(4 Marks) : © The Institute of Chartered Accountants of India

PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING
SECTION A – BUSINESS LAWS

Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.
Question 1
(a) X found a wallet in a restaurant. He enquired of all the customers present there but the
true owner could not be found. He handed over the same to the manager of the
restaurant to keep till the true owner is found. After a week he went back to the
restaurant to enquire about the wallet. The manager refused to return it back to X, saying
that it did not belong to him.
In the light of the Indian Contract Act, 1872, can X recover it from the Manager?
(4 Marks)
(b) Mr. Anil formed a One Person Company (OPC) on 16 th April, 2018 for manufacturing
electric cars. The turnover of the OPC for the financial year ended 31st March, 2019 was
about ` 2.25 Crores. His friend Sunil wanted to invest in his OPC, so they decided to
convert it voluntarily into a private limited company. Can Anil do so? (4 Marks)
(c) State the various essential elements involved in the sale of unascertained goods and its
appropriation as per the Sale of Goods Act, 1930. (4 Marks)
Answer
(a) Responsibility of finder of goods (Section 71 of the Indian Contract Act, 1872): A
person who finds goods belonging to another and takes them into his custody is subject
to same responsibility as if he were a bailee.
Thus, a finder of lost goods has:
(i) to take proper care of the property as man of ordinary prudence would take
(ii) no right to appropriate the goods and
(iii) to restore the goods if the owner is found.
In the light of the above provisions, the manager must return the wallet to X, since X is
entitled to retain the wallet found against everybody except the true owner.
(b) As per the provisions of Sub-Rule (7) of Rule 3 of the Companies (Incorporation) Rules,
2014, an OPC cannot convert voluntarily into any kind of company unless two years have
expired from the date of its incorporation, except threshold limit (paid up share capital) is
increased beyond fifty lakh rupees or its average annual turnover during the relevant
period exceeds two crore rupees.
© The Institute of Chartered Accountants of India

2 FOUNDATION EXAMINATION: NOVEMBER, 2019
In the instant case, Mr. Anil formed an OPC on 16th April, 2018 and its turnover for the
financial year ended 31st March, 2019 was Rs. 2.25 Crores. Even though two years have
not expired from the date of its incorporation, since its average annual turnover during
the period starting from 16th April, 2018 to 31st March, 2019 has exceeded Rs. 2 Crores,
Mr. Anil can convert the OPC into a private limited company along with Sunil.
(c) Sale of unascertained goods and Appropriation (Section 23 of the Sale of Goods
Act, 1930): Appropriation of goods involves selection of goods with the intention of using
them in performance of the contract and with the mutual consent of the seller and the
buyer.
The essentials are:
(a) There is a contract for the sale of unascertained or future goods.
(b) The goods should conform to the description and quality stated in the contract.
(c) The goods must be in a deliverable state.
(d) The goods must be unconditionally appropriated to the contract either by delivery to
the buyer or his agent or the carrier.
(e) The appropriation must be made by:
(i) the seller with the assent of the buyer; or
(ii) the buyer with the assent of the seller.
(f) The assent may be express or implied.
(g) The assent may be given either before or after appropriation.
Question 2
(a) Define consideration. What are the legal rules regarding consideration under the Indian
Contract Act, 1872? (7 Marks)
(b) Discuss the conditions under which LLP will be liable and not liable for the acts of the
partner. (5 Marks)
Answer
(a) Consideration [Section 2(d) of the Indian Contract Act, 1872]: When at the desire of
the promisor, the promisee or any other person has done or abstained from doing, or
does or abstains from doing or promises to do or abstain from doing something, such an
act or abstinence or promise is called consideration for the promise.
Legal Rules Regarding Consideration
(i) Consideration must move at the desire of the promisor: Consideration must be
offered by the promisee or the third party at the desire or request of the promisor.
This implies “return” element of consideration.

PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 3
(ii) Consideration may move from promisee or any other person: In India,
consideration may proceed from the promisee or any other person who is not a
party to the contract. In other words, there can be a stranger to a consideration but
not stranger to a contract.
(iii) Executed and executory consideration: A consideration which consists in the
performance of an act is said to be executed. When it consists in a promise, it is
said to be executory. The promise by one party may be the consideration for an act
by some other party, and vice versa.
(iv) Consideration may be past, present or future: It is a general principle that
consideration is given and accepted in exchange for the promise. The
consideration, if past, may be the motive but cannot be the real consideration of a
subsequent promise. But in the event of the services being rendered in the past at
the request or the desire of the promisor, the subsequent promise is regarded as an
admission that the past consideration was not gratuitous.
(v) Consideration need not be adequate: Consideration need not to be of any
particular value. It need not be approximately of equal value with the promise for
which it is exchanged but it must be something which the law would regard as
having some value.
(vi) Performance of what one is legally bound to perform: The performance of an
act by a person who is legally bound to perform the same cannot be consideration
for a contract. Hence, a promise to pay money to a witness is void, for it is without
consideration. Hence such a contract is void for want of consideration.
But where a person promises to do more that he is legally bound to do, such a
promise provided it is not opposed to public policy, is a good consideration. It
should not be vague or uncertain.
(vii) Consideration must be real and not illusory: Consideration must be real and
must not be illusory. It must be something to which the law attaches some value. If
it is legally or physically impossible it is not considered valid consideration.
(viii) Consideration must not be unlawful, immoral, or opposed to public policy.
Only presence of consideration is not sufficient it must be lawful. Anything which is
immoral or opposed to public policy also cannot be valued as valid consideration.
(b) Conditions under which LLP will be liable [Section 27(2) of the LLP Act, 2008]
The LLP is liable if a partner of a LLP is liable to any person as a result of a wrongful act
or omission on his part in the course of the business of the LLP or with its authority.
Conditions under which LLP will not be liable [Section 27(1) of the LLP Act, 2008]
A LLP is not bound by anything done by a partner in dealing with a person if—
(a) the partner in fact has no authority to act for the LLP in doing a particular act; and

(b) the person knows that he has no authority or does not know or believe him to be a
partner of the LLP.
Question 3
(a) (i) When the continuing guarantee can be revoked under the Indian Partnership Act, 1932?
(2 Marks)
OR
(ii) What do you mean by Goodwill as per the provisions of Indian Partnership
Act,1932? (2 Marks)
(b) With reference to the provisions of Indian partnership Act, 1932 explain the various
effects of insolvency of a partner. (4 Marks)
(c) Mr. Sonumal a wealthy individual provided a loan of ` 80,000 to Mr. Datumal on
26.02.2019. The borrower Mr. Datumal asked for a further loan of ` 1,50,000.
Mr. Sonumal agreed but provided the loan in parts at different dates. He provided
` 1,00,000 on 28.02.2019 and remaining ` 50,000 on 03.03.2019.
On 10.03.2019 Mr. Datumal while paying off part ` 75,000 to Mr. Sonumal insisted that
the lender should adjusted ` 50,000 towards the loan taken on·03.03.2019 and balance
as against the loan on 26.02.2019.
Mr. Sonumal objected to this arrangement and asked the borrower to adjust in the order
of date of borrowal of funds.
Now you decide:
(i) Whether the contention of Mr. Datumal correct or otherwise as per the provisions of
the Indian Contract Act, 1872?
(ii) What would be the answer in case the borrower does not insist on such order of
adjustment of repayment?
(iii) What would the mode of adjustment/appropriation of such part payment in case
neither Mr. Sonumal nor Mr. Datumal insist any order of adjustment on their part?
(6 Marks)
Answer
(a) (i) Revocation of continuing guarantee (Section 38 of the Indian Partnership Act,
1932)
According to section 38, a continuing guarantee given to a firm or to third party in
respect of the transaction of a firm is, in the absence of an agreement to the
contrary, revoked as to future transactions from the date of any change in the
constitution of the firm. Such change may occur by the death, or retirement of a
partner, or by introduction of a new partner.

OR
(ii) Goodwill: The term “Goodwill” has not been defined under the Indian Partnership
Act, 1932. Section 14 of the Act lays down that goodwill of a business is to be
regarded as a property of the firm.
Goodwill may be defined as the value of the reputation of a business house in
respect of profits expected in future over and above the normal level of profits
earned by undertaking belonging to the same class of business.
(b) Effects of insolvency of a partner (Section 34 of the Indian Partnership Act, 1932):
(i) The insolvent partner cannot be continued as a partner.
(ii) He will be ceased to be a partner from the very date on which the order of
adjudication is made.
(iii) The estate of the insolvent partner is not liable for the acts of the firm done after the
date of order of adjudication.
(iv) The firm is also not liable for any act of the insolvent partner after the date of the
order of adjudication,
(v) Ordinarily, the insolvency of a partner results in dissolution of a firm; but the
partners are competent to agree among themselves that the adjudication of a
partner as an insolvent will not give rise to dissolution of the firm.
(c) Appropriation of Payments: In case where a debtor owes several debts to the same
creditor and makes payment which is not sufficient to discharge all the debts, the
payment shall be appropriated (i.e. adjusted against the debts) as per the provisions of
Section 59 to 61 of the Indian Contract Act, 1872.
(i) As per the provisions of 59 of the Act, where a debtor owing several distinct debts
to one person, makes a payment to him either with express intimation or under
circumstances implying that the payment is to be applied to the discharge of some
particular debt, the payment, if accepted, must be applied accordingly.
Therefore, the contention of Mr. Datumal is correct and he can specify the manner
of appropriation of repayment of debt.
(ii) As per the provisions of 60 of the Act, where the debtor has omitted to intimate and
there are no other circumstances indicating to which debt the payment is to be
applied, the creditor may apply it at his discretion to any lawful debt actually due
and payable to him from the debtor, where its recovery is or is not barred by the law
in force for the time being as to the limitation of suits.

Hence in case where Mr. Datumal fails to specify the manner of appropriation of
debt on part repayment, Mr. Sonumal the creditor, can appropriate the payment as
per his choice.
(iii) As per the provisions of 61 of the Act, where neither party makes any appropriation,
the payment shall be applied in discharge of the debts in order of time, whether they
are or are not barred by the law in force for the time being as to the limitation of
suits. If the debts are of equal standing, the payments shall be applied in discharge
of each proportionately.
Hence in case where neither Mr. Datumal nor Mr. Sonumal specifies the manner of
appropriation of debt on part repayment, the appropriation can be made in
proportion of debts.
Question 4
(a) What are the rights of an unpaid seller against goods under the Sale of Goods Act,
1930? (6 Marks)
(b) Master X was introduced to the benefits of partnership of M/s ABC & Co. with the
consent of all partners. After attaining majority, more than six months elapsed and he
failed to give a public notice as to whether he elected to become or not to become a
partner in the firm. Later on, Mr. L, a supplier of material to M/s ABC & Co., filed a suit
against M/s ABC & Co. for recovery of the debt due.
In the light of the Indian Partnership Act, 1932, explain:
(i) To what extent X will be liable if he failed to give public notice after attaining
majority?
(ii) Can Mr. L recover his debt from X? (6 Marks)
Answer
(a) Rights of an unpaid seller against the goods: As per the provisions of Section 46 of
the Sale of Goods Act, 1930, notwithstanding that the property in the goods may have
passed to the buyer, the unpaid seller of goods, as such, has by implication of law-
(a) a lien on the goods for the price while he is in possession of them;
(b) in case of the insolvency of the buyer, a right of stopping the goods in transit after
he has parted with the possession of them;
(c) a right of re-sale as limited by this Act. [Sub-section (1)]
Where the property in goods has not passed to the buyer, the unpaid seller has, in
addition to his other remedies, a right of withholding delivery similar to and co-extensive
with his rights of lien and stoppage in transit where the property has passed to the buyer.
[Sub-section (2)]

These rights can be exercised by the unpaid seller in the following circumstances:
(i) Right of lien (Section 47): According to sub-section (1), the unpaid seller of goods
who is in possession of them is entitled to retain possession of them until payment
or tender of the price in the following cases, namely:-
(a) where the goods have been sold without any stipulation as to credit;
(b) where the goods have been sold on credit, but the term of credit has expired;
(c) where the buyer becomes insolvent.
(ii) Right of stoppage in transit (Section 50): When the buyer of goods becomes
insolvent, the unpaid seller who has parted with the possession of the goods has
the right of stopping them in transit, that is to say, he may resume possession of the
goods as long as they are in the course of transit, and may retain them until paid or
tendered price of the goods.
(iii) Right to re-sell the goods (Section 54): The unpaid seller can exercise the right to
re-sell the goods under the following conditions:
1. Where the goods are of a perishable nature
2. Where he gives notice to the buyer of his intention to re-sell the goods
3. Where an unpaid seller who has exercised his right of lien or stoppage in
transit resells the goods
4. A re-sale by the seller where a right of re-sale is expressly reserved in a
contract of sale
5. Where the property in goods has not passed to the buyer
(b) As per the provisions of Section 30(5) of the Indian Partnership Act, 1932, at any time
within six months of his attaining majority, or of his obtaining knowledge that he had been
admitted to the benefits of partnership, whichever date is later, such person may give
public notice that he has elected to become or that he has elected not to become a
partner in the firm, and such notice shall determine his position as regards the firm.
However, if he fails to give such notice, he shall become a partner in the firm on
the expiry of the said six months.
If the minor becomes a partner by his failure to give the public notice within specified
time, his rights and liabilities as given in Section 30(7) are as follows:
(A) He becomes personally liable to third parties for all acts of the firm done since he
was admitted to the benefits of partnership.
(B) His share in the property and the profits of the firm remains the same to which he
was entitled as a minor.

(i) In the instant case, since, X has failed to give a public notice, he shall become
a partner in the M/s ABC & Co. and becomes personally liable to Mr. L, a third
party.
(ii) In the light of the provisions of Section 30(7) read with Section 30(5) of the
Indian Partnership Act, 1932, since X has failed to give public notice that he
has not elected to not to become a partner within six months, he will be
deemed to be a partner after the period of the above six months and therefore,
Mr. L can recover his debt from him also in the same way as he can recover
from any other partner.
Question 5
(a) Mrs. Geeta went to the local rice and wheat wholesale shop and asked for 100 kgs of
Basmati rice. The Shopkeeper quoted the price of the same as ` 125 per kg to which
she agreed. Mrs. Geeta insisted that she would like to see the sample of what will be
provided to her by the shopkeeper before she agreed upon such purchase.
The shopkeeper showed her a bowl of rice as sample. The sample exactly corresponded
to the entire lot.
The buyer examined the sample casually without noticing the fact that even though the
sample was that of Basmati Rice but it contained a mix of long and short grains.
The cook on opening the bags complained that the dish if prepared with the rice would
not taste the same as the quality of rice was not as per requirement of the dish.
Now Mrs. Geeta wants to file a suit of fraud against the seller alleging him of selling mix
of good and cheap quality rice. Will she be successful?
Explain the basic law on sale by sample under Sale of Goods Act 1930?
Decide the fate of the case and options open to the buyer for grievance redressal as per
the provisions of Sale of Goods Act 1930?
What would be your answer in case Mrs. Geeta specified her exact requirement as to
length of rice? (6 Marks)
(b) "The Memorandum of Association is a charter of a company". Discuss. Also explain in
brief the contents of Memorandum of Association. (6 Marks)
Answer
(a) (i) As per the provisions of Sub-Section (2) of Section 17 of the Sale of Goods Act,
1930, in a contract of sale by sample, there is an implied condition that:
(a) the bulk shall correspond with the sample in quality;
(b) the buyer shall have a reasonable opportunity of comparing the bulk with the
sample.

In the instant case, in the light of the provisions of Sub-Clause (b) of Sub-Section
(2) of Section 17 of the Act, Mrs. Geeta will not be successful as she casually
examined the sample of rice (which exactly corresponded to the entire lot) without
noticing the fact that even though the sample was that of Basmati Rice but it
contained a mix of long and short grains.
(ii) Sale by Sample: (Section 17 of the Sale of Goods Act, 1930): As per the
provisions of Sub-Section (1) of section 17 of the Sale of Goods Act, 1930, a
contract of sale is a contract for sale by sample where there is a term in the
contract, express or implied, to that effect.
As per the provisions of Sub-Section (2) of section 17 of the Sale of Goods Act,
1930, in a contract of sale by sample, there is an implied condition that:
(a) that the bulk shall correspond with the sample in quality;
(b) that the buyer shall have a reasonable opportunity of comparing the bulk with
the sample.
(c) that the goods shall be free from any defect, rendering them unmerchantable,
which would not be apparent on reasonable examination of the sample.
(iii) In the instant case, the buyer does not have any option available to him for
grievance redressal.
(iv) In case Mrs. Geeta specified her exact requirement as to length of rice, then there
is an implied condition that the goods shall correspond with the description. If it is
not so, the seller will be held liable.
(b) The Memorandum of Association of company is in fact its charter; it defines its
constitution and the scope of the powers of the company with which it has been
established under the Act. It is the very foundation on which the whole edifice of the
company is built.
Object of registering a memorandum of association:
• It contains the object for which the company is formed and therefore identifies the
possible scope of its operations beyond which its actions cannot go.
• It enables shareholders, creditors and all those who deal with company to know
what its powers are and what activities it can engage in.
A memorandum is a public document under Section 399 of the Companies Act,
2013. Consequently, every person entering into a contract with the company is
presumed to have the knowledge of the conditions contained therein.
• The shareholders must know the purposes for which his money can be used by the
company and what risks he is taking in making the investment.

A company cannot depart from the provisions contained in the memorandum however
imperative may be the necessity for the departure. It cannot enter into a contract or
engage in any trade or business, which is beyond the power confessed on it by the
memorandum. If it does so, it would be ultra vires the company and void.
Contents of the memorandum: The memorandum of a company shall state—
(a) the name of the company (Name Clause) with the last word “Limited” in the case of
a public limited company, or the last words “Private Limited” in the case of a private
limited company. This clause is not applicable on the companies formed under
section 8 of the Act.
(b) the State in which the registered office of the company (Registered Office clause) is
to be situated;
(c) the objects for which the company is proposed to be incorporated and any matter
considered necessary in furtherance thereof (Object clause);
(d) the liability of members of the company (Liability clause), whether limited or
unlimited
(e) the amount of authorized capital (Capital Clause) divided into share of fixed
amounts and the number of shares with the subscribers to the memorandum have
agreed to take, indicated opposite their names, which shall not be less than one
share. A company not having share capital need not have this clause.
(f) the desire of the subscribers to be formed into a company. The Memorandum shall
conclude with the association clause. Every subscriber to the Memorandum shall
take at least one share, and shall write against his name, the number of shares
taken by him.
Question 6
(a) Explain the term 'Coercion" and what are the effects of coercion under Indian Contract
Act, 1872. (5 Marks)
(b) "Dissolution of a firm is different from dissolution of Partnership". Discuss. (4 Marks)
(c) A, an assessee, had large income in the form of dividend and interest. In order to reduce
his tax liability, he formed four private limited company and transferred his investments to
them in exchange of their shares. The income earned by the companies was taken back
by him as pretended loan. Can A be regarded as separate from the private limited
company he formed? (3 Marks)
Answer
(a) Coercion (Section 15 of the Indian Contract Act, 1872): “Coercion’ is the committing,
or threatening to commit, any act forbidden by the Indian Penal Code or the unlawful
detaining, or threatening to detain any property, to the prejudice of any person whatever,
with the intention of causing any person to enter into an agreement.”

Effects of coercion under section 19 of Indian Contract Act, 1872

(i) Contract induced by coercion is voidable at the option of the party whose consent
was so obtained.
(ii) As to the consequences of the rescission of voidable contract, the party rescinding
a void contract should, if he has received any benefit, thereunder from the other
party to the contract, restore such benefit so far as may be applicable, to the person
from whom it was received.
(iii) A person to whom money has been paid or anything delivered under coercion must
repay or return it.
(b) DISSOLUTION OF FIRM VS. DISSOLUTION OF PARTNERSHIP
S. BASIS OF DISSOLUTION OF DISSOLUTION OF PARTNERSHIP
NO. DIFFERENCE FIRM
1. Continuation of It involves It does not affect continuation of
business discontinuation of business. It involves only
business in reconstitution of the firm.
partnership.
2. Winding up It involves winding up It involves only reconstitution and
of the firm and requires only revaluation of assets
requires realization of and liabilities of the firm.
assets and
settlement of
liabilities.
3. Order of court A firm may be Dissolution of partnership is not
dissolved by the ordered by the court.
order of the court.
4. Scope It necessarily It may or may not involve dissolution
involves dissolution of firm.
of partnership.
5. Final closure of It involves final It does not involve final closure of the
books closure of books of books.
the firm.
(c) The House of Lords in Salomon Vs Salomon & Co. Ltd. laid down that a company is a
person distinct and separate from its members, and therefore, has an independent
separate legal existence from its members who have constituted the company. But under
certain circumstances the separate entity of the company may be ignored by the courts.
When that happens, the courts ignore the corporate entity of the company and look
behind the corporate façade and hold the persons in control of the management of its

affairs liable for the acts of the company. Where a company is incorporated and formed
by certain persons only for the purpose of evading taxes, the courts have discretion to
disregard the corporate entity and tax the income in the hands of the appropriate
assesse.
In Dinshaw Maneckjee Petit case it was held that the company was not a genuine
company at all but merely the assessee himself disguised that the legal entity of a limited
company. The assessee earned huge income by way of dividends and interest. So, he
opened some companies and purchased their shares in exchange of his income by way
of dividend and interest. This income was transferred back to assessee by way of loan.
The court decided that the private companies were a sham and the corporate veil was
lifted to decide the real owner of the income.
In the instant case, the four private limited companies were formed by A, the assesse,
purely and simply as a means of avoiding tax and the companies were nothing more than
the façade of the assesse himself. Therefore, the whole idea of Mr. A was simply to split
his income into four parts with a view to evade tax. No other business was done by the
company.
Hence, A cannot be regarded as separate from the private limited companies he formed.

SECTION-B : BUSINESS CORRESPONDENCE AND REPORTING
Question No. 7 is compulsory.
Answer any three questions from the remaining four questions.
All candidates (including those who have opted for Hindi Medium) are required to answer the
questions in Section B, in English only.
Question 7
(a) Read the passage carefully and answer the questions given below:
Being the daughter of a physics professor, Marie who was born in 1867 in Warsaw,
Poland, was greatly influenced by the wonders of Science and technology. Since an early
age, she displayed a blithe personality. Her fascination for learning prompted her to
continue with her studies even after school. She become disgruntled, however, when she
learned that the university in Warsaw was closed for women. Determined to complete
higher education, she defiantly left Poland and in 1891 entered the Sorbonne, a French
university, where she completed her doctorate in physics.
Marie met Pierre Curie at the Sorbonne along with some of the other greatest scientists
of her day. Marie and Pierre were married in 1895 and spent many productive years
working together in the physics laboratory. A short time after they discovered radium,
Pierre was killed by a horse-drawn wagon in 1906. For Marie it was an horrible
misfortune and heartbreaking event. Despondently she recalled their close relationship
and the joy that they had shared in scientific research. The fact that she had two young
daughters to raise by herself greatly increased her distress.
Curie's feeling of desolation finally began to fade when she was asked to succeed her
husband as a physics professor at the Sorbonne. She was the first woman to be given a
professorship at the world-famous university. In 1911 she received the Nobel Prize in
physics for isolating radium. Although Marie Curie eventually suffered a fatal illness from
her long exposure to radium, she never became disillusioned about her work. Regardless
of the consequences, she had dedicated herself to science and to revealing the
mysteries of the physical world.
(i) What did Marie did not like about the Warsaw University? (1 Mark)
(ii) What was first step that Marie took towards her becoming a scientist? (1 Mark)
(iii) How did Marie deal with the desolation caused by her husband’s death? (1 Mark)
(iv) Write a Summary of the above Passage. (2 Marks)
(b) Read the Passage:
(i) Make Notes, using Headings, Subheadings and abbreviations whenever necessary.
(3 Marks)
(ii) Write summary

People do not always do the things we want them to do. No matter' how reasonable
or minimal our expectations may be, there are times when we are let down.
Naturally, we feel upset and hurt when our expectations are not met. We dread
confrontations because they are unpleasant and can damage relationships.
Yet not confronting a person does not solve the problem because unresolved issues
also affect relationships in an adverse way. Actually, the real problem lies in our
style of confrontation, not in the issue.
Typically, we use character-based confrontations. They help in venting our
ange4rand hurt, but that is the only thing they do. They lead to angry show downs
and bring all discussions to a grinding halt. It is important to remember that self-
image is the most important possession of all human beings.
It is the way we view and regard ourselves in our own eyes and in the eyes of
others. As self-conscious beings, we are actually aware of our· image and
constantly work towards protecting it from any damage.
We also seek approval from others about our own self-image. We feel distraught if
we sense that there. is even a slight threat to our self image, because our character
is the essence of our lives. To ensure a rational dialogue over dashed expectations,
we need to deploy issued based confrontations. They involve an explanation of.
which actions have bothered us, in what manner and what changes we would like
from the other person. (2 Marks)
Answer
(a) (i) Marie did not like the fact that University in Warsaw was closed for women.
(ii) Marie left Poland in 1891 and joined Sorbonne University, France, where she
completed her doctorate in Physics.
(iii) She got over her desolation when she became the first woman to join as a professor
of Physics at the world renowned University of Sorbonne, France.
(iv) Summary:
Marie, daughter of a physics professor was born in 1867 in Warsaw, Poland.
Disappointed at not being allowed to join University in Warsaw, she left Poland in
1891 to enter the University of Sorbonne, France and completed her doctorate in
Physics.
In 1895, Marie married Pierre Curie a great scientist at Sorbonne. Having spent
many years together in research, shortly after they discovered Radium, Pierre Curie
was killed in 1906.
She got over her desolation when she became the first woman to join as a professor
of Physics at the world-renowned University of Sorbonne. In 1911, she received the

PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3
Nobel Prize in Physics for isolating Radium. Being overexposed to radium, she
developed a fatal illness. She dedicated herself to the cause of science.
(b) (i) Human Nature
1. Hmn Ntr
1.1 Expctns
1.1.1 hurt when not met
1.2 Cnfrntns
1.2.1 are avoided by hmns
1.2.2 are unplsnt
1.2.3 dmgrlstnsps
1.2.4 Styles of cnfrntns:
1.2.4.1 Chrctrbsd
1.2.4.1.1 Help vent anger
1.2.4.1.2 Cse angry shwdns
1.2.4.1.3 Halt dscssns
1.2.4.1.4 Dtrmntl to slf-img
1.2.4.2 Issue bsd
1.2.4.2.1 Lead to rtnldlg
1.2.4.2.2 Help anls:
1.2.4.2.2.1 Prblm
1.2.4.2.2.2 Cses
1.2.4.2.2.3 Chngrqd in othrprsn
1.3 Slf-img
1.3.1 Is how we prcv ourselves
1.3.2 How othrsprcv us
1.3.3 We try avdngdmg
1.3.4 Seek aprvlfrmothrs
1.3.5 Bldschrctr
Key:
Hmn: Human/s
Ntr: Nature

Expctns: Expectations
cnfrntns: confrontations
unplsnt: unpleasant
dmg: damage
rlstnsps: relationships
chrctr: character
bsd: based
cse: cause
shwdns: showdowns
dscssns: discussions
dtrmntl: detrimental
slf-img: self-image
rtnl:rational
dlg: dialogue
anls: analyse
prblm:problem
chng:change
rqd: required
othr:other
prsn:person
prcv: perceive
othr: other/s
avdng: avoiding
aprvl: approval
blds: builds
(ii) Summary
We feel hurt when our expectations from others are not met. We avoid
confrontations, as they are displeasing and can affect relations. More often, it is the
style of confrontation that causes problems rather than the underlying issue. We
generally indulge in character-based confrontations, letting out our anger. Our
image is important as it builds our character. Therefore, we must indulge in issue-

based confrontations where we analyze our disagreements and identify the actions
in others that bother us and to resolve the issue.
Candidates who have given abbreviations as below or any other suitable
abbreviations, should also be given due credit. For Example:
Confrontation - Confront
Expectation - Expat
Self-Image - Selfina
Problem - Probe
Question 8
(a) Discuss the process of communication.
(b) (i) Choose the word which best expresses the meaning of the given word :
Abundant
(1) Plentiful
(2) Sufficient
(3) Enough
(4) Many (1 Mark)
(ii) Select a suitable antonym for the word given under:
Adumbrate
(1) Elaborate
(2) Summarize
(3) Angry
(4) Happy (1 Marks)
(iii) Change the following sentence to indirect speech:
Reena said, "Nobody can solve the problem on the earth". (1 Mark)
(c) Write a Precis and give appropriate title to the passage given below:
DNA degrades quickly· after an: animal dies, so researchers once believed it impossible
to find ancient genetic material. The search for primeval vestiges of DNA took off in the
late 1980s after the. development of a technique called polymerase chain reaction
(PCR), which copies minute quantities of DNA. Armed with PCR, scientists could look for
tiny fragments of DNA that might have weathered the millennia unharmed.
In recent years, researchers have isolated DNA from 20-million-year-old magnolia leaves
and extracted DNA from a 135-million-year-old weevil found in amber. Recently, a team

extracts DNA from bone dating back millions of years for the first time. In the frenzied
hunt for ancient DNA, microbiologist Scott R. Woodward may have bagged the biggest
quarry. Drawing on lessons learned while growing up among the fossil-rich rocks of
eastern Utah, Woodward and his team became the first people to find genetic material
belonging to a dinosaur.
Woodward, whose grandfather was a coal miner, knew that mines in the area often
contained dinosaur traces. After six months of looking Woodward pulled two bone
fragments from a Cretaceous siltstone layer directly a top a coal seam. Impeded by an
unstable mine roof) Woodward's team could not recover any more bone samples.
The siltstone apparently inhibited fossilization and preserved much of the original cell
structure in the bone. Researchers isolated strands of DNA from both fragments and
used-PCR to copy a segment that codes for a protein called cytochrome b. Once they
had made many copies, they ·could determine the DNA sequence.
Throughout their work, the biologists took precautions to avoid contaminating the
samples with modern DNA or ancient material found within the coal. According to
Woodward, circumstantial evidence indicates that the bone fragments belong to one or
two species of dinosaurs. Dinosaur tracks are abundant in this 'coal formation, and the
bones visible in the mine were larger than those of a crocodile the biggest non-dinosaur
known in these rocks. (5 Marks)
Answer
(a) The process of communication entails :
1. The purpose or reason for the communication.
2. The framing of the content of the message
3. The medium used for conveying the message. (For example, internet, written text,
speech, pictures, gestures and so on).
4. Transmitting the formulated message.
5. Messages are often misinterpreted due to external disturbances such as noise created
by humans, traffic and natural forces. These factors can result in miscommunication.
6. Receiving the message.
7. Deciphering and making sense of the message. decode
8. Interpreting and figuring out what the receiver thinks is the real message.

Encoding
Channel Message
Barrier
Feedback Noise Channel
Receiver
Decoding
(b) (i) (1) Plentiful

(ii) (1) Elaborate
(iii) Reena commented/said that nobody could solve the problem on the earth.
(c) Précis’:
Exploring ancient DNA: Innovations and Findings
Contrary to their earlier belief, in the late 1980s, scientists/researchers could search for
remnants of DNA that existed in the primitive era/times after the development of the PCR
technique (Polymerase Chain Reaction) that could copy minute quantities of DNA.
More recently, researchers have isolated DNA from 20-million-year-old magnolia leaves
and successfully extracted DNA from a 135-million-year-old weevil found in amber.
Microbiologist Scoot R. Woodward with his team were the first to find genetic material
belonging to a dinosaur. He pulled two bone fragments from a Cretaceous siltstone layer
from the top of a coal seam from which researchers isolated strands of DNA and used
PCR to copy a segment that codes for a protein called Cytochrome b. DNA sequence
was determined from the copies. Due care was taken to avoid contamination of samples
with modern DNA. Evidence indicated that the samples found belonged to one or two
dinosaur species.

Question 9
(a) (i) Discuss the term "Virtual Communication" in communication. (2 Marks)
OR
(ii) What do you mean by an "Attitude Barrier"? (2 Marks)
(b) (i) Choose the word which best expresses the meaning of the given word:
Relevant
(1) Related
(2) Important
(3) Pertinent
(4) Common (1 Mark)
(ii) Choose the word which best. expresses the meaning of the given word:
Unabashed
(1) Not fast
(2) Not Finding
(3) Not Embarrassed
(4) Not Angry (1 Mark)
(iii) Change the following sentence to indirect speech:
He said, "Will you all come for the meeting?" (1 Mark)
(c) Draft Newspaper Report on "Flood. situation grim in· southern, western states" to be
published in a National newspaper. (5 Marks)
Answer
(a) (i) Visual communication through visual aids such as signs, typography, drawing, graphic
design, illustration, color and other electronic resources usually reinforces written
communication. Sometimes, it may replace written communication altogether. Visual
communication is powerful medium. It is the reason that the print and audio-visual
media makes effective use of visuals to convey their message. Visuals like graphs, pie
charts and other diagrammatic presentations convey clearly and concisely a great deal
of information. They are an essential part of official presentations these days.
(ii) Attitude barriers refer to personal attitudes of employees that can affect
communication within the organization. A proactive, motivated worker will facilitate
the communication process, whereas a dissatisfied, disgruntled, shy, introvert or
lazy employee can delay, hesitate in taking the initiative, or refuse to communicate.

Attitude problems can be addressed by good management, periodic training and

regular interaction with staff members.
(b) (i) (3) Pertinent
(ii) (3) Not Embarrassed
(iii) He asked if everyone would come for the meeting.
(c) Flood situation grim in Western, Southern Indian states: With heavy downpours, up
to 330 mm, the flood situation continues to worsen particularly in the western and
southern states of Maharashtra, Gujarat, Karnataka and Kerala. Over 500 peopl e have
died in landslide, deluge related incidents, thousands have gone missing, as many as 40
lakh people have been displaced and over 8 lakh people have been moved to relief
camps in these states. Almost half a metre of rain fell in Vadodara alone in the last 24
hours, disrupting railways and air routes. Major rivers viz. Krishna and Tungabhadra are
flowing at record high levels creating severe to extreme flood situation in the states. Red
alert has been issued in most of these areas. The recent floods have damaged crops
over 10 lakh hectares of land in Maharashtra, Karnataka and Kerala making survival
even more difficult. According to the meteorological department, the situation is likely to
improve in the days to come with meager or intermittent rains.
Union Home Minister has carried out an aerial survey of the worst affected areas and the
Prime Minister has declared immediate monetary relief to these states. Campaigns are
being carried out to appeal to masses in other states to contribute to the mass relief
operations. Several NGOs and non profit agencies have join hands with the army in
carrying out immediate relief operations in worst hit areas. Their volunteers are
propagating the message through social media to collect clothes, food and funds for
those stranded after deluge. To contribute to the Prime Minister’s Disaster Relief Fund
you may directly transfer funds through
NEFT details are as under:
Favour of: PM’s Relief Fund
Account No.:
IFSC code::
Source: Press Trust of India.
Question 10
(a) Explain how emotional awareness and control helps in communication? (2 Marks)
(b) (i) Change the sentence from Active to Passive Voice.
The audience loudly cheered the Prime Minister's speech. (1 Mark)
(ii) Change the sentence from Passive to Active Voice
The Bird was killed by a cruel boy. (1 Mark)

(iii) Change the following sentence to indirect speech.

He said, "My Mother is writing letters". (1 Mark)
(c) Write an article of about 250 words on the topic, "The Importance of water conservation".
(5 Marks)
Answer
(a) Emotions play a major role in our interactions with other people. They are a powerful
force that affect our perception of reality regardless of how hard we try to be unbiased . In
fact, intense emotions can undermine a person’s capacity for rational decision-making,
even when the individual is aware of the need to make careful decisions.
Emotional awareness is a necessary element of good communication. While interacting
with another person or a group, it is important to understand the emotions you and he/
she/ they are bringing to the discussion. Managing your own and others emotions and
communicating keeping in mind the emotional state of others helps in smooth interaction
avoiding conflict resulting in successful completion of the communication process.
(b) (i) The Prime Minister’s speech was cheered loudly by the audience.
(ii) A cruel boy killed the bird.
(iii) He told that his mother was writing letters.
(c) Article: The Importance of Water Conservation
-By ….. (Writer’s name)

Water is one of the three basic resources for the survival of human kind besides air and
food. More than 90 percent of human body is composed of water. Though water is
abundantly available on our planet, with 2/3 rd of earth covered by water, still fresh, clean
water is a limited resource. Rivers, fresh water lakes, waterfalls, natural springs, ground
water and rain are the natural resources of fresh water.
With indiscriminate rise in human population worldwide, the pressure on these natural
resources has increased manifold. In many developing countries, due to incessant
industrialization leading to exponential rise in migration to big cities/townships,
contamination of ground water and rivers has not only led to scarcity of pure drinking
water but also emerged as a serious health hazard.
Over reliance on ground water and rivers for construction/infrastructure development
projects in urban areas and little or no awareness about water conservation has led to
fast depletion of these natural resources. It is about time we realized the importance of
clean water as water tables are fast declining, rivers and lakes are drying or being
polluted/contaminated especially in thickly populated urban areas such as Ne w Delhi,

Hyderabad and Bangalore. According to a study these urban areas will have little or no
ground water left that will lead to a drought like situation in a few years time.
As progressive citizens, we must take immediate measures to not only restrict our water
consumption but also devise innovative conservation methods to provide sustainable
sources of clean drinking water. While Rain water harvesting and reducing water
consumption are effective methods of water conservation in urban areas, construct ion of
small dams to provide huge water reservoirs holds the key to effective water
conservation in rural areas.
Question 11
(a) Define the areas where chain network of communication is found in an organization.
(2 Marks)
(b) Select the correct meaning of Idioms/Phrases given below:
(i) Takes Two to Tango
(1) Two people are required for dancing
(2) Two people are required for creating mischief.
(3) Two people required to clean floor.
(4) Two people required to help others. (1 Mark)
(ii) Storm in a teacup
(1) Crave for something
(2) Least importance
(3) Emergency situation
(4) Make a big issue out of a small thing. (1 Mark)
(iii) Change the sentence into Active Voice;
They will be given a ticket for over speeding by the police inspector. (1 Mark)
(iv) Choose the word which best expresses the meaning of the given word.
Myriad
(1) Dramatic
(2) To Fetch
(3) Many
(4) Confusion (1 Mark)
(c) Write a letter to a bank requesting them to stop payment of a cheque which has been
reported lost. (4 Mark)

Answer
(a) Communication pattern that follows the chain of command from the senior to the junior is
called the chain network. Communication starts at the top, like from a CEO, and works its
way down to the different levels of employees. The supervisor/ manager/ CEO g ives
commands or instructions to those working under him/her in the organization.
B, C, D and E, F, G are the subordinates to A in the organizational hierarchy and receive
commands from ‘A’ as shown in the diagram. The chain network often takes up time, a nd
communication may not be clear.
AA
E B
F C
G D
Chain of Command
(b) (i) (2) Two people are required for creating mischief.
(ii) (4) Make a big issue out of a small thing.
(iii) The police inspector will give them a ticket for over speeding.
(iv) (3) Many

(c) Letter:
From:
ABC Private Limited,
Nariman Point, Mumbai
November 13, 2019
XYZ Bank
106 Millenum Tower
Prashant Lok
Mumbai-02
Sir/Madam,
Subject: Request to Stop Payment of the Cheque No. xxxxxx
On behalf of ABC Pvt Ltd, I request you to stop payment of the cheque number xxxxxx
issued against our company Bank Account Number 123-456-789 maintained by your
branch. This cheque was issued to our vendor PQR Ltd amounting to ` 3 Lakh dated
XX/XX/XXXX and has been misplaced as reported by their accounts department. We will
issue a new cheque after your response.
Thanks for your cooperation.
Regards,
ASD
Senior Manager, Accounts

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PAPER – 2: BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING

SECTION A – BUSINESS LAWS

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Effects of coercion under section 19 of Indian Contract Act, 1872

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Feedback Noise Channel

(b) (i) (1) Plentiful

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Attitude problems can be addressed by good management, periodic training and

© The Institute of Chartered Accountants of India

(iii) Change the following sentence to indirect speech.

-By ….. (Writer’s name)

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© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

November 13, 2019

Thanks for your cooperation.

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