Company Law Practice Questions for CLAT PG 2020

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Company Law Practice Questions for CLAT PG 2020Passage​​ (Excerpted from the judgment​​ of​​ Shanti Prasad Jain v. Kalinga Tubes Ltd.)The main plank of the appellant‘s case to prove oppression is the agreement of July 27, 1954 between himself and Patnaik and Loganathan. At that time he was not a member of the Company. It is not disputed that the Company was to a party to that agreement and is thus strictly speaking not bound by its terms. But even apart from this strict legal aspect of the matter, let us see what exactly the agreement provides. At that time Patnaik and Loganathan groups held shares of the value of Rs. 21 lacs in the Company, and the main provision of the agreement is that the share capital would be increased and the appellant would be given shares of the face value of Rs. 10,50,000 so that his holding should be equal to the holdings of the other two groups. It also provides that the three groups would have an equal number of representatives on the Board of Directors and the appellant would be its Chairman. Other provision of the agreement refer to matters of detail to which it is unnecessary to refer. It will be seen, however, that there is no provision in the agreement as to what would happen if and when the share capital was actually increased beyond the increase envisaged at the time of the agreement. There is also no provision in the agreement to the effect that the Articles of Association of the private company as it then was would be amended suitably to bring the provisions of the agreement with respect to shareholding and the Board of Directors, into line with the agreement. Thus there is nothing in the agreement about the future in the matter of allotment of shares in case capital was actually increased thereafter. In this connection our attention is drawn to the fifth term of the agreement which is in these terms:- ―Ordinary shares of the face value of Rs. 4 lacs held by the French Company (Rs. 3,75,000) held by them as heretofore, and none of the parties hereto will have any interest therin so that the shareholding in the Company of all the three parties hereto will remain equal and in the same proportion‖. It is argued that the intention was that the shareholding of the three groups would remain equal for ever. We are not prepared to read this implication in this term. It was easy to provide in the agreement that whenever capital was actually increased, it would be divided​​ equally between the three parties thereto. It the absence of such a provision we do not think that the fifth term is capable of the interpretation which is put on it on behalf of the appellant. It only deals with the shares worth Rs. 1 lacs held by the other two persons and provides that besides those shareholdings capital shares would be held equally by the three parties. Therefore, as we read the agreement we cannot come to the conclusion that if provides that if in future there was an actual increase in capital that will necessarily be share equally by the three parties. 21. However, it is said that the conduct of the three parties later on shows that when there was actual increase of capital to Rs. 61 lacs sometime after July 1954, this increase was shared equally by the three parties and further when Mr. Rath sold his holdings in the Company they were purchased equally by the three parties so much so that one odd share out of 250 shares was held by the three parties jointly. This is undoubtedly so, and does give some colour to the argument that the three parties concerned in the agreement intended that their shareholdings should remain equal even later. But this intention cannot be said to bind the Company, much less so when the Company was not bound strictly speaking even by the express terms of the agreement. So far as the Company is concerned, it was free to dispose of shares as the directors or the shareholders in general meeting considered proper without regard to this agreement their shareholdings should remain equal even later. But this intention cannot be said to bind the Company, much less so when the Company was not bound strictly speaking even by the express terms of the agreement. So far as the Company is concerned, it was free to dispose of shares as the directors or the shareholders in general meeting considered proper without regard to this agreement.QuestionsWhich of the following grounds of lifting corporate veil has been recognised by the judicial interpretation?​​ Enemy character of the companyTax evasionFraud​​ All the aboveAns. dThe doctrine of indoor management is invokedTo protect the outsiders against the companyTo protect the insiders against the companyTo protect the company itselfTo protect the promoters of the companyAns. aThe doctrine of constructive notice is applicable toAOAMOABoth a and bNone of the aboveAns. cUltra vires of the company meansAn action outside the prospectusAn action outside the MOAAn action outside the AOAAn action outside the purview of promotersAns. bThe doctrine of ultra vires was first demonstrated the case ofAttorney general v. great eastern railway co.Ashbury railway carriage and iron co v. richeSalmon v. salmonLondon country council v. attorney generalAns. bThe case Dovey v. Cory is related toLiability of the director for co directors defaultsLiability of the director for default of employeesLiability of the director for the mistake committed by outsidersLiability of the director for his own mistakesAns. aWhich of the following documents contain the object of the company?MOAAOAProspectus​​ Share
Ans. aSection 2(62) of the Companies Act talks about-One man companyForeign companyFinancial yearNone of the aboveAns. dWhat is the maximum number of members in case of private companies?10020050250Ans. bOne person company may be founded byArtificial or natural personNatural person onlyNatural person who is a citizen of IndiaAny of the aboveAns. c (function( $ ) { //footnotes $('.defaultNote').children(":first").css('cursor', 'pointer'); $('.defaultNote').children(":first").click(function(){ var gotoID = '#' + $(this).parent().attr('id'); $('html, body').animate( { scrollTop: $('a[href="' + gotoID + '"]').offset().top - 60, }, 250, 'linear' ) }); }(jQuery)); var numFormat = ",."; (function( $ ) { "use strict"; //do some cleaning on load var sortCells = $('td[data-sorting], th[data-sorting]'); sortCells.each(function(){ var first = $(this).text().trim().charAt(0); if (first == '@'){ var oldHTML = $(this).html(); var newHTML = oldHTML.replace('@', ''); $(this).html(newHTML); } }); function sortingTable(node, pos, ordBy){ var rows = node.children('tbody').children('tr').get(); rows.sort(function(a, b) { var X = $(a).children('td').eq(pos).text().toUpperCase(); var Y = $(b).children('td').eq(pos).text().toUpperCase(); if (numFormat != '.,'){ //we are dealing with a different locale and we need to do some //transformation in numbers X = convert2number(X); Y = convert2number(Y); } else { X = X.replace(/,/g, '').replace(/ /g, ''); Y = Y.replace(/,/g, '').replace(/ /g, ''); } var currencies = ['$', '¥', '£', '€']; var arrayLength = currencies.length; var XX = X; var YY = Y; for (var i = 0; i < arrayLength; i++) { XX = XX.replace(currencies[i], ''); YY = YY.replace(currencies[i], ''); } if (!isNaN(XX) && !isNaN(YY)){ var floatXX = parseFloat(XX); var floatYY = parseFloat(YY); return -(floatYY-floatXX) * ordBy; } else if (!isNaN(XX) && isNaN(YY)){ return -1 * ordBy; } else if (isNaN(XX) && !isNaN(YY)){ return ordBy; } else { if(X < Y) { return -1 * ordBy; } if(X > Y) { return 1 * ordBy; } return 0; } }); $.each(rows, function(index, row) { node.children('tbody').append(row); }); } function removeTableCellDecoration() { $("td[data-sorting], th[data-sorting]").removeClass('sortDecorator'); } //unbind the click event just in case we are loading more than one document $("td[data-sorting], th[data-sorting]").off('click'); $("td[data-sorting], th[data-sorting]").click(function(){ removeTableCellDecoration(); $(this).addClass('sortDecorator'); //get desired ordering var ordering = $(this).attr('data-sortOrdering'); if (ordering == 'ASC'){ var ordBy = -1; $(this).attr('data-sortOrdering', 'DESC'); } else { var ordBy = 1; $(this).attr('data-sortOrdering', 'ASC'); } var cellPosition = $(this).prevAll().length; var table = $(this).parents('table:first'); sortingTable(table, cellPosition, ordBy); }); function convert2number(str) { str = str.trim(); if (str.match(/^\d+/)) { //we have to take special care when the thousand separators are '.' var result_0 = str.replace(/\./g, '_@_'); var result_1 = result_0.replace(window.numFormat[0], '.'); var result = result_1.replace(/_@_/g, ''); result .replace(/ /g, ''); return result; } else { return str; } } }(jQuery));