CMA Inter Suggested Answers | Dec 25 Paper 5 Law & Ethics
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CMA Inter Dec 25 Suggested Answer Other Subjects Blogs :
(i) Which Article of the Constitution of India mentions about the Right of Minorities to establish and administer educational institutions?
(ii) In a conciliation, if no consensus could be arrived at between the parties and the conciliation proceedings fail, the parties can then resort to ______
(iii) In which of the following are the basic aims and objectives of the Indian Constitution discussed?
Choice 'B' is correct as--
The Preamble discusses the basic aims and objectives of the Indian Constitution. It serves as an introductory statement that reflects the core values like justice, liberty, equality, and fraternity, and sets the guiding philosophy of the Constitution.
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(iv) When parties to a contract substitute it with a new one, or agree to rescind or alter it, the original contract ______
(v) A guarantee is a tripartite agreement which contemplates
(vi) If a seller makes use of pretended bidding at an auction to raise the price, the sale is
(vii) As per the Negotiable Instruments Act, which of the following is not an instrument?
(viii) Which type of partnership is automatically dissolved after achieving a specific objective?
(ix) As per Section 30 of the LLP Act, when is the liability of an LLP and its partners considered unlimited?
(x) Within how many days a LLP must appoint a designated partner when a vacancy arises?
(xi) Which one of the following amounts to safety measure?
Choice 'C' is correct as
Fencing of a factory is one of the safety measures that can be taken to ensure the safety of workers and other individuals who may be present in and around the factory premises. Fencing can prevent unauthorized access to the factory and also prevent workers or visitors from accidentally wandering into hazardous areas of the factory, such as areas with heavy machinery or chemical storage tanks.
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(xii) As per Section 63 of the Companies Act, 2013 which of the following cannot be used to issue bonus shares?(xiii) What is the maximum number of directors a company can have without passing a special resolution?
(xiv) At every AGM, not less than ______ of the total number of directors shall retire by rotation.
Choice "B" is Correct as
According to sec 152(6) of the Companies Act, 2013, 2/3rd of the total number of directors are liable to retire by rotation.
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(xv) Which of the following is the disadvantage of business ethics?
Choice 'D' is correct as
When we talk about business ethics, we usually refer to the principles and standards that guide the behavior of individuals and organizations in the business world. These principles often include honesty, integrity, fairness, and respect for others.
The other options listed (a, b, and c) are advantages or benefits of practicing good business ethics:
a) Through increasing morale and trust, businesses can increase their market share: This option highlights a positive outcome of ethical behavior. When a company operates ethically, it tends to build trust with its customers and employees, leading to higher morale and increased market share.
b) Publicity due to well and ethical performance: Ethical businesses often gain positive publicity for their actions, which can enhance their reputation and attract more customers and stakeholders.
c) Acceptance of products of the company by the public: Ethical behavior can lead to greater acceptance and trust in a company's products or services by the public, resulting in increased sales and customer loyalty.
On the other hand, "d) Diversity in achievements" does not directly relate to a disadvantage of business ethics. Diversity in achievements could refer to a variety of accomplishments or successes within a business, which is generally considered a positive aspect. However, it is not typically seen as a disadvantage of practicing business ethics.
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Analyze the Misrepresentation and effects of Misrepresentation under the Indian Contract Act, 1872.
Compare and contrast the Contract of Indemnity with Contract of Guarantee under the Indian Contract Act, 1872.
| Point of distinction | Contract of Indemnity | Contract of Guarantee |
| Number of party/ Parties to the contract | here are only two parties namely the indemnifier [promisor] and | there are three parties creditor, principal debtor and surety. |
| Nature of liability | The liability of the indemnifier is primary and unconditional. | The liability of the surety is secondary and conditional as the primary liability is that of the principal debtor. |
| Time of liability | The liability of the indemnifier arises only on the happening of a contingency. | The liability arises only on the non performance of an existing promise or non-payment of an existing debt. |
| Time to act | The indemnifier need not act at the request indemnity holder | The surety acts at the request of principal debtor |
| Right to sue third party | indemnifier cannot sue a third party for loss in his own name as there is no privity of contract. Such a right would arise only if there is an assignment in his favour. | surety can proceed against principal debtor in his own right because he gets all the right of a creditor after discharging the debts. |
| Purpose | Reimbursement of loss | For the security of the creditor |
| Competency to contract | All parties must be competent to contract | competent to contract In the case of a contract of guarantee, where a minor is a principal debtor, the contract is still valid. |
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Discuss the mutual rights and liabilities of partners as per the Indian Partnership Act, 1932.
Conduct of the Business (Section 12 of the Indian Partnership Act, 1932): Subject to contract between the partners-
(a) every partner has a right to take part in the conduct of the business;
(b) every partner is bound to attend diligently to his duties in the conduct of the business;
(c) any difference arising as to ordinary matters connected with the business may be decided by majority of the partners, and every partner shall have the right to express his opinion before the matter is decided, but no change may be made in the nature of the business without the consent of all partners; and
(d) every partner has a right to have access to and to inspect and copy any of the books of the firm.
(e) in the event of the death of a partner, his heirs or legal representatives or their duly authorised agents shall have a right of access to and to inspect and copy any of the books of the firm.
Liability of a partner
Section 25 provides that every partner is liable, jointly with all other partners and also severally, for all acts of the firm done while he is a partner.
Liability of the firm
Section 26 provides that where, by the wrongful act or omission of a partner, acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable therefore to the same extent as the partner.
Section 27 provides that the firm is liable for misapplication by partners. If -
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Examine the buyers’ remedies against the seller for breach of a contract.
If the seller commits a breach of contract, the buyer gets the following rights against the seller:
1 Damages for non-delivery [Section 57 of the Sale of Goods Act, 1930]: Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery
2. Suit for specific performance (Section 58): Where the seller commits breach of the contract of sale, the buyer can appeal to the court for specific performance. The court can order for specific performance only when the goods are ascertained or specific and where damages would not be an adequate remedy.
3. Suit for breach of warranty (Section 59): Where there is breach of warranty on the part of the seller, or where the buyer elects to or is forced to treat breach of condition as breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods on the basis of such breach of warranty; but the buyer may –
(i) set up against the seller the breach of warranty in diminution or extinction of the price; or
(ii) sue the seller for damages for breach of warranty.
4. Repudiation of contract before due date (Section 60): Where either party to a contract of sale repudiates the contract before the date of delivery, the other may either treat the contract as:
• subsisting and wait till the date of delivery, or
• he may treat the contract as rescinded and sue for damages for the breach.
5. Suit for interest:
(1) The buyer is entitled to recover interest or special damages, or to recover the money paid where the consideration for the payment of it has failed.
(2) In the absence of a contract to the contrary, the court may award interest at such rate as it thinks fit on the amount of the price to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on the part of the seller from the date on which the payment was made
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Illustrate the social purpose of Code on Wages 2019 and summarize the various components of minimum wages that appropriate government shall fix.
The social purpose of the Code that it seeks to achieve is to avoid all kinds of gender based discrimination.
Section 3 of the Code states that:
1. There shall be no discrimination in an establishment or any unit thereof among employees on the ground of gender in matters relating to wages by the same employer, in respect of the same work or work of a similar nature done by any employee.
2. No employer shall -
a) for the purposes of complying with the provisions of sub-section (1), reduce the rate of wages of any employee; and
b) make any discrimination on the ground of sex while recruiting any employee for the same work or work
of similar nature and in the conditions of employment, except where the employment of women in such
work is prohibited or restricted by or under any law for the time being in force.
The Code lays down the various components of minimum wage that the appropriate Government shall fix. Under Section 7, the Code lays down that:
1. Any minimum rate of wages fixed or revised by the appropriate Government under section 8 may consist of:
a basic rate of wages and an allowance at a rate to be adjusted, at such intervals and in such manner as the appropriate Government may direct, to accord as nearly as practicable with the variation in the cost of living index number applicable to such workers (hereinafter referred to as “cost of living allowance”); or
a basic rate of wages with or without the cost of living allowance, and the cash value of the concessions in respect of supplies of essential commodities at concession rates, where so authorised; or
an all-inclusive rate allowing for the basic rate, the cost of living allowance and the cash value of the concessions, if any.
2. The cost of living allowance and the cash value of the concessions in respect of supplies of essential commodities at concession rate shall be computed by such authority, as the appropriate Government may by notification, appoint, at such intervals and in accordance with such directions as may be specified or given by the appropriate Government from time to time.
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Prepare a list of the various purposes for which withdrawal and advances from the Employees Provident Fund are permitted.
Describe the procedure of sending notice through electronic mode as per the Companies Act, 2013.
Notice by electronic mode
Rule 18 provides the procedure for issue of notice through electronic mode. The term ‘electronic mode’ shall mean any communication sent by a company through its authorized and secured computer program which is capable of producing confirmation and keeping record of such communication addressed to the person entitled to receive such communication at the last electronic mail address provided by the member.
The procedure of sending notice through electronic mode is discussed as detailed below:
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Elaborate the provisions relating to Board’s report, Directors report and Financial statements as per Section 134 of the Companies Act, 2013.
Salini is a women director in ESSEL Ltd, which is a listed company. On 15th July, 2025 she resigned from the post of women director. The Board of Directors of ESSEL Ltd. appointed Sharmi as a woman director in the board meeting held on 16th September, 2025 to fill the vacancy of women director, which had occurred as a result of resignation of Salini.
Examine the validity of appointment of Sharmi as a woman director with reference to the provisions of Companies Act, 2013. What would be your answer, if Sharmi is appointed as a women director in the board meeting held on 1st October, 2025?
State the primary roles and responsibilities of the Key Managerial Personnel as per the Companies Act, 2013.
Explain ethics in context of nature and its relevance to business.
What are general Business Ethics? Discuss various unethical practices followed by the executives of corporate with reference to the Business Ethics
Mr. X plans a hill-station holiday program for three months duration during summer season. He lends his car to Mr. Y under a clear understanding that it is for Mr. Y’s personal use only. Contrary to this condition, Mr. Y permits Mrs. Y, his wife, to use the vehicle. While Mrs. Y drives with due care, the car meets with an accident, resulting in damages estimated at ₹45,000. When Mr. X comes to know this loss, he demands compensation from Mr. Y for such loss. Mr. Y contends that Mrs. Y acted responsibly and the accident was unforeseen. However, Mr. X argues that Mr. Y breached the agreed terms of use by allowing a third party to operate the vehicle.
In light of the law relating to bailment and unauthorized use, assess whether Mr. Y is legally bound to compensate Mr. X. Does Mrs. Y’s careful driving negate Mr. Y’s liability?
Decide the case and support your answer with relevant legal principles.
Demonstrate the different roles and responsibilities of the audit committee as specified by the Board under Section 177 of the Companies Act, 2013.
1. The Board of Directors of every listed public company and such other class or classes of companies, as may be prescribed, shall constitute an Audit Committee.
2. The Audit Committee shall consist of a minimum of three directors with independent directors forming a majority, provided that majority of members of Audit Committee including its Chairperson shall be persons with ability to read and understand, the financial statement.
3. Every Audit Committee of a company existing immediately before the commencement of this Act shall, within one year of such commencement, be reconstituted in accordance with subsection (2).
4. Every Audit Committee shall act in accordance with the terms of reference specified in writing by the Board which shall, inter alia, include–
5. The Audit Committee may call for the comments of the auditors about internal control systems, the scope of audit, including the observations of the auditors and review of financial statement before their submission to the Board and may also discuss any related issues with the internal and statutory auditors and the management of the company.
6. The Audit Committee shall have authority to investigate into any matter in relation to the items specified in sub-section (4) or referred to it by the Board and for this purpose shall have power to obtain professional advice from external sources and have full access to information contained in the records of the company.
7. The auditors of a company and the key managerial personnel shall have a right to be heard in the meetings of the Audit Committee when it considers the auditor’s report but shall not have the right to vote.
8. The Board’s report under sub-section (3) of section 134 shall disclose the composition of an Audit Committee and where the Board had not accepted any recommendation of the Audit Committee, the same shall be disclosed in such report along with the reasons therefore.
9. Every listed company or such class or classes of companies, as may be prescribed, shall establish a vigil mechanism for directors and employees to report genuine concerns in such manner as may be prescribed.
10. The vigil mechanism under sub-section (9) shall provide for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases.
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She believes - "When you study, you get wise, you obtain knowledge. A knowledge that helps you in real life, in solving problems, finding opportunities. Implement what you study". She has a huge affinity for the Law Subject in particular and always encourages student to - "STUDY FROM THE BARE ACT, MAKE YOUR OWN INTERPRETATIONS". A rare practice that you will find in her video lectures as well.
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