business law - ii mb2f2 october 2008

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Question PaperBusiness Law - II (MB2F2): October 2008

Answer all 70 questions.

Marks are indicated against each

question.

Total Marks : 100

1. The primary objective of securitization under the SARFAESI Act, 2002 is to sell the secured Non-

Performing Assets (NPA) loans to investors through a special purpose vehicle called

(a) Securitization Company

(b) Qualified Institutional Buyers

(c) Asset Reconstruction Company

(d) Reserve Bank of India

(e) Debt Recovery Tribunal. (1 mark)

2. Which of the following is not considered as an instrument negotiable by custom or usage?

(a) Delivery orders for goods

(b) Railway receipts for goods(c) Hundi

(d) Government Promissory notes

(e) Cheques. (1 mark)

3. Under the Competition Act, 2002, any agreement restricting in any manner the purchaser in the course

of his trade from acquiring or otherwise dealing in any goods other than those of the seller is known as

(a) Migration

(b) Exclusive supply agreement

(c) Exclusive distribution agreement

(d) Predatory pricing

(e) Bids. (1 mark)

4. Under the common law, which of the following is known as self-help remedy, because the owner of

the land affected may take action to contain the damage?

(a) Suit for injunction

(b) Suit for damages

(c) Abatement

(d) Rule of strict liability

(e) Rule of absolute liability. (1 mark)

5. Which of the following is not a method of Alternative Dispute Resolution (ADR)?

(a) Arbitration

(b) Conciliation

(c) Litigation

(d) Mediation

(e) Negotiation. (1 mark)

6. Sree Leathers Ltd., a manufacturer of footwear entered into an agreement with Foot Needs, a retailer of

footwear, for the sale of its products. One of the conditions in the agreement between Sree Leathers

Ltd., and Foot Needs was that the retailer shall sell the goods manufactured by Sree Leathers Ltd., at a

price not below the one, marked on the label of the footwear. Under the Competition Act, 2002, such an

agreement is classified as

(a) Denial of market access

(b) Unfair discrimination in purchase

(c) Unfair discrimination in sale

(d) Resale price maintenance

(e) Refusal to deal. (2marks)

7. Soubhgya Bank Ltd., is licensed to carry-on business as a banking company. It wants to take advantageof the retail boom in the country and wishes to open a retail chain of consumer and electronic goods.

Which of the following businesses is prohibited for banks under the Banking Regulation Act, 1949?

(2marks)

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(a) The business of contracting for private loans and negotiating the same

(b) The business of undertaking and executing trusts

(c) The business of buying or selling of goods

(d) The business of carrying on and transacting every kind of guarantee and indemnity business

(e) The business of acquiring and undertaking the whole of the business of another banking

company.

8. Eknath has taken two mediclaim policies from two different insurers. The first policy was for

Rs.1,00,000 was taken from Reliable Insurance and the second one for Rs.1,50,000 was taken fromMedisure Insurance. Suddenly, one day Eknath had to be hospitalized for a serious health problem and

he had to undergo surgery. A medical expenditure of Rs.1,80,000 was incurred by him. He is planning

to file for claim. Which of the following statements is true in respect of the liability of the insurers?

(a) As the actual expenditure is more than the coverage provided by each insurer, Eknath cannot

file any claim

(b) Reliable Insurance should pay an amount of Rs.1,00,000 and Medisure Insurance should pay the

balance Rs.80,000

(c) Medisure Insurance should pay an amount of Rs.1,50,000 and Reliable Insurance should pay the

balance Rs.30,000

(d) Both Reliable Insurance and Medisure Insurance should pay an equal amount of Rs.90,000 each

(e) Reliable Insurance and Medisure Insurance should pay the total amount of Rs.1,80,000 in the

ratio of their respective liabilities i.e. 2:3. (2marks)

9. Which of the following is considered as an inland bill under the Negotiable Instruments Act, 1881?

(a) A bill drawn in Lucknow upon a resident of Paris, made payable in London

(b) A bill drawn in Muscat upon a resident of Delhi, payable in Singapore

(c) A bill drawn in Beijing upon a resident of Chennai, payable in Kolkata

(d) A bill drawn in Mumbai upon a resident of Bangalore, payable in Paris

(e) A bill drawn in London upon a resident of Paris, made payable in Singapore. (2marks)

10.Marine insurance contract is a short term contract. The maximum period for which marine insurance

can be taken is

(a) Period of voyage

(b) One year (c) One year or period of voyage, whichever is longer

(d) Three years

(e) Five years. (1 mark)

11.Enforcement under the provisions of the SARFAESI Act, 2002 applies to

(a) Secured loans classified as non-performing assets

(b) Unsecured loans classified as non-performing assets

(c) Secured loans not classified as non-performing assets

(d) Unsecured loans not classified as non-performing assets

(e) Unsecured loans whether classified or not classified as non-performing assets. (1 mark)

12.Under the Negotiable Instruments Act, 1881, when a negotiable instrument is delivered conditionally or

for a special purpose as a collateral security or for safe custody only, and not for the purpose of

transferring absolutely property therein, it is called an

(a) Inchoate instrument

(b) Escrow

(c) Accommodation bill

(d) Trade bill

(e) Ambiguous instrument. (1 mark)

13.Which of the following statements is false in respect of the electronic governance under the Information

Technology Act, 2000?

(a) Information can be rendered or made available in electronic form

(b) Digital signature is recognized as equal to affixing physical signature

(c) Documents required to be filed under any law can be filed electronically

(d) Information required to be retained under any law may be retained in electronic form(e) Recognition of documents in electronic form gives a right to a person to insist the acceptance of

a document only in electronic form. (1 mark)

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14.Akash Khurana intends to file a claim for Rs.25,00,000 against Flywell Airlines for deficiency of

service under Consumer Protection Act, 1986. The complaint is to be filed with

(a) District Forum

(b) State Commission

(c) High Court

(d) National Commission

(e) Supreme Court. (1 mark)

15.Which of the following matters can be referred to arbitration?

(a) Matters relating to breach of contracts

(b) Industrial disputes

(c) Matrimonial matters

(d) Criminal proceedings

(e) Determination of guardianship. (1 mark)

16.Rampur Fertilizers Ltd., released its untreated chemical waste into a nearby canal that flowed through

its premises. The regular release of the waste discolored the ground water in the vicinity and posed a

great risk to the residents of the village who were residing just outside the premises of the company.

The residents are proposing to file a case against the company for causing water pollution. Which of the

following statements is true in respect of these circumstances?

(a) The company is not liable for causing water pollution as it is not engaged in any inherently

dangerous industrial process

(b) The company is liable for causing water pollution as the quality of ground water has decreased

(c) The company is not liable for causing water pollution as its action has not directly led to

discoloration of ground water

(d) The company is not liable for causing water pollution as the damage is caused in its premises

(e) The company is not liable for causing water pollution as discharge of any waste into water does

not amount to water pollution. (2marks)

17.Sarabjeet and Sridharan entered into an online agreement. The terms of the contract stipulated that the

electronic record shall be binding on the receipt of the acknowledgement. Sarabjeet, who is the

originator of the contract, has not received the acknowledgement as per the terms of the contract. Which

of the following statements is true in respect of these circumstances under the Information Technology

Act, 2000?

(a) The contract can be enforced as receipt of acknowledgement is not compulsory in an online

agreement

(b) The contract can be enforced only after receipt of acknowledgement by Sridharan who is the

receiver of the contract

(c) The contract can be enforced only after receipt of acknowledgement by Sarabjeet who is the

originator of the contract

(d) The contract can be enforced only after both Sarabjeet and Sridharan receive each others

acknowledgement

(e) The contract can be enforced only after receipt of acknowledgement by the certifying authority. (2marks)

18.A ship, MV Kalyanee, together with its cargo was insured against enemy action. The enemy country

had sunk another ship named MV Rajani on the voyage. Due to a collision with MV Rajani, MVKalyanee was filled with water and sank without any other action on the part of enemy. Which of the

following statements is true in these circumstances?

(a) No claim can be filed in respect of the loss of cargo of MV Kalyanee as it sunk without any

action on the part of enemy

(b) No claim can be filed in respect of the loss of cargo of MV Kalyanee as it sunk by reason of

collision with MV Rajani

(c) No claim can be filed in respect of the loss of cargo of MV Kalyanee as the cargo was lost due

to sinking of the ship

(d) A claim can be filed in respect of the loss of cargo of MV Kalyanee as it is deemed to have

sunk due to action on the part of enemy in having submerged MV Rajani

(e) No claim can be filed in respect of the loss of cargo of MV Kalyanee as its collision with MV

Rajani amounts to negligent navigation. (2marks)

19.Ananth signed as maker of a promissory note, a blank stamped paper and gave it to Bhushan and

authorized him to fill it as a promissory note for Rs.500. Bhushan fraudulently filled it up as a

promissory note for Rs.1,000 and endorsed it in favour of Chinmay, who in good faith advanced

(2marks)

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Rs.1,000. Can Chinmay, as a holder in due course recover Rs.1,000 from Ananth under the Negotiable

Instruments Act, 1881?

(a) Chinmay cannot recover the amount from Ananth

(b) Chinmay can recover the amount from Ananth

(c) Chinmay cannot recover from Ananth but can recover from Bhushan

(d) Chinmay does not get valid title to the instrument, hence he cannot collect from either of them

(e) Chinmay cannot recover the amount of Rs.1,000 from Ananth, but can recover damages fromAnanth.

20.The trading system of the National Stock Exchange is known as

(a) BSE Online Trading (BOLT) System

(b) Very Small Aperture Terminal (VSAT)

(c) Trader Work Stations (TWS)

(d) National Exchange for Automated Trading (NEAT)

(e) Open outcry system. (1 mark)

21.Who among the following persons is not considered as an insurer under the Insurance Act?

(a) A Provident Society

(b) An Insurance agent recognized by the Act undertaking insurance business

(c) An individual(d) A Government company

(e) An unincorporated body of individuals. (1 mark)

22.Which of the following statements is false under the Negotiable Instruments Act, 1881?

(a) Every holder of the instrument is presumed to be the owner of the property contained therein

(b) Every holder in due course is entitled to sue for recovery of the sum in his own name

(c) Every negotiable instrument is transferable till maturity

(d) Every holder is not a holder in due course

(e) Every negotiable instrument is presumed to have been drawn for consideration irrespective of

consideration mentioned in the document. (1 mark)

23.Which of the following agreements may be categorized as arising out of non-instantaneous form of

communication under the Information Technology Act, 2000?

(a) Implied contracts

(b) Oral contracts

(c) Express contracts

(d) E-mail contracts

(e) Government contracts. (1 mark)

24.The limitation period for filing of a complaint by the complainant for deficiency of service before the

redressal agency under the Consumer Protection Act, 1986 is

(a) 6 months from the date on which cause of action has arisen

(b) 1 year from the date on which cause of action has arisen

(c) 18 months from the date on which cause of action has arisen

(d) 2 years from the date on which cause of action has arisen

(e) 3 years from the date on which cause of action has arisen. (1 mark)

25.Which of the following is true in respect of the causes and hazards of air pollution?

(a) The life of buildings is not affected due to acid rain

(b) Acid rain changes the physical condition of soil thereby improving its fertility

(c) Pollutants like Chlorine do not react with ozone to cause depletion of ozone layer

(d) Carbon dioxide and water vapour in the atmosphere absorb reflect infrared radiation to the

earths surface, bringing its temperature down

(e) Due to global warming evapouration of water is increasing rapidly from ponds, rivers, seas etc.,

leading to untimely rains and cyclones. (1 mark)

26.Kailash Toys Ltd., a manufacturer of childrens toys entered into a distribution agreement with Gaurav

Distributors Ltd., engaged in the distribution of childrens toys for the distribution of the toys

manufactured by Kailash Toys Ltd. Both the companies incorporated an arbitration clause in thedistribution agreement to submit their present and future disputes to arbitration. Later, when disputes

arose, Gaurav Distributors Ltd., contends that there should have been a separate arbitration agreement

and hence, the arbitration clause in the distribution agreement was not valid. Which of the following

(2marks)

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statements is true in these circumstances under the Arbitration and Conciliation Act, 1996?

(a) The arbitration clause in the distribution agreement is invalid as a separate arbitration agreement

is required to be entered into by the parties concerned

(b) The arbitration clause in the distribution agreement is invalid as only present disputes can be

submitted to arbitration

(c) The arbitration clause is invalid as the parties can enter into an arbitration agreement only after

the dispute has been submitted to litigation(d) The arbitration clause is invalid as only a Court of Law can provide for the arbitration in case of

dispute

(e) The arbitration clause is valid as no separate agreement is required between the parties to submit

their disputes to arbitration.

27.The State Government of Uttaranchal purchased a photo-copying machine to comply with the statutory

requirement of photo-copying registered documents for public. The concerned Government Department

charged a subsidized rate of 25 paise per copy. One month later, the machine developed a defect that

was traced as a manufacturing defect. The State Government of Uttaranchal is proposing to file a

consumer complaint against the manufacturer for supplying defective goods. Which of the following

statements is true in respect of these circumstances under the Consumer Protection Act, 1986?

(a) State Government cannot be considered as a consumer under the Act

(b) The purchase of the photocopying machine is deemed to be for commercial use as it was meantfor photo-copying documents for public

(c) The purchase of the photocopying machine cannot be deemed to be for commercial use as it was

purchased to comply with statutory requirement for use by public

(d) The purchase of the photocopying machine is deemed to be for commercial use as the concerned

Government Department was charging a rate from the public for its use

(e) The purchase of the photocopying machine is deemed to be for commercial use as it was

purchased to comply with statutory requirement. (2marks)

28.Spring Valley Constructions has borrowed an amount of Rs.15,00,000 from City Bank by mortgaging

its open land. As the firm has continuously defaulted in the repayment of the loan, City Bank has

classified the loan as non-performing asset in its books, in accordance with Reserve Bank of India

(RBI) guidelines. Then City Bank issued a notice to Spring Valley Constructions demanding

discharging of full liabilities within 60 days, failing which it intends to secure the open land. Which of

the following statements is true in respect of these circumstances under the SARFAESI Act, 2002?

(a) The bank can take over the open land and proceed to recover its dues directly without any

intervention of any Court or Tribunal

(b) The bank can take over the open land and proceed to recover its dues only with the prior

approval of the RBI

(c) The bank has to apply to the Court before taking over the open land and proceeding to recover

its dues

(d) As the bank was a secured creditor, it cannot invoke the provisions of the SARFAESI Act, 2002

(e) The bank can take over the open land and proceed to recover its dues only with the prior

approval of the Debt Recovery Tribunal (DRT). (2marks)

29.Ramesh, the owner of an oil tanker insured it against fire, while being garaged. In reply to a question in

the proposal form enquiring about the address at which the tanker was to be usually garaged, Rameshinadvertently gave the address of the godown whereas the oil tanker was always garaged in his delivery

office. The policy contained a clause that answers to the queries in the proposal form were the basis of

the contract. The premium on the policy was duly paid. The oil tanker caught fire while garaged at the

delivery office address. Which of the following statements is true in respect of these circumstances

under the Insurance Act?

(a) The insurer is liable to compensate the loss as the policy was validly taken

(b) The insurer is liable to compensate the loss as the premium on the policy was duly paid

(c) The insurer is liable to compensate the loss as the risk of fire was taken for the oil tanker

(d) The insurer is liable to compensate the loss as the wrong address was given inadvertently

(e) The insurer is not liable as the giving of wrong address amounts to breach of one of the

conditions on which the policy was issued. (2marks)

30.Which of the following instances is treated as a restrictive crossing under the Negotiable InstrumentsAct, 1881?

(a) The word not negotiable is added to the general crossing

(2marks)

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(b) The word not negotiable is added to the special crossing

(c) The word account payee is added to special crossing

(d) The name of the banker is added across the face of a cheque within transverse lines

(e) The name of the banker is added across the face of a cheque without the transverse lines.

31.Which of the following statements is false in respect of a general insurance contract?

(a) All general insurance contracts are short-term contracts

(b) The expired contracts can be revived by renewal(c) Renewal of contract does not amount to a fresh contract

(d) Presence of insurable interest is essential

(e) Amount payable as compensation depends on various factors including intention of the

insured. (1 mark)

32.The Reserve Bank of India (RBI) acts as a banker to Government of India and all State Governments.

Which of the following functions is not carried by the RBI as a banker to Government of India?

(a) Maintaining cash balances

(b) Receiving and making payments for Governments

(c) Issue and regulation of currency

(d) Managing public debt

(e) Providing ways and means advances to Government for 90 days. (1 mark)

33.Which of the following instruments payable to bearer of the instrument on demand can be drawn andaccepted by any citizen of India under the Negotiable Instruments Act, 1881?

(a) A hundi

(b) A cheque

(c) A demand draft

(d) A promissory note

(e) A bill of exchange. (1 mark)

34.Which of the following conditions is/are required to be satisfied for the treatment of a writ petition as

Public Interest Litigation?

I. The writ petition should involve a question, which affects public at large or group of people, and

not a single individual.

II. Only the affected/aggrieved person can file a writ petition.III. There should be a specific prayer, asking the Court to direct the State Authorities to take note of

the complaint/allegation.

(a) Only (I) above

(b) Both (I) and (II) above

(c) Both (I) and (III) above

(d) Both (II) and (III) above

(e) All (I), (II) and (III) above. (1 mark)

35.When a person is guilty of an illegal omission causing any common injury to the people who dwell in

general in the vicinity of his premises, it amounts to

(a) Malignant act likely to spread infection of dangerous disease to life

(b) Negligent act likely to spread infection of dangerous disease to life(c) Negligent conduct with respect to poisonous substance

(d) Public nuisance

(e) Negligent conduct with respect to explosive substance. (1 mark)

36.Ramnath Enterprises and Bhairav & Co., submitted their business dispute to conciliation. However,

during the pendency of the conciliation proceedings, Ramnath Enterprises felt that their dispute could

not be solved by conciliation and hence, it decided to take the cause of action to the Court. Which of the

following statements is true in these circumstances under the Arbitration and Conciliation Act, 1996?

(a) The dispute can be taken to the Court by a party only after obtaining approval of the

Conciliator

(b) The dispute can be taken to the Court by an agreement of both the parties after obtaining

approval of the Conciliator

(c) The dispute can be taken to the Court by the parties only after arbitration proceedings failbetween the parties

(d) The dispute can be taken to the Court only if such proceedings are necessary for preserving the

rights of Ramnath Enterprises

(2marks)

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(e) A dispute submitted for conciliation can simultaneously be taken to Court for its resolution.

37.Deepak filed a complaint with the District Forum, against Sheetal Industries for defect in their product

due to which he suffered a serious health problem requiring immediate medical assisstance. Owing to

the urgency to give immediate relief to Deepak, the District forum passed interim orders for the

payment of compensation. When Sheetal Industries failed to comply with the District Forums order,

the District Forum ordered the attachment of the property of Sheetal Industries. Which of the following

statements is true in respect of these circumstances under the Consumer Protection Act, 1986?

(a) The District Forum is not empowered to issue interim orders for the payment of compensation

(b) In case of failure to comply with the interim orders, further action by way of attachment of

property can be taken only by the State Commission

(c) In case of failure to comply with the interim orders, further action by way of attachment of

property can be taken only by the National Commission

(d) Attachment of property can be ordered only by Civil Court upon application by the District

Forum

(e) The District Forum is empowered to issue interim orders and attach property of the opposite

party upon his failure to comply with the interim orders. (2marks)

38.The Securities Exchange Board of India (SEBI) initiated enquiry against Mahesh Industries Ltd., on the

suspicion of indulging in insider trading and unfair trade practices related to the securities market.

Pending enquiry, the SEBI has suspended the trading of the stock of Mahesh Industries Ltd., to protect

public interests. Which of the following statements is true in respect of the powers of SEBI pending

enquiry into the affairs of a company?

(a) The power of SEBI is limited only to production of books of account pending enquiry

(b) SEBI is empowered to carry out inspection of books, registers and other documents only

pending enquiry

(c) SEBI can only restrain the directors of the company from accessing the securities market

pending enquiry

(d) SEBI is empowered only to impound and retain the proceeds of the securities under

investigation pending enquiry

(e) SEBI is empowered to suspend the trading of the stock of Mahesh Industries Ltd., to protect

public interests pending enquiry. (2marks)

39.

Anil owes Rs.50,000 to Vinod, who took a life insurance policy in the name of Anil for the amount ofRs.50,000 and paid the premium. Suddenly Anil died and Vinod claimed the amount of Rs.50,000 from

the insurance company. Which of the following statements is true in respect of the above situation

under the Insurance Act?

(a) Vinod can claim Rs.50,000 from the insurance company as he had taken out the life insurance

policy

(b) Vinod can claim Rs.50,000 from the insurance company as Vinod being the creditor has an

insurable interest in the life of Anil, his debtor

(c) Only the wife of Anil can claim Rs.50,000 from the insurance company as she only has an

insurable interest

(d) Vinod can claim Rs.50,000 from the insurance company as he had paid the premium on the life

insurance policy

(e) Vinod cannot claim Rs.50,000 from the insurance company but he can recover his dues in

preference of other dues from the legal heirs of Vinod. (2marks)

40.A bill was drawn by Pramod upon Satish. Later, Pramod indorsed the bill by signing his name and

adding a direction to pay the amount mentioned in the instrument to the order of Mukesh. Such an

indorsement under the Negotiable Instruments Act, 1881 is known as

(a) Restrictive indorsement

(b) Conditional indorsement

(c) Special indorsement

(d) Blank indorsement

(e) General indorsement. (2marks)

41.Radhika purchased a bottle of floor cleaning liquid manufactured and marketed by Alchemy Chemicals

Ltd. The bottle did not carry any warning labels or instructions for its use, due to which Radhika was

prevented from taking proper safety precautions and she was injured while cleaning the floor of herhouse with the cleaning liquid. Which of the following statements is true in respect of product liability

claim that can be brought by Radhika against Alchemy Chemicals Ltd.?

(2marks)

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(a) Radhika cannot bring a product liability claim as there was no defect in the efficacy of the

cleaning liquid in cleaning the floors

(b) Radhika can bring a product liability claim as the cleaning liquid was not fit for use by human

beings

(c) Radhika can bring a product liability claim alleging manufacturing defect in the cleaning liquid

due to which she was injured

(d) Radhika can bring a product liability claim alleging design defect in the cleaning liquid due to

which she was injured(e) Radhika can bring a product liability claim alleging marketing defect in the cleaning liquid due

to which she could not take safety precautions and she was injured.

42.Zeneca Chemicals Ltd., is listed with the Bombay Stock Exchange (BSE) and National Stock Exchange

(NSE). Which of the following is false in respect of the advantages that may accrue to a shareholder of

Zeneca Chemicals Ltd.?

(a) The liquidity of investments is well ensured

(b) Rights entitlement in respect of further issues can be disposed off in the market

(c) Listed securities are well preferred by bankers for extending loan facility

(d) Listed companies are obligated to furnish audited financial results on a half-yearly basis that

enables investor to exercise their discretion in respect of the share

(e) Since securities are quoted, there is no secrecy of the price realization of securities sold by the

investors. (2marks)

43.M/s Shine Traders that carries on the business of overseas exports has insured its goods in the

warehouse at Hyderabad against fire only. Though the insurance company offered coverage against loss

by flood, M/s Shine Traders did not take the offer. Due to sudden heavy rains, the warehouse got

flooded and in consequence, the firm lost its business as the goods could not be replaced in time. The

insurance company denied to pay the compensation as risk of loss by flood was not covered by it.

Which of the following statements is true in respect of the above circumstances?

(a) The insurance company can refuse to pay the compensation as risk of loss by flood was not

covered by it

(b) The insurance company cannot refuse to pay the compensation as the warehouse was covered

against all risks

(c) The insurance company cannot refuse to pay the compensation as the loss was caused due to

loss of business(d) The insurance company cannot refuse to pay the compensation as the loss was caused due to

failure to replace the goods in time

(e) The insurance company cannot refuse to pay the compensation as it had offered coverage

against loss by flood. (2marks)

44.Mukesh stole a cheque that was payable to bearer and crossed generally with the words not negotiable

and indorsed the cheque in favour of Manohar, who took it in good faith and for valuable consideration.

Manohar deposited the cheque into his bank account and the cheque was duly collected by his bank.

Which of the following statements is true in respect of the recovery of money by the true owner of the

cheque under the Negotiable Instruments Act, 1881?

(a) As Manohar does not acquire a good title to the cheque, he shall be liable to refund the money

to the true owner

(b) As Manohar is a holder in due course who has obtained the cheque in good faith and forvaluable consideration, he shall not liable to refund anything to any person

(c) The banker of Manohar, being the collecting banker shall be liable to refund the money to the

true owner

(d) The paying banker shall be liable to refund the money to the true owner as the payment made by

him does not amount to payment in due course

(e) As Mukesh had stolen the cheque he only shall be liable to refund the money and the owner has

to file a police complaint. (2marks)

45.Which of the following statements is true in respect of a fire insurance policy?

(a) It is of long duration

(b) It is not operative without ignition and combustion

(c) It does not require presence of insurable interest

(d) It does not require presence of indemnity(e) It does not cover risk to incidental fire. (1 mark)

46.Which of the following statements is false in respect of asset reconstruction involving securitization and(1 mark)

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enforcement of security interest under SARFAESI Act, 2002?

(a) Rescheduling of payment of dues payable by the borrower

(b) Enforcement of security interest in accordance with the provisions of the Act

(c) Settlement of dues payable by the borrower

(d) Taking possession of securities

(e) Issue of security receipts to the borrower.

47.Under which of the following circumstances, notice of dishonour is considered necessary under theNegotiable Instruments Act, 1881?

(a) The party is likely to suffer damage for want of notice

(b) The drawer countermands payment

(c) One of the drawers is also the acceptor

(d) When the note is not negotiable

(e) The notice of dishonour is waived impliedly. (1 mark)

48.The provisions of the Information Technology Act, 2000 are not applicable to which of the following

(a) A Bill of Exchange

(b) Digital signature

(c) Electronic governance

(d) Maintenance of electronic records

(e) Electronic filing of documents. (1 mark)

49.Which of the following statements is false in respect of the salient features of the Consumer Protection

Act, 1986?

(a) The Act applies to all goods and services, unless specifically exempted by the Central

Government

(b) It does not cover the goods manufactured under the cooperative sector

(c) The redressal forums are empowered to issue interim orders

(d) The provisions of the Act are compensatory in nature

(e) The compensation amount under the Act can be recovered through a certificate in the same

manner as arrears of land revenue. (1 mark)

50.Which of the following statements is true in respect of Alternative Dispute Resolution (ADR)

mechanisms?

(a) ADR mechanisms are more expensive than court-based litigation

(b) Most ADR processes are not based on an integrative approach

(c) ADR does not encourage compromise

(d) ADR settlements are done in public scrutiny

(e) Participating in an ADR process improves the relationship between the disputing parties. (1 mark)

51.Pyaremohan Prajapati, a farmer purchased a bag of maize seeds sold by CTC Ltd., for sowing in his

fields. The seeds turned out to be defective and Pyaremohan Prajapati is proposing to file a consumer

case against CTC Ltd., for supplying defective seeds. The seeds were in fact produced by another

company Bhumimitra Agro-products Ltd., and were only marketed by CTC Ltd. However, the bag

containing the seeds bore the mark produced and marketed by CTC Ltd. Which of the following

statements is true in respect of the above circumstances under the Consumer Protection Act, 1986?

(a) Pyaremohan Prajapati can file a suit against CTC Ltd., for supplying defective seeds

(b) Pyaremohan Prajapati can file a suit only against Bhumimitra Agro-products Ltd., for producing

defective seeds

(c) Pyaremohan Prajapati has to file a suit against both CTC Ltd., and Bhumimitra Agro-products

Ltd., for supplying defective seeds

(d) Pyaremohan Prajapati has to file a suit against CTC Ltd., for supplying defective seeds and a

suit against Bhumimitra Agro-products Ltd., for producing defective seeds

(e) Pyaremohan Prajapati can file a suit neither against CTC Ltd., nor against Bhumimitra

Agro-products Ltd., as manufacturing defect cannot be complained against. (2marks)

52.While surfing the internet, Nilesh bought an i-pod from an online shopping site. The i-pod was to be

delivered within a period of 7 working days. Nilesh accepted the contract by clicking on the option I

agree and agreed to pay by credit card on delivery. The sale was subject to the terms and conditions of

sale as mentioned in the website. One of the conditions of sale was that in case of payments by creditcards, the period of 7 days for the delivery of the goods sold by the website will be counted from the 3 rd

day of the transaction. This condition was not read by Nilesh, who refused to take delivery when the i-

pod reached him 9 days after ordering. Which of the following statements is true in respect of these

(2marks)

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circumstances under the Information Technology Act, 2000?

(a) As the agreement amounts to a click-wrap agreement, Nilesh is bound to take delivery and

make payment

(b) As the agreement amounts to a click-wrap agreement, Nilesh is entitled to refuse to take

delivery and make payment

(c) As the agreement amounts to a shrink-wrap agreement, Nilesh is entitled to refuse to take

delivery and make payment(d) As the agreement amounts to a click-wrap agreement, Nilesh is entitled to claim only damages

for delay in delivery

(e) As the agreement amounts to a shrink-wrap agreement, Nilesh is entitled to claim only

damages for delay in delivery.

53.Three row houses belonging to Amarendra, Bhushan and Kushal were insured with KPMG Insurance,

against loss by fire. As a result of an earthquake, the house belonging to Amarendra fell down and a fire

broke out. The fire spread to the house belonging to Bhushan, as a consequence of which his gas

cylinder exploded and the house belonging to Kushal was wrecked. In the absence of any agreement to

the contrary, which of the following statements is true in respect of these circumstances?

(a) Kushal cannot file a claim for loss by fire as his house was wrecked and not lost by fire

(b) All the three viz. Amarendra, Bhushan and Kushal cannot file a claim for loss by fire as the

primary cause of the loss was earthquake(c) Kushal can file a claim for loss by fire as his house got wrecked due to explosion by fire

(d) Only Amarendra can file a claim as his house had originally caught fire

(e) Only Bhushan can file a claim for loss by fire as his house was destroyed due to fire from

Amarendras house. (2marks)

54. Amrita issued a cheque for Rs.10,000 to her creditor, Bindu. The cheque was wrongfully dishonoured

by the bank, even as Amrita had more than Rs.25,000 in her account. Which of the following statements

is true in respect of the wrongful dishonour of a cheque by the bank under the Negotiable Instruments

Act, 1881?

(a) As Amrita had sufficient balance in her account, the bank is liable to pay Rs.10,000 to Bindu

upon presentation of the cheque for the second time

(b) Bindu being the holder in due course can file a suit for damages against the bank

(c) The bank is liable only to pay Rs.10,000 upon a new cheque issued by Amrita in favour ofBindu

(d) The bank is liable only to compensate the monetary loss of Rs.10,000 suffered by Bindu

(e) The bank is liable not only to compensate for the monetary loss suffered by Amrita but also to

pay damages for the loss of Amritas reputation. (2marks)

55.A insurance contract between the owner of a factory and the insurer, whereby the insurer will

compensate the owner from the liability of payment of compensation to the employees handling

hazardous substances in classified as

(a) Fidelity guarantee

(b) Public liability insurance

(c) Third party insurance

(d) Valued policy insurance

(e) Floating policy insurance. (1 mark)

56.Which of the following statements is false in respect of an insurance contract?

(a) In an insurance contract, the proposal is made by the insured

(b) The acceptance of the proposal may be conditional

(c) It comes into force as soon as the communication of acceptance is completed and other

necessary conditions are fulfilled

(d) Consideration in the insurance contract is the consent to pay premium by the proposer for a

promise by the insurer to compensate

(e) There is one promise in an insurance contract. (1 mark)

57.Which of the following is not considered as a payment in due course under the Negotiable Instruments

Act, 1881?

(a) Payment made in accordance with the apparent tenor of the instrument

(b) Payment made on an instrument before the date of maturity

(c) Payment made to a person who is in possession of the instrument as a holder

(1 mark)

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(d) Payment made in good faith and without negligence

(e) Payment made to a person in possession of an instrument payable to bearer.

58.When does an electronic mail message become an electronic record for the purposes of the Information

Technology Act, 2000?

(a) When it is composed by the originator

(b) When it is sent by the originator

(c) When it enters the designated computer resource of the addressee(d) When it comes to the knowledge of the addressee

(e) When it is retrieved by the addressee. (1 mark)

59.Under the Consumer Protection Act, 1986, which of the following is/are empowered to review its/their

decision where there is a patent error apparent from the records?

(a) Only the State Commission

(b) Only the National Commission

(c) National Commission/State Commission

(d) State Commission/District forum

(e) National Commission/State Commission/District forum. (1 mark)

60.Which of the following is not regarded as a cause of environmental pollution?

(a) Population growth(b) Molten lava from volcanoes

(c) Urbanization

(d) Afforestation

(e) Industrialization. (1 mark)

61.A leather tannery disposed off its waste products in an area outside the city limits of Kanpur, far away

from residential areas of the city. Nevertheless, some gases were released in the process that caused a

noxious atmosphere in some of the residential areas of the city. Some people of the area propose to file

a case against the owners of the tannery for polluting the atmosphere. Which of the following

statements is true in respect of above mentioned circumstances?

(a) The owners of the tannery cannot be held liable for polluting the atmosphere as all the required

permissions have been obtained by it

(b) The owners of the tannery cannot be held liable for polluting the atmosphere as the tannerydisposed its waste products far away from the residential areas of the city

(c) The owners of the tannery can be held liable for polluting the atmosphere under the doctrine of

strict liability

(d) The owners of the tannery can be held liable for polluting the atmosphere under the doctrine of

absolute liability

(e) The owners of the tannery cannot be held liable for polluting the atmosphere as they were only

disposing their waste. (2marks)

62.Smile Consumer-care Ltd., the manufacturer of the toothpaste Fresh advertised the Fresh Healthy

teeth contest for the purpose of educating the public about benefits of dental health. The contestants

were required to answer three questions by ticking the correct answer from three alternatives for each

question and also write a slogan not exceeding 10 words describing as to why they used that toothpaste.

The entry form had to be sent along with two empty cartons in which the toothpaste was sold. Apartfrom prizes for best entries, the company also offered 2,000 early-bird prizes to those entries received in

the first week, irrespective of the fact whether the contestants answers were correct or not and the

slogan was of merit or not. The price of the toothpaste remained same as before. Which of the following

statements is true in respect of these circumstances under the Competition Act, 2002?

(a) Any scheme or contest irrespective of its object, conducted by a manufacturer is considered as

an unfair trade practice

(b) The contest amounts to unfair trade practice as it assumes the character of a lottery in respect of

the early-bird prizes as no skill or correctness of answers is required

(c) The contest does not amount to unfair trade practice as it was conducted for the purpose of

educating the public about benefits of dental health

(d) The contest does not amount to unfair trade practice as prizes were intended to be given to the

winners

(e) The contest does not amount to unfair trade practice as the price of the toothpaste was not

increased. (2marks)

63.Akash took an insurance policy from Secure Insurance Ltd. At the maturity of the policy the company(2marks)

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neglected to pay the agreed amount to Akash even after several reminders were sent to it. Aggrieved by

the delay in payment of maturity amount, Akash approached the Insurance Regulatory and

Development Authority (IRDA). After an enquiry, the IRDA found that the company has neglected to

pay maturity amount to a large number of its customers. The IRDA cancelled the registration certificate

of the company. Which of the following statements is true in respect of the powers of the IRDA?

(a) The IRDA can only withdraw the registration certificate under consultation with the Tariff

Advisory Committee(b) The IRDA is empowered to issue, renew, modify, withdraw, suspend or cancel a certificate of

registration

(c) The IRDA cannot cancel the certificate of registration without prior approval of the Central

Government

(d) The IRDA can only suspend the certificate of registration as it has only general supervisory

powers

(e) The IRDA can only modify the certificate of registration as it has the duty to ensure orderly

growth of insurance business.

64.Prakash has drawn a bill of exchange, payable after four months. The maturity date of the bill falls on

January 26, 2009 (Republic Day). Under the Negotiable Instruments Act, 1881, the bill shall be deemed

to be due on

(a) January 25, 2009(b) January 26, 2009

(c) January 27, 2009

(d) Either January 25, 2009 or January 27, 2009, as the parties decide

(e) Either January 25, 2009 or January 26, 2009, as the parties decide. (2marks)

65.The BSE allows trading of securities that are traded at other regional stock exchanges but are not listed

at the BSE. Such class of securities are known as

(a) Listed securities

(b) Unlisted securities

(c) Permitted securities

(d) Initial Public Offer

(e) Shares held under depository. (1 mark)

66.An agreement between two insurers, where one agrees to cede and the latter agrees to accept a certain

specified share of risk in return for agreed premium is known as

(a) Double insurance

(b) Mitigation of losses

(c) Reinsurance

(d) Contribution

(e) Subrogation. (1 mark)

67.In which of the following situations a maker, acceptor or indorser is not discharged from the liability

under the Negotiable Instruments Act, 1881?

(a) By default in presenting the cheque within the reasonable time

(b) By making payment of the instrument in due course

(c) By alteration of the instrument without the assent of all parties liable(d) By acceptance of the instrument

(e) By cancellation of the drawers name. (1 mark)

68.Under the Information Technology Act, 2000, hacking with computer system causing wrongful loss or

damage to public is punishable with

(a) A fine up to Rs.1,00,000

(b) A fine up to Rs.2,00,000

(c) A fine up to Rs.1,00,000 or imprisonment up to 1 year or with both

(d) A fine up to Rs.1,00,000 or imprisonment up to 3 years or with both

(e) A fine up to Rs.2,00,000 or imprisonment up to 3 years or with both. (1 mark)

69.Which of the following anti-competitive agreements amounts to horizontal agreement in relevant

markets?

(a) Refusal to deal

(b) Tie-in arrangements

(1 mark)

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(c) Exclusive supply agreements

(d) Exclusive distribution agreements

(e) Resale price maintenance.

70.Which of the following is correct in respect of the main effect of the presence of organic pollutants in

water due to waste coming from industries and agricultural fields?

(a) Water becomes toxic

(b) Bones and teeth of human beings get affected(c) Decrease in photosynthesis due to lack of algae leading to indirect air pollution

(d) Physical condition of water varies and it becomes toxic for aquatic animals

(e) Ponds get dried up due to eutrophication. (1 mark)

END OF QUESTION PAPER

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Suggested AnswersBusiness Law - II (MB2F2): October 2008

Answer Reason

1. A The primary objective of securitization is to sell the secured Non Performing

Assets (NPA) loans to investors through a special purpose vehicle calledSecuritization Company.

< TOP >

2. EThe Negotiable Instruments Act, 1881 recognizes only three kinds of instruments

under Section 13 promissory notes, bills of exchange and cheques that are

considered negotiable by statute.

Certain instruments have acquired the character of negotiability by the usage or

custom of trade. In India, Government promissory notes, bankers drafts and pay

orders, hundies, delivery orders and railway receipts for goods have been held to

be negotiable by usage or custom.

Hence, option E is correct answer.

< TOP >

3. BUnder the Competition Act, 2002, any agreement restricting in any manner the

purchaser in the course of his trade from acquiring or otherwise dealing in any

goods other than those of the seller is known as exclusive supply agreement.Hence, option B is correct answer.

< TOP >

4. CUnder the common law, abatement is known as self-help remedy, because the

owner of the land affected may take action to abate the damage.

The common law remedies available to a plaintiff, depending upon the particular

circumstances of each case, are given below:

Damages: The object of damages in the law of tort is to put the

plaintiff into the position he would have been in, had the harm or damage not

happened. Under environmental legislations, the most common form of

damages that may be awarded by the Courts are compensatory damages,

where the plaintiff is compensated for any loss that has been suffered.

In addition, or as alternative to damages, the plaintiff may seek an

injunction. An injunction allows the Court to require the defendant to

discontinue the operation, which is causing the damage. The rule that the defendant is liable for the harm even though the

same is unintentional and also without negligence on the part of the defendant

is known as rule of strict liability.

The rule, when an enterprise is engaged in a hazardous or

inherently dangerous industry which poses a potential threat to the health and

safety of the people, it owes an absolute and non-delegable duty to ensure that

no harm results to anyone from such activity is known as rule of absolute

liability.

Hence, option C is correct answer.

< TOP >

5. CThe most commonly known Alternative Dispute Resolution methods are:

Arbitration

Conciliation Mediation

Negotiation.

Litigation is the method of resolving a dispute by taking resort to the Courts.

< TOP >

6. DAccording to the provisions of the Competition Act, 2002 restrictive trade practice

includes any agreement to sell goods on condition that the prices to be charged on

the resale by the purchaser shall be the prices stipulated by the seller unless it is

clearly stated that prices lower than those prices may be charged.

Therefore, in the given case, the agreement amounts to exclusive resale price

maintenance by Sree Leathers Ltd., it amounts to an restrictive trade practice.

Hence, option D is correct answer.

< TOP >

7. CAccording to Section 8 of the Banking Regulation Act, 1949 notwithstanding

anything contained in Section 6 or any contract, no banking company shall directly

or indirectly deal in the buying or selling or bartering of goods, except inconnection with the realization of the security given or held by it, or engage in any

trade, or buy, sell or barter goods for others otherwise than in connection with bills

of exchange received for collection or negotiation or with such of its business as

< TOP >

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refereed to in clause (i) of subsection (1) of Section 6.

Hence, option C is correct answer.

8. EIt is the principle of insurance by which the insured is prevented from recovering

more than his loss, despite having several insurance policies. It states where the

assured is over insured by different policies, each insurer is to contribute ratably to

the loss in proportion to the amount for which he is liable under his contract. If any

insurer has already paid the loss to the assured irrespective of his share, the said

insurer in entitled to receive the contribution from other co-insurers or jointinsurers.

Therefore, in the given instance, Reliable Insurance and Medisure Insurance

should pay the total amount of Rs.1,80,000 in the ratio of their respective liabilities

i.e. 2:3. Hence, option E is correct answer.

< TOP >

9. DAccording to Section 11 of the Negotiable Instruments Act, a promissory note, bill

of exchange or cheque which is both drawn or made in India and made payable in

India, is deemed to be an inland instrument.

Therefore, in the given instance, a bill drawn in Mumbai upon a resident of

Bangalore, payable in Paris is an inland bill. Hence, option D is correct answer.

< TOP >

10. CMarine insurance contract is a short term contract that is for a maximum period of

one year or for a period of voyage or for such period till such act or purpose is

completed.

< TOP >

11. A Enforcement under the provisions of the SARFAESI Act, 2002 applies to securedloans classified as non-performing assets. Hence, option A is correct answer.

< TOP >

12. BUnder the Negotiable Instruments Act, 1881, when a negotiable instrument is

delivered conditionally or for a special purpose as a collateral security or for safe

custody only, and not for the purpose of transferring absolutely property therein, it

is called an escrow.

< TOP >

13. EThe recognition of documents in electronic form for the governmental purposes

does not confer on any one the right to insist the acceptance of a document in

electronic form. Hence, E is correct answer. All other statements are true in

respect of electronic governance under the Information Technology Act, 2000.

< TOP >

14. B District Forums have jurisdiction to entertain where the value of goods or

services and compensation if any, claimed does not exceed Rs.20,00,000.

State Commission is having jurisdiction to entertain complaints where the

value of goods or services and the compensation if any claimed exceedsRs.20,00,000 lakhs but does not exceed Rs.1,00,00,000(Rupees one crore)

High Court has no jurisdiction to entertain complaints under Consumer

Protection Act

National Commission has jurisdiction to entertain complaints where the value

of the goods or services and compensation if any, claimed exceeds

Rs.1,00,00,000 (Rupees one crore)

Supreme Court has no original jurisdiction and only appeals against decisions of

National Commission can be filed. Hence, option B is correct answer.

< TOP >

15. ABroadly, all disputes involving Civil Rights, which fall within the jurisdiction of

Civil Courts, are referable to Arbitration.

No arbitration agreement can validly be executed which calls for the adjudication

of the following matters:

Matrimonial matters and matters connected with conjugal rights.

Industrial Disputes and Revenue matters.

Testamentary Matters under the Succession Act.

Insolvency, Dissolution and Winding-up Proceedings under

Companies Act.

Criminal Proceedings.

Matters under Indian Trust Act, Trusteeship of Charitable

Institutions, Public charity, matters falling within the purview of Monopolies

and Restrictive Trade Practices Act.

Determination of guardianship or Wards.

< TOP >

16. BThe release of unwanted chemicals and substances into the water, decreasing the

water quality is called as water pollution.

Therefore, in the given instance, the company is liable for causing water pollutionas the quality of ground water has decreased. Hence, option B is correct answer.

< TOP >

17. CSection 12 of the Information Technology Act, 2000 states that if the originator

stipulates that electronic record shall be binding on receipt of the

< TOP >

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acknowledgement of the record, it is binding only on the receipt of

acknowledgement by the originator.

Therefore, in the given instance, the contract can be enforced only after receipt of

acknowledgement by Sarabjeet who is the originator of the contract. Hence, option

C is correct answer.

18. DA contract of marine insurance is an agreement whereby the insurer undertakes to

indemnify the assured, in the manner and to the extent thereby agreed, against

marine losses, that is to say, the losses incidental to marine adventure. It alsoincludes liability to a third party incurred by the owner of the ship or other person

interested in the property assured on happening of the maritime event. This

maritime peril or event of risk is consequent on, or incidental to, the navigation of

the sea, that is to say perils of the seas, fire, war perils, pirates, rovers, thieves,

captures, seizures, restraints and detainments of princes and peoples, jettisons,

barratry and any other perils which are either of the like kind or may be designated

by the policy.

Therefore, in the given instance, a claim can be filed in respect of the loss of cargo

of MV Kalyanee as it is deemed to have sunk by action on the part of enemy in

having sunk MV Rajani. Hence, option D is correct answer.

< TOP >

19. BWhen 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 negotiableinstrument, 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, option B is correct answer.

< TOP >

20. DThe trading system of the National Stock Exchange is known as National

Exchange for Automated Trading (NEAT).

< TOP >

21. BThe definition of insurer under section 2(a) of the Insurance Act does not include a

Principal Agent, Chief Agent, Special Agent or an Insurance agent either

appointed under any Act or recognized by the Act undertaking insurance business.

< TOP >

22. DThe law presumes every holder is a holder in due course, although the presumption

is rebuttable. All other statements are true under the Negotiable Instruments Act,

1881. Hence, D is correct answer.

< TOP >

23. D E-mail contracts may be categorized as the non-instantaneous forms ofcommunication. Hence, option D is correct answer.

< TOP >

24. DAccording to Section 24-A of the Consumer Protection Act, 1986, the District

Forum, State Commission or National Commission shall not admit a complaint

unless it is filed within two years from the date on which cause of action has

arisen.

< TOP >

25. ECarbon dioxide and water vapour absorb infrared radiation coming to the earth and

partly reflect it back to the earths surface, due to this, the earths surface gets

heated up. This phenomenon is called green house effect. Due to global warming,

the rate of evapouration of water from seas, rivers and ponds is increasing rapidly,

leading to untimely rains, cyclones and hurricanes. All other statements are false.


< TOP >

26.

E

Arbitration agreement has been defined in Section 7 of the Arbitration and

Conciliation Act, 1996 as an agreement by the parties (two disputants) to submit toarbitration all or certain of the disputes which have arisen or which may arise in

future between them with regard to a defined legal relationship, whether

contractual or not. Thus an arbitration agreement may be:

In the form of an arbitration clause in the contract, or

In the form of a separate agreement.

Therefore, in the given instance, the arbitration clause is valid as no separate

agreement is required between the parties to submit their disputes to arbitration.


< TOP >

27. CConsumers do not include persons who obtained goods and services for

commercial purposes. In the decide case of State Government of Maharashtra vs.

Hindustan Computers Ltd., the purchase of photo-copying machine by State

Government for complying with statutory provisions of photo-copying registered

documents for public was held a purchase not for commercial purpose.

Therefore, in the given instance, the purchase of the photocopying machine cannot

be deemed to be for commercial use as it was purchased to comply with statutory

< TOP >

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requirement for use by public. Hence, option C is correct answer.

28. AAny secured interest created in favour of any secured creditor may be enforced

without intervention of Court or Tribunal.

Therefore, in the given instance, the bank can take over the open land and proceed

to recover its dues directly without any intervention of any Court or Tribunal.

Hence, option A is correct answer.

< TOP >

29. EThe insurance contract is an aleatory, voluntary, executory and conditional

contract between the two parties. All the formalities required to form a validcontract are to be observed in formulating the contract. Failure of a precedent

condition invalidates an insurance contract like a general contract.

Therefore, in the given instance, the insurer is not liable as the giving of wrong

address amounts to breach of one of the conditions on which the policy was issued.


< TOP >

30. CIn Restrictive Crossing the words Account Payee are added to the general or

special crossing. The words Account Payee on a cheque are direction to the

collecting banker that the amount collected on the cheque is to be credited to the

account of the payee. Account Payee cheques are not negotiable.

According to Section 124, where a cheque bears across its face an addition of the

name of a banker, either with or without the words not negotiable that addition

shall be deemed a crossing, and the cheque shall be deemed to be crossed

specially, and to be crossed to that banker.According to Section 130 of the Act, the effect of the words not negotiable on a

crossed cheque is that the title of the transferee of such a cheque cannot be better

than that of its transferor. The addition of the words not negotiable does not

restrict the further transferability of the cheque. The object of crossing a cheque

not negotiable is to afford protection to the drawer or holder of the cheque

against miscarriage or dishonesty in the course of transit by making it difficult to

get the cheque so crossed cashed, until it reaches its destination. Hence, C is the

correct answer.

< TOP >

31. CAll general insurance contracts are short-term contracts. The expired contracts can

be revived by renewal and renewal of contract amounts to a fresh contract.

Presence of insurable interest is essential. Amount payable as compensation

depends on various factors including intention of the insured. Hence, option C is

correct answer.

< TOP >

32. CThe Reserve Bank of India (RBI) acts as a banker to Government of India and all

State Governments. The RBI transacts Government business by carrying out the

functions of -

Maintaining cash balances

Receiving and making payments for Governments

Managing public debt

Providing ways and means advances to Government for 90 days.

Advising Government on floating of loans and legislation affecting banking.

Issue and regulation of currency is a function that is performed by Reserve Bank

of India as the Central Bank of India.

< TOP >

33. BThe provisions of Section 31 of the Reserve Bank of India Act, 1934 states that no

other person other than the Reserve Bank of India or the Central Government, can

draw, accept, make or issue any bill of exchange, hundi or promissory note

payable to bearer on demand nor make or issue any promissory note payable to the

bearer of the instrument. Section 32 provides that a person is punishable with fine

if he issues a bill or note payable to bearer on demand or a note payable to bearer.

Hence, B is correct answer.

< TOP >

34. EA writ petition filed by the aggrieved person, whether on behalf of the group or

together with the group can be treated as Public Interest Litigation. However,

The writ petition should involve a question, which affects public at

large or group of people, and not a single individual.

Only the affected/aggrieved person can file a writ petition.

There should be a specific prayer, asking the Court to direct the

State Authorities to take note of the complaint/allegation.

Hence, option E being the combination of Statements (I), (II) and (III) is correctanswer.

< TOP >

35. DWhen a person is guilty of an illegal omission causing any common injury, danger

or annoyance to the public or people in general who dwell or occupy property in

< TOP >

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the vicinity, or which necessarily causes injury, obstruction, danger or annoyance

to persons who has occasions to use public right, it amounts to public nuisance.

Hence, option D is correct answer.

36. DDuring the pendency of conciliation proceedings, a party is debarred from

initiating arbitral or judicial proceedings on the same dispute, except such

proceedings as are necessary for preserving his rights. By implication, there is no

bar for continuing any judicial or arbitral proceedings, which were initiated

already pending settlement in the conciliation proceedings.Therefore, in the given instance, the dispute can be taken to the Court only if such

proceedings are necessary for preserving the rights of Ramnath & Co. Hence,

option D is correct answer.

< TOP >

37. EThe Redressal Agencies are now empowered under Section 13(3B), 18 and 22

respectively to pass interim orders during the pendency of any proceedings, as it

feels necessary in the circumstances of the case.

Section 25(1) provides that where the interim orders of the Redressal Agencies are

not complied with, the Forums may order attachment of property of the person

who has not complied with the order, which shall be effective for a period of three

months. If the non-compliance continues, the property attached shall be sold and

damages will be awarded to the complainant from out of the sale proceeds.

[Section 25(2)].

Therefore, in the given instance, the District Forum is empowered to issue interimorders and attach property of the respondent upon his failure to comply with the

interim orders. Hence, option E is correct answer.

< TOP >

38. EDuring an investigation or pending enquiry, in order to protect the interests of

investors or the securities market, the Securities Exchange Board of India (SEBI)

may:

Suspend trading of a stock in a stock exchange.

Restrain persons from accessing the securities market and prohibit

any person associated with the securities market to buy, sell or deal in

securities.

Suspend any office bearer of any stock exchange or self regulatory

authority.

Impound and retain the proceeds or securities of any transaction

under investigation. Attach after the specified process, for a period not exceeding one

month, the bank account(s) of any intermediary or any person associated with

the securities market in a matter involving violation of the provisions of the

SEBI Act.

Therefore, in the given instance, SEBI is empowered to suspend the trading of the

stock of Mahesh Industries Ltd., to protect public interests pending enquiry.


< TOP >

39. BIn case of life insurance policies, insurable interest is also recognized in the

policies where the creditor has purchased the policy in the name of a debtor.

Therefore, in the given instance, Vinod can claim Rs.50,000 from the insurance

company as Vinod being the creditor has an insurable interest in the life of Anil,

his debtor. Hence, option B is correct answer.

< TOP >

40. CAn indorsement can be blank or general, special or full, restrictive, partial and

conditional or qualified.

If the endorser signs his name and adds a direction to pay the

amount mentioned in the instrument to, or to the order of a specified person,

the indorsement is said to be special or in full.

An indorsement is said to be blank or general if the endorser signs

his name only on the face or back of the instrument.

An indorsement is restrictive which prohibits or restricts the

further negotiation of the instrument.

An indorsement is partial which purports to transfer to the

endorsee only a part of the amount payable on the instrument.

An indorsement is conditional or qualified which limits or

negatives the liability of the endorser.Hence, option C is correct answer.

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41. EAfter the process of designing and manufacturing the product, the product will be

put into market. If the product is put in the market, without appropriate warning

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labels or instructions, which may prevent the consumer or the plaintiff from

recognizing the defects in the product, or to make them know the safety methods

of use and application of the product, then the manufacturer may give an

opportunity to the consumer to claim for the injury, alleging marketing defects.

Therefore, in the given case, Radhika can bring a product liability claim alleging

marketing defect in the cleaning liquid due to which she could not take safety

precautions and she was injured. Hence, option E is correct answer.

42. D Listed companies are obligated to furnish unaudited financial results on a half-yearly basis within two months of the expiry of the period. The said details enable

the investing public to exercise their discretion on such matters. It may be noted

that unaudited not audited financial results are required to be furnished.

Therefore, in the given instance, listed companies are obligated to furnish audited

financial results on a half-yearly basis that enables investor to exercise their

discretion in respect of the share is a false statement. Hence, option D is correct

answer.

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43. AThe insurer undertakes to protect the insured from a specified loss. In general, the

contract of insurance is the contract of indemnity in which the insurer promises to

indemnify the insured from the loss or damage of asset due to risk attributed to it.

It is the payment of money or the pecuniary interest that is compensated due to

happening of a certain event to the insured subject.

Therefore, in the given instance, the insurance company can refuse to pay thecompensation as risk of loss by flood was not covered by it. Hence, option A is

correct answer.

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44. AA person who takes a cheque that bears the words not negotiable acquires no

better title than that of his immediate transferor. The true owner of the instrument

can claim the instrument or the money from the said person. However, under

Sections 128 and 131, the paying and collecting bank will be exonerated from any

liability if it can be proved that the payment and collection were made in good

faith and without negligence.

For example, a cheque that is payable to bearer and crossed generally with the

words not negotiable is stolen and subsequently comes into the hands of B

who takes the instrument in good faith and gives value for it. B pays the cheque

into his own account and his bank collects the payment from the drawee bank. By

virtue of Sections 128 and 131, the drawee bank and the collecting bank areexonerated from liability on the cheque. However, as B does not acquire a good

title to the cheque, he is liable to refund the money to the true owner. The cheque

in the given case is not negotiable and therefore as regards the true owner, B is in

no better position than his immediate transferor.

Hence, in the given instance, as Manohar does not acquire a good title to the

cheque, he is liable to refund the money to the true owner.

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45. BFire insurance policies cover the risk from fire and incidental to fire. The fire

insurance policies are of short duration. Essential principles of fire insurance are

insurable interest and principle of indemnity. Ignition and combustion are

important ingredients of fire, without which the fire policy is not operative.

Hence, option B is correct answer.

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46. EAsset reconstruction involves the following measures under Section 9 of the

SARFAESI Act, 2002: Rescheduling of payment of dues 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 securities

An Asset Reconstruction Company issues security receipts to the Qualified

Institutional Buyers (QIB). Asset reconstruction dos not involve this process.


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47. AUnder the Negotiable Instruments Act, 1881, notice of dishonour is unnecessary

when

When notice is expressly waived

Where the drawer countermands payment

When the party is not likely to suffer any damage for want of notice When the party entitled to notice cannot after due search be found

Where the party required to give notice, is unable to do so, without any

fault of his

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When one of the drawers is also an acceptor

When the note is not negotiable

When notice of dishonor is waived impliedly.

Therefore, when the party is not likely to suffer any damage for want of notice,

notice of dishonour is not required but where the party is likely to suffer any

damage for want of notice, notice of dishonour is required. Hence, A is correct

answer.

48. A The provisions of the Information Technology Act, 2000 are not applicable to thefollowing set of documents:

A negotiable instrument as defined in Section 13 of the Negotiable

Instruments Act, 1881 (excluding cheques as amended);

A power-of-attorney as defined in Section 1A of the Power of

Attorney Act, 1882;

A trust as defined in Section 3 of the Indian Trusts Act, 1882;

A will as defined in clause (h) of Section 2 of the Indian

Succession Act, 1925 including any other testamentary instrument ;

Any contract for sale of conveyance of immoveable property or

any interest in such property;

The provisions of the Information Technology Act, 2000 are applicable to all the

other options.

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49. BThe salient features of the Consumer Protection Act, 1986 are:

The Act applies to all goods and services unless specifically

exempted by the Central Government.

It covers all the sectors whether private, public or cooperative.

The provisions of the Act are compensatory in nature.

A provision for issue of interim orders by the redressal forums.

Power to issue punitive damages.

Recovery of compensation amount through a certificate in the

same manner as arrears of land revenue.

Creation of benches of State and National Commissions.

Hence, option B is correct answer.

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50.

E

Dispute resolution through ADR mechanism is generally faster and less

expensive. Most ADR processes are based on an integrative approach.

Some critics of the ADR mechanism believe that it encourages compromise

that can be a good way to settle some disputes but not appropriate for serious

justice conflicts and cases of intolerable moral difference.

ADR settlements are in private and not in the public record or exposed to

public scrutiny which can be a cause for concern in some cases.

One of the advantages of ADR is that, participating in an ADR process will

often ultimately improve, rather than worsen, the relationship between

disputing parties.

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51. AThe modified definition of manufacturer includes a person who puts or causes to

be put his mark on any product (whether he manufactured it himself or not).

In the decided case of Namdeo Bajirao Raut vs. Hindustan Lever Ltd., thecomplainant established that the seeds purchased by him were defective. He

alleged that the seeds were produced and marketed by the defendant company. The

defendant contended that the seeds were in fact produced by a company in Gujrat.

But the bag containing the seeds bore the words that the seeds were both produced

and marketed by the defendant company. The State Commission held that the

defendant by lending his brand name even to the production of seeds has made

itself liable for the defect in the goods.

Therefore, in the given case, Pyaremohan Prajapati can file a suit against CTC

Ltd., for supplying defective seeds. Hence, option A is correct answer.

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52. AClick-wrap or web-wrap agreements are commonly used in connection with e-

commerce transactions. These agreements are typically used to specify the terms

and conditions applicable to the use of the website as well as to the products and

services purchased over the Internet. With these agreements, the buyer or userexplicitly assents to these terms by clicking on a button I agree or I accept after

having an opportunity to review the terms. An act by the buyer affirmatively

assenting to the terms of the click-wrap agreement significantly enhances its

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enforceability.

Therefore, in the given instance, as the agreement amounts to a click-wrap

agreement, Nilesh is bound to take delivery and make payment. Hence, option A

is correct answer.

53. CThe proximity of cause is an important element of insurance contract. The

payment of compensation depends upon the nature and proximity of the cause that

resulted in the loss of the asset. It is the cause without which the loss would not

have occurred. It is the cause which is most closely and directly connected with theloss not necessarily in time but in efficiency and effectiveness. This doctrine is

applicable when the insured peril need not be the initial cause and it is not direct

result of the operation of an external peril, but then the risk insured against must

actively take place. An insurer is liable for any loss proximately caused by a peril

insured against.

Therefore, in the given instance, Kushal can file a claim for loss by fire as his

house got wrecked due to explosion by fire. Hence, option C is correct answer.

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54. EA drawee bank is liable to make payment only if the cheque is presented to it

during the usual banking hours. Where the bank holds sufficient funds of the

customer but wrongfully dishonors the customers cheque, then it is liable not only

for any monetary loss suffered by the customer but also for loss or injury to the

reputation of the customer.

It should be noted that a drawee bank is liable only to the drawer in case ofwrongful dishonor of a cheque. Thus, the holder of a cheque cannot enforce

payment upon the same from the bank as there is no privity of contract between

the two. This is the case, even when the bank has sufficient funds of the customer.

The remedy of the holder of a cheque lies against the drawer of the cheque and not

against the bank.

Hence, in the given instance, the bank is liable not only to compensate for the

monetary loss suffered by Amrita but also to pay compensation for the loss to

Amritas reputation. The bank has no liability towards Bindu.

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55. BA insurance contract between the owner of a factory and the insurer, whereby the

insurer will compensate the owner from the liability of payment of compensation

to the employees handling hazardous substances in classified as public liability

insurance.

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56. E Consideration in the contract of insurance is the payment or the consent to pay thepremium by the proposer and a promise to pay or compensate or indemnify by the

insurer in accordance with the terms and conditions incorporated in the policy.

Thus, there are two promises by the proposer and promisee. These are reciprocal

promises undertaken and agreed by the parties.


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57. BAn instrument should be payable either at maturity or after the date of maturity.

An instrument paid before the date of maturity is not a payment in due course. It

was held in Burbridge vs. Manners that a bill paid before maturity and

subsequently endorsed is valid in the hands of a bona-fide endorsee. Hence, B is

correct answer.

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58. BOne creates a document when one composes an electronic mail message; it

becomes a record when one sends it.

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59. B The National Commission is empowered under section 2(22) to review its owndecision/order where there is a patent error. This power is limited to review errors

apparent from the records and not all errors. There is no similar power to the

District Forum or the State Commission.

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60. DThe natural causes of pollution include floods, cyclones, earthquakes and molten

lava from volcanoes. Since, they are the agents of nature and the man has no

control over them, they are known as natural causes.

Man-made causes include:

Population growth and Industrialization

Poverty and unhygienic settlements

Urbanization

Depleting natural resources and rising population

Deforestation.However afforestation is not a cause of environmental pollution. Hence, option D

is correct answer.

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61. DAccording to the Doctrine of Absolute Liability formulated by the Supreme Court< TOP >

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in the decided case of M.C. Mehta vs. Union of India, when an enterprise is

engaged in a hazardous or inherently dangerous industry, which poses a potential

threat to the health and safety of the people, it owes an absolute and non-delegable

duty to ensure that no harm results to anyone from such activity. If the harm

results to anyone due to such activity, the enterprise must be absolutely liable to

compensate for such harm and should not be allowed to avoid liability by pleading

that it was not negligent.

Therefore, in the given instance, the owners of the tannery can be held liable forpolluting the atmosphere under the doctrine of absolute liability. Hence, option D

is correct answer.

62. BConduct of any contest, lottery, game of chance or skill for the purpose for

promoting directly or indirectly the sale, use or supply of any product or any

business interest is considered as an unfair trade practice.

Therefore, in the given instance, the contest amounts to unfair trade practice as it

assumes the character of a lottery in respect of the early-bird prizes as no skill or

correctness of answers is required. Hence, option B is correct answer.

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63. BThe IRDA is empowered to issue a certificate of registration, renew, modify,

withdraw, suspend or cancel such registration to the applicant i.e., insurance

company.

Therefore, in the given instance, IRDA is empowered to issue, renew, modify,

withdraw, suspend or cancel a certificate of registration. Hence, option B iscorrect answer.

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64. AAccording 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, 2009. Hence, A is correct answer.

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65. CNormally, only securities which are listed on the Exchange are permitted to be

traded on the Exchange. But with a view to facilitate trading in securities of the

companies which are traded at other Regional Stock Exchanges but not listed on

the Exchange, it was decided to permit trading in securities provided they meet the

relevant norms specified by the Exchange. They are known as Permitted

Securities.

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66. CA reinsurance transaction can be defined as an agreement between a Ceding

company and a reinsurer, whereby the former agrees to cede and the latteragrees to accept a certain specified share of risk or liability in return for premium

upon terms as set out in the agreement.

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67. DThe liability of the drawee does not arise until the bill is accepted. After the bill is

accepted by the drawee he is known as acceptor accepting the instrument. In all

other cases, the parties to the negotiable instrument are discharged from their

liability. Hence, D is correct answer.

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68. EU