RECRUITMENT & INTERNSHIP COORDINATION COMMITTEE ft.

Aditya Gore

INTERVIEW PREPARATION GUIDE

“the same boiling water that softens a potato hardens an egg, it’s not about your circumstances,
but about what you’re made of”
- Aditya Gore

1.1. Concepts of bailment, pledge, lien, hypothecation etc. ...................................................... 2

1.2. Elements of a contract: valid consideration, meeting of minds etc. ..................................... 3
1.3. Types of a contract: conditional, contingent, determinable and so on.................................. 5
1.4. Void and voidable contracts.................................................................................................. 5
1.5. Representation, covenant, indemnity, guarantee, warranty, condition, and the differences
between these terms. ....................................................................................................................... 5
1.6. Consequences of breach of contract. .................................................................................. 7
1.7. Damages: liquidated and unliquidated. ............................................................................... 8
1.8. Novation and assignment. ................................................................................................... 8
Companies Act, 1956 and Companies Act, 2013 (keep track of notified sections and
circulars/amendments passed since 2013) ...................................................................................... 9
2.1. Newly introduced concepts under the 2013 Act: class action suits, CSR etc. Class Action:
Section 245(1) (Oppression and Mismanagement)......................................................................... 9
2.3. Private, public, listed, unlisted, one-person companies. ....................................................... 9
2.4. Winding-up of a company. ................................................................................................. 10
2.5. Capital- fully and partly paid up, total share capital, subscribed capital and so on. Shares,
various types. Share capital such as equity, preference. ............................................................... 11
2.7. Meetings: general meetings, shareholder meetings, creditor meetings; voting methods-ballot,
e-voting, etc................................................................................................................................... 12
2.9. Directors, Promoters, Key Managerial Personnel: definitions, duties, fiduciary and
otherwise; independent directors; women directors; rotation of directors. ................................... 13
2.10. Associates companies, subsidiary companies; related parties: definition of related party and
who are included within its ambit (compare with related parties in tax laws, SEBI regulations). 14
2.11. Fund raising: debt v. equity, IPO, private placement, etc. ................................................. 15
Foreign Investment Law ............................................................................................................... 16
3.3. Types of foreign investment: FDI, FPI, FVCI etc., and governing regulations; special
provsions regarding: Merchant banking, start-ups........................................................................ 16
Differences between Part I and Part II, and applicability of both parts; difference between seat,
place, venue; Bhatia and BALCO judgments. ............................................................................... 17
4.6. Types of law applicable: lex fori, lex arbitri, substantive law etc. ..................................... 17
CPC ............................................................................................................................................... 18
5.1. Jurisdiction under the CPC: pecuniary, territorial. ............................................................. 18
5.2. Differences between judgement, decree, order, etc. ........................................................... 19
5.3. Enforceability of foreign decisions in India........................................................................ 19
5.4. Review, reference and revision. .......................................................................................... 20
Misc............................................................................................................................................... 21
6.1. Mergers: types. Sections 390 to 396A of the 1956 Act, and corresponding provisions under
the 2013 Act. Differences between merger, reverse merger, triangular merger, amalgamation,
takeover, demerger, slump sale (concepts from the SEBI (SAST) regulations, 2011). Minority
squeeze out under Section 395 and 100 of the old Act. Definitions of the above terms.
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Definitions under the Income Tax Act and when these can be imported into the Companies Act
regime. .......................................................................................................................................... 21
6.2. Open offer: mandatory, voluntary, conditional, competing. ............................................... 23
6.7. Difference between Sale, Hypothecation, Bailment, Pledge, Mortgage, Charge, Lien,
Encumbrance, Lease, Leave and Licence, Exchange, Gift. .......................................................... 24
1. Contract Law

1.1. Concepts of bailment, pledge, lien, hypothecation etc.

Bailment:
• Delivery of Goods by one person to another, for some purpose, upon contract that when
the purpose is accomplished, the goods shall be returned or disposed off as per directions.
• Delivery: By putting into possession
• Bailor: Duty to disclose faults in Goods. Bailee: Duty to take reasonable care of goods.
Beyond that not liable
• No unauthorised use.
• Bailees Lien. (right to retain)
i. Particular: If the Bailee has rendered any service involving exercise of labour or
skill in respect of goods bailed in accordance with the contract.

ii. General Lien: Bankers, factors, wharfingers, attorneys

Types of Lien:
i. Bailees Lien
ii. Pawnee’s lien
iii. Agents Lien
iv. Finders Lien
• Finders are bailee’s: No right to sue owner for compensation but can exercise lien. Can
sell if owner not found or not willing to pay.

Pledge
• Bailment of Goods as security for payment of a debt or performance of a promise is
called Pledge.
• Pawnee has right of retainer. In respect of debt and interest. But only for debts in relation
to which the goods were pledged.
• However, where subsequent advance is made without any other security, a contract to
burden the same goods shall be presumed.

Pledge by Hypothecation:
• On default Pawnee cannot seize goods . Must do so with consent or Court Order.
• Default:
i. Sell (after reasonable notice: So as to afford the Pawnor the time required to come
up with the amount)
ii. File Suit to recover dues
iii. Retain Goods
• If lost: Get compensated
• Right to redeem: Pawnor
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 • If Pawnor has not title due to a voidable contract: Pawnee gets legal title (if he got
without knowledge)

1.2. Elements of a contract: valid consideration, meeting of minds

etc.
4 Essentials: Promise, Acceptance, Consideration and Consent and Legality of object
When a person proposes to do or abstain from doing something that is a promise. When this
proposal is accepted the other person is the promisee. When, at the desire of the promisor, the
promisee has done or promises to do or abstain from doing something it is called
consideration for the promise.

Acceptance: When a proposal made is assented to. On acceptance the proposal becomes a
promise.
Acceptance must be communicated unless another mode of acceptance is stipulated.
Postal Acceptance: Complete (as against the Proposer) when the letter is posted and out of the
acceptors reach. As against the acceptor, when it comes to the knowledge of the proposer.

Acceptance must be absolute and unqualified. Acceptance with some new proposal is a counter
offer. Conditions subsequent may not be a counter offer.

Revocation:
Proposal- Before communication of acceptance is complete as against the proposer
Acceptance: Before the communication of the acceptance is complete as against the acceptor.

Consideration: Must be of some value in the eyes of the law. However, value need not be
adequate. Section 25 of the Act provides that inadequacy of consideration is a fact taken into
consideration when determining whether the consent of the Promisor was freely given.

Forbearance to sue is a valid consideration.

Section 25: Agreement made without consideration is void unless:
i. Made between parties on account of natural love and affection between parties
standing near in relation to each other
ii. Or is a promise to compensate for something already done voluntarily or something the
promisor was legally compellable to do.
iii. Or is a promise to pay a debt barred by limitation.
Does not apply to Gifts (Explanation)

Capacity to Contract: Section 11: Following persons are incompetent

i. Minors (18 or 21)
ii. Persons of unsound mind
iii. Persons disqualified by law to which they are subject

• No estoppel against minor (if he misrepresents his age)

• No liability out of contract or tort
• Doctrine of restitution applies (as long as consideration or benefit received is traceable) Not
applicable if other party was aware of minority.

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• Mohori Bibi: Contract entered into by minor is absolutely void. However, Minor is allowed
to enforce a contract which is of some benefit to him and under which he is required to bear
no obligation.
• Cannot ratify on reaching majority.
• Exception: Section 68 Necessities. Person who has supplied is entitled to be reimbursed from
property of minor. (Things without which an individual cannot exist) Only Articles of mere
luxury are excluded.

Free Consent: Section 14 Consent is said to be free if it is not caused by (Section 19 makes all
these voidable Not mistake and UI)
i. Coercion: Section 15: Threatening to commit an act forbidden by IPC, or unlawfully
detaining or threatening to detain any property with the intention of causing a
person to enter into an agreement. Voidable
ii. Undue Influence: Section 16: Where relations subsisting between parties are such that
one party is in the position to dominate the will of the other and uses that to
obtain an unfair advantage. Two Positions: Authority over other or fiduciary
relations and Mental incapacity. Presumption: If the transaction appears to be prima
facie unconscionable then BoP on the person in dominant position. Voidable (19A)
iii. Fraud (S. 17) : Intentional Misrepresentation, promise made without the intention of
performing it, Active concealment of a fact (Mere silence not fraud unless it is
equivalent to speech), deception. Voidable
iv. Misrepresentation: S 18 Assertion which is not true though he believes it to be true. No
deception. No MP if a party had the means to discover the truth with ordinary
diligence. Voidable
v. Mistake (S. 20, 21, 22): Consent means where two people agree upon the same thing in
the same sense. Where Both parties are under a Mistake as to fact essential to
Agreement: VOID – Section 20 (Does not include mistake as to the value of a
thing). Section 21: Mistake as to any law in force in India, not a mistake of fact.
Section 22: When only one party under mistake of fact then not voidable.
Section 23: Where object or consideration is unlawful, contract is void.
Section 26: Agreements in restraint of marriage are void. Penalty upon remarriage not void. (co-
widow example)
Section 27

Every agreement by which anyone is restrained from exercising a lawful profession, trade or
business of any kind is, to that extent, void
Exception: Sale of Goodwill (only if the restriction is within specified local limits and such
restriction is reasonable).

There have several judicial pronouncements which had carved out more exceptions to Section 27
apart from Sale of Goodwill. These are generally in relation to employment contracts:

1. Non Solicitation clauses: If an employee leaves a company and approach the former
clients to associate with him in his new employment and basis this representation, if the
clients give any new business to this employee, he would be in breach of the non solicitation
clause. These clauses are generally enforced by the Courts.

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 [It was held in FL Smidth Pvt. Ltd. vs. Secan Invescast (India) Pvt. Ltd. (01.02.2013 –
Madras HC) that “the appellant should prove that the respondent approached their erstwhile customers
and only on account of such solicitation, customers placed orders with the respondent.”

2. Protection of Confidential Information and Trade Secret clauses: These clauses are also
generally enforced by the Courts because it is considered necessary for protection of
businesses.
Superintendence Company of India (P) Ltd. vs. Krishan Murgai: Under Section 27 of the Contract
Act, a service covenant extended beyond the termination of the service is void.

If any negative covenant is during the term of the employment, it is generally enforced unless it is
excessively harsh or unreasonable. Negative covenants extending beyond the term of the
employment are not enforced by the Courts unless they fall in the non statutory exception category.
Non-compete clauses are an example of negative covenant extending beyond the term of
employment (and not falling in non statutory exception category) and, therefore, are void.

Q: If we hire you and ask you to continue with us for two years mandatorily, is it valid agreement?
A: [Respectfully] No sir/ma’am. It is hit by Section 27.

1.3. Types of a contract: conditional, contingent, determinable and

so on.
Determinable Contract: The word, "Determinable", in legal parlance means "liable to end upon
the happening of a contingency; terminable" 2. Thus, any contract which provides for the
termination of the same at the instance of one of the parties and at the occurrence or non-
occurrence of a certain event is determinable in nature. If a contract does not provide for
unilateral termination of agreement, such an agreement cannot be said to be determinable. 3

As per the amendment, the court shall allow specific performance except under certain
circumstances. One of the circumstances where no specific performance of the contract may be
allowed is when a contract is of a determinable nature.

Building upon the exposition in Amritsar Gas Service, in Turnaround Logistics (P) Ltd. v. Jet
Airways (India) Ltd. and Ors.(2000 Delhi HC), a division bench of the Delhi High Court held that
contracts of a terminable nature and including voidable contracts cannot be specifically
enforced. Further, it is now an established principle 7 that an injunction cannot be granted in
order to restrain a party from determining a contract.

1.4. Void and voidable contracts.

1.5. Representation, covenant, indemnity, guarantee, warranty,

condition, and the differences between these terms.
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Representations:
• Representations are statements of past or present fact or circumstance. It’s a contractual
statement that a fact or circumstance is presently true, and/or has been true in the past.
• Representations are either true or not at the time the representation is made. This is why
breach of a representations gives rise to a remedy that breach of warranty or covenant
does not. Breach of a representation may give rise to a right by the non-breaching party
to void the entire agreement under such theories as fraudulent misrepresentation or
fraudulent inducement to contract

Warranties
• Warranties are statements or promise of current and future condition. It’s a contractual
statement that a condition is, and/or will be, true when made and/or for a period of time,
often for the term of the agreement.
• A warranty is a promise of indemnity if the assertion is false.
• Example: “ABC warrants that the Licensed Software conforms in all material respect to its
documentation and is free of bugs” or “ABC warrants that the Deliverables do not
infringe the intellectual property rights of any third party.”
• In the event of a breach of warranty, the non-breaching party may be entitled to
damages resulting from the breach to put them in the position they would have been in
had the breach not occurred (“benefit of the bargain” damages).

Covenant

• Covenants are promises of future action or inaction. It’s a contractual statement that a
party will do, or will not do, something during a period of time (often the term of the
agreement).
• Example of a positive contractual covenant is “Party A shall issue a press release
announcing the relationship within 30 calendar days of the Effective Date”; an example
of a negative covenant is “Party A shall not issue a press release or make any public
statement regarding the terms of the Agreement during the term of this Agreement.”
• Like a warranty, a covenant is a part of the contract, and not made to induce a party to
enter into the contract. In the event of a breach of a covenant, in addition to
compensatory damages for breach of contract, if the covenant is material enough it
could excuse the future performance of the non-breaching party (e.g., the breach of
covenant frustrates the purpose of the agreement such that continued performance no
longer matters), and may give rise to a right of rescission similar to a breach of
representation.
• unlike the breach of a representation or warranty, the breach of a covenant may give rise
to injunctive relief or specific performance.

Indemnity
• Section 124: A contract by which one party promises to save the other from loss caused
to him by the conduct of the promisor himself or by the conduct of any other person.
• By definition excludes loss from fire etc. Must be caused by some human agency. May be
express or implied.
• The party indemnified shall never be called upon to pay.
Extent of Liability: Promisee may recover
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 i. All damages that he may be compelled to pay in a suit to which the promise of indemnity
applies
ii. All costs that he may be compelled to pay in such a suit.
iii. Indemnifier: Indemnity Holder

Guarantee
• Section 126: Contract to perform the promise or discharge the liability of a third person in
case of his default. Person Who gives guarantee is called surety (not guarantor), for
whom is called principle debtor the person to whom it is given is called creditor.
• Surety and Guarantors liability is coextensive. In case PD is minor then the liability on
Surety only.
• Consideration: Anything done for benefit of PD
• Misrep, concealment: Invalid
• Coextensive
• Condition Precedents to Guarantees are valid: (Eg: Not operate until another person joins
as co-surety)
• No need to exhaust remedies against Principal Debtor first. Suit against Surety Alone
maintainable
• Continuing Guarantee: For a series of transactions: Allowed
• Bank Guarantee: Independent of Underlying transaction. Any Guarantee holder can
approach a bank and get paid. Not for the benefit of any third person
• Inter Surety agreement (to decide who will be surety in case of others default) No effect
on equal liability of both.
Automatic Discharge
• If the Creditor compromises with Debtor to hive him time etc then Surety automatically
discharged (S. 135) (unless surety assents) But not mere forbearance to sue.
• Impairing surety’s eventual remedy against PD
Rights
• Implied promise to indemnify surety. (by PD)
• Right to the creditors securities (whether he knows about them or not). If Creditor parts
with the security then surety is discharged to that extent.
• Co-sureties liable to contribute equally.
• Discharge of one does not discharge others.

Indemnity Guarantee

i. Contingent. Liability may or may not i. Liability arises as soon as contract is

arise. entered into. Coextensive with PD.
ii. Bipartite ii. Tripartite.
iii. 1 Contract iii. 2 Contracts. Guarantee + Implied
Indemnity between PD and Surety

1.6. Consequences of breach of contract.

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Repudiation: abandonment of contract or refusal of performance or disabling self from
performance.
• Consequences
i. Innocent party excused from performance
ii. Immediate right of action (exists even in case of anticipatory breach and even in
AB in contingent contract before happening of a contingency)
However, Restitution of benefits under S. 64
iii. Aggrived Party may wait for performance. Damages assessed from the date the
breach happens. So more damages also

1.7. Damages: liquidated and unliquidated.

• Remoteness of Damage: Only those that followed in the ordinary course subsequent to
the breach.
Types:
i. General: Those that arise naturally in the usual course of things
ii. Special: Those that arise on account of special circumstances. Not recoverable unless the
special circumstances were brought to knowledge of defendant. (Loss of profits is a
special loss)

S. 73: When a contract has been broken, the party who suffers by such breach is entitled to
receive compensation for loss or damage caused to him which arose naturally in the usual
course of things from such breach

Nominal Damages: Where no loss suffered, court may award nominal damages.
Punitive, Exemplary: Breach is so severe wanton and reckless.

Obligations In the Nature of Contract:

i. Finder of Goods
ii. Necesities

1.8. Novation and assignment.

• Assignment: Burden of Liabilities cannot be assigned. The Promisee can insist on

performance by the promisor.
A contract cannot be assigned except with consent of the promise and when such
consent is given it is really a novation resulting in the substitution of liabilities.

• Assignment of rights is possible.

Valid Assignment:
i. Consideration (From Assignor to Assignee)
ii. Subject to Free Consent.
iii. Notice of Assignment (to debtor)
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 • Effect of Novation, Rescission and Alteration: The Original Contract need not be
performed

• Novation: Where parties agree to substitute existing contract from new contract.
i. Change of Parties
ii. Substitution of New Contract in place of old.

Must be by agreement. Not Unilateral, there must be a consideration. Where rights under old
contract are kept alive, no novation has taken place.

Remission of performance: Dispense with performance and accept any kind of satisfaction

Companies Act, 1956 and Companies Act, 2013 (keep track of

notified sections and circulars/amendments passed since 2013)

2.1. Newly introduced concepts under the 2013 Act: class action
suits, CSR etc. Class Action: Section 245(1) (Oppression and
Mismanagement)
Every qualifying company requires spending of at least 2% of its average net profit for the
immediately preceding 3 financial years on CSR activities

Applicability: Section 135 of the Companies Act provides the threshold limit for applicability of
the CSR to a Company i.e.

(a) net worth of the company to be Rs 500 crore or more;

(b) turnover of the company to be Rs 1000 crore or more;
(c) net profit of the company to be Rs 5 crore or more.

Further as per the CSR Rules, the provisions of CSR are not only applicable to Indian
companies, but also applicable to branch and project offices of a foreign company in India.

The term CSR has been defined under the CSR Rules which includes but is not limited to:

• Projects or programs relating to activities specified in the Schedule; or

• Projects or programs relating to activities undertaken by the Board in pursuance of
recommendations of the CSR Committee as per the declared CSR policy subject to the
condition that such policy covers subjects enumerated in the Schedule.

2.2. Amendments to and notifications under the Act after 2013.

2.3. Private, public, listed, unlisted, one-person companies.

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 Private Public OPC

Restricts the right to transfer Transferable in the manner

shares, if any. (Right of pre provided in AoA.
emption) Only restrictions
contained in articles are valid.

Prohibits invitation to public to

subscribe for any securities.

Minimum 2 Directors Minimum 3 Directors

Minimum 2 members to7 One shareholder. Goes to

subscribe names to the MoA. nominee after death.
Presumption is that both should
be equity shareholders.

Minimum Quorum for meetings: Minimum 5 – 1000 Members

2 15 – 5000
30- >5000 (s. 103)

No need for independent dir,
Exemptions from filing board
resolutions, No need for audit
committee, no need for
rotational directors, no limits on
managerial remuneration.
Limits number of members to No max
200 (Not including employees
and Past employees, Jointly held
shares counted as one) Directors
are not employees
Must be there No need for cash flow
statements, annual return can
be signed by director, No need
for AGM, Only one BoD
meeting in each half of
calendar year.
Max 1

Cannot issue prospectus can

• Private also includes OPC and Small Cos (PUSC of less than 50 lakhs and turnover of less
than 2 crore)
• Subsidiary of public co is deemed to be a public co.
• Statutory Companies, Associations not for profit (S. 8) can be registered as limited liab.
• Limited Liability: Limited by shares, guarantee and both. Unlimited liability is similar to
partnership.
• Govt Co: 51 % PUSC is held by gov. (S. 2(45))

2.4. Winding-up of a company.

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Section 271: Winding up by Tribunal
i. If the company has, by special resolution, resolved that the company be wound up (75%)
ii. Acted against the sovereignty and integrity of India
iii. Reggie is of the opinion that the affairs of the Co have been carried out in a fraudulent manner.
iv. If co makes a default in filing annual returns of last 5 years
v. If it is just and equitable to do so in the opinion of the tribunal. (company has lost substratum
Etisalat v. Etisalat, 2G case) (Deadlock in Mgmt) (Illegality of objects) (oppression)

Who can file? Company, Reggie (ii, iii, iv), Contributory, any person authorised by CG. (ONLY)
Commencement: Deemed to commence on the filing of petition
Powers of Tribunal: Dismiss, Pass order for winding up, appoint liquidator, interim order
Recall?: Only in exceptional circumstances. If based on wrong info.
Moratorium on suits against co?: Yes
Section 275: Tribunal to appoint liquidator
Section 277: Liquidator makes an application to tribunal for constitution of a winding up committee.
Oversee Taking over of assets, sale of assets, review of audit reports
Section 281: Liquidator submits preliminary report to tribunal: Nature and details of assets, amount of
capital issues, existing liabilities, debts due, list of contributories.
Priority: Workmens dues.
Contributories: Person liable to contribute to assets of company on winding up.
i. Present and past members (1) if they left less than 1 year ago, or 2) if the debt or liability was
contracted when he was member or 3) if the present members are unable to satisfy
contribution)
ii. Directors and Managers whose liability is unlimited (unless ceased to hold office more than a year
ago)
iii. Legal representatives of deceased members
iv. Assignee of contributory

2.5. Capital- fully and partly paid up, total share capital, subscribed
capital and so on. Shares, various types. Share capital such as
equity, preference.
Share: A share in the share capital of a company. A negotiable Instrument. A good under SOGA.
Stock: Aggregate of fully paid up shares of a member merged into a fund of the same value.

Of two types
i. Preference: Preference in payment of dividend and on winding up. Types: Participating (in
surplus) and Non Participating; Cumulative (Last years dividends) and Non-Cumulative;
Redeemable and Irredeemable.
ii. Equity Shares: Share in remaining profits. Has a right to vote in every resolution, in proportion to
his shareholding. Pref shareholders can only vote on those matters which affect their rights.
However, if dividend not paid for two years then they acquire the right. (S. 47) However,
there are non-voting equity shares (extra dividend in lieu of voting rights)
Ways of raising Share Capital:
i. Private Placement: security allotted to Less than 200 persons. (QIB and Employees not included)
ii. Offer for sale: Company→ Issue House → Public ( at a higher price, issue house renounces
allotment in favour of buyer)
iii. Rights issue to existing shareholders
iv. Public Issue of shares: Further Public Offer, IPO
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 v. Employees Stock Options

BuyBack:
Section 67 of CA 2013 provides that a company limited by shares or a company limited by guarantee
having share capital cannot buy its own shares.
Section 68 is a proviso: Can buy out of:
i) Free Reserves
ii) Securities Premium Account
iii) Proceeds from sales of any shares and securities. (except same kind of shares or securities).
Conditions:
i. Must be authorised by articles
ii. Cannot be for more than 25% of the PUSC and Free reserves
iii. Only for fully paid up shares
iv. Ratio of debt after buyback is not twice the PUSC and free reserves.
Why? Increases EPS, Increase Shareholding of remaining members.

Board can implement. Buyback not allowed without special resolution if open offer is made.

Sweat Equity Shares: Shares issued by company to its directors, employees at a discount or for
consideration for providing their skills, knowhow or making rights available in the nature of intellectual
property. Lock In period: 3 Years non-trnasferable. Not more than 15% of PUSC in a year or 5Crores,
whichever is higher. In no case more than 25%. Startups: 50% for a period of 5 years from date of
incorporation. DIPP Circular, Ministry of Commerce

Bonus Shares Rights Issue

i. Shares given Free of charge to existing i. Existing members given right to buy shares
members first.
ii. Fully paid up ii. May be be partly paid up
iii. No right to renounce in favour of another iii. Right to renounce in favour of another.

Reduction of Share Capital:

Section 66: can be done in the following ways
i. Extinguish or reduce the liability on any of its shares in respect of capital not paid up. Eg 10 rupee
share but only 5 paid up→ 5 rupee share
ii. Either cancel PUSC which is lost or unrepresented by assets OR Pay of PUSC which is in excess of
need
Diminution different from reduction in that diminution is in respect of issued Share capital where as
Reduction is in respect of PUSC only.

Forfeiture of Share: Failure to pay on calls within a certain time. Fully paid up shares can also be forfeited
due to default in fulfilling any engagement between members or if the Articles permit.

2.6. Voting rights and differential voting rights associated with shares; effects of these voting
rights; minority squeeze out.

2.7. Meetings: general meetings, shareholder meetings, creditor

meetings; voting methods-ballot, e-voting, etc.
Kinds of Meetings
1. Shareholders meeting: Statutory, AGM , EGM, Class Meetings
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 2. Board Meeting
3. Meetings of committees of board
4. Meetings of debentures holders.
Conditions: Properly convened (by proper authority with adequate notice), legally constituted (Quorum,
proper chairman, compliance with AoA) , Properly conducted (ascertaining sense of the meeting-Voice
vote, show of hands, acclamation, ballot; rules of discussion)
Motion: Proposal made at a meeting
Amendment: Modification to Motion
Formal Motion:
i. Closure motion: to end a prolonged discussion
ii. Previous Question: Prevent vote being taken on main motion.
iii. Next business:
iv. Adjounment

Motion Passed → Resolution

Three types:
i. Ordinary: Passed by simple majority. i.e >50 Appointment of Auditors, Declaration of Dividend
ii. Special Resolution: Notice of Intention (If required), Notice of meeting Required (21 Days), 3/4th
Majority Alteration of Memorandum, Registered Office change from one state to another,
reduce share capital, alter AoA.
Special Notice: Notice of Intention to be given by such number of members holding not less than 1% of
total voting power or share holding. 3-14 days before meeting to the company. → Company to
shareholders not less than 7 days before meeting.

General Body Meetings:

i. AGM: First within 9 months from closing of financial year. Once per year (not more than 15
months apart)
ii. EGM: all other than AGM. For special or urgent business. Can be called by BoD on own accord (21
days notice), Tribunal (on its own motion, on application), Directors on requisition, By
requisitionists (21 days notice if BoD fails to do it).
BOD: First within 30 days of incorporation, then 4 per year. Not more than 120 days gap.
Videoconferencing allowed. Companies Meeting of Board and Powers Rules 7 days notice. Quorum: 1/3rd
of total strength. (not including vacancies)

2.8. Resolutions: ordinary 50, special 75.

2.9. Directors, Promoters, Key Managerial Personnel: definitions,

duties, fiduciary and otherwise; independent directors; women
directors; rotation of directors.
DIRECTORS
Director: (S. 2) Director appointed to the board of a company. Only individuals not body corporates. Pre-
requisite: Director identification number
Qualifications: Not unsound, not undischarged insolvent.
Considered agents, trustees, not employees. Sometimes treated as officers of the company.
Part time: Can be relieved of liability in some cases
Appointment: At a GM. Sometimes BoD appoints directors such as nominee directors
Resident Director: CA 2013, at least one director is a resident in India.

13
Independent Director: Not a promotor of the company, not related to promotors, no pecuniary
relationship with company, no relatives with pecuniary interest, not KMP, CEO of NGO receiving funds
from co.

Neither him or relatives

i. holding more than 2% of voting power in company.
ii. Not employee proprietor or partner in company’s auditing firm or legal consulting firm

Functions: Supervise, interests of shareholders

Appointment by board: ratification by shareholders.
Assignment by directors: Punishable
Minimum: 1 OPC, 2 Pvt, 3 Public. Max 15, but can be bypassed by passing a special resolution.
Powers of BoD: Do all such things which the company is authorised to do. Restrcitions: Sell a whole
undertaking or substantially whole. Borrow more than PUSC and Free Reserves.
DUTY Interested Directors have to disclose their interest. Participation in any meeting where a transaction
is entered to renders that transaction void.
Liabilities Under Companies Act:
i. Fraudulent conduct of business,
ii. misstatement in Prospectus.
iii. Loans to director by company

Managing Director: Director, who, by virtue of the articles of the Company or an agreement with the
company or a resolution passed in a GM, or by its board is entrusted with substantial powers of
management of the affairs of the company. (Power to do administrative acts of routine nature, affix
company seal to any document. Director who carries on day to day business.

KEY MANAGERIAL PERSONNEL

i. CEO, MD
ii. Company Secretary
iii. Whole time Director
iv. CFO

Manner of appointment: 1) Articles 2)Resolution at GM 3)Agreement with Company 4)BoD

• Listed Company, Public Company with PUSC 10 Crore: CEO, CS, CFO

2.10. Associates companies, subsidiary companies; related parties:

definition of related party and who are included within its ambit
(compare with related parties in tax laws, SEBI regulations).
Holding: A company is a holding in relation to another company if it controls the composition
of its BoD, controls over ½ of the total share capital either alone or with other subsidiaries.
Thus 1) BOD 2) Shareholding 3) H→S→T T is a subsidiary of H.

Associate Company: a Company is an associate company in relation to another company means

that the other company has control over 20% of total shareholding or business decisions under
an agreement.

14
Section 188: Related Party Transactions

Except with board consent via resolution, company cannot enter into a contract or agreement
with a related party relating to
i. Sale purchase or supply of any goods Goods, properties (buy sell
lease), Services, Employ
ii. Selling or disposing of or buying property of any kind
iii. Lease properties of any kind
iv. Availing or rendering services
v. Appointment as agent
vi. Appointment as an officer in the company or in an office of profit.

Additional Condition for Companies with greater than stipulated PUSC: Ordinary Resolution
(Companies 2015 Amendment Act) for holding subsidiary companies
Special Resolution under Meetings of Board and its Powers Rules. Related parties shall not
vote.

However, provision does not apply to transactions in the ordinary course of business (as long as
they are at an arms length) (Transaction conducted as if they were unrelated, without conflict of
interest)

Consequence:
i. Any such contract is voidable at the option of the Board if not in compliance with S. 188.
ii. Listed Company: Person in contravention can be imprisoned
iii. Unlisted: Fine upto 5 lakh

Who is related party: Dir, KMP, Relative, Firm, Company, Holding

i. Director or relative (HUF, Spouse, Children, Parents)
ii. KMP or relative
iii. Firm WHERE Director, KMP or where relative is partner
iv. Company with same director (prvt) and where he owns 2% PUSC.
v. Any Body Corp which is accustomed to act on instructions of director or Manager.
vi. Holding/ SUbsidiary

2.11. Fund raising: debt v. equity, IPO, private placement, etc.

Debenture: An instrument of the company evidencing debt or charge on the assets of the company.
Charges are of two types:
i. Fixed Charge: Charge covers definite and ascertained assets of permanent nature.
Company retains possession but loses right to dispose of it.
ii. Floating Charge: Charge on class of assets, present or future, can change in the course
of business. Can dispose of it. Carry on business as if there is no charge, until it is
enforced.

Kinds of Debentures:
i. Perpetual or irredeemable debentures: Not allowed now under CA2013
ii. Redeemable debentures:
iii. Naked Debentures: Debentures issues without creating any charge on assets
15
 iv. Convertible Debentures: Convert to equity or preference shares (Fully Convertible: After
a specified time) (Partly: Some converted, some redeemed after specified time)
v. Bearer Debentures/ Registered Debentures: Pay to bearer (Transferable), pay to
registered holders.

DIVIDEND

i. Current Profits
ii. Out of past reserves (Out of free reserves only)
Within 5 days of declaration
2.12. Shareholders’ rights.

2.13. Basic concepts of constructive notice, piercing of corporate veil, indoor management;
relevant landmark case laws for the same.

2.14. Oppression and mismanagement.

2.15. The Bankruptcy Code and how its sections replace some of the Companies Act’s provisions.;
difference between insolvency and bankruptcy (and how it is different from the US
interpretation); definition of debtors; interim and final insolvency resolution
professionals; timelines under the Insolvency resolution process.

2.16. Elements of corporate governance.

2.17. Valuation of a company: why and when is it necessary.

Foreign Investment Law

(RBI FAQ are helpful in this section)
3.1. Overview of the Foreign Exchange Management Act, FEMA 20 (read only from a manual, or
from Manupatra, not from RBI’s website), FDI Policy.
3.2. Who these are targeted at? What are capital account and current account transactions and
what are the restrictions thereupon?

3.3. Types of foreign investment: FDI, FPI, FVCI etc., and governing
regulations; special provsions regarding: Merchant banking, start-
ups.

Foreign Direct Investment (FDI) is the investment through capital instruments by a person resident
outside India (a) in an unlisted Indian company; or (b) in 10 percent or more of the post issue paid-up
equity capital on a fully diluted basis of a listed Indian company.

Foreign Portfolio Investment is any investment made by a person resident outside India in capital
instruments where such investment is (a) less than 10 percent of the post issue paid-up equity capital on
a fully diluted basis of a listed Indian company or (b) less than 10 percent of the paid up value of each
series of capital instruments of a listed Indian company.

16
FPI→FDI more than 10%

FDI can never become FPI.

Automatic→Government Route: No approval required as long as shareholding remains same

All foreign investments are repatriable (net of applicable taxes) except in cases where
the investment is made or held on non-repatriation basis.

3.4. Eligible instruments: equity shares, CCPS, CCD, share warrants, partly paid shares;
differences between the instruments; conditions of issue; conditions of use.
3.5. Eligible lenders and borrowers.
3.6. Sectoral regulations and prohibited sectors under the FDI Policy.
3.7. Points under important sectors which have been in the news recently. Pharmaceuticals,
defence, etc.

4. Arbitration
4.1. Basic concepts under the Arbitration Act 1996; differences between arbitration, conciliation,
mediation, judicial determination; court-ordered arbitration (Sec. 89 of CPC), etc.

4.2. 2015 Amendment in the Arbitration Act; key changes introduced by the Amendment.
4.3. Does the Amendment Act apply prospectively or retrospectively?
4.4. Concept of ‘party’ under the Arbitration Act.

Differences between Part I and Part II, and applicability of both

parts; difference between seat, place, venue; Bhatia and BALCO
judgments.
Under the Bhatia regime, all the provisions of Part I of the Indian Arbitration & Conciliation Act, 1996 [“Act”] were to
be applicable to all arbitration whether domestic or foreign-seated unless the parties by agreement, express or
implied, had excluded wholly or partly, the provisions of Part I of the Act.

BALCO
Held: The court cited Union of India v. Reliance Industries4
where the Supreme Court of India held that Part I of the
Act would be considered impliedly excluded when the juridical seat is outside India or where a foreign law is chosen
as the law governing the arbitration agreement. So saying the court dismissed the Section 34 applications filed at the
High Court to set aside the arbitral awards.

BALCO II required because BALCO I applied only prospectively.

4.6. Types of law applicable: lex fori, lex arbitri, substantive law
etc.

17
The law which governing the subject of the dispute is called as the substantive law, which
alternatively called as ‘applicable law’, ‘governing law’ or ‘law of the contract’.

Lex arbitri is the law that regulates and supports the procedural aspects of arbitration, as opposed
to the laws that govern the substantive rights of the parties in an arbitral dispute.

Lex Fori means the law of Court in which the proceeding is brought whilst Lex Arbitri is the law
of the place where the arbitration takes place.

Recent Development:

Union of India v. Hardy Exploration and Production (India) Inc:

the question before the court was whether designation of place, ipso facto, will assume the
nature of 'seat'. The court answered the question in negative and held that place will not ipso
facto assume the status of seat unless one of the following conditions precedents is satisfied.
Thus, a place mentioned in an arbitral clause will be deemed to be the 'juridical seat' if:
i. Law governing arbitration agreement is same as the law of the place mentioned as
venue.
ii. Law of the Matrix Contract and law of the venue/ place of arbitration are same.
iii. If the parties provide for an Institutional Rules.

4.7. Can two Indian parties choose to not be governed by Indian substantive law? Can two Indian
parties choose to be governed by foreign law of arbitration? Which Part of the
Arbitration Act shall govern these?
Seat Venue: https://www.lawsenate.com/publications/articles/international-arbitration-proceedings-
seat-vs-venue.pdf Enercon v. Enercon (2014)
You have not understood this yet
http://www.mondaq.com/india/x/750704/trials+appeals+compensation/Seat+Venue+Or+Place+Of+Arbitra
tion+Analysis+Of+Hardy+Exploration+And+Production+India+Inc

CPC

5.1. Jurisdiction under the CPC: pecuniary, territorial.

Power of a Court or Authority to hear and determine a matter. Various types
i. Civil Criminal
ii. Pecuniary Jurisdiction: The Court will only hear those suits whose amount or value of
subject matter does not exceed the pecuniary limits of its jurisdiction.
iii. Territorial or Local Jurisdiction: Territorial limits beyond which it cannot exercise its
jurisdiction
iv. Subject Matter Jurisdiction: Special Courts have been made
v. Original and Appellate Jurisdiction: Jurisdiction in first instance and jurisdiction in
appeal
vi. Exclusive and concurrent: Sole power on one court or forum to hear the matter.
Concurrent: may be exercised by different courts

18
5.2. Differences between judgement, decree, order, etc.
Mesne Profits: Profits from wrongful posession

Decree: Formal Expression of Adjudication which conclusively determines the rights of the
parties with regard to any matter. Can be preliminary (before final adjudication, does not decide
matter conclusively) or Final or partly preliminary and partly final. Essentials
i. adjudication
ii. In a suit
iii. Determining the rights of the parties in relation to a matter
iv. Such determination must be final
v. There must be formal expression of adjudication
Does not include orders of dismissal for default or adjudication from which appeal lies as
an appeal from an order EG: Order refusing interim relief, Order holding an application to be
maintainable . Includes rejection of plaint (Deemed decree, i.e. decree even though it does
not satisfy all conditions

Judgment: Statement given by judge of the grounds of a decree or an order. (S. 2(9))
Essentials according to case law:
i. Statement of the case
ii. Points for determination
iii. Decision
iv. Reasons for decision

Order: Formal expression of any decision of a civil court which is not a decree

Difference
Decree Order
i. Can only be passed in a suit commenced i. Petitions and applications also
by filing a plaint
ii. Conclusive determination ii. May not be a conclusive
iii. Can be preliminary or final or both. determination
iv. In every suit there can be only one
Decree (except where preliminary iii. No such thing as preliminary order
decree is passed)
iv. There can be multiple orders

5.3. Enforceability of foreign decisions in India.

Section 13 provides that a foreign judgment passed by a court of competent jurisdiction shall be
conclusive as to any matter directly adjudicated upon between the same parties (i.e. Res Judicata)
UNLESS
i. No Jurisdiction
ii. Not given on merits of case
iii. Where it appears, prima facies, to be based on incorrect view of international law or
refusal to acknowledge Indian law where it is applicable.
19
 iv. Opposed to natural justice
v. Fraud
vi. Breach of a law in force in India

Enforce through execution proceedings or by instituting a suit on the foreign judgment

Section 14: The Court shall presume upon the production of any document purporting to be a
certified copy of a foreign judgment, that such judgment was pronounced by a Court of
competent jurisdiction, unless the contrary appears on the record; but such presumption may be
displaced by proving want of jurisdiction.

5.4. Review, reference and revision.

Reference:
Section 113 Subordinate court can refer the same for the opinion of the HC (Question of Law)
Conditions: Order 46, R1
i. A question of Law must arise in the course of a suit
ii. The Court trying the suit must entertain a reasonable doubt on such question
Obligatory if the question of law is in relation to the validity of any Act Ordinance or
Regulation and it is necessary to decide the question to order to dispose of the suit or if the
subordinate court thinks its ultra vires.

Review:
Section 114 Order 47: Substantive Right of review in some cases, other than this no right as the
court becomes functus officio and has no right to alter its decision. Can be filed by person
aggrieved.

Which Cases: Order 47

i. Cases in which no appeal lies
ii. Cases in which appeal lies but not preferred: Thus appealability not grounds for rejection.
Only if appeal already filed reject.
iii. Decisions on reference from Small Causes Court

Grounds:
i. Discovery of new and important evidence
ii. Mistake or error apparent on the face of the record
iii. Any other sufficient reason

Review by the same judge only. If not available (retired) then his successor or any other
judge.
No Suo Motu Review
Article 137: Review Powers of Supreme Court

Revision:
Power of High Court to entertain a revision in any case decided by any subordinate Court where
no appeal lies. Revisional Jurisdiction of HC.

Conditions: If Subordinate Court

20
 i. Has acted without proper jurisdiction
ii. Failed to exercise jurisdiction (Refusal of Court to do something it is empowered to do)
iii. Exercised jurisdiction in an illegal manner or with a material irregularity

Difference between Review and Revision: Same Court/ done for Subordinate Court
There can be Suo Motu Revision.

Misc.

6.1. Mergers: types. Sections 390 to 396A of the 1956 Act, and
corresponding provisions under the 2013 Act. Differences between
merger, reverse merger, triangular merger, amalgamation, takeover,
demerger, slump sale (concepts from the SEBI (SAST) regulations,
2011). Minority squeeze out under Section 395 and 100 of the old
Act. Definitions of the above terms. Definitions under the Income
Tax Act and when these can be imported into the Companies Act
regime.
Arrangement: Reorganisation of the share capital of a company S. 230.
Section 230: Where scheme of arrangement is proposed between company and creditors or members or
any class of them.
→ Application by Company (or its creditor or liquidator)
→ Tribunal shall order for meeting of members and creditors to be called in a manner called for by the
Tribunal. [NCLT 2017 In re Adobe Properties, cannot dispense with meeting of shareholders but creditors
allowed, with an affidavit from 90% Creditors) Notice of meeting must contain all relevant information:
valuation report, explaining effect on KMPs. Must state material interest of directors. Publish in the
Newspaper. Send to SEBI if listed. Place on website. Send to Government, RBI, Exchanges. They can make
representations within 30 days. Consent of Stock exchange not required.
→ Majority of shareholders or creditors at the meeting (Value Majority: ¾ value) and number Majority
(Simple Majority)) must pass the arrangement or compromise. This will be binding on all shareholders
and creditors.
→ Tribunal Exercises its discretion: Given in Sakamari Steels case
a. Compliance with Law, made in good faith, Material interests of directors have been disclosed,
material facts have been disclosed (valuation report, explaining effect on KMPs), no
concealment, public interest, not prejudicial to interests of creditors and members.
b. Members of the class have been fairly represented by those who attended the meeting.
c. Scheme is fair and reasonable.
→ Tribunal passes an order sanctioning scheme with or without modifications. Also has power to recall
order. Directions: Exit offer to dissenting shareholders.

Buyback of securities under S. 230 is not permissible. Does not override S. 68.
However, reduction of share capital may be done. Overrides S. 66.
21
Reconstrcution Amalgmation

Transfer of an undertaking from one company to Blending of two companies into one company. Assets
another. S. 232. Rights of shareholders in old and liabilities of the transferor are merged with
company may be transferred to new co. those of the transferee. The transferor’s legal entity
comes to an end.

Demerger, Shedding a part of the undertaking to

another company

Reverse Merger: Where a loss making entity extends

its arms and absorbs a profit making company (sort of
a rehabilitation package). Shell Co’s Private company
being merged with shell public company to bypass
the need for an IPO to raise more capital.

Tests: Bihari Mills Case (1985) Guj HC

i. Value of assets of healthy company exceeds
the value of the loss making company or
less profits making co,
ii. Value of profits of helthy co is more
iii. Consideration being offered is more than
the value of net assets of the profit
making co.

Section 233: Simplified procedure for merger of small companies or a holding and subsidiary.
Section 234: Rules apply to Cross border M&A mutatis mutandis. Plus
i. Prior Approval of RBI required (Rule 25 of Comp, Arr and Amalgam rules).
ii. Valuation done by professionals recognised in the jurisdiction of transferee.
iii. Application only after approval of RBI.
Section 235: Power to acquire shares of dissenting Shareholders. Approved by 9/10 th of value of the
shareholders of the transferee company. Acquired on the same basis as other shares.

MINORITY SQUEEZEOUT: Section 236 (purchase of minority shareholding)

Provisions apply when acquirer and persons acting in concert become the registered holders of 90% of
issued share capital
Process: → Notify the company of their intention to buy the rest of the shares and make offer to minority
shareholders. (Price is calculated on the basis of a report by registered valuer).
→ Consideration is to be deposited in a separate bank A/C opened by transferor. Disbursed within 60
days
→ Even if no physical delivery, shares will be deemed to have been cancelled and transferor can issue
new shares in lieu of cancelled shares.
→ In case shareholder dies, allow heirs to make an offer for sale for 3 years.

22
Triangular Merger: A triangular merger is often resorted to, for regulatory and tax reasons. As the name
suggests, it is a tripartite arrangement in which the target merges with a subsidiary of the acquirer. Based
on which entity is the survivor after such merger, a triangular merger may be forward (when the target
merges into the subsidiary and the subsidiary survives), or reverse (when the subsidiary merges
into the target and the target survives).

Acquisitions may be by way of acquisition of shares of the target, or acquisition of assets and liabilities of
the target. In the latter case the business of the target is usually acquired on a going concern basis. Such a
transfer is referred to as a ‘slump sale’ under the ITA and benefits from favourable taxing provisions visà-
vis other transfers of assets/liabilities. Section 2(42C) of the ITA defines slump sale as a “transfer of one or
more undertakings as a result of the sale for a lump sum consideration without values being assigned to
the individual assets and liabilities in such sales”.

Slump Sale/ asset acquisition: Ability to choose in asset acquisition.

6.2. Open offer: mandatory, voluntary, conditional, competing.

Open Offer: Takeovers, which result in acquisition of more than 25% of shares or voting rights or control
over a target company, trigger the requirement of making a public announcement of an open offer to the
existing shareholders as a minority shareholders’ protection mechanism. Or done by a person already
over 25%. (less than 5% per year creeping acquisition can be done without public announcement)

Exemption: 1) Inter se transfers between promoters, family members. 2) Or if offer is acquisition is under
rights issue.3) Increase due to buy back of shares

Control: Ability to appoint majority directors in company or to control management or policy of the
target.

Voluntary Offer: means Open Offer given by the acquirer voluntarily without triggering the mandatory
Open Offer obligations as envisaged under SEBI (SAST) Regulations, 2011. Generally, the purpose of giving
Voluntary Open Offer is to consolidate the shareholding.
- Must be holding 25% to 75% shareholding.
- Should not have acquired any shares of target in preceding 52 weeks.
Since the procedure for a voluntary offer is simpler than the procedure for an open offer, any shareholder
holding at least twenty-five per cent shares would prefer to rely on the voluntary offer provisions while
implementing a hostile takeover.

Competing offer (r. 20) is an offer made by a person, other than the acquirer who has made the first
public announcement of open offer, without being subject to the restrictions for voluntary offer as laid
down under the Takeover Code. Such a competing offer is required to be made within 15 days of the
original offer. Should be atleast equal to the acquirer’s and PACs shareholding (including those sought to
be acquired).

Conditional offer: R 19 An offer in which the acquirer has stipulated a minimum level of acceptance is
termed as a conditional offer. If the number of shares (validly tendered in the conditional offer) is less
than the minimum level of acceptance stipulated under the conditional offer, then the acquirer will not
be bound to accept any shares under the said offer.
23
The maximum permissible non-public shareholding limit, in a public listed company, is 75% of the share
capital. In case the said hard-cap of 75% is exceeded in the process of acquisition of shares of the target
company, then the acquirer may launch a voluntary delisting offer of the target company only after a
period of 12 months from the date of the completion of the offer period.
6.3. Listing of a company. Whether a public company becomes delisted if it merges with a private
company? Vice versa? Minimum shareholding thresholds for a company to remain listed,
whether different for public and government companies?
6.4. Call and put options and their enforceability.
6.5. Basic concepts under the SCRA, SARFAESI, and ease of doing business policies outside the
Companies Act.

6.6. Property law concepts such as definition of immoveable property, types of sale and
mortgages, registration, attestation and so on.

6.7. Difference between Sale, Hypothecation, Bailment, Pledge,

Mortgage, Charge, Lien, Encumbrance, Lease, Leave and Licence,
Exchange, Gift.
English law recognises four types of security interest: 1) mortgages, 2)charges, 3)pledges and
4)liens.

Mortgage: is created by the transfer or assignment of legal title to an asset by way of security,
subject to an express or implied condition which requires the mortgagee to transfer title back to
the mortgagor when the obligation for which the security was created is discharged. Immovable
property is used as security for a debt.
Section 58 (a) of the TRANSFER OF PROPERTY ACT, 1882, defines mortgage as, “A
mortgage is the transfer of an interest in specific immovable property for the purpose
of securing the payment of money advanced or to be advanced by way of loan, an
existing or future debt, or the performance of an engagement which may give rise to a
pecuniary liability.

• Types of Mortgage
i. Simple Mortgage: transferred to the mortgagee the right to have the specific
immovable property sold in the event of his having failed to repay. Possession
remains with Mortgagor.
ii. Usufructuary Mortgage: Mortgagee gets possession of the immovable property.
Gets to use it.
iii. Mortgage by Conditional Sale: Mortgagor sells the mortgaged property a) on
the condition that on default of payment of the mortgage money (loan) on a
certain date the sale shall become absolute or
b) on condition that on such payment being made the sale shall become void
or,
c) on the condition that in such payment being made the buyer shall transfer
the property to the seller,
iv. English Mortgage: That the mortgaged property should be transferred absolutely
to Mortgagee. That such absolute transfer should be made subject to a proviso that
the mortgagee will recover the property to the mortgagor, upon the payment by
24
 him of the mortgage money on the appointed day. Difference: Mortgagor Binds
himself personally to pay.
v. Anomalous Mortgage: Any other type of Mortgage

Charges—a charge does not involve any transfer of title to an asset and is therefore an equitable
interest

As per Section 2(16) of the Companies Act 2013 ―charge means an interest or lien created
on the property or assets of a company or any of its undertakings or both as security and
includes a mortgage.

The following are the essential features of the charge which are as under:

a. There should be two parties to the transaction, the creator of the charge and the charge
holder.
b. The subject-matter of charge, which may be current or future assets and other
properties of the borrower.
c. The intention of the borrower to offer one or more of its specific assets or properties as
security for repayment of the borrowed money together with payment of interest at the
agreed rate should be manifested by an agreement entered into by him in favour of the
lender, written or otherwise.

Charges must bre registered.

Pledge: Where Bailed goods are used as security until the discharge of debt.

Lien: Right to Retain Possession of bailed goods until debt is Discharged.

Liens always represent a financial interest. Encumbrances are not necessarily monetary, but
they also include property use restrictions or easements (Right to cross). Encumbrances can be
any interest in the property that burdens or reduces the property's value or clear title.

Lease
• It is transfer of an interest
• both transferable and heritable
• Comes to an end only in accordance
with the terms and conditions stipulated
in the contract
• unaffected by the transfer of the property
by sale in favour of third party and
continues
• lessee has the right to protect the
possession in his own right
License
• mere permission to do something
without any transfer of interest
• Non Transferable and non-inheritable
• can be withdrawn at any time at the
pleasure of the grantor
• comes to an end immediately if the
property is sold to a third party
• licensee cannot defend his possession in
his own name as he does not have any
propriety right in the property

6.8. Assignment and endorsement under the Negotiable Instruments Act.

6.9. Any contemporary topics including (and not limited to)
25
 6.9.1. Demonetization scheme: Banking Regulation Act, right of the government to
implement such schemes.
6.9.2. Cross-border mergers.
6.9.3. NCLT and NCLAT functioning.
6.9.4. Latest FDI Policy.
6.9.5. Goods and Services Act.
6.9.6. SEBI, RBI and IBC developments.
6.9.7. Stock market scams, banking scams (such as PNB) and corporate sagas (such as
the Cyrus Mistry issue).
6.9.8. Any bills pending before the legislature.

Security for Costs:

In international arbitration, security for costs is an interim measure filed by the Respondent to
a claim (or counter-claim). The purpose of such an application is to ensure that the Claimant is
able to pay a potential adverse costs award rendered against it if the Respondent wins the
claim.

These are ‘Security for Costs‘ (Order 25)

The Code provides for several types of interim orders to assist the parties for the purpose of
protecting the subject matter of the suit and otherwise. These are ‘Security for Costs‘ (Order 25),
‘Commissions‘ (Order 26), 'Arrest before Judgment‘ (Order 38, Rules 1-4), ‘Attachment before
Judgment‘ (Order 38, Rules 5-13), ‘Temporary Injunctions and Interlocutory Orders‘ (Order 39)
and ‘Appointment of Receiver‘ (Order 40).

Arbitration Act:
The insertion of Section 9(3) reduces the amount of intervention by the judiciary in terms of
interim measures. It states that the after the arbitral tribunal has been constituted, the court shall
not entertain any application under section 9(1) unless there are circumstances which can
render remedy provided under section 17 ineffective.

Current Knowledge
1. Read business newspapers everyday (keep track of recent significant developments in law/
policy/ economy, etc).
2. Keep yourself updated with posts, articles and updates on websites such as:
2.1. www.indiacorplaw.blogspot.in
2.2. www.www.lexology.com/search (Select “India” in the dropmenu titled “Jurisdiction”) or
www.mondaq.com (Select “India” in the dropmenu).
2.3. www.barandbench.com and www.legallyindia.com
2.4. www.nishithdesai.com (good for compendium/ digest on various areas of law and legal
updates).
2.5. Monthly CLS Newsletters.
3. For legal developments, try to refer primary sources and other citable material. For e.g. for the
Bankruptcy code, the members of the drafting committee themselves have written very good
articles on the topic. Note the authors for these articles and go for trustworthy sources.

26
 General Pointers for Succeeding at Interviews
1. Be pleasant. Start the interview by greeting the interviewers and end it by thanking the
interviewers for their time.
2. Be extremely polite and professional. Never interrupt the interviewers.
3. Smile while greeting the interviewers and at other appropriate junctures in the interview (reflects
confidence).
4. Be perceptive. Stop if you can sense that the interviewers are satisfied with the answer or if it
seems as if they want to ask a follow up/clarificatory question.
5. Try and showcase genuine interest in joining the firm you are interviewing with. You can cite your
internship experience with the firm to justify such interest.
6. Never bad mouth/criticize other firms as that is seen as extremely disrespectful.
7. Try to lead the interviewer into your CV to ensure that they ask questions you are best prepared
for.
8. For technical questions, do not try to fake answers if you do not know them. The interviewers
appreciate that you may not know the correct answers to every single question they pose.
9. Be sufficiently prepared to answer all questions which are either remotely related to your CV or
fall within the basic technical topics identified above.
10. Brevity is much appreciated. Try not to answer questions in a long-winded manner. Three to five
sentences is generally sufficient, unless the interviewers want you to explain further. Judge by the
interviewers’ voices/faces if they are looking for a more detailed answer.
11. Structure your answer. Do not get yourself confused in trying to get all the arguments out at the
same time. Questions may be either direct, or problem type. Acquaint yourself with both types
and formulate structures accordingly.
12. Pay attention to the question. Answer what is asked, and not what you would like to have been
asked. This was also a common point of feedback in most mock interviews.
13. Be calm, composed and confident. Always remember that the fact that you have been invited to
interview with a firm means that the firm is already impressed by you and interested in recruiting
you.

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