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ADL 12 Business Law V5
Assignment – A
Q1: What is business environment? What are the benefits & limitations of
Q2: Define contract. Explain any four element of a contract.
Q3: What are the rights of a finder of a good under the Indian contract Act?
Q4: For every valid agreement there should be a consideration. Comment
Q5: Explain the rights of an unpaid seller under Indian sales of goods Act.
Assignment – B
Q1: What is a negotiable instrument, explain its characteristics.
Q2: Explain various types of companies.
Q6: What relief is/are available to the consumer under Consumer Protection Act.
A dealer in radios gives a ‘Murphy’ radio to a customer on the terms that Rs.
100 should be paid by him immediately and Rs 200 more in two monthly equal
installments. It was further agreed that if the radio is found defective the
customer may return it within a week but not later. The customer makes default
in paying the last installment. Can the radio dealer take back the radio on his
X sees a book displayed in a shelf of a book shop with a price tag of Rs. 85. X
tenders Rs. 85 on the counter and asks for the book. The bookseller refuses to
sell saying that the book has already been sold to someone else and he does not
have another copy of that book in the stock.Is the bookseller bound to sell the
Assignment – C
Q1. Any person is a holder in due course if he has obtained the negotiable
a) For consideration
b) By gift
c) Before its maturity
d) Both (a) & (c) above
Q2 Michael Porte’s Five Forces Model includes:
a) Threat of Substitutes
b) Bargain Power of supplier
c) Bargain Power of Government
Q3 I had applied for subscription in Rajlakshmi scheme of UTI. The essence of
the scheme was that the sum of money deposited with the UTI would grow 21 times
in 28 years. However subsequently, the UTI extended the maturity date by two
years. Can I approach a Consumer Court?
a) Yes you can seek relief in a consumer court
b) No you can’t seek relief in a consumer court
Q4 Can Consumer Forums adjudicate disputes involving scale of pay?
a) Yes, Consumer Forums do adjudicate dispute-involving scale of pay
b) No, Consumer Forums do adjudicate dispute-involving scale of pay
Q5 In which of the following instances, the collecting banker shall not be
liable for conversion to the true owner under the Negotiable Instruments Act,
a) The collecting bank advances money to the customer against the cheque even
before the cheque is realized
b) The uncrossed cheque given to the collecting bank for collection is crossed
by the banker
c) The payment is received by the collecting bank on behalf of a person who is
not a customer of the bank
d) The collecting bank is a holder for value
e) The collecting bank is acting as an agent for receiving the payment.
Q6 Which of the following amounts to reduction of share capital under section
100 of the Companies Act, 1956?
a) Redemption of redeemable preference shares under the provisions of Section 80
and 81 of the Companies Act, 1956
b) Forfeiture of shares for non-payment of calls
c) Payment of dividend out of share premium
d) Surrender of shares to a company
e) Reduction of nominal share capital of a company by canceling any shares which
have not been taken by any person.
Q7 Which of the following statements is false in respect of offer and it’s
acceptance under the Indian Contract Act, 1872?
a) An offer will be valid only if it is communicated to the offeree
b) A person who acts according to the terms of an offer which has not been
communicated to him will not be deemed to have accepted the offer
c) The communication of the offer must be made with an intention to obtain the
assent of the offeree
d) A mere intent of acceptance will not suffice, the acceptance must be
communicated to the offeror
e) The mode of rejection of an offer must be specified in order to constitute a
Q8 Mr. Dheeraj is a director of Laxmi Ltd., which failed to file its annual
returns from the year 2003-04. The maximum period for which Mr. Dheeraj will be
disqualified from becoming a director in any public limited company is
a) 3 years
b) 5 years
c) 7 years
d) 8 years
e) 10 years.
Q9 Which of the following statements is false in respect of a contract of
guarantee under the Indian Contract Act, 1872?
a) Guarantee given for a time barred debt is valid
b) A guarantee may be given retrospectively for an existing debt
c) A contract of guarantee presupposes the existence of a debt, therefore, if
there is no existing liability, there cannot be a guarantee
d) There are always three parties in a contract of guarantee
e) Where the principal debtor’s liability becomes unenforceable because of
illegality, the surety cannot be made liable on the said debt.
Q10 Which of the following statements is false in respect of a contract of sale
under the Sale of Goods Act, 1930?
a) Title to goods is immediately transferred to the buyer
b) A contract of sale is an executed contract
c) In case of default by the seller, the buyer may rescind the contract
d) In a sale, a breach of condition can only be treated as a breach of warranty
e) In a contract of sale the goods are specified and ascertained.
Q11 The articles of association of Rathi Informatics Ltd. provided for a maximum
of 18 directors on the Board. Presently there are 12 directors on the Board of
the company. The company wishes to increase the strength of its Board to 15.
Which of the following statements is correct in respect of these circumstances
under the Companies Act, 1956?
a) As the proposed increase is within the maximum permissible number fixed by
the articles only an ordinary resolution is required
b) As the proposed increase is beyond 12, a special resolution is required
c) As the proposed increase is within the maximum permissible number fixed by
the articles only an ordinary resolution as well as approval of the Central
Government is required
d) As the proposed increase is beyond 12, a special resolution as well as
approval of the Central Government is required
e) As the proposed increase is beyond 12, a special resolution as well as
approval of the National Company Law Tribunal (NCLT) is required.
Q12 Which of the following statements is false in respect of dividend on
a) Where there are two or more types of preference shares, the shareholders of
the class which has priority are entitled to their preferential dividend before
any dividend is paid to other shareholders
b) Cumulative preference shareholders are entitled to receive all dividends
which are in arrears before any dividend is paid on equity shares
c) Where cumulative preference shares have been issued at different times, the
arrears of dividend will have to be paid to all the preference shareholders
d) In case of non-cumulative preference shares, only the amount of dividend
which is due in the current year will have to be paid to the holders
e) The preference shareholder cannot sue the company for dividends, unless the
company has declared the same and did not pay the amount.
Q13 Which of the following statements is false in respect of consideration under
the Indian Contract Act, 1872?
a) Consideration given at the behest of third parties will not be valid
b) Inadequacy of consideration invalidates a contract
c) Consideration must be real and not illusory
d) Performance of an existing legal duty will not constitute valid consideration
e) Forbearance or abstinence amounts to valid consideration.
Q14 Which of the following statements in respect of bailment is false under the
Indian Contract Act, 1872?
a) The bailor is bound to disclose, all the faults in the goods bailed to the
bailee, of which the bailor is aware
b) The bailee will have to bear all the ordinary expenses incurred by vitue of
c) The bailor is responsible to the bailee for any loss sustained by him in case
the bailor is not entitled to make the bailment or to receive back the goods
d) The bailor is not responsible to the bailee for any loss sustained by him in
case of premature termination of a gratuitous bailment
e) It is the duty of the bailor to receive back the goods after the purpose is
Q15 Which of the following statements is false in respect of dividend under the
Companies Act, 1956?
a) Dividend is to be paid only in cash
b) Before payment of interim dividend a company must transfer to reserves the
prescribed percentage of estimated profits arrived at after providing for
current year’s depreciation and arrears of depreciation/loss
c) A final dividend for any financial year can be declared and paid only when
the balance sheet and profit and loss account are presented to the shareholders
at the AGM
d) The shareholders can approve the recommended rate of dividend or lower the
same, but cannot increase the amount of dividend
e) A dividend once declared cannot be revoked even with the consent of all the
Q16 Which of the following powers may be exercised by the board of directors
without obtaining consent of the company at a general meeting?
a) Power to contribute to the welfare of its employees any amount less than Rs.
b) Power to borrow in excess of capital and reserves of the company
c) Power to remit debt due by a director
d) Power to invest compensation amounts received on compulsory acquisition of
any of the company’s properties
e) Power to appoint sole selling agents.
Q17 Which of the following agreements is not valid under the Contract Act, 1872?
a) An agreement for training a minor in a particular trade
b) An agreement between a minor agent and his major principal
c) An agreement made by the certified guardian of a minor with authority for
benefit of minor
d) An agreement made by a minor agent on behalf of his principal
e) An agreement by a minor to repay a loan taken for supply of necessaries to
him during his minority.
Q18 As per section 166 of the Companies Act, 1956, the first annual general
meeting of a company should be held within
a) 6 months of its incorporation
b) 12 months of its incorporation
c) 15 months of its incorporation
d) 18 months of its incorporation
e) 24 months of its incorporation.
Q19 Which of the following is not excluded for the purpose of counting maximum
number of directorships under section 275 of the Companies Act, 1956?
a) Directorship in a private company
b) Directorship in a private company which is the holding company of a public
c) Directorship in a unlimited company
d) Directorship as an alternate director
e) Directorship in an association not carrying on business for profit.
Q20 Which of the following is not a foreign bill under the Negotiable
Instruments Act, 1881?
a) A bill drawn in Singapore upon a resident of India, payable in Kuala Lumpur
b) A bill drawn in Kuala Lumpur upon a resident of Singapore, payable in India
c) A bill drawn in India upon a resident of Kuala Lumpur, payable in Singapore
d) A bill drawn in India upon a resident of India, payable in Kuala Lumpur
e) A bill drawn in Singapore upon a resident of Singapore, payable in Kuala
Q21 A prospectus once registered with the Registrar Of Companies (ROC) should be
a) 14 days from the date of registration with ROC
b) 21 days from the date of registration with ROC
c) 30 days from the date of registration with ROC
d) 60 days from the date of registration with ROC
e) 90 days from the date of registration with ROC.
Q22 Which of the following statements is false in respect of a pawnee under the
Indian Contract Act, 1872?
a) When the pawnor defaults in payment of the principal debt, the pawnee can
retain the pledged goods as collateral security
b) When the pawnor fails to perform his part of the promise, the pawnee may sell
the pledged goods after giving the pawnor a reasonable notice of sale
c) When the pawnor defaults in payment of the principal debt the pawnee cannot
recover from the pawnor any deficit between the debt due and sale price
d) When the pawnor defaults in payment of the principal debt, the pawnee can
file a suit for breach of contract against the pawnor
e) The pawnee can sue the pawnor for any extraordinary expenses incurred by him
for the preservation of the goods pledged.
Q23 Mr. Pankaj who was appointed as an additional director at the Board meeting
held on December 31, 2005 continues to be in his office on the ground that the
annual general meeting of the company for the year 2006 was not held as required
under the Act. Mr. Pankaj was also appointed as a managing director for a period
of five years with effect from January 01, 2006 at the same Board meeting. Which
of the following statements is true in respect of an additional director under
the Companies Act, 1956?
a) Mr. Pankaj shall hold the office as an additional director till the
completion of five years
b) Mr. Pankaj shall hold the office as an additional director upto the
conclusion of any general meeting
c) Mr. Pankaj shall hold the office as an additional director as long as he
d) Mr. Pankaj shall vacate the office of the managing director
e) Mr. Pankaj shall hold the office of the managing director till the completion
of five years.
Q24 Which of the following statements is false under the Companies Act, 1956?
a) A director must be a member of the company
b) Minimum seven persons are required for incorporation of a public company
c) Proxy has no right to speak in the general meeting
d) Company having profits need not declare dividends
e) A private company cannot issue prospectus.
Q25 Which of the following statements is false in respect of rights of a bailee
under the Indian Contract Act, 1872?
a) Where the bailee has rendered any service or exercised his skill in respect
of the goods bailed, then he can retain the bailed goods until his dues are paid
b) If the bailee has agreed to refrain from exercising the right of lien or has
waived his right, then he cannot exercise the same
c) The right of particular lien will be revived, if the bailee gets possession
of the bailed goods after parting with the same in the first place
d) The right of lien can be exercised so long as the bailee has the possession
of the goods
e) The bailee may retain not only those goods of the bailor in respect of which
some particular service has been rendered, but also other goods in the
possession of the bailee belonging to the bailor.
Q26 Section 165 of the Companies Act, 1956, in respect of conduct of statutory
meeting is applicable to
a) A private company converted into a Public Company within 6 months of its
b) A private company, which is a subsidiary of a public company
c) A public company having liability of it’s members unlimited
d) An independent private company
e) A government company registered as a private company.
Q27 Hiten Desai picked up a diamond ring from the floor of Divya Jewellers,
Surat and handed it over to Premchand Bhatia, the manager of Divya Jewellers,
with a request to hand it over to the true owner. The true owner could not be
traced in spite of best efforts of Premchand. Hiten Desai paid the expenses
incurred by Premchand and asked him to return the diamond ring to him. Which of
the following statements is true under the Indian Contract Act, 1872?
a) Premchand is under no obligation to return the ring to Hiten Desai as the
ring was found on the floor of his shop
b) Premchand is under an obligation to return the diamond ring only to the true
c) Premchand and Hiten Desai can share the value of the diamond ring equally
d) Hiten Desai being the finder of lost goods can retain the diamond ring
against everyone except the true owner
e) Premchand can retain the diamond ring against everyone including the true
Q28 Under the Companies Act, 1956, up to what date a director appointed to fill
casual vacancy shall hold office?
a) The last day on which the annual general meeting should have been held
b) Until the original director, in whose place he is appointed, returns back
c) Till the date up to which the director in whose place he is appointed would
have held office
d) Up to the next extraordinary general meeting
e) Up to the conclusion of the annual general meeting.
Q29 At a public auction a car was put up for sale and as Mr. Ramlal was the
highest bidder, he got the car. Later, it was discovered that the car was a
stolen one. This fact was also not known to the auctioneer. The true owner
wishes to obtain possession of the car. Under these circumstances which of the
following statements is true under the Sale of Goods Act, 1930?
a) Mr. Ramlal did not get any title against the true owner
b) The true owner cannot recover any possession as Mr. Ramlal had bought at a
c) As Mr. Ramlal had purchased the car in good faith, Mr. Ramlal can enjoy
possession of the car
d) The true owner can file a suit against the auctioneer for fraudulently
selling a stolen car
e) The auctioneer is personally liable to the true owner for damages only and
the true owner has no right to obtain possession of the car.
Q30 Which of the following statements is false under the Companies Act, 1956?
a) The Board of directors should authenticate the accounts before submission to
b) The Profit and Loss account should reveal the details of auditor’s
c) The provision of depreciation is necessary to show true and fair picture of
the accounts d) Company with a paid up capital of Rs.2 crores is required to
form an ‘audit committee’
e) The first auditor usually holds office till the conclusion of the first
annual general meeting.
Q31 Which of the following instances is not treated as ‘crossing’ under the
Negotiable Instruments Act, 1881?
a) A cheque bearing across its face the words ‘account payee’ without two
transverse parallel lines
b) A cheque bearing across its face the words ‘not negotiable’ with two
transverse parallel lines
c) A cheque bearing across its face the words ‘not exceeding rupees two hundred’
within two transverse parallel lines
d) A cheque bearing across its face the words ‘HDFC Bank, Karol Bagh Branch, New
Delhi’ within two transverse parallel lines
e) A cheque bearing across its face the words ‘Citi Bank, Daryaganj Branch, New
Delhi’ without two transverse parallel lines.
Q32 Which of the following persons is incompetent to enter into a valid contract
under the Indian Contract Act, 1872?
a) The official assignee of an adjudged insolvent
b) A person of the age of twenty years for whose estate a guardian has been
appointed by the Court
c) A person who is a foreign diplomat
d) A convict after the expiry of his sentence
e) An Indian, voluntarily residing in a foreign country.
Q33 Which of the following statements is false in respect of qualification
shares to be held by a director of a company under the Companies Act, 1956?
a) A director will have to take up qualification shares only if required by the
articles of association
b) The nominal value of the qualification shares shall not exceed Rs. 5,000 or
the nominal value of one share where it exceeds Rs.5,000
c) The qualification shares required to be taken up by a director must be
purchased from the company
d) Share warrants will not count for the purpose of share qualification
e) Any provision in the articles requiring a person to obtain qualification
shares before his appointment as director or within a period shorter than two
months of his appointment shall be void.
Q34 Mr. Ankit, a creditor of Silktech Ltd. issued a demand notice by registered
post at the company’s registered office to payback his loan amount worth Rs.
1,50,000 (along with interest). But the company neglected to reply/ respond for
a period of two months. Which of the following statements is true in respect of
consequences of failure of Silktech Ltd. to reply under the provisions of the
Companies Act, 1956?
a) Mr. Ankit has no remedy for the negligent conduct of the company
b) Mr. Ankit can sell the assets of the company and take his money
c) Mr. Ankit has to file a complaint to the Central Government
d) Mr. Ankit can approach the National Company Law Tribunal (NCLT) for winding
up of the company
e) Mr. Ankit has to conduct the general meeting and pass resolutions for
changing the directors.
Q35 Which of the following casual vacancies of directors cannot be filled by
Board of directors under the Companies Act, 1956?
a) A vacancy caused by the death of a director
b) A vacancy caused by the resignation of a director
c) A vacancy caused by the resignation of nominee director of a financial
d) A vacancy caused due to disqualification of a director
e) A vacancy caused due to failure of an elected director to assume office.
Q36 Which of the following agreements is voidable under the Indian Contract Act,
a) Agreements by way of wager
b) Agreements contingent on impossible events
c) Agreements made under a mutual mistake of fact
d) Agreement induced by fraud
e) Agreements by incompetent parties.
Q37 Which of the following statements is true under the Negotiable Instruments
a) Every holder is a holder in due course
b) Every holder in due course is a holder for value
c) Every holder for value is a holder in due course
d) A holder in due course need not have taken the instrument in good faith
e) Holder in due course may be party to the fraud.
Q38 Which of the following is an illegal agreement under the Indian Contract
a) Agreement by way of wager
b) Agreeing to sell a house for paying money lost in gambling
c) Hire of a truck knowingly for bringing goods which are prohibited
d) Agreement not to enforce promise through legal means (e)Agreements in
restraint of trade.
Q39 Under the Negotiable Instruments Act, 1881, when a negotiable instrument is
delivered conditionally or for a special purpose as a collateral security or for
safe custody only, and not for the purpose of transferring absolutely property
therein, it is called an
a) Inchoate instrument
c) Accommodation bill
d) Trade bill
e) Ambiguous instrument.
Q40 Which of the following matters requires passing of special resolution and
also the approval of the Central Government under the Companies Act, 1956?
a) Increase in the paid up capital
b) Rectification of name of the company under section 22 of the Companies Act,
c) Payment of interest out of capital
d) Sub-division of shares
e) Appointment of company secretary.
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