KSLU Solved Question Papers
Company Law
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 6
2013 Dec Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 6 Company Law 2013 Dec Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2013 Dec examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2013 Dec examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2013 Dec examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 100 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all 5 questions. (2) One essay type question and one short note question or problem from each Unit which is referred as Part (a) and Part (b) in all the Units. (3) Figures to the right indicate full marks. (4) Answer should be written either in English or Kannada completely.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Unit I
(a)Explain the fundamental clauses of Memorandum of Association of a company.[15]
Answer
For full marks, cover: why the memorandum's clauses are called fundamental (they fix the company's identity, capacity and liability, bind the company and members under section 10 of the Companies Act 2013, and are public, so outsiders are taken to know them: Kotla Venkataswamy); then each clause of section 4(1) in turn, with what it says, why it matters, a case where one fits, and how it is altered: name (sections 4(2) to (5), 12(3), 13(2), 16), registered office (sections 12, 13(4), (5); In re Automobile Products of India), objects (ultra vires: Ashbury, Attorney General v. Great Eastern Railway, Lakshmanaswami Mudaliar; section 13(1), (8) to (10)), liability (section 18), capital (sections 61, 64, 66), the One Person Company nominee, and the subscription clause (section 3(1), Salomon); a table.
Why these clauses are "fundamental"
The memorandum of association is the company's constitution towards the outside world. Section 2(56) defines it as the memorandum "as originally framed or as altered from time to time". Its clauses are called fundamental for three reasons.
- They fix what the company is. Its name, its home State, what it may do, how far its members are liable and how much capital it may raise.
- They bind. Under section 10(1), the memorandum and articles bind the company and its members as if each had signed them and covenanted to observe them.
- They are public. Filed with the Registrar, they are open to anyone. A person dealing with the company is taken to know their contents. In Kotla Venkataswamy v. Chinta Ramamurthy, AIR 1934 Madras 579, a mortgage was executed without a signature the articles required. The Madras High Court held that it did not bind the company, because the lender was taken to have read the public documents.
Because they matter so much, the Act lets them be changed only by set procedures, often with outside approval.
1. The name clause (section 4(1)(a))
What it says. The company's name, ending in "Limited" for a public company and "Private Limited" for a private company. A section 8 company may omit those words.
Why it matters. The name identifies the company. The closing word warns everyone that the members' liability is limited.
The controls. The name must not be identical with or too like an existing company's name (section 4(2)). Nor may its use be an offence, or undesirable in the Central Government's view. Words suggesting Government patronage need prior approval (section 4(3)). A name may be reserved for twenty days, or sixty days for an existing company changing its name (sections 4(4), (5)). The name must be displayed outside every office and printed on letters and notices (section 12(3)).
Alteration. By special resolution with the Central Government's written approval; a fresh certificate of incorporation completes the change (section 13(2), (3)). The Government may also compel a change if the name clashes with an existing company or a registered trade mark (section 16).
2. The registered office clause (section 4(1)(b))
What it says. Only the State in which the registered office will be. The exact address is notified within thirty days of incorporation (section 12).
Why it matters. The State decides which Registrar and which bench of the Tribunal have jurisdiction. The registered office is also where documents are served on the company (section 20).
Alteration.
- Within the same city, town or village: no special resolution is needed, but the Registrar must be told within thirty days (section 12(4)).
- Outside those local limits: a special resolution (section 12(5)).
- To another Registrar's area in the same State: confirmation by the Regional Director (proviso to section 12(5)).
- To another State: a special resolution and the Central Government's approval, after it is satisfied that creditors and others are protected (section 13(4), (5)).
In re Automobile Products of India Ltd., (2005) 127 Comp Cas 941 (CLB), shows the protective scrutiny. A company wanted to shift its registered office from Maharashtra to Tamil Nadu after closing its Maharashtra units. Former employees with pending labour claims objected. The Company Law Board confirmed the shift, but only on the company's undertaking to abide by the Labour Court's directions.
3. The objects clause (section 4(1)(c))
What it says. The objects for which the company is formed, and any matter considered necessary in furtherance of them.
Why it matters. It fixes the company's capacity. What lies outside it is ultra vires and void.
Ashbury Railway Carriage and Iron Company v. Riche, (1875) LR 7 HL 653. A company formed to make and sell railway carriages agreed to finance the building of a railway itself. The House of Lords held the contract beyond the company's capacity and wholly void, incapable of ratification even by every shareholder.
Attorney General v. Great Eastern Railway Co., (1880) 5 App Cas 473, tempered the rule. Whatever may fairly be regarded as incidental to, or consequential on, the authorised objects is within power unless expressly forbidden. Hiring out rolling stock was held lawful.
A. Lakshmanaswami Mudaliar v. Life Insurance Corporation of India, AIR 1963 SC 1185, applied the strict view in India. A donation of two lakh rupees to a trust for insurance education was held outside an insurance company's objects. The directors had to restore the money.
Alteration. By special resolution (section 13(1)). If public issue money is unused, the company must also publish the change and give dissenting shareholders an exit (section 13(8)). The change takes effect only when the Registrar registers it, within thirty days of filing (section 13(9), (10)).
4. The liability clause (section 4(1)(d))
What it says. Whether the members' liability is limited or unlimited. In a company limited by shares, it is limited to the amount unpaid on their shares. In a company limited by guarantee, the clause states what each member undertakes to contribute on winding up.
Why it matters. It tells creditors how far they can look to the members.
Alteration. A company may convert from one class to another, for example from unlimited to limited, by altering its memorandum and articles (section 18).
5. The capital clause (section 4(1)(e))
What it says. The amount of share capital with which the company is registered and its division into shares of a fixed amount. It also states the number of shares each subscriber agrees to take, at least one each.
Why it matters. It sets the ceiling on the shares the company may issue, and records the subscribers' commitments.
Alteration. If the articles allow, the company may increase, consolidate, sub-divide or convert its capital by resolution in general meeting (section 61). It notifies the Registrar within thirty days (section 64). A reduction needs the Tribunal's confirmation (section 66).
6. The nominee clause (section 4(1)(f))
A One Person Company names the person who becomes its member if the subscriber dies. It ensures that a one-member company survives its founder.
7. The subscription clause
The memorandum ends with the subscribers' declaration that they wish to form a company, each writing the shares he takes. Under section 3(1), seven persons are needed for a public company, two for a private company and one for a One Person Company. In Salomon v. A. Salomon and Co. Ltd., [1897] AC 22, the required seven were Salomon and six members of his family. The House of Lords held the company validly formed, whatever the founder's motive.
The clauses at a glance
| Clause | Fixes | How altered |
|---|---|---|
| Name | Identity | Special resolution and Government approval |
| Registered office | Jurisdiction, service | Board, special resolution, Regional Director or Government, by distance |
| Objects | Capacity | Special resolution, registration |
| Liability | Members' exposure | Conversion under section 18 |
| Capital | Ceiling on shares | Section 61; reduction under section 66 |
| Nominee | Survival of an OPC | Notice to the company |
| Subscription | The founders | Not altered |
Conclusion. The memorandum's clauses are fundamental because they fix the company's name, home, capacity, liability and capital. They bind the company and members under section 10, and outsiders are taken to know them (Kotla Venkataswamy). The objects clause is the most important: acts beyond it are void (Ashbury, Lakshmanaswami Mudaliar), though incidental acts are allowed (Attorney General v. Great Eastern Railway). Each clause may be altered only by the procedure the Act sets, with outside approval for name and registered office changes, as Automobile Products illustrates.
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