Important Topics For CS Final Examination June, 2014 (With Answers)

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COMPANY SECRETARIAL PRACTICE

1. Explain the procedure for incorporation of a public limited company.

The minimum paid-up share capital at the time of incorporation of a private company has to be Rs. 5,00,000.
There is no upper limit on having the authorized share capital and the paid-up share capital.
Ensure that the minimum number of members are seven.
Ensure that the minimum number of directors are three.
Apply for Director Identification Number (DIN) of all the directors and Digital Signatures of the signatories for
electronic signature on all the e-forms.
Select, in order of preference, a few suitable names, maximum 6, indicative of the main objects of the company.
Ensure that the name does not resemble the name of any other company already registered and also does not
violate the provisions of Emblems and Names (Prevention of Improper Use) Act, 1950.
Apply to the Registrar of Companies (ROC) in e-Form-1A to ascertain which of the names selected are available
along with the prescribed fees of Rs. 500/-.
The ROC will ordinarily inform within 3 days from submission of application on the availability of name.
Arrange for the drafting of the Memorandum and Articles of Association of the company.
Get the Memorandum and Articles signed by at least two subscribers filling in the relevant details like their
fathers name, occupation, address and the number of shares subscribed for. The Memorandum and Articles shall
also be witnessed by at least one person.
Arrange for stamping of the Memorandum and Articles with the appropriate stamp duty .
Submit the following e-forms duly filled up and signed with the necessary attachments and fees:
- Application and declaration of incorporation of the company Form-1
- Notice of situation of registered office of the company Form-18
- Particulars of Director, Manager or Secretary Form-32
Pay the prescribed Registration and filing fees depending on the authorised share capital of the proposed
company.
The ROC will then register the company and issue the Certificate of Incorporation on which there will be a 21
digit Corporate Identity Number (CIN).
The date of incorporation of the company shall be the date printed on the Certificate of Incorporation issued by
the ROC.
A public company can only commence business under the Companies Act, 1956 after obtaining a certificate of
commencement of business from the ROC.
2. Short note on Section 25 companies, producer companies and govt. companies.

Section 25 companies
An association which is formed not for earning profits but for promoting commerce, art, science, religion,
charity or any other useful social purpose
Such associations when registered as company with limited liability, need a licence by the Central Government
(power delegated to RoC)
The RoC may grant a licence subject to the following:
1. that the company to be formed as a limited company, is for the promotion of commerce, art, science, religion,
charity or any other useful social purpose
2. that such a company shall apply its profits or other income in promoting its objects
3. it prohibits payment of dividend to its members
Section 13 of the Act makes it mandatory for companies to have the words Limited or Private Limited at the end
of their names; Section 25 companies are however exempted from this requirement
Another major feature of such companies is that a firm may be a member of such companies.

Producer companies
Section 581A defines Producer Company as a body corporate having its objects or activities specified in
Section 581B of the Act.
The membership of producer companies is open to such people who themselves are primary producers which is an
activity by which some agricultural produce is produced by such primary producers.
The activities specified in Section 581B, inter alia, include activities of harvesting, drying, preserving, brewing,
generation & transmission of power etc.
Any 10 or more individuals, each of them being a producer, any 2 or more producer institutions, i.e. producer
companies or any other institution having only producers or producer companies as its members or a combination of
10 or more individuals and producer institutions, can get a producer company incorporated under the Act.

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Government companies
Section 617 defines a Government company as a company in which not less than 51% of the paid-up share
capital is held by the Central Government or State Government.
However a government company is neither a government department nor a government establishment Hindustan
Steel Works Construction Co. Limited vs. State of Kerala.
The employees of a Government company are not government servants and they have no legal right to claim that
their salary should be paid by the Government A K Bindal vs. Union of India.
Section 620 of the Act empowers the Central Government to grant exemptions to government companies from the
applicability of the provisions of the Act.
3. What are the various clauses of Memorandum of Association?

(a) Name Clause - A company being a distinct entity must have a name of its own to establish its separate entity. Last
words of the name of the company shall be limited or private limited as the case may be. The name should not
be undesirable in the opinion of the Government. It should not be prohibited under The Emblems and Names
(Prevention of Improper Use) Act, 1950. Also the name should not be identical with or too resemble the name with
which another company is registered or a registered trademark - Section 20 of the Act.
(b) Registered office Clause - Every company must have a registered office to which all communications and notices
will be addressed. This Clause states the name of the State in which the registered office of the company is situated
the exact address need not be stated.
(c) Objects Clause - This clause defines the sphere of the companys activities and the specific objectives for the
formation of the company. All companies registered after 1965 must divide its objects into Main Objects and Other
Objects (ancillary or incidental to the attainment of the main objects). Anything done beyond the objects is ultra
vires and void and cannot be ratified even by assent of the whole body of shareholders.
(d) Capital Clause - This states the amount of capital with which the company is to be registered. It also states the
number and value of shares into which the capital of the company is divided.
(e) Liability Clause - This clause states the liability of the members of the company. In case of a company limited by
shares or by guarantee this clause shall state that the liability of the members is limited.
(f) Association Clause - In this clause the subscribers declare that they desire to be formed into a company & agree to
take the shares stated against their names. The names, addresses and occupations of the subscribers must be given.
Each subscriber must sign in the presence of atleast one witness who shall attest his signature.
4. Explain the steps for change of name of a company.

Hold a Board meeting to propose 6 names in order of preference.
Make an application to RoC in e-form 1A for checking availability of name alongwith a letter explaining the
reason and justification of change.
RoC shall intimate availability of name within 3 days of receipt of application.
On receipt of approval hold another Board meeting for calling a general meeting.
Hold a general meeting and pass
1. Special resolution for change of name
2. Special resolution for alteration of MOA.
File e-form 23 with copies of various special resolutions within 30 days of passing the resolutions.
Make an application to CG in e-form 1B.
Issue of fresh Certificate of Incorporation from RoC.
Inform various authorities.
Arrange for a new common seal.
Correct all the records of the company.
5. Explain the procedure for shifting of registered office within one State from one RoC to another.

Hold a Board meeting to pass a board resolution for shifting of registered office and for calling a general meeting.
Hold the general meeting and pass a Special resolution for shifting of registered office.
In case the company is listed, the aforesaid special resolution shall be passed through postal ballot.
File a copy of the special resolution passed with the RoC in e-form 23 within 30 days of passing the resolution.
Make an application to the Regional Director in Form 1AD alongwith a copy of the special resolution and a
copy of newspaper advertisement.
The Regional Director shall pass an order in writing confirming the change within 4 weeks from the date of receipt
of application.
The company shall file a copy of the order received from the Regional Director with the RoC in Form 21.
The RoC shall thereafter issue a certificate of registration confirming the aforesaid shifting within 1 month from the
date of filing Form 21.
Such certificate shall be conclusive evidence that the company has complied with all the statutory provisions.

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6. What are the eligibility norms for making IPO / FPO under the SEBI ICDR Regulations?
Eligibility Norms for IPOs
(a) The company has net tangible assets of atleast Rs. 3 crores in each of the preceding 3 full years (of 12 months
each), of which not more than 50% is held in monetary assets. If more than 50% of the net tangible assets are held
in monetary assets, the company should make firm commitments to deploy such excess monetary assets in its
business/project.
(b) The company has a minimum average pre-tax operating profit of Rs. 15 crores, calculated on a restated and
consolidated basis, during the 3 most profitable years out of the immediately preceding 5years.
(c) The company has a net worth of at least Rs. 1 crore in each of the preceding 3 full years (of 12 months each)
(d) In case the company has changed its name within the last one year, atleast 50% of the revenue for the preceding 1
full year is earned by the company from the activity suggested by the new name
(e) The aggregate of the proposed issue and all previous issues made in the same financial year in terms of size does
not exceed 5 times its pre-issue net worth as per the audited balance sheet of the last financial year.

Eligibility Norms for FPOs
The aggregate of the proposed issue and all previous issues made in the same financial year in terms of size does not
exceed 5 times its pre-issue networth as per the audited balance sheet of the last financial year.
In case the company has changed its name within the last one year, atleast 50% of the revenue for the preceding 1
full year is earned by the company from the activity suggested by the new name

Companies not complying with the above
The company may make an IPO if the issue is made through the book-building process and the company
undertakes:
(a) to allot, at least 75% of the net offer to public, to QIBs and
(b) to refund full subscription money if it fails to make the said minimum allotment to QIBs
The number of prospective allottees should be more than 1000
7. Explain the procedure for making bonus issue by a listed company.

A listed company has to comply with the following procedure for issue of bonus shares in terms of SEBI (ICDR)
Regulations, 2009:
Ensure that bonus is made out of free reserves built out of genuine profits.
Ensure that the company has not defaulted in the payment of interest / principal of fixed deposits, debentures,
statutory dues to employees etc.
There should be a provision in the AOA permitting issue of bonus shares.
Share capital after bonus must be within the authorised capital otherwise the authorised share capital will be
required to be increased.
Hold a board meeting for passing a resolution for bonus issue and for calling a general meeting.
Ensure all partly paid up shares are made fully paid up before bonus issue.
Intimate the results of the Board meeting within 15 minutes to the stock exchange.
Forward copies of notice of general meeting to the stock exchange.
Hold general meeting and pass the resolution for issue of bonus shares.
File a copy of the proceedings of the general meeting with the stock exchange.
File e-form 23 and e-form 5 with the RoC within 30 days of passing the resolution.
Fix record date / book closure.
Give 30 days notice to the stock exchange before record date.
File return of allotment Form 2 with the RoC within 30 days of allotment.
Ensure that the bonus issue is completed within 2 months from the date of approval in case it requires shareholders
approval for bonus issue as per its AOA and within 15 days in case it requires no such approval.
Get share certificates printed and issue the same to the members.
Submit an application to stock exchange for listing of bonus shares.
8. Explain the procedure for issuing sweat equity shares.

In terms of Section 79A of the Companies Act, 1956, sweat equity shares means shares issued by a company to
its employees / directors at a discount or for consideration other than cash for providing know-how or making
available rights in the nature of IPRs or value additions.
In terms of Section 79A of the Companies Act, 1956 read with the SEBI (Issue of Sweat Equity) Regulations, 2000,
the following procedure needs to be followed by a listed company for issue of sweat equity shares:
Atleast 1 year must have elapsed from the date on which company is entitled to commence business.
Convene a Board Meeting for passing a resolution to issue sweat equity shares and calling a general meeting.
Pass a special resolution at General meeting. The special resolution shall specify the number of shares, current
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market price, consideration and the class of employees / directors to whom such shares shall be issued.
File a copy of the special resolution passed with the RoC in e-form 23 within 30 days of passing the resolution.
Forward a copy of the proceedings of general meeting to stock exchanges where the company is listed.
9. Explain the procedure for making preferential issue by a listed company.

Preferential Issue means issue of specified securities to any select person or group of persons on a private
placement basis. It does not include an offer of specified securities made through a public issue, rights issue, bonus
issue, ESOPs or qualified institutions placement or an issue of sweat equity shares or depository receipts issued in a
country outside India or foreign securities
The company shall pass a SR
All the equity shares held by the proposed allottees are in the dematerialized form
The company shall obtain the PAN of the proposed allottees
In the explanatory statement given to the shareholders the company shall inter alia disclose the objects of the
preferential issue, proposal of promoters / directors to subscribe to the offer, shareholding pattern of the company
before and after the issue, time within which such issue shall be completed, the identity of the natural persons who
are the ultimate beneficial owners of the shares proposed to be allotted
The Statutory Auditors of the company shall certify that the all requirements have been complied with
Such certificate shall also be laid before the shareholders at their meeting
In case the promoters of the company have sold their shares during the 6 months preceding the relevant date, they
shall be ineligible for allotment of securities on preferential basis.
Such issue can be made at a price not less than the higher of the following:
(a) The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange
during the 26 weeks preceding the relevant date;
OR
(b) The average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange
during the 2 weeks preceding the relevant date.
The resolution passed for such issues shall be valid for 15 days from the date of passing
The company shall not make a preferential issue if the same is not in compliance with the conditions for continuous
listing
The currency of the instruments / warrants which will be converted into equity shares at a later date shall not exceed
18 months
Lock-in period of the instruments allotted on preferential basis shall be as follows
- to the promoter / promoter group - 3 years from the date of trading approval
- to persons other than the above 1 year from the date of trading approval
10. What are the steps for redemption of preference shares?

No authorization is required to redeem preference shares.
Fully paid-up shares may be redeemed
- out of profits
- out of fresh issue of shares
The premium payable on redemption, if any, may be taken out from profits of the company or securities premium
account
Creation of Capital Redemption Reserve (CRR) is mandatory if preference shares are redeemed out of profits
Nominal amount of preference shares is required to be transferred to CRR
CRR may be utilized for issuing fully paid up bonus shares or for any other purpose (subject to compliance of
requirements applicable to reduction of share capital)
The company is required to give notice to the RoC in e-form 5 within 30 days from redemption.
The company will also be required to inform the preference shareholders individually and also through a public
notice.
11. Explain the various grounds for compulsory delisting.

The company has incurred losses during the preceding 3 consecutive years and it has negative networth;
Shareholding of the company held by the public has come below the minimum level applicable to the company as
per the listing agreement (i.e. 25%) and the company has failed to raise public holding to the required level within
the time specified by the Stock Exchange;
Trading in securities of the company has remained suspended for a period exceeding 6 months;
Securities of the company have remained infrequently traded during the preceding 3 years;
Company or any of its promoters or any of its director has been convicted for failure to comply with any of the
provisions of the SCRA or the SEBI Act, 1992 or the Depositories Act, 1996 and awarded a penalty of not less
than Rs. 10 million or imprisonment of not less than 3 years;
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Addresses of the company or any of its promoter or any of its directors, are not known or false addresses have been
furnished or the company has changed its registered office in contravention of the provisions of the Companies Act,
1956.
12. Explain the procedure for issue of share certificates.

Share Certificate is a document of title to the shares in a company. It is issued by a company to its members in
whose names shares are registered in the register of members of the company. following is the procedure for issue
of share certificates:
Pass a resolution at the board meeting for issue and allotment of share certificates.
The Board will approve the numbers and authorise by resolution for their printing.
In case of listed companies, forms of share certificates shall also be approved by the stock exchanges.
All blank form of share certificates will be in the custody of the company secretary.
The depository shall be immediately informed after the shares are issued.
Necessary entries will be made in the register of members.
They shall be issued within the specified time limit
Share certificates are issued under the signatures of at least 2 directors, one of whom shall be MD, and the CS /
Authorised signatory
Share certificates is issued under the common seal of the company.
13. Short note on Debenture Redemption Reserve.

In terms of Section 117C of the Companies Act, 1956:
Creation of Debenture Redemption Reserve is mandatory for every company which issues debentures
Adequate amounts shall be created to Debenture Redemption Reserve out of the profits of the company every year
till debentures are redeemed
Debenture Redemption Reserve shall be utilized for redemption of debentures
Debenture Redemption Reserve shall not be required to be created by banks and financial institutions.
Amount of Debenture Redemption Reserve
NBFCs - @ 25% for public issue of debentures and NIL for privately placed debentures
Other companies - @ 25%.
14. What are the requirements relating to redemption and roll over of convertible debentures?

The non-convertible portion of partly convertible debt instruments issued, the value of which > Rs.50 lakhs may
be rolled over without change in the interest rate, subject to compliance with the following conditions:
75% of the holders of the convertible debt instruments of the issuer have approved the rollover through postal ballot
The company has, along with the notice for passing the resolution, sent to all holders of the convertible debt
instruments, an auditors certificate on the cash flow of the issuer and with comments on the liquidity position of the
issuer
The company has undertaken to redeem the non-convertible portion of the partly convertible debt instruments of all
the holders of the convertible debt instruments who have not agreed to the resolution
Credit rating has been obtained from at least one credit rating agency registered with SEBI within a period of six
months prior to the due date of redemption and has been communicated to the holders of the convertible debt
instruments, before the roll over
The creation of fresh security and execution of fresh trust deed shall not be mandatory if the existing trust deed or
the security documents provide for continuance of the security till redemption of secured convertible debt
instruments.
15. What are the various modes of acquiring membership in a company?

By subscribing to the MOA
By agreement and registration
By agreeing to purchase qualification shares
By application and allotment
By transfer / transmission of shares
By estoppel
16. Short note on nomination of shares and transmission of shares.

Nomination of shares Section 109A and 109B
Every member who is an individual can make a nomination at anytime
The nominee shall be an individual; a minor may be named as a nominee provided the name of a guardian is
mentioned in the nomination form
After the death of the holder, an application signed by the nominee alongwith a death certificate of the member shall
be submitted to the company. The application shall state that the nominee has elected to become a member of the
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company.
The nominee is also entitled to transfer such shares.

Transmission of shares Section 109
Transmission means passing of the title to a person to another by operation of law
In case of joint holding, transmission shall only take place when all the joint holders die
A person entitled to shares as a consequence of death or insolvency of a member needs to make an application in
writing to the company requesting the company to admit him as a member
Such person may also chose to transfer such shares without becoming a member by executing a transfer deed.
17. Short note on Refusal of registration of transfer by a public company and a private company.

Private company may by its Articles or otherwise refuse to register transfer or transmission of shares.
However in the case of a public company, shares are freely transferable and it cannot refuse to register transfer of
shares.
In case of refusal by a public company, the Company Law Board is empowered to direct rectification of register of
members to give effect to the transfer.
Section 111A of the Companies Act, 1956 provides that the CLB may, on an application made by a depository,
company, participant, investor or SEBI, if the transfer of shares is in contravention of any provisions of the SEBI
Act, SICA, or any other law, within 2 months from the date of transfer, direct the depository or the company to
rectify its records.
18. Explain the procedure for appointment of additional directors and alternate directors.

Procedure for appointment of Additional Directors Section 260 of the Companies Act, 1956
Ensure that the AOA authorise the Board to appoint additional directors.
Ensure that the person proposed to be appointed as additional director does not suffer from any disqualifications.
Ensure that such appointment of additional director is within the maximum limit mentioned in AOA.
BOD shall appoint the director either at a board meeting or through circulation.
Ensure that the director has given his DIN and his consent to the company.
Company has to file e-form 32 within 30 days of appointment.
Particulars of the director shall be entered in all the registers.
In case the company is listed, it shall also inform the Stock Exchanges.

Procedure for appointment of alternate directors Section 313 of the Companies Act, 1956
An alternate director can be appointed to act in place of an original director during the absence of the original
director for a period of 3 months or more from the State in which Board meetings are ordinarily held.
The Board should be authorized either by the Articles or by resolution in general meeting to appoint alternate
directors.
As and when the original director returns to the State as above, the alternate director shall vacate his office.
Alternate director acts on his right he is not the agent nor the proxy of the original director.
19.
Short note on Independent directors and nominee directors.

Independent Directors
SEBI has defined Independent Director in Clause 49 of the Listing Agreement as a non-executive director of the
company who:
apart from receiving directors remuneration, does not have any material pecuniary relationships or transactions
with the company, its promoters, its directors, its senior management or its holding company, its subsidiaries and
associates which may affect independence of the director;
is not related to promoters or persons occupying management positions at the board level or at one level below the
board;
has not been an executive of the company in the immediately preceding three financial years;
is not a partner or an executive or was not partner or an executive during the preceding three years, of any of the
following:
(i) the statutory audit firm or the internal audit firm that is associated with the company, and
(ii) the legal firm(s) and consulting firm(s) that have a material association with the company.
is not a material supplier, service provider or customer or a lessor or lessee of the company, which may affect
independence of the director;
is not a substantial shareholder of the company i.e. owning 2% or more of the block of voting shares; and
has attained 21 years of age.

Nominee Directors
Non-executive Directors appointed by banks or financial institutions which extend financial assistance to
companies.
They represent the interest of the bank / financial institution on the board of the company.
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20. What are the various grounds of vacation of directors.

A person who has been found to be of unsound mind by a Court of competent jurisdiction AND the finding is in
force
A person who is an undischarged insolvent
A person who has applied to be adjudicated as an insolvent AND his application is pending
A person who has been convicted by a Court of any offence involving moral turpitude AND is sentenced to
imprisonment for not less to 6 months, and a period of 5 years has not elapsed from the date of expiry of the
sentence
A person who has not paid any call in respect of shares of the company held by him, whether alone or jointly with
others, AND 6 months have elapsed from the last day fixed for the payment of the call
A person who has been disqualified for appointment as a director by an order of the Court under Section 203 of the
Act (i.e. he is convicted of any offence in connection with promotion, formation or management of the company or
he is found guilty in the course of winding up proceedings of the company)
A person who fails to obtain qualification shares within the prescribed time
A person who absents himself without obtaining leave of absence from the Board
(a) from 3 consecutive meetings of the Board of directors or
(b) from all meetings of the Board for a continuous period of 3 months, whichever is longer.
A person who acts in contravention of Section 295 of the Act i.e. loan to a director or a firm in which he is a partner
or a private company in which he is a director without complying with Section 295
A person who acts in contravention of Section 299 of the Act i.e. he fails to disclose his interest in any contract or
arrangement
A person who is removed by the shareholders in pursuance of Section 284
A person who having been appointed a director by virtue of his holding any office or other employment in the
company, ceases to hold such office or other employment in the company.
21. Explain the procedure for re-appointment of a retiring director at the AGM.

The vacancy in the office of the retiring director may be filled up by re-appointing the same director or appointing
some other person.
If the place of the retiring director is not filled up AND the meeting does not expressly resolve not to fill up the
vacancy, the AGM shall be adjourned to the next week, same day, time and place (if that day is a public holiday,
then to next succeeding day which is not a public holiday).
If at the adjourned meeting also the place of the retiring director is not filled up and the meeting does not expressly
resolve not to fill up the vacancy then the retiring director shall be deemed to be reappointed.
22. Explain the kinds and limits on remuneration payable to executive and non-executive directors.

Remuneration of a director who is not a MD / WTD i.e. non-executive directors Section 309 of the Act:
He can be paid :
(a) Monthly, quarterly or annual payment with approval of the CG
(b) Commission with approval of members through special resolution (this SR is valid for 5 years)

Quantum of payment
In case the company has a managing or
whole-time director
1% of the net profits of the company
In any other case 3% of the net profits of the company

The NEDs can also be paid sitting fees (no sitting fees can be paid to MD / WTD) subject to the following ceilings:
Companies with a paid-up share capital and
free reserves of ` 10 crores or more or
turnover of ` 50 crores or more
Sitting fees not to exceed ` 20,000/-
Other companies Sitting fees not to exceed ` 10,000/-

Where Board meeting is adjourned and again held, sitting fees shall be paid only once, since adjourned meeting is a
mere continuation of the original meeting.

Remuneration of a MD / WTD / Manager - Section 309 of the Act

Determination of managerial remuneration
(a) By Articles of Association
(b) By ordinary resolution
(c) By special resolution, if the Articles so provide
Mode of payment
(a) Monthly payment and / or
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(b) Specified % of net profits
Quantum of payment
Particulars % of Net Profit
Single Managing Director or Manager or Whole time Director 5%
More than One Managing Director or Manager or Whole time
Director
10%

In case of payment of remuneration to a director for services rendered in any capacity other than that of a director,
his total remuneration cannot go above the ceiling fixed by Section 198. But if the services rendered are of a
professional nature, the remuneration payable to a director for that will not come within the provisions of Section
309 of the Act.
23. Can a company give loans to its directors ?

Section 295 is attracted if
Company X gives any loan or any security or guarantee for any loan taken or given by :
Any director (Mr. A) of Company X (or its holding company)
Partner or relative of Mr. A
Firm (A & B Associates) in which Mr. A or relative of Mr. A is partner
Private Company in which Mr. A is a director or member
A company where Mr. A or 2 or more of other directors of Company X exercises 25% voting power
A company, where the Board is accustomed to act in accordance with the instructions of BOD of Company X
Exemptions:
A private company
A banking company
A loan given by a holding company to its subsidiary company or security or guarantee provided in connection with
a loan given to its subsidiary.
Condition to be complied
Prior approval of Central Government is required in Form 24AB
24. What do you mean by office or place of profit ?

Held by a director
If the director holding it obtains from the company anything over and above the remuneration to which he is entitled
as a director.
Held by any other person
If such person obtains from the company anything by way of remuneration by whatever name called.
25. Short note on disclosure of interest by directors.

In terms of Section 299 of the Companies Act, 1956, every director who is interested in any contract or
arrangement or any proposed contract or arrangement shall disclose his interest.
Such disclosure is required to be made as follows:
(a) In case of a proposed contract at the Board meeting when the contract is first considered by the Board (if then
the director is interested) or at the meeting held first after he became interested (if he later on becomes
interested)
(b) In case of an existing contract at the Board meeting held first after the director becomes interested
(c) Alternatively the director can given a general notice of disclosure which shall remain till the expiry of one
financial year after which the same can be renewed.
Disclosure is not required if interest of one or more directors is less than 2% of the paid-up capital of the other
company
If the cumulative holding of all the directors together with their relatives does not exceed 2% of the paid-up capital
of the other company.
26. Define the term Company Secretary in Practice as defined under the CS Regulations.
Section 2(2) of the Company Secretaries Act, 1980, provides that a member of ICSI shall be deemed to be in
practice, when individually or in partnership with one or more members of the Institute,
engages himself in the practice of the profession of Company Secretaries to, or in relation to, any company; or
offers to perform or performs services in relation to the promotion, forming, incorporation, amalgamation,
reconstruction, reorganization or winding up of companies; or
offers to perform or performs such services as may be performed by
(a) an authorized representative of a company with respect to filing, registering, presenting, attesting or verifying
any documents (including forms, applications and returns) by or on behalf of the company,
(b) a share transfer agent,
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(c) an issue house
(d) a secretarial auditor or consultant,
(e) an adviser to a company on management, including any legal or procedural matter,
(f) issuing certificates on behalf of, or for the purposes of, a company;
holds himself out to the public as a Company Secretary in practice; or
renders professional services or assistance with respect to matters of principle or detail relating to the practice of the
profession of Company Secretaries; or
renders such other services as, in the opinion of the Council, are or may be rendered by a Company Secretary in
practice.
27. What is the difference between MD and Manager?
Managing Director Manager
He is entrusted with substantial powers of management

He has the management of whole or substantially whole
of the affairs of the company
A company can have > 1 MD A company cannot have > 1 Manager
He is appointed either under an agreement or by a Board
resolution or general meeting or under the provisions of
MOA / AOA
He is appointed either under a contract of service or by
Board

He must be a director He cannot be a director
He, on ceasing to be a director, shall automatically cease
to be a MD
Not Applicable
The grounds of disqualification of a MD as prescribed
u/s 267 remain effective for the whole life and cannot be
waived by the Govt.
The grounds of disqualification of a manager as
prescribed u/s 385 are only valid for 5 years and can be
waived by the Govt.
28. What are the various kinds of services which a PCS can render under the CS Regulations?

Regulation 168 prohibits a company secretary in practice from engaging in any business or occupation other than the
profession of company secretary unless it is permitted by a general or specific resolution of the Council.
Following services are permitted generally -
Private tutorship.
Authorship of books and articles.
Holding of Life Insurance Agency Licence for the limited purpose of getting renewal commission.
Holding of public elective offices such as M.P, M.L.A., M.LC.
Honorary office-bearership of charitable, educational or other non-commercial organisations.
Acting as Justice of Peace, Special Executive Magistrate and the like.
Teaching assignment under the Coaching Organisation of the Institute or any other organisation, so long as the
hours during which a member in practice is so engaged in teaching do not exceed average four hours in a day
Valuation of papers, acting as a paper-setter, head examiner or a moderator, for any examination.
Editorship of professional journals.
Acting as ISO lead auditor.
Providing Risk Management Services for non-life insurance policies except marketing or procuring of policies.
Acting as Recovery Consultant in the Banking Sector.
Becoming non-executive director / promoter / promoter director / subscriber to the Memorandum and Articles of
Association of a company the objects of which include areas, which fall within the scope of the profession of
Company Secretaries irrespective of whether or not the practising member holds substantial interest in that
company.
Becoming non-executive director / promoter / promoter director / subscriber to the Memorandum and Articles of
Association of a company which is engaged in any other business or occupation provided that the practising
member does not hold substantial interest in the company.

Permission to be granted specifically
Interest or association in family business concerns provided that the member does not hold substantial interest in
such concerns.
Interest in agricultural and allied activities carried on with the help, if required, of hired labour.
Editorship of journals other than professional journals.
29. Short note on casual vacancies in the position of auditors.

Casual vacancy vacancy due to death, insanity or insolvency etc. of the auditor
Such casual vacancy will be filled by the BOD
However in case of resignation by auditor such vacancy can only be filled up at the general meeting
(10)


30. Explain the steps and requirements for maintenance of cost accounting records and appointment of cost
auditor.

In terms of Companies (Cost Accounting Record) Rules 2011 dated 3
rd
June, 2011, the CG has mandated
companies engaged in production, processing, manufacturing, or mining activities and wherein, -
the aggregate value of net worth as on the last date of the immediately preceding financial year > Rs. 5 crores or
the aggregate value of the turnover made by the company from sale or supply of all products or activities during
the immediately preceding financial year > Rs. 20 crores or
the companys equity or debt securities are listed
Cost accounting records are required to be maintained in respect of financial years commencing on or after 1
st

April, 2011.
Exemptions wholesale or retail trading activities, banks, investment and insurance companies, IT services, postal /
courier services etc.

Appointment of cost auditor
Such audit shall be conducted by a cost accountant within the meaning of the Cost and Works Accountants Act,
1949
Such cost auditor shall be appointed by the Board of Directors with the previous approval of the CG.
The Audit committee of the company shall be the first point of reference for such appointment.
Auditor of the company cannot be appointed as cost auditor.
A person disqualified to be an auditor cannot be appointed as cost auditor.
The company shall disclose full particulars of its cost auditor in its annual report.
31. Explain the procedure for passing of resolutions through postal ballot.

In terms of Section 192A read with Companies (passing of the resolution by postal ballot) Rules, 2011:
Notice to all shareholders alongwith a draft resolution and requesting them to send their assent / dissent within 30
days of posting the letter.
It shall be sent by registered post acknowledgement due or through e-mail provided the company obtains the e-mail
addresses of its shareholders.
Company shall issue advertisement in one English and vernacular newspaper after despatch of the postal ballot
forms.
If it is assented by the majority it shall be deemed to be passed at a meeting.
Voting by electronic mode is also permitted. Further in terms of Clause 35A of the Listing Agreement, every
listed company conducting postal ballot, shall give the facility of e-voting to its shareholders.

Matters which compulsorily need to be passed through postal ballot
Alteration of objects clause of MOA
Alteration of AOA for insertion of provisions re. Private co.
Buy back of shares
Issue of shares with differential voting rights
Change in registered office outside the local limits of the city, town or village
Sale of whole of the undertaking of the co.
Give loans, guarantees, or security in excess of the limits u/s 372A
Election of a small shareholder director
Variation of rights attached to a class of shares / debentures
32. Explain the powers of the Board of Directors which are exercisable only with the approval of shareholders.

In terms of Section 293 of the Companies Act, 1956, the following powers of the Board can only be exercised
with the approval of the shareholders:
Sell, lease or otherwise dispose of whole, or substantially the whole, of the undertaking of the company
Remit, or give time for repayment of any debt due by a director
Invest, otherwise than in trust securities, the amount of compensation received by the company in respect of the
compulsory acquisition of any such undertaking as referred above
Borrow moneys, where the moneys to be borrowed, together with the moneys already borrowed by the company
(apart from temporary loans obtained from the company's bankers in the ordinary course of business), will exceed
the aggregate of the paid-up capital of the company and its free reserves
Contribute to charitable and other funds not directly relating to the business of the company or the welfare of its
employees, any amounts in excess of Rs. 50,000/- or 5% of its average net profits during the 3 financial years
immediately preceding, whichever is greater.

(11)


33. Short notes on explanatory statement and poll in general meetings.

Explanatory Statement Section 173 of the Companies Act, 1956
In terms of Section 173 of the Companies Act, 1956, every notice proposing to transact special business in a
general meeting, shall be accompanied by an explanatory statement, setting out all material facts concerning
that special business, including the concern / interest of every director / manager.
The object of providing explanatory statement u/s 173 is to secure that all facts which have a material bearing on the
question on which the shareholders have to form their judgment are brought to the notice of them so that the
shareholders can exercise an intelligent judgment Balasundaram vs. New Theatres Carnatic Talkies Private
Limited
The provision of Section 173 is mandatory in nature and disobedience to its requirements will lead to
nullification of the action taken Firestone Tyre and Rubber Co. Ltd. Vs. Synthetics and Chemicals Ltd.
The principle to be applied in case of explanatory statement is that could a reasonable shareholder knowing the true
facts have taken a different course from that which he took on the basis of the explanatory statement which did not
disclose the true facts Jessel Trust Limited

Poll Section 179 of the Companies Act, 1956
It is a method of voting in which votes are cast by members (in person or by proxy) in accordance with the
number of shares held, by registering their votes on sheets of paper called Poll paper or Ballot paper
distributed to the voters.
The object of a poll is to ascertain the true sense of a meeting and is not to give absent members a further
opportunity of voting unless a contrary intention is expressly or impliedly to be gathered from the Articles
Liladhar Shamji vs. Rehmubhoy Allana
A poll may be ordered by the Chairman on his own motion or shall be ordered on a demand made by the persons as
follows:
(a) Public company with share capital members holding not less than 1/10th of the voting power or on which an
aggregate sum of Rs. 50,000/- or more has been paid
(b) Private company with share capital 1 member, if 7 members are present or 2 members if > 7 members are
present
(c) Any other company - members holding not less than 1/10th of the voting power
Proxies may also demand a poll Berar Trading Company Limited vs. Gajana G Dixit
In case of poll on election of chairman or on adjournment of the meeting, it has to be taken forthwith
In case of poll on any other question, it must be taken within 48 hours of the time of demand
Chairman should appoint 2 scrutineers (atleast 1 scrutineer should be a member of the company and not an officer /
employee) to scrutinize the votes cast on a poll
The results of the poll shall be displayed at the registered office of the company.
34. What are the various methods of voting at a general meeting ?
By acclamation
By voice vote
By division
By show of hands
By ballot
By poll
35. What do you mean by statutory meeting?

Every public company having is required to hold statutory meeting within a period of not less than 1 month
and not more than 6 months from the date the company is entitled to commence business.
Section 165 allows members to discuss any matter relating to the formation of the company or arising out of the
statutory report, whether previous notice has been given or not.
The Board of directors is required to cause a list showing the names, addresses and occupations of the members of
the company, and the number of shares held by them respectively, to be produced at the commencement of the
statutory meeting and to remain open and accessible to any member of the company during the continuation of the
meeting.
A statutory report is required to be sent to each member along with the notice of the statutory meeting. A
copy of the statutory report should also be sent to the Registrar after the same is sent to the members.
The Statutory Report contains information regarding:
1. the total number of shares allotted-fully paid-up and partly paid-up; allotted for cash and consideration other
than cash;
2. the total cash received by the company in respect of all allotments;
3. an abstract of receipts and payments up to a date within 7 days of the Report, and the balance of cash in hand;
(12)

4. any commission or discount paid in the issue of shares or debentures;
5. the names, addresses, and occupations of directors, auditors, manager and the secretary of the company;
6. the extent to which any underwriting contact has not been carried out;
7. the arrears due on calls from every director; and
8. the particulars of any commission or brokerage paid to any director or manager on the issue of shares and
debentures.
36. Short notes on powers of the Chairman of a general meeting.

To maintain order and decorum
To give ruling as to points of order
To decide priority of speakers
To maintain relevancy and order in debate
To adjourn a meeting
To exercise a casting vote
To ascertain the sense of the meeting and declare the results of voting
37. Distinguish between motion and resolution.

A motion is a definite proposal put before a meeting for its consideration and adoption.
Notice of a motion is necessary before it is put before the meeting
It must be proposed and seconded
A resolution is the formal expression of the decision of a meeting
When a motion has been voted upon and passed by the requisite majority it is called a resolution.
38. Short note on Corporate Governance Report under Clause 49 of the Listing Agreement.

In terms of Clause 49 of the Listing Agreement :
Annual Report of the Company should comprise a separate section on Corporate Governance wherein specified
compliance with Clause 49 is required to be disclosed.
Quarterly Compliance Report to be submitted to Stock Exchanges within 15 days from the close of the quarter in the
prescribed format.
39. What do you mean by Directors Responsibility Statement?

In terms of Section 217 of the Companies Act, 1956, the Directors Report of a company shall contain a
Directors Responsibility Statement certifying that
- that in preparation of annual accounts, the applicable accounting standards are being followed together with
proper explanations relating to material departures
- that the directors have selected such accounting policies and applied them consistently and made judgements
and estimates that they are reasonable and prudent so as to give a true and fair view of the state of affairs of the
company at the end of the year and profit and loss for the period
- that the directors have taken proper and sufficient care for the maintenance of adequate accounting records for
safeguarding the assets of the company and for preventing and detecting fraud and other irregularities
- that the directors have prepared the accounts on a going concern basis
40. Short notes on liabilities of auditor.

Civil Liability of an auditor
The term officer as defined in the Companies Act also includes an auditor
Liability for mis-statement in prospectus
Section 62 provides that an auditor shall be liable to compensate every person who subscribes for the shares /
debentures of the company on the faith of the prospectus containing an untrue statement made by the auditor
Liability for misfeasance
Section 534 provides that the auditor may be held liable for misfeasance or breach of trust
Criminal Liability
Various Sections of the Act provide for criminal liability of auditors
41. Explain the power of RoC to strike off names of companies.

Section 560 of the Companies Act, 1956 empowers RoC to strike off the names of those companies which do
not carry on any business or operation in the following circumstances:
(a) where a company is being wound up and the RoC has reasonable cause to believe that no liquidator is acting;
(b) if the affairs of the company have been completely wound up and the required returns are not forthcoming from
the liquidator appointed for a period of 6 consecutive months.
Any aggrieved member / creditor may apply for restoration of name within 20 years from publication of striking off
notice in official gazette.

(13)


42. Short notes on SS7, SS8, SS9 and SS10.

Secretarial Standard 7 - Passing of Resolutions by Circulation
Chairman of the Board or the managing director should decide whether the approval of the Board for a particular
business should be obtained by means of a resolution by circulation.
A resolution proposed to be passed by circulation should be sent in draft form, together with the necessary papers,
individually to all the directors or, in the case of a Committee to all the members of the Committee, at the same
time.
Each business proposed to be passed by way of resolution by circulation should be explained by a note setting out
the details of the proposal and the draft of the resolution proposed
The resolution is passed, when it is approved by a majority of directors entitled to vote on the resolution other than
interested directors.
The resolution is deemed to have been passed on the date on which it is approved by the majority of the Directors.
Resolutions passed by circulation should be noted at the next meeting of the Board or Committee, as the case may
be, and the decision recorded in the minutes of such meeting.
Passing of resolution by circulation should be considered valid as if it had been passed at a duly convened meeting
of the Board or of the Committee.

Secretarial Standard 8 - Affixing of Common Seal
The common seal should be adopted by a resolution of the Board.
The impression of the common seal should be made part of the minutes of the meeting in which it is adopted.
The common seal should be made of metal and capable of being manually operated.
The common seal should have the name of the company and state in which the registered office is situated
engraved in legible characters.
The common seal should be affixed to any instrument only by authority of a resolution of the Board or a committee
authorized by the Board.
The common seal should be affixed in the presence of managing director or any two directors, and the company
secretary or any other person as the Board may authorize for the purpose.
The persons in whose presence the seal is affixed should sign every instrument to which the seal of the company is
so affixed.
Every company should maintain a register, at its registered office, containing particulars of documents on which the
common seal of the company has been affixed.
The common seal should be kept in the custody of a director of the company or the company secretary or any other
official, as authorized by the Board.

Secretarial Standard 9 - Forfeiture of shares
The Articles should contain a provision for forfeiture of shares.
Forfeiture of shares requires approval of the Board in a duly convened meeting.
A forfeiture of shares held by a member should be made under the authority of the Board, if a call on the shares,
together with interest accrued thereon, in accordance with the terms of issue of the shares, remains unpaid after the
day appointed for payment thereof.
If a member fails to pay any call, on or before the day for payment thereof, the company should during such time as
any part of the call or instalment remains unpaid, serve a notice on him requiring payment of the call remaining
unpaid, together with interest which may have accrued.
The notice should state the amount of the call due and the interest accrued thereon.
The Board at a duly convened meeting should approve the forfeiture and authorize any director or manager or the
secretary to make a declaration of such forfeiture.
The Notice should also specify a day not being earlier than the expiry of twenty-one days from the date of posting
of the notice on or before which the payment required by the notice is to be made; and state that in the event of non-
payment on or before the day so specified, the shares in respect of which the call was made including the amount
already paid thereon will be forfeited.
Upon forfeiture, any director or manager or the secretary, authorized by the Board of the company shall make a
declaration specifying the particulars of shares forfeited.
The declaration shall be conclusive evidence of forfeiture as against all persons claiming to be entitled to the shares
of the company which have been forfeited.
The Board should issue individual notices to the defaulting members whose shares have been forfeited.
Entries in the register of members should be made with regard to forfeited shares and share certificates in relation to
forfeited shares shall stand cancelled upon forfeiture.
There should be a reference to the forfeiture of shares in the report of the directors to the shareholders.
A person whose shares have been forfeited would cease to be a member of the company, in respect of those shares.
(14)

Upon forfeiture, any director or manager or the secretary, authorized by the Board of the company shall make a
declaration specifying the particulars of shares forfeited.
The declaration shall be conclusive evidence of forfeiture as against all persons claiming to be entitled to the shares
of the company which have been forfeited.
The Board should issue individual notices to the defaulting members whose shares have been forfeited.
Entries in the register of members should be made with regard to forfeited shares and share certificates in relation to
forfeited shares shall stand cancelled upon forfeiture.
There should be a reference to the forfeiture of shares in the report of the directors to the shareholders.
A person whose shares have been forfeited would cease to be a member of the company, in respect of those shares.

Secretarial Standard 10 - Boards Report
The Boards Report should include a statement by the Board that the company has devised proper systems to ensure
compliance of all laws applicable to the company.
In the event of sickness of the company, the Report should provide the factors leading to such sickness and the steps
proposed to be taken.
The Report should disclose specified details of issue of sweat equity shares. The Report should specify the reasons
for the failure to implement any proposal relating to preferential allotment.
The Report should specify the reasons for the failure to pay interest or redeem debentures or preference shares on
due date(s) and remedial measures taken.
The Report should specify changes in the composition of Board.
The Report should disclose if any director has incurred any disqualification or vacated office pursuant to the
provisions of the Act or any other law for the time being in force.
The Report should disclose the amounts, if any, transferred during the year to the Investor Education and Protection
Fund.
The Report should, in case of payment of managerial remuneration in excess of prescribed limits, disclose the
particulars specified under the Act
The Report should disclose composition of audit committee.
The Report should specify the reasons for not accepting the recommendations of the Audit Committee.
The Report should disclose the amounts to be paid as limited return on share capital.
The Report should disclose the amounts, if any, proposed to be disbursed as patronage bonus.
The Report should state that the consolidated financial statements are also presented in addition to the individual
financial statement of the company.
The Report should specify projections made in the previous year and the current status related to the companys
performance.
The Report shall be the collective responsibility of all the directors though the report may have been approved only
by a majority of the directors.
The Board should ensure consistency of information given in the Report, the Report on Corporate Governance and
the explanatory statements to resolutions.
43. Short note on Investor Education and Protection Fund.

In terms of Section 205C of the Companies Act, 1956:
Investor Education and Protection Fund shall be established by CG
Such fund shall be credited with
- amounts in the unpaid dividend accounts of companies
- application moneys received by companies for allotment of any securities and due for refund
- accrued interest on the aforesaid amounts
- grants and donations given to the Fund
- interest or other income received out of the investments made from the Fund
The aforesaid amounts shall be transferred to IEPF only if the same remains unclaimed for 7 years
44. Explain the procedure for declaration and payment of interim dividend.

Give notices for board meeting.
Inform the stock exchanges atleast 2 working days in advance.
Hold the Board meeting and declare the interim dividend. Before declaring interim dividend the directors must
satisfy themselves about the financial position of the company.
Inform the stock exchanges about the interim dividend declared within 15 minutes of Board meeting.
Publish notice of book closure in newspapers atleast 7 days before the commencement of book closure and inform
the stock exchanges.
Close the register of members of the company.
Open bank account and transfer the amount of dividend within 5 days of declaration.
(15)

Ensure payment of dividend distribution tax.
Print dividend warrants and despatch them within 30 days of declaration.
Arrange for transfer of unpaid dividend to the unpaid dividend account within 7 days from completion of 30 days
period.
Transfer dividend lying in the unpaid dividend account after expiry of 7 years from the date of transfer.
File Form 1 of IEPF Rules with the RoC.
45. What are the consequences of non-registration of charge?

The charge will be void against the creditor and liquidator of the company
The company shall be liable for repayment of the money secured by the charge immediately
The company may create a second charge having priority of the unregistered charge
46. Explain the procedure for satisfaction of a registered charge.

In terms of Section 138 of the Companies Act, 1956, a company is required to comply with the following
procedure for satisfaction of charge:
File Form 17 with the RoC within 30 days of satisfaction of charge.
Attach with Form 17 a certified copy of the document satisfying the charge.
47. Short note on the Model Code of conduct for prevention of insider trading.

In terms of the SEBI (Prohibition of Insider Trading) Regulations, 1992 every listed company is required to
frame a code of internal procedures and conduct as near thereto the Model Code specified in the Regulations
without diluting it in any manner and ensure compliance of the same. The Model Code of Conduct contains the
following terms:
Company shall appoint a Compliance Officer (senior level employee) who shall report to the MD / CEO.
The Compliance Officer shall be responsible for setting forth policies, procedures, monitoring adherence to the rules
for the preservation of Price Sensitive Information, pre-clearing of designated employees and their dependents
trades (directly or through respective department heads as decided by the company), monitoring of trades and the
implementation of the code of conduct under the overall supervision of the Board of the listed company.
The Compliance Officer shall maintain a record of the designated employees and any changes made in the list of
designated employees.
Employees / directors shall maintain confidentiality of price sensitive information.
Price sensitive information shall be dealt on a need to know basis.
Company shall specify a period called trading window for trading in the companys securities.
The window shall be closed during which the price sensitive information shall be unpublished.
It shall open 24 hours after information is made public.
All directors /officers / designated employees of the company and their dependants who intend to deal in the
securities of the company (above a minimum threshold limit to be decided by the company) should pre-clear the
transactions.
All directors / officers / designated employees who buy or sell any number of shares of the company shall not enter
into an opposite transaction i.e. sell or buy any number of shares during the next six months following the prior
transaction. All directors/ officers/ designated employees shall also not take positions in derivative transactions in
the shares of the company at any time.
All directors / officers / designated employees shall hold their investments for minimum period of 30 days.
All directors / officers / designated employees shall disclose their holdings at the time of joining and on an annual
basis.
Any employee/ officer / director who trades in securities or communicates any information for trading in securities
in contravention of the code of conduct may be penalised and appropriate action may be taken by the company.
48. What do you mean by the term insider?

In terms of Regulation 2(e) of the SEBI (Prohibition of Insider Trading) Regulations, 1992 -
insider means any person who,
is or was connected with the company or is deemed to have been connected with the company and who is
reasonably expected to have access to unpublished price sensitive information in respect of securities of a company,
or
has received or has had access to such unpublished price sensitive information.
(16)

49. Salient features of UK Companies Act 2006 and Australian Corporations Act.

UK Companies Act 2006
One person can form a company
Minimum authorised capital 50,000
Minimum members 2 members
Minimum 2 directors
Directors duty to act in accordance with the companys constitution and exercise powers for the purpose of which
they are given
Company to prepare a directors remuneration report
Public company must have a secretary
Companies to lay and file accounts
Private company within 9 months
Public company within 6 months
Small companies exempt from audit
Shareholders holding atleast 10% shares may requires companies to do audit.

Australian Corporations Act
Proprietary company
having not more than 50 non-employee shareholders
Minimum 1 director ordinarily residing in Australia
Public company atleast 3 directors minimum 2 should reside in Australia
Directors minimum age 18 years
Company other than proprietary company must have a CS ordinarily residing in Australia
CS has the responsibility to notify ASIC
Changes in directors and CS
Changes to register of members
Changes of holding company.
50. Short notes on Companies Act, 2013.

Companies Act, 2013 was passed by the Lok Sabha on 18
th
December, 2012, Rajya Sabha on 8
th
August, 2013
and Presidential assent on 29
th
August, 2013. Highlights are given below:
Concept of One Person Company and Small companies introduced. These companies have been subjected to less
stringent regulatory framework. Small companies mean companies with paid-up share capital upto Rs. 50 Lakhs or
turnover upto Rs. 2 Crores.
Maximum number of members in case of private companies enhanced to 200 (from 50). Private companies to
also require a certificate of commencement of business by the RoC.
Maximum number of directors in a company restricted to 15. Companies permitted to appoint more than 15
directors after taking approval of the shareholders by way of special resolution.
Prescribed class of companies to have atleast one woman director.
All listed companies are required to appoint atleast 1/3rd of the total number of directors as independent directors.
Key Managerial Personnel, in relation to a company, means
(i) Chief Executive Officer or the managing director or the manager;
(ii) Company Secretary;
(iii) Whole-time Director;
(iv) Chief Financial Officer; and
(v) such other officer as may be prescribed;
Prescribed class of companies are required to have the following whole-time key managerial personnel,
(i) Managing director, or Chief Executive Officer or manager and in their absence, a whole-time director; and
(ii) Chief Financial Officer and
(iii) Company Secretary.
Independent Directors have been prohibited from getting Stock options but may get sitting fees and profit
linked commission subject to limits specified in the Act / Rules.
Secretarial Standards on Board and General Meetings (issued by ICSI and approved by Central Govt.) to be made
mandatory.
Companies having minimum net worth of Rs. 500 crores or turnover of Rs.1000 crores or net profit of
Rs. 5 crores to mandatorily constitute a CSR Committee (comprising of 3 or more directors with atleast one
independent director). Such companies to endeavour to spend at least 2% of average net profits of the 3
immediately preceding financial years on CSR activities. Companies to specify in their Directors Report reasons
for not spending the said amount.
(17)

Companies to constitute Audit Committee (mandatory for listed companies and other prescribed class of
companies) Nomination and Remuneration Committee (mandatory for listed companies and other prescribed class
of companies) and Shareholders Grievance Committee (mandatory for companies having 1000 shareholders /
depositors / debenture holders).
Financial statements to include Balance Sheet, P/L Account, Cash Flow Statement and Statement of changes
in equity.
Companies permitted to make investment only through maximum two layers of investment companies.
Central Govt. empowered to prescribe maximum permissible layers of subsidiaries for prescribed class of
companies.

DRAFTING, APPEARANCES AND PLEADINGS

1. Short notes on Testimonium clause, Indenture, Deed Escrow and Habendum.

Testimonium Clause
This clause signifies that the parties to the document have signed the deed.
It marks the close of the deed and is an essential part of the deed.
In usual form, it states In witness whereof, parties hereto have hereunto set their respective hands and seals the
date and year first above written.

Indentures
They are those deeds in which there are two or more parties.
It is an old concept where they were written in duplicate upon one piece of parchment and two parts were served so
as to leave an indented edge.
Indentures are so called as at one time they were indented or cut with uneven edge at the top.

Deed escrow
A deed signed by one party is delivered to another as an escrow for it is not a perfect deed.
It is only a mere writing unless signed by all parties and dated when the last party signs it.

Habendum
Habendum states the interest the purchaser is to take in the property if the property conveyed is unencumbered
reference thereto should be made in the habendum.
It starts with the words The have and to hold.
It limits the estate mentioned in the parcels.
The transferee is mentioned again in the habendum for whose use the estate has been conveyed.
2. Distinguish between drafting and conveyancing.

Both the terms drafting and conveyancing convey the same meaning, although these terms are not
interchangeable.
Conveyancing gives more stress on documentation much concerned with transfer of property from one person to
another whereas drafting gives a general meaning relating to preparation of documents. Documents may include
loan agreement, deed of mortgage, bill of lading, summons, notices etc. Different statutes provide different
definition for documents.
3. Short notes on the recital clause.

Recitals - short story of the property upto its vesting into the last transferor
Recitals are of two types
1. Narrative recitals relating to past history of the property transferred
2. Introductory recitals explaining the motive and intention behind execution of a deed
Recitals should be inserted with great caution because they precede the operative part and as a matter of fact contain
the explanation to the operative part of the deed.
Recitals carry evidentiary importance in the deed it is an evidence against the parties to the instrument and those
claiming under and it may operate as estoppel Ram Charan vs. Girija Nandini
4. What do you mean by endorsements and supplemental deeds?

Endorsement means to write on the back / face of a document wherein it is necessary in relation to the
contents of that document.
The term endorsement is used with reference to negotiable instruments like cheques, bill of exchange etc.
It is used to give legal significance to a particular document with reference to new facts to be added to it.
Supplemental Deed is a document which is entered between the parties on the same subject on which there is
a prior document existing and operative for adding new facts to the existing document.
Thus supplemental deed is executed to give effect to the new facts in the deed.
(18)

When a deed or document is required to be supplemented by new facts in pursuance of or in relation to a prior deed
this can be affected by either endorsement on the prior deed when short writing would be sufficient, or by executing
a separate deed know as supplemental deed.
5. Distinguish between deed poll and deed pool.

Deed Pool a deed made between two or more parties where as many copies are made as there are parties, so that
each party is in possession of a copy.
Deed Poll a deed made and executed by a single party for example POA.
6. Draft an agreement for sale of house property.

THIS AGREEMENT OF SALE executed on the 10
th
day of June, 2013, between Mr. Ram Kapoor son of
Mr. Atmaram Kapoor, residing at 41 Chowringhee Road, Kolkata 700 071, hereinafter called the vendor of the
one part and
Ms. Priya Sharma, daughter of Mr. Shivraj Sharma, residing at 4 Lovelock Place, Kolkata 700 019, hereinafter
called the purchaser of the other part,

(The expressions "vendor" and "purchaser" wherever they occur in these presents, shall unless the context otherwise
admits, also mean and include their respective heirs, executors, administrators, legal representatives and assigns).

WHEREAS the vendor is the sole and absolute owner of the property more fully set out in the Schedule hereunder:

AND WHEREAS it is agreed that the vendor shall sell and the purchaser shall purchase the said property for a sum of
Rs. 50,00,000/- (Rupees fifty lakhs only) free of all encumbrances.

NOW THIS AGREEMENT OF SALE WITNESSETH AS UNDER:

(a) The price of the property more fully set out in the Schedule hereunder is fixed at Rs. 50,00,000/- (Rupees fifty
lakhs only) free of all encumbrances.
(b) The purchaser has paid to the vendor this day, a sum of Rs. 10,00,000/- (Rupees ten lakhs only) by way of
earnest money for the due performance of the agreement, the receipt whereof the vendor doth hereby admit and
acknowledge.
(c) The time for performance of the agreement shall be three months from the date hereof and it is agreed that the
time fixed herein for performance shall be of the essence of this agreement.
(d) The purchaser shall pay to the vendor the balance sale price of Rs. 40,00,000/- (Rupees forty lakhs only) before
registration of the conveyance deed.
(e) The vendor agrees that he will deliver vacant possession of the property to the purchaser before registration of the
conveyance deed. Or alternatively, the vendor agrees that he will put the purchaser in constructive possession of
the property by causing the tenants in occupation of the property to attorn their tenancy to the purchaser.
(f) The vendor shall execute the conveyance deed in favour of the purchaser or his nominee as the purchaser may
require.
(g) The vendor shall hand over all the title deeds of the property to the purchaser or an advocate nominated by him
within ten days from the date of this agreement for scrutiny of title and the opinion of the vendor's advocate
regarding title to the property shall be final and conclusive. The purchaser shall duly intimate the vendor about the
approval of title within thirty days after delivering the title deeds to him or to his advocate.
(h) If the vendor's title to the property is not approved by the purchaser, the vendor shall refund the purchaser the
earnest money received by him under the agreement and on failure of the vendor to refund the same within thirty
days, he shall be liable to repay the same with interest thereon at the rate of 15% per annum.
(i) If the purchaser commits a breach of the agreement, he shall forfeit the earnest amount of Rs. 10,00,000/-
(Rupees ten lakhs only) paid by him to the vendor.
(j) If the vendor commits a breach of the agreement, the vendor shall not only refund to the purchaser the sum of Rs.
10,00,000/- (Rupees ten lakhs only) received by him as earnest money, but shall also pay to the purchaser an
equal sum by way of liquidated damages.
(k) Nothing contained in paras (i) and (j) above shall prejudice the rights of the parties hereto specific performance of
this agreement of sale/purchase.

IN WITNESS WHEREOF the vendor and the purchaser have set their respective hands to the agreement of
sale/purchase on the day, month and the year above written, in the presence of the following witnesses:

Witnesses:

(1) Name:

Father's Name:

Address:
Mr. Ram Kapoor
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Signature: Vendor

(2) Name:

Father's Name:

Address:
Ms. Priya Sharma
Signature: Purchaser

Schedule of Property

All that one Flat being No. 5/B, containing an area of 1258 square feet more or less on the fifth floor of the building
commonly known as Poonam being premises No. 5/2, Russel Street, P.S.- Park Street, in the town of Kolkata.
7. What do you mean by del credere agent ?

Del Credere Agency is a special type of agency which combines agency with guarantee.
A Del Credere Agent is one who for an extra remuneration undertakes the liability to guarantee the due performance
of the contract by the buyer.
He therefore gives additional security to the seller, but he does not shift the responsibility of payment from
the buyer to the seller.
8. Draft an agreement for entering into a collaboration.

Agreement executed this 20
th
day of August, 2013 between M/s. Incos. Limited a Foreign Company incorporated in
the United Kingdom and having its registered office at 43, Birmingham Place, UK, hereinafter called the U.K.
Company of the ONE PART.

AND

M/s. Prem Works Limited, a company incorporated in India and having its registered office at 43, V.I.P Road,
Kolkata 700 056, hereinafter called the Indian company of the OTHER PART.

WHEREAS the Indian company has been incorporated having for its object the manufacture and production of steel
rolls; WHEREAS the Indian company has already constructed factory buildings, installed plant and machinery and
commenced manufacture and production of steel rolls; WHEREAS the Indian company with a view to improve still
further the quality of the commodities manufactured and to increase production are desirous of procuring the latest
technique and know-how relates to the manufacture of the above said commodities; WHEREAS the Indian company
therefore approached the U.K. company who have considerable experience in the line of manufacture engaged in by
the Indian company, and requested them to extend to them necessary technical assistance in that behalf; AND
WHEREAS the U.K. company has agreed to extend technical assistance and to furnish to the Indian company for
improvement of their business the requisite know-how in the form of designs, plans, engineering drawings, technical
advice and also to supply technicians to advice for improvement of the existing factories, machineries and plant and
also to provide to the Indian personnel necessary technical training to enable them to successfully handle and exploit
the technical know-how to be imparted to the Indian company subject to the terms and conditions set out hereunder:

NOW THIS AGREEMENT WITNESSES AS FOLLOWS:

(a) In consideration of the remuneration paid by the Indian company to the U.K. company as described hereinafter the
U.K. company shall supply to the Indian company:

technical advice and know-how for the purpose of improving or adding to the existing factories and installing
additional plant and machineries if necessary for the manufacture of steel rolls;
further the necessary plans, factory-design and layouts, charts and drawings,
documentation and other forms of technical know-how for the said purpose;
render advice in the matter of purchase of the further plant and machinery suitable and necessary for the
factory;
lend the services of their technicians to assist the Indian company in carrying out the improvement to the
factories and for installing additional plants and machinery;
provide technicians from their own staff to attend at the Indian company's factory in India whenever necessary;
impart technical training to selected Indian personnel at their works in England or in their associated
companies, to enable them to operate the machinery and plant to be installed and to exploit the imported
technical know-how to the best advantage;
advise the Indian company, promptly and to the best of their ability, in connection with any technical or
manufacturing problems or difficulties which may be referred to it by the Indian company during the
continuance of this agreement.

(b) For technical know-how and data supplied by the U.K. company to the Indian company as above, the Indian
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company shall make a lump sum payment of Rs. 50 lakhs to the U.K. company phased as follows:

one-third on approval of the agreement by the Central Government;
one-third, on the U.K. company supplying the Indian company necessary charts, plans, engineering drawings,
documentation and other technical data and know-how, which shall be done within 15 days from the date of
approval, of this agreement by the Central Government;
the balance one-third in three equal annual instalments thereafter after commencement of production.

(c) This Agreement shall be in force for a period of 5 years at the first instance, subject to extension for a further
period of 5 years by mutual agreement and subject to approval by the Central Government.

(d) The Indian company may but not bound to use foreign brand names on their products for internal sale or on
products to be exported.

(e) There shall be no restriction on the Indian company exporting their products to foreign countries.

(f) The Indian company shall not have the right to pledge, mortgage or assign or to sub-licence the technical know-
how, data, engineering designs, layouts etc. to other parties, without the consent in writing of the U.K. company.

(g) There shall be no restraint on the Indian company having their own arrangements for procurement of raw
materials, purchase of spares and components and for pricing their products and the sale thereof.

(h) Technicians who may be deputed by the U.K. company to the Indian company to advise and assist the Indian
company under this agreement shall be paid their salary, travelling expenses and boarding and lodging by the
Indian company.

(i) The Indian company shall likewise bear all the expenses of the persons sent by them to the U.K. company for
training in their works under clause (a) supra.

(j) The parties hereto mutually agree that they will each inform the other of any new development in design or
methods of manufacture which they respectively may discover during the continuance of this Agreement in so far
as such new developments are applicable to the products manufactured by the Indian company.

(k) The Indian company shall maintain the utmost secrecy in connection with any technical data supplied by the U.K.
company under this Agreement, and in particular shall keep all data concerned with the manufacturing processes
under lock and key.

(l) It is agreed that the payment made to the U.K. company shall include the compensation for use of the patent rights
for the period of its duration and that the Indian company shall have the right for the period of its duration and that
the Indian company shall have the right to manufacture their products even after the expiry of this Agreement.

(m) The Indian company shall not during the continuance of the Agreement refer any technical or manufacturing
problems or difficulties to any one other than the U.K. company but shall regard and use the U.K. company as its
sole technical consultant.

(n) On the expiry of the period prescribed herein or of extended period provided in clause (c) (supra) or upon the
termination of this agreement for any reason the Indian company shall return to the U.K. company all copies of
information data or material sent to it by the U.K. company under this Agreement and then in its possession and
shall expressly refrain from communicating any such information, technical data or material received by it
hereunder to any person, firm or company whatsoever.

IN WITNESS WHEREOF the parties hereto have signed this Agreement this 20
th
day of August, 2013 in the presence
of the following:
Witnesses:

(1) Name:

Father's Name:

Address:

Signature: On behalf of Incos. Limited

(2) Name:

Father's Name:

Address:

Signature: On behalf of Prem Works Limited

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9. Draft an arbitration agreement to refer dispute to two arbitrators.

This agreement made and entered into between Mr. Amit Agarwal and Mr. Shiv Seksaria on this 9th day of
February, 2013 witnesseth as follows:

WHEREAS differences and disputes have arisen between the parties above-mentioned regarding the matter of export
of machines and the parties could not mutually settle the matter. Now the parties agree that the matter as under be
referred to arbitration to obtain an award:

For the purpose of final determination of the dispute, the matter will be referred to Mr. A K Guha nominated by one
party and Mr. Shyam Sundar Pansari nominated by the other party as arbitrators and their award shall be final and
binding on both the parties.

If differences should arise between the said two arbitrators on the questions referred to them, the said arbitrators shall
select an umpire and the award to be given by the umpire shall be final and both the parties hereby agree that the award
so given by the umpire or arbitrators shall be binding on both the parties.

A reasonable time-limit may be fixed after consulting the arbitrators for the grant of the award by them and umpire if
appointed and the said time may be extended in consultation with the arbitrators or umpire if need be.

The provisions of the Arbitration and Conciliation Act, 1996 so far as applicable and as are not inconsistent or
repugnant to the purposes of this reference shall apply to this reference to arbitration.

Both the parties agree that they would co-operate and lead evidence etc. with the arbitrators so appointed as
expeditiously as possible and it is an express condition of this agreement, that if any of the parties non-co-operates or is
absent at the reference, the arbitrators would be at liberty to proceed with the reference ex parte.

The parties hereto agree that this reference to arbitration would not be revoked either by death of either party or any
other cause.

If the arbitrators or anyone of them as chosen under this agreement become incapacitated either by death or sickness or
other disability, the parties retain the right of nominating substitutes and no fresh agreement therefor would be
necessary.

It is an express stipulation that any award passed by the said arbitrators shall be binding on the parties, their heirs,
executors and legal representatives.

Having agreed to the above by both the parties, the said parties affix their signatures to this agreement this 9
th
day of
February, 2013 at Kolkata.

Signature I Signature II
10. Draft a Deed of Guarantee for the Performance of a Contract.

THIS DEED OF GUARANTEE made this 29
th
day of September, 2013 between Shri Avinash Aggarwal, son of Shri
Mahesh Aggarwal, resident of 36 Rafi Ahmad Kidwai Road, Kolkata 700 001, (hereinafter called "the
Guarantor"), which expression shall, unless repugnant to the context, include his heirs, legal representatives, assigns
etc. of the one part and Shri Sandeep Gattani, son of Gopal Gattani, resident of 41, Lake Town, Block B, Kolkata
700 056, (hereinafter called "the Principal), which expression shall, unless repugnant to the context, include his heirs,
legal representatives, assigns etc., of the other part.

WHEREAS BY AN AGREEMENT DATED 13
th
day of August, 2013, made between Shri Ravi Varma, son of Shri
Vikash Varma, resident of 12, Belgachia Main Road, Kolkata 700 058, therein referred to as "the Contractor", of
the one part and the Shri Sandeep Gattani herein referred to as "the Principal", of the other part, it was inter alia
agreed by and between the parties as follows:

(a) The Contractor will construct a Building on the main V.I.P. Road, on the land selected by the Principal;
(b) The Contractor will be paid a sum of Rs. 5,00,000/- plus taxes.

AND WHEREAS the said work was entrusted to the Contractor upon the Guarantor having agreed with the Principal
as to its guarantee of performance by the Contractor and to indemnify and keep indemnified the Principal against all
losses, damages, costs, charges and expenses arising out of performance or non-performance thereof. Now it is agreed
and declared by and between the parties as follows:

The Guarantor will see that the Contractor (unless relieved from the performance by operation of any clause of the
contract or by statute or by virtue of the decision of any tribunal or court of competent jurisdiction, shall carry out,
execute and perform the contract without any exception or reservation and in case he commits any breach thereof, the
Guarantor will indemnify and keep indemnified the Principal and his estate against all losses, damages, costs, expenses
or otherwise which he may suffer or otherwise incur by reason of any act, negligence, default or error in judgement on
the part of the Contractor in performing or non-performing the contract.

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In case of any dispute or difference as regards the quantum of such losses, damages, costs, charges or expenses, the
same shall be decided by reference to arbitration of one architect or engineer if the parties so agree or otherwise to two
architects or engineers, one to be appointed by each, whose decision shall be final and binding on all parties.

IN WITNESS WHEREOF, the parties hereto have hereunto set and subscribed their respective hands and seals the day,
month and the year first above-written.

Signed, sealed and delivered in the presence of :

1. Guarantor

2. Principal
11. Distinguish between lease and licence.

In a lease there is a transfer of interest in the premises whereas in case of licence there is no transfer of
interest
In Khalil Ahmed Bashir Ahmed vs. Tufelhussein Samasbhai Sarangpurwala the SC held that in order to
determine whether a document created a licence or a lease the real test is to ascertain the interest of the parties. If
the document creates an interest in the property entitling the transferee to enjoyment, then it is a lease. But if it
permits another to make use of the property without exclusive possession then it is a licence.

Licence Lease
It is a personal non-heritable right It is a heritable right in rem.
Creates no interest in the licensee Interest is created in the lessee
Non-assignable Usually assignable
Always permissible and normally revocable Permissive but not normally revocable
Not Exclusive user Exclusive user
Denial of grantors title does not result in forfeiture. Denial of lessors title results in forfeiture
Remedy of breach is damages Specifically enforceable
No notice necessary for termination Notice necessary for termination
Instrument granting right does not require registration Instrument granting right requires registration
Does not entitle licencee to sue strangers in his own
name
Lessee can sue in his own name
Licencee not liable for rents Liable
Licencee not liable for public nuisance Liable
12. Explain the components of a leave and licence agreement.

Leave and License Agreement are alternatives to lease deeds or tenancy agreements.
In a Leave and License Agreement the juridical possession of the premises is deemed to remain with the licensor
and the licensee is said to be in constructive possession of the said premises.
13. Draft an agreement for sale of immoveable property.

THIS AGREEMENT OF SALE executed on the 15
th
day of December, 2012 between Greenacre Holdings Limited,
a company incorporated within the meaning of the Companies Act, 1956 and having its registered office at 7/1
Ballygunge Park, Kolkata 700 019, (hereinafter called Vendor of the one part) and Divya Management Limited, a
company incorporated within the meaning of the Companies Act, 1956 and having its registered office at 21
Prafulla Sarkar Street, Kolkata 700 027 (hereinafter called the Purchaser of the other part)
(The expression "Vendor" and "Purchaser" wherever they occur in these presents, shall also mean and include their
respective heirs, executors, administrator, legal representatives and assigns).

WHEREAS the vendor is the sole and absolute owner of the property more fully set out in the Schedule hereunder.

AND WHEREAS it is agreed that the vendor shall sell and the purchaser shall purchase the said property for the sum
of Rs. 10,00,00,000 (Rupees Ten Crores only) free of all encumbrances.

NOW THIS AGREEMENT OF SALE WITNESSES AS FOLLOWS:

1. The price of the property more fully set out in the Schedule is fixed at Rs. 10,00,00,000 (Rupees Ten Crores
only) free of all encumbrances.
2. The purchaser has paid to the vendor this day the sum of Rs. 2,00,00,000 (Rupees Two Crores only) by way of
earnest money for the due performance of the agreement, the receipt of which the vendor doth hereby admit and
acknowledge.
3. The time for performance of the agreement shall be three months from this date, and it is agreed that time fixed
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herein for performance shall be the essence of this contract.
4. The purchaser shall pay to the vendor the balance sale price of Rs. 8,00,00,000 (Rupees Eight Crores only)
before registration of the sale deed.
5. The vendor agrees that he will deliver vacant possession of the property to the purchaser before registration of the
sale deed.
6. The vendor shall execute the sale deed in favour of the purchaser or his nominee or nominees as purchaser may
require.
7. The vendor shall hand over all the title deeds of the property to the purchaser or his advocate nominated by him
within 15 days from the date of this Agreement for scrutiny of title and the opinion of the vendor's Advocate
regarding title of the property shall be final and conclusive. The purchaser shall duly intimate the vendor about the
approval of the title within 10 days after delivering the title deeds to him or his Advocate.
8. If the vendor's title to the property is not approved by the purchaser, the vendor shall refund to the purchaser the
earnest money received by him under this Agreement and on failure of the vendor to refund the earnest money
within 15 days he shall be liable to repay the same with interest thereon at 15% per annum.
9. If the purchaser commits a breach of the Agreement, he shall forfeit the earnest amount of Rs. 2,00,00,000
(Rupees Two Crores only) paid by him to the vendor.
10. If the vendor commits a breach of the Agreement, the vendor shall not only refund to the purchaser the sum of Rs.
2,00,00,000 (Rupees Two Crores only) received by him as earnest money, but shall also pay to the purchaser an
equal sum by way of liquidated damages.
11. Nothing contained in paras 9 and 10 supra shall prejudice the rights of the parties hereto, to specific performance
of this Agreement of sale.

IN WITNESS WHEREOF the vendor and the purchaser have set their hands to the Agreement of sale the 15
th
day of
December, 2012 in the presence of the witnesses:

Witness Vendor

Witness Purchaser

ALL THAT piece of parcel of freehold land or ground containing by admeasuring 3916.67 square meters or
thereabouts (being a portion of the Sauparibaug Estate Scheme No. XXXI formerly of the Trustees for the
Improvement of the City of Bombay and subsequently of the Municipal Corporation of Greater Bombay) TOGETHER
WITH the buildings erections and structures erected and standing thereon situate at Dr. Earnest Bourges Road at its
junction with Parmar Guruji Marg in the City and Island and Registration Sub-Dristict of Bombay forming part of
Cadastral Survey No 2158/74 of Parel - Sewri Division and assessed by the Assessor and Collector of Municipal Rates
and Taxes under F Ward No. 619 (1-4) Street Nos. 33B, 33C and 33 Chamerbagwalla Road and bounded as follows,
that is to say: On or towards the North by Parmer Guruji Marg aforesaid, On or towards the East by a portion of the
property bearing C.S. No. 2158/74 of the Vendors, On or towards the South by portion of the property of Prakash
Chandra Mangaldas Verma bearing C.S. No.215/74 of Parel - Sewri Division and On or towards the West by Dr.
Earnest Bourges Road aforesaid.
14. Draft an agreement for sale of business and assignment of goodwill.

THIS INDENTURE made the 6
th
day of July, 2013 between Greenacre Holdings Limited, a company incorporated
within the meaning of the Companies Act, 1956 and having its registered office at 7/1 Ballygunge Park, Kolkata
700 019, (hereinafter called Vendor of the one part) and Divya Management Limited, a company incorporated
within the meaning of the Companies Act, 1956 and having its registered office at 21 Prafulla Sarkar Street,
Kolkata 700 027 (hereinafter called the Purchaser of the other part)
(The expression "Vendor" and "Purchaser" wherever they occur in these presents, shall also mean and include their
respective heirs, executors, administrator, legal representatives and assigns).

WHEREAS the said Vendor has been carrying on the trade and business of selling garments and other textile
articles, at premises 7/1 Ballygunge Park, Kolkata 700 019 under the name and style of Shyam Garments.

AND WHEREAS the said Vendor has contracted with the said Purchaser for the sale to him of all his stock-in-trade
and other assets and goodwill of the said trade of and the business in entirety as a going concern together with all book
debts and other debts and all rights and benefits of all pending contracts, orders, securities, etc., full particulars whereof
are contained in the books of the said business and all money due and payable to the said Vendor on account therefor
whether adjusted or unadjusted subject however to all contracts, orders and engagements which are still to be executed
or for which the said Vendor is otherwise liable; at and for the sum of Rs. 50,00,000 (Rupees Fifty lakhs only) upon
the terms hereinafter mentioned;

AND WHEREAS the said Vendor has delivered to the said Purchaser the books of account and other books relating to
the said business containing full particulars of the debts, respectively due and owing to and from the said Vendor and
also the particulars of the contracts and engagements to which he is liable in respect of the said business.
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NOW THIS DEED OF SALE WITNESSES that in pursuance of the said agreement and in consideration of the sum of
Rs. 50,00,000 (Rupees Fifty lakhs only) paid by the said Purchaser to the said Vendor (the receipt whereof the said
Vendor hereby admits and acknowleges), and also in consideration of the covenants and conditions thereunder
contained to be observed and performed on the part of the said Purchaser the said Vendor do hereby and hereunder
grant, convey, sell, transfer, assign and assure unto and to the use of the said Purchaser all that the trade or business
carried under the name and style of Shyam Garments at premises 7/1 Ballygunge Park, Kolkata 700 019 with
ALL beneficial interest and goodwill of the said Vendor, in the said trade and business of, etc., so carried on by him as
aforesaid, and also all the books and other debts now due and owing to him on account of the said trade and the
business and all securities for the same, and also all contracts and engagements and benefits and advantages thereof
which have been entered into with the said Vendor and also all the stock-in-trade goods, fixtures, articles and things
which, at the date of this deed, belong to the said Vendor on account of the said trade and business, and all the rights,
title and interest of the said Vendor to and in the said premises; TO HAVE AND TO HOLD the same to the said
Purchaser absolutely.

AND THAT THE SAID Vendor does hereby covenant with the said Purchaser that he, the said Vendor, will not at any
time hereafter, either by himself or in collaboration with any other person or persons, or as a partner or as a director of
any limited company carry on the said trade and business of selling garments and other textile articles, within a
radius of 100 miles of the said premises.

AND that the amount and particulars of the debts respectively due and owing to and from the said Vendor on account
of the said trade and business and the particulars of the contracts and engagements to which he is liable with respect to
the said trade and business, are correctly stated in the books of account and other books delivered by the said Vendor to
the said Purchaser.

AND further that the said Vendor will pay or cause to be paid all and every sum to the said trade and business in excess
of the amount or amounts which by the said books appear to be so due and owing.

AND furthermore that the said Vendor has good right, full power, absolute authority and title to grant, convey, sell,
transfer, assign and assure the trade or business of selling garments and other textile articles unto and to the use of
the said Purchaser in the manner hereunder indicated together with the benefit of the tenancy according to the nature
and tenure of the contract.

AND THIS INDENTURE ALSO WITNESSES that in pursuance of the said agreement in this behalf and in
consideration of the premises, the said Purchaser do hereby agree with the said Vendor that he, the said Purchaser, shall
and will from time to time and at all times hereafter execute and perform all outstanding contracts and orders and
engagements and/or otherwise save harmless, indemnify and keep indemnified the said Vendor and his estate and
effects against all losses, claims, demands, costs, charges and expenses as against the several sums of money which by
the said books appear to be due and owing from the said Vendor in respect or the said trade and business, and also from
and against the contracts and engagements to which by the said books the said Vendor appears to be now liable and or
performance or non-performance thereof.

AND THIS INDENTURE ALSO WITNESSES that the said Vendor do hereby irrevocably nominate, appoint and
constitute the said Purchaser as his attorney for him and in his name to do, execute and perform all acts, deeds, and
things as shall be necessary or requisite to carry on the said business as his successor and for that purpose to represent
him before all appropriate authorities and in all courts of law and to sue for, recover, realise and to give good valid
discharges for all moneys due and payable to him on account of or in connection with the said trade or business hereby
assigned and appropriate the same for his use and purposes.

IT IS FURTHER AGREED that the names of the parties hereto shall, unless inconsistent with the context, include as
well the heirs, administrators or assigns of the respective parties as the parties themselves.

IN WITNESS WHEREOF the Vendor and the Purchaser have set their hands to the Agreement of sale the 6
th
day of
July, 2013 in the presence of the witnesses:

Signed, sealed and delivered Greenacre Holdings Limited

Divya Management Limited
15. Draft a memorandum of mortgage by deposit of title deeds.

Memorandum that this 13
th
day of March, 2012, Mr. Anand Sharma, son of Mr. Vijay Sharma, resident of 43
Chowringhee Road, Kolkata 700 071 (hereinafter referred to as the mortgagor), as beneficial owner, has
deposited with Mr. Abhishek Sanganeria, son of Mr. Deen Dayal Sanganeria, resident of 33/1 NS Road, Kolkata
700 001, (hereinafter referred to as the mortgagee), the original title deeds comprised in the Schedule A hereto,
relating to the premises belonging to the said mortgagor and situated at Faridabad (more clearly described in Schedule
B hereto) with intent to create a charge thereon for securing repayment to the said mortgagee of the sum of
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Rs. 10,00,000 (Rupees Ten lakhs only) this day lent and advanced by the said mortgagee to the said mortgagor on
demand with interest for the same from this date at the rate of 12% per annum.

The said mortgagor do hereby undertake as and when required by the said mortgagee to execute and register at the
costs of the said mortgagor a legal mortgage in such form and containing such covenants and provisions as he may
reasonably require.

Dated this 13
th
day of March, 2012

Mortgagor

Mortgagee

SCHEDULE-I
DESCRIPTION OF THE TITLE DEEDS DEPOSITED

a) Indenture of Lease dated 10/01/1995 executed between Rajdhani Unnayan Kartripakkha and Mr. Anand Sharma.
b) Photocopy of final survey report issued by RAJUK dated 06/11/1994
c) Photocopy of the proposal sheet of Mutation Case No. 8089/03 dated 28/09/2003 and original copy of the DCR.
d) Ground Rent Payment Receipt No. G 378910.

SCHEDULE II
SCHEDULE OF THE MORTGAGED PROPERTY

All that piece and parcel of land measuring 5 Katha situated within District Dhaka, P. S. Uttara, Sub-Registry Office
Gulshan, Mouza Faidabad being Plot No. 51 (fifty one), Road-Lake Drive, Sector No. 7 (seven) of the layout plan
prepared by the Rajdhani Unnayan Kartripakkha alongwith all constructions and structures constructed or to be
constructed thereon with all other rights, interests, title, easements etc. attached or appertaining to the land.
16. Short note on English mortgage and mortgage by conditional sale.

English mortgage
The mortgagor binds himself to pay the money and transfers the property absolutely subject to the condition that the
property will be retransferred on payment of the mortgage money.

Mortgage by conditional sale
The mortgage is with a condition that in the event of failure to pay money the transaction is treated as sale. On
payment, the sale shall become void. Possession of the property shall remain with the mortgagee.
17. Draft a deed for surrender of lease.

THIS DEED OF SURRENDER OF LEASE executed on the 10
th
day of April, 2011, between Mr. Ram Kapoor son
of Mr. Atmaram Kapoor, residing at 41 Chowringhee Road, Kolkata 700 071, hereinafter called the Lessor of the
one part and
Ms. Priya Sharma, daughter of Mr. Shivraj Sharma, residing at 4 Lovelock Place, Kolkata 700 019, hereinafter
called the Lessee of the other part.

WHEREAS by an Indenture dated 5
th
August, 2005 made between the parties hereto and registered before the Sub-
Registrar, Kolkata, it was witnessed that the said Lessor, did in consideration of the rent thereby and thereunder
reserved and of the covenants and conditions to be observed and performed on the part of the said Lessee as therein
contained granted and demised by way of lease the property fully mentioned and described in the schedule hereto for a
term of 20 years.

AND WHEREAS such lease is in full force and virtue and all rents and conditions reserved by and contained
thereunder on the part of the Lessee to be paid, observed and performed by the said Lessee upto the date of these
presents.

AND WHEREAS the lessee was at all material times and is presently in possession of the property since the execution
of the lease.

AND WHEREAS for personal reasons and consideration, the said Lessee having desired to be relieved from any
further payment of such rent and performance of the covenants and conditions approached the said Lessor for a
surrender of the said lease and delivery of the possession of the property.

AND WHEREAS the said Lessor has agreed to accept from the said Lessee a surrender of the aforesaid lease of the
said premises.

NOW THE DEED WITNESSES that in pursuance of the said agreement and in consideration of a sum of Rs. 5,00,000
(Rupees Five lakhs only) being the token consideration paid by the said Lessor to Lessee, the said Lessee as beneficial
user of the said property do hereby give up and relinquish all his leasehold estate and interest in and surrender and
(26)

deliver possession to the said Lessor of the premises comprised in and by the said Deed of Lease. TO HOLD the same
as before execution of the lease by the Lessor. TO HOLD THE INTENT and object that the same shall stand
determined to all intents and purposes and that the residue of the said term of 10 years created by the said Deed of
Lease, and all other rights and interests of the said Lessee in the said premises under or by virtue of the said Deed shall
stand extinguished and merged in the reversion freehold and inheritance of the premises with immediate effect as if the
said lease was never granted nor intended.

AND THIS INDENTURE further witnesses that in consideration of the surrender of the lease which is accepted by the
Lessor, the said Lessor do hereby release and discharge the Lessee, his successor and estate from all claims, demands
and liabilities on account of future rent and or arising out of performance or non-performance or hereinbefore recited
Indenture of Lease.

IN WITNESS WHEREOF the parties above named have put their signatures the day and year above.

Signed, sealed and delivered
Lessee
Lessor

All that one Flat being No. 5/B, containing an area of 1258 square feet more or less on the fifth floor of the building
commonly known as Poonam being premises No. 5/2, Russel Street, P.S.- Park Street, in the town of Kolkata.
18. Draft a deed for lease of plant and machinery.

THIS DEED OF LEASE made this 29
th
day of September, 2011 between Shri Avinash Aggarwal, son of Shri
Mahesh Aggarwal, resident of 36 Rafi Ahmad Kidwai Road, Kolkata 700 001, (hereinafter called "the Lessor"),
which expression shall, unless repugnant to the context, include his heirs, legal representatives, assigns etc. of the one
part and Shri Sandeep Gattani, son of Gopal Gattani, resident of 41, Lake Town, Block B, Kolkata 700 056,
(hereinafter called "the Lessee), which expression shall, unless repugnant to the context, include his heirs, legal
representatives, assigns etc., of the other part.

THIS DEED OF LEASE FOR PLANT AND MACHINERY WITNESSES AS FOLLOWS:

LEASE: The Lessor hereby agrees to lease to Lessee and the Lessee hereby agrees to take on Lease from Lessor,
subject to the terms of this Lease Agreement (hereinafter referred to as the "AGREEMENT"), plant and machineries
(hereinafter referred to as the "EQUIPMENT") described in the Schedule annexed hereto.

PERIOD: The Lessee shall take the equipment for its use on lease for the term to commence from the date of payment
by the Lessor to the supplier and to terminate at the end of 36 months from the date of such commencement. The
period of lease may be extended for such period and on such terms and conditions as may be agreed upon by and
between the parties hereto. (Subject to the concurrence of Lessor's Bankers).

RENTAL: In consideration of the above, the Lessee shall pay to the Lessor, Lease rent at the rate of Rs. 25,000/- per
month, for the entire period of the Lease. Such rent shall be payable by the Lessee to the Lessor's [designated Bankers
Standard Chartered Bank for and on behalf of the Lessor] within seven days of the same becoming due and payable.
The lease rent shall be due and payable on the first day of each calendar month, commencing from the calendar month
in which the period of lease commences, provided that the lease rent for the calendar month in which the period of
lease commences shall become payable on the commencement of the lease period. Lessee will pay on demand as late
charges, an amount equal to two per cent (2%) per month of each instalment of lease rent or part thereof that remains
unpaid for a period of more than seven (7) days. It is expressly understood by the parties hereto that time shall be the
essence of this Agreement, in so far as it relates to the obligations or commitments of the lessee.

WARRANTIES: The Lessee has made the selection of the Equipment based upon its own judgement prior to the
purchase thereof by the Lessor and expressly declares that it has not relied upon any statements or representations
made by Lessor, makes no express or implied warranties including those of merchantability or fitness for particular use
of the Equipment and hereby disclaims the same. The Lessor shall not be responsible for any repairs, service or defects
in the Equipment or the operation thereof. However, the Lessor agrees that Lessee shall be entitled to the benefits of
the manufacturer's warranties in respect of the Equipment.

TITLE, IDENTIFICATION, OWNERSHIP OF EQUIPMENT: No right, title or interest in the Equipment shall
pass to Lessee by virtue of these presents. Conditioned upon Lessee's compliance with and fulfilment of the term of
conditions of this Agreement, the Lessee shall have the right to have and retain possession and use of the Equipment
for the full term of lease including the extended term if agreed to. Lessor may require plates or makings to be affixed to
or placed on the Equipment, indicating Lessor's interests therein (and the interests of its Bankers). Lessor and Lessee
hereby confirm that their intent is that the Equipment shall at all times remain the property of the Lessor. Lessee also
agrees and undertakes not to sell, assign, sublet, pledge, hypothecate or otherwise encumber or suffer a lien upon or
against any interest in this Agreement or the Equipment, or to remove except for the purposes of repairs with prior
intimation to the Lessor the Equipment from the factory or office site where originally put to use or allow any third
(27)

person to use the equipment without the prior consent of the Lessor in writing.

The equipment hereunder leased, will be delivered by the manufacturers/ suppliers to the location specified by Lessee.
Lessor shall not be responsible for any damage incurred to the Equipment during delivery. Lessor will request the
manufacturers/suppliers to effect delivery on or before the date of commencement of the rentable, but if for whatever
reasons, delivery is not affected by the manufacturers/suppliers by the date, lessor shall not be liable for any loss
suffered by the Lessee thereby. Lease rentals shall be deemed to commence from the date of disbursement for the
actual purchase made with the consent of the lessee.

INDEMNITY: Lessee agrees to comply with all laws, regulations and orders relating to the possession, operation, and
use of the Equipment and assumes all risks and liabilities arising from or pertaining to the possession, operation or use
of the Equipment. Lessee does hereby agree to indemnify and keep indemnified and hold safe and harmless the Lessor
from and covenants and undertakes to defend Lessor against any and all claims, costs, expenses, damages and
liabilities whether civil or criminal, of any nature whatsoever, arising from or pertaining to the use, possession,
operation or transportation of the Equipment. Any fees, taxes or other lawful charges paid by Lessor upon failure of
Lessee to make such payments, shall become immediately due from Lessee to make such payments, shall become
immediately due from Lessee to Lessor. Lessee further covenants and undertakes to indemnify and keep indemnified
the Lessor against loss of Equipment by seizure by any person other than the Lessor for any reason whatsoever, or
resulting from any form of legal process initiated by any person other than the Lessor, provided that such indemnity
shall not cover such loss as arises out of any neglect or default on the part of the Lessor. Lessee further agrees to
indemnify and keep indemnified the lessor against all risks and liabilities whether civil or criminal, arising from the
possession, use, operation or storage of the Equipment and for injuries or deaths of persons or damage to property
arising from the above.

USE, INSPECTION: Lessee will cause the Equipment to be operated in accordance with manufacturers' manuals or
instructions, if any, and in so far as applicable by competent and duly qualified personnel only and in accordance with
applicable Government regulations, if any, and for business purposes only. Lessor shall have the right from time to
time during the normal business hours on any working day to enter upon Lessee's premises or elsewhere after prior
notice for the purpose of confirming the existence, condition and proper maintenance of the Equipment.
REPAIRS, LOSS AND DAMAGE: During the term of the Lease and any renewal thereof, Lessee, at its own cost and
expenses will keep all Equipments in good repair, condition and working order and shall furnish all parts, mechanisms,
devices and servicing required thereof. All such parts, mechanisms and devices shall immediately be deemed part of
the Equipment for all purposes hereof and shall become the property of the Lessor. In the event, any item of Equipment
is lost, stolen or destroyed or damaged beyond repair for any reason, Lessee shall promptly pay the Lessor the
instalments of lease rentals then remaining unpaid less insurance claims received by Lessor, in respect of insurance
effected in pursuance of this Agreement, whereupon Lessor will transfer to Lessee, without recourse of warranty, all of
Lessor's right, title and interest, if any, in such items. If, however, the insurance claim received by the Lessor exceeds
the amount of unpaid rentals, the Lessor shall forthwith pay the difference to the Lessee.

INSURANCE: Lessee shall obtain and maintain for the entire term of this Agreement at its own expense,
comprehensive insurance against loss or destruction or damage to the Equipment including without limitations
destruction or loss by fire, theft and such other risks or loss as are customarily insured against on the type of Equipment
leased hereunder and by businesses in which Lessee is engaged and in such amounts as shall be satisfactory to lessor,
provided however that the amount of insurance against loss or destruction or damage to the Equipment shall not be less
than the greater of the full replacement value of the Equipment or the instalments of lease rentals then remaining
unpaid hereunder plus any renewal options entered into pursuant to this Agreement. Each insurance policy will name
Lessee as insured and note Lessor's (and its Bankers') interests as loss payee. Lessee shall furnish to Lessor a certificate
of insurance or other satisfactory evidence that such insurance coverage is in effect.

FURTHER ASSURANCE:
1. During the term of this Agreement, Lessee shall provide if so asked for by Lessor annual audited accounts of the
Lessee.
2. Lessor hereby covenants that the Equipment is the absolute property of the Lessor and undertakes not to sell or
transfer the same to any party except as to hypothecate, mortgage or create a charge in favour of a Bank or
Financial Institution. The Lessor shall inform the Lessee of any such mortgage or hypothecation.
3. Lessee irrevocably agrees that the lease rentals will be increased by any incremental taxes, if any, whether Sales
Tax or Excise Duties or any other related and consequential charges, if any, levied on this transaction now or
hereafter as also by any increase in purchase price of the asset in the intervening period between placement of the
order and its acceptance and the eventual delivery of the Equipment.
4. Lessee further irrevocably stipulates that at no time during the period of this lease agreement will the Lessee
attempt to capitalise the leased asset on Lessee's balance sheet and Lessee and Lessor irrevocably agree that
ownership of the Equipment during the tenure of the lease as specified herein and inclusive of any renewal options
that the parties hereto may concur to indisputably vests with the Lessor.
5. The Lessor does hereby agree to indemnify and keep indemnified and hold safe and harmless the Lessee from and
against any loss or damage caused to or suffered by the Lessee on account of any action taken by the Bank or
Financial Institution for non-satisfaction or breach of the conditions of the loan granted by the Bankers to the
(28)

Lessor. In case of Lessor's failure to make payment of principal and/or interest of the loan and on being called
upon by the Bank or Financial Institution to pay to them all or any instalments of rental and the Lessee making
such payment the Lessor agrees that such payment to the Bankers or Financial Institution made by the Lessee of
the sums due under this Agreement, shall be considered as having been paid to the Lessor, towards the Lessor's
dues hereunder. In that event, the Bank shall have no right of recourse to possession of Equipment so long as the
Lessee meets with lease rental payments falling due under this Agreement.
6. The Lessor hereby agrees to inform its Bankers about this arrangement and obtain their confirmation to the same.

SURRENDER: Upon expiration or earlier termination of the lease, Lessee shall deliver to the Lessor the said
Equipment at such a place as Lessor may specify in good repairable condition and working order, normal wear and tear
resulting from the proper use of the Equipment and damage by fire not caused by the negligence of the Lessee shall be
excepted.

EVENTS OF DEFAULT: An event of default shall occur hereunder if Lessee:
1. fails to pay any instalment of lease rentals or part thereof or other payment required hereunder when due and such
failure continues for a period of 10 days after written notice is sent from Lessor; or
2. fails to perform or observe any other covenant condition or agreement to be performed or observed by it hereunder
or breaches any representation or provision contained herein or in any other document furnished to the Lessor in
connection herewith and such failure or breach continues unremedied for a period of ten days (if such breach is
capable of being remedied within ten days) after written notice is sent from the Lessor; or
3. without Lessor's consent, attempts to remove (except for repairs), sell, transfer, encumber, part with possession or
sublet any item of Equipment; or
4. shall commit an act of bankruptcy or become insolvent or bankrupt or make an assignment for the benefit of
creditors, or consent to the appointment of a Trustee or Receiver or either shall be appointed for Lessee or for
substantial part of its property without its consent, or bankruptcy, reorganisation or insolvency proceedings shall
be instituted by or against Lessee; or
5. shall suffer an adverse material change in the financial condition from the date hereof, and as a result thereof
Lessor deems itself or any of its equipment to be insecure; or
6. shall be in default under any other agreement at any time executed with Lessor.

REMEDIES: Upon the occurrence of any default and at any time thereafter the Lessor would declare all future rentals
due and to become due hereunder for the full term of the lease immediately due and payable and on such declaration
being made by Lessor, Lessee shall forthwith provide to the Lessor the present value of the said sums due discounted at
the rate of 12% per annum and upon Lessee failing to make the said payment within 30 days thereof Lessor may in its
discretion do any one of the following:
(a) Take action for recovery as liquidated damages for loss of bargain and not as penalty, of any amount equal to all
unpaid lease rental payment which in the absence of a default would have been payable by Lessee hereunder for
the full term thereof plus interest thereon at the rate of 2% p.m. for the period until receipt of the said amount;

(b) Upon notice to Lessee terminate this Agreement and all Schedules executed pursuant hereto and forfeit the
amounts paid by Lessee by way of rentals and demand the Lessee to return all equipment to Lessor at Lessor's
own risk and expenses in the same condition as delivered, ordinary wear and tear and damage by fire not caused
by the negligence of Lessor excepted, at such location as the Lessor may designate and upon failure of Lessee to
do so within 14 days from the date of demand, enter upon premises where such Equipment is located and take
immediate possession of and remove the same, all without liability to Lessor or its Agent for such entry or for
damage to property or otherwise. Lessor may detach and dismantle the Equipment from any part of the freehold or
process machinery to which it may be affixed without the written permission of Lessee;

(c) Sell all the Equipments at public or private sale or lease to others with 7 days' Notice on account and at the risk of
Lessee and appropriate the net sale proceeds or realisation of rental towards the present value of all the future
rentals declared to be immediately due and payable at the rate of 12% per annum as aforesaid and to recover from
the Lessee the shortfall or deficit together with interest thereon at the rate of 2% p.m. but the Lessor shall not in
any such action or for duty to account to Lessee for such action or for any surplus realised by the Lessor by sale or
lease.

(d) The remedy referred to hereinabove is intended to be in addition to any other remedy available to Lessor at law
provided however that on the Lessee making payment to the Lessor at any time before action under Clauses (a) or
(b) above taken by Lessor of the present value of all future lease rentals as provided herein before, the Lessee shall
retain all the equipment leased hereunder for its own use and the Lessor further undertakes to transfer all its title
and interest on the said Equipment to the Lessee on receipt of payment as referred to hereinabove.

WAIVER: Any expressed or implied waiver by the Lessor of any default shall not constitute a waiver of any other
default by Lessee or a waiver of any of Lessor's right. All original rights and powers of the Lessor under this
Agreement will remain in full force, notwithstanding any neglect, forbearance or delay in the enforcement thereof, by
the Lessee of this Agreement shall not be deemed as waiver of any continuing or recurring breach by the Lessee of this
Agreement.

(29)

NOTICES: Any notices or demands required to be given herein shall be given to the parties hereto in writing and by
post or by hand delivery at the address herein set forth or to such other addresses as the parties hereto may hereafter
substitute by written notice given in the manner prescribed herein above.

This Agreement and other contracts executed between the parties hereto pursuant to this Agreement cannot be
cancelled or terminated except as expressly provided herein. Lessee hereby agrees that Lessee's obligations to pay all
lease rentals and any other amounts owing hereunder shall be absolute and unconditional. This Agreement cannot be
amended except in writing and shall be binding upon and to the benefit of the parties hereto their permitted successors
and assigns.

The captions in this Agreement are for convenience only and shall not define or limit any of the terms hereof.

ARBITRATION: All disputes, differences, claims and questions, whatsoever, which shall arise either during the
subsistence of this Agreement or afterwards between the parties and/or their respective representatives touching these
presents or any clause or thing herein, contained or otherwise in any way relating to or arising from these presents shall
be referred to the arbitration of two Arbitrators, one to be appointed by each party to the dispute and such arbitration
shall be in accordance with and subject to the provisions of the Arbitration and Conciliation Act, 1996 or any statutory
modification or reenactment thereof for the time being in force.

By execution hereof, the signor hereby certifies that he has read this Agreement, including the Schedule hereto and that
he is duly authorised to execute this Agreement on behalf of the Lessee.

IN WITNESS WHEREOF each of the parties hereto has caused this agreement to be executed in duplicate on this
29
th
day of September, 2011.


1. Lessor

2. Lessee
SCHEDULE
DETAILS OF MACHINERY

SL.NO PARTICULARS QTY
01. KL-2- AUTO MATCH MAKING MACHINE 1 NO
02. VEESON MAKE BOILER 1 NO
03. SHRINK WRAPPING MACHINE 1 NO
04. OUTER MULTILINE FEEDING SYSTEM 1 NO.
19. Draft an agreement for assignment of business debts.

THIS DEED OF ASSIGNMENT made this 9
th
day of August, 2012 between Mr. Dipak Ghosh, son of Mr. K. C.
Ghosh, resident of 1A Heysham Road, Kolkata 700 072 (hereinafter called "the assignor") of the one part, and Mr.
B. Bhattacharya, son of Mr. Kiron Bhattacharya, resident of 43 Golf Green, Kolkata 700042 (hereinafter called
"the assignee") of the other part.

WHEREAS the assignor has, for some time been carrying on the business of selling carpets in the course whereof the
several persons whose names, addresses and occupations are mentioned in the Schedule appended hereto, have become
lawfully debtors to him and so for the several sums of money set opposite to their respective names;

AND WHEREAS the assignor has contracted with the assignee for the absolute sale to him of the said business debts
for the sum of Rs. 50,00,000/- (Rupees Fifty Lakhs only).

NOW THIS DEED WITNESSES that in consideration of the sum of Rs. 50,00,000/- (Rupees Fifty Lakhs only) now
paid to the assignor by the assignee (the receipt whereof the assignor hereby acknowledges), the said assignor, as
beneficial owner, does hereby transfer, sell and assign unto and to the use of the said assignee, all the several said
debts, and sums of money specified in the said Schedule which are now due and owing to the assignor to have and to
receive them for his absolute use and benefit with absolute power, authority and liberty to enforce payment thereof by
suit or otherwise and that the assignor does hereby covenant with the assignee that all the several debts are lawfully due
to him and the parties by whom they are payable are alive, and further that he has not entered into any arrangement
with any of them and that the assignor shall at all times hereafter do, execute and perform all such and other acts,
deeds, things, or writings as may be reasonably required for realization of the said debts, and further and better and
more effectively transferring and/or assuring them or any of them in favour of the assignee.

IN WITNESS WHEREOF the assignor and the assignee do hereto affix their signatures on the day, month and the year
above mentioned at Kolkata.

Witness: (Assignor)

(30)

Witness: (Assignee)

Schedule

Sl
No.
Name of the person Address Amount due

20. What are the conditions for assignment of trademarks?

Section 37 of the Trademarks Act, 1999 deals with the power of registered proprietor of a trademark to assign his
rights in trademark
Further Section 38 provides that a registered trademark shall be assignable and transmissible, whether with or
without goodwill of the business concerned and in respect either of all goods or services in respect of which the
mark is registered or some of those goods or services
An unregistered trademark cannot be assigned without goodwill of the business concerned.
21. Explain the requirements relating to dissolution of a partnership firm.

Dissolution may take place with the intervention of court or without such intervention
Dissolution without Courts intervention may take place by
Agreement between the partners
Adjudication as insolvent of all the partners or all but one
Business of the firm becoming unlawful
By expiry of the term fixed
By death of a partner
By insolvency of a partner
By notice in writing in case of partnership at will.
22. Draft a notice in newspapers for dissolution of partnership.

Notice is hereby given that the partnership lately subsisting between us the undersigned, ABC & Co., carrying on
business as a firm of Chartered Accountants, at 41 Chowringhee Road, Kolkata 700 071, under the style or firm
of ABC and has this day been dissolved by mutual consent. All debts due to and owing by the said late firm will be
received and paid by the said A, who will continue to carry on the said business under the same style and firm.

Dated: Sd/- A, B and C
23. Draft a deed for revocation of trust.

THIS DEED is made on the 3
rd
day of June, 2013 by Mr. A. Prasad, son of Mr. Bhanu Prasad, resident of A43,
Salt Lake, Kolkata 700 064 (hereinafter called "the Settlor") of the one part AND Ms. R. Agarwal, daughter of
Mr. Shiv Agarwal, resident of 45 Park Street, Kolkata 700 071 (hereinafter called "the Trustee") of the other part.

WHEREAS by a Deed of Trust dated 5
th
March, 2002 the Settlor transferred him property specified therein to the
Trustee upon trust to sell the same and with the proceeds of the sale to pay the debts due from the Settlor to the several
creditors named in the said deed;

AND WHEREAS the trust created as aforesaid has not yet been communicated to any of the aforesaid creditors;

AND WHEREAS the Settlor now desires to revoke the said trust and to make other arrangements for the discharge of
his aforesaid debts.

NOW THIS DEED WITNESSES that the Settlor hereby revokes the trust created by the aforesaid deed of trust.

IN WITNESS WHEREOF parties have signed this deed on the 3
rd
day of June, 2013.


1. Settlor

2. Trustee
24. Distinguish between revocable and irrevocable POA.

A POA executed in favour of a person can always, at the discretion of the donor thereof, be revoked
If a donee has an interest in the matters covered by the POA, which forms the subject matter thereof, the POA in the
absence of express contract cannot be terminated to the prejudice of such interest. A POA executed, in which the
done himself as an interest, is irrevocable
(31)

Such irrevocable POA is executed in favour of the financial institutions by a company who offer financial
assistance to the latter.
Such a POA also requires registration.
A power of attorney is revocable if the principal reserves the right to revoke the power at any time. Once the
principal revokes the power, the agent can no longer act on the principal's behalf. But a power of attorney can be
made irrevocable if the document includes a provision that specifically states that the principal gives up the right of
revocation or otherwise indicates that the power is irrevocable. As a practical matter, an irrevocable power of
attorney is rarely used and is typically limited to a specific purpose.
The power of attorney becomes irrevocable only when it is coupled with interest namely consideration. Where a
power of attorney is coupled with interest, as stated above the stamp duty would be equal to conveyance. All other
power of attorneys are revocable.
Irrevocable powers of attorney are relatively rare, though, because they essentially operate like any other power of
attorney, but are not unilaterally revocable by the principal. An irrevocable power of attorney can have a sunset
provision, ending the assignment on a particular date or condition, but remains irrevocable until that time unless the
parties agree to terminate.
25. Draft a special POA to be filed with RoC at the time of incorporation of a company.

Shri B. C. Mukherjee, Secretary, to represent us before the Registrar of Companies in connection with the
incorporation of our Company under the name of BFIL Securities Limited. He is authorised to make any
modification, alteration, correction, additions, in the Memorandum and Articles of Association and other documents
filed with the Registrar of Companies for the registration of the Company. He is also authorised to collect the
certificate of incorporation.

Date: Directors

Accepted.

S/o
Secretary
26. Explain the Validity of pre-incorporation contracts.

Contracts before incorporation
Before incorporation of a company, promoters enter into a contract to acquire some property / right
However company is not bound by its pre-incorporation contracts
The legal position is that since presence of two consenting parties is necessary for a contract, and the company
before incorporation is a non-entity, the promoters cannot act as agents for the company, which is yet to come into
existence
It cannot also ratify the same
But the company can enter into a new contract known as novation of promoters contracts.
27. Draft an agreement by a company for adopting a pre-incorporation contract.

This Agreement made at New Delhi on this 6
th
day of February, 2012 between Shri Ravi Varma, son of Shri Vikash
Varma, resident of 12, Belgachia Main Road, Kolkata 700 058 of the first part, Shri Sandeep Gattani, son of Shri
Gopal Gattani, resident of 54, VIP Road, Kolkata 700 054, of the second part and AB & Co. Ltd., a company
incorporated under the Companies Act, 1956 and having its registered office at 36 Rafi Ahmad Kidwai Road,
Kolkata 700 001 (hereinafter referred to as 'the company') of the third part.

Whereas after the execution of the contract on 10
th
January, 2012 (hereinafter referred to as "the said contract")
between Shri Ravi Varma, the vendor, and Shri Sandeep Gattani on behalf of the company, the said company AB &
Co. Ltd. has been incorporated under the Companies Act, 1956.

Now it is hereby agreed by and between the parties hereto as under:

The said contract dated 10
th
January, 2012 is hereby adopted by the company and shall be binding on the said Shri
Ravi Varma and on the company in the same manner and shall take effect in all respects as if the company had been in
existence at the date of the agreement.

Shri Sandeep Gattani who actually signed on behalf of the proposed company shall be discharged from all liability
under the said contract as the company had adopted and ratified the said contracts.

In witness whereof the parties hereunto have put their hands and signatures and the company has caused its common
seal affixed in the presence of Shri A and Shri B, two directors who have set their respective hands and signatures the
day and year first herein above written in terms of the Resolution passed in its Board of Directors in their meeting held
on 5
th
February, 212.

Witnesses:
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1. Director
2. Director

Signatures of Ravi Varma .
Sandeep Gattani .

28. Draft an underwriting agreement.

Shree Securities Limited
16 Sarat Bose Road, Kolkata 700 024

Ref. No. 26/2012 Date: 5
th
February, 2013

The Board of Directors
ABC Limited
34, AJC Bose Road
Kolkata 700 026

Dear Sir(s),

Re: Proposed Public Issue of Equity Shares

We, hereby record the terms on which we (hereinafter referred as "underwriters") have agreed to underwrite 10,00,000
Equity Shares of the aggregate nominal value of Rs 10/- per share out of the total issue of 20,00,000 Equity Shares to
be offered to the public at Rs. 150/- each for cash at par.

1. The prospectus as approved by the underwriters will be delivered to the Registrar of Companies, West Bengal,
on or before 15
th
March, 2013 for registration in accordance with the provisions of Section 60 of the Companies
Act, 1956. Sufficient number of copies of the prospectus and application forms shall be printed and made available
to the underwriters, brokers and members of the public who intend to apply for the Equity Shares as soon as
possible thereafter.

2. Underwriters shall be entitled to arrange sub-underwriting with respect to their respective commitments for their
own account on terms to be arranged at their discretion with their sub-underwriters.

3. If by the closing date of the subscription list or such earlier date as may be agreed to by the underwriters, the
Equity Shares offered to the public are not subscribed in full by the public and the application money payable in
respect thereto is not received by you, you will within 14 days or such extended time as may be agreed to by the
underwriters, notify the underwriters in writing as to the amount/number of Equity Shares which have not been so
subscribed. The underwriters shall within 21 days after the receipt of such intimation apply for and subscribe such
unsubscribed amount/number of Equity Shares and pay or procure to be paid the money payable on application in
respect of such Equity Shares in proportion that the amount underwritten by each of them bears to the total amount
of the issue.

4. In determining the amount/number of Equity Shares to be taken up by the underwriters the following factors shall
be taken into consideration:
(a) In no circumstances will the underwriters be liable to take up Equity Shares more than the amount
underwritten by them.

(b) All applications made before the closing of the subscription list by the underwriters, or on forms of
application bearing the stamp of the underwriters, and not withdrawn in the meantime shall be taken into
account in pro tanto reduction of the liability of the underwriters under this underwriting agreement.

(c) After scrutiny of the applications received, the total shortfall shall first be allocated among all persons who
have underwritten the issue and who have not fulfilled their quota, in proportion to the amount underwritten
by each of them.

(d) Credit shall be given to each underwriter who has not fulfilled his quota in relation to applications made by
members of the public independently proportionately to the amount underwritten by each under writer,
any amount or such credit being in excess of the commitment of any underwriter being similarly shared
proportionately by the others.

5. Subject to the terms of the prospectus, you will allot Equity Shares for which applications have been received as
soon as possible and despatch Equity Share Certificates within six months of such allotment.

6. In consideration of the underwriting you will, within 14 days from the date on which we shall have fulfilled our
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obligation, pay the underwriters a commission at the rate of two and a half per cent on the issue of the amount/
number of Equity Shares underwritten by the underwriters.

7. Notwithstanding anything stated above the underwriters shall have the option to be exercised by them at any time
prior to the date fixed finally for publication of the "Announcement" of terminating underwriting arrangement in
the event of a complete breakdown or dislocation of business in the financial markets of the cities of Calcutta,
Bombay, Madras and Delhi due to war, insurrection, civil commotion or any other serious or sustained or political
or industrial disturbances or if the whole present basis of Stock Exchange prices in any such city should undergo
substantial change through the occurrences of such catastrophe or similar event at present not foreseen. In the
event of underwriters exercising such option they shall be released from all obligations arising out of the
underwriting agreement.

8. Our offer is valid subject to your subscription list opening on or before 1
st
April, 2013.

Please acknowledge receipt of this letter and intimate to us your acceptance of the terms and conditions mentioned
above.

Thanking you,

Yours faithfully,

For Shree Securities Limited
29. Draft a letter of offer to the prospective Company Secretary.

Welcomgroup Hotels Private Limited
8/2 Kiron Shankar Roy Road
Kolkata 700 027
Ref. No. 23/2012 Date: 1
st
April, 2012

Mr. B. C. Mukherjee
5/2 M G Road
Kolkata 700 001

Dear Sir,

I have been directed to advise you that the Board of Directors of the company have decided to appoint you as Secretary
of the company and the said assignment is hereby offered to you. You are requested to join the service of the company
on or before 15
th
April, 2012 and contact the undersigned so that you may be introduced to the concerned persons
before you start functioning.

1. You will be considered to have been appointed with effect from the day you actually join duty.

2. The company shall pay to you a monthly basic salary of Rs. 50,000/- per month in the time scale of pay of Rs.
800/- per month with other allowances as are applicable to other employees of the company in the same time scale
of pay,

3. You will enjoy other benefits like the medical expenses reimbursement, leave travel allowance, bonus etc. as may
be permissible under the company's service rules.

4. You shall be allowed casual leave/sick leave/festival holidays, weekly off days and earned leave as per rules of the
company.

5. You will be on probation for a period of six months and on your services during the said probation period being
found satisfactory the Board of Directors may consider you for confirmation in the said post.

6. During the period of your probation, your services may be terminated by the company without any notice and you
may also leave the service of the company at twenty-four hours' notice. On confirmation, however, the contract of'
employment may be terminated by either party by giving the other, thirty days' written notice or paying thirty days'
salary in lieu thereof.

7. The company may terminate your services even after confirmation without giving you any notice if you are found
by the Board of Directors of the company not performing your assigned duties and your statutory duties properly
and to the satisfaction of the Board.

8. As Company Secretary you shall be exclusively responsible: (a) for complying with all the provisions of the
Companies Act and the various Rules framed thereunder; (b) maintaining all the statutory and non-statutory
essential registers, books, files, records, papers etc.; (c) preparing and filing with the Registrar of Companies and
other concerned authorities the required reports, returns, documents, papers etc. complete in all respects and within
(34)

the prescribed periods of time; and (d) for carrying out the instructions, directions and advice of the Board of
Directors of the company given to you from time to time.

9. You shall devote your whole time and attention to the work of the company during your tenure as Company
Secretary and shall work with due diligence and using your abilities to your best. You shall obey the orders of the
Board of Directors of the company. You shall do your best to promote the interest of the company and shall
faithfully serve the company.

10. You shall not disclose to any unauthorised person during your employment as Secretary of the company an
information obtained by you in relation to the business and corporate policies of the company with special
reference to the company's policy regarding the issue of rights shares, bonus shares, time and quantum of payment
and/or declaration and payment of dividends from time to time.

Please convey your acceptance of the offer and the terms and conditions attached thereto by signing the carbon copy of
this letter and returning the same to the company within a period of seven days from the receipt hereof.

Thanking you.

Yours truly

For Welcomgroup Hotels Private Ltd.

(A. B. Das)
Managing Director

I accept the above offer of the post of Company Secretary with all the terms and conditions attached thereto and shall
join on..

(B. C. Mukherjee)
Company Secretary
30. Explain the various points to be kept in mind while drafting petitions / applications.

They should contain all the particulars required to be alleged by law
They should state all the material facts
They should be precise as well as concise
They should state the grounds on which they are based
Certain petitions / applications are also required to be supported with an affidavit
They should contain the name of the court, number and cause title of the suit followed by names of the parties and
provisions of law under which it is made.
31. Explain the various considerations before drafting a written statement.

Denial of the averments contained in the plaint / petition in case any para is not denied specifically it is
presumed to have been admitted by the defendant
Submit the facts which are in the nature of defence and present them in a concise manner
Attach all relevant correspondence, invoice, challan etc.
After drafting of the reply, the attorney is required to sign the same
The written statement must be supported by an affidavit
If any point is not included in the plaint no evidence could be let on that point
While pleading against fraud or misrepresentation the party must state the particulars in the pleadings
The prayer clause should be drafted properly.
32. What do you mean by counter affidavit?

Pleadings filed by the defendant in answer to the claims set out by the plaintiff in the form of an affidavit and / or
supported by an affidavit is called counter affidavit.
The rule of pleadings as are applicable to a written statement, apply to a counter affidavit as well.
Filing of counter affidavit is mandatory when the defendant is so required by the Court.
Failure of defendant to do so, will not entitle him, as of right, thereafter to file it.
33. Short note on writ of mandamus and writ of quo warranto.

Writ of Mandamus
Expression mandamus means a command
A command issued to direct any person, corporation, inferior court or government authority to do a particular
specified thing
The said thing is in the nature of a public duty
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Can be issued against any public authority
Does not lie against President or Governor or private party.

Writ of Quo Warranto
It is to pray for an inquiry into the legality of the claim which a person asserts to an office or franchise and to oust
him from such a position
It is issued when
the office is of a public and of a substantive nature;
the office is created by a Statute or by the Constitution itself; and
the respondent must have asserted his claim to the office. It can be issued even though he has not assumed
charge of the office.
34. Draft a special leave petition.

CIVIL APPELLATE JURISDICTION

IN THE MATTER OF:

Special Leave Petition under Article 136 of the Constitution of India

AND

IN THE MATTER OF:

ABC Company Ltd., a company registered under the Companies Act through Mr. J. Singh, Managing Director, the
company having its registered office at 15 M G Road, Kolkata 700 001.
Petitioner
Versus
1. Mr. R. Tandon, son of Mr. K. N. Tandon, resident of 6/4 Alipore Road, Kolkata 700 020
2. Union of India through the Secretary, Ministry of Corporate Affairs, New Delhi.
3. The Registrar of Companies, West Bengal
Respondents

May it please the Hon'ble Chief Justice of India and His Lordship's Companion Judges of the Supreme Court.

The petitioner-appellant-(company)

MOST RESPECTFULLY SHOWETH:

1. That the petitioner is a company duly incorporated under the provisions of the Companies Act, having its
registered office at 15 M G Road, Kolkata 700 001 and is challenging by way of this Special Leave petition the
judgment and order of the High Court of West Bengal at Calcutta dated in proceeding under Section 433 of the
Companies Act.

2. That the questions of law involved in this matter are as follows:
(a) Whether the High Court has fallen into error in taking the view that it is just and equitable that the
petitioner company should be wound up?
(b) Whether it would be a good ground for winding up of the petitioner-company that two of its directors are not
an speaking terms and there is, thus, a deadlock in the administration of the affairs of the company.

3. That respondent No. 1 herein had filed a petition before the Hon'ble High Court of West Bengal at Calcutta
seeking the relief of winding up of the petitioner company which petition was contested by the petitioner-company
inter alia on the grounds that the company should not be wound up.

4. That the High Court after hearing the parties through their respective counsel allowed the said petition, holding
that sufficient grounds had been made out for winding up of the petitioner-company (or any other relief claimed in
the petition before the High Court).

5. That the aforesaid findings and the final judgement/order of the High Court are assailed on the following,
amongst, other.

GROUNDS
5.1 That the aforesaid Order of High Court of West Bengal at Calcutta is erroneous.

5.2 That the said High Court did not take into account that the petitioner company has full intention to carry on its
business.

5.3 That an opportunity of being heard was not given to the petitioner company.

That the petitioner has not filed any appeal or other proceeding relating to this matter in this Hon'ble Court or any other
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Court.

RELIEF

The petitioner-company accordingly prays that this Hon'ble Court be pleased to grant Special Leave to Appeal in the
matter and to allow the appeal, set aside the impugned judgement/order passed by the High Court and dismiss the
petition filed by the respondent in the High Court.
PETITIONER
AFFIDAVIT
IN THE HON'BLE SUPREME COURT OF INDIA

IN THE MATTER OF:
ABC Company Ltd., a company registered under the Companies Act through Mr. J. Singh, Managing Director, the
company having its registered office at 15 M G Road, Kolkata 700 001.
Petitioner
Versus
1. Mr. R. Tandon, son of Mr. K. N. Tandon, resident of 6/4 Alipore Road, Kolkata 700 020
2. Union of India through the Secretary, Ministry of Corporate Affairs, New Delhi.
3. The Registrar of Companies, West Bengal
Respondents

AFFIDAVIT

I, Mr. J, Singh, do hereby solemnly affirm and state as under:

1. That I am the Managing Director of the petitioner-company and am fully aware of and conversant with the
relevants facts concerning the matter in issue in this petition.
2. That the contents of the accompanying Special Leave Petition are true and correct to the best of my knowledge
and belief.
3. That no relevant fact has been concealed or kept back in the S.L.P.

DEPONENT

I, further solemnly affirm at Kolkata this 15
th
day of May, 2012 that the above averments are true and correct. Nothing
has been kept back or concealed.

DEPONENT
35. Distinguish between revision and review of applications?

Review Revision
It refers to a case whereby an aggrieved party may apply
to the Court to recall the case for further consideration
It refers to a case where the HC revises an order passed
by a subordinate court
It is made in a case where appeal is allowed but no
appeal has been made or no appeal is allowed
It is made in a case for which no appeal lies
It is made on application by the party to the suit It is made suo moto by the Court
36. Explain the various kinds of professional etiquettes.

Dressing etiquette
Always wear neat and nicely pressed formal clothes. Choose corporate shades while you are picking up clothes for
your office wear.
Ties for men should compliment.
Women should avoid wearing exposing dresses and opt for little but natural make-ups. Heels should be of
appropriate or modest height.
Men need to keep their hair (including facial hair) neatly trimmed and set.
Always polish your shoes.
Keep your nails clean.
Wear clothes which you are comfortable in and can carry well. This is very important while you are in a business
meeting or client presentation.
Handshake etiquette
Always rise when introducing or being introduced to someone.
Shake hands with your right hand.
Shake hands firmly (but not with a bone crushing or fish-limp grip), and with only one squeeze.
Hold it for a few seconds (only as long as it takes to greet the person), and pump up and down only once or twice.
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Make eye contact while shaking hands.
Communication etiquette
Always speak politely. Listen to others attentively. A good listener is always dear to every client.
While speaking over telephones, always greet the other person while starting and ending the call.
Speak only when the other person has finished talking instead of interrupting in between.
Show interest in what other people are doing and make others feel good.
Stand about an arms length away while talking to others.
Question another person in a friendly, not prying, manner.
Make eye contact when talking to others.
Be polite. Avoid foul language, unkind statements, and gossip.
Keep your conversations short and to the point.
Maintain your sobriety and politeness even if the client speaks something offensive or rude and avoid replying back
in harsh tone/words
Invitation etiquette
Reply by the date given in the invitation, so that the host or hostess knows what kind of arrangements to make for
the event, food is not wasted, and unnecessary expense is eliminated.
If an RSVP card is not included, respond by calling or sending a brief note.
If you cancel after initially accepting an invitation, phone your regrets as soon as possible. Send a note of regret
following the phone conversation.
Dont ask for permission to bring a guest unless the invitation states.
Arrive at the event promptly, but not too early.
Mingle and converse with the other guests.
Dont overstay your welcome.
Extend your thanks as you leave.
Dining etiquette
Always be courteous while official dinners. Offer the seat to your guest first. If you are the guest, be punctual and
thank the host for the dinner.
Wait until you receive your hosts signal.
Initiate conversations while waiting for the food.
Never begin eating any course until everyone has been served or the host/hostess has encouraged you to do so.
Chew quietly; dont speak with your mouth full.
Avoid pointing the knife or fork towards the other person while eating and speaking.
Allow your guest to select the menu and wine.
If something unwanted has gone to your mouth, place the napkin in front of your mouth tactfully and bring it out
instead if putting your hand inside the mouth to get rid of it.
Learn the basic table manners before you go out to dine with a potential client or an important business meet.
37. Explain the procedure of compounding under Companies Act.

Section 621A empowers CG to compound offences
Offences punishable with imprisonment or imprisonment + fine are not compoundable
Offences punishable with imprisonment or fine or both are compoundable with permission of Court
Compounding permissible only after payment to CG a sum not exceeding the maximum amount of fine
Facility of compounding only available once in 3 years
Application to RoC who shall forward to CG + his comments
Compounding is permissible whether prosecution has been launched or not
If prosecution has been launched RoC shall give notice to the appropriate Court
38. What do you mean by consent orders ?

Consent order means an order for settling administrative or civil proceedings between the regulator and a person
who may prima facie be found to have violated securities laws
Section 15T of SEBI Act provides that no appeal shall lie on an order made with the consent of the parties
Such orders can be passed at any stage where violation has been found
When such proposal is submitted by a party it will be examined by a high powered Committee headed by a retired
HC judge Thereafter the Committee will submit its views to the Authority where proceedings are pending
Only available for offences under the SEBI Act, SCRA and Depositories Act
After passing of order, it shall be published and placed on the SEBI website
Certain defaults including insider trading, front running, failure to make an open offer, redress investor grievances
and respond to the summons issued by SEBI are excluded from the consent process.
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The defaults falling in the category of fraudulent and unfair trade practices, which in the opinion of SEBI are very
serious and/or have caused substantial losses to the investors, shall also not be consented
No consent application shall be considered, if any violation is committed within a period of two years from the date
of any consent order. However, if the applicant has already obtained more than two consent orders, no consent
application shall be considered for a period of three years from the date of the last order.
No consent application shall be entertained by SEBI before the completion of investigation / inspection.

CORPORATE RESTRUCTURING AND INSOLVENCY

1. Explain the terms compromise and arrangements.

The expression compromise has not been defined by the Companies Act, 1956
The term implies the existence of a dispute. In other words, compromise denotes an agreement between two or more
persons for the ascertainment of their rights when there is some question in controversy between them or some
difficulty in the enforcement of their rights
Arrangement involves a readjustment of rights and liabilities of the members or creditors or any class of
them; however there need not be any dispute for an arrangement
Section 390 provides that the term arrangement" includes a reorganization of the share capital of the company by
the consolidation of shares of different classes, or by the division of shares into shares of different classes or, by
both those methods
The term arrangement is wider than compromise. It includes any form of internal reorganization of the company or
its affairs as well as scheme for amalgamation of two or more companies
A few examples of arrangement are
- issue of fully paid up shares to pay off debentures
- creditors agreeing to waive a part of their dues
- preference shareholders surrendering their right of arrears of dividend
- exchange of companys assets for shares in a newly formed company
2. Distinguish between horizontal and vertical mergers.

Horizontal merger is a combination of two or more firms in the same area of business. It is a merger of two
companies which are essentially operating in the same business. The main purpose of this type of merger is to
obtain economies of scale in production by eliminating duplication of facilities, reducing of competition, reduction
of cost, increase in share price and market segments. For example the merger of ICICI Bank and Bank of
Rajasthan is a horizontal merger.
Vertical merger on the other hand is a combination of two or more firms involved in different stages of
production or distribution of the same product. It is a merger of one company with another having different
stages of production / distribution process of the same product / service. The main objective of these mergers is to
increase the profitability by the previous distributors. For example ICICI Limited with ICICI Bank is an example
of vertical merger with backward linkage as far as ICICI Bank is concerned.
Vertical merger takes the form of forward or backward merger. When a company combines with the supplier of
materials, it is called backward merger and when it combines with the customer, it is known as forward merger.
3. What do you mean by effective date and appointed date in case of mergers and amalgamations ?

Transfer date or Appointed Date this is usually the first day of the financial year preceding the financial year for
which audited accounts are available with the companies. This is the cut-off date from which all the movable and
immoveable properties including all rights, powers, privileges of the Transferor Company shall be transferred to
deemed to be transferred without any further act to the Transferee Company
Effective Date - The date with effect from which the assets of the Transferor Company will be transferred to the
Transferee Company describing briefly the nature of assets and also the rights & liabilities of the Transferor
Company. In other words this is the date on which the transfer and vesting of the undertaking of the Transferor
Company shall take effect i.e. all the requisite statutory approvals have been obtained
4. Explain the special majority approvals required for mergers?

In terms of Section 391 of the Companies Act, 1956, the resolution relating to the approval of amalgamation
has to be approved by members representing :
a majority in number AND
3/4th in value of the members present and voting either in person or by proxy
The 3/4th value is to be computed with reference to the paid-up capital held by members present and voting at the
meeting Maknam Investments Ltd.
In determining whether a resolution has been passed by the requisite majority or not, the members remaining neutral
or not participating in voting are to be ignored Hindustan General Electric Corporation Limited.

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5. Which combinations require approval of CCI and what are the exemptions in this regard?

Amalgamations / mergers exceeding the below-mentioned ceilings attract Sections 5 & 6 of the Competition
Act, 2002 -:
Either in India Or Globally
Assets

Turnover Assets Turnover
Jointly, the parties to the
acquisition, including the
enterprise being acquired have
Exceeding
Rs. 1500 crores
Exceeding
Rs. 4500 crores
Exceeding 750 million
USD including atleast Rs.
750 crores in India
USD, including atleast
Rs. 2250 crores in India
Jointly, the acquiring group,
together with the enterprise being
acquired have
Exceeding
Rs. 6000 crores
Exceeding
Rs. 18000 crores
Exceeding 3 billion USD
including atleast Rs. 750
crores in India
USD, including atleast
Rs. 2250 crores in India
In terms of the said Sections, no person or enterprise shall enter into a combination which causes or is likely to
cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall
be void.
Any person or enterprise, who or which proposes to enter into a combination, shall give notice to CCI disclosing the
details of the proposed combination, within 30 days of approval of the said proposal by its board of directors or
execution of any agreement or other document for acquisition
No combination shall come into effect until 210 days have passed from the day on which the notice has been given
to the CCI or CCI has passed orders, whichever is earlier.
The following combinations do not require approval of CCI :
Acquisition of not more than 25% shares or voting rights in any company, solely as an investment or in the ordinary
course of business.
Acquisition of additional shares / voting rights upto 5% in an enterprise where the existing shareholding of the
acquirer or its group is 25% or more but less than 50%.
Acquisition of further shares or voting rights in cases where the acquirer, prior to acquisition, holds 50% or more
shares.
Acquisition of shares / voting rights / control / assets by one person or enterprise of another person or enterprise
within the same group.
Acquisition of assets not directly related to the business activity of the party acquiring the asset or made solely as an
investment or in the ordinary course of business.
Acquisition of stock in-trade, raw materials, stores and spares, trade receivables and other similar current assets in
the ordinary course of business.
Acquisition of shares or voting rights pursuant to sub-division or consolidation of shares, bonus issue or rights issue,
not leading to acquisition of control.
Combinations taking place entirely outside India with insignificant local nexus and effect on markets in India.
Mergers / amalgamations of two enterprises where one of the enterprise has more than 50% shares / voting rights of
the other enterprise or cases in which more than 50% shares / voting rights in each of such enterprises are held by
enterprises within the same group.
Increase in shareholding pursuant to buy back of shares, provided the same does not result in acquisition of control.
6. Explain the procedure for taking approval of Stock Exchanges for mergers / amalgamations.
Clause 24(f) of the Listing Agreement requires listed companies to file all schemes relating to mergers,
amalgamations, reduction of capital etc. with the Stock Exchanges (SEs) for their approval, atleast 1 month
before the same is presented to the Court.
SEBI, vide Circulars dated 4
th
February, 2013 and 21
st
May, 2013, has prescribed the following new requirements
relating to such schemes of mergers / amalgamations etc. :
Alongwith the scheme, following documents will also be required to be filed with the SEs:
a. Valuation Report from an independent CA
b. Report from the Audit Committee recommending the draft scheme
c. Fairness opinion from a merchant banker
d. Audited financials of last 3 years and
e. Compliance with Clause 49 of the Listing Agreement.
However, it has been clarified that Valuation Report will not be required in cases where there is no change in the
shareholding pattern of the concerned listed company / resultant company.
The aforesaid documents will also be required to be uploaded on the websites of the company and the SEs.
Listed companies shall be required to choose one of the SEs having nation-wide terminals as the Designated Stock
Exchange (Designated SE) for the purpose of coordinating with SEBI. Such Designated SE shall forward the
scheme alongwith the aforementioned documents to SEBI.
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The SEs shall thereafter process the draft scheme and forward their Objection / No-Objection Letter to
SEBI within 30 days. SEBI shall thereafter provide its comments on the draft scheme to the SEs within the
following 30 days, post which the SEs shall issue the Observation Letter to the company.
In cases where the scheme involves allotment of shares to promoter / promoter group, companies will be required to
obtain shareholders approval to such scheme through postal ballot and e-voting.
Post approval of the scheme by the Court, the company will once again be required to submit to the SEs, a copy of
the said scheme (alongwith the results of voting by shareholders), which in turn will forward the same to SEBI for
its views. SEBI has again been given 30 days time to offer its comments / approval to the scheme.
7. Short note on stamp duty on amalgamations.

Under Section 3 of the Indian Stamp Act, 1899, every instrument mentioned in Schedule I appended to the Stamp
Act executed in India on or after the 1st Day of July 1899 is chargeable to duty as mentioned in the said Schedule I
Further Section 3 of the Indian Stamp Act defines instrument as including every document by which any right or
liability is or purports to be created, transferred, limited, extinguished or recorded
By virtue of Section 2(g) of the Bombay Stamp Act, the order of the Court ordering the transfer of assets and
liabilities of the transferor Company to the transferee Company is deemed to be a conveyance.
"Conveyance" includes,
a) a conveyance on sale,
b) every instrument,
c) every decree or final order of any Civil Court,
d) every order made by the High Court under Section 394 of the Companies Act, 1956 (I of 1956) in respect of
amalgamation of companies;
by which property, whether moveable or immovable, or any estate or interest in any property is transferred
to, or vested in, any other person, inter vivos, and which is not otherwise specifically provided for by
Schedule I.
In Li Taka Pharmaceuticals Ltd vs. State of Maharashtra, the Bombay HC held that an order of the Court u/s
394 is based upon a compromise between two companies of transferring assets and liabilities of one company to
another company and that order is an instrument within the definition of the Bombay Stamp Act. Similar view was
taken by the SC in Hindustan Lever vs. State of Maharashtra with respect to the Bombay Stamp Act
The Delhi HC also held a similar view in Delhi Towers Limited vs. GNCT of Delhi.
Further the Calcutta HC in Gemini Silk Ltd. vs. Gemini Overseas Ltd, an order sanctioning a scheme of
reconstruction or amalgamation is covered by the definition of the words conveyance and instrument and
therefore the same is liable to stamp duty. Subsequently, a Division Bench of the Calcutta HC adopted a
contrary view in Madhu Indra Limited vs. RoC and set aside the decision of the Single Bench in the Gemini
Silk case.
However in Emami Biotech Limited and Anr, ITP Limited and Anr and Brijbhumi Agents Private Limited
and Others, the Calcutta HC confirmed the view that an order of the High Court sanctioning a scheme of
amalgamation or demerger under section 394 of the Companies Act, 1956 will be considered as conveyance and
an instrument under the provisions of the Indian Stamp Act, 1899
The WB Govt. vide notification dated 8
th
Jan, 2013, has amended the definition of instrument under the WB
Stamp Act include HC orders passed for mergers / amalgamations.
Thus a HC order u/s 394 is liable to stamp duty in those states where the state stamp law provides for such stamp
duty. For example, Maharashtra, Gujarat, Karnataka, WB, MP and Rajasthan.
8. State whether additional fees needs to be paid on the increased authorized capital on the amalgamated
company?

Under the Companies Act when the Authorised Share capital of a company are increased, registration fee is required to
be paid in terms of Schedule X. In Jaypee Greens Ltd, the Allahabad HC held that where a combined authorized
capital of the amalgamated company exceeds the authorized capital of the transferor and transferee company, no
further fee is required to be paid. Similar view has been held by the Bombay HC in YOU Telecom India Pvt. Ltd
and Delhi HC in Hotline Hol Ceilings P Ltd. However the Calcutta HC in Areva T&D India Ltd holds an opposite
view. The judgment of SC on the matter is awaited.
9. Can the CG order amalgamation of two companies?

In order to speed up the procedure for amalgamation of companies, the CG may in public interest order
amalgamation of companies under Section 396 of the Companies Act, 1956
The CG shall prepare a draft scheme of amalgamation. In cases where the rights and interests of a member in the
new company is less than those he possessed before amalgamation. CG may provide for payment of such
compensation by the new company as it may deem fit
Any person aggrieved by such an order of compensation may appeal to the CLB within 30 days from the date of
publication of assessment of compensation in the Official Gazette.

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10. Short note on Section 391 is a complete code in itself.

Section 394 provides that in case of a petition for amalgamation, the Court may, either by the order sanctioning the
compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:-
(i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any
transferor company;
(ii) the allotment or appropriation by the transferee company of any shares, debentures, policies, or other like
interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by
that company to or any person;
(iii) the continuation by or against the transferee company of any legal proceedings pending by or against any
transferor company;
(iv) the dissolution, without winding up, of any transferor company;
(v) the provision to be made for any person who, within such time and in such manner as the Court directs, dissent
from the compromise or arrangement; and
(vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or
amalgamation shall be fully and effectively carried out.
In Maneck Chowk and Ahemdabad Manufacturing Co. Ltd, a scheme of amalgamation was put forward
before the Court. The propose scheme envisaged reorganization of share capital including reduction of share
capital. The Gujarat High Court held that Section 391 is a complete code in itself which provides for a scheme
of amalgamation of companies which could conceivably include a reorganization of share capital.
Similar view was taken by the Bombay High Court in PMP Auto Industries Ltd, where the Court held that
Section 391 is in the nature a single window clearance system to ensure that the parties are not put to avoidable,
unnecessary and cumbersome procedu re of making repeated applications to the Court for various other alterations
which must be needed to effectively implement the sanctioned scheme whose overall fairness and feasibility has
been judged by the Court u/s 394 of the Act.
11. Whether share exchange ratio can be challenged?

In Gujarat Ambuja Cotspin Ltd, it was held that it is for equity shareholders acting bona fide in the interests of
their class as a whole to accept a particular scheme and once the exchange ratio is worked out by a recognized firm
of CA who are experts in their field and if no mistake can be pointed out, it is not for the court to substitute its share
exchange ratio, especially when the same has been accepted without demur by overwhelming majority of
shareholders. Similar view was taken by the Court in Carbon & Chemicals India Ltd vs. Philips Carbon Black Ltd.
Further in Hindustan Lever Employees Union vs. HUL, the Supreme Court held that it is not part of the judicial
process to examine entrepreneurial activities. The Court is least equipped for such oversights nor indeed is it a
function of the judges in our constitutional scheme.
In Carron Tea Co. Ltd, it was held that although the question of valuation of shares and fixation of exchange ratio
is a matter of commercial judgment and the court should not sit over it, yet the court cannot abdicate its duty to
scrutinize the scheme with vigilance.
12. Distinguish between partial bid and competitive bid under the Takeover Regulations.

Partial bid is made for acquiring part of the shares of a class of capital where the offeror intends to obtain effective
control of the offeree through voting power. In other words, the offeror bids for the whole of issued shares of one
class of capital in a company other than the equity share capital carrying voting rights. Such acquisitions attract
public announcement under Regulation 4 of the SAST Regulations.
On the other hand, competitive bids are made under Regulation 20 of the SEBI Takeover Regulations 2011 by any
person other than the acquirer within 15 working days from the date of detailed public announcement. The
competitive offer shall be for at least such number of shares which when taken together with his existing holdings
equals the number of shares held by the original acquirers together the number of shares for which the present offer
is made. After competitive offer, the original bidder will have the option of revising his offer provided the revised
terms are more favourable to the shareholders of the target company. All the provisions of these Regulations shall
apply to competitive bid as are applicable to a normal bid. Accordingly, mandatory bids are required to be made
mandatorily under the SEBI Takeover Regulations 2011. Competitive bids are made voluntarily by persons other
than the acquirer.
13. Define the terms promoter, control and persons acting in concert under the Takeover Regulations.

Promoter
Regulation 2(1)(s) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 defines
promoter having the same meaning as in the SEBI ICDR Regulations and includes a member of the promoter
group.
Promoter includes:
(i) the person or persons who are in control of the issuer;
(ii) the person or persons who are instrumental in the formulation of a plan or programme pursuant to which specified
securities are offered to public;
(iii) the persons named in the offer document as promoters.
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A director or officer of the company or a person, if acting as such merely in his professional capacity, shall not be
deemed as a promoter.
Promoter group includes:
(i) the promoter;
(ii) an immediate relative of the promoter (i.e., any spouse of that person, or any parent, brother, sister or child of the
person or of the spouse); and
(iii) in case promoter is a body corporate
(A) a subsidiary or holding company of such body corporate;
(B) any body corporate in which the promoter holds 10% or more of the equity share capital or which holds 10% or
more of the equity share capital of the promoter;
(C) any body corporate in which a group of individuals or companies or combinations thereof which hold 20% or more
of the equity share capital in that body corporate also holds 20% or more of the equity share capital of the issuer; and
(iv) in case the promoter is an individual
(A) any body corporate in which 10% or more of the equity share capital is held by the promoter or an immediate
relative of the promoter or a firm or Hindu Undivided Family in which the promoter or any one or more of his
immediate relative is a member;
(B) any body corporate in which a body corporate as provided in (A) above holds 10% or more, of the equity share
capital;
(C) any Hindu Undivided Family or firm in which the aggregate shareholding of the promoter and his immediate
relatives is equal to or more than 10% of the total.
Financial Institutions, Scheduled Banks, FIIs and Mutual Funds shall not be deemed to be a promoter or promoter
group merely by virtue of their shareholding.

Control
Regulation 2(1)(e) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 - control
shall include right to appoint majority of the directors or to control the management or policy decisions exercisable by
a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or
management rights or shareholders agreements or voting agreements or in any other manner.

Persons acting in concert
Regulation 2(1)(q) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 defines
person acting in concert as -
- persons who, with a common objective or purpose of acquisition of shares or voting rights in, or exercising
control over a target company, pursuant to an agreement or understanding, formal or informal, directly or indirectly
co-operate for acquisition of shares or voting rights in, or exercise of control over the target company.
- the following persons will be deemed to be persons acting in concert with other persons in the same category,
unless the contrary is established :
(i) a company, its holding / subsidiary company, or companies under the same management / control
(ii) (ii) a company, its directors, and any person entrusted with the management of the company
(iii) (iii) directors of companies referred to in (i) and (ii) above and their associates
(iv) promoters and members of the promoter group
(v) immediate relatives
(vi) mutual fund with sponsor or trustee or asset management company
(vii) a collective investment scheme and its collective investment management company, trustees
(viii) a venture capital fund and its sponsor / trustee and AMC
(ix) foreign institutional investors with sub-accounts
(x) merchant bankers and portfolio managers with their clients as acquirer
(xi) banks with financial advisers, stock brokers of the acquirer, or any company which is a holding company,
subsidiary or relative of the acquirer
(xii) any investment company / fund with any person who has an interest in such investment company or fund as a
shareholder or unitholder having not less than 10% of the paid-up capital of the investment company, and any
other investment company or fund in which such person or his associate holds not less than 10% of the paid-up
capital of that investment company.
14. Explain the obligations of acquirer.
The acquirer shall disclose during the offer period every acquisition made by the acquirer / PAC of any shares of the
TC to the SEs where TC is listed and to the TC within 24 hours of such acquisition
The acquirer shall issue an advertisement, 1 working day before the commencement of the tendering period,
announcing the schedule of activities for the open offer
Such advertisement shall also be published in the newspapers and sent to SEBI, TC and SEs where TC is listed
The tendering period shall start not later than 12 working days from the date of receipt of comments from SEBI and
shall remain open for 10 working days
Shareholders who have tendered their shares in the open offer shall not be entitled to withdraw their acceptances
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The acquirer shall complete all procedures for the offer including making payment to the shareholders within 10
working days from the last date of tendering period.
The acquirer shall also issue a post issue advertisement within 5 working days after the offer period.
The acquirer shall make the open offer only if he is able to implement it
He should ensure firm financial arrangements for fulfilling the obligations under the public offer
He shall not sell shares of the target company held by them during the offer period.
The acquirer shall not complete the acquisition of shares / voting rights / control in the target company attracting the
obligation to make the open offer until the expiry of the offer period.
During the offer period, no person representing the acquirer / PAC shall be appointed as director on the BOD of TC.
Such directors may be appointed after expiry of 15 working days from the detailed PA, if the acquirer deposits
100% cash in the escrow.
In case any such person representing the acquirer / PAC is already on the board of the TC, such person shall not
participate in the deliberations nor vote on any matter in relation to the open offer.
15. Explain the provisions relating to escrow account in the SEBI Takeover Code.

Not later than 2 working days prior to detailed Public Announcement, the acquirer shall create an escrow
account.
The escrow amount shall be calculated in the following manner:
Consideration payable in the
public offer
Amount to be deposited in the escrow account
Not exceeding ` 500 crores 25% of the consideration payable assuming full acceptances
Exceeding ` 500 crores 25% of the consideration upto ` 500 crores and additional
10% of the balance amount
For offers subject to minimum level of acceptances, then 100% of the consideration in respect of
minimum level of acceptance or 50% of the total consideration shall be deposited in cash in the
escrow account
The escrow account shall consist of
(a) cash deposited with a scheduled commercial bank
(b) bank guarantee in favour of the merchant banker
(c) deposit of acceptable securities with appropriate margin, with the merchant banker or
(d) any combination of the above
The merchant banker shall not release the escrow account till 30 days from completion of payment of consideration
to the shareholders
In case of non-fulfilment of obligations under these Regulations, SEBI shall forfeit the escrow account either in full
or in part
In case of forfeiture of escrow account, the amount deposited shall be distributed as follows:
- 1/3
rd
to the target company
- 1/3
rd
to the IEPF
- 1/3
rd
to be distributed pro rata among shareholders who have accepted the offer.
16. Can an open offer be withdrawn ?
Under Regulation 23 of the SEBI Takeover Regulations, 2011 -
A public offer may be withdrawn in case the requisite statutory approvals have been refused, the sole acquirer,
being a natural person, has died or due to non-fulfillment of any condition stipulated in the agreement for
acquisition or in such other circumstances as SEBI may decide
Upon withdrawal of offer, the acquirer or merchant banker shall within 2 working days, make public announcement
in all newspapers in which the original public announcement was made. The same shall also be intimated to SEBI,
target company and the Stock Exchanges where shares of target company are listed.
17. Explain voluntary offers and indirect acquisitions.

Voluntary Offers
Under Regulation 6 of the SEBI Takeover Regulations, 2011, An acquirer holding 25% shares / voting rights shall
be entitled to make voluntary offer of 10%
If the acquirer (including PAC) has acquired shares of the target company in the preceding 52 weeks (excluding by
way of bonus issue / stock split) without attracting open offer obligations shall not be eligible to make voluntary
offers
Further an acquirer who has made a voluntary offer shall not be entitled to acquire shares of the target company
within the next 6 months after completion of voluntary offer.

Indirect Acquisitions (Regulation 5 of the SEBI Takeover Regulations, 2011)
Any acquisition of shares / voting rights / control in any company that would enable any person and persons
acting in concert with him to exercise or direct the exercise of such percentage of / voting rights / control over
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a target company, the acquisition of which would otherwise attract the obligation to make a public
announcement of an open offer for acquiring shares under these regulations, shall be considered as an
indirect acquisition of shares / voting rights / control in the target company.
Further, in the case of an indirect acquisition where,
a) the proportionate NAV of the target company as a percentage of the consolidated NAV of the entity or business
being acquired;
b) the proportionate sales turnover of the target company as a percentage of the consolidated sales turnover of the
entity or business being acquired; or
c) the proportionate market capitalisation of the target company as a percentage of the enterprise value for the
entity or business being acquired;
is in excess of 80% on the basis of the most recent audited annual financial statements, such indirect acquisition
shall be regarded as a direct acquisition of the target company.
18. Explain the terms management buy out and leveraged buy out.

Leveraged Buyouts
Simply put it is the purchase of a company by using a small investment and a large loan
LBO also called Highly Leveraged Transaction occurs when a financial sponsor gains control of a majority of
a target companys equity through the use of borrowed money or debt
It is essentially a strategy involving the acquisition of shares of another company using a significant amount of
borrowed money (bonds or loans) to meet the cost of acquisition. Often the assets of the company being acquired
are used as collateral for the loans in addition to the assets of the acquiring company
The purpose of LBOs is to allow companies to make large acquisitions without having to commit a lot of capital. In
an LBO, there is usually a ratio of 70% debt to 30% equity.
LBOs can increase management commitment and effort because they have greater equity stake in the company. In a
publicly traded company, managers typically own only a small percentage of the common shares, and therefore can
participate in only a small fraction of the gains resulting from improved managerial performance. After an LBO,
however, executives can realize substantial financial gains from enhanced performance.
LBOs can often act to revitalize a mature company. In addition, by increasing the companys capitalization, an LBO
may enable it to improve its market position.
Successful LBOs also tend to create value for a variety of parties. For example, empirical studies indicate that the
firms shareholders can earn large positive abnormal returns from leveraged buyouts. Similarly, the post-buyout
investors in these transactions often earn large excess returns over the period from the buyout completion date to the
date of an initial public offering or resale.

Management Buyouts
MBO occurs when a company's managers buy or acquire a large part of the company.
The goal of an MBO may be to strengthen the managers' interest in the success of the company. In most
cases, the management will then make the company private. Management teams typically want to gain
independence and autonomy, apart from having the power to influence strategic decisions and give the
company future direction
The purpose of such a buyout from the managers' point of view may be to save their jobs, either if the business has
been scheduled for closure or if an outside purchaser would bring in its own management team. They may also want
to maximize the financial benefits they receive from the success they bring to the company by taking the profits for
themselves. This is often a way to ward off aggressive buyers.
There are three ways of financing such buyouts debt financing, private equity financing and vendor financing
MBOs have assumed an important role in corporate restructurings beside mergers and acquisitions.
Key considerations in an MBO are fairness to shareholders, price, the future business plan, and legal and tax issues.
One recent criticism of MBOs is that they create a conflict of interestan incentive is created for managers to
mismanage (or not manage as efficiently) a company, thereby depressing its stock price, and profiting handsomely
by implementing effective management after the successful MBO.
Examples - In 2007, the private equity firm Blackstone Group agreed to buy Indian back-office company Intelenet
Global Services, marking its first MBO in India.
19. Explain the importance of valuation of brands.

It indicates the origin of goods
It makes the jobs of the consumers very easy
It enables premium pricing
Same manufacturer may use different brands to differentiate goods of same description having different quality and
value
Consumers have more faith on branded goods
It connects the consumers mind to the manufacturer.
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20. Write short notes on funding through ADRs / GDRs.

Funding through ADRs / GDRs
Funding through ADR / GDR facilitates raising of funds from foreign markets at lower cost as compared to domestic
issue. The following are the requirements to be complied with for issuing ADR / GDR:
In accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through
Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India
A company can issue ADRs / GDRs if it is eligible to issue shares to persons resident outside India under the FDI
Policy
Indian listed companies not eligible to raise funds from the capital market or which are restrained from accessing
the securities market are not eligible
Unlisted companies can raise funds but they would require prior listing in the domestic market
No monetary limit
No end use restrictions except real estate or the stock market
Voting rights on shares issued under the Scheme shall be as per the provisions of Companies Act, 1956 and in a
manner in which restrictions on voting rights imposed on ADR/GDR issues shall be consistent with the Company
Law provisions.
The pricing of ADR / GDR issues should be made at a price determined under the provisions of the Scheme of issue
of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme,
1993 and guidelines issued by the Government of India and directions issued by the RBI.
21. Discuss the various methods of valuation of shares.

(a) Valuation based on assets This valuation method is based on the assumption that adding the value of all assets
of the company and subtracting the liabilities, leaving a net asset valuation, can best determine the value of a
business.
An asset based valuation can be further separated into four approaches :
(i) Book value Historical cost of company assets liabilities. Intangible assets etc. are not considered in this
calculation.
(ii) Replacement cost
(iii) Appraised value
(iv) Excess earnings
(b) Open market valuation Open market valuation refers to a price of the assets of the company which could be
fetched or realized by negotiating sale provided there is a willing seller, property is freely exposed to market, sale
could materialise within a reasonable period, orders will remain static throughout this period and without
interruption from any purchaser giving an extraordinarily higher bid.
(c) Valuation based on earnings P/E = P/ EPS
(d) Discounted Cash flow Valuation Method - Discounted cash flow valuation is based upon expected future cash
flows and discount rates. Discounted cash flow valuation, relates the value of an asset to the present value of
expected future cash flows on that asset. This approach has its foundation in the present value concept, where
the value of any asset is the present value of the expected future cash flows on it.
22. Explain the mechanism for valuation of ESOPs.

In terms of the SEBI (ESOP and ESPS) Guidelines, 1999, Fair value of a stock option is the price that shall be
calculated for that option in an arms length transaction between a willing buyer and a willing seller.
The fair value shall be estimated using an option-pricing model (for example, the Black- Scholes* or a binomial
model) that takes into account as of the grant date the exercise price and expected life of the option, the current
price in the market of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-
free interest rate for the expected term of the option.
23. Explain the mechanism for valuation of securities under FDI Scheme.

Listed - Price worked out as per SEBI Regulations
Unlisted - not less than the fair value determined by a Merchant Banker / CA as per discounted cash flow method

24. Explain the difference between partial demerger and complete demerger.

Partial Demerger in this case the existing company also continues to maintain its separate legal entity and the
new company being a separate legal identity carries on the spun off business
Complete Demerger in this case, the existing company is voluntary would up and its entire business, assets etc
are transferred to one or more new companies

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25. Short notes on types of demerger.

Spin Offs when an existing parent company distributes on a pro rata basis all the shares it owns in a controlled
subsidiary to its own shareholders thereby creating a separate legal entity with its own management team and BOD.
Such distributions are made in direct proportion to the shareholders current holdings of the parent companys stock
Split Offs a process of reorganizing a corporate structure whereby the capital stock of a division or a subsidiary of
a corporation or of a newly affiliated company is transferred to the stakeholders of the parent corporation in
exchange for part of the stock of the latter
Split Ups a process of reorganizing a corporate structure whereby all the capital stock and assets are exchanged
for those of two or more newly established companies, resulting in the liquidation of the parent corporation.
26. What do you mean by reverse mergers?

Generally a loss making company merges with a company with good track record. However in a reverse
merger a healthy company merges with a financially weak company
The main reason for these kinds of mergers is the tax advantage of carry forward of losses u/s 72A as explained
above
Under the Companies Act, there is no distinction between merger and reverse merger
However in case one of such companies is a sick company within the meaning of SICA, then approval of BIFR
(Board for Industrial and Financial Reconstruction) is also required for such mergers.
27. How do you measure the success of an amalgamated company ?

The earning performance of the merged company can be measured by return on total assets and return on net worth.
Whether the merged company yields larger net profit than before, or a higher return on total funds employed or the
merged company is able to sustain the increase in earnings.
The capitalisation of the merged company determines its success or failure.
Whether merged company is creating a larger business organisation which survives and provides a basis for growth.
Comparison of the performance of the merged company with the performance of similar sized company in the same
business in respect of (i) Sales, (ii) assets, (iii) net profit, (iv) earning per share and (v) market price of share.
In general, growth in profit, dividend payouts, companys history, increase in size provides base for future growth
and are also the factors which help in determining the success or failure of a merged company.
Fair market value is one of the valuation criteria for measuring the success of post merger company.
28. Short notes on factors for post merger success.

Gain or loss to stakeholders
Implementation of objectives
Legal requirements
Combination of operations
Top management changes
Management of financial resources
Financial restructuring
Rationalisation of labour cost
Production and marketing management
Corporate planning and control.
29. Explain the procedure of reduction of share capital.

Modes of reduction of capital in terms of Section 100 of the Companies Act, 1956, capital of a company may be
reduced in the following ways:
(a) Extinguishment or reduction of liability on shares in respect of the capital not paid-up
(b) With or without extinguishment or reduction of liability on shares in respect of the capital not paid-up, cancellation
of any paid-up capital which is lost or unrepresented by the available assets
(c) With or without extinguishment or reduction of liability on shares in respect of the capital not paid-up, pay off any
paid up share capital which is in excess of the wants of the company

Procedure for reduction
The company needs specific provision in the AOA + special resolution + approval of Court
Every creditor of the company is entitled to object to reduction of capital
The court shall prepare a list of the creditors of the company entitled to object and it shall ensure that creditors
entitled to object to reduction have given their consents / have been discharged / have been given sufficient security
Before approving, Court shall ensure that reduction will be fair considering the interests of all classes of
shareholders & it will not be prejudicial to the interests of creditors
It may direct the company to add the words and reduced at the end of its name
The company shall deliver a certified copy of the Court order and a copy of the minute approved by the Court
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The reduction shall become effective from the date of registration by RoC.
30.
Explain the objectives of buy back.

Putting unused cash to use.
Raising Earnings per Share.
Helping capital restructuring by way of capital reduction.
Reduced equity base strengthens management control and thus eliminating any threats of hostile takeover.
Obtaining stock for ESOP plans for the company.
In the opinion of the management, current market price is much lower than the intrinsic value of the share.
31.
Short notes on buy back through stock exchange route and through book building route.

Buy Back through stock exchange route
The special resolution or the board resolution shall specify the maximum price at which the buy-back shall be made
The buy-back shall not be made from the promoters or persons in control of the company
The company shall appoint a merchant banker and make a public announcement at least 7 days prior to the
commencement of buy-back as prescribed under buy back through tender offer
The public announcement shall also contain disclosures regarding details of the brokers and stock exchanges
through which the buy-back would be made
The buy-back shall be made only on stock exchanges having nationwide trading terminals
The buy-back shall be made only through the order matching mechanism except all or none order matching
system
The company and the merchant banker shall submit the information regarding the shares or other specified
securities bought- back to the stock exchange on a daily basis and publish the said information in a national daily on
a fortnightly basis and every time when an additional 5% of the buy back has been completed.

Buy Back through book building route
The special resolution or the board resolution shall specify the maximum price at which the buy-back shall be made
The company shall appoint a merchant banker and make a public announcement at least 7 days prior to the
commencement of buy-back as prescribed under buy back through tender offer
The public announcement shall also contain the detailed methodology of the book-building process, the manner of
acceptance, the format of acceptance to be sent by the security holders pursuant to the public announcement and the
details of bidding centers
The book building process shall be made through an electronically linked transparent facility
The number of bidding centres shall not be less than 30 and there shall be at least one electronically linked
computer terminal at all the bidding centers
The offer for buy back shall remain open to the security holders for a period not less than 15 days and not exceeding
30 days
The merchant banker and the company shall determine the buy-back price based on the acceptances received
The final buy-back price, which shall be the highest price accepted shall be paid to all holders have been accepted
for buy-back.
32. Explain the various immunities available to a sick company under SICA.

In terms of Section 22 of SICA :
No proceedings for the winding up of the industrial company or for execution, distress or the like against any of the
properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the
recovery money or for the enforcement of any security against the industrial company or of any guarantee in respect
of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the
consent of BIFR or, as the case may be, the Appellate Authority
The above protection is available when
1. an inquiry is pending or
2. when a scheme of rehabilitation is under preparation or
3. a scheme is under implementation or
4. appeal is pending.
33. Write short note on Sick company.

According to Section 3(1)(o) of SICA, "sick industrial company" means an industrial company (being a
company registered for not less than five years), which has at the end of any financial year accumulated
losses equal to or exceeding its entire net worth.
Supreme court in Namit R Kamani v. R.R. Kamani had explained the object of SICA as
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- affording maximum protection to employment
- optimising the use of funds and available production assets
- realising amounts due to banks, institutions, creditors and
- providing efficient authority consisting of experts for expeditious determination of measures to avoid time
consuming procedures.
34. Explain the various rights available to a bank / financial institution under the SRFAESI Act for enforcement of
security interest.

Section 13 of the SRFAESI Act provides for the enforcement of security interest by a secured creditor straight away
without intervention of the court, on default in repayment of instalments, and non compliance with the notice of 60
days after the declaration of the loan as a non-performing asset.
The Secured Creditor has been defined to mean
any bank or
financial institution or
any consortium or group of banks or financial institutions and
includes debenture trustee appointed by any bank or financial institution or
securitisation company or reconstruction company or any other trustee holding securities on behalf of a bank or
financial institution, in whose favour security interest is created for due repayment by any borrower of any
financial assistance
Section 13(4) of the Act empowers the recourse to one more of the following measures, after giving proper notice,
for the recovery of the secured debts, namely:
Take possession of the secured assets of the borrower including the right to transfer by way of lease,
assignment or sale for realizing the secured asset;
Take over the management of the secured assets of the borrower including the right to transfer by way of lease,
assignment or sale and realize the secured asset;
Appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which
has been taken over by the secured creditor;
Require at any time by notice in writing, any person who has acquired any of the secured assets from the
borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so
much of the money as is sufficient to pay the secured debt.
In cases of joint financing under consortium or multiple lending arrangements if 60% of the secured creditors in the
value agree to initiate recovery action the same is binding on all secured creditors.
In case of a company under liquidation, the amount realized from the sale of the secured assets are to be distributed
in accordance with the provisions of Section 529A of the Companies Act, 1956.
Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured
creditor may file an application to the DRT.
35. Short note on Lok Adalats.

The Reserve Bank has advised all scheduled commercial banks and all India financial institutions that they
can take up the matter where outstandings are Rs. 10 lakhs and above with Lok Adalats organized by the
Debt Recovery Tribunal and Debt Recovery Appellate Tribunal.
Lok Adalats do not have any statutory status
Hence judgements passed by them do not have any binding effect on the parties
The social workers use their moral authority and pursuade the parties to settle the matter on the basis of a reasonable
agreement.
Settlements arrived at Lok Adalats are not legally enforceable, by themselves.
Where settlement has been arrived at, in a matter regarding which no civil suit is pending, the settlement has to be
filed before a competent court of civil jurisdiction in the form of a plaint for obtaining a decree in terms of the
settlement.
On the other hand, where settlement has been arrived at in respect of a matter for which a civil suit is already
pending, the settlement has to be filed in the form of a compromise and the court passes necessary decree in the
civil suit itself.
36. Short note on Powers of the DRT under the Recovery of debts due to banks and financial institutions Act 1993.

If it appears to be Debt Recovery Tribunal it may
appoint a receiver of any property, whether before or after the grant of certificate for recovery of debt;
remove any person from the possession or custody of the property;
commit the same property to the possession, custody or management of the receiver;
confer upon the receiver all such powers, as to bringing and defending suits in the courts, or filing and
defending applications before the Tribunal and for the realization, management, protection, preservation and
improvement of the property, the collection of rents and profits thereof, the application and disposal of such
rents and profits, and the execution of documents as the owner himself has, or such of those powers as the
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Tribunal thinks fit; and
appoint a Commissioner for preparation of an inventory of the properties of the defendant or for the sale
Debt Recovery Tribunal and Debt Recovery Appellate Tribunal shall not be bound by the procedure laid
down in Code of Civil Procedure
The recovery may be done in any of the following ways
attachment and sale of the movable or immovable property of the defendant;
arrest of the defendant and his detention in prison;
appointing a receiver for the management of the movable or immovable properties of the defendant.
37. Write note on objectives behind creation of ARCs.

The main objective of asset reconstruction company (ARC) is to act as agent for any bank or financial institution
for the purpose of recovering their dues from the borrowers on payment of fees or charges, to act as manager of the
borrowers asset taken over by banks, or financial institution, to act as the receiver of properties of any bank or
financial institution and to carry on such ancillary or incidental business with the prior approval of Reserve Bank
wherever necessary.
If an ARC carries on any business other than the business of asset reconstruction or securitisation or the business
mentioned above, it shall cease to carry on any such business within one year of doing such other business.
38. Explain the various measures for asset reconstruction under the SRFAESI Act.

Proper management of the business of the borrower, by change in, or take over of, the management of the business
of the borrower.
The sale or lease of a part or whole of the business of the borrower.
Rescheduling of payment of debts payable by the borrower.
Enforcement of security interest in accordance with the provisions of the Act.
Settlement of dues payable by the borrower.
Taking possession of secured assets in accordance with the provisions of the Act.
To convert any portion of debt into shares of the borrower company.
39. The SRFAESI Act has an overriding effect over other laws Explain.

In terms of Section 35 of the SRFAESI Act, the provisions of this Act shall have effect, notwithstanding
anything inconsistent therewith contained in any other law for the time being in force or any instrument
having effect by virtue of any such law.
In accordance with Section 37, the provisions of this Act or the rules made thereunder shall be in addition to and not
in derogation of, the Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956, the Securities and
Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or
any other law for the time being in force.
The combined affect of Sections 35 and 37 is that in cases of any conflict with these Acts or any other Act, then the
SRFAESI Act, 2002 shall have the over riding effect over such Act or Acts.
40. Explain the various grounds for compulsory winding up.

In terms of Section 433 of the Companies Act, 1956, a company shall be compulsorily wound up if :
The company has passed a special resolution of its being wound up by the Court
Default is made in delivering the statutory report to the Registrar or in holding the statutory meeting
The company does not commence business within a year from its incorporation or suspends business for a whole
year
The number of its members in the case of a public company is reduced below seven and in the case of a private
company, below two
The company is unable to pay its debts
The Court is of the opinion that it is just and equitable that it should be wound up
If the company has made a default filing with the Registrar its balance sheet and profit and loss account or annual
return for any five consecutive financial years
If the company has acted against the interests of the sovereignty and integrity of India, the security of the state,
friendly relations with foreign states, public order, decency or morality
If the Court is of opinion that the company should be wound up under the circumstances specified in Section 424G
(i.e. winding up of a sick company).
41. Short notes on just and equitable clause for winding up of a company.

Following are few circumstances considered to be just and equitable for winding up of a company:
Where the whole object of the company was fradulent
Where the substratum of the company is gone.
Where the main object of the company for which it was incorporated has been completely achieved.
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Where there is a complete deadlock in the management of the company
Where the company is a "bubble" and has no business to carry on e.g. where the main business of the company has
been taken over by the Government and there is no prospect of the company doing any other business mentioned in
the objects clause of the Memorandum of Association.
Where the company is insolvent and its business is being carried on for the benefit of the debenture holders.
Where there has been mismanagement and misapplication of funds by the directors of private company
Where the petitioner was excluded from all participation in the business of a private company.
If the company has committed default in making payment to various investors, allegations that directors have
cheated several thousand investors, banks and financial institutions, company has not filed balance sheet for two
years and no reply from company to advertisement under Rule 24, the company is liable to be wound up
42. Short note on appointment of liquidator in case of voluntary winding up.

Members Voluntary Winding Up: in terms of Section 490 of the Companies Act, 1956, the liquidator shall be
appointed by the company in general meeting. The remuneration shall also be fixed by the company in general
meeting. Company shall inform the appointment of liquidator to the RoC within 10 days. Liquidator shall himself
inform the RoC within 30 days.
Creditors Voluntary Winding Up: in terms of Section 502 of the Companies Act, 1956, the creditors and the
company at their respective meetings may nominate a person to be liquidator, but the person nominated by the
creditors shall become the liquidator subject to an application to the Court. If no person is nominated by the
creditors, the person nominated by the company shall be liquidator. Further if no person is nominated by the
company, the person nominated by the creditors shall be liquidator.
43. Explain the concept of committee of inspection.

In terms of Section 503 of the Companies Act, 1956, in a Creditors Voluntary Winding up, the creditors may
at set up a Committee of Inspection consisting of not more than 5 members.
In case such a Committee is appointed, the company shall also appoint not more than 5 members on the Committee.
The powers and proceedings of such Committee are the same as the committee appointed in compulsory winding up
under Section 465 of the Act. The following are the powers:
(a) The Committee shall have the right to inspect the accounts of the liquidator at all reasonable times.
(b) The Committee shall meet at such times as it may from time to time appoint and the liquidator or any member of
the committee may also call a meeting of the committee as and when he thinks necessary.
(c) The quorum for a meeting of the Committee shall be one-third of the total number of the members, or two,
whichever is higher.
(d) The Committee may act by a majority of its members present at a meeting, but shall not act unless a quorum is
present.
44. What do you mean by fraudulent preference of creditors in case of winding up?

Section 531 of the Companies Act, 1956 provides that every transfer of property, movable or immovable, delivery
of goods, payment, execution or other act relating to property made, taken or done by or against the company within
six months before the commencement of its winding up shall be deemed, in the event of its being wound up, a
fraudulent preference of its creditors and, therefore, invalid. It will amount to a fraudulent preference if it is shown
that-
the company was at the date of transfer unable to pay its debts as they became due;
the transaction took place within six months of the presentation of the petition to the Court and in case of
voluntary winding up, within six months from the date of the resolution for winding up;
the dominant motive of the company, acting by its directors was to prefer one creditor to another;
the transaction was made in favour of a creditor.
45. Explain the highlights of UNCITRAL Model law on Cross Border Insolvency.

A Model Law is a legislative text that is recommended to countries for incorporation into their national law.
Purpose of UNCITRAL Model Law
Cooperation between the courts and other competent authorities of a State and foreign States involved in cases of
cross-border insolvency;
Greater legal certainty for trade and investment;
Fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other
interested persons, including the debtor;
Protection and maximization of the value of the debtors assets; and
Facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving
employment

Applicability of the Model Law
Assistance is sought in the enacting State by a foreign court or a foreign representative in connection with a foreign
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proceeding; or
Assistance is sought in a foreign State in connection with a proceeding under the laws of the enacting State relating
to insolvency; or
A foreign proceeding and a proceeding under the laws of the enacting State relating to insolvency in respect of the
same debtor are taking place concurrently; or
Creditors or other interested persons in a foreign State have an interest in requesting the commencement of, or
participating in, a proceeding under the laws of the enacting State relating to insolvency.

Provisions of Model Law
A foreign representative may apply directly to the Court
The Model Law avoids the need to rely on cumbersome and time-consuming letters rogatory or other forms of
diplomatic or consular communications that might otherwise have to be used.
Foreign creditors have the same rights regarding commencement and participation in an insolvency proceeding
The court may refuse to take an action if the action would be contrary to public policy
A foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign
representative has been appointed. An application for recognition shall be accompanied by:
A certified copy of the decision commencing the foreign proceeding and appointing the foreign representative;
or
A certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of
the foreign representative; or
In the absence of evidence referred to in subparagraphs (a) and (b), any other evidence acceptable to the court of
the existence of the foreign proceeding and of the appointment of the foreign representative.

STRATEGIC MANAGEMENT, ALLIANCES AND INTERNATIONAL TRADE

1. Explain the functions of strategic management.

Strategic management is an externally oriented philosophy of managing an organization that links strategic
thinking and analysis to organizational action. As an explicit philosophy of managing an organization, strategic
management discharge the following functions:

novation, and excellence;

2. Explain the steps for implementation of a Knowledge Management Programme.

Defining Knowledge Management Strategy: Knowledge management strategy is defined in advance so that a
systematic approach is followed. It requires the active involvement of top management so that its commitment and
support are ensured. Knowledge management strategy contains the following:
(a) What to Share
(b) Why to Share
(c) How to Share
(d) Whom to Share
Organizing Knowledge Management Programme: For organizing knowledge management programme, a
knowledge management centre should be established. Besides this, the business should undertake the following
steps to implement the knowledge management programme:
(a) Providing Budget for Sharing Knowledge
(b) Communicating the Value of Sharing Knowledge
(c) Choosing Technology for Sharing Knowledge
(d) Selecting Methods of Sharing Knowledge:
(e) Measuring of Performance
Reinforcement for Knowledge Management : Reinforcement for knowledge management is necessary to make it
a part of organizational processes and practices. It increases the strength of a new behaviour and tends to induce
repetition of that behaviour. Reinforcement should be provided so long as knowledge sharing does not get imbibed
into personnel. In order to provide reinforcement for knowledge management, the business has to:
(a) Introduce New Incentives
(b) Provide Support Knowledge Sharing.

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3. What are the limitations of strategic management?

Uncertain Predictions: Business units are operating in very complex, competitive and dynamic environment.
Strategic management, thus, helps to overcome this problem by making trend predictions and framing strategies
accordingly. But practically this has become a serious limitation on effective strategic management. Due to
increasing complexity and an accelerating rate of change, it becomes more and more difficult to predict the future
outcome with certainty i.e. in terms of government policies, regulatory measures, change in technical know-how,
global scenario and political conditions etc. Thus, under these conditions, strategic management is very difficult,
time consuming and costly exercise. In spite all this, the role of strategic management business cannot be ignored or
overlooked.
Non-Flexibility: It has been advocated by experts that strategic -management brings non flexibility in the
organization through strategic planning. It may be a more serious limitation of strategic management. Strategies are
selected and implemented in a given set of environment both external as well as internal. The organization sets outs
various parameters for its working, for example, designing of organization structure, prescribing rules and
procedures, allocating resources, etc. after taking in to account both internal and external factors. In a situation when
business unit wants certain change in the light of change in the environment, it becomes difficult. Thus, this internal
rigidness - human and procedural may make the strategic planning ineffective and unsound.
Contribution of Strategic Management: Another limitation of strategic management is a situation when the
managers in the organization are inadequately aware about its contribution to the success of the organization
objectives and the way in which strategic management can be undertaken. It has been observed that managers,
generally focus their attention on operating problems, ignore more important strategic problems. It is because they
are more interested in short-term results.
Implementation: The most important limitation of strategic management for a business unit is its implementation.
Implementation of policies and strategies is concerned with design and management of systems to achieve the best
integration of people, structure, processes and resources in reaching organizational purposes. Implementation
basically involves number of interrelated decisions, choices and broad range of activities. It requires the
commitment and cooperation of all units, levels and members if it is to succeed.
4. Explain the various techniques of forecasting.

Trend Extrapolation Technique: This involves picking a tracking factor or environmental variable, noting its
trend (statistically or otherwise), and extending that trend into the future. Lead and lag correlates are often used in
the process. Linear and non-linear statistical models and techniques can be used when hard numerical data exist.
This normally involves line fitting to historical data, and extending the line into future periods. Most spreadsheet
programs and some operating systems have easy-to-use trend line extrapolation routines built into them.
Historical Analogy Technique: It involves identification of precursor or concurrent events and simple recognition
of the relationship. Under this technique a forecaster really examines a series of analogous (though not identical)
events. Because forecasting by analogy is used where historical data are inadequate for the more formal trend
extrapolation, its validity and reliability are open to challenge.
Delphi Techniques: Under this technique, the divergent expert opinions are consolidated to arrive at a compromise
estimate of future. To be precise it basically involves the use of expert opinion through anonymous, interactive,
controlled feedback among a group of participants (the expert panel). Normally the panel is polled by questionnaires
in a search for opinions on reasonably well-defined issues. Each member responds with a forecast and reasons for it.
These responses are then statistically compiled and fed back anonymously to all members of the panel. This routine
continues through subsequent interactions as the information is reprocessed by the experts and new forecasts are
generated. Ideally the composite results will move towards a consensus.
Econometric Models: The econometric models combine statistical tools with economic and business theories to
estimate various economic variables and to forecast the intended variable. Basically the econometric models are
designed as numerical interpretations of real-world systems (e.g., national economies, ecologies, production
systems). They involve the estimation of theoretical and empirically based relationships, which, when taken
together, interact quantitatively to produce forecast outcomes. Computers are normally used to make the
calculations. An econometric model may be single equation regression model or it may consist of a system of
simultaneous equations. The forecast made on the basis of econometric models are much more reliable as compared
to other techniques. The unique advantage of this technique is the ability to perform sensitivity analysis where the
analyst changes assumptions or estimations within the model to generate varying outcomes.
Cross-Impact Analysis Technique: It is a forecasting technique which is designed to assess the interactions among
future environmental conditions. The analyst begins these exercises by assuming that a set of future environmental
circumstances will come true (e.g., four new industry entrants, each holding a 5% market shares within six years).
Through the use of matrix analysis, the analyst then attempts to assess the impact of these circumstances on the
possibility and timing of others, (such as price competition). If nothing else, the analyst is able to expose forecasting
inconsistencies and to clarify underlying assumptions in the forecasts themselves.
Scanning and Monitoring Technique: These are forecasting techniques which involve future thinking. The scan is
the equivalent of a 360-degree radar sweep, but monitoring is the choice for specific environmental variables or
factors which are tracked over time. The latter merely helps to refine and make the gathering and processing of
environmental information more efficient.
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Survey Technology: Under this technique, field surveys are conducted to collect information on the intentions of
the concerned people. The survey may be on census or sample basis. Under census survey all the units in the
population are taken into account. In sample survey industry analysis, a selected subset of them are surveyed and
through their study inferences about the whole population are drawn.
Business Barometer Technique: Under this technique experts use economic indicators as barometer to forecast
trends in business activities. The basic approach applied under this technique is to construct an index number of
relevant economic indicator and to forecast future trends on the basis of movements in the index of economic
indicators over the period.
Time Series Analysis Technique: It refers to an arrangement of statistical data in a chronological order in
accordance with its time of occurrence. It basically reflects the dynamic pace of steady movements of phenomena
over a period of time. Important variables of business interest include price, production, investment, consumption,
national income, foreign trade and exchange reserves. Time series data on the relevant variable under forecast are
used to fit a trend line or a curve graphically. Trend line can be worked out by fitting a trend equation to time series
through least square method or some other estimation techniques.
Regression Analysis: Regression analysis is the most popular and widely applied forecasting technique used by the
experts. It is a mathematical analysis which reveals the relative movements of two or more interrelated series. It is
used to estimate the changes in one variable as a result of specified changes in other variable or variables.
Generally, the regression and correlation analysis is used for processing the statistical data and deriving a
generalized mathematical relationship which, subject to a certain error, can be used for forecasting the expected
values of the dependent variables in future if the values of independent variables are known. It is objective method
which uses both time series and cross sectional data.
Input-Output Analysis: Input-output analysis considers inter industry relationship in an economy depicting how
the output of one industry goes to another industry where it serves as an input and thereby makes one industry
dependent on another both, as customer of output and as supplier of inputs. An input-output model is a specific
formulation of input-output analysis. According to Watson, input-output analysis is the statistical measurement of
the inputs and outputs of all industries taken together in an interdependent system of commodity flows. It is based
on certain set-off assumptions.
5. Short notes on SWOT analysis and value chain analysis.

SWOT Analysis
SWOT Analysis, is a strategic planning tool used to evaluate the Strengths (S), Weaknesses (W), Opportunities (O),
and Threats (T) involved in a project or in a business venture. It basically involves specifying the objective of the
business venture or project and identifying the internal and external factors that are favorable and unfavorable for
achieving the objective.

HELPFUL
In achieving the
objectives
HELPFUL
In achieving the
objectives
Internal Origin Strengths Weaknesses
External Origin Opportunities Threats

In SWOT analysis Strengths, Weaknesses, Opportunities and Threats can be understood as:
Strengths: Attributes of the organization that are helpful in achieving the objective.
Weaknesses: Attributes of the organization that are harmful in achieving the objective.
Opportunities: External conditions that are helpful in achieving the objective.
Threats: External conditions that are harmful in achieving the objective.
The aim of any SWOT analysis is to identify the key internal and external factors which are important to achieving
the objective.
Internal factors The strengths and weaknesses internal to the organization.
External factors The opportunities and threats presented by the external environment.
Identification of SWOT is essential because subsequent steps in the process of planning for achievement of the
selected objective may be derived from the SWOT. The decision makers have to determine whether the objective is
attainable, given the SWOT. If the objective is not attainable a different objective must be selected and the process
is repeated.
The merit of SWOT analysis is not limited to profit-seeking organizations. SWOT analysis may be used in any
decision-making situation when a desired end-state (objective) has been defined. SWOT analysis may also be used
in pre-crisis planning and preventive crisis management.

Value Chain Analysis
A value chain can be described as the full range of activities which are required to bring a product or service
from conception through the different phases of production to its delivery to final consumers. In the
illustrative case study of value chain appended to this topic, the value chain in the fishery sector can be defined as
movement of the product (fish) from the landing centers to the final consumer taking into consideration the entire
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gamut of service providers at the various levels of the chain, the value addition done or the service done to the
product before its consumption.
There are four elements in the value chain :
(i) Design and Product Development
(ii) Production
(iii) Marketing
(iv) Consumption / Recycling.
Michael Porter in his famous book Competitive Advantage introduced a generic value chain model that comprises
a sequence of activities found to be common to a wide range of firms. Porter identified that the activities of a
business could be grouped under two broad headings:

(1) Primary Activities It covers those activities which are directly concerned with creating and delivering a
product (e.g. component assembly); and
(2) Support Activities It includes those activities which are not directly involved in production. It may increase
effectiveness or efficiency. It is rare for a business to undertake all primary and support activities itself.
6. Short note on Business Process Reengineering.

Business process re-engineering can be defined as the analysis and design of workflows and processes within
and between organizations. It is basically the critical analysis and radical redesign of existing business processes
to achieve breakthrough improvements in performance measures business process re-engineering is also known as
business process redesign, business transformation or business process change methodology.
Following steps are considered for business process re-engineering:
(i) Developing business vision and process objective: Under this process it is desirable that a vision of
organization is defined clearly so that one can put business process function in tune with the vision. Basically
organizational vision depicts the challenging position what the organization will be in future.
(ii) Identifying the process to be redesigned: Once business vision and process objectives are clearly defined, the
organization should focus and identify those processes which needs redesigning.
(iii) Measuring the performances of existing processes: Under this step, the organisation should focus on various
methods used to measure the performance of a process to determine whether an opportunity exists to improve
its efficiency, effectiveness and adaptability. Two popular methods include benchmarking and process
evaluation.
(iv) Identification of the opportunity for application of information technology: Under this step, the emphasis is
placed on application of IT knowledge to support a process and redesign the process accordingly. As against
this, under the conventional approach method of process design, firstly it establishes a process and than assesses
the information requirement.
(v) Building prototype of new processes: Under this step, the organization should design a new process on an
experimental basis in the light of series of revision and improvement until the redesign process is put in actual
operation. The prototype must be tested to measure this performance and incorporate needed changes. It may be
noted that the testing should be in realistic environment as far as possible.
7. What are the various environments which effect the success of an organisation?

An analytical classification of various environmental factors are as follows:

-legal environment,
-cultural environment, and

ECONOMIC ENVIRONMENT: Economic environment is by far the most important environmental factor which
the business organizations take into account because a business organisation is an economic unit of operation. Since
the measurement of organizational performance is mostly in the form of financial terms, often managers concentrate
more on economic factors. The economic environment is important for non-business organizations too because such
organizations depend on the environment for their resource procurement which is greatly determined by the
economic factors.
TECHNOLOGICAL ENVIRONMENT: Technological environment refers to the sum total of knowledge
providing ways to do things. It may include inventions and techniques, which affect the ways of doing things, i.e.,
designing, producing, and distributing products. Technological environment is important for business as it affects
the type of conversion process that it may adopt for its purpose. A given technology affects an organisation in the
way it is organised and faces competition
POLITICAL LEGAL ENVIRONMENT: Political-legal environment consists of laws and regulatory
framework and political set-up in which a business unit is operating. The stable political set-up and legal framework
in the economy influence the decisions of the organisation. S.H. Robock has developed a conceptual framework for
identifying and assessing political risk which may affect business decisions.
SOCIO-CULTURAL ENVIRONMENT: Social-cultural environment is another important aspect of
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environmental scanning in strategic management. It basically refers to the set of values, ideals, attitudes, belief,
desires, expectations which distinguish one group from those of another. The organisation needs to be aware of how
social and cultural factors can directly influence the way they manage their operations particularly human resources
and marketing.
GLOBAL ENVIRONMENT: Business organization in every industry is facing the rising tide of globalization. The
world has reduced to smaller place as a result of revolution of means of transport and communication and diffusion
in information technology. So today, business organization needs to think about setting and producing goods for
customers globally. Globalization basically presents existing opportunities and challenges to many companies.
8. Short note on mission of an organization.

Mission is a general statement of what distinguish the organization from all other of its types. It should
address the basic purpose of the firm, the reasons for which it exists. Mission is the answer of basic question,
What is our business?
A clear mission statement is essential for effectively establishing objectives and formulating strategies. It is the
guiding principle that drives the processes of goal and action plan formulation, a pervasive, although general,
expression of the philosophical objectives of the enterprise.
Mission should focus on long-range economic potentials, attitude toward customers, product and service quality,
employee relations, and attitudes toward owners. It provides identity, continuity of purpose, and overall definition,
and should convey the following categories of information.
An ideal mission statement should possess the following features:
Mission should be clear, both in terms of intentions and words used.
It should be feasible, neither too high to be unachievable, nor too low to demotivate the people for work.
It should be precise but self-explanatory, neither too narrow so as to restrict the organizations activities, nor too
broad to make itself meaningless.
It should be distinctive, both in terms of the organizations contributions to the society and how these
contributions can be made.
The role played by mission in guiding the organization is an important one. Specifically it:
Serves as a basis for consolidation around the organization's purpose.
Provides impetus to and guidelines for resource allocation.
Defines the internal atmosphere of the organization, its climate.
Serves as a set of guidelines for the assignment of job responsibilities.
Facilitates the design of key variables for a control system.
9. Distinguish between objectives and goals.

Time: Objectives are timeless, enduring, and unending whereas goals are temporal, time-phased, and intended to be
superseded by subsequent goals. Objectives relate to the ongoing activities of an organization, their achievement
tends to be open-ended and not bound by time. A goal on the other hand is short-lived as it is time bound.
Specification: Objectives are stated in broad, general terms, dealing with matters of image, style and self-
perception. These are aspirations to be worked in the future. Goals are very specific, stated in terms of a particular
result that will be accomplished by a specific date. Goals are more specific and time bound.
Focus: Objectives are usually stated in terms of some relevant environment which is external to the organization.
Goals on the other hand, are more internally focused and carry important implications about how resources of the
organization are utilized or will be utilized in future. Objectives are more generalized statements like maintaining
market leadership, striving continuously for technological superiority, etc., whereas a goal may imply a resource
commitment requiring the organization to use those resources in order to achieve the desired outcomes.
Measurement: Both objectives and goals can be stated in terms, which are quantitatively measured, but the
character of measurement is different. Generally quantitative objectives are set in relative terms. For example,
Reliance Industries has put its objectives like this: to acquire top position among the Indian companies. This
objective may not be achieved in one year, but it is timeless and externally focused, providing a continuing
challenge for the company. Quantitative goals are expressed in absolute terms; say 20% increase in sales. The
achievement of this goal can be measured irrespective of environmental conditions and competitors actions.
10. Explain the components of the BCG Matrix.

The Boston Consulting Group developed the growth-share matrix to analyze the problem of resource
deployment among the business units or products of multi-business firms. It is based on product life cycle
theory.
The business units or products are analyzed by placing each one in the matrix according to their (1) expected growth
rate (vertical axis), measured by anticipated growth rate in sales which depends on maturity of industry, and (2)
relative market share (horizontal axis), measured as the unit's share divided by that of its largest competitor. The
basic idea behind this model is that if a product has a bigger market share or if the products market grows faster, it
is better for the organization.

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Stars
Invest
Question marks
Remain divested
Cash cows
Invest just enough cash
to maintain
Dogs
Liquidate

high market share low

Thus, the placing products in BCG matrix provide four categories in the portfolio of an organization. Each of the
strategic business units categories shown in the (2x2) matrix is explained as follows:
Dogs (Low Growth, Low Market Share): Each of businesses or products in quadrant I with low expected growth
rates and low relative market standing are labeled as "dogs" or "cash traps." The strategy in this category should
consist of cost cutting by divestments, retrenchment, or even liquidation. These units or products are likely to be
characterized by high costs, low quality, less effective marketing procedures, and so on, which would collectively
contribute to weak competitive position and low potential for profits. The strategy for this category should consist
of cost cutting.
Question Marks (High Growth, Low Market Share): Those in quadrant II, with high projected growth rates and
low market standing, are labeled as Question Mark. The reason is that although they are operating in markets with
expected growth potential, they are otherwise experiencing competitive disadvantage. This quadrant has worst cash
characteristics of all, because they have high cash demands and generate low returns because of their low market
shares. Management can invest cash to correct the market weakness so as to take advantage of expected market
growth or, if not convinced of their ability to improve market share, it can retrench, divest, or liquidate to minimize
the cash drain.
Stars (High Growth and High Market): Products or business units in quadrant III, have both high market standing
and high industry growth potential are labeled as stars. They should receive heavy cash investment in order to
maintain their market share. Successful resource deployment beyond cash requirements could lead to a superior
market share when industry growth potential falls off. Resources should be allocated to these units to grow faster
than the competitions in sales and profits. Stars are leaders in the business and generate large amounts of cash.

Cash Cows (Low Growth and High Market Share): A product or business would become a cash generator in
quadrant IV. Cash cows have a strong market position in industries that have matured. These products or businesses
can thus be "milked" by investing just enough cash to maintain market standing and applying excess cash inflows to
the firm's other activities which are growth industries or products.
11. Distinguish between focus strategies and integration strategies.

FOCUS STRATEGIES
Focus strategies are those which are designed to help an organization target a specific niche within industry. As
against low cost leadership and differentiation strategies which are designed to target a broader or industry wide
market, focus strategies aim at a specific and typical small niche such as
Particular buyer group
A narrow segment of given product line
A geographical or regional market, and
A niche with distinctive special taste and preferences.
The basic idea behind a focus strategy is to specialize the firm activities in ways that other borderline (low cost or
differentiation) organization cannot perform as well. Superior value, and thus, higher profitability is generated when
other borderline organizations cannot specialize their activities as well as a focused organization.
INTEGRATION STRATEGIES
Integration strategies seek mainly, but not exclusively, to acquire a service or product by merging with or
acquiring the prior provider. Therefore, the process of integration should be implemented within a framework of
goals that spells out the limits of such evaluative criteria as return on sales and investment, pivotal expense items, time,
and cash flow. Integration strategies can be achieved in the following ways:
(i) Backward Integration
(ii) Forward Integration
(iii) Horizontal Integration
(iv) Vertical Integration

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12. Short note on Tactical Planning and McKinseys 7-S Framework.

Tactical Planning
Tactical plans have shorter time frames and narrower scopes than strategic plans. Tactical planning provides the
specific ideas for implementing the strategic plan. It is the process of making detailed decisions about what to do, who
will do it, and how to do it. Tactical planning is micro-oriented and focused on your short term goals, which usually
have 1 to 18 months time frames. Tactical planning is contributory to strategic planning. This type of planning is
mainly short-term oriented and made at lower levels and is all about how things are getting done. It is designed to
apply and implement corporate strategy. The focus is on operations, which includes creating and executing effective
and efficient action plans.
The following are the characteristics of tactical planning:
Tactical planning is formulated at supervisory or lower level of management who are supposed to take appropriate
actions for solving operating problems.
Tactical planning is short-term duration and directed at short-term actions.
Tactical decisions are operational and people-oriented.
Tactics are highly dynamic and innovative in approach.
Tactical decisions are the means designed to pursue specific ends or goals.
Tactical planning is based on functional strategies.
Tactics are subject to dynamics of administrative decisions concerning costs, time and resources.
Tactical planning applies to all activities and it directly affects the implementation of functional strategies.

McKinseys 7-S Framework
McKinsey developed the 7-S framework management model which organize seven factors to organize a
company in a holistic and an effective way with the objective to diagnose the causes of organization problem
and formulate program for improvement due to the implementation of the strategy which are associated with
change in the organization.
The organizational change is not simply a matter of structure although the structure is a significant variable in the
management change. Effective organizational change may be understood to be a complex relationship between the
7-S i.e. strategy, structure, systems, style, skills, staff and shared values (super ordinate goals). The relationship is
diagrammatically presented as follows:

High
Invest &
grow
Invest &
grow
Caution
category
Medium
Invest &
grow
Minimum
investment
Minimum
investment
Low
Invest &
grow
Minimum
investment
Minimum
investment
High Medium Low

Business Unit Strength

The above framework shows that there are a multiplicity of factors which influence an organizations ability to change
and understand as to how the 7-S model mechanism works:
Strategy: Strategy means to achieve objectives. It provides the direction and the scope of the organization over the
long-term. Strategy refers to actions the organization plans or undertakes in response to or in anticipation of external
environment. It includes purposes, missions, objectives, goals and major action plans and policies. A strategy
targets at gaining competitive advantage over rivals.
Structure: It is a basic framework to designate responsibilities and functions. Organization structures prefers
relatively more durable organizational arrangements and relationship. It prescribes the formal relationship among
various positions and activities.
System: It is a management tool for planning, decision-making, communication control and the procedures and
processes regularly followed by an organization. Systems in the 7-S framework signifies all the rules and
regulations, procedures both formal and informal that complement the organizational structure.
Style: Style stands for the patterns of behaviour and managerial style of top management over a period of time. It is
visible through relationship among the three levels of management or managers, organizational culture which is a
reflection of value system. The style has to change with the change in strategy, system and structure.
Staff: It is the human resources of the organization i.e., the kind of specialties or professions represented in an
organization such as engineers, specialist in different areas: finance, personnel, legal etc. Staffing is the process of
recruiting and selecting persons for the organization, training and developing them, placing them in their post so as
to reap the potential from each of them.
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Skills: It means organization and individual capabilities. Skill is an ability or proficiency in performing a particular
task. It includes those characteristics which most people use to describe a company. Skills are developed over a
period of time and as a result of interaction of a number of factors, performing certain tasks successfully over a
period of time, kind of people in the organization, top management style, the organizational structure, the external
influences etc. Skills are the dominant capabilities and competencies possessed by the organization through its
people.
Shared Values (Super-ordinate Goals): Super-ordinate goals stands for companys mission, vision, values,
philosophy in the backdrop of which organizational goals and objectives are set and strategies are formulated. Its a
set of values and aspirations that goes beyond a conventional formal statement of corporate objectives. These are
essential as they inspire the members of the organization and provide a definite direction to its operations.
13. Short note on behavioral implementation.

Strategic choice is influenced by various subjective factors such as decision styles, attitude to risk and
internal power play between the strategists. The strategy implementation process is also influenced by the
behaviour and attitude of the strategist along with organizational factors such as corporate culture, corporate values,
ethics and organization sense of social responsibility.
Behavioural implementation is concerned with those aspects of strategy implementation which have influence
on the behaviour of the people in the organization. Since the organization is basically a deliberate creation of
human beings for certain specified objectives, the activities and behavior of its members need to be directed
in certain way.
(i) Leadership: It is the ability to persuade others to achieve the defined objectives willingly and enthusiastically
(ii) Organizational culture: It is a set of assumptions, beliefs, values and norms which are shared by people and
groups in the organization and control the way they interact with each other and with stakeholder outside the
organization.
(iii) Organizational Development: It refers to long-term effort supported by top management to improve an
organizations problem-solving and renewal process through effective management of organizational change.
(iv) Values and Ethics: Values represent basic convictions that a specific mode of conduct is personally or socially
preferable to an opposite mode of conduct. Ethics is concerned with moral principles or set of values about
what conduct ought to be.
(v) Corporate Governance: It is the application of best management practices, compliance of law in true letter
and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge
of social responsibility for sustainable development of all stakeholders.
(vi) Corporate Social Responsibility: It is a tool used by business and industry to align operations with social and
environmental values.
(vii) Organizational Politics: Politics can be referred to as actions for seizing, holding, extracting and executing of
power by individuals and groups for achieving personal goals. The organization decisions are affected because
of organizational politics in such a way that they constitute to personal goals rather than organizational goals.
14. What are the limitations of strategic programming?

Required Conditions: The fulfillment of required conditions by an organization is one of the important limitation
of strategic programming. Strategic planning is most appropriate to those organizations which are confronted with
stable, simple and normal conditions. Further once the organization crosses this limit the following conditions are
also fulfilled:
Stability
Simplicity
Industry maturity
Capital intensity and
External control.
Falling visibility of Mechanistic Organizations: Mechanic structure is founded on formal hierarchy taking a
changed pyramid to design making it rigid, complex and highly centralized. Lack of freedom and inadequate
communication are hindrances to achieve efficiency and disciple. Strategic programming goes well with
mechanistic organization. This itself is a limitation that it can not work in other types of organization.
Planning Problems: Strategic programming is impossible without planning. In some cases planning leads the
organizations away from the main track of progress or normalcy because managers are not aware as to where their
intended strategy will take them. Further, planning is inherently a conservative process so much so that the mangers
find that it is ill-suited to change course i.e., planning works to conserve the basic orientation of an organization.
Difficulties with command and control: There are difficulties in enforcing command and control: Managers in
organization develop commands which reflect that their understanding of the plans are derived from the intended
strategy. They use the organizational control system to enforce it in order to comply with those commands.

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15. Discuss the types of resistance to organizational change.

In the process of strategic change, managers face the problem of resistance to change. People tend to resist many types
of changes because it requires new habits or some sacrifices. Likewise social systems tend to resist change because of
homeostasis, which implies self-correcting characteristics of human being to maintain equilibrium as a result of
change. The reasons underlying resistance to change may be identified as individual resistance and group resistance.
Individual Resistance: There are many factors operating at the individual level which are responsible for
resistance. Degree of resistance depends on how people feel about the change. Their feelings may be either real or
emotional which may be seen in the context of economic; psychological and social factors.
(i) Economic Factors: People feel attached to the organization for satisfying their needs. The economic needs i.e.
physiological, job security, etc., precede over other needs. People may perceive that they will be adversely
affected by the change in terms of their need satisfaction due to: (i) obsolescence of skill; (ii) fear of economic
loss; and (iii) reduced opportunity for incentives.
(ii) Psychological Factors: It covers those factors which are based on peoples emotions, sentiments and attitudes
towards change. These are qualitative rather than quantitative. Major psychological factors responsible for
resistance may include: ego defensiveness; status quo; low tolerance of change; lack of trust on change agent
and fear of unknown.
(iii) Social Factors: People derive need satisfaction, particularly social needs through their mutual compatible
interaction and form their own social groups at the workplace for the satisfaction of their social needs. The
satisfaction of these needs is affected by a change which people resist. The major social factors causing
resistance to change are: (i) desire to maintain existing social interaction; and (ii) feeling of outside
interference.
Group Resistance: People may express their resistance in the form of group also. The effect of group as a source of
resistance may be analysed in terms of nature of group dynamics and vested interests. Group dynamics refers to
forces which operate in a group determining the bevahiour of its members. These forces determine how effective a
group would be in accepting or rejecting a change. The following nature of group dynamics is important in this
context:
i. If the group is highly cohesive and members have developed strong belongings to the group, it has strong say
in acceptance or rejection of change.
ii. If both change agent and people are target for change belong to the same group, the role of group is more
effective.
iii. The degree of group attractiveness to its members affect how effective the group is in change response.
iv. Group can exert more pressure on those factors of the members which are responsible for group being
attractive to the members i.e., attitudes, values and behaviors.
v. The degree of prestige of group determines the degree of influence the group has over the members and
response to change.
16. What do you mean by the Balance Score Card Approach?

The balanced score card (BSC) is a strategic planning and management system that is used extensively in
business and industry, government, and non-profit organizations worldwide to align business activities to the
vision and strategy of the organization.
The BSC provides for the development of a conceptual framework model which assigns the strategic mission of the
organization with achievable goals and actions measured against pre-determined metrics. It helps to improve
internal and external communications, and monitor organization performance against strategic goals.
It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance
measurement framework that added strategic non-financial performance measures to traditional financial metrics to
give managers and executives a more 'balanced' view of organizational performance. However, the phrase balanced
scorecard was coined in the early 1990s, the roots of the this type of approach are deep, and include the pioneering
work of General Electric on performance measurement reporting in the 1950s and the work of French process
engineers (who created the Tableau de Bord literally, a "dashboard" of performance measures) in the early part of
the 20th century.
The balanced scorecard suggests the following four perspectives:
(i) Learning and Growth Perspective : This perspective includes employee training and corporate cultural
attitudes related to both individual and corporate self-improvement. In a knowledge based organization, people;
the only repository of knowledge are the main resource. In the current situation of rapid technological change, it
is becoming necessary for knowledge workers to be in a continuous learning mode. Government agencies often
find themselves unable to hire new technical workers, and at the same time, there is a decline in training of
existing employees.
(ii) Business Processes Perspective: This perspective refers to internal business processes. Metrics based on this
perspective allow the managers to know how well their business is running, and whether its products and
services conform to customer requirements. These metrics have to be carefully designed by those who know
these processes most intimately; with unique missions, these are not something which can be developed by
outside consultants.
(iii) Customer Perspective: Recent management philosophy has shown an increasing realization of the importance
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of customer focus and customer satisfaction in any business. These are leading indicators, if customers are not
satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this
perspective is thus a leading indicator of future decline, even though the current financial picture may look
good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and
the kinds of processes for which we are providing a product or service to those customer groups.
(iv) Financial Perspective: The availability of timely and accurate financial data will always be a priority, and
managers will do whatever necessary to provide it. In fact, often there is more than enough handling and
processing of financial data. With the implementation of a corporate database system, it is seen that more of the
processing can be centralized and automated. But the current emphasis on financial parameters only may lead
to the unbalanced situation with regard to other perspectives. There is a need to include additional finance-
related data, such as risk assessment and cost-benefit data, in this category.
17. Short notes on HR and R&D key performance indicators.

Human Resource Key Performance Indicators
Head count control
Head count by responsibility
Mix of staff analysis
Mix of business analysis and staff personnel needs
Skilled and non-skilled staff
Management personnels vs. operations staff
Own labour/outside contractor analysis
Workload activity analysis
Vacancies existing and expected
Labour turnover
Labour turnover vs. local economy
Percentage of overtime worked to total hours worked
Absence from work
Staff morale
Cost of recruitment
Number of applicants per advertisement
Number of employees per advertising campaign
Staff evaluation techniques
Evaluation of staff development plans
Monitoring of specific departments, e.g. accounting
Accuracy of reporting as measured by wrong-allocations and wrong-postings
Monitoring of departments long-term performance
Pay and conditions vs. competition.

Research and Development Key Performance Indicators
Evaluation and basic research and development objectives, strategic objectives and project objectives
Product improvement against potential market acceptance
Research and development against technical achievement criteria against cost and markets
Research and development priority vs. other projects
Research and development vs. competition
Research and development technical milestones
Analysis of market needs over the proposed product/service life of R&D outcome
Top management audit of research and development projects
Major programme milestones
Failure rates of prototypes
Control by visibility - releases, e.g. definition release, design release, trial release, manufacturing release, first
shipment release, research and development release.
18. What are the objectives of risk management?

Risk management refers to identification of opportunities and avoiding or mitigating losses. It is a logical and
systematic process of establishing the context, identifying, analysing, evaluating, treating, monitoring and
communicating risks associated with any activity, function or process, in a way which enables an organisation to
minimise losses and maximise opportunities.

Broadly speaking, the objectives of risk management is:
To provide a structured framework for more effective strategic planning
To ensure maximising of opportunities and minimisation of losses
To widen management perspective and encourage initiative and pro-active behaviour
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To contribute to improved organisational efficiency and effectiveness
To optimise the use of resources
To promote greater openness in decision-making and improve communication
To provide senior management with a concise summary of the major risks affecting the organisation and a
mechanism to ensure that appropriate resources are directed towards areas of high risk
To provide a framework for ensuring that unavoidable risks are adequately insured
To provide an effective and systematic approach which enables management to focus on areas of risk in their
operations
To improve the level of accountability in the organisation
To identify and prioritise potential risk events
To help in developing risk management strategies and risk management plans
To analyse and report identified risk events
To find ways to identify and evaluate risks
To develop strategies and plans for risk management strategies.
19. What are the various strategies for risk mitigation?

Transfer Risk: Normally in projects assignments or multifaceted exercises, execution is fought with risks.
Different agencies work together and these agencies take care to transfer risk in their areas to another agency
which is better equipped to take care of a risk for a consideration. Here the concept of core competence curves in
and whenever a particular agency, individual or a firm finds that it is dealing in an area where it does not have the
core competence to deal with it seeks the help of another agency which has the specific core competence to
transfer its own risk. The risk may be in the form of loss of reputation or sub quality performance and this risk is
taken care of through transfer.
Tolerate Risk: It is retention of the risk. It is accepting the loss when it occurs. True self insurance falls in this
category. Risk retention is a viable strategy for small risks where the cost of insuring against the risk would be
greater over time than the total losses sustained. All risks that are not avoided, reduced or transferred are retained
by default. This includes risks that are so large or catastrophic that they either cannot be insured against or the
premiums would be infeasible.
Reduce Risk: By far the greater number of risks will belong to this category. The purpose of treatment is not
necessarily to obviate the risk, but more likely to contain the risk to an acceptable level. Internal controls are
actions instigated from within the organization (although their effects may be felt outside of the organization)
which are designed to contain risk to acceptable levels.
Avoid Risk: This method results in complete elimination of exposure to loss due to a specific risk. It can be
established by either avoiding to undertake the risky project or discontinuance of an activity to avoid risk. This
means that no risky projects are undertaken. Alternatively, a project may be abandoned midway to mitigate the
risk while handling a project.
Combine Risk: When the business faces two or three risks the overall risk is reduced by combination. This
strategy is suitable mainly in the areas of financial risk. Different financial instruments say, shares and debentures
are taken in a single portfolio to reduce the risk.
Sharing Risk: Insurance is a method of sharing risk for a consideration. For example by paying insurance
premium the company shares the risk with companies and the insurance companies themselves share their risk by
doing re-insurance.
Hedging Risk: Exposure of funds to fluctuations in foreign exchange rates, prices etc., bring about financial risks
resulting in losses or gain. The downside risk is often taken care.
20. Short note on information needs at various levels of management.

Top level management
Information is needed on a adhoc basis
It is often unexpected
It is usually predictive of the future events
It is usually in the summarized form
Large part of the data is acquired from external resources
The data is in a unstructured format
The information is highly subjective in nature

Middle level management
The information is of a predictive nature
It produces unexpected findings
It is comparative in nature
It is also in the summary form
It is acquired from both internal and external sources

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Supervisory level of management
The information is repetitive in nature
They are usually predictive
They often describe the past
The information is very detailed
It usually originates from internal sources
It is in a structured form
The accuracy level of such information is very high.
21. What are the limitations of MIS ?

The quality of the outputs of MIS is basically governed by the quality of inputs and processes.
MIS is not a substitute for effective management. It means that it cannot replace managerial judgement in making
decisions in different functional areas. It is merely an important tool in the hands of executives for decision-
making and problem solving.
MIS may not have requisite flexibility to quickly update itself with the changing needs of time, especially in the
fast changing and complex environment.
MIS cannot provide tailor made information packages suitable for the purpose of every type of decisions made by
executives.
MIS takes into account mainly quantitative factors; thus it ignores non-quantitative factors like morale, attitudes
of members of the organization, which have an important bearing on decision-making process of executives.
MIS is less useful for making non-programmed decision-making. Such type of decisions are not of routine type
and thus they requires information, which may not be available from existing MIS to executives.
The effectiveness of MIS is reduced in the organization, where the culture of hoarding information and not
sharing with others hold.
MIS effectiveness decreases due to frequent changes in top management organizational structure and operational
team.
22. Distinguish between MIS and Decision Support System.

MIS Decision Support System
Information form is periodic & based on demands Information form is interactive required
Information formats are pre-specified and fixed Information formats are adhoc, flexible and
adaptable
Information is provided by extraction and
manipulation of operational data
Information is produced by analytical modeling of
operational and external data
It provides information about the performance of
the organisation
It provides information to confront specific
problems or opportunities
It supports the intelligence and implementation
stages of decision making
It supports the intelligence decision, choice and
implementation stages of decision making
It supports structured decisions for operational and
tactical planning and control
It supports the semi-structured and unstructured
decisions for technical and strategic planning and
control
It provides indirect support designed to many
managers
It provides direct support tailored to the decision
making styles of individual managers
23. What do you mean by artificial intelligence and expert systems?

Artificial Intelligence: The effort to develop computer based systems which can behave like humans, with
the ability to learn languages, accomplish physical tasks, use a perceptual apparatus, and emulate human
expertise and decision making. An example of such an effort is the diagnosis of a specific illness and
prescription of a course of treatment by a physician. These are artificial intelligence programs called expert
systems that will perform limited diagnosis of an illness with an accuracy rate greater than the physician. The
primary areas of artificial intelligence research and applications today are robotics, computer vision, speech
recognition, natural language processing, expert systems, and neutral networks.

Expert Systems: It is a knowledge intensive computer program which captures the expertise of a human in
a limited domain of knowledge and experience. It helps in organizations value added work. The users of an
expert system are the people who do value added work which requires a special skill or expertise. It provides
tools, information, structured methods for decision making. It stores and provide expert knowledge to support
decisions in specific areas.
Examples of expert system:
System which generate competitive bids.
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System to help sales people and suggest the best choice for the customer.
System which helps in diagnose of failures may be machine or human being.
Systems to support a loan approval system.
Systems to support training in specialized areas where experts are in scarcity.
System to find price inconsistencies between different equity markets.
24. What are the characteristics of an effective internal control system?

Internal control of a business includes the whole system of controls i.e. operational, financial and managerial
control. Controls are exercised through internal checks by the executives, by internal and statutory auditor and
by various committees appointed to examine in-depth, certain aspects of business. Controls are also exercised to
some extent by outside bodies like financial institutions; banks etc. who offer term loans for working capital.
The main characteristics of an effective internal control system are stated as follows:
There should be proper delegation of authority, responsibility and duties within the organisation and any areas of
conflict, misunderstanding and overlapping of duties.
Appropriate monitoring system should exist for an analysis of performance and taking immediate corrective
measures.
In built facilities should exist for checking, cross checking and reconciliation of data by experienced employees
including internal audit personnel, to ensure reliability, adequacy and correctness of all recorded transactions.
The internal control system should not be expensive but should be commensurate with the benefits to be derived.
The control system should be flexible and adjustable to the changing situational needs and should never be too
tight to take away the initiative of the operational executives.
There should exist a system of authorisation and record procedures to provide reasonable accounting control over
assets, liabilities, revenue and expenditure. The work of one person should become complementary to the work of
another with a view to prevent and detect errors and frauds.
Selection procedures are carefully screened to ensure that only qualified people are employed. Responsibilities are
assigned according to individuals having requisite competence and qualification. The staff should have adequate
facilities to carry out their work and duties.
There should be plan of organisation which provides the segregation of functional responsibilities and allocation
of duties in such a way that none is responsible for the entire transaction. Functional responsibilities should be
attainable and not academic.
Evaluation of control system is periodically done by internal auditors and weakness revealed therein are brought
out suitably for improvements. Appraisal is necessary to keep control alive, vital and effective. Management
should not be reluctant to take steps in formulating effective systems of control at any stage or at any line of
organisational functioning.
Control should be a continuous process and control measures should not be static but dynamic.
Control measures, should not be taken as substitutes for judgement. Control measures should be well conceived
and operate with maximum efficiency and should not taken as substitutes for judgement. Controls should not be
duplicating and repeating to avoid extra costs in their applications.
25. Short notes on Artificial Intelligence and Flow charts.

Artificial Intelligence
It is the effort to develop computer based systems which can behave like humans, with the ability to learn
languages, accomplish physical tasks, use a perceptual apparatus and emulate human expertise and decision
making
Primary areas are robotics, speech recognition, expert systems etc.

Flow Charts
It is a graphical representation of the flow of operations and documentations in their correct sequence from the
initiation of the transaction to its final entry in the books.
26. Explain the need for strategic alliances.

Most firms enter into alliances out of need. According to an executive, With alliances, we can do more for less.
Whatever the needs driving alliance formation, managements must take the time to analyse why an alliance is the best
strategy. The president of an Automotive industry had once explained, Understanding why you need a partnership is
the most critical step. Sorting out the whys in the equation will in turn dictate the answers to key issues such as with
whom you want to collaborate, how the partners will combine their strengths, and how the venture will be structured
and managed. The record suggests that ten main strategic factors reduce the whys in most alliance equations:
Satisfy customer demands: Customer demands in many markets are changing. For example, in office
automation, customers now prefer a systems solution and want to rely on a single company to service all
equipment.
Share R & D costs: High financial stakes and a cut-throat global market have fuelled a spate of competitive
alliances in a number of industries.
Fill knowledge gaps: Companies that are leaders in their fields can maintain that position by using alliances to
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capture new developments, and keep their technological resource base ahead of the competition.
Make scale economies: Alliances can achieve the scale needed to amortise investments.
Make scope economies: Alliances can enlarge dramatically the scope of a companys operations. Alliances
focusing on scope help counter the ever-shorter product cycle of modern technology.
Jump market barriers: However potent the producer companys name may be in its home markets, that
company may not market even its mature products best in international markets. Alliance marketing, franchising,
distribution and licensing deals can leave a development-focused company free to concentrate on new products.
Speed product introduction: The narrowing of the development-to-market lead time has been a crucial feature
of the past decade. In many sectors, the first company to introduce a new product enjoys a dominant market
position and stands the best chance of recouping costs before the competition arrives to drive prices down-or
before patent protection expires.
Pre-empt competitive threats: In industries in which a few large players increasingly dominate markets, some
companies resort to an if you cant beat them, join them approach.
Use excess capacity: A large number of companies have used the restructuring effect of manufacturing alliances
to soak up excess capacity.
Cut exit costs: Participants can use alliances to cut the costs of leaving a business.
27. What are the steps for preparing for strategic alliances?

The important steps necessary for good alliance creation and management are:
Developing qualitative and quantitative partner criteria: The organisational culture and norms should be
analysed, personnel functions should be analysed and the proposed criteria of partner to be selected should be
outlined.
Developing a list of prospective partners: It is essential that the partner analysis is proactive and not reactive. A
partner that approaches a company may not be the optimum partner. It is therefore, necessary to examine other
opportunities, if they exist. Accordingly, a list of prospective partners should be prepared.
Partner Selection: While selecting a partner, companies must list the prospective standards against which they
can measure the merits of a prospective partner; the most important being the three Cs of successful alliances
namely, Compatibility, Capability and Commitment.
Obtaining internal approvals: The policies should be completely unambiguous and clear internal approvals
should be obtained from the CEO and top advisory personnel to avoid embarrassment later.
Creating an implementation plan: Alliances conceived entirely by the planning and corporate departments
without the active participation of the operational managers, who will ultimately have responsibility for the
implementation of projects are bound to fail. It is therefore, essential that the operating managers are involved in
at least the later stage of the negotiation process.
Final predeal evaluation of all the relevant information
Negotiating the deal
Managing the legal process
28. What are the factors for success in strategic alliances?

Dynamic management structure
Encouragement of calculated initiatives
Systematic task setting
Equal distribution of authority
Streamlined communication channels
Development of multi-manager roles
29. Short note on different kinds of Joint Ventures.

Equity Joint Venture: The equity joint venture is an arrangement whereby a separate legal entity is created in
accordance with the agreement of two or more parties. The parties undertake to provide money or other resources
as their contribution to the assets or other capital of that legal entity. The entity is generally established as a
limited liability company and is distinct from either of the parties which participate in its creation. The newly
created company, thus, becomes the owner of the resources contributed by the parties to the joint venture
arrangement. Each of the parties in turn becomes the owner of the company having equity in the company.
Contractual Joint Venture: The contractual joint venture might be used where the establishment of a separate
legal entity is not needed or the creation of such a separate legal entity is not feasible in view of one or the other
reasons. The contractual joint venture agreement can be entered into in situations where the project involves a
narrow task or a limited activity or is for a limited term or where the laws of the host country do not permit the
ownership of property by foreign citizens. For the purposes of contractual joint venture, the relationship between
parties is set forth in the contract or agreement concluded between them.

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30. What are the points to be kept in mind while drafting foreign collaboration agreement?

The collaboration agreement should generally contain the following comprehensive clauses:
(1) In case of agreement for provision of technical know-how
definition and characteristics of the subject-matter of the know-how;
the mode of transfer of technical know-how i.e. the time and place of transfer and whether the transfer is
absolute or for a specified period;
clause safeguarding secrecy of the technology;
training of the technical personnel of the Indian company by the foreign collaborator;
performance guarantee in regard to the achievement of the required qualities, standard of the product,
quantities to be produced and minimum standard of performance with suitable indemnity clause;
conferring of licence or patent right for the technical know-how and the product to be manufactured;
mode and method of payment i.e. whether a lump-sum or by way of royalty or technical fees;
who would own the future improvements in the technology by the transferee made by the transferor of the
technology;
(2) In case of agreement for a joint venture
care must be taken to provide for the equity participation by the foreign company under a joint venture
agreement; the agreement should also provide for the type of share capital and the mode of payment for
acquiring the shares;
the constitution of the Board of Directors with election, number of directors and the powers of the Board;
who will run the management of the company, and
pre-emption rights on the shares of the company.
the mode of declaration and distribution of the dividends;
the area of marketing of the products;
restriction on any change in the ownership ratio; other provisions as incorporated under an agreement for
supply of technical know-how.
31. Draft an arbitration clause in a foreign collaboration agreement in line with the LCIA recommendation.

"Any dispute arising out of or in connection with his contract, including any question regarding its existence, validity
or termination, shall be referred to and finally resolved by arbitration under the Rules of the London Court of
International Arbitration, which Rules are deemed to be incorporated by reference into this clause".
Parties are also reminded that difficulties and expenses may be avoided if they expressly specify the law governing
their contract. The parties may if they wish also specify the number of arbitrators, and the place and language of the
arbitration. The following provisions may be suitable:
"The governing law of this contract shall be the substantive law of"
"The tribunal shall consist of .(a sole or three) arbitrator(s)."
In the case of a three-member tribunal, the following words may be added
".two of them be nominated by the respective parties"
"The place of the arbitration shall be ..(city)"
"The language of the arbitration shall be .."
32. Explain the restrictive clauses in foreign collaboration agreements.

Restrictions after expiration of Industrial Property Rights or Loss of Secrecy of Technical Know-how: The
expiration of the term of patent in a technology transfer agreement signifies that the knowledge and invention
covered by such patent enters into public domain and any interested party can use such patent without any
obligation. Therefore, any restriction or future payment or any other obligations in respect of such an industrial
property rights should be invalid. Where the supplier of the technology imposes any restriction after the
expiration of the intellectual property rights, such restriction is deemed to be the restrictive practice.
Restrictions after Expiration of Arrangements: The use of such clauses in technology transfer agreements
generally oblige the company acquiring technology to pay royalties during the entire duration of manufacture of
product or the application of the process involved, without specifying any time limit. Sometimes these clauses
also contain restrictions to be continued even after the expiration of the agreement, for example, restrictions on
competition, restriction on Research and development activities and specially, the acquiring companys obligation
to keep secret and not to make use of the confidential information even after the expiration of the life of the
arrangement.
Restrictions on Research and Development: Such restrictions in the technology transfer agreement generally
involve limitations on the research and development policies and activities of the company acquiring technology.
The use of such clauses affects directly or indirectly the possibilities for the technological development
capabilities of the recipient company. Such provisions also restrict the freedom of recipient party to undertake its
own Research and development programmes.
Non-Competition Clauses: The Non-competition clauses in the technology transfer transactions include the
restrictions on freedom of technology acquiring company to enter into arrangements to use or purchase the
competing technologies or products not furnished or designated by the company supplying technology. These
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clauses directly or indirectly affect the acquiring companys capability of competition. Some of the non-
competition clauses which may have direct effect, oblige the recipient company not to manufacture or sell
competing products or not to acquire competing technology.
Tying Arrangements: Tying clauses in a technology transfer agreement requires the licensee to obtain raw
materials, spare parts, intermediate products for use with licensed technology, only from the licensor or its
nominees. These clauses also oblige the acquiring company to use personnel designated by the supplier. The main
reason behind the use of tying clauses by the company supplying technology seems to be based on the fact that it
wants to preserve an exclusive right to supply necessary processed or semi-processed inputs, to maintain quality
control, and to expand their profit margin.
Export Restrictions: Export restrictions in a transfer of technology agreement may include clauses restricting or
prohibiting the export of products manufactured by the transferred technology. These clauses restrict the export of
such products to certain markets or permission to export to certain markets and requirement of previous
permission for exports. The restrictions can be classified into following three categories:
Price Fixing: Price fixing clauses in a technology transfer arrangement involve the practices where the supplier
company reserve the right to fix the sale or resale price of the product manufactured by the imported technology.
In certain cases the imposition of resale conditions might be justified, e.g. where the supplier company practices a
legal selective distribution system, the supplier may impose the conditions on his distributor only to sell to
qualified dealers.
Restrictions on Field of Use, Volume or Territory: Restrictions on the field of use authorises supplier company
to restrict use of the technology or reserving some uses of technology for self-exploitation or exploitation by third
parties. The practices concerning the volume restrictions may consist of minimum production requirements or
maximum output. The volume of production may also be controlled by higher royalties to be paid beyond a
certain production quota or to produce by manufactured goods in a prescribed package with a certain weight.
Grant-back Provisions: The grant-back provisions in the technology transfer transactions provides for flow of
technical information and improvements to the supplier. These provisions oblige the recipient company to transfer
to the supplier of technology, free of cost, any invention or improvement made in the imported technology. The
grant-back provisions may be characterised as unilateral, exclusive or non-exclusive. A unilateral grant-back
provision establishes unilateral flow of technical information or improvement by recipient without any reciprocal
obligation of the supplier company.
Exclusive Sales and Representation Arrangements: Such practices prohibit the freedom of the technology
recipient company to organise its own distribution system. Such clauses in the technology transfer agreement
prohibit the technology receipient company from entering into exclusive sales or representative contract with any
third party, other than the supplier or a party designated by the supplier company. In other words, under these
clauses the recipient company becomes handicapped and has to be dependent on the suppliers distribution
channels. Therefore, in the presence of such clauses the recipient company cannot supply the product to the
parties to whom it wishes to supply.
Use of Quality Controls: Quality control and product standards are very important for an entrepreneur. The
quality product is of great importance for the supplier company particularly when it involves a trade mark or
service mark. The poor quality of product may injure the reputation of supplier attached with its trade mark. With
a view to avoid injury to its reputation the supplier company may impose restrictions to manufacture the product
of a certain quality. Quality control clauses generally involve in the licensing of trade marks.
Restrictions on Use of Personnel: The restrictions on the use of personnel are imposed by the supplier company
on the basis of non-availability of trained local personnel and high risk or delays which might occur if untrained
local staff is used. These clauses may impose a heavy social cost on the community of the host country, specially
where the supplier obliges the recipient company to use expert personnel, reserve certain managerial or technical
positions for experts or impose discriminatory conditions on the recruitment of local personnel.
Restrictions on Publicity: Generally the restrictions on publicity obliges the recipient company to spend a
minimum amount or to undertake a certain quantity of advertising. Such practices may relate to the content,
channels or amount to be spent on publicity. Restrictions on publicity may be justified where the publicity or
advertisement is of the nature which is injurious to the goodwill of the supplier.
33. Short notes on Direct and Indirect Foreign Investment.

Direct Foreign Investment - All investment directly by a non-resident entity into the Indian company would be
counted towards foreign investment.
Indirect Foreign Investment - The foreign investment through the investing Indian company would not be
considered for calculation of indirect foreign investment in case of Indian companies which are owned and
controlled by resident Indian citizens.
If the investing company is owned or controlled by non-resident entities, the entire investment by the investing
company into the subject Indian company would be considered as indirect foreign investment.
However, in case of 100% owned subsidiaries, the indirect foreign investment will be limited to the actual foreign
investment.

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34. Can an Indian company issue ESOPs to its foreign employees?

Indian companies are allowed to issue shares under ESOP to its employees or that of its joint ventures or WOS
who are resident outside India
Citizens of Pakistan and Bangladesh can invest under Govt. route
The ESOP scheme should be drawn in accordance with SEBI Guidelines (Companies Act in case of unlisted
companies)
The face value of the shares allotted does not exceed 5% of the paid up capital of the issuing company.
35. Short notes on QFI Investment scheme and Issue of ADRs / GDRs.

QFI Investment scheme
QFIs as defined therein to mean non-resident investors, other than SEBI registered FIIs and SEBI registered FVCIs,
who meet the KYC requirements of SEBI
QFIs shall be permitted to invest through SEBI registered Depository Participants (DPs) only in equity shares of
listed Indian companies through recognized brokers on recognized stock exchanges in India as well as in equity
shares of Indian companies which are offered to public in India in terms of the relevant and applicable SEBI
guidelines/regulations
The individual and aggregate investment limits for the QFIs shall be 5% and 10% respectively of the paid up capital
of an Indian company. These limits shall be over and above the FII and NRI investment ceilings prescribed under
the Portfolio Investment Scheme for foreign investment in India.

Issue of ADRs / GDRs
In accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through
Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India
A company can issue ADRs / GDRs if it is eligible to issue shares to persons resident outside India under the FDI
Policy
Indian listed companies not eligible to raise funds from the capital market or which are restrained from accessing
the securities market are not eligible
Unlisted companies can raise funds but they would require prior listing in the domestic market
No monetary limit
No end use restrictions except real estate or the stock market
Voting rights on shares issued under the Scheme shall be as per the provisions of Companies Act, 1956 and in a
manner in which restrictions on voting rights imposed on ADR/GDR issues shall be consistent with the Company
Law provisions.
The pricing of ADR / GDR issues should be made at a price determined under the provisions of the Scheme of issue
of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme,
1993 and guidelines issued by the Government of India and directions issued by the RBI
36. Short note on Overseas investment by registered trust / society.

Registered trusts and societies engaged in manufacturing / educational sector can make investment in the
same sector in JV / WOS with prior RBI approval.
Conditions for Trust
Trust should be registered under the Indian Trust Act, 1882
The Trust deed permits the proposed investment overseas
The proposed investment should be approved by the trustees
AD is satisfied that the Trust is KYC (Know Your Customer) compliant and is engaged in a bonafide activity
The Trust has been in existence at least for a period of 3 years
The Trust has not come under the adverse notice of any Govt. agency.
Conditions for Society
The Society should be registered under the Societies Registration Act, 1860
The Memorandum of Association and rules and regulations permit the Society to make the proposed investment
which should also be approved by the governing body/council or a managing/executive committee
AD is satisfied that the Society is KYC (Know Your Customer) compliant and is engaged in a bonafide activity
The Society has been in existence at least for a period of 3 years
The Society has not come under the adverse notice of any Govt. agency.
37. Short note on NAFTA.

The North American Free Trade Agreement was signed in to effect in January of 1994.
It is an agreement between Canada, United States of America and the United States of Mexico in hopes of
increasing trade by reducing trade restrictions. The agreement established the worlds largest free trade area at the
time. The North American Free Trade Agreement (NAFTA) has two supplements, the North American Agreement
on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC).
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The objectives of this Agreement, as elaborated more specifically through its principles and rules, including
national treatment, most-favored-nation treatment and transparency are to:
a) eliminate barriers to trade in, and facilitate the cross border movement of, goods and services between the
territories of the Parties;
b) promote conditions of fair competition in the free trade area;
c) increase substantially investment opportunities in their territories;
d) provide adequate and effective protection and enforcement of intellectual property rights in each
Party's territory;
e) create effective procedures for the implementation and application of this Agreement, and for its joint
administration and the resolution of disputes; and
f) establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the
benefits of this Agreement.
38. Short note on objectives of SAARC.

The main objectives of SAARC is
To promote the welfare of the people of socio-economic developments within SAARC countries; and
To develop productive relationship with regional and international organizations.
39. What are the various components of the European Union?

European Union has four main institutions, which are as follows:

1. THE COUNCIL OF MINISTERS: Highest decision making body, Comprised of ministers from national
governments of each of the member states, Meets once in a week either in Brussels or in Luxemburg,
Decides/deliberate upon legislation and policy;

Major responsibilities/functions:
a) It is the unions legislative body;
b) It co-ordinates the broad economic policies of the member states;
c) It concludes on behalf of the EU, international agreements with one or more states or international
organizations;
d) It shares budgetary authority with parliament;
e) It takes decisions necessary for framing and implementing the common foreign and security policy;
f) It co-ordinates the activities of member states and adopts measures in the field of police and judicial co-
operation in criminal matters.

2. THE EUROPEAN PARLIAMENT:
By It is democratically elected body with 626 members, directly elected citizens of all member countries;
The MEPs(member of European parliament) are elected for 5 years;

Major responsibilities/functions:
a) It shares with the council the power to legislate;
b) It shares budgetary authority with the council of ministers;
c) It exercises democratic supervision over the European commission;
d) It scrutinizes the activities the activities of other EU institutions.

3. THE EUROPEAN COMMISSION:
It is unions executive body;
It does the administrative work like drafting the proposals for legislations, implementing the legislations etc.;
The headquarters of the European commission is in Brussels;
Commissioners are nominated by its member govts and approved by the European parliament;
Term of office is 5 years.

Major responsibilities/functions;
a) It has the right to initiate draft legislation and therefore presents legislative proposals to parliament and the
council;
b) It implements the European legislation, budget and programmes adopted by parliament and the council;
c) It acts as a guardian of the treaties and together with the court of justice, ensures that community law is
properly applied;
d) It represents the union on the international stage negotiates international agreements, chiefly the field of trade
and co-operation.

4. THE EUROPEAN COURT OF JUSTICE;
It adjudicates all legal issues and disputes regarding European law;
It has one judge form each member country;
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It is situated at Luxemburg;
The term of office is 6 years.
40. What do you mean by the MFN Principle and the principle of national treatment?

MFN Principle
Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone
a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all
other WTO members. This principle is known as most-favoured-nation (MFN) treatment.
Some exceptions are allowed. For example, countries can set up a free trade agreement that applies only to goods
traded within the group discriminating against goods from outside. Or they can give developing countries special
access to their markets. Or a country can raise barriers against products that are considered to be traded unfairly
from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate. But the
agreements only permit these exceptions under strict conditions. In general, MFN means that every time a country
lowers a trade barrier or opens up a market, it has to do so for the same goods or services from all its trading
partners whether rich or poor, weak or strong.
Principle of National Treatment
Imported and locally produced goods should be treated equally at least after the foreign goods have entered the
market. The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights
and patents.
National treatment only applies once a product; service or item of intellectual property has entered the market.
Therefore, charging customs duty on an import is not a violation of national treatment even if locally produced
products are not charged an equivalent tax.
41. Short note on TRIMs and Rule of Origin.

TRIMs
The Trade-Related Investment Measures (TRIMs) Agreement applies only to measures that affect trade in
goods. These are rules that apply to the domestic regulations a country applies to foreign investors, often as part of
an industrial policy. Policies such as local content requirements and trade balancing rules that have traditionally
been used to both promote the interests of domestic industries and combat restrictive business practices are now
banned.
Trade Related Investment Measures is the name of one of the four principal legal agreements of the WTO trade
treaty. TRIMs are rules that restrict preference of domestic firms and thereby enable international firms to operate
more easily within foreign markets.
Under the agreement, countries must inform fellow-members through the WTO of all investment measures that do
not conform with the agreement. Developed countries had to eliminate these in two years (by the end of 1996);
developing countries had five years (to the end of 1999); and least-developed countries seven. In July 2001, the
Goods Council agreed to extend this transition period for a number of requesting developing countries.
The agreement establishes a Committee on TRIMs to monitor the implementation of these commitments. The
agreement also says that WTO members should consider, by 1 January 2000, whether there should also be
provisions on investment policy and competition policy. This discussion is now part of the Doha Development
Agenda.

Rule of Origin
Rules of origin as those laws, regulations and administrative determinations of general application applied to
determine the country of origin of goods except those related to the granting of tariff preferences.
The Agreement on Rules of Origin covers only rules of origin used in non-preferential commercial policy
instruments, such as MFN treatment, anti-dumping and countervailing duties, safeguard measures, origin marking
requirements and any discriminatory quantitative restrictions or tariff quotas, as well as those used for trade
statistics and government procurement.
WTO ensures that
Rules of origin are transparent
They do not have restricting, distorting or disruptive effects on international trade
They are administered in a consistent, uniform, impartial and reasonable manner
They are based on a positive standard
Rules of origin are used:
to implement measures and instruments of commercial policy such as anti-dumping duties and safeguard
measures;
to determine whether imported products shall receive most-favoured-nation (MFN) treatment or preferential
treatment;
for the purpose of trade statistics;
for the application of labelling and marking requirements; and
for government procurement.
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42. Short note on the Doha Ministerial Conference.

Doha Ministerial Conference
Current trade negotiation round which commenced in Nov, 2001
The objective was to lower trade barriers around the world which will facilitate increase of global trade
Significant differences are between developed nations led by EU, USA and Japan and major developing countries
led by India, Brazil, China and South Africa
Major issues
(a) Agriculture commitment to substantial improvements in market access, reductions of all forms of export
subsidies and substantial reductions in trade distorting support
(b) Access to patented medicines balance of interests between pharmaceutical companies in developed countries
that held patents in medicines and the public health needs in developing countries
(c) Special and differential treatment for developing countries
(d) Implementation issues being faced by developing countries in implementation of agreements because of
limited capacity or lack of technical assistance
Other issues
(a) NAMA
(b) Trade and Investment
(c) Trade and competition
(d) Transparency in governmental procurement
(e) Trade facilitation
(f) Trade and environment
43. What were the various issues discussed at the Bali Ministerial Conference?

159 members of WTO agreed to the Bali Package which eases barriers to international trade covering 4 areas
Trade facilitation
Agriculture
Cotton
Development and least developed countries.
It aimed at lowering global trade barriers and is the first agreement reached through the WTO that was approved by
all its members.
44. Short note on Trade Policy reviews.

Individuals and companies involved in trade have to know as much as possible about the conditions of trade. It is
therefore fundamentally important that regulations and policies are transparent. In the WTO, this is achieved in two
ways: governments have to inform the WTO and fellow-members of specific measures, policies or laws through
regular notifications; and the WTO conducts regular reviews of individual countries trade policies the trade
policy reviews. These reviews are part of the Uruguay Round agreement, but they began several years before the round
ended they were an early result of the negotiations. Participants agreed to set up the reviews at the December 1988
ministerial meeting that was intended to be the midway assessment of the Uruguay Round. The first review took place
the following year. Initially they operated under GATT and, like GATT, they focused on goods trade. With the creation
of the WTO in 1995, their scope was extended, like the WTO, to include services and intellectual property. The
importance countries attach to the process is reflected in the seniority of the Trade Policy Review Body it is the
WTO General Council in another guise.

The objectives are:
to increase the transparency and understanding of countries trade policies and practices, through regular monitoring
improve the quality of public and intergovernmental debate on the issues
to enable a multilateral assessment of the effects of policies on the world trading system.

The reviews focus on members own trade policies and practices. But they also take into account the countries wider
economic and developmental needs, their policies and objectives, and the external economic environment that they
face. These peer reviews by other WTO members encourage governments to follow more closely the WTO rules and
disciplines and to fulfill their commitments. In practice the reviews have two broad results: they enable outsiders to
understand a countrys policies and circumstances, and they provide feedback to the reviewed country on its
performance in the system.
45. What do you mean by dumping? Explain the various types of dumping.

Dumping is said to occur when the goods are exported by a country to another country at a price lower than
its normal value. This is an unfair trade practice which can have a distortive effect on international trade.
Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect.
Thus, the purpose of anti dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade.
The use of anti dumping measure as an instrument of fair competition is permitted by the WTO.
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Dumping occurs when the export price of goods imported into India is less than the Normal Value of like articles
sold in the domestic market of the exporter. Imports at cheap or low prices do not per se indicate dumping. The
price at which like articles are sold in the domestic market of the exporter is referred to as the Normal Value of
those articles.
Normal Value: The normal value is the comparable price at which the goods under complaint are sold, in the
ordinary course of trade, in the domestic market of the exporting country or territory. If the normal value cannot be
determined by means of domestic sales, the Act provides for the following two alternative methods:
(i) Comparable representative export price to an appropriate third country.
(ii) Cost of production in the country of origin with reasonable addition for administrative, selling and general costs
and for profits.
Export Price: The export price of goods imported into India is the price paid or payable for the goods by the first
independent buyer.

Types of Dumping
1. Sporadic Dumping
For a short term
Unloading of stocks by a foreign producer
The firm regards its costs as fixed and marginal costs as zero
2. Intermittent Dumping
For a medium term
To secure a foothold in a foreign market
Conscious decision to lower prices to drive the competitors away from the market
3. Continuous Dumping
For a long term
Practically not possible for a firm to sustain losses for a long term
46. Explain the concept of boxes in case of agricultural subsidies.

In WTO terminology subsidies under Agreement on Agriculture are identified by boxes, which have an analogy
similar to colours of traffic lights:
Green Permitted
Amber Slow Down
Red - Forbidden
But the Agriculture Agreement has no red box although domestic support exceeding the reduction commitments in the
amber box is prohibited. There is a blue box for subsidies that are related to programmes that limit production.

AMBER BOX:
All domestic support measures considered to distort production and trade fall into the amber box. It is defined in
Article 6 of the Agriculture Agreement as all domestic supports except those described in the blue and green boxes.
These include measures to support prices or subsidies directly related to production quantities. The total value of these
measures must be reduced. WTO members have commitments to reduce their trade-distorting domestic supports in the
amber box (i.e. to reduce the total aggregate measurement of support or AMS).
These supports are subject to limits de minimis supports are allowed 5% of agricultural production for developed
countries & 10% for developing countries.
BLUE BOX:
The Blue Box is an exemption from the general rule that all subsidies linked to production must be reduced or kept
within defined minimal levels. It covers payments directly linked to acreage or animal numbers, but under schemes,
which also limit production, by imposing production quotas or requiring farmers to set aside part of their land.
These are generally given to farmers of developed countries to limit the production because the home market is small
and is given as a sort of unemployment allowance. In other words it is the amber box with conditions conditions
designed to reduce distortion. Any support that would normally be in the amber box will be placed in the blue box if
the support also requires the members to limit production.
GREEN BOX:
In order to qualify for the green box, subsidies must not distort trade or at most cause minimal distortion. They have to
be government funded and must not involve price support. These are in the nature of programmes that are not targeted
at particular products and may include direct income supports for farmers that are related to current production levels
or prices. They also include environmental protection and regional development programmes.
DEVELOPMENT BOX:
Subsidies in this category refer to certain concessions granted to developing countries specially LDCs on the ground
of Special and Differential Treatment and include subsidies granted for the development of these econom
47. Explain the various types of subsidies.

Prohibited subsidies
- export subsidies - subsidies contingent, in law or in fact, whether wholly or as one of several conditions, on
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export performance
- local content subsidies - subsidies contingent, whether solely or as one of several other conditions, upon the
use of domestic over imported goods
Actionable subsidies
Non-actionable subsidies -
- Basic R&D subsidies
- Assistance to disadvantaged regions
- Assist to adapt existing facilities to new environmental requirements.
48. Explain the central concept of nullification or impairment.

The concept of nullification or impairment of benefits is central to dispute settlement in the WTO.
In case of violation of an agreement, nullification or impairment is presumed to exist. This means that there is
normally a presumption that a breach of the rules has an adverse impact on other WTO Members. In such a case, it
will be up to the Member against which the complaint is brought to rebut the charge.
In the absence of a violation by another WTO Member, i.e. in a situation of "non-violation nullification or
impairment" or as a result of any other situation, no presumption applies and the complaining party bears the burden
of proof of establishing the existence of a nullification or impairment.
49. Short note on the Panel Stage of dispute settlement procedure.

Panels are like tribunals. But unlike in a normal tribunal, the panelists are usually chosen in consultation
with the countries in dispute. Only if the two sides cannot agree does the WTO director-general appoint
them. This only happens rarely.
Panels consist of three (occasionally five) experts from different countries who examine the evidence and decide
who is right and who is wrong. The panel's report is passed to the Dispute Settlement Body, which can only reject
the report by consensus.
Panelists for each case can be chosen from a permanent list of well-qualified candidates, or from elsewhere. They
serve in their individual capacities. They cannot receive instructions from any government.
If the consultations have failed to settle a dispute within 60 days after the date of receipt of the request for
consultations, the complaining party may request the establishment of a panel. An earlier request for a panel is
permitted if the consulting parties jointly consider that consultations have failed to settle the dispute (Article 4.7
DSU).
A request for the establishment of a panel must be made in writing. It must indicate whether consultations were
held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint
sufficient to present the problem clearly.
The panel will be established at the latest at the DSB meeting following that at which the request first appears as an
item on the agenda of the DSB, unless the complaining party no longer requests it or the DSB decides by consensus
at that meeting not to establish a panel. If the complaining party so requests, a special meeting of the DSB must be
convened for the purpose of establishing the panel within 15 days of the request, provided that at least 10 days'
advance notice is given.

Panel Stage:
It can be further subdivided into the following:
Before the first hearing: each side in the dispute presents its case in writing to the panel.
First hearing: the case for the complaining country and defence: the complaining country (or countries), the
responding country, and those that have announced they have an interest in the dispute, make their case at the
panels first hearing.
Rebuttals: the countries involved submit written rebuttals and present oral arguments at the panels second
meeting.
Experts: if one side raises scientific or other technical matters, the panel may consult experts or appoint an expert
review group to prepare an advisory report.
First draft: the panel submits the descriptive (factual and argument) sections of its report to the two sides, giving
them two weeks to comment. This report does not include findings and conclusions.
Interim report: The panel then submits an interim report, including its findings and conclusions, to the two sides,
giving them one week to ask for a review.
Review: The period of review must not exceed two weeks. During that time, the panel may hold additional
meetings with the two sides.
Final report: A final report is submitted to the two sides and three weeks later, it is circulated to all WTO members.
If the panel decides that the disputed trade measure does break a WTO agreement or an obligation, it recommends
that the measure be made to conform with WTO rules. The panel may suggest how this could be done.

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50. Explain the role of Director General in dispute settlement.

The Director-General of the WTO may, acting in an ex officio capacity, offer good offices, conciliation or
mediation with a view to assisting Members to settle a dispute. Such an offer may normally be made during the
consultation period, but good offices, conciliation or mediation may, with the agreement of the parties to the
dispute, continue while the panel process proceeds.
In a dispute settlement procedure involving a least-developed country Member, when a satisfactory solution has not
been found during consultations, the Director-General will, upon request by a least-developed country Member,
offer his or her good offices, conciliation or mediation in order to help the parties to the dispute, before a request for
a panel is made.
The Director-General may also be requested, in certain circumstances, to appoint panel members. This is the case
where, within 20 days after the date of the establishment of a panel, there has been no agreement among the parties
on the composition of the panel. The Director-General can act only at the request of either party in the dispute.
The Director-General may appoint an arbitrator in cases where it is necessary to determine the reasonable period of
time for implementation or where a suspension of concessions or other obligations has been authorized by the DSB
and the Member concerned objects to the level of suspension proposed, or claims that the principles and procedures
to be followed when considering what concessions or other obligations to suspend were not respected.

DUE DILIGENCE AND CORPORATE COMPLIANCE MANAGEMENT

1. What are the objectives of Due Diligence?

Due diligence is an analysis and risk assessment of an impending business transaction. Following are the few
objectives of due diligence:
Collect material of information from the target company.
Conduct a SWOT analysis to identify the strength and to uncover threats and weaknesses.
For improving the bargaining position depending on SWOT analysis.
To take an informed decision about an investment.
Identification of areas where representations and warranties are required.
To provide a desired comfort level in a transaction.
To ensure complete and accurate disclosure.
Bridge the gap between the existing and expected.
To take smooth / accurate action / decision.
To enhance the confidence of stake holders.
2. Distinguish between Due Diligence and Audit.
Due Diligence Audit
Limited to financial analysis Includes analysis of financial statements, business plan,
management structure etc.
Based on historical data Covers future growth prospects in addition to historical
data
Mandatory Mandatory based on transaction
Positive assurance Negative assurance
Post mortem analysis Required for future decision
Always uniform Varies from transaction to transaction
Recurring event Occasional event
3. Explain the Role of CS in IPOs and FPOs.

Planning stage
(a) Deciding the time line
(b) Compliance related issues
(c) Importance of corporate governance
(d) Structure of the Board
(e) Promoters consent
(f) Method of issuance of shares
Due diligence
(a) Company contracts and leases
(b) Legal and tax issues
(c) Corporate issues
(d) Financial assets
(e) Financial statements
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(f) Creditors and debtors
(g) Legal cases against the company
Appointing advisors and other intermediaries
Offer document
(a) Drafting the offer document
(b) Filing with SEBI
(c) In-principle approval of Stock Exchanges
(d) Filing with Stock Exchanges
(e) Complying with the comments received from SEBI
(f) Filing with RoC
Issue period
Allotment of shares
Listing
Post issue compliances
(a) To ensure proper compliance with the Listing Agreement
(b) Redressal of shareholders complaints
(c) Timely filing of required reports with RoC / SEBI / Stock Exchanges
4. Short note on reservation on competitive basis in a public issue.
In case of a public issue the company may make reservation on competitive basis out of the issue size
excluding promoters contribution and net offer to public in favour of the following categories of persons:
(a) employees of the company including employees of the promoting companies
(b) shareholders (other than promoters) of listed promoting companies and listed group companies
The reservation on competitive basis shall be subject to following conditions:
(a) the aggregate of reservations for employees shall not exceed 5% of the post issue capital
(b) value of allotment to any employee shall not exceed ` 2 lakh
(c) reservation for shareholders shall not exceed 10% of the issue size
any unsubscribed portion in any reserved category may be added to any other reserved category and the
unsubscribed portion, if any, after such inter-se adjustments among the reserved categories shall be added to the net
offer to the public category.
5. Short note on Fast Track Issues.
Certain companies are exempted from the requirement from the requirement of filing draft offer document
with SEBI and SEs and obtaining in-principle approval from SEs subject to fulfillment of the following
conditions :
The shares of the company have been listed on any stock exchange having nationwide terminals for a period of at
least three years immediately preceding the date of filing the prospectus with RoC or letter of offer with designated
SE.
The average market capitalisation of public shareholding of the company is at least Rs. 3,000 crores
The annualized trading turnover of the shares of the company during 6 calendar months immediately preceding the
month of filing the prospectus with RoC or letter of offer with designated SE has been at least 2% of the weighted
average number of shares listed during the said six months period
The company has redressed at least 95% of the total investor complaints received till the end of the quarter
immediately preceding the month of filing the prospectus with RoC letter of offer with designated SE.
The impact of auditors qualifications, if any, on the audited accounts of the company in respect of the financial
years for which such accounts are disclosed in the offer document does not exceed 5% of the PAT of the company
for the respective years
No prosecution proceedings or show cause notices issued by SEBI are pending against the company or its
promoters or whole time directors as on the date of filing the prospectus with RoC letter of offer with designated
SE.
The entire shareholding of the promoter group is held in dematerialized form.
6. Explain the methodology for pricing in preferential allotment.

In terms of SEBI (ICDR) Regulations, 2009, Preferential issue can be made at a price not less than the higher
of the following:
- The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange
during the 26 weeks months preceding the relevant date;
OR
- The average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange
during the 2 weeks preceding the relevant date.
Such Issue to QIBs 5 in number shall be made at a price not less than the average of the weekly high and low of
the closing prices of the related shares quoted on a stock exchange during the 2 weeks preceding the relevant date
(75)

Relevant date means 30 days prior to the date on which general meeting of shareholders is held
Where warrants are issued on a preferential basis relevant date shall be 30 days prior to the date on which the
holder of the warrants becomes entitled to apply for shares of the company
7. Short notes on obligations of debenture trustees under SEBI Listing of Debt Regulations.

The Debenture Trustee shall be vested with the requisite powers for protecting the interests of debenture
holders including a right to appoint nominee directors on the board of the company in consultation with the
institutional holders of such securities.
The Debenture Trustee shall carry out its duties and perform its functions under the SEBI (Listing of Debt
Securities) Regulations, 2008, SEBI (Debenture Trustees) Regulations, 1993, the trust deed and offer document,
with due care, diligence and loyalty.
The Debenture Trustee shall ensure disclosures of all material events on an ongoing basis.
He shall supervise the implementation of the conditions regarding creation of security for the debt securities and
debenture redemption reserve.
8. Short note on inter-se transfers between promoters.

In terms of Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011,
acquisition pursuant to inter se transfer of shares are exempted from the requirement of making public
announcement, provided the transfers are amongst qualifying persons, being,
immediate relatives;
persons named as promoters in the shareholding pattern filed by the target company for not less than 3 years
prior to the proposed acquisition;
a company, its subsidiaries, its holding company, other subsidiaries of such holding company, persons holding not
less than 50% of the equity shares of such company, other companies in which such persons hold not less than 50%
of the equity shares, and their subsidiaries subject to control over such qualifying persons being exclusively held by
the same persons;
persons acting in concert for not less than 3 years prior to the proposed acquisition, and disclosed as such;
shareholders of a target company who have been persons acting in concert for a period of not less than 3 years prior
to the proposed acquisition and are disclosed as such and any company in which the entire equity share capital is
owned by such shareholders in the same proportion as their holdings in the target company without any differential
entitlement to exercise voting rights in such company.
For purposes of availing of the exemption under this clause, if the shares of the target company are frequently traded,
the acquisition price per share shall not be higher by more than 25% of the volume-weighted average market price for a
period of 60 trading days preceding the date of issuance of notice for the proposed inter se transfer.
9. Short note on disclosures that are required to be made in a public announcement.

In terms of Regulation 15 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the
following are required to be stated in the public announcement:
name and identity of the acquirer and persons acting in concert with him;
name and identity of the sellers, if any;
nature of the proposed acquisition such as purchase of shares or allotment of shares, or any other means of
acquisition of shares or voting rights in, or control over the target company;
the consideration for the proposed acquisition that attracted the obligation to make an open offer for acquiring
shares, and the price per share;
the offer price, and mode of payment of consideration; and
offer size, and conditions as to minimum level of acceptances.
10. Explain the penal provisions on non-compliance of SEBI Takeover Code.

Any person violating any provisions of the regulations shall be liable for action in terms of these regulations
and the SEBI Act.
If the acquirer or any PACs fails to carry out the obligations under the regulations, the entire or a part of the sum in
the escrow account shall be liable to be forfeited and the acquirer or such a person shall also be liable for action in
terms of the regulations and the Act.
The BOD of the TC failing to carry out the obligations under the regulations shall be liable for action in
terms of the regulations and the SEBI Act
SEBI may, for failure to carry out the requirements of the regulations by an intermediary, initiate action for
suspension or cancellation of registration of an intermediary holding a certificate of registration under Section 12 of
the SEBI Act
For any mis-statement to the shareholders or for concealment of material information required to be disclosed to the
shareholders, the acquirers or the directors where the acquirer is a body corporate, the directors of the TC, the
merchant banker to the public offer and the merchant banker engaged by the TC for independent advice would be
liable for action in terms of the regulations and the Act.
(76)

The penalties referred to above may include:
(a) criminal prosecution under section 24 of the Act;
(b) monetary penalties under section 15H of the Act;
(c) directions by SEBI to protect the interests of the investors and the securities market;
(e) cease and desist order in proceedings under section 11D of the Act;
(f) adjudication proceedings under section 15HB of the Act.
Further Section 24 of the SEBI Act provides that if any person contravenes the provisions of this Act or of any
rules / regulations, he shall be punishable with imprisonment for a term which may extend to 10 years or with fine
which may extend to ` 25 crores or with both.
Also Section 15H of the SEBI Act provides that if any person fails to disclose his shareholding or fails to make a
PA to acquire shares, he shall be liable to a penalty of ` 25 crores or three times the amount of profits made,
whichever is higher.
Once the violation of statutory regulations is established, imposition of penalty becomes sine qua non of violation
and the intention of the parties committing such violation becomes totally irrelevant Multiplus Holding Ltd.
Mistaken interpretation of regulation is not an excuse to absolve offender from consequences of an offence
SAT in Satyadeva Prakash Sinha
11. Explain the requirements relating to publication and submission of quarterly results by a listed company.

In terms of Clause 41 of the Listing Agreement,
Listed company shall furnish audited or un-audited financial results on a quarterly basis in the prescribed
pro-forma, within 45 days from the end of the quarter
Company shall also submit audited financial results for the entire financial year within 60 days of the end of the
financial year. The company shall also submit the audited financial results in respect of the last quarter alongwith
the results for the entire financial year, with a note that the figures of last quarter are the balancing figures between
audited figures in respect of the full financial year and the published year to date figures upto the third quarter of the
current financial year.
In case of submission of unaudited results, they shall be subject to limited review by statutory Auditors and such
report shall be submitted to Stock Exchange within 45 days from the end of the quarter.
In case the company opts to submit audited financial results they shall be accompanied by Audit Report.
Listed company shall inform date of the Board / Committee Meeting and shall also simultaneously issue a press
release in at least 1 national newspaper and one regional language newspaper - at least 7 clear days (i.e. 9 days) in
advance of the date of the meeting.
Listed company shall make announcement of the results to Exchanges - immediately within 15 minutes of the
closure of the Board / Committee Meeting.
Results also to be published in at least one English daily newspaper circulating in the whole or substantially the
whole of India and in one newspaper published in the regional language where the registered office of the company
is situated - within 48 hours of the conclusion of the Board Meeting.
However, where the company has submitted to the SE consolidated financial results in addition to stand-alone
financial results, it shall publish only consolidated financial results in the newspapers. In case the company
publishes only consolidated financial results, it shall also publish Turnover, PBT and PAT on a standalone basis.
Results shall be approved by the Board of Directors (BOD) or a committee thereof, (consisting of not less than
1/3rd of total no. of directors and shall include MD and 1 Independent Director) other than the Audit Committee.
While placing results before the Board, the CEO and CFO of the company shall certify the fact that the results do
not contain any false or misleading information and that they do not omit any material fact, which may make the
results misleading.
Results shall be signed by the Chairman or MD or Whole time Director.
Limited review Report shall be placed before BOD, before submission to Stock Exchanges, in case variations
between unaudited and audited financials is greater than 10 %.
Quarterly unaudited financial results should also be accompanied by Segment wise revenue, results and capital
employed as per the format provided.
12. Explain the requirements of the Listing Agreement relating to composition, role etc. of Audit Committee.

In terms of Clause 49 of the Listing Agreement, Audit Committee is required to be set up, consisting of:
Minimum of three members of which two third of the members to be independent.
All members shall be financially literate and at least one member to have accounting or related financial
management expertise
Chairman of the committee shall be an independent Director.
The Chairman shall remain present in AGM to answer shareholders queries. The committee should invite
company executives as it considers appropriate (particularly the head of finance function) to be present in the
meeting of the committee.

(77)

Functioning of Audit Committee
1. Audit committee shall meet at least four times a year.
2. Not more than four months shall lapse between two Meetings.
3. The quorum shall be of two members or one-third of the members of the audit committee, whichever is higher and
minimum of two independent Directors.

Powers of the Audit Committee
To investigate any activity within its terms of reference.
To seek information from any employee.
To obtain outside legal or other professional advice.
To secure attendance of outsiders with relevant expertise, if it considers necessary.

Role of Audit Committee
1. Oversee the Company's financial reporting process and the disclosure of the financial information to ensure that
the financial statement is correct, sufficient and credible.
2. Recommending the appointment and removal of external auditor, fixation of auditor, fixation of audit fee and also
approval for payment for any other services.
3. Approving the appointment of CFO after assessing the qualifications, experience and background etc. of the
candidate.
4. Reviewing with management the annual financial statements before submission to the board, focusing primary on :
a) Any changes in accounting policies and practices.
b) Major accounting entries based on exercise of judgement by management
c) Qualifications in draft audit report.
d) Significant adjustments arising out of audit.
e) The going concern assumption.
f) Compliance with Accounting Standards.
g) Compliance with stock exchanges and legal requirements concerning financial statements.
h) Any related party transactions i.e. transactions of the company of material nature, potential conflict with the
interests of company at large.
i) Reviewing with the management, external and internal "auditors, the adequacy of internal control system,
internal audit function etc.
j) Reviewing, with the management, the statement of uses / application of funds raised through an issue. (Public
issue, rights issue, preferential issue, etc.)

Mandatory Review of following information by Audit Committee
Management discussion and analysis of financial condition and results of operations;
Statement of significant related party transactions as defined by management;
Management letters/letters of internal control weaknesses issued by the statutory auditors;
Internal audit reports relating to internal control weaknesses; and
The appointment, removal and terms of remuneration of the Chief internal auditor
13. Short note on the concept of Independent Director as defined under the Listing Agreement.

In terms of Clause 49 of the Listing Agreement, 'Independent director' means a non-executive director of the
company who:
1. apart from receiving director's remuneration, does not have any material pecuniary relationships or transactions
with the company, its promoters, its directors, its senior management or its holding company, its subsidiaries and
associates which may affect independence of the director.
2. is not related to promoters or persons occupying management positions at the board level or at one level below the
board;
3. has not been an executive of the company in the immediately preceding three financial years;
4. Is not a partner or an executive or was not partner or an executive during the preceding three years, of any of the
statutory audit firm or the internal audit firm that is associated with the company, and/or the legal firms(s) and
consulting firm(s) that have a material association with the company.
5. Is not a material supplier, service provider or customer a lessor or lessee of the company, which may affect
independence of the director, and is not a substantial shareholder of the company i.e. owning two percent or more of
the block of voting shares.
6. Is not less than 21 years of age.
14. Preparation of Cash Flow Statement is mandatory for listed companies Comment.

In terms of Clause 32 of the Listing Agreement, listed company will give Cash Flow Statement along with
the Balance Sheet and Profit and Loss Account.
The Cash Flow Statement will be prepared in accordance with the Accounting Standard on Cash Flow Statement
(AS-3) issued by the Institute of Chartered Accountants of India, and the Cash Flow Statement shall be presented
(78)

only under the Indirect Method as given in AS-3.
The statement shall be issued under the authority of the Board and shall be signed on behalf of the Board of
Directors in the manner provided for the authentication of Balance Sheet and Statement of Profit and Loss in
Section 215 of the Companies Act, 1956.
15. What is the penalty for non-compliance of Listing Agreement?

Section 23(2) of Securities (Contract) Regulation Act, 1956 person imprisonment for a term upto 10 years and
fine of Rs. 25 crores or both
Section 23E of Securities (Contract) Regulation Act, 1956 company fine of Rs. 25 crores
The Stock Exchange may suspend dealing in securities for breach or non-compliance of Listing Agreement
The Stock Exchange may delist companies which have been suspended for a period of 6 months for non-compliance
with Listing Agreement
16. Short note on the process of dematerialization.

Investor opens account with the Depository Participant
Fills demat request form for registered shares
Investor lodges Demat Request Form and certificates with Depository Participant
Depository Participant intimates Depository
Depository intimates Issuer
Depository Participant sends certificates and Demat Request Form to Issuer
Issuer confirms demat to Depository
Depository credits investors account
17. Is Internal audit of DPs mandatory?

The two Depository service providers in India, viz., National Securities Depository Ltd. (NSDL) and Central
Depository Services (India) Limited (CDS) have allowed Company Secretaries in Whole-time Practice to
undertake internal audit of the operations of Depository Participants (DPs).

NSDL - Every Participant shall ensure that an internal audit in respect of the operations of the Depository is
conducted at intervals of not more than six months by a qualified Chartered Accountant or a Company Secretary
holding a certificate of Practice and a copy of the internal audit report shall be furnished to the Depository.
The report is required to be submitted to NSDL for the period 1
st
April to 30
th
September by 15
th
November and for
the period from 1
st
October to 31
st
March by 15
th
May.
CDSL - Every Participant shall ensure that an internal audit in respect of the operations of the Depository is
conducted at intervals of not more than six months by a qualified Chartered Accountant or a Company Secretary
holding a certificate of Practice and a copy of the internal audit report shall be furnished to the Depository.
The report is required to be submitted to CDSL for the period 1
st
April to 30
th
September by 15
th
November and for
the period from 1
st
October to 31
st
March by 15
th
May.
18. Short note on the agreements entered into by the DPs.

A DP is required to enter into two important agreements in course of demat trading:
(A) Agreement with the Depository
(B) Agreement with the Client / Investors
19. Explain the procedure for creation of pledge on dematerialized securities.

If the beneficial owner wants to create a pledge of securities, it shall apply to the Depository through DP
DP after satisfaction shall make a note in its records of the notice of pledge and forward the application to the
Depository
The Depository on appropriate confirmations from pledgees shall create the pledge within 15 days of receipt of
application
On receipt of intimation, DPs of both pledgor and pledgee shall intimate the parties
20. Short notes on ADRs and GDRs.

American Depository Receipt / Global Depository Receipt means any instrument in the form of a depositary
receipt or certificate created by the Overseas Depositary Bank outside India and issued to non-resident
investors against the issue of ordinary shares or FCCBs of issuing company.
Eligibility Requirements
Indian Company should be eligible to raise funds from the Indian capital market
Company should not be restrained from accessing the securities market by SEBI
Unlisted Indian companies issuing GDRs / FCCBs shall be required to simultaneously list themselves on Indian
Stock Exchanges.
The company shall have a consistent track record of good performance (financial or otherwise) for a minimum
period of 3 years.
(79)

FCCBs shall be denominated in any convertible foreign currency and the ordinary shares of an issuing company
shall be denominated in Indian rupees.
The company shall deliver the ordinary shares or bonds to a Domestic Custodian Bank who will, in terms of
agreement, instruct the Overseas Depositary Bank to issue GDRs to non-resident investors against the shares or bonds
held by the Domestic Custodian Bank.
Other Provisions
There are no end use restrictions on the funds raised through GDRs / FCCBs except that the funds cannot be used
for real estate and investment in the capital market.
The pricing of GDRs for listed companies should not be less than the average of the weekly high and low of the
closing prices of the related shares quoted on the stock exchange during the 2 weeks preceding the relevant date.
The "relevant date" means date of the meeting in which the Board of the company or the Committee of Directors
duly authorized by the Board of the company decides to open the proposed issue.
21. Explain the various approvals required for issuing GDRs.
Approval of the Board of Directors and shareholders of the Company.
For issuing FCCB's exceeding $ 100 million, approval of the Ministry of Finance is required. The maximum
amount that the company can raise through issue of FCCB's is $ 750 million.
Approval of the RBI.
In-principle consent of banks / financial institutions.
22. Short note on various requirements of the Companies (Issue of IDRs) Rules, 2004.

IDR means any instrument in the form of a depository receipt created by Domestic Depository in India against
the underlying equity shares of issuing company.
Eligibility for issue
Its pre-issue paid-up capital and free reserves are at least US$ 50 million and it has a minimum average market
capitalization (during the last 3 years) in its parent country of at least US$ 100 million
It has a continuous trading record or history on a stock exchange in its parent country for at least 3 immediately
preceding years.
It has a track record of distributable profits in terms of section 205 of the Companies Act, 1956, for at least three
out of immediately preceding 5 years
It fulfills such other eligibility criteria as may be laid down by SEB! from time to time in this behalf.
23. What are the advantages of entering into a Joint Venture?

Rapidly move to decisively seize opportunities before they disappear
Respond more quickly to change
Adapt with greater flexibility
Increase a companys market share
Gain access to a new market or beat others to that market
Quickly shore up internal weaknesses
Gain a new skill or area of competence
24. Short note on the requirements the FEMA Regulations relating to Liaison Office.

Companies incorporated outside India may establish Liaison Offices with specific approval of RBI which
can only undertake liaison activities acting as a channel of communication between Head Office and parties
in India
Application to RBI alongwith MOA and AOA and Certificate of registration in the country of incorporation
Initial permission granted by RBI generally valid for 3 years
Have to file annual activity reports to RBI
Entities from Nepal are allowed to establish only Liaison Offices in India.
Track Record - profit making record during the immediately preceding 3 financial years
Net worth USD 50,000
25. Explain the various requirements of FEMA Regulations relating to setting up of JVs by Indian companies
abroad.

Limits on Investment
400% of the net worth of the Indian Party as on the date of the last audited accounts
Ceiling is not applicable if investment is made out of funds held in EEFC Account or out of funds raised through
ADRs / GDRs.
The above ceiling will include contribution to capital, loans granted and 100% guarantees issued to or on behalf of
JV / WOS.
Proposals from the Indian party for undertaking financial commitment without equity contribution in JV / WOS may
(80)

be considered by the RBI under the approval route.
Conditions
The Indian Party should not be on the RBIs Exporters Caution list / list of defaulters
All transactions should be routed through one branch of an authorized dealer
Where the investment is > USD 5 million, valuation of the shares of the company shall be made by a Merchant
Banker
Where investment is by way of swap of shares, irrespective of the amount, valuation of the shares of the company
shall be made by a Merchant Banker. Approval of FIPB shall also be required for investment by swap of shares.
This automatic route facility is not available for investment in Pakistan.
An Indian company may acquire shares of a foreign company engaged in a bonafide business activity, in exchange
of ADRs / GDRs issued to the latter provided
(a) The ADRs / GDRs are listed on an overseas SE
(b) The ADRs / GDRs are backed by underlying fresh equity shares issued by the Indian party
(c) The total holding in the Indian entity by PROI does not exceed sectoral caps
(d) Valuation of shares of the foreign company shall be as per recommendations of an Investment Banker if the
shares are not listed or based on the current market capitalization of the foreign company arrived on the basis of
monthly average price on any SE abroad for the preceding 3 months.
Creation of charge in the form of pledge / mortgage / hypothecation on the immovable / movable property and other
financial assets of the Indian Party and their group companies will require approval of RBI under the approval route
within the overall limit fixed (presently 400%) for financial commitment.
Methods of Funding overseas JV / WOS
Drawal of foreign exchange from an AD in India
Capitalization of exports
Swap of shares
Proceeds of ECBs / FCCBs
In exchange of ADRs / GDRs
Balance held in EEFC Account of the Indian Party
Proceeds of foreign currency funds raised through ADRs / GDRs
26. Explain the process of conducting legal due diligence.

Entering into of MOU
Determination of scope of legal due diligence
Calculation of time frame
Drafting of various questionnaires and checklists
Obtaining access to records
Interaction with management and key managerial persons
Interaction with regulatory authorities
Checking of regulatory and contractual compliances
Analysis of financial and non-financial information
Investigation of material issues
Drafting of preliminary report
Discussions with the management
Finalisation of report
Determination of strategy
27. Short note on the possible hurdles of carrying out legal due diligence.

Non availability of information
Unwillingness of target companys personnel in providing complete information
Providing of incorrect information
Complex tax policies and hidden liabilities
Multiple regulations and its applicability
Process in providing data
Absence of proper MIS
28. Explain the elements of an effective compliance management program.

Compliance dashboard
Policy and procedure management
Event management
Rules and regulations
(81)

Audit management
Quality management
Training management
Compliance task management
29. What is the legal requirements relating to conducting secretarial audit ?

A Practising Company Secretary shall conduct the audit
It would relate to the current financial year of the company
Only member of ICSI holding Certificate of Practice can be appointed as secretarial auditor
The auditor shall submit his report to the BOD
Clause 204 of the Companies Bill, 2012 mandates secretarial audit for all listed companies and other
prescribed class of companies.
30. Explain the provisions of the Listing Agreement of various Stock exchanges relating to conduct of share transfer
audit.
No statutory requirement
Required to be done for the purpose of Annual return
Clause 47 of the Listing Agreement requires listed companies to appoint CS as a compliance officer who will
be responsible for monitoring share transfer process and report to the Stock Exchanges insist that the
Registrar and Share Transfer Agent to produce a certificate from Practising Company Secretary that all
transfers have been completed on time
BSE requires such certificate not only for transfers but also for sub-division, consolidation, renewal of share
certificate etc.
BSE also insists such certificates for in house Registrar and Share Transfer Agent to be submitted to exchanges
within 24 hours of receipt
31. Explain the professional responsibility for issue of Compliance certificate by PCS.
Company Secretaries must take adequate care while issuing Compliance Certificate
Any failure or lapse on the part of CS in issuing such Certificate attracts penalty under Section 628 for false
statement - 2 years + fine
PCS will also be guilty of professional misconduct under the provisions of the Companies Secretaries Act, 1980
It is imperative for the PCS to exercise great care and caution while issuing the Compliance Certificate and also
adhere to the highest standards of professional ethics and excellence in providing his services.
32. What are the requirements relating to issue of Compliance Certificate by PCS?

In terms of Companies (Compliance Certificate) Rules, 2001:
Compliance certificate shall be in the format prescribed in the rules
It shall relate to the financial year of the company
It is required to be filed with RoC within 30 days of AGM
It shall be attached with the Directors Report
It shall be laid down at the AGM
PCS shall send a communication to the earlier incumbent
Qualification, reservation, adverse remarks may be stated by the PCS
33. Explain the requirements relating to Search Reports by various banks and financial institutions.

Banks and FIs while granting loans to companies obtain a status report on the position of borrowings made by the
company and particulars of charges created by the company on its assets
It acts as a tool to confirm and evidence information on status of charges
Requirements of financial institutions and lenders
Power of a company and directors to enter into an agreement
Borrowing limits of the company u/s 293(1)(d)
List of members of the company
Copies of resolutions passed by the company
34. What are the advantages of securities management?

Advantages to company
1. Elimination of misstatements
2. Maintenance and updation of records
3. Early corrective measures
4. Expeditious redressal of grievances
5. Relief from unintended violation of laws
(82)

6. Reduction of litigations
7. Expeditious disposal of securities related matters
8. Sustained investors confidence
Advantages to investors
Advantages to regulators
Advantages to compliance officers
Advantages to statutory auditor
35. Explain the role of PCS under the SEBI Act and NSE requirements.

Role of PCS SEBI Act and regulations
Appear before SAT
Certify non-promoter holdings shareholder pattern under clause 35
Certify compliance of conditions of corporate governance
Certify maintenance of adequate security cover in respect of listed securities
Conduct internal audit of portfolio managers
Certify that all refund orders / allotment letters in respect of the previous issue were despatched within time
Role of PCS NSE
Following details submitted by trading member to SE
1. Details of directors / promoters
2. Details of shareholding pattern
3. Details of dominant group of corporates
4. Details of dominant group of firms
5. Undertaking from relative / corporates of persons constituting dominant promoter group
Approval for listing certificate confirming that entire pre-preferential holding of allottee is locked in for a period
of 6 months
Approval of listing in case of mergers etc. certificate of net worth pre and post the scheme

GOVERNANCE, BUSINESS ETHICS AND SUSTAINABILITY
1. Write short note on CIIs Corporate Governance Code.

The full board of a company should meet minimum 6 times a year at an interval of 2 months
Listed company with turnover of Rs. 100 crores should have independent directors as follows
1. 30% - if Chairman is NED
2. 50% - if Chairman and MD is same
A single person shall hold directorships in maximum 10 listed companies
NEDs should become active participants in boards, not passive advisors, have clearly defined responsibilities
with the board, know how to read balance sheet etc.
NEDs should be paid commissions @ 1% of net profits
If a Director has attended less than 50% of the board meetings, then this fact should be stated in his re-appointment
resolution
Annual plans, show cause notices, serious accidents etc. should be put before the Board of Directors of a company
Listed companies with turnover of Rs. 100 crores or paid up capital of Rs. 20 crores should have Audit Committee
Audit Committee should consists of 3 members, all NEDs
Committee should have clearly defined Terms of reference
Listed companies should give information about high and low monthly averages of their share prices, statement of
value added etc. in its Annual report
Consolidation of Accounts should be optional
Stock Exchanges should insist on a certificate from CEO and CFO of the company
FIs should re-write their covenants to eliminate nominee directors except in serious debt default
A company should disclose all ratings obtained from credit rating agencies
Companies which default in repayment of fixed deposits should not be permitted to accept further deposits and
declare dividend till the default is made good.
2. What are the requirements of the UK Corporate Governance Code, 2010?

Comply or explain principle.
Company should be headed by an effective Board which is collectively responsible for long-term success of the
company.
There should be clear division of responsibilities at the head of the company.
The Board and its committees should have an appropriate balance of skills, experience, independence and
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knowledge of the company.
There should be a formal, rigorous and transparent procedure for appointment of new directors.
The Board should undertake a formal and rigorous annual evaluation of its own performance, committees and
individual directors.
All directors should be submitted for re-election at regular intervals, subject to satisfactory performance.
Board should present a balanced and understandable assessment of the companys position and prospects.
Remuneration Levels should be sufficient to attract, retain and motivate directors of the quality required to run the
company, but company should avoid paying more than is necessary for this purpose.
There should be a dialogue with shareholders based on the mutual understanding of objectives.
Board should use the AGM to communicate with investors and to encourage their participation.
3. Write short note on recommendations of Naresh Chandra Committee.

Auditors disqualifications
1. Prohibition of direct financial interest in audit client
2. Prohibition of receiving any loans / guarantees from or on behalf of the audit client
3. Prohibition of business and personal relationship with the audit client
4. Prohibition of service or cooling off period
5. Prohibition of undue dependence on audit client
Auditor not to provide book keeping, internal audit etc. services to the company
Audit partner and 50% of audit engagement team should be rotated every 5 years
Auditors qualifications should be distinctly stated in the accounts
Replacement of auditor should be done through a special resolution
Before appointment the auditor should give a certificate of independence to the company
Audit Committee shall be the first point of reference for the auditors
CEO and CFO certificate in case of listed companies with paid up capital and free reserves of Rs. 10 crores or
turnover of Rs. 50 crores
Three QRBs should be constituted by ICAI, ICSI and ICWAI
Minimum board size in case of listed companies with paid up capital and free reserves of Rs. 10 crores or turnover
of Rs. 50 crores 7 of which minimum 4 shall be independent directors
Directors should be permitted to participate in board meetings through tele / video conferencing
The statutory limit on sitting fees should be reviewed
Exemption to NEDs from civil and criminal liabilities under Companies Act, NI Act, ESI Act etc.
Independent directors should be required to attend atleast one training session before becoming a director
Corporate Serious Fraud Office should be set up by MCA with specialists
4. Short note on the Report of the Cadbury Committee.

Cadbury Report 1992 chairman Sir Adrian Cadbury
Every public company should be headed by an effective board which can both lead and control the business
There should be a clearly accepted division of responsibilities at the head of a company, which will ensure a
balance of power and authority, such that no one individual has unfettered powers of decision
All boards will require a minimum of 3 NEDs and majority IDs
NEDs not to participate in share option schemes
Directors training should be mandatory
All directors should have access to the advice and services of the CS
Companies to draw up Codes of ethics or standards of best practices for their employees
Companies should have audit committee, nominations committee and remuneration committee
Directors should make a statement in the report and accounts on the effectiveness of their system of internal control
and the auditors should report thereon
Detailed disclosures on directors remuneration should be made
Institutional investors should make a positive use of their voting rights and should take a positive interest in
BOD composition
5. What are the requirements relating to training of directors and performance evaluation of Board?

Training of Directors
An important aspect of Board effectiveness would be appropriate attention to development and training of
independent directors on the lines of management development and training.
The normal expectation is that independent directors having been invited to join the Board due to their rich
background and expertise, may not need any training.
As the Board of Directors is primarily responsible for good governance practices, which is quite different from
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management, it calls for new areas of knowledge and different skills.
Training should encompass both a thorough induction programme and an ongoing training and development
opportunities for the board members. Since the Board composition is getting more diverse a system of formal
training and evaluation is very important to foster trust, cohesion and communication among board members.

Performance evaluation of Board
A formal evaluation of the Board and of the individual directors is one potentially effective way to respond to
demand for greater board accountability and effectiveness. Feedback about the performance of individual board
members can help them enhance their skill as directors and can motivate them to be better board members.
Major factors for performance evaluation
The quality of the issues that get raised discussed and debated at the meetings of the Board and its
Committees.
The guidance provided by the Board in light of changing market conditions and their impact on the organisation.
The methodology adopted by the Board to solve issues referred to them such as, the homework done by the Board
on the problem presented to them, the information they seek to get a complete picture of the situation, the points of
view presented to solve the issue, the harmonization of remedial measures proposed by the Board and ensuring the
implementation of the solution by the management with appropriate and timely review mechanism.
The effectiveness of the directions provided by the Board on the issues discussed in meetings.
6. What are the barriers to effective leadership?

Time management
Resistance to risk taking
Strategic planning
Complexity
Micro management
Clinging to tradition
Confused roles
Past habit
7. Short note on relation between directors and executives.

The Board and executive leadership need to work together based on mutual respect, trust and commitment. The
executive management can help the Board govern more and manage less by adopting the following three
methods:
Use a comprehensive strategic plan that has been developed in conjunction with the board, and supplement it with
regular progress reports.
Provide the board with relevant materials before board meetings, and explain why the materials are coming to the
attention of the board.
Facilitate board and board committee discussions so that the board stays focused on the larger issues.
8. What are the mandatory committees required under law?

Clause 49 of the Listing Agreement provides for constitution of the following mandatory committees:
Audit Committee : Audit Committee is required to be set up, consisting of:
1. Minimum of three members of which two third of the members to be independent.
2. All members shall be financially literate and at least one member to have accounting or related financial
management expertise
3. Chairman of the committee shall be an independent Director.
Mandatory Review of following information by Audit Committee
a) Management discussion and analysis of financial condition and results of operations;
b) Statement of significant related party transactions as defined by management;
c) Management letters/letters of internal control weaknesses issued by the statutory auditors;
d) Internal audit reports relating to internal control weaknesses; and
e) The appointment, removal and terns of remuneration of the Chief internal auditor.
Shareholders Grievance Committee: The same is required to be formed with the Chairman as a Non-executive
director. The committee to specifically look into the redressal of shareholders and investors complaints like - non-
receipt of transferred shares, non-receipt of Balance Sheet, non-receipt of declared dividend etc.
9. Write short notes on Remuneration Committee and Shareholders Grievance Committee.

Remuneration Committee
To determine the remuneration packages of executives / directors
Not mandatory under Clause 49
SEBI ESOP Guidelines provides that when a company wishes to grant ESOPs it has to constitute Compensation
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Committee
Such Committee shall consist of majority of Independent Directors
The Committee shall formulate the detailed terms and conditions of ESOS

Shareholders Grievance Committee
In terms of Clause 49 of the Listing Agreement, every listed company is required to set up a Shareholders /
Investors Grievance Committee with Non-executive Director as the Chairman of the Committee.
The Committee to specifically look into the redressal of shareholders and investors complaints like - non-receipt of
transferred shares, non-receipt of Balance Sheet, non-receipt of declared dividend etc.
The number of meetings of such Committee shall be in accordance with the exigencies of business requirements.
10. What are the roles and responsibilities of company with respect to internal controls?

CEO and CFO Certificate: It is the responsibility of the CEO and CFO to :
(a) Establish and maintain the internal controls
(b) Evaluate effectiveness of internal control system
(c) Disclose deficiencies in the design or operation of internal controls
(d) Take steps to rectify these deficiencies
(e) Inform the auditors and the Audit Committee of any significant change in the internal control systems.
Management: It is the role of management to implement board policies on risk and control. In fulfilling its
responsibilities, management should identify and evaluate the risks faced by the company for consideration of the
board and design, operate and monitor a suitable system of internal control which implements the policies adopted
by the board.
Board of Directors: A strong and active Board, particularly when coupled with effective upward communication
channels and capable financial, legal and internal audit functions, is often the best needed framework for internal
control effectiveness and adequacy.
Internal Auditors: Internal Auditors play an important role in evaluating the effectiveness of control systems, and
contributing to ongoing effectiveness.
Employees: All employees should collectively have the necessary knowledge, skills, information and authority to
establish, operate and monitor the systems of internal control.
11. What are the advantages of risk management?
Better informed decision making
Less chances of major problems in new and ongoing activities
Increased likelihood of achieving corporate objectives.
12. What are the steps of risk management?

Identification of risk
Evaluation / measurement of risks
Handing of risks
- Risk avoidance
- Risk reduction
- Risk retention
- Risk transfer
Implementation of risk management decisions.
13. What are the various kinds of risks?

Industry & Service risks
Management and operational risks
Market risks
Political risks
Credit risks
Liquidity risks
Disaster risks
Systems risks
Legal risks
Non-compliance risk

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14. What are the various international requirements relating to corporate governance?

USA Sarbanes Oxley Act
It created the Public Company Accounting Oversight Board to monitor auditors
SOX Act barred certain services not to be rendered by the auditors
Auditors are required to submit their report to the audit committee on all critical accounting policies and practices
Audit Committee of companies must ensure that companies have procedures that ensure compliance with GAAP
prescribed by FASB

USA NYSE Listing Rules
Listed companies must have majority of independent directors
Listed companies must have audit committee minimum 3 members, all independent and financially literate and
atleast one with accounting or related financial management expertise
Listed companies must have remuneration committee and nominating / CG committee consisting entirely of
independent directors

UK Combined Code of Corporate Governance
Listed companies are required to disclose in their annual report on how they have complied with such rules
Atleast one half of the Board, excluding the Chairman should consist of independent NEDs
There should be separate Chairman and CEO
Companies should constitute audit committee with atleast 3 members
Companies should constitute remuneration committee with atleast 3 members
Companies should constitute nomination committee with majority of independent NEDs

Australia ASX Corporate Governance Council
Comply or explain principle
Companies must have majority of independent directors
Listed companies must have audit committee minimum 3 members, all independent and financially literate and
atleast one with accounting or related financial management expertise
Listed companies must have remuneration committee and nomination committee consisting of majority
independent directors
15. Write short note on Corporate Governance in PSUs.

For listed PSUs Clause 49 of the Listing Agreement is applicable
For unlisted PSUs separate Guidelines as detailed below have been prescribed -
(a) The Board of Directors -
1. Should contain optimum combination of functional, nominee and independent directors
2. Maximum 50% functional directors
3. Nominee directors maxm. 2
4. Independent directors
- Listed PSUs minm. 50%
- Unlisted PSUs minm. 33.33%
5. Govt. directors should not exceed 1/6
th
of the Board
(b) Policy of appointing single Chairman-cum-MD should continue
(c) Board meetings 4 and one in every 3 months
(d) Board shall lay down a code of conduct for its employees
(e) A Director shall not be a member of more than 10 committees and chairman of more than 5 committees
(f) The Board should have a formal Board charter clearly defining the roles and responsibilities of the Board and
individual directors
(g) The company shall undertake training programme for its new Board members
(h) The CPSE shall have an Audit Committee and a Remuneration Committee.
16. What are the factors influencing CSR?

Globalisation
Governments and inter governmental bodies
Advances in communication technology
Consumers and investors interests
Serious breaches of ethics
Increasing awareness
It reduces the risk of business disruptions
17. Write Short note on the advantages of good corporate citizenship.

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CSR creates a favorable public image which attracts customers
CSR builds up positive image encouraging social involvement of employees which in turn develops a sense of
loyalty towards the organization helping in creating a dedicated workforce
Society gains through better neighborhoods and employment opportunities
Public needs have changed leading to changed expectations from consumers
The companys social involvement discourages excessive regulation or intervention from the Government
The internal activities of the organization have an impact on the external environment
The good public image of an organization encourages other organisations in the neighborhood to adapt themselves
to achieve their social responsiveness
Companies can better address the grievances of their employees
Financial institutions are increasingly incorporating social and environmental criteria into their assessment of
projects.
18. Write short note on UN Global Compact on CSR.

Human Rights
Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights abuses.
Labour Standards
Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to
collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and occupation.
Environment
Principle 7: Businesses should support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diffusion of environmentally friendly technologies.
Anti-Corruption
Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.
19. Write short note on role of institutional investors in good corporate governance.

The Cadbury Committee (1992) states: "Because of their collective stake we look to the institutions in
particular, with the backing of the Institutional Share Holder's Committee to use their influence as owners to
ensure that companies in which they have invested comply with the code".
Kumara Mangalam Birla Committee on institutional investors observed that:
1. Institutional shareholders have acquired a large stake in equity share capital of listed companies. In some of
the listed companies they are the major shareholders and own shares largely on behalf of the retail
shareholders.
2. They have a special responsibility given the weightage of their votes and have a bigger role to play in
corporate governance as retail investors look upon them for positive use of their voting rights.
3. The report recommends that Institutional investors maintain an arm's length relation with the management.
Role of Institutional Investors
Take active interest in the BOD composition
Be vigilant
Maintain regular and systematic contact at senior level for exchange of views on management, strategy,
performance and quality of management
Ensure that voting intentions are translated into practice
Evaluate CG performance of the company
20. What do you mean by shareholder activism?

Shareholder activism refers to the active involvement of stockholders in their organization. Active
participation in company meetings is a healthy practice.
In India, shareholders have been granted certain rights under the Companies Act, 1956 such as:
right to vote on election of directors, changes in companies articles, and any other policy matters like
compensation, salary, remuneration, sitting fees etc of directors;
right to transfer and registration of shares;
obtain relevant information on the company on timely and regular basis;
electing members of the board;
and share the residual profit.

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21. Explain the benefits of good corporate communication.

Corporate Communications is all about managing perceptions and ensuring effective and timely
dissemination of information, positive corporate image, smooth and affirmative relationship with all
stakeholders.
Corporate Communication promotes:
Strong corporate culture
Building corporate identity
Reasonable corporate philosophy
Genuine sense of corporate citizenship
An appropriate and professional relationship with the press
Building corporate brand reputation.
22. Short notes on NFCG and OECD.

NFCG National Foundation for Corporate Governance
Set up by MCA in partnership with ICSI, ICAI and CII
Internal structure consists of
Governing council chaired by Minister of Corporate Affairs
Board of trustees headed by Secretary, MCA
Executive directorate

OECD Organisation for Economic Cooperation and Development
Established in 1961 was one of the first non-governmental organization to spell out the principles that should
govern corporates
OECD Principles of Corporate Governance -
They call on governments to have in place an effective institutional and legal framework to support good corporate
governance practices .
They call for a corporate governance framework that protects and facilitates the exercise of shareholders' rights .
They also strongly support the equal treatment of all shareholders, including minority and foreign shareholders.
They recognise the importance of the role of stakeholders in corporate governance.
They look at the importance of timely, accurate and transparent disclosure mechanisms
They deal with board structures, responsibilities and procedures.
23. What are the objects of IOD, UK?

The Institute of Directors, UK, is a non-party political business organization established in the UK in 1903.
Objects of IOD are:
To promote for the public benefit high levels of skill, knowledge, professional competence, and integrity on the part
of directors, and equivalent office holders
To promote the study, research and development of the law and practice of corporate governance
To represent the interests of members and of the business community to government and in all public forums
To advance the interests of the members of the Institute and to provide facilities and benefits to them.
24. What are the various ethics philosophies?

Deontological ethics or deontology: It focuses on the rightness or wrongness of actions emphasizes on the
relationship between duty and morality of human actions. In this case, an action is considered morally good because
of some characteristic of the action itself, not because that the consequence of the action is good.
Teleology: It is ethical theory that holds that the ends or consequences of an act determine whether an act is good or
evil.
Enlightened egoism: It holds that good is based on the pursuit of self-interest. It takes into account harms, benefits
and rights for a persons own welfare.
Utilitarianism: It is the idea that the moral worth of an action is solely determined by its contribution to overall
utility, i.e. its contribution to happiness or pleasure as summed among all persons.
Relativism: It is the idea that some elements or aspects of experience or culture are relative to other elements or
aspects. It holds that there are no absolute truths in ethics and that what is morally right or wrong varies from person
to person and from society to society.
Virtue Ethics theory: It is a branch of moral philosophy that emphasizes character, rather than rules or
consequences, as the key element of ethical thinking.

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25. What are the various advantages of business ethics?

Shareholders invest their money into a company and expect a certain level of return from that money in the form of
dividends and/or capital growth.
Customers pay for goods, give their loyalty and enhance a company's reputation in return for goods or services that
meet their needs.
Employees provide their time, skills and energy in return for salary, bonus, career progression, learning.
26. Devise a model code of business conduct and ethics.

A Model Code of Conduct may contain the following:
Company Values.
Avoidance of conflict of interest.
Accurate and timely disclosure in reports and documents that the company files before Government agencies, as
well as in Company's other communications.
Compliance of applicable laws, rules and regulations including Insider Trading Regulations.
Maintaining confidentiality of Company affairs.
Non-competition with Company and maintaining fair dealings with the Company.
Standards of business conduct for Company's customers, communities, suppliers, shareholders, competitors,
employees.
Prohibition of Directors and senior management from taking corporate opportunities for themselves or their
families.
Review of the adequacy of the Code annually by the Board.
No authority of waiver of the Code for anyone should be given.

27. What are the features of good ethics programme?

Leadership: executives and supervisors care about ethics and value as much as they do about the bottom lime
Consistency between words and actions: top management practices what it preaches
Fairness: the organization operates fairly
Openness: people talk openly about ethics and values
Just rewards: ethical behavior is rewarded
Value driven: the ethics and compliance programme is driven by values.
28. Short note on Ethics Audit.

The following are some of the steps in Ethics Audit:
The first step in conducting an audit is securing the commitment of the firm's top management.
The second step is establishing a committee or team to oversee the audit process.
The third step is establishing the scope of the audit.
The fourth step should include a review of the firm's mission values, goals, and policies.
The fifth step is identifying the tools or methods that can be employed to measure the firm's progress and then
collecting and analyzing the relevant information.
The sixth step is having the results of the data analysis verified by an independent party.
The final step in the audit process is reporting the audit findings to the board of directors and top executives and, if
approved, to external stakeholders.
29. What do you mean by stakeholders in an organisation?

In a business context, investors & shareholders, employees, suppliers, govt. agencies, communities, and many
others who have a stake or claim in some aspect of companys products, operations, markets, industry and outcomes
are known as stakeholders
The classic definition of stakeholder is any group of individuals who can affect is affected by the
achievement of the organisations objectives
There are two types of stakeholders:
(a) Primary stakeholders whose continued association is absolutely necessary for a firms survival employees,
customers, investors, as well as governments and communities
(b) Secondary stakeholders - who do not typically engage themselves with the company and thus are not essential
for its survival media, trade associations and special interest groups.
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30. Short note on Activity Analysis.

Parasite
Helping Self
Injuring others
Win-win situation
Helping Self
Helping others
Martyr
Helping Others
Injuring Self
Total Loss
Injuring Self
Injuring others
31. Write Short note on Caux Round Table.

The Caux Round Table (CRT) is based on the belief that the world business community should play an
important role in improving economic and social conditions
It is based on two basic ethical ideals - kyosei and human dignity.
The Japanese concept of "kyosei" means living and working together for the common good enabling cooperation
and mutual prosperity to coexist with healthy and fair competition.
"Human dignity" refers to the sacredness or value of each person as an end, not simply as a mean to the fulfillment
of others' purposes or even majority prescription.
General Principles of CRT
The Responsibilities of Businesses - Beyond Shareholders toward Stakeholders
The Economic and Social Impact of Business - Toward Innovation, Justice and World Community
Business Behavior - Beyond the Letter of Law Toward a Spirit of Trust
Respect for Rules
Support for Multilateral Trade
Respect for the Environment
Avoidance of Illicit Operations
32. What do you mean by ethical dilemma?

It involves the need to choose from among two or more morally acceptable courses of action, when one choice
prevents selecting the other; or, the need to choose between equally unacceptable alternatives
Steps to resolve
Consider the consequences
Analyze the actions
Make decision and act with commitment
Evaluate the system.
33. What are the principles of sustainable development?

Principle of Intergenerational equity: need to preserve natural resources for future generation.
Principle of sustainable use: use of natural resources in a prudent manner without or with minimum tolerable
impact on nature.
Principle of equitable use: Use of natural resources by any state / country must take into account its impact on
other states.
Principle of integration: Environmental aspects and impacts of socio-economic activities should be integrated so
that prudent use of natural resources is ensured.
34. Explain the methods for sustainability reporting.

Life cycle assessment tracks the environmental impacts of a product from its raw materials through disposal at
the end of its useful life
Ecological footprint measure of human demand on the earths ecosystems
Environmental performance index method of quantifying and numerically benchmarking the environmental
policies of a countrys policies
35. Write Short notes on Dow Jones Sustainability Index and GRI Reporting framework.

Dow Jones Sustainability Index
The Dow Jones Sustainability Indices are the first global indices tracking the financial performance of the leading
sustainability-driven companies worldwide, it was launched in 1999.
The Dow Jones Sustainability World Index comprises of more than 300 companies that represent the top 10% of
the leading sustainability companies out of the biggest 2500 companies in the Dow Jones World Index.

GRI Reporting framework
The GRI Reporting Framework is intended to serve as a generally accepted framework for reporting of an
organisations economic, environmental and social performance.
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The Sustainability Reporting Guidelines or G3 Guidelines are the cornerstones of the GRI Reporting Framework.
These Guidelines are divided into the following parts :
(a) Reporting principles
Materiality
Stakeholder inclusiveness
Sustainability context and completeness
(b) Reporting guidance
(c) Standard disclosures
36. Write Short notes on UN Conference on Environment and Development and Rio Declaration on Environment
and Development.

UN Conference on Environment and Development
Agenda 21 is a blueprint on how to make development socially, economically and environmentally sustainable.
The Rio Declaration on Environment and Development it has 27 principles defining the rights and
responsibilities of nations as they pursue human development and well-being.
A statement of forest principles they guide the management, conservation and sustainable development of all
types of forests, as essential to economic development and the maintenance of all forms of life.
The United Nations Framework Convention on Climate Change aims to stabilize greenhouse gases in the
atmosphere at levels.
The Convention on Biological Diversity it requires the countries to adopt ways and means to conserve the
variety of living species, and ensure that the benefits from using biological diversity are equitably shared.

Rio Declaration on Environment and Development
Human beings are at the centre of concerns for sustainable development
States have the sovereign right to exploit their own resources pursuant to their environmental and developmental
policies
The right to development must be fulfilled so as to equitably meet the environmental and developmental needs of
present and future generations
Environmental protection should constitute an integral part of the developmental process
All states and all people shall cooperate in the essential task of eradicating poverty
The special needs and situation of developing countries particularly the least developed should be given special
priority
States should cooperate in the spirit of global partnership to protect, conserve and restore the health and integrity of
the Earths ecosystem
To achieve sustainable development and a higher quality of life for all people, States should reduce and eliminate
unsustainable patterns of production and consumption and promote appropriate demographic policies
States should cooperate to strengthen endogenous capacity building for sustainable development
Environment issues are best handled with participation of all concerned citizens, at all levels
States should enact effective environmental legislation
States should cooperate to promote a supportive and open international economic system that would lead to
economic growth and sustainable development in all countries
States should develop national law regarding liability and compensation for the victims of pollution and other
environmental damage
States should effectively cooperate to discourage or prevent the relocation and transfer to other States of any
activities and substances that cause severe environmental degradation
In order to protect the environment, the precautionary approach should be widely applied by all States
National authorities should endeavour to promote the internalization of environmental costs
States should immediately inform the other States of any natural disasters
Women play an vital role in environmental management and development.
37. What do you mean by Kyoto Protocol?

Adopted in Kyoto Japan in 1997 at UNFCCC Conference and came into force in 2005
As of Sept, 2011, 191 states have signed and ratified the Protocol
Under the Protocol, 37 countries (Annex I countries) commit themselves to reduction of four greenhouse
gases (GHG) and all member countries give general commitments
The Protocol allows for several flexible mechanisms such as emission trading, clean development mechanism and
joint implementation to allow Annex I countries to meet their GHG emission limitations by purchasing GHG
emission reduction credits from elsewhere through financial exchanges that reduce emissions in non-Annex I
countries from other Annex I countries with excess allowances
The objective of the UNFCC was to establish a legally binding international agreement, whereby all the
participating nations commit themselves to tackling the issue of global warming and greenhouse gas emissions
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The target was an average reduction of 5.2% from 1990 levels by the year 2012
Each Annex I country is required to submit an annual report of inventories of all GHG emissions.
The countries nominate a person called designated national authority to create and maintain its greenhouse gas
inventory.
38. How does the Ryland vs. Fletcher rule applied in the Bhopal Gas tragedy?

Rule of Ryland vs. Fletcher: "We think that that the rule of law is, that the person who for his own purposes brings
on his lands and collects and keeps there anything likely to do mischief if it escapes, must keep it at his peril, and, if
he does not do so, is prima facie answerable for all the damage which is the natural consequence of its escape.
He can excuse himself by showing that the escape was owing to the plaintiffs default; or perhaps that the escape
was the consequence of vis major or the act of God...... and it seems but reasonable and just that the neighbour, who
has brought something on his own property which was not naturally there, harmless to others so long as it is
confined to his own property, but which he knows to be mischievous if it gets on his neighbours, should be obliged
to make good the damage which ensues if he does not succeed in confining it to his own property".
In the Bhoapl Gas disaster which happened on the night of 2
nd
or 3
rd
Dec, 1984, there was a gas leak in the plant of
Union Carbide India Limited
In 1989, the Supreme Court awarded US $ 470 million to the Govt. of India on behalf of all Bhopal victims in full
and final settlement of all the past, present and future claims arising from the disaster.
39. Short note on the Corporate Manslaughter and Corporate Homicide Act in UK.

For prosecuting companies and other organisations where there has been a gross failing, throughout the
organisation, in the management of health and safety with fatal consequences.
The Act, which came into force on 6 April 2008, clarifies the criminal liabilities of companies including large
organisations where serious failures in the management of health and safety result in a fatality.
Prosecutions will be of the corporate body and not individuals, but the liability of directors, board members or other
individuals under health and safety law or general criminal law, will be unaffected. And the corporate body itself
and individuals can still be prosecuted for separate health and safety offences.
Companies and organisations should keep their health and safety management systems under review, in particular,
the way in which their activities are managed and organised by senior management.
40. Explain the various water pollution cases decided in India.

Kanpur tanneries - Jajmau area near Kanpur - 1988
The Court has issued various notices to these tanneries but many industrialists have not bothered either to respond
to the notice or to take elementary steps for the treatment of industrial effluent before discharging the same into the
river.
The Court hence issued directions for the closure of those tanneries which have failed to take minimum steps
required for the primary treatment of industrial effluent.
The Court further held that closure of such tanneries may bring unemployment, loss of revenue, but life, health and
ecology have greater importance to the people.
Role of Municipalities - Kanpur Nagar Mahapalika - 1988
The Kanpur Nagar Mahapalika has not yet submitted its proposals for sewage treatment works to the State Board
constituted under the Water Pollution Act
There are a large number of dairies in Kanpur - Kanpur Nagar Nahapalika may either direct the dairies to be
shifted to a place outside the city so that the waste accumulated at the dairies does not ultimately reach the river
Ganga or in the alternative it may arrange for the removal of such waste by employing motor vehicles to transport
such waste from the existing dairies
The Nagar Mahapalika should immediately take action to prevent the collection of manure at private manure pits
inside the city
The Kanpur Nagar Mahapalika should also take immediate steps to increase the size of the sewers in the labour
colonies so that the sewage may be carried smoothly through the sewerage system. Wherever sewerage line is not
yet constructed, steps should be taken to lay it.
Immediate action should also be taken o construct sufficient number of public latrines and urinals for the use of the
poor people in order to prevent defecation by them on open land.
The practice of throwing corpses and semi-burnt corpses into the river Ganga should be immediately brought to an
end
Whenever applications for licences to establish new industries are made in future, such applications shall be
refused unless adequate provision has been made for the treatment of trade effluents flowing out of the factories.
It is the duty of the Central Government to direct all the educational institutions throughout India to teach, atleast
for one hour in a week, lessons relating to the protection and the improvement of the natural environment
In order to rouse amongst the people the consciousness of cleanliness of environment the Government of India and
the Governments of the States and of the Union Territories may consider the desirability of organising 'Keep the
city clean' week and 'Keep the village clean' week in every city, town and village throughout India at least once a
(93)

year.
Kolkata tanneries - Tangra, Tiljola, Topsia and Pagla Danga- 1997
The Calcutta tanneries shall relocate themselves from their present location and shift to the new leather complex set
up by the West Bengal Government
The Calcutta tanneries shall deposit 25% of the price of the land with the concerned authority. The subsequent
instalments shall be paid in accordance with the terms of the allotment letters issued by the State Government. The
Pollution Control Board shall issue public notice to this effect.
The State Government shall hand over the possession of the plots allotted to the tanneries before April 15, 1997.
The State Government shall render all assistance to the tanneries in the process of relocation.
The use of the land which would become available on account of shifting/relocation/closure of the tanneries shall be
permitted for green purposes.
All the Calcutta tanneries shall stop functioning at the present sites on September 30, 1997.
The State Government shall appoint an authority / Commissioner, who with the help of the Board and other expert
opinion and after giving opportunity to the polluting tanneries concerned, assess the loss to the ecology/environment
in the affected areas.
The said authority shall further determine the compensation to be recovered from the polluter - tanneries as cost of
reversing the damaged environment.
The Court imposed pollution fine of Rs. 10,000 each on all the tanneries in the four areas of Tangra, Tiljola, Topsia
and Pagla Danga.
The workmen employed in the tanneries shall have continuity of employment at the new place where the tannery is
shifted.
The period between the closure of the tannery at the present site and its restart at the place of relocation shall be
treated as active employment and the workmen shall be paid their full wages with continuity of service.
All those workmen who agree to shift with the tanneries shall be given one years wages as "shifting bonus" to help
them settle at the new location.

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