Comprehension
The Companies Act, 2013 does not deal with insolvency and bankruptcy when the companies are unable to pay their debts or the aspects relating to the revival and rehabilitation of the companies and their winding up if revival and rehabilitation is not possible. In principle, it cannot be doubted that the cases of revival or winding up of the company on the ground of insolvency and inability to pay debts are different from cases where companies are wound up under Section 271 of the Companies Act, 2013. The two situations are not identical. Under Section 271 of the Companies Act, 2013, even a running and financially sound company can also be wound up for the reasons in clauses (a) to (e). The reasons and grounds for winding up under Section 271 of the Companies Act, 2013 are vastly different from the reasons and grounds for the revival and rehabilitation scheme as envisaged under the IBC. The two enactments deal with two distinct situations and in our opinion, they cannot be equated when we examine whether there is discrimination or violation of Article 14 of the Constitution of India. For the revival and rehabilitation of the companies, certain sacrifices are required from all quarters, including the workmen. In case of insolvent companies, for the sake of survival and regeneration, everyone, including the secured creditors and the Central and State Government, are required to make sacrifices. The workmen also have a stake and benefit from the revival of the company, and therefore unless it is found that the sacrifices envisaged for the workmen, which certainly form a separate class, are onerous and burdensome so as to be manifestly unjust and arbitrary, we will not set aside the legislation,solely on the ground that some or marginal sacrifice is to be made by the workers. We would also reject the argument that to find out whether there was a violation of Article 14 of the Constitution of India or whether the right to life under Article 21 Constitution of India was infringed, we must word by word examine the waterfall mechanism envisaged under the Companies Act, 2013, where the company is wound up in terms of grounds (a) to (e) of Section 271 of the Companies Act, 2013; and the rights of the workmen when the insolvent company is sought to be revived, rehabilitated or wound up under the Code. The grounds and situations in the context of the objective and purpose of the two enactments are entirely different.
(Extracted, with edits and revision, from the judgement in Moser Baer Karamchari Union Thr. President Mahesh Chand Sharma v. Union of India and Ors, 2023 SCC Online SC 547)
Question: 1

In which of the following cases, it was held by the Supreme Court addressed shareholders rights, RB's role and judicial Intervention?

Updated On: Jan 13, 2026
  • Life Insurance Corporation of India v. Escorts Ltd
  • R. K. Dalmia v. Delhi Administration
  • Dale And Carrington Invt. Ltd. v. P.K. Prathapan
  • Rohtas Industries Ltd v. S.D. Agarwal & Anr
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The Correct Option is A

Solution and Explanation

The Supreme Court case "Life Insurance Corporation of India v. Escorts Ltd" concerns shareholder rights, the Reserve Bank of India's (RBI) role, and judicial involvement. This key case clarifies the connection between corporate governance, shareholder relationships, and regulatory supervision. It's important for legal studies because it defined shareholder rights in company management, the RBI's discretionary powers, and the extent of court intervention in corporate issues. The case started when Life Insurance Corporation of India, a major Escorts Ltd shareholder, had voting problems on management resolutions. The Supreme Court addressed shareholder voting rights in meetings, the RBI's regulatory powers over financial institutions, and the scope of judicial review in corporate affairs. The court's ruling clarified the legal structure for statutory bodies, companies, and shareholders, supporting corporate democracy while balancing regulatory and judicial oversight.
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Question: 2

The extent to which a corporation as a legal person can be held criminally liable for its acts and omissions and for those of the natural persons employed by it is called

Updated On: Jan 13, 2026
  • Corporate manslaughter
  • Lifting the corporate veil
  • Corporate criminal liability
  • Corporate social responsibility
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The Correct Option is C

Solution and Explanation

The term corporate criminal liability describes a company's responsibility for criminal acts, either directly or through its employees. This legal concept is essential in business law, ensuring corporations are accountable for illegal actions and cannot avoid responsibility because they are not human. Consider these definitions:
  • Corporate manslaughter: A corporation is charged with causing death through gross negligence, often related to workplace safety.
  • Lifting the corporate veil: A court decision treating a corporation's rights or duties as those of its shareholders.
  • Corporate social responsibility: A company's commitment to ethical practices, addressing social and environmental impact.
  • Corporate criminal liability: The correct term, referring to a corporation's legal responsibility for criminal acts, whether direct or through employees.
Although the original text discusses company insolvency and liquidation laws, comparing Indian frameworks, this question focuses on a corporation's legal accountability outside of insolvency. It clarifies the meaning and importance of corporate criminal liability.
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Question: 3

In which of the following cases, the constitutionality of the Insolvency and Bankruptcy Code, 2016 was upheld by the Supreme Court?

Updated On: Jan 13, 2026
  • RPS Infrastructure Ltd. v. Union of India
  • Paschimanchal Vidyut Vitran Nigam Ltd. v. Union of India
  • Union Bank of India v. Financial Creditors of M/s Amtek Auto Limited
  • Swiss Ribbons v. Union of India
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The Correct Option is D

Solution and Explanation

In the case of Swiss Ribbons v. Union of India, the Supreme Court confirmed the legality of the Insolvency and Bankruptcy Code, 2016. This significant ruling defined the legal basis for the IBC, separating company revival, rehabilitation, and winding up from procedures under the Companies Act, 2013. The court clarified the distinct objectives of the IBC and the Companies Act, stressing the unique demands of insolvency resolution, including contributions from secured creditors, governments, and employees. The judgment reinforces the need to differentiate between these two legal frameworks, preventing confusion and ensuring fair treatment under Article 14 of the Indian Constitution.
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Question: 4

A Director other than a managing Director or a whole-time Director or a nominee Director who does not have any material or pecuniary relationship with the company/ Directors other than the remuneration is called

Updated On: Jan 13, 2026
  • Impartial Director
  • Promoter
  • Independent Director
  • Associate Director
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The Correct Option is C

Solution and Explanation

The query concerns a specific type of company director, as defined by laws like the Companies Act. Here's an analysis of the choices:
  1. Impartial Director
    This term isn't standard in corporate governance, making this option likely incorrect.
  2. Promoter
    A Promoter establishes a company and often has considerable influence but doesn't meet the criteria of having no material or financial ties.
  3. Independent Director
    An Independent Director, as defined by the Companies Act, 2013, has no significant financial or material connection with the company, its directors, or its promoters, except for director fees. This aligns with the description.
  4. Associate Director
    An Associate Director may have responsibilities, but the role doesn't specifically match the definition of having no material connections beyond director compensation.
Based on the evaluation, the correct answer is Independent Director because it precisely fits the requirement of lacking material or financial relationships with the company or other directors, apart from remuneration.
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Question: 5

Which among the following is not a duty of a Director of the company?

Updated On: Jan 13, 2026
  • To file return of allotments
  • To disclose interest
  • Duty to call upon the shareholders to attend the Board meetings
  • To convene General meeting
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The Correct Option is C

Solution and Explanation

The question asks which option isn't a Director's duty. To answer, we need to know typical Director responsibilities, often defined by laws like the Companies Act. These usually include managing the company responsibly, declaring conflicts of interest, and participating in board meetings for strategic decisions. Here's an analysis of the options:
  1. To file return of allotments: Directors must ensure compliance, including filing share allotment returns.
  2. To disclose interest: Directors must disclose personal transaction interests to avoid conflicts, following good governance.
  3. Duty to call upon the shareholders to attend the Board meetings: This involves inviting shareholders to board meetings. It's usually a board or corporate secretary's task, not a direct Director duty. Directors call board or general meetings, not individual shareholders.
  4. To convene General meeting: Organizing shareholder meetings is a key board responsibility, where directors are crucial.
The correct answer is the duty NOT typically a Director's responsibility: Duty to call upon the shareholders to attend the Board meetings.
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Top Questions on Company Law

Questions Asked in CLAT PG exam

An unpleasant tussle ensured between the TATA Sons and Cyrus Pallonji Mistry (“CPM”) in October 2016, when Mistry, who was the sixth chairman of Tata Sons, was ousted from the position of Executive Chairman of Tata Sons Limited. CPM took over as the chairman in 2012 after Ratan Tata announced his retirement. Tata Group patriarch Ratan Tata had personally asked Cyrus Mistry to resign as chairman of Tata Sons as the board had lost faith in him, but his refusal led to the removal via majority vote. Cyrus Investments Private limited and Sterling Investment Corporation Private Limited belonged to the Shapoorji Palloni Group in which CPM held a controlling interest (about 2% of the issued share capital of Tata Sons). Seven out of the nine directors of Tata Sons voted for CPM’s replacement after Farida Khambata abstained and Mistry was declared ineligible to vote as he was an interested director. Mistry challenged his removal, accusing the board of mismanagement and of oppressing minority shareholders. however, the National Company Law Tribunal (NCLT) rejected his petition. After this Mistry challenged his removal in National Company Law Appellate Tribunal (NCLAT). In 2018, NCLAT order restored Mistry as the group’s executive chairman. Tata Sons challenged that NCLAT order in Supreme Court. CPM also challenged the order for few more relief. Supreme Court stayed NCLAT’s order reinstating Cyrus Mistry as the executive chairman of Tata Sons and restoring his directorships in the holding company as well as three group companies, with a preliminary observation that the first impression of the order was “not good” and that the tribunal ‘could’ not have given consequential relief that had not been sought in the first place. Ultimately, the Supreme Court decided the case in favour of Tata Sons. One of the issues decided by Supreme Court was that “whether the case was fit to be qualified as a situation of ‘Oppression and Mismanagement’ under Section 241 of the Companies Act, 2013?”. On this issue, the Supreme Court observed that “unless the removal of a person as a chairman of a company is oppressive or mismanaged or done in a prejudicial manner damaging the interests of the company, its members or the public at large, the NCLT cannot interfere with the removal of a person as a Chairman of a Company in a petition under Section 241 of the Companies Act, 2013.” This case highlighted the point that “an executive chairman does not have sovereign authority over the company. In corporate democracy, decision making always remains with the Board as long as they enjoy the pleasure of the shareholders. Likewise, an executive chairman will continue as long as he/she enjoys the pleasure of the Board. An assumption by the executive chairman that he/she would have a free hand in running the affairs of the company is incongruous to corporate governance and corporate democracy. The Tribunal held that the concept of ‘free hand rule’ is antithesis to collective responsibility and collective decision making”.
[Based on Tata Consultancy Services Ltd. v. Cyrus Investment Pvt. Ltd., 2021 SCC 122].
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Alastair Hudson in his book ‘Securities Law’ First Edition (Sweet & Maxwell), 2008 at page 342, refers to ‘Restricted Offers’ and noticed that there is no contravention of Section 85 of FSMA 2000, if: “(b) the offer is made to or directed at fewer than 100 persons, other than qualified investors, per EEA State”. The purpose underlying that exemption, the author says, is mainly the fact that the offer is not being made to an appreciable section of “the public” such that the policy of the prospectus rules generally is not affected. Further, the author says that “Self-evidently, while an offer to 99 ordinary members of the public would be within the literal terms of the exemption, it would not be the sort of activity anticipated by the legislation. Moreover, if a marketing campaign were arranged such that ordinary members of the people were approached in groups of 99 people at a time in an effort to avoid the prospectus rules, then that would not appear to be within the spirit of the regulations and might be held to contravene the core principle that a regulated person must act with integrity.”
I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty-nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. Facts clearly reveal that Saharas have issued securities to the public more than the threshold limit statutorily fixed under the first proviso to Section 67(3) and hence violated the listing provisions which may attract civil and criminal liabilities. Principles of listing, which I may later on discuss, is intended to assist public companies in identifying their obligations and responsibilities, which are continuing in nature, transparent in content and call for high degree of integrity. Obligations are imposed on the issuer on an ongoing basis. Public companies who are legally obliged to list their securities are deemed to accept the continuing obligations, by virtue of their application, prospectus and the subsequent maintenance of listing on a recognized stock exchange. Disclosure is the rule, there is no exception. Misleading public is a serious crime, which may attract civil and criminal liability. Listing of securities depends not upon one’s volition, but on statutory mandate.
[Extract from Sahara India Real Estate Corporation Limited v. Securities and Exchange Board of India (SEBI), Para 89-91, Civil Appeal No. 9833/2011 (SC)]
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The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in recent years. In the past, it was thought that it included just two rules namely: (1) no one shall be a judge in his own case (Nemo debet esse judex propria causa) and (2) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem).
Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must be held in good faith, without bias and not arbitrarily or unreasonably. But in the course of years many more subsidiary rules came to be added to the rules of natural justice. Till very recently it was the opinion of the courts that unless the authority concerned was required by the law under which it functioned to act judicially there was no room for the application of the rules of natural justice. The validity of that limitation is not questioned.
If the purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative enquiries. Often times it is not easy to draw the line that demarcates administrative enquiries from quasi-judicial enquiries. Enquiries which were considered administrative at one time are now being considered as quasi-judicial in character. Arriving at a just decision is the aim of both quasi-judicial enquiries as well as administrative enquiries. An unjust decision in an administrative enquiry may have more far reaching effect than a decision in a quasi-judicial enquiry as observed by this Court in Suresh Koshy George v. University of Kerala [Civil Appeal No. 990/68, decided on 15-07- 1968], the rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principle of natural justice had been contravened the court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.
[Extract from the judgment of the Supreme Court in A.K. Kraipak v. Union of India, (1969) 2 SCC 262, decided on April 29, 1969, hereafter ‘A.K. Kraipak’].
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The doctrine of promissory estoppel is by now well recognized and well defined by a catena of decisions of this Court. Where the Government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promise, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promise notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 229 of the Constitution. The rule of promissory estoppel being an equitable doctrine has to be moulded to suit the particular situation. It is not a hard-and-fast rule but an elastic one, the objective of which is to do justice between the parties and to extend an equitable treatment to them. This doctrine is a principle evolved by equity, to avoid injustice and though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. For application of the doctrine of promissory estoppel the promise must establish that he suffered in detriment or altered his position by reliance on the promise.
Normally, the doctrine of promissory estoppel is being applied against the Government and defence based on executive necessity would not be accepted by the court. However, if it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promise and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. The Government can change the policy in public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something which is not allowed by law or prohibited by law. There is no promissory estoppel against the settled proposition of law. Doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute. Thus, the Government or public authority cannot be compelled to make a provision which is contrary to law.
[Extract from the judgment of the Supreme Court in Shree Sidhbali Steels Limited v. State of Uttar Pradesh, (2011) 3 SCC 193, decided on January 20, 2011, hereafter ‘Shree Sidhbali Steels’].
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