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Reason : It is not necessary that a contract be entered for a bailor and bailee relationship to be formed. The facts
of the given case are similar to the decided case of Basava K D Patil vs State of Mysore (1977),
wherein, E’s ornaments having been stolen and recovered by the police disappeared from police
custody. Held, the state was liable, the contract of bailment having been implied. Hence, (a) is correct
answer.
46. Answer : (c) < TOP >
Reason : As Abhilash, Biswajeet and Sukant are co-sureties, on default Abhilash will be liable for one-third of
the amount lent to Deepak which is Rs.20,000.
47. Answer : (d) < TOP >
Reason : Where there is a contract for the sale of specific goods and the seller is bound to do something to the
goods for the purpose of putting them into a deliverable state, the property does not pass until such
thing is done and the buyer has notice thereof.
In Underwood vs. Burgh Castle Cement Syndicate, there was a contract for sale of a fixed condensing
engine. According to the contract, the engine was to be severed and delivered free on rail at a specified
price. However, the goods were damaged before it reached the railway. It was held that the property in
the goods did not pass as the goods were not in a deliverable state when it reached the railway. Hence,
Anuradha can recover the bangles for M/s Toshinwal Jewellers.
48. Answer : (a) < TOP >
Reason : In case of a special crossing (i.e. from one bank to another) the crossing is permitted even without two
traverse lines. But in case of general crossing or any other crossing there should two transverse lines.
The instances cited in (b), (c), (d) and (e) are “crossing” under the Negotiable Instruments Act, 1881.
Hence (a) is correct answer.
49. Answer : (b) < TOP >
Reason : When one person signs and delivers to another, a stamped instrument which is either wholly blank or
incomplete, he thereby gives a prima facie authority to the holder thereof to make or complete, as the
case may be, upon it a negotiable instrument, for any amount specified therein, and not exceeding the
amount, covered by the stamp. Therefore, Chinmay can recover the amount from Ananth as Chinmay
being the holder in due course but the stamp affixed must permit the amount. Hence, (b) is correct
answer.
50. Answer : (a) < TOP >
Reason : According to section 25 of the Negotiable Instruments Act, 1881, when the day on which a promissory
note or bill of exchange is at maturity is a public holiday, the instrument shall be deemed to be due on
the next preceding business day, i.e. January 25, 2008. Hence, (a) is correct answer.
51. Answer : (b) < TOP >
Reason : Under the Indian Contract Act, 1872, an offer will be valid only if it is communicated to the offeree.
Communication of an offer is complete when it comes to the knowledge of the offeree. A person who
acts according to the terms of an offer which has not been communicated to him will not be deemed to
have accepted the offer.
The facts of the given case are similar to the decided case of Lalman Shukla vs Gauri Dutt. The
plaintiff who was successful in tracing the missing nephew of the defendant claimed the reward in spite
of not being aware of the offer. The contention of the plaintiff was that he was entitled to the reward as
he had traced the missing boy. It was held that as the plaintiff was oblivious of the offer he was not
entitled to the reward.
Hence, in the given case, Gopal cannot claim the reward of Rs.2,000 as he had not heard of the offer
of reward by Srinath.
52. Answer : (a) < TOP >
Reason : Even though the total amount of the bill has been negotiated Brijesh and Chiraag are endorsees for
only a part of the amount and hence the indorsement is invalid.
According to section 56 of the Negotiable Instruments Act, 1881, no writing on a negotiable
instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the
amount appearing to be due on the instrument; but where such amount has been partly paid, a note to
that to that effect may be endorsed on the instrument, which may then be negotiated for the balance.
According to the later part of sec.56, A bill which has been endorsed ‘pay ‘A’ or order Rs.500 being
unpaid residue of the bill’ is a valid endorsement. Hence, (a) is correct answer.
53. Answer : (a) < TOP >
Reason : The facts of the case are similar to the decided case of Shivallingappa Shankarappa vs. Balakrishna &
Son, where the buyer ordered for the best quality of ‘tur dal’. However, on arrival at the destination,
the “tur dal” had been damaged by moisture and was no longer of merchantable quality. It was held
that the buyer could reject the goods and claim damages from the seller. Hence, (a) is correct answer.
54. Answer : (d) < TOP >
Reason : Under the Sale of Goods Act, 1930, Anil will not get a valid title as the hire purchaser has no valid title
until all the agreed installments are paid by him.
55. Answer : (b) < TOP >
Reason : Nitish can take action against seller as he had committed breach of condition as to quality or fitness
under section 16(1) of Sale of Goods Act, 1930 and hence seller was liable to pay damages to Nitish.
The facts of the given case are similar to the decided case of Priest vs. Last, where the plaintiff who
wanted to buy a hot water bottle for his spouse went to the defendant and asked for one. The defendant
sold him an American rubber bottle and on enquiry informed the plaintiff that the bottle would be
suitable only for hot water and not boiling water. However, the bottle burst and injured the plaintiff’s
spouse while she was using it. The Jury concluded that the bottle was not fit for use as a hot water
bottle. The seller had committed a breach of condition and hence was liable to pay damages to the
plaintiff.
56. Answer : (c) < TOP >
Reason : The company being an artificial person, enjoys perpetual succession. The company remains unaffected
by the death, insolvency or retirement of its members. In the given case, the legal heirs of Rakesh and
Rahul will become the members.
57. Answer : (b) < TOP >
Reason : A contract entered after incorporation but before obtaining certificate for commencement of business
is a provisional contract. It automatically gets confirmed as soon as certificate for commencement of
business is obtained. No further ratification is necessary
In case of a private company, it does not require any certificate of commencement of business, as
section 149 is not applicable to private company. Hence question of provisional contract does not arise
in case of a private company.
58. Answer : (e) < TOP >
Reason : The facts are similar to the decided case of Royal British Bank vs. Turquand (1856), where the
directors of a company borrowed a sum of money from the plaintiff. The company’s articles provided
that the directors might borrow on bonds from time to time to be authorized by a resolution passed at a
general meeting of the company. The directors gave a bond to Turquand without the authority of any
such resolution. It was held that Turquand could sue the company on the strength of the bond, as he
was entitled to assume that the necessary resolution had been passed.
Hence (e) is correct answer.
59. Answer : (c) < TOP >
Reason : If a shareholder of a company fails to pay any call money the company can forfeit his shares.
The forfeiture must be authorized by the Articles of the Company and a due notice is required to be
issued to the defaulting shareholders. A notice has to be given to the shareholder giving time of at least
14 days to pay-up the required amount. This is to give a last chance to the shareholder to pay for the
call money and interests due thereon. The notice shall also state that in the event of non-payment the
shares are liable to be forfeited.
In the given case the Board of Directors of Shanti Biotech Ltd., failed to mention the time of the
payment, which invalidates the forfeiture of shares of Mr. Amitav Bose and he is liable to pay the call
money.
60. Answer : (d) < TOP >
Reason : The misrepresentation should relate to a material fact. Where it is represented that something will
happen or be done in future, this does not amount to a representation of fact. It is only an estimate or a
forecast. Hence, there should be a misstatement relating to an existing fact. In Bentley vs. Black it was
held that a calculation of future profits is not a representation of fact. Hence, (d) is correct answer.
61. Answer : (e) < TOP >
Reason : A forged transfer is a nullity and does not confer a good title to the transferee even if he has acquired
the shares in good faith and for consideration.
The company is bound to restore the name of the rightful owner in the register of members on
becoming aware of the fact of forgery. In such an event, the transferee is required to surrender the share
certificates to the company and repay all the dividends, benefits, etc. received by him. In Kaushalya
Devi v National Insulated Cable Company of India Limited, it was held that a person who becomes a
holder of shares under a forged transfer does not acquire a good title and is bound to return the shares
to the rightful owner. Therefore, the company has to restore the name of Ramesh Mathur as the
rightful owner of the shares. Hence, (e) is the correct answer.
62. Answer : (c) < TOP >
Reason : Inefficient management by the directors is not an act of oppression by the directors. All the other acts
are held as oppressive. Hence, (c) is correct answer.
63. Answer : (e) < TOP >
Reason : A final dividend for any financial year can, as a rule, be declared and paid only when the balance sheet
and profit and loss account are presented to the shareholders at the annual general meeting, and the
shareholders after a consideration of the amount recommended by the directors, approve the same or
such lesser amount as may appear to them to be reasonable and proper. The shareholders can approve
the recommended rate of dividend or lower the same, but cannot increase the amount of dividend.
Where the shareholders of a company desire to increase the rate of dividend, the proper course of
action would be to adjourn the annual general meeting, hold a board meeting for increasing the rate of
dividend and adoption of revised accounts and then hold the adjourned annual general meeting for
declaration of dividend. Hence, (e) is correct answer.
64. Answer : (e) < TOP >
Reason : The First Auditor/s of a company shall be appointed by the Board of Directors within three months of
the date of registration of the company by passing a resolution to that effect. Such an auditor shall hold
office till the conclusion of the first annual general meeting.
However, the company has the power to remove any such auditor and appoint any other person/s
nominated by any member of the company by giving not less than 14 days notice before the date of the
meeting. Such an appointment can be made at a general meeting.
Where the Board fails to exercise its powers to appoint the first auditors, the company in general
meeting may appoint the first auditor/s. Hence, (e) is correct answer.
65. Answer : (e) < TOP >
Reason : Statutory meeting must be held not less than one month but within 6 months from date of
commencement of business. (Sec.165). Hence the statutory meeting should be held any time during 12-
09-2006 to 12-02-2007. On 12-09-2005, one month is just over. Hence, meeting can be held on that
day, as the words used are not less than one month. Similarly, sixth month gets over on 12-02-2006.
Hence, meeting can be held on that date.
66. Answer : (a) < TOP >
Reason : Section270 of the Companies Act, lays down that a director is required to hold qualification shares
within 2 months from the date of his appointment. The nominal value of such shares required to be held
by a director is Rs.5,000 where the nominal value of share to be held exceeds Rs.5,000, the number of
shares required to be held is one share. A director will have to take up qualification shares only if
required by the articles of association Therefore, the minimum number of shares required to be held by
Mr. Surendranath is nil.
67. Answer : (c) < TOP >
Reason : A chairman is required to maintain order and decorum at a meeting, to give ruling on points of order,
to decide priority of speakers, to maintain relevancy and order in debate, to adjourn a meeting, to exercise a
casting vote in case of a tie and to ascertain the sense of meeting and declare the result of voting.
Hence, (c) is correct answer.