which 9 are executive Directors and the remaining 5 are non-executive Directors. Following information was extracted from the auditedfinancial statements as on 31st March, 2020: S. Particulars Amount (₹ No. in Crores) CA AMIT POPLI 26  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES 1. Authorised Share Capital (15,00,00,000 15.00 Equity Shares of ₹ 1 each) 2. Paid-up Share Capital 8.42 3. Turnover 84.00 4. Outstanding Loans, Debentures and Deposits 42.00 (in aggregate) In the Annual General Meeting (AGM), held on 20th August, 2020, Anil, Badal, Chanchal and Damodar were appointed as Directors in place of Mohan, Navin, Om and Prasad by passing a single resolution with simple majority. It is to be noted that earlier, a motion authorising the appointment of Anil, Badal, Chanchal and Damodar by a single resolution was passed in the meeting and not a single vote was cast against such motion. Based on the audited financial statements as on 31st March, 2021, following information emerged: S. Particulars Amount No. (₹ in Crores) 1. Authorised Share Capital (15,00,00,000 15.00 Equity Shares of ₹ 1 each) 2. Paid-up Share Capital 8.42 3. Turnover 120.52 4. Outstanding Loans, Debentures and 40.00 Deposits (in aggregate) It is noteworthy that due to the increased turnover there arose the requirement of appointing two independent Directors. Since the company was required to appoint two independent Directors, the total strength of the Board with such appointments would go up to 16 Directors from the present 14 whereas according to the Articles, the company can have a maximum of 15 Directors. Accordingly, the Articles were altered and the total strength was increased to 20 Directors. After altering the Articles, the company proceeded to appoint four independent Directors instead of the mandatorily required two since it was felt that such step would strengthen the corporate governance to the maximum extent. The independent Directors were: (i) Mrs. Eekam, who is considered ‘influencer’ on supply chain management and has a lot of expertise in the logistics field; (ii) Mrs. Prajna who is a marketing expert; (iii) Mrs. Ruchita, who is MBA (Finance and Accounting) from IIM, CA AMIT POPLI 27  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES Ahmedabad; and (iv) Mr. Amit, who is skilled in developing customized software. Subsequent to the above developments, the time to hold Annual General Meeting (AGM) approached and it was conducted on 12th August, 2021 through video conferencing after complying with applicable provisions of the Companies Act, 2013 read with General Circular 20/2020, dated 05-05-2020, issued by MCA. Multiple Choice Questions 1. In this case scenario, Anil, Badal, Chanchal and Damodar were appointed as Directors by passing a single resolution at the AGM. Is such appointment valid? a) The appointment of Anil, Badal, Chanchal and Damodar by a single resolution is valid because beforehand, a motion authorising their appointment by a single resolution was passed in the meeting and not a single vote was cast against such motion. b) The appointment of Anil, Badal, Chanchal and Damodar by a single resolution is not valid because passing of resolution by simple majority indicates that it was not passed unanimously. c) The appointment of Anil, Badal, Chanchal and Damodar by a single resolution with simple majority is not valid because such resolution is required to be passed as a special resolution. d) The appointment of Anil, Badal, Chanchal and Damodar by a single resolution is not valid because in no case more than one Director can be appointed by passing a single resolution. 2. In the given case scenario, according to the Articles all the Directors are rotational. Had this been not the case, how many Directors were required to retire at the AGM which was held on 20th August, 2020? a) Five Directors b) Four Directors c) Three Directors d) Two Directors 3. In the given case scenario, if it is presumed that as on 31st March, 2021, the turnover of the company is ₹ 87.00 crores and the paid-up share capital is ₹ 12.00 crores, would the company be still mandatorily required to appoint two independent Directors? a) There is no need to appoint two independent Directors since the aggregate of turnover and paid-up share capital has not crossed the threshold of ₹ 100 crore. CA AMIT POPLI 28  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES b) Instead of appointing two independent Directors, the company is required to appoint only one independent Director since the aggregate of turnover and paid-up share capital is above ₹ 90 crores but less than ₹ 100 crores. c) The company is required to appoint minimum two independent Directors since the paid- up share capital is ₹ 12 crore. d) The company is required to appoint only one independent Director since the paid-up share capital is below ₹ 15 crore. 4. According to the case scenario, the company altered its Articles of Association so as to increase the total strength of Directors up to 20 from the present 15 Directors. Which of the following options is applicable in such a case of alteration: a) The articles were altered by passing an ordinary resolution. b) The articles were altered by passing an ordinary resolution followed by approval sought from the jurisdictional Registrar of Companies. c) The articles were altered by passing a Board Resolution with more than seventy-five percent majority. d) The articles were altered by passing a special resolution. 5. As on 12th August, 2021, when the AGM of LTSL was held, the total strength of Directors reached to 18 due to the appointment of four independent Directors. When all the Directors are rotational, how many Directors would have got retired at this AGM? a) Six Directors b) Five Directors c) Four Directors d) Two Directors Solution 1 A 2 C 3 C 4 D 5 B Case No- 9 Sheetal Chemicals Limited (SCL) is a listed company dealing in petrochemicals which are used in numerous household products like wax, detergents, dyes, carpeting, safety glasses, etc. As per the latest audited balance sheet as at 31st March, 2021, its paid-up capital stood at ₹ 40.00 crores CA AMIT POPLI 29  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES against its Authorised Capital of ₹ 50.00 crore. The turnover for the FY 2020-21 was to the tune of ₹ 300.00 crore. The company has thirteen Directors on its Board namely, A1, B2, C3, D4, E5, F6, G7, H8, I9, J10, K11, L12 and M13 of which A1, B2, C3, D4 and E5 are the Independent Directors. The Articles of Association of the company restrict the maximum number of Directors to fifteen. SCL remains ever-conscious to corporate governance and ensures compliance to legal provisions in both letter and spirit. L12 is the Managing Director of the company whereas M13 is the only woman, Director. The company has constituted requisite committees as per the requirements of law. The Audit Committee consists of seven Directors as members i.e. A1, B2, C3, D4, E5, I9 and J10. Earlier, for the financial year ending 31st March, 2020, the company successfully convened and held Annual General Meeting (AGM) on 25th September, 2020 at its registered office at Pune. On the fateful day of AGM, while returning to Mumbai from Pune by road after her re- appointment at AGM, a fatal accident claimed the life of M13 thus snatching an efficient and trustworthy Director from the hands of the company. Later on, a Board Meeting was held on 09-01-2021 and N14, a finance professional and daughter of deceased woman Director M13 was appointed as Director to fill the vacancy of woman Director so created due to the death of her mother M13. It may be noted that before 09-01-2021, a Board Meeting was held on 15-09-2020. SCL is a growing company which wants to diversify its business into the sphere of agrochemicals also and therefore, desires to bring on its Board O15 who is a chemical engineer with hands-on experience of about twenty years post his qualification in the field of agrochemicals and other petroleum products. Besides production, he is well versed in marketing of agrochemicals both in India and abroad. It is hoped that he shall prove to be a valuable asset to the company. Accordingly, a Board Meeting was held on 6th April, 2021 to appoint O15 as additional Director. As the total strength of Directors was well within the limit prescribed by the Articles, there was no need to alter the Articles. Multiple Choice Questions 1. After the appointment of O15 as additional Director on 06-04- 2021, another Board Meeting of SCL was held on 17-08-2021 through video conferencing2. From the given options, choose the correct one which indicates the quorum for the current Board Meeting. a) Nine Directors b) Five Directors c) Four Directors CA AMIT POPLI 30  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES d) Two Directors 2. For the purpose of meeting of the Audit Committee of SCL, how many members should be present at such meeting in order to constitute the quorum. a) All the seven members. b) Only five members of which minimum two should be independent members. c) Only three members of which minimum two should be independent members. d) Only two members of which minimum one should be independent member. 3. From the case scenario, it is observed that after the death of M13, her daughter N14 was appointed at a Board Meeting held on 09-01-2021 to fill the vacancy of woman Director. Is the appointment of N14 on 09-01-2021 justified? a) No. The appointment of N14 should have been made within three months from 25-09- 2020. 2 In view of the difficulties arising due to resurgence of COVID-19, General Circular No. 08/2021, dated 03- 05-2021 issued by MCA states that the requirement of holding meetings of the Board of the companies within the intervals provided in section 173 of the Companies Act, 2013 (120 days) stands extended by a period of 60 days for the first two quarters of Financial Year 2021-22. Accordingly, the gap between two consecutive meetings of the Board may extend to 180 days during the Quarter – April to June 2021 and Quarter – July to September, 2021, instead of 120 days. This amendment is given to make you understand the given situation in a realistic manner under practical scenario. b) No. The appointment of N14 should have been made within two months from 25-09-2020. c) No. The appointment of N14 should have been made within one month from 25-09-2020. d) Yes. The appointment of N14 made at the Board Meeting held on 09-01-2021 is justified. 4. In the above case scenario, L12 is the Managing Director of SCL. If it is assumed that there is no managing or Whole-Time Director, then in such a situation, how much remuneration the company can pay to all the Directors for the Financial Year 2020-21. a) 11% of the net profits available for the Financial Year 2020-21. b) 5% of the net profits available for the Financial Year 2020-21. c) 3% of the net profits available for the Financial Year 2020-21. d) 1% of the net profits available for the Financial Year 2020-21. 5. In this case scenario, the Audit Committee formed by SCL contains seven members. If there are only six members in the Audit Committee then out of such six members, minimum how many shall be the independent members? CA AMIT POPLI 31  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES a) Five b) Four c) Three d) Two Solution 1 B 2 C 3 D 4 C 5 B Case No- 10 Global Trade and Securities (India) Limited (GTSIL) is a listed company having been listed at BSE and NSE. It was incorporated around four and a half years back in June, 2017 and has its registered office at Connaught Place, New Delhi. The authorised and paid-up share capital of the company is ₹ 30.00 crore. GTSIL is duly registered with the Securities and Exchange Board of India (SEBI) for providing merchant banking services. The company offers a varied range of services including issue management, handling of buy- back of shares, debt and equity syndication, mergers and acquisitions, listing and delisting, etc. GTSIL is a well-established and reputed name among the regulatory authorities, Government Agencies, law firms, share-brokers, mutual funds, banks and other prominent organisations. The company is being managed by nine Directors out of which three are independent Directors. Of the other non-independent six Directors, two are non-executive. The four executive Directors i.e. Skand, Srishti, Rina and Rohan are energetic, young and dynamic professionals with vast experience in the field of merchant banking. In the current Financial Year 2021-22, a chance scrutiny of accounts revealed that during the last financial year, by oversight, Rohan, who heads the new issue division of the company, had drawn remuneration in excess of the limit provided by the relevant statutory provisions. The shareholding base of the company is quite wide and therefore, the number of small shareholders having stake in the company is substantial. It so happened that some of them wished to appoint Mukund, a seasoned finance professional, as small shareholders’ Director on the Board of the company. After due process, Mukund was appointed by the company as Director to represent small shareholders. CA AMIT POPLI 32  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES During the financial year 2020-21, the profits of the company rose by around 7.00 crore in comparison to the previous year and therefore, a rise in the dividend per share was expected to be approved in the AGM. Accordingly, a dividend of ₹ 6 per share was declared as against ₹ 4 per share in the preceding year and the same was approved at the AGM held on 24-09-2021 through video conferencing as permitted by MCA vide General Circular No. 20/2020, dated 05-05-2020 read along with General Circular No. 02/2021, dated 13-01-2021. It is a proven fact that PESTEL analysis3 (i.e. analysis of political, economic, social, technological, environmental and legal factors affecting organisations) has always been a critical aspect for the success of any organisation. Keeping this crucial fact in view, the Directors of the company desiring to improve political understanding, after following the due procedure of law in this respect, made one-time political contribution of certain amount in the current Financial Year to Janta Vikassheel Dal which is one of the prominent political parties of the country duly registered under Section 29A of the Representation of the People Act, 1951. Multiple Choice Questions 1. According to the case scenario, small shareholders got appointed Mukund as small shareholders’ Director on the Board of the company. Out of the following four options, choose the one which correctly indicates the minimum number of small shareholders who might have assembled together to get Mukund appointed as Director to represent them. a) The minimum number of small shareholders must have been not less than one thousand or one-tenth of the total number of such shareholders whichever is lower. b) The minimum number of small shareholders must have been not less than one thousand or one-tenth of the total number of such shareholders whichever is higher. c) The minimum number of small shareholders must have been not less than one thousand 3 It is a marketing tool gainfully used by the marketing department of an organisation and involves analysis and monitoring of various macro-environmental factors that impact the organisations. or one-fifth of the total number of such shareholders whichever is lower. d) The minimum number of small shareholders must have been not less than one thousand or one-fifth of the total number of such shareholders whichever is higher. 2. From the case scenario it is evident that the company made political contributions of certain amount to Janta Vikassheel Dal, a prominent political party of the country. As the company is in existence for less than five years, how much amount it might have contributed to the political party in question. a) Any amount as approved by the Directors. CA AMIT POPLI 33  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES b) Any amount within the limit of 5% of the average net profits of the last three years. c) Any amount within the limit of 7.5% of the average net profits of the last three years. d) Political contribution made by the company is invalid as it is yet to complete five years of its existence. 3. The above case scenario states that Mukund was appointed as small shareholders’ Director on the Board of the company. To be a director of the small shareholders, what is the nominal value of shares which such Director is required to own: a) Such Director is required to own shares of the nominal value of ₹ 20,000 in the company prior to his appointment as small shareholders’ Director. b) Such Director is required to own shares of the nominal value of at least ₹10,000 in the company prior to his appointment as small shareholders’ Director. c) Such Director is required to own shares of the nominal value of at least ₹ 5,000 prior to his appointment as small shareholders’ Director. d) Such Director is not required to own shares of any nominal value in the company prior to his appointment as small shareholders’ Director. 4. In this case scenario, the name of the company includes the word ‘India’. In case a company is desirous of including the words ‘British India’ in its name, which of the following options is applicable: a) For including ‘British India’ in its name, such company must be incorporated with minimum Authorised Capital of ₹ 50,00,000. b) For including ‘British India’ in its name, such company must be incorporated with minimum Authorised Capital of ₹ 75,00,000. c) For including ‘British India’ in its name, such company must be incorporated with minimum Authorised Capital of ₹ 100,00,000. d) None of the above. 5. The above case scenario reveals that Rohan, one of the Directors, had drawn remuneration in excess of the limit prescribed by the relevant provisions. As regards recovery of the excess remuneration drawn by him, which of the following options is applicable: a) The company shall not waive recovery of excess remuneration paid unless approved by a special resolution within one year from the date the sum becomes refundable. CA AMIT POPLI 34  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES b) The company shall not waive recovery of excess remuneration paid unless approved by a special resolution within two years from the date the sum becomes refundable. c) The company shall not waive recovery of excess remuneration paid unless approved by the Central Government. d) The company shall not waive recovery of excess remuneration paid unless approved by a special resolution within three years from the date the sum becomes refundable. Solution 1 A 2 A 3 D 4 D 5 B Case No- 11 Hibiscus Powergear Limited (HPL), an unlisted company, is “One Stop Shop” for all the custom- built electrical switchboards, battery chargers and bus ducts. It manufactures comprehensive range of products from small industrial distribution boards to the large state-of-the-art intelligent motor and power control centers. The Registered Office of the company is located in Belthangadi and two manufacturing plants are situated at Dabaspet Industrial Area near Bengaluru. HPL has been incurring huge losses for the last three years. There were accumulated losses to the extent of ₹ 19 Crores as on 31.03.2020. The Board of Directors had been evaluating all the possible options to bring the company back on the track. One of the options considered was Corporate Debt Restructuring (CDR) with the creditors, through Compromise. Following data was extracted from the latest Audited Financial Statements of HPL as on 31.03.2020: S. No. Particulars Amount (₹ in Crores) 1. Secured Creditors (a) 8%Debentures (Secured by creating 20.00 Charge on Freehold Property) (b) Accrued Interest on 8%Debentures 1.60 (c) Cash Credit (availed from National 15.00 Commercial Bank against hypothecation of stocks and book debts) 2. Unsecured Creditors CA AMIT POPLI 35  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES Loans from Directors @8% p.a. 30.00 Trade Payables 18.00 Other creditors 0.40 Total Outstanding Debt payable by HPL 85.00 After deliberations, a Scheme of Corporate Debt Restructuring was consented by 78% of the secured creditors and all other stake holders. Brief outlines of the Scheme are given below: (a) 8%Debenture-holders were to take over the Freehold Property at the current valuation of ₹ 12 Crores (book value ₹ 8 Crores) in part payment of their dues and to provide additional ₹10 Crores @9% p.a. secured by a floating charge on the assets of HPL. Interest accrued on Debentures was to be paid immediately. (b) National Commercial Bank agreed to reduce interest rate from 11% p.a. to 8% p.a. on Cash Credit till next one year. It also in- principle agreed to provide ₹ 3 Crores as non-fund-based limits for a period of two years. (c) Directors were to waive off all the outstanding interest payable to them upto 31.3.2020 and also had no objection if interest rate on their loans was reduced to 6% p.a. (d) Suppliers and other creditors consented to waiving off their debts to the extent of all the amounts outstanding for a period beyond 2 years as on 31.03.2020. In essence, HPL was required to pay only for the last 2 years to the suppliers and other creditors. (e) Patents and goodwill were to be written off to the extent of ₹ 0.50 Crores. Value of obsolete items in the inventory was quantified to ₹ 0.80 Crores and was to be written off. (f) Bad debts identified to the extent of ₹ 0.75 Crores were to be written off. (g) Remaining Freehold property worth ₹ 15 Crores was revalued at ₹ 23 crore. After the above exercise, an application for the Compromise was filed by HPL with the jurisdictional National Company Law Tribunal (in short ‘Tribunal’) and made the necessary disclosures by filing an Affidavit. The disclosures contained all the material facts in respect of HPL, a copy of the Scheme of Corporate Debt Structuring as consented to by the creditors, methodology on the basis of which creditors had been identified, creditors’ responsibility statement in the prescribed form, safeguards for the protection of other secured and unsecured creditors, Auditor’s Report, Valuation Report, etc. After hearing the Application, the Tribunal gave necessary directions in respect of conducting of the meeting of the creditors, fixed the date and place of the meeting, gave directions for the appointment of the Chairperson and scrutinizer, fixed the quorum, stated the procedure to be followed at the meeting including methodology of voting which could be either in person or by CA AMIT POPLI 36  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES proxy or by postal ballot or by voting through electronic means, the time within which the Chairperson was required to report the result of the meeting to the Tribunal, etc. To ensure transparency that may facilitate all the stakeholders to take proper decisions, extensive disclosures were made by HPL along with the Notice for the Meeting and then the company, as per the directions of the Tribunal, sent Notices to all the creditors and to all those who were entitled to receive it. Further, it was also sent to all the relevant Regulators seeking their representations. In addition, the Notice was advertised in English in Times of India and in the local Kannada Newspaper Udayavani in Kannada language. The company also published the Notice on its website. It is worth noting that United Belts Private Limited (UBPL), supplying some of the components to HPL, had raised objections to the proposed Scheme of Compromise after receiving the Notice. As on 31.03.2020, HPL was required to pay ₹ 0.80 Crores to UBPL for the supply of various components. The Meeting was duly convened and the majority representing 78% of the value of creditors agreed to the Scheme of Compromise. The Tribunal provided for the protection of minority creditors and by an Order sanctioned the Scheme of Compromise relating to Corporate Debt Structuring (CDR), after considering the Certificate issued by the Auditor of HPL. The order of the Tribunal was filed with the Registrar by HPL within the specified period of the receipt of the order. However, in the due course of time, HPL faced many practical hurdles in the implementation of the Scheme of Compromise sanctioned by the Tribunal. Multiple Choice Questions 1. The case scenario states that an Application for Compromise was filed by HPL with the jurisdictional National Company Law Tribunal (NCLT) along with all the necessary documents including Auditor’s Report. From the following options, choose the one which the auditor must include in the Auditor’s Report when the Application for Compromise relates to the Scheme of Corporate Debt Restructuring (CDR): a) That all the Fixed Assets of HPL have been properly revalued by the Registered Valuer for the purpose of Compromise and the Valuation Report being submitted to the Tribunal is true and correct; b) That the total value of creditors shown in the financial statements of HPL as on 31.03.2020 is true and correct and there are no material discrepancies. c) That the fund requirements of HPL after the corporate debt restructuring as approved shall conform to the liquidity test, based upon the estimates provided to the auditor by the Board of HPL. CA AMIT POPLI 37  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES d) That all the contents of the Application and other documents submitted to the Tribunal are true and correct to the best of his knowledge and belief and reflect a true and fair position of HPL as on the date of submission of Application to the Tribunal. 2. According to the case scenario, with a view to ensure transparency that might facilitate all the stakeholders to take proper decisions, extensive disclosures were made by HPL along with the Notice for the Meeting and the notices were sent to all the creditors and all those who were entitled to receive it. As regards the adoption of the Compromise, the Notice needs to provide that the persons to whom the notice is sent may vote in the meeting either themselves or through proxies or by postal ballot: a) Within 21 days from the date of receipt of such Notice. b) Within one month from the date of receipt of such Notice. c) Within 14 days from the date of receipt of such Notice. d) Within 7 days from the date of receipt of such Notice. 3. It is stated in the case scenario that United Belts Private Limited (UBPL), supplying some of the components to HPL, had raised objections to the proposed Scheme of Compromise. For raising any objection to the Scheme of Compromise, the value of UBPL as trade creditor in the books of HPL must be: a) Not less than 5% of the total outstanding debt as per the audited financial statements as on 31.03.2020 of HPL. b) Not less than 10% of the total outstanding debt as per the audited financial statements as on 31.03.2020 of HPL. c) Not less than ₹ 1 Crore as per the audited financial statements as on 31.03.2020 of HPL. d) Not less than 25% of the total outstanding debt as per the audited financial statements as on 31.03.2020 of HPL. 4. The Notice was also sent to all the relevant Regulators seeking their representations which was to be made within the specified period from the date of receipt of such notice. From the following options, choose the one which specifies the correct time period for making representations: a) Representation needs to be made within 10 days from the date of receipt of notice. b) Representation needs to be made within 15 days from the date of receipt of notice. c) Representation needs to be made within 30 days from the date of receipt of notice. d) Representation needs to be made within 45 days from the date of receipt of notice. CA AMIT POPLI 38  CA-FINAL-SELF PACED EXAM & IBS EXAMS BASED CASE STUDIES 5. According to the case scenario, the Tribunal while providing for the protection of minority creditors, sanctioned by an order the Scheme of Compromise relating to Corporate Debt Structuring (CDR), after considering the Certificate issued by the Auditor of HPL. The Auditor’s Certificate at the Sanctioning stage shall be to the effect that: a) HPL has duly followed all the procedure required for the Compromise as required under the Companies Act 2013 and the relevant Rules thereunder. b) All the documents submitted by HPL to the Tribunal for the purpose of Compromise are true and correct and the Auditors have duly verified them. c) The accounting treatment, if any, proposed in the Scheme of Compromise by HPL is in conformity with the prescribed accounting standards. d) The Auditors have r