Business Laws Solved Question Papers' 2019, Gauhati University Solved Question Papers, B.Com 1st Sem CBCS Pattern (2023)

BUSINESS LAWS (Honours)’2019
Paper: COM – HC- 1036
Full Marks: 80:Time: 3 hours

Business Laws Solved Question Papers' 2019, Gauhati University Solved Question Papers, B.Com 1st Sem CBCS Pattern (1)

The figures in the margin indicate fullmarks for the questions

1. (a) Choose the correct option from the following: 1x5=5

1)An agreement to procure a Government job is a/an

a)Void agreement.

b)Illegal agreement.

c)Voidable agreement.

d)Unenforceable agreement.

2)Who among the folio Wing appoints a sub-agent?



c)Both (a) and (b).

d)Third person.

3)The Sale of Goods Act, 1930 came force on

a)1st May, 1930.

b)1st June, 1930.

c)1st July, 1930.

d)1st July, 1931.

4)Registration of partnership firm is



c)Both (a) and (b).

d)None of the above.

5)Who appoints the Central InformationCommissioner?

a)The Prime Minister of India.

b)The President of India.

c)The Chief Justice of the Supreme Court.

d)None of them.

(b) State whether the following statements are correct or incorrect: 1x5=5

1)The Indian Contract Act came into effect from 1stSeptember, 1872. True

2)A contract of life insurance is an indemnitycontract. False,contract of guarantee

3)Sale is an executed contract. True

4)The paying banker has no right to dishonour acheque. False

5)A promissory note can be crossed. False

2. Answer the following questions in brief: 2x5=10

a) Who can cross a cheque?

Ans: A cheque canbe crossed by the:

1. Drawer; or

2. The holder; when the cheque is open; or

3. The collecting banker.

b) What is contract?

Ans: Section 2 (h) defines ‘Contract’ as an agreement enforceable bylaw. If we analyse the definition it hastwo components viz.

1. An agreementbetween two or more persons "To Do" or "Not to Do"something.

2. Anenforceability of such an agreement at law i.e. personal rights and personalobligations created and defined by agreement must be recognized by law.

c) Write two rights of surety.

Ans: Rights of surety:

a) Right to securities: On default of principal debtor, whenthe surety is sued by the creditor to compensate the surety has the right tothe benefit of all securities which the creditor has against the principaldebtor at the time of contract of guarantee.

b) Right of set-off: If thesurety is sued by the creditor, he is entitled to use all the defences againstthe creditor principal debtor.

d) Write two essentials elements of acontract of sale.

Ans: Elements of Contract ofSale:

a) There aretwo parties in a contract of sale – buyer and seller.

b) Theconsideration for a contract of sale is price.

e) Write two differences betweenpartnership and co-ownership.

Ans: Difference between partnership andco-ownership




1. Basis of creation

Partnership is arises from contract not from status.

Co-ownership may be arises from contract or from status.

2. Covered by

Partnership is covered under the Indian Partnership Act’ 1932.

Co-ownership is not covered under the Indian Partnership Act’ 1932.

3. Transfer of interest

No partner can transfer his interest to anyone without the consent of all partners.

A co-owner can transfer his share.

Also Read:

Business Laws Solved Question Papers' 2019, Gauhati University

Business Laws Solved Question Papers' 2020 (Held in 2021), Gauhati University

Business Laws Solved Question Papers' 2021 (Held in 2022), Gauhati University

3. Answer any four of thefollowing questions: 5x4=20

a) Brieflystate the various kinds of contract on the basis of validity.

Ans: On the basis of validity, contract is of various typeswhich are discussed below:

a) VALID CONTRACT: Valid contract is that which is enforceable at law. Itcreates legal obligations between the parties. It enables one party to compel anotherparty to do something or not to do something. In case of valid contract all theparties to the contract are legally responsible for the performance of acontract. If one party breaks the contract other has right to be enforcedthrough the court.

b) VOID CONTRACT: "An agreement not enforceable at law is a void contract".Originally it is a valid contract but due to certain reasons it becomes voidafter its formation. A void contract cannot beenforcedby either party. In this case theparties are not legally responsible to fulfill the contract. If any party hasreceived any benefit is bound to return. This contract takes place when consentof one of the parties is not free.

c) VOIDABLE CONTRACT: An agreement, which is enforceable by law at the option of onemore of the parties, but not at the option of the other (s), is a voidablecontract.

d)Unenforceable Contract:An unenforceable contract is thatcontract which cannot be enforced incourts due to sometechnicaldefect, such as absence of writing, payment of inadequate stamp duty etc.

e)Illegal Contract:An illegal agreement is onetheobjectof which is: a) Fraudulent b) against the provisions ofany law c) causes an injury or damage to any person or his property d) immoralor opposed to public policy.

b) Explainthe duties of bailee.

Ans: Duties/Responsibilities of aBailee

1. Duty to take reasonable care (151):Thebailee is bound to take as much care of the goods bailed to him as a man ofordinary prudence would, under similar circumstances take, of his own goods ofthe same bulk, quality, and value as the goods bailed. The bailee must treatthe goods as his own in terms of care. However, this does not mean that if the baileris generally careless about his own goods, he can be careless about the bailedgoods as well. He must take care of the goods as any person of ordinaryprudence would of his things.

2. Duty not to make unauthorized use (Section154):Section 154says that if the bailee makes any use ofthe goods bailed which is not according to the conditions of the bailment; heis liable to make compensation to the bailer for any damage arising to thegoods from or during such use of them.

3. Duty not to mix (Section 155-157):Thebailee should maintain the separate identity of the bailer’s goods. He shouldnot mix his goods with bailer’s good without bailer’s consent. If he does so,and if the goods are separable, he is responsible for separating them and ifthey are not separable, he will be liable to compensate the bailer for hisloss.

4. Duty to return (Section 160):Section160 -It is the duty of the bailee to return or deliver according to the bailer’sdirections, the goods bailed, without demand, as soon as the time for whichthey were bailed has expired or the purpose for which they were bailed has beenaccomplished.

c) State the essential elements of partnership.

Ans: Partnership has the following characteristics:

(i)Agreement: Partnership is the result of anagreement, either written or oral, between two or more persons. An agreement betweenthe partners may be expressed or implied. It arises from contract and not fromstatus or process of law.

a)Number of Persons: In a partnership firm there must be atleast two people to form the business. Partnership Act 1932, does not specifiesthe maximum numbers of persons, but Section 464 of the Indian Companies Act2013, restricts the number of Partners to 50 for a partnership firm. But incase of limited liability partnership there is no maximum limit.

(ii)Profit-Sharing: The agreement between/among partners must beto share profit or losses. Sharing of profit is an essential feature ofpartnership. But an agreement to share losses is not an essential element.There may be specific provision in the partnership deed that a particularpartner or partners shall not bear the losses.

(iii)Business: The existence of business is essential incase of partnership. The term business includes every trade, occupation andprofession. Also the motive of thebusiness is the acquisition of gain which leads to the formation ofpartnership. If there is no intention to carry on the business and to share theprofit thereof, there can be no partnership.

(iv)Business carried on by all or any of themacting for all: Business must becarried on by all the partners or any one of them acting as agent of otherpartners. Each partner carrying on the business is the principle as well as theagent for all the other partners. Any act of one partner in the course of thebusiness of the firm is in fact an act of all the partners. This relationshipbetween the partners is the true test of partnership.

(v)Motive:For a partnership firm there must bemotive to earn profit. A partnership firm cannot be formed with service motive.

d) Explainthe different types of goods under the Sale of Goods Act, 1930.

Ans: Goods maybe classified into various types as under:

1. Existing goods: These are goods which areowned and possessed by the seller at the time of sale. Only existing goods canbe the subject-matter of a sale. The existing goods may be –

Specific goods: These are goods which areidentified and agreed upon at the time of contract of sale is made. For e.g. aperson visit s a Titan showroom and identifies a watch for purchase.

Ascertained goods: Though commonly used assimilar in meaning to specific goods, these are the goods which becomeascertained subsequent to the formation of contract of sale. For e.g. from say10 Sony T.V. a person identifies the particular T.V.

Unascertained goods: These are the goods whichare not identified and agreed upon at the time of the contract of sale. Theyare defined only by description and may form part of a lot. For e.g. ashopkeeper has a bag containing 50 kg of sugar. He agrees to sell 10 kg sugarto X out of that bag The 10 kg of sugar is unascertained goods as they are yetto be identified from the bag containing 50 kg.

2. Future Goods: These are goods which aseller does not possess at the time of the contract but which will bemanufactured, or produced, or acquired by him after the making of the contractof sale. [Section 2(6)]. A contract of present sale of future goods, thoughexpresses as an actual sale, purports to operate as an agreement to sell thegoods and not a sale. This is because the ownership of a thing cannot betransferred before that thing comes into existence.

3. Contingent Goods: It is a type of futuregoods but these are goods the acquisition of which by the seller depends upon acontingency which may or may not happen.

e) Distinguishbetween cheque and bill of exchange.

Ans: Difference between cheque and bills of exchange:



Bills of Exchange


A cheque is always drawn on a bank or banker.

A bill of exchange can be drawn on any person including a banker.


A cheque does not require any acceptance.

A bill must be accepted before the Drawee can be made liable upon it.


A cheque is payable immediately on demand without any days of grace.

A bill of exchange is normally entitled to three days of grace unless it is payable on demand.


A cheque does not require any stamp.

A bill of exchange must be stamped.


A banker is given statutory protection with regard to payment of cheques in certain circumstances.

No such protection is available to the Drawee or acceptor of a bill of exchange.

f) Discusswith examples the rules relating to contingent contract.

Ans: Rules regarding contingentcontracts: To enforce the performance of a contingent contract the followingrules have to be followed:

1. Where theperformance of a contingent depends on the happening of an uncertain futureevent, it cannot be enforced till the event takes place. And if the happeningof the event becomes impossible, such contracts become void (sec. 32). Example-Acontracts to sell B a piece of land if he (A) wins the legal case involvingthat piece of land. A loses the case. The contract becomes void.

2. Where theperformance of a contingent contract depends on the non-happening of a futureevent, the contract can be enforced if the happening becomes impossible (sec.33). Example-A agrees to sell his house to B if Y dies. Thiscontract cannot be enforced till Y is alive.

3. If the contractis dependent on the manner in which a person will act at an unspecified time,the event shall be considered to become impossible when such person doesanything which makes it impossible that he should so act within any definitetime or otherwise than under further contingencies (sec. 34).

4. Contingentcontract to do or not to do anything, if a specified uncertain event happenswithin a fixed time, becomes void if the event does not happen and the timeexpires or its happening becomes impossible before the time expires [sec.35(1)].

5. Contingentcontract to do or not to do anything, if a specific event does not happenwithin a specified time, may be enforced when the time so specified expires andsuch event does not happen, or before the time so specified it becomes certainthat such event will not happen [sec. 35(1)].

4. Discuss with examples theessential elements of a valid contract. 10

Ans: Section 2 (h) defines ‘Contract’ as an agreement enforceable bylaw. If we analyse the definition it hastwo components viz.

1. An agreement betweentwo or more persons "To Do" or "Not to Do" something.

2. Anenforceability of such an agreement at law i.e. personal rights and personalobligations created and defined by agreement must be recognized by law.

Section 2 (e) defines ‘agreement’ as “everypromise and set of promises forming consideration for each other”. For acontract to be enforceable by law there must be an agreement which should beenforceable by law. To be enforceable, the agreement must be coupled withobligation. Obligation is a legal duty to do or abstain from doing what onepromised to do or abstain from doing.All contracts are agreements but for agreement to be a contract it hasto be legally enforceable.

Section10 of the Act provide “All agreementsare contracts if they are made by the free consent of the parties competent tocontract for lawful object & are not hereby expressly declared void.”

An agreement inorder to become a contract must be enforceable by law. Agreements, which do notfulfill the essential requirements of a contract, are not enforceable. Thus when an agreement enables a person tocompel another to do something or not to do something it is called a contract.Thus all contracts are agreements but all agreements are not contracts. In order to become a valid contract anagreement must possess the following essential elements:

a) Offer & Acceptance: Theremust be two parties to an agreement i.e. one making the offer & other partyaccepting it. Acceptance of must be unconditional & absolute. A part of anoffer cannot be accepted. The terms of an offer must be definite. Theacceptance must be in the mode as prescribed & must be communicated. Theacceptor of an offer must accept it in the same way & same sense & atthe same time as offered by the offeror i.e. there must be consensus ad idem.

b) Intention to create legal relationship: When twoparties enter into a contract their intention must be to create legalrelationship. If there is no such intention between the parties, there is nocontract between them. Agreements of a social or domestic nature to do notconstitute contracts.

c) Lawful consideration: Anagreement to be enforceable by law must be supported by consideration.“Consideration” means an advantage or benefit which one party receives fromanother. It is the essence of bargain. The agreement is legally enforceableonly when both parties give something or get something in return. An agreementto do something without getting anything in return is not a contract. Contractmust be in cash or kind.

d) Capacity to Contract-Competency: Theparties competent to contract must be capable of contracting i.e. they must beof the age of majority, they must be of sound mind & they must not bedisqualified from contracting by any law to which they are subject to. An agreement with minors, lunatics,drunkards, etc. is not contract & does not get a legal title.

e) Free Consent: It isnecessary between the contracting parties to have a free & genuine consentto an agreement. The consent of parties is said to be free when the contractingparties are of the same mind on the materials of a contract. They must mean thesame thing at the same time the parties must not enter into a contract underundue influence, coercion, misrepresentation etc. If these flaws are present inan agreement it does not become a contract.

f) Lawful object: Theobject of an agreement must be lawful. It should not be illegal, immoral or itshould not oppose public policy. If an agreement suffers from a legal flaw withrespect to object it is not enforceable by law & so it is not a contract.

g) Agreement not declared void: For anagreement to be a contract it is necessary for the agreement must not beexpressly declared void by any law in force in the country.

h) Possibility & Certainty of performance: The termsof an agreement must not be vague or indefinite. It should be certain. Theagreement must be to do a thing which is possible. For e.g. an agreement tosell a car for Rs. 100/- if sun does not rise tomorrow. This agreement isimpossible & so not enforceable by law.

Thus,agreement is the genus of which contract is the specie.


Discuss the different types ofvoid agreements under the Indian Contract Act, 1872.

Ans: VOID CONTRACT: "An agreement notenforceable at law is a void contract". Originally it is a valid contractbut due to certain reasons it becomes void after its formation. A void contractcannot beenforcedby either party. In this case theparties are not legally responsible to fulfill the contract. If any party hasreceived any benefit is bound to return. This contract takes place when consentof one of the parties is not free.

Caseswhere the contracts specifically declared to be void under the Indian ContractAct:

1) Agreement made by incompetent person, fore.g. minor, a person of unsound mind

2) Agreement made under mutual mistake as tomatter of fact essential to the agreement.

3) Agreement made under mistake as to a lawnot enforce in India.

4) Agreement, the consideration or object ofwhich is unlawful in part or in full.

5) Agreement made without consideration.

6) Agreement in restraint of marriage: Everyagreement in restraint of the marriage of any person other than the minor isvoid. Every adult person has a right to get married and that to have a right toexercise his choice.

7) Agreement in restraint of trade: Everyagreement by which anyone is restraint from exercising a lawful profession,trade or business of any kind is to that extent void.

8) Agreement in restraint of legalproceedings: Every agreement which restricts, whether wholly or partly, theenforcing of rights in a court of law or every agreement limiting the timeallowed by Law of Limitation shall be void. Every individual has a right to suein any court and enforce his rights within the time allowed by the limitationact. The following are the exceptions to this rule:

(a) An agreement to refer any dispute toarbitration is permissible.

(b) An agreement restricting the right ofother party to sue in a particular court is permissible.

9) Agreement, the meaning of which isuncertain.

10) Agreements by way of wager.

11) Agreements contingent on an uncertainfuture event, if the event becomes impossible.

12) Agreements contingent on an impossibleevent.

13) Agreements to do the impossible act.

14) Agreements to do an act which subsequentlybecomes impossible.

5. (a) Distinguish between acontract of indemnity and a contract of guarantee. 5

Ans: Distinction between a contract of Indemnity and a contract ofguarantee

The contract of indemnity differs from thecontract of guarantee in the aspects shown in the following table:

Contract of Indemnity

Contract of Guarantee

1. In a contract of indemnity the promisor undertakes an independent liability.

1. A contract of guarantee is a contract to discharge the liability of a third person in case of default made by him.

2. A contract of indemnity involves two persons, viz., the indemnifier and the indemnity-holder.

2. A contract of guarantee requires the concurrence of three person viz. the principal debtor, the creditor and the surety.

3. The primary liability is on the indemnifier.

3. The principal liability is on the principal debtors.

Secondary liability is on the surety.

4. The loss to be indemnified in such contract is contingent.

4. There is an existing debt for which the surety gives guarantee.

5. The contract of indemnity is for the reimbursement of the loss.

5. The contract of guarantee is for the security of the creditor.

(b) Briefly discuss the rightsof an agent. 5

Ans: Rightsof agent

a) Right to remuneration: Everyagent has a right to receive remuneration from his principal for performing hisduties. But, if an agent is guilty of misconduct in the business is not entitledto any remuneration in that part of the business which he has mis-conducted.

b) Right of retaining cash: Agent hasthe right to retain cash, received by selling goods of the principal, to theextent of amount spent and advances given to the principal by him in carryingout his business.

c)Right oflien: In the absence of any contract to the contrary, an agent isentitled to retain goods, papers and other property, whether movable orimmovable, of the principal received by him, until the amount due to himselffor commission, disbursements and services in respect of the same has been paidor accounted for to him.

d)Right tocompensation: if any loss or injury caused to agent due to negligence or lack ofskill of principal, then the agent has the right to claim compensation for thesame.

e)Right toindemnity: The employer of an agent is bound to indemnify him against theconsequences of all lawful acts done by such agent in exercise of the authorityconferred upon him. Further, where one person employs another to do an act, andthe agent does the act in good faith, the employer is liable to indemnify theagent against the consequences of that act.


Who is an unpaid seller?Discuss the rights of an unpaid seller. 2+8=10

Ans: UnpaidSeller and His Rights

Section 45 define an unpaid seller as “One whohas not been paid or tendered the whole of the price or one who receives a billof exchange or other negotiable instrument as conditional payment and thecondition on which it was received has not been fulfilled by reason ofdishonour of the instrument or otherwise.” The following conditions must befulfilled before a seller can be deemed to be an unpaid seller:

(i) He must be unpaid and the price must bedue.

(ii) He must have an immediate right of actionfor the price.

(iii) A bill of exchange or other negotiableinstrument was received but the same has been dishonoured.

Rights ofan Unpaid Seller against the Goods

According to Section 46, an unpaid seller’s rightsagainst the goods are:

(a) A lien or right of retention

(b) The right of stoppage in transit.

(c) The right of resale.

(d) The right to withhold delivery

The above rights of the unpaid can be broadlydivided under 2 main headings:

I] Rights against the goods and

II] Rights against the buyer

I] Rightsagainst the goods:

A] Wherethe property in the goods has passed to the buyer: Wherethe ownership in the goods has already been transferred to the buyer thefollowing rights are available to an unpaid seller –

1. Rightof Lien: The right of lien means the right to retain the possession ofgoods until the full price is paid or tendered.When can lien be exercised:

(a) Where the goods have been soldwithout any stipulation as to credit.

(b) Where the goods have been sold oncredit, but the term of credit has expired, and

(c) Where the buyer becomes insolvent.

The right can be exercised even if the sellerholds the goods as an agent or bailee. Where part delivery of goods has beenmade, it can be exercised on the remaining goods, unless circumstances show hehas waived his right.

Termination of lien: The right gets terminatedunder following circumstances:

(a) When the goods are delivered to a carrieror bailee but without reserving the right of disposal.

(b) When the possession is acquired by thebuyer or his agent lawfully.

(c) When the right of lien is waived by theseller.

(d) When the buyer has disposed of the goodsby sale of in any manner with the consent of the seller.

2. Rightof stoppage of goods in transit: The right of stoppage in transitmeans the right to stopping the goods while they are in transit, to regainpossession and to retain them until the price is paid. The essential feature ofstoppage in transit is that the goods should be in the possession of someoneintervening between the seller and the buyer. The unpaid seller can exercisethe right of stoppage in transit if:

(a) The seller has parted with the possessionof the goods.

(b) The buyer has not taken possession ofgoods.

(c) Buyer has become insolvent.

The unpaid seller may exercise the right to stoppage in transit inany one of the following 2 ways:

(a) By taking actual possession of the goods,or

(b) By giving notice of his claim to thecarrier or other bailee in whose possession the goods are.

The right to stoppage in transit is lost underthe following circumstances:

(a) If the buyer or his agent obtainspossession.

(b) If after arrival of the goods at theappointed destination, the carrier or the bailee acknowledges to the buyer thathe holds the goods on his (buyer’s) behalf.

(c) If the carrier or bailee wrongfullyrefuses to deliver the goods to the buyer or his agent.

(d) Where the part delivery of the goods hasbeen made to the buyer or his agent, the remainder of goods may be stopped intransit. But if such part delivery has been given in such circumstances as toshow an agreement to give up possession of the whole of the goods the transitcomes to an end at the time of part delivery.

3. Rightof resale: Where the unpaid seller has exercised his right of lien orresumes possession of the goods by exercising his right of stoppage in transitupon insolvency of the buyer, he can re-sell the goods under the followingcircumstance:

(a) where the goods are of perishable nature.

(b) Where the seller has given notice of hisintention to re-sell the goods and yet the price remains unpaid.

(c) Where the seller expressly reserves aright of resale if the buyer commits a default in making the payment.

B] Wherethe property in the goods has not passed to the buyer: Wherethe property in the goods has not passed to the buyer, the unpaid seller canexercise the right to withholding delivery of the goods. This right is similarto and co-extensive with the right of lien and stoppage in transit where theproperty has passed to the buyer. Other remedies may include the right to claimdamages for the loss suffered, special damages, etc.

II] Rightsof an unpaid seller against the buyer personally

In addition to the unpaid seller’s rightsagainst the goods, he has rights even against the buyer personally. They are asfollows:

1. Suitfor Price: Generally the seller can sue for the price of the goods onlywhen the property in the goods has passed to the buyer and the price is notpaid as per the terms of the contract. In cases where the property in the goodshas not passed to the buyer, suit for price generally, cannot be maintained,unless under the contract, price is payable on a certain date irrespective ofthe delivery of passing of the ownership of the goods.

2. Suitfor damages: The unpaid seller can bring an action for damages where thebuyer wrongfully refuses to accept the goods or repudiates the contract.

3. Suit for repudiation: Where thebuyer repudiates the contract before the date of delivery, the seller may waittill the date of delivery or maytreat the contract as cancelled and sue for damages for breach.

4. Suit forinterest: In case of breach of contract on the part of the buyer, theunpaid seller can claim for interest from the date of tender of the goods orfrom the date, the price becomes payable along with a suit for price.

6. (a) State the features ofLimited Liability Partnership. 4

Ans:Features of LLP:

a) An LLP is abody corporate formed and incorporated under this Act and is legal entityseparate from its partners.

b) It is analternative corporate business from that gives the benefit of limited liabilityof a company and the flexibility of the partnership;

c) An LLP shall have perpetual succession.

d) Minimum numberof members for a LLP is 2 and no limit for maximum numbers.

e) Individualsand Corporate body can be partners in an LLP.

f) It can continueits existence irrespective of changes in partners. Admission, retirement ordeath of a partner does not affect the existence, rights or liabilities of theLLP.

g)It is capable of entering into contracts and holding property in its own name;

h) The provisionsof the Indian Partnership Act, 1932 shall not apply to an LLP.

i) No partner isliable on account of the independent or un-authorized actions of otherpartners, thus individual partners are shielded from joint liability created byanother partner’s wrongful business decisions or misconduct.

(b) Discuss the advantages ofLimited Liability Partnership. 6

Ans:Advantages of LLP: An LLP has thefollowing advantages:

a) Easyformation: The process of formation is very simple as compared to companies anddoes not involve too much formality.

b) Separate LegalEntity: It has separate legal entity distinct from its members. LLP is known byits name and not by the name of its partners.

c) PerpetualExistence: It has perpetual existence irrespective of change in partners. The LLP shall continue to exist till it iswound up in accordance with the provisions of the relevant law.

d) Limitedrestrictions: In LLPs, there is no requirement of minimum capital contribution,no restrictions as to maximum number of partners.

e) Less Cost:Cost of formation of an LLP is less as compared to a company.

f) No need tomaintain statutory record: There is no requirement to maintain statutory recordexcept books of accounts and return which is required to be submitted with ROC.

g) Less Tax:Another benefit of an LLP is low tax rate. LLP is taxed at a lower rate ascompared to company.

h) Easy windingup: An LLP can be wound up easily. There are limited formalities to wind up anLLP.


State the rights and duties ofa partner under the Indian Partnership Act, 1932. 10

Ans: The Rights of a partner are as under:

(i) To take active part in the business: Everypartner has a right to take active part in the conduct and management of thebusiness of the firm.

(ii) To share Profits: Every partnerhas a right to share profits earned and are liable to contribute to the lossesincurred by the firm.

(iii) To be consulted: Every partnerhas a right to be consulted in all matters affecting the business of thepartnership firm before any decision is been taken. In case of difference ofopinion it may be settled by decision of majority of the partners.

(iv) To have access to the accounts: Everypartner has a right to have access, inspect and copy the books of accounts ofthe firm.

(v) To be indemnified: Every partnerhas a right to be indemnified for the expenses incurred or payments made in theordinary course of business.

(vi) To use the property of the firm: Everypartner has a right to use the property of the firm for the purposes of thebusiness of the firm. If the partner uses the firm’s property for privatepurpose then he is liable to compensate the firm for the same.

The dutiesof a partner are as under:

(i) To carry on the business to thecommon advantage: Every partner is bound to:

(a) Carry on the business of the firmto the greatest common advantage.

(b) To be just and faithful to eachother in the mutual dealings.

(c) To use reasonable care and skillin the performance of his duties and

(d) Render true accounts and fullinformation of all things, affecting the firm, to any partner or his legalrepresentative.

(ii) To indemnify: Everypartner is bound to indemnify the firm:

(a) For any loss cause to it by hisfraud in the conduct of business of the firm.

(b) For any loss incurred due to hiswillful neglect in the conduct of the business of the firm.

(iii) To attend diligently to hisduties: Every partner is bound to attend diligently to his duties in theconduct of the business of the firm. He must use his knowledge and skill forthe benefit of the firm.

(iv) To account for privateprofits: If a partner derives any benefit, without the consent of the otherpartners from any transactions of the firm or from any use of the partnershipproperty, name or business connection. He must account for it and compensate itto the firm. There exists a fiduciary relationship between partners andtherefore no partner is entitled to make any personal profit.

(v) To account for profit incompeting business: A partner must not carry a business as of competingnature with the firm. If he does that then he is bound to account for andcompensate to the firm all the profits made by him in that competing business.

7. (a) Under what circumstancesthe banker must refuse payment of cheques? 5

Ans: The bank may dishonour a cheque in the following cases.

a) When thecheque is post dated and it is presented for payment before the date it bears.

b) When thereare insufficient funds to the credit of the drawer.

c) When thecheque is presented for payment at branch where the drawer of the cheque has noaccount.

d) When acheque is not duly, presented, as for example a cheque presented outsidebanking hours.

e) When thecheque is ambiguous, mutilated, materially altered or irregular.

f) When thecheque has become stale, that is it is not presented within six months of theissue of the cheque.

g) When thesignatures of the drawer of a cheque do not tally with the specimen signaturesin the records of the bank.

h) When theamount in figures and in words is not the same in a cheque.

i)When the cheque is crossed and it is notpresented through a bank.

j)Where the bank receives a notice of theinsolvency or insanity of the customer.

(b) Briefly discuss thedifferent kinds of endorsement. 5

Ans: Different kinds of endorsement with their respective significanceare explained below:

a) Blank orGeneral Endorsement: An endorsement is said to be blank or general, if theendorser sings on the back or on the face of the instrument without specifyingthe name of any endorsee. The effect of his endorsement makes the instrumentpayment to bearer even though originally it was payable to order. For example,a cheque payable to Mr. X or order and Mr. X endorse the cheque by simplyaffixing her signature. The effect of this endorsement makes the instrumentpayable to bearer even though originally it was payable to order.

b) Full orSpecial Endorsement: If an endorser signs his name and adds a direction to paythe amount mentioned in the instrument to or to the order of a specifiedpersons, such an endorsement is said to be a full or special endorsement. For example, “Pay to Mr. X or order” S/d Mr.Y is an example of full endorsement. Here Mr. Y is the endorser and he hasmentioned the name of the endorsee – Mr. X.

c) ConditionalEndorsement: An endorsement is conditional or qualified if it limits orneglects the liability of the endorser.For example, “Pay to Mr. X on his marriage” s/d Mr. Y is a conditionalendorsement. In case of conditional endorsement, the liability of the endorserand the rights of the endorsee becomes conditional on the happening of aparticular event.

d) RestrictiveEndorsement: An endorsement is said to be Restrictive, when it prohibits orrestrictive the future negotiability of the instrument, it merely entitles theholder of the instrument to receive the amount on the instrument for aspecified purpose. For example, “Pay to Mr. X only” s/d Mr. Y. This endorsementconfers all the rights of an endorser to the endorsee except the right ofnegotiation.

e) SanRecourse endorsement and San frais endorsement: In San recourse endorsement,the endorser by his expressed words excludes his own liability and in San fraisendorsement, the holders have no right against the endorser if the instrumentis dishonoured. For example, “Pay to Mr. X or order – Notice of dishonourwaived.” These types of endorsement are generally used to avoid personalliability.

f) Facultativeendorsement: In such type of endorsement, the endorser by his express wordsincreases his liability or give up some of his rights.

g) PartialEndorsement: When the endorser intends to transfer to the endorsee only a partof the amount of instrument by endorsement, the endorsement is said to bepartial. A partial endorsement does not operate as a negotiation of theinstrument. For example, when a cheque of Rs. 10,000 is endorsed for Rs. 5000is an example of partial endorsement.

h) Forgedendorsement: When a negotiable instrument is endorsed with the forged signatureof the endorser, the endorsement is called forged endorsement.


What are the obligations ofpublic authorities under the Right to Information Act, 2005? Discuss. 10


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