SEBI Grade A (Legal) Test 3 — Questions & Solutions
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Under the SEBI (PIT) Regulations, 2015, communication or procurement of unpublished price sensitive information is permitted in which of the following situations?
aIn furtherance of legitimate purposes, performance of duties or discharge of legal obligations
bWhenever the recipient promises to keep it confidential
cOnly with the prior written approval of SEBI in every case
dNever, as all communication of UPSI is absolutely prohibited
Answer: A
Under Regulation 3(2A) and the proviso to Regulation 3(1) of the PIT Regulations, 2015, communication or procurement of UPSI is permitted where it is in furtherance of legitimate purposes, performance of duties, or discharge of legal obligations.
Under Section 15G of the SEBI Act, 1992, the penalty for insider trading is:
aA fine not exceeding one lakh rupees only
bA penalty of not less than ten lakh rupees which may extend to twenty-five crore rupees or three times the profit made, whichever is higher
cImprisonment up to one year with no monetary penalty
dA warning followed by debarment without any monetary penalty
Answer: B
Section 15G of the SEBI Act, 1992 provides that an insider who indulges in insider trading is liable to a penalty of not less than ten lakh rupees, extendable to twenty-five crore rupees or three times the amount of profits made, whichever is higher.
Under the SAST Regulations 2011, an acquirer who, together with persons acting in concert, holds 24% of voting rights in a target company proposes to acquire an additional 6%. Which statement is correct?
aNo open offer is triggered because the holding remains below 26%
bAn open offer is triggered only if control is also acquired
cAn open offer is triggered as the acquisition crosses the 25% threshold of voting rights
dAn open offer is triggered because the 5% creeping limit is exceeded
Answer: C
Regulation 3(1) of SAST 2011 mandates an open offer when an acquirer (with PACs) crosses 25% of voting rights; here 24% + 6% = 30% crosses 25%, triggering the obligation.
Under the creeping acquisition limit in Regulation 3(2) of SAST 2011, an acquirer already holding between 25% and the maximum permissible non-public shareholding may acquire additional voting rights in a financial year, without an open offer, only up to:
a2%
b10%
c15%
d5%
Answer: D
Regulation 3(2) permits creeping acquisition of up to 5% of voting rights in a financial year without triggering an open offer, provided the post-acquisition holding stays within the permissible limit.
An acquirer triggers a substantial acquisition open offer under SAST 2011. The minimum size of the open offer (shares to be acquired from public shareholders) must be at least:
a26% of the total shares of the target company
b20% of the total shares of the target company
c10% of the total shares of the target company
d15% of the total shares of the target company
Answer: A
Regulation 7(1) of SAST 2011 fixes the minimum open offer size at 26% of the total shares of the target company (raised from the earlier 20% under the 1997 Regulations).
Under the PIT Regulations 2015, the term 'generally available information' (which is excluded from 'unpublished price sensitive information') is best described as information that is:
aKnown to the board of directors of the company
bAccessible to the public on a non-discriminatory basis
cAvailable only to institutional investors
dCommunicated to SEBI but not yet to the exchanges
Answer: B
Regulation 2(1)(e) of PIT 2015 defines 'generally available information' as information accessible to the public on a non-discriminatory basis; UPSI under 2(1)(n) is information not so generally available.
X, a designated person, is in possession of UPSI but trades in the securities of the company. Under PIT 2015, which of the following is a recognised defence available to X to show absence of insider-trading liability?
aThat the trade resulted in a loss rather than a profit
bThat X was unaware that the information was price sensitive
cThat the trade was carried out pursuant to a trading plan formulated and disclosed in accordance with Regulation 5
dThat the trade was for a value below Rs. 10 lakh
Answer: C
Proviso to Regulation 4(1) of PIT 2015 recognises trades executed under a pre-disclosed trading plan (Regulation 5) as a defence; loss/profit and small value are not, by themselves, defences.
In SEBI v. Kishore R. Ajmera (2016), the Supreme Court held that in proving market manipulation/fraudulent trading, the standard of proof is:
aProof beyond reasonable doubt, as in criminal trials
bStrict liability requiring no proof of intent or facts
cProof only by direct documentary evidence of the manipulation
dPreponderance of probabilities, and the conclusion may be drawn from a logical inference of proved facts
Answer: D
In Kishore R. Ajmera, the Supreme Court held that securities-law violations may be established on the preponderance of probabilities, drawing logical inferences from proved/admitted facts and surrounding circumstances.
Under Section 11B read with Section 15J of the SEBI Act 1992, when an adjudicating officer assesses the quantum of penalty, which factor is expressly relevant?
aThe amount of disproportionate gain or unfair advantage made and the loss caused to investors
bThe age of the violator
cWhether the violator has apologised publicly
dThe political affiliation of the entity
Answer: A
Section 15J of the SEBI Act directs the adjudicating officer to consider the disproportionate gain/unfair advantage made, the loss caused to investors, and the repetitive nature of the default.
Appeals against orders of the Securities Appellate Tribunal (SAT) under the SEBI Act 1992 lie to the Supreme Court. Such an appeal is maintainable:
aOn any ground of fact or law within 60 days
bOnly on a question of law arising out of the SAT order, within 60 days (extendable by a further 60 days)
cOn any ground within 90 days without extension
dOnly with prior leave of the High Court
Answer: B
Section 15Z of the SEBI Act permits appeal to the Supreme Court only on a question of law within 60 days, with a possible extension of a further 60 days for sufficient cause.
Under the Securities Contracts (Regulation) Act 1956, the power to recognise a stock exchange and to make rules in respect of contracts in securities is conferred primarily on:
aThe Reserve Bank of India
bThe State Government where the exchange is located
cThe Central Government (with SEBI exercising delegated powers)
dThe Company Law Board
Answer: C
Under the SCRA 1956 (e.g., Sections 4 and 30), recognition of stock exchanges and rule-making vest in the Central Government, many of these powers being exercised by SEBI through delegation/notification.
A and B enter into a forward contract for the purchase and sale of listed shares which is not a 'spot delivery contract' and is entered into otherwise than between members of a recognised stock exchange. Under the SCRA 1956, such a contract is:
aAlways valid and enforceable
bValid only if registered with the RBI
cVoidable at the option of the seller alone
dIllegal and void under Section 13/16 if entered into in a notified area in contravention of the Act
Answer: D
Under Sections 13 and 16 of the SCRA 1956, contracts in securities entered into in a notified area otherwise than in accordance with the Act/bye-laws (and not spot delivery) are illegal and void.
Under the Depositories Act 1996, the legal nature of the relationship between the depository and a beneficial owner whose securities are held in dematerialised form is that:
aThe depository is the registered owner for the limited purpose of effecting transfers, while the beneficial owner enjoys all rights and benefits of the securities
bThe depository is the beneficial owner and the investor is merely a nominee
cThe depository and the investor are joint owners in equal shares
dThe depository holds the securities as an unsecured creditor of the investor
Answer: A
Section 10 of the Depositories Act 1996 provides that the depository is the registered owner for the purpose of effecting transfer of ownership on behalf of the beneficial owner, who retains all rights and benefits.
Under the Depositories Act 1996, where securities of a beneficial owner are held by a depository and a register of beneficial owners is maintained, the securities held in a depository are:
aTreated as immovable property
bFungible and non-distinguishable as between holders of the same class
cRequired to bear distinctive certificate numbers at all times
dIncapable of being pledged or hypothecated
Answer: B
Section 9 of the Depositories Act 1996 declares that securities in a depository shall be fungible, dispensing with distinctive numbers; Section 12 permits pledge/hypothecation, so options b and c are wrong.
A member holding 50 out of 5,000 shares (1%) wishes to bring an action alleging oppression and mismanagement before the National Company Law Tribunal in a company having share capital. Which of the following correctly states the eligibility threshold under Section 244 of the Companies Act, 2013 (absent a Tribunal waiver)?
aMembers holding not less than one-tenth of the issued share capital, or not less than one-fifth of the total number of members.
bAny single member regardless of shareholding is entitled to apply.
cNot less than 100 members or members holding not less than one-tenth of the total number of members, whichever is less, or members holding not less than one-tenth of the issued share capital.
dMembers holding not less than one-half of the issued share capital.
Answer: C
Section 244 requires, for a company having share capital, at least 100 members or one-tenth of the total number of members (whichever is less), or members holding at least one-tenth of the issued share capital, to apply under Sections 241-242; the Tribunal may, however, waive this requirement.
A creditor seeks to disregard the separate legal personality of a company, alleging it was incorporated solely as a sham to evade an existing contractual restraint against the promoter. Which of the following most accurately states the law on lifting the corporate veil?
aThe veil can never be lifted once a certificate of incorporation is issued.
bThe veil may be lifted only by the Central Government and never by courts.
cThe veil is lifted automatically whenever a company makes losses.
dCourts may lift the veil where the corporate form is used for fraud, evasion of legal obligations, or as a mere facade concealing the true facts.
Answer: D
The separate legal personality recognized in Salomon v. Salomon is disregarded where the company is a mere cloak or sham used for fraud or to defeat legal obligations (Gilford Motor Co. v. Horne; DDA v. Skipper Construction), an exception preserved under the Companies Act, 2013.
A company proposes to make a loan to a private limited company in which one of its directors holds 30% of the paid-up share capital. Under Section 185 of the Companies Act, 2013 (as amended in 2017), such a loan to an entity in which a director is interested is:
aPermissible if a special resolution is passed in general meeting and the loans are utilised by the borrowing company for its principal business activities.
bAbsolutely prohibited in all circumstances.
cPermissible only with prior approval of the Central Government.
dPermissible by mere board resolution without any special resolution.
Answer: A
As amended by the Companies (Amendment) Act, 2017, Section 185 permits a loan/guarantee/security to any person in whom a director is interested, including a body corporate, subject to a prior special resolution and the condition that the loans are used by the borrower for its principal business activities.
A director is personally interested in a proposed contract that the board is to consider. At the board meeting he discloses his interest and then votes in favour of the contract, his vote being decisive. Under Section 184(2) read with Section 188 of the Companies Act, 2013, the consequence is:
aThe contract is valid because disclosure was made, regardless of his participation.
bThe interested director shall not participate in such meeting, his vote cannot be counted, and a related-party contract entered without requisite consent is voidable at the option of the company.
cThe contract is automatically void and the director is disqualified for life.
dDisclosure is unnecessary if the contract is in the ordinary course of business.
Answer: B
Under Section 184(2) an interested director must disclose and shall not participate in the meeting on that item; under Section 188(3) a related-party contract entered without requisite consent/ratification is voidable at the option of the board/company, and the interested director's vote cannot be counted.
An LLP incurs a liability through a wrongful act committed by one partner in the ordinary course of the LLP's business. A creditor seeks to recover from the personal assets of an innocent partner who had no involvement. Under the Limited Liability Partnership Act, 2008, the position is:
aAll partners are jointly and severally liable to the extent of their personal assets, as in an ordinary partnership.
bOnly the designated partners are personally liable for all liabilities.
cThe LLP is liable out of its property and the wrongdoing partner is personally liable, but another partner is not personally liable solely by reason of being a partner.
dNo partner is ever personally liable for any act under any circumstances.
Answer: C
Under Sections 27 and 28 of the LLP Act, 2008, the LLP is liable for a partner's wrongful acts done in the course of business, and an obligation of the LLP is solely its obligation met out of its property; a partner is not personally liable merely by being a partner, except for his own wrongful act.
Promoters wish to incorporate an LLP. Regarding 'designated partners' under the Limited Liability Partnership Act, 2008, which statement is correct?
aAn LLP need not appoint any designated partner if all partners are individuals.
bAll partners of an LLP must be designated partners and all must be Indian residents.
cA designated partner can only be a body corporate, never an individual.
dEvery LLP must have at least two designated partners who are individuals, at least one of whom is a resident in India.
Answer: D
Section 7 of the LLP Act, 2008 mandates that every LLP have at least two designated partners who are individuals, and at least one of them shall be a resident in India.
A financial creditor files an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The corporate debtor disputes the debt, but records of an information utility and the financial contract clearly establish the debt and a default. At the admission stage the Adjudicating Authority is principally required to:
aAscertain only that a default has occurred from the records furnished and that the application is complete, and then admit it.
bConduct a full trial on the genuineness and quantum of the claim before admission.
cRefuse admission whenever the corporate debtor raises any dispute, however unsubstantiated.
dRequire the financial creditor to first obtain a civil court decree for the debt.
Answer: A
Under Section 7(5) IBC and Innoventive Industries v. ICICI Bank, for a financial creditor the Adjudicating Authority need only be satisfied that a default has occurred and the application is complete; it is not concerned with adjudicating disputes as in operational-creditor cases.
An operational creditor issues a demand notice under Section 8 of the IBC, 2016. The corporate debtor, within ten days, points to a pending arbitration concerning the very quality of goods supplied, raising a plausible contention. The operational creditor's Section 9 application should be:
aAdmitted, because any dispute raised by the debtor is irrelevant for operational creditors.
bRejected, because a pre-existing genuine dispute that is not spurious, illusory or moonshine bars admission.
cAdmitted only if the disputed amount exceeds rupees one crore.
dKept pending until the arbitration concludes on merits.
Answer: B
Under Section 9(5)(ii)(d) IBC and Mobilox Innovations v. Kirusa Software, an operational creditor's application must be rejected where there is a pre-existing dispute, the test being whether a plausible contention requiring investigation exists and the dispute is not patently feeble, spurious or moonshine.
During liquidation of a corporate debtor under the IBC, 2016, the liquidator distributes the proceeds of liquidation assets in a statutory order of priority. Under Section 53 (the 'waterfall mechanism'), which of the following is correct?
aGovernment dues rank above workmen's dues for 24 months and secured creditors who relinquish security.
bEquity shareholders are paid before any creditor.
cInsolvency resolution process costs and liquidation costs are paid in full in priority to all other dues.
dUnsecured financial creditors rank above secured creditors in all cases.
Answer: C
Section 53 IBC places insolvency resolution process costs and liquidation costs first in the waterfall, to be paid in full, followed by workmen's dues (24 months) and debts of secured creditors who relinquished security pari passu, with government dues ranking lower and equity holders last.
A resolution plan is approved by the committee of creditors with the requisite majority and confirmed by the Adjudicating Authority under the IBC, 2016. A government tax authority later seeks to recover dues for a period prior to the plan's approval which were not part of the approved plan. The claim:
aCan be recovered in full, as statutory dues always survive insolvency.
bSurvives but only to the extent of 50% of the dues.
cCan be pursued against the erstwhile promoters personally without limit.
dStands extinguished, since on approval the plan binds all stakeholders including government authorities and pre-approval claims not in the plan are wiped out ('clean slate' principle).
Answer: D
Under Section 31 IBC and Ghanashyam Mishra & Sons v. Edelweiss ARC, once a resolution plan is approved it binds the corporate debtor and all stakeholders including Central/State governments and local authorities, and all claims not part of the plan stand extinguished, giving the resolution applicant a clean slate.
Q25Constitution of India
A pre-Constitution law inconsistent with a fundamental right becomes inoperative under Article 13(1). If the relevant fundamental right is later removed by a constitutional amendment, the law revives. Which doctrine explains this revival?
aDoctrine of eclipse
bDoctrine of severability
cDoctrine of waiver
dDoctrine of harmonious construction
Answer: A
Under the doctrine of eclipse, a pre-Constitution law inconsistent with fundamental rights is not void but merely overshadowed and dormant; it revives once the eclipse is removed, as held in Bhikaji Narain Dhakras v. State of M.P.
Q26Constitution of India
Which of the following is NOT among the grounds on which the State may impose reasonable restrictions on the freedom of speech and expression under Article 19(2)?
aSovereignty and integrity of India
bMaintenance of supplies essential to the community
cFriendly relations with foreign States
dPublic order
Answer: B
Article 19(2) lists eight grounds including sovereignty and integrity, friendly relations with foreign States, public order, decency, morality, contempt of court, defamation and incitement to an offence; 'maintenance of supplies essential to the community' is not among them.
Q27Constitution of India
Under Article 22, which of the following protections is available to a person detained under a preventive detention law?
aThe right to be produced before a magistrate within 24 hours
bThe right to consult a legal practitioner of his choice
cThe right to be informed of the grounds of detention, subject to the State withholding facts against public interest
dThe right not to be detained beyond three months without sanction of a court
Answer: C
Article 22(5) requires that grounds of detention be communicated, but Article 22(6) permits the authority to withhold facts it considers against the public interest to disclose; the safeguards in Article 22(1) and (2) do not apply to preventive detention.
Q28Constitution of India
In Keshavananda Bharati v. State of Kerala, the Supreme Court held that Parliament's power under Article 368:
aCannot amend fundamental rights at all
bIs unlimited and can amend any part of the Constitution
cIs subject to ratification by all State legislatures
dCan amend any provision but cannot alter the basic structure of the Constitution
Answer: D
Keshavananda Bharati (1973) propounded the basic structure doctrine: Parliament can amend any part of the Constitution under Article 368 but cannot destroy or abrogate its basic structure.
Q29Constitution of India
Which writ is appropriately issued to a public official who has wrongfully refused to perform a public duty that the law requires him to perform?
aMandamus
bQuo warranto
cCertiorari
dProhibition
Answer: A
Mandamus ('we command') is issued to compel a public authority to perform a mandatory public duty it has failed or refused to perform; quo warranto questions the authority to hold an office, while certiorari and prohibition control judicial/quasi-judicial action.
Q30Constitution of India
Article 21 guarantees the right to life and personal liberty. Which case first held that the 'procedure established by law' under Article 21 must be just, fair and reasonable, overruling the earlier narrow view?
aA.K. Gopalan v. State of Madras
bManeka Gandhi v. Union of India
cKharak Singh v. State of U.P.
dADM Jabalpur v. Shivkant Shukla
Answer: B
Maneka Gandhi v. Union of India (1978) held that procedure under Article 21 must be just, fair and reasonable, linking Articles 14, 19 and 21, and effectively departing from the restrictive view in A.K. Gopalan.
Q31Constitution of India
A money bill, as defined in Article 110, can be introduced only in the Lok Sabha. After the Lok Sabha passes it, the Rajya Sabha:
aMay reject it, forcing a joint sitting
bHas co-equal power to amend it
cMay only make recommendations, which the Lok Sabha may accept or reject, and must return it within 14 days
dMust pass it within one month or it is deemed passed
Answer: C
Under Article 109, the Rajya Sabha can only recommend amendments to a money bill and must return it within 14 days; the Lok Sabha may accept or reject those recommendations, and if not returned in time it is deemed passed.
Q32Constitution of India
Which of the following best states the scope of Article 14's guarantee of equality with respect to classification?
aIt forbids all classification by the State
bIt permits classification only on the grounds enumerated in Article 15
cIt permits classification only in favour of socially and educationally backward classes
dIt permits reasonable classification founded on intelligible differentia having a rational nexus with the object sought to be achieved
Answer: D
Article 14 forbids class legislation but permits reasonable classification if it is founded on an intelligible differentia and that differentia has a rational nexus with the object of the law, as established in State of West Bengal v. Anwar Ali Sarkar.
Q33Criminal Law — Bharatiya Nyaya Sanhita 2023 & Bharatiya Nagarik Suraksha Sanhita 2023 (use NEW code sections)
A first-time undertrial has been detained during investigation, inquiry or trial for a period extending to one-half of the maximum imprisonment specified for the offence (not punishable with death or life). Under the BNSS, 2023, what is the correct position regarding his release?
aUnder Section 479 BNSS, a first-time offender shall be released on bond by the court on completion of one-third of the maximum period, subject to specified exceptions
bHe cannot be released until the trial concludes
cHe can be released only after serving the full maximum sentence
dRelease is barred for all undertrials facing multiple offences
Answer: A
Section 479 BNSS, 2023 provides that a first-time offender is entitled to release on bond after undergoing one-third of the maximum imprisonment (others after one-half), subject to exceptions like offences punishable with death/life and multiple pending cases.
Q34Criminal Law — Bharatiya Nyaya Sanhita 2023 & Bharatiya Nagarik Suraksha Sanhita 2023 (use NEW code sections)
A, intending to cause grievous hurt to B, strikes him; B, who suffers from an enlarged spleen unknown to A, dies from the blow. Under the Bharatiya Nyaya Sanhita, 2023, A is most appropriately liable for:
aMurder under Section 103, since death resulted
bCulpable homicide not amounting to murder, the act being done with intention of causing grievous hurt likely to cause death
cNo offence, since the death was unforeseeable
dCausing death by negligence under Section 106
Answer: B
Mirroring the classic 'thin-skull' principle, the act is culpable homicide (Section 100 BNS) but, the intention being only to cause such bodily injury as is likely to cause death of an ordinary person, falls under culpable homicide not amounting to murder, punishable under Section 105 BNS.
Q35Criminal Law — Bharatiya Nyaya Sanhita 2023 & Bharatiya Nagarik Suraksha Sanhita 2023 (use NEW code sections)
Which of the following is a NEW offence introduced for the first time by the Bharatiya Nyaya Sanhita, 2023, with no direct corresponding provision in the Indian Penal Code, 1860?
aSedition
bCausing death by negligence
cOrganised crime
dCheating
Answer: C
Organised crime (Section 111 BNS) and terrorist act (Section 113 BNS) are new offences in the general criminal code; the IPC had no such standalone provisions, while sedition has been recast as Section 152 (acts endangering sovereignty, unity and integrity).
Q36Criminal Law — Bharatiya Nyaya Sanhita 2023 & Bharatiya Nagarik Suraksha Sanhita 2023 (use NEW code sections)
Under Section 4 of the Bharatiya Nyaya Sanhita, 2023, 'community service' as a punishment is best described as:
aMandatory paid employment with a government body
bA reformative measure available only for juveniles
cConfinement to a community welfare centre in lieu of jail
dUnpaid work which the court may order an offender to perform as a form of punishment, benefiting the community
Answer: D
Section 4 BNS introduces community service as a recognised punishment; the Explanation defines it as work the court may order the convict to perform as a form of punishment, which benefits the community and for which he is not entitled to remuneration.
Q37Criminal Law — Bharatiya Nyaya Sanhita 2023 & Bharatiya Nagarik Suraksha Sanhita 2023 (use NEW code sections)
A man, by deceitful means and false promise to marry, has sexual intercourse with a woman, the promise being one he never intended to keep, and the act does not otherwise amount to rape. Under the Bharatiya Nyaya Sanhita, 2023, he commits an offence under:
aSection 69 (sexual intercourse by employing deceitful means)
bSection 64 (rape)
cSection 84 (enticing a married woman)
dNo offence, intercourse being consensual
Answer: A
Section 69 BNS is a new provision punishing sexual intercourse obtained by deceitful means or by making a promise to marry without any intention of fulfilling it; the Explanation clarifies 'deceitful means' includes a false promise of marriage.
Q38Criminal Law — Bharatiya Nyaya Sanhita 2023 & Bharatiya Nagarik Suraksha Sanhita 2023 (use NEW code sections)
Z, while of unsound mind, kills A. Y, who is sane, abets Z in committing the act. Under the Bharatiya Nyaya Sanhita, 2023, the liability of Y is:
aY is not liable, since the principal offender Z is exempt
bY is liable for abetment in the same manner as if he had committed the offence himself
cY is liable only for attempt
dY is liable for culpable homicide but at a reduced sentence
Answer: B
Under Section 49 BNS (abettor present when offence committed) and the principle that an abettor's liability is independent of the principal's exemption, the insanity of the doer does not exonerate the sane abettor, who is liable as if he committed the act.
Q39Criminal Law — Bharatiya Nyaya Sanhita 2023 & Bharatiya Nagarik Suraksha Sanhita 2023 (use NEW code sections)
Under the Bharatiya Nyaya Sanhita, 2023, the minimum number of persons constituting an 'unlawful assembly' is:
aTwo or more
bThree or more
cFive or more
dSeven or more
Answer: C
Section 189 BNS retains the IPC standard: an assembly of five or more persons is an unlawful assembly if their common object is one of those enumerated in the section.
Q40Contract & allied — Indian Contract Act 1872, Sale of Goods Act 1930, Partnership Act 1932, Specific Relief Act 1963
Under Section 38 of the Specific Relief Act, 1963, a perpetual injunction may be granted to a plaintiff to prevent breach of an obligation in his favour. In which situation is such an injunction appropriate?
aTo restrain a party from instituting proceedings in a court not subordinate to that from which the injunction is sought
bTo enforce a contract that the court cannot specifically enforce
cTo compel an act which the plaintiff is not entitled to in law
dWhere the defendant is a trustee of the property for the plaintiff
Answer: D
Section 38(3)(a) of the Specific Relief Act, 1963 expressly provides that a perpetual injunction may be granted where the defendant is trustee of the property for the plaintiff; restraining suits in non-subordinate courts is barred by Section 41(b).
Q41Contract & allied — Indian Contract Act 1872, Sale of Goods Act 1930, Partnership Act 1932, Specific Relief Act 1963
A displays a marked-price coat in his shop window for Rs. 5,000. B enters and tenders Rs. 5,000, demanding the coat. A refuses to sell. With reference to the law of offer, which statement is correct?
aThe display is only an invitation to offer; B's tender is the offer, which A is free to reject.
bA has made a binding offer that B has accepted, so a contract exists.
cThe display is a general offer to the whole world that anyone may accept.
dA standing offer arises which A cannot revoke once goods are exhibited.
Answer: A
Display of goods with a price tag is merely an invitation to offer (invitation to treat); the customer makes the offer, which the shopkeeper may accept or decline (Pharmaceutical Society of GB v. Boots; principle under Sec. 2(a) of the Indian Contract Act, 1872).
Q42Contract & allied — Indian Contract Act 1872, Sale of Goods Act 1930, Partnership Act 1932, Specific Relief Act 1963
A offers a reward by public advertisement to anyone who finds his lost dog. B, ignorant of the advertisement, finds and returns the dog, later learning of the offer and claiming the reward. Which is correct?
aB can claim the reward because performance of the conditions is conclusive proof of acceptance.
bB cannot claim, since acceptance presupposes knowledge of the offer when performing the act.
cB can claim because motive is irrelevant once the act is done.
dB can claim half the reward on quantum meruit.
Answer: B
Acceptance of a general offer requires knowledge of the offer at the time of performance; one who acts in ignorance of the offer cannot claim the reward (Lalman Shukla v. Gauri Datt; Sec. 2(b), 8 of the Indian Contract Act, 1872).
Q43Contract & allied — Indian Contract Act 1872, Sale of Goods Act 1930, Partnership Act 1932, Specific Relief Act 1963
A, at the request of B, paints B's house, B never having promised to pay anything. Later B promises in writing to pay Rs. 50,000 for the past work. Regarding this promise to compensate for a past voluntary act:
aIt is void for want of consideration because past consideration is no consideration.
bIt is valid only if registered.
cIt is valid; a promise to compensate for something already voluntarily done is enforceable under Sec. 25(2).
dIt is voidable at B's option as it lacks present consideration.
Answer: C
Under Sec. 25(2) of the Indian Contract Act, 1872, a promise to compensate a person who has already voluntarily done something for the promisor is an exception to the rule that an agreement without consideration is void.
Q44Contract & allied — Indian Contract Act 1872, Sale of Goods Act 1930, Partnership Act 1932, Specific Relief Act 1963
A contracts to sing for B at a concert for Rs. 1,000 payable in advance. A is too ill to sing on the appointed night. What is the legal consequence?
aA must refund the advance and additionally pay damages for breach.
bThe contract is void from inception for impossibility.
cA remains bound and must arrange a substitute singer.
dThe contract is voidable at B's option, and B may recover the advance already paid.
Answer: D
Where performance depends on the personal skill of a party who becomes incapacitated, the contract becomes voidable at the option of the other party; B may avoid it and recover the advance (illustration to Sec. 56, Indian Contract Act, 1872).
Q45Contract & allied — Indian Contract Act 1872, Sale of Goods Act 1930, Partnership Act 1932, Specific Relief Act 1963
In a contract, the parties agree that on breach the defaulting party shall pay Rs. 1,00,000 named as 'liquidated damages,' though actual loss is only Rs. 20,000. Under Indian law, the court will award:
aReasonable compensation not exceeding the named sum, regardless of whether it is a penalty or genuine pre-estimate.
bThe full Rs. 1,00,000, as parties are bound by their stipulation.
cNothing, since the clause is a penalty and hence void.
dExactly the Rs. 20,000 actual loss in every case, ignoring the named sum.
Answer: A
Section 74 of the Indian Contract Act, 1872 entitles the aggrieved party to reasonable compensation not exceeding the amount named, whether the sum is a penalty or liquidated damages (Fateh Chand v. Balkishan Das; ONGC v. Saw Pipes).
Q46Contract & allied — Indian Contract Act 1872, Sale of Goods Act 1930, Partnership Act 1932, Specific Relief Act 1963
A agreement is made by A to sell goods to B; A's consent was obtained by B's fraud. Before A discovers the fraud, B sells the goods to C, who buys in good faith for value. Which is correct?
aC gets no title because A's consent was vitiated, making the contract void.
bA can rescind against B but cannot recover the goods from C, a bona fide purchaser for value without notice.
cA can recover the goods from C absolutely, as fraud destroys title.
dC's title is good only if the original price was paid in full.
Answer: B
Fraud makes a contract voidable, not void; before rescission a bona fide purchaser for value without notice acquires good title, and the original owner cannot recover against him (Sec. 19, 64 of the Indian Contract Act, 1872; cf. Sec. 29 Sale of Goods Act, 1930).
Q47Code of Civil Procedure, 1908
In execution of a money decree, the decree-holder seeks arrest and detention of the judgment-debtor in civil prison. Under Section 51 read with its proviso CPC, such detention cannot be ordered unless the court is satisfied that the judgment-debtor:
aOwns immovable property exceeding the decretal amount
bHas filed an appeal against the decree
cHas, since the date of the decree, the means to pay and refuses or neglects, or has dishonestly transferred or removed property
dIs a habitual defaulter in earlier suits
Answer: C
The proviso to Section 51 bars detention in civil prison unless the court is satisfied that the judgment-debtor has dishonestly transferred or concealed property, or has had since the decree the means to pay and refuses or neglects to pay (or the debt is for a fiduciary breach).
Q48Code of Civil Procedure, 1908
A plaintiff withdraws a suit without the court's permission to file a fresh suit on the same subject-matter. Under Order XXIII Rule 1(4) CPC, the consequence is that the plaintiff:
aMay file a fresh suit on the same cause of action at any time within limitation
bMay file a fresh suit only with the consent of the defendant
cMust pay double court fees on any subsequent suit
dIs precluded from instituting any fresh suit in respect of such subject-matter
Answer: D
Order XXIII Rule 1(4) provides that a plaintiff who abandons or withdraws a suit without leave to file afresh is precluded from instituting any fresh suit in respect of such subject-matter, and is liable for costs.
Q49Code of Civil Procedure, 1908
Against an order rejecting a plaint under Order VII Rule 11 CPC, the correct remedy for the aggrieved plaintiff is to file:
aAn appeal, since rejection of a plaint is a 'decree' under Section 2(2) CPC
bA revision under Section 115 CPC
cA review petition under Order XLVII
dOnly an application under Section 151 before the same court
Answer: A
Section 2(2) expressly includes the rejection of a plaint within the definition of 'decree'; therefore an order under Order VII Rule 11 is appealable as a decree, not merely revisable.
Q50Code of Civil Procedure, 1908
A plaintiff files a suit and, before the case is set down for hearing, applies to withdraw it without seeking permission to file a fresh suit on the same subject-matter. What is the legal consequence under Order XXIII Rule 1 CPC?
aHe can file a fresh suit on the same cause of action as a matter of right
bHe is precluded from instituting any fresh suit in respect of the same subject-matter
cThe suit is merely adjourned and can be revived on application
dThe court must record reasons before permitting withdrawal
Answer: B
Under Order XXIII Rule 1(3) and (4), where a plaintiff withdraws a suit without the court's permission to bring a fresh suit, he is precluded from instituting any fresh suit in respect of the same subject-matter or part thereof.
Q51Code of Civil Procedure, 1908
Which of the following correctly states the position regarding an order rejecting a plaint under Order VII Rule 11 CPC?
aIt is an interlocutory order and is not appealable
bIt can be challenged only by way of revision under Section 115
cIt amounts to a decree and is therefore appealable
dIt bars the plaintiff from presenting a fresh plaint on the same cause of action
Answer: C
Section 2(2) CPC expressly includes the rejection of a plaint within the definition of 'decree', making an Order VII Rule 11 rejection appealable; Order VII Rule 13 also permits a fresh plaint on the same cause of action.
Q52Code of Civil Procedure, 1908
In a suit, the defendant fails to file a written statement within the permitted time. As regards the maximum period for filing a written statement under the proviso to Order VIII Rule 1 (as applicable to non-commercial suits), the court:
aHas no power to extend time beyond ninety days in any circumstance
bMust reject the defence and pass an ex parte decree automatically
cCan extend time only with the written consent of the plaintiff
dMay extend time for reasons to be recorded, the limit being directory and not mandatory for ordinary suits
Answer: D
For ordinary (non-commercial) suits, the Supreme Court in Kailash v. Nanhku (2005) held the time limit in Order VIII Rule 1 is directory, allowing extension in exceptional cases for recorded reasons; the rigid bar applies only to commercial disputes.
Q53Law of Evidence — Bharatiya Sakshya Adhiniyam 2023 (use NEW code sections)
Under the Bharatiya Sakshya Adhiniyam, 2023, which of the following persons is NOT competent to testify?
aA person whose unsoundness of mind, at the time of questioning, prevents him from understanding the questions or giving rational answers
bA child of tender years who can understand the questions and give rational answers
cA dumb witness who communicates intelligibly in writing or by signs in open court
dAn accomplice testifying against a co-accused
Answer: A
Section 124 BSA 2023 (old Section 118 IEA) bars a person from testifying only if a condition such as unsoundness of mind prevents him from understanding the questions and giving rational answers.
Q54Law of Evidence — Bharatiya Sakshya Adhiniyam 2023 (use NEW code sections)
Under the Bharatiya Sakshya Adhiniyam, 2023, communications made during marriage between spouses are privileged. Which of the following correctly states an exception to this privilege?
aThe privilege protects only oral and not written communications
bThe privilege does not apply in suits between the married persons themselves, or where one is prosecuted for a crime against the other
cThe privilege can be waived only by the court
dThe privilege ceases automatically on divorce
Answer: B
Section 128 BSA 2023 (old Section 122 IEA) protects marital communications but excepts suits between the spouses and prosecutions of one spouse for an offence against the other.
Q55Law of Evidence — Bharatiya Sakshya Adhiniyam 2023 (use NEW code sections)
A witness called by the prosecution turns hostile and gives evidence favouring the accused. Under the Bharatiya Sakshya Adhiniyam, 2023, the party who called him may, with the court's permission, put questions to him as in cross-examination. This is permitted under the provision dealing with:
aLeading questions in examination-in-chief
bRefreshing memory
cThe court permitting a party to cross-examine its own witness (hostile witness)
dCorroboration of prior statements
Answer: C
Section 157 BSA 2023 (old Section 154 IEA) empowers the court, in its discretion, to permit the party who calls a witness to put questions to him which might be put in cross-examination, i.e., to treat him as hostile.
Q56Law of Evidence — Bharatiya Sakshya Adhiniyam 2023 (use NEW code sections)
In a prosecution for rape under the Bharatiya Sakshya Adhiniyam, 2023, where sexual intercourse is proved and the question is consent, if the woman states in her evidence that she did not consent, the court:
aMay presume the absence of consent
bMust require corroboration before believing her
cShall presume consent unless force is shown
dShall presume that she did not consent
Answer: D
Section 120 BSA 2023 (old Section 114A IEA) provides that in specified rape prosecutions, where intercourse is proved and the woman states she did not consent, the court shall presume absence of consent.
Q57Law of Evidence — Bharatiya Sakshya Adhiniyam 2023 (use NEW code sections)
Under the Bharatiya Sakshya Adhiniyam, 2023, A intentionally and falsely leads B to believe that certain land belongs to A, and B buys it. Later A sues to recover the land claiming it actually belonged to another. A is precluded from doing so. This is an application of:
aSection 121 (estoppel)
bSection 122 (admissions are not conclusive proof)
cSection 119 (presumptions of fact)
dSection 128 (privileged communications)
Answer: A
Section 121 BSA 2023 (old Section 115 IEA) embodies the doctrine of estoppel: one who by declaration or conduct intentionally causes another to believe and act on a thing cannot later deny its truth in litigation.
Q58Administrative Law
Wednesbury unreasonableness, as a ground of judicial review, refers to a decision that is:
aMerely different from what the court would have decided
bSo unreasonable that no reasonable authority could ever have come to it
cTaken without prior publication in the official gazette
dContrary to a non-binding policy circular
Answer: B
Associated Provincial Picture Houses v. Wednesbury defines reviewable unreasonableness as a decision so outrageous in its defiance of logic that no sensible authority could have reached it.
Q59Administrative Law
A statutory authority empowered to act 'as it thinks fit' to grant a permit refuses an application by mechanically applying a self-imposed inflexible rule never to grant permits to new entrants. This is open to challenge as:
aA proper exercise of statutory discretion
bMala fide use of the doctrine of pleasure
cFettering of discretion / failure to exercise discretion
dValid sub-delegation
Answer: C
An authority vested with discretion must genuinely apply its mind to each case; rigidly fettering discretion by a blanket self-imposed rule amounts to non-exercise of the discretion conferred.
Q60Administrative Law
The requirement that an administrative or quasi-judicial authority must give reasons for its decision is best regarded as:
aWholly outside the scope of natural justice
bNecessary only where the statute expressly mandates reasons
cRequired only in original proceedings, never in appeals
dA facet of natural justice and fair procedure, ensuring against arbitrariness and aiding judicial review
Answer: D
The Supreme Court (e.g., S.N. Mukherjee v. Union of India) treats recording of reasons as an integral part of natural justice, introducing clarity and minimising arbitrariness while enabling review.
Q61Administrative Law
A 'speaking order' in administrative law denotes an order which:
aStates on its face the reasons supporting the decision
bIs communicated orally to the affected party
cIs passed without hearing the party
dCan only be reviewed by the Supreme Court
Answer: A
A speaking order is one that 'speaks for itself' by setting out the reasons for the conclusion, enabling the affected person and reviewing court to test its validity.
Q62Administrative Law
Conditional legislation differs from delegated legislation in that, in conditional legislation, the legislature:
aDelegates the power to frame the substantive law to the executive
bItself completes the law and leaves only the determination of a fact or the time/area of its application to the executive
cConfers unguided power on the executive to repeal the parent Act
dAuthorises the executive to impose taxes at will
Answer: B
In conditional legislation the law is complete; the executive merely determines the contingency or condition (e.g., when, where, to whom) on which it is brought into operation, with no law-making power delegated.
Q63Jurisprudence, Interpretation of Statutes & legal maxims
Identify the maxim that expresses the principle that a delegate cannot further delegate the authority entrusted to him.
aActus non facit reum nisi mens sit rea
bAudi alteram partem
cDelegatus non potest delegare
dUbi jus ibi remedium
Answer: C
'Delegatus non potest delegare' means a delegate cannot sub-delegate the power conferred on him, absent express or implied authority. The other maxims concern mens rea, fair hearing, and remedy for a right.
Q64Jurisprudence, Interpretation of Statutes & legal maxims
According to Salmond, a 'right in rem' is distinguished from a 'right in personam' chiefly by which feature?
aA right in rem is always a proprietary right while a right in personam is always personal
bA right in rem can be waived but a right in personam cannot
cA right in rem arises only from contract while a right in personam arises from tort
dA right in rem avails against persons generally (the world at large), whereas a right in personam avails against a determinate person
Answer: D
A right in rem is available against the world at large, while a right in personam is enforceable only against a specific, determinate person (e.g. a contracting party). The distinction is not based on waiver or source alone.
Q65Jurisprudence, Interpretation of Statutes & legal maxims
Under the doctrine of 'noscitur a sociis', how is the meaning of a doubtful word in a statute ascertained?
aBy reference to the words associated with it in the statute
bBy giving it the widest dictionary meaning available
cBy reference to the long title of the Act alone
dBy presuming it bears its meaning under the prior common law
Answer: A
Noscitur a sociis means a word takes colour from the words associated with it; a doubtful term is construed in the light of its accompanying words. It is broader than ejusdem generis but rests on the same associative idea.
Q66Jurisprudence, Interpretation of Statutes & legal maxims
Hohfeld analysed legal relations into jural correlatives. What is the jural correlative of a 'right' (claim) in Hohfeld's scheme?
aPrivilege
bDuty
cPower
dImmunity
Answer: B
In Hohfeld's analysis the correlative of a claim-right is a duty; the correlative of a privilege is a no-right, of a power a liability, and of an immunity a disability.
Q67Transfer of Property Act, 1882
A sells property to B. B sells the same property to C. Later A redeems an existing mortgage on the property and claims the property back from C. C resists. Which doctrine determines the priority of competing equities here, captured by the maxim qui prior est tempore potior est jure?
aSection 51 - improvements by a bona fide holder under defective title
bSection 41 - transfer by ostensible owner
cSection 48 - priority of rights created by transfer; where successive transfers conflict and there is nothing to the contrary, each later transfer is subject to the rights previously created
dSection 52 - lis pendens
Answer: C
Section 48 embodies the maxim that he who is earlier in time is stronger in law: where a person purports to create by transfer rights in property at different times and they cannot all exist together, each later-created right is subject to the rights previously created.
Q68Transfer of Property Act, 1882
During the pendency of a suit concerning title to immovable property, the defendant transfers the suit property to a third party who has no notice of the suit. The transferee's rights are:
aWholly unaffected, since he is a bona fide purchaser without notice
bProtected because Section 52 applies only where the transferee had actual notice of the suit
cVoid and the transfer is a nullity from inception
dSubject to the result of the suit under the doctrine of lis pendens (Section 52), bona fide want of notice being no defence
Answer: D
Under Section 52 (lis pendens), a transfer of property during the pendency of a suit in which a right to that property is directly in question does not affect the rights of the other party under the decree; the transferee is bound by the outcome, and absence of notice is immaterial.
Q69Arbitration and Conciliation Act, 1996
The 'public policy of India' ground for setting aside a purely domestic award under Section 34 includes the additional ground of 'patent illegality appearing on the face of the award'. After the 2015 Amendment, this patent-illegality ground:
aApplies only to awards arising out of arbitrations other than international commercial arbitration
bPermits merits review of every error of law
cApplies equally to international commercial arbitrations seated in India
dWas wholly deleted from the Act
Answer: A
Section 34(2A), inserted in 2015, confines the patent-illegality ground to awards in arbitrations other than international commercial arbitration, and an award cannot be set aside merely on an erroneous application of law or re-appreciation of evidence.
Q70Arbitration and Conciliation Act, 1996
In BALCO v. Kaiser Aluminium (2012), the Constitution Bench held that Part I of the Act (including Section 9) does not apply to arbitrations seated outside India. This overruling operated:
aRetrospectively, affecting all pending matters
bProspectively, applying only to arbitration agreements executed after 6 September 2012
cOnly to ICC arbitrations
dOnly where parties were Indian nationals
Answer: B
BALCO (2012) overruled Bhatia International prospectively, holding Part I inapplicable to foreign-seated arbitrations for arbitration agreements executed on or after 6 September 2012.
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