business laws,ethics and communication

351 Pages·2014·1.62 MB·English

P M
RACTICE ANUAL
Intermediate (IPC) Course

P : 2
APER

B L , E
USINESS AWS THICS
AND
C
OMMUNICATION

VOLUME – II

BOARD OF STUDIES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
i
© The Institute of Chartered Accountants of India
This practice manual has been prepared by the faculty of the Board of Studies. The
objective of the practice manual is to provide teaching material to the students to enable
them to obtain knowledge and skills in the subject. Students should also supplement their
study by reference to the recommended text books. In case students need any
clarifications or have any suggestions to make for further improvement of the material
contained herein, they may write to the Director of Studies.
All care has been taken to provide interpretations and discussions in a manner useful for
the students. However, the practice manual has not been specifically discussed by the
Council of the Institute or any of its Committees and the views expressed herein may not
be taken to necessarily represent the views of the Council or any of its Committees.
Permission of the Institute is essential for reproduction of any portion of this material.

 THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

All rights reserved. No part of this book may be reproduced, stored in retrieval system, or
transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording, or
otherwise, without prior permission in writing from the publisher.
Revised Edition : July, 2013
Website : www.icai.org
E-mail : [email protected]
Committee / : Board of Studies
Department
ISBN No. :

Price : `

Published by : The Publication Department on behalf of the Institute of Chartered
Accountants of India, ICAI Bhawan, Post Box No. 7100,
Indraprastha Marg, New Delhi – 110 002
Printed by :

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© The Institute of Chartered Accountants of India
A W P M
ORD ABOUT RACTICE ANUAL
The Board of Studies, the academic wing of the Institute of Chartered Accountants of India has
been taking proactive initiatives in imparting the distance education to the students pursuing the
Chartered Accountancy Course. Keeping in view of the requirements of the curriculum, the time
available with the students, integration of training vis-à-vis industrial expectation, it is necessary
that students should have a holistic learning and not a mere rote learning. CA students have a wide
choice in learning the subject through the mode of text books, study modules, compilation of
answers to the past years examination questions, revisionary test papers, supplementary study
material on the subject updates, teleconference classes and other reference inputs. Despite the
various options, it is found that when it comes to the examination requirements, most of them do
not come to the expectation level even though students have put in their best efforts. There may be
several causes as to their performance in the examination and it is therefore necessary that a
student from the very beginning of his career need to know as to what is the best way of
approaching the examination.
The plan, preparation and proceeding with each of the subject differ widely and therefore one
should customize his study accordingly. At the Intermediate (IPC) level, Paper-2 deals with
Business Laws, Ethics and Communication, where the level of knowledge prescribed is that of
‘Working knowledge’. The paper consists of three parts, Part I relating to Business Laws carrying a
weightage of 60 marks with the objective that students are ‘able to analyze and apply various
provisions of the Business Laws constituting the Indian Contract Act,1872, the Negotiable
Instruments Act,1881,the Payment of Bonus Act,1965,the Employees’ Provident Funds and
Miscellaneous Provisions Act,1952,the Payment of Gratuity Act,1972 and the Companies Act,
1956 in practical situations’ . Part II relating to Ethics carrying weightage of 20 marks dealing with
issues relating to business ethics and the objective is ‘to have understanding of ethical issues in
business’. Part III consisting of Communication carrying weightage of 20 marks including the
communication in general, in business environment along with the drafting of simple deeds and
documents relating to business. Accordingly, preparation should be proceeded with care, concern
and caution.
The study material serves as a basic input for the subject and the student’s study is complete when
he synchronizes with other related publications of the institute as mentioned above. It is in this
context, the Board of Studies thought it fit that there should be a common material which should
provide him all the inputs at one place and for this purpose, a new avatar of study requirements
have been introduced for the benefit of students community, which is known as ‘Practice Manual’.
What is Practice Manual?
As the name suggests, that examination is an art, where you require constant practice in solving as
many problems as possible. After studying the basic study material, a student has to synchronize it
with examination. It is in this context, the Practice Manual will fill up the gap. As the name
suggests, the practice manual contains lot of solved questions and some practical exercises with
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© The Institute of Chartered Accountants of India
hints wherever necessary. It is in fact a compilation of various practical problems whether it is from
past years or practical or based on amendments in relevant laws and other problems culled from
different sources. As compared to the study material, this practice manual proceeds with the
subject from beginning to end. In other words, since it is a law subject, chapterization in this
Practice Manual has been done topic-wise as given under the study material. You will come across
definition clauses, important provisions which have bearing on application and interpretation and so
forth. By this method of study you will know the genesis of
• The analysis part
• The application part
• The interpretation part
• The judgement part
• The sequence part
• The logical part
• The clarity part
• The concise part
• The secretarial part
• And above all the conclusion part.
Contents of Practice Manual
This practice manual is segregated into 19 Chapters dealing with the Business Laws starting from
Chapter on the Indian Contract Act,1872 and ending with Chapter on the Companies Act,1956.
Besides there is a chapter on Ethics and Communication. All the questions given in the practice
manual goes topic -wise that have been arranged and given in the respective study material.
Before reading the question, remember the sequence of the chapter in the study material and its
subject-matter. This will help you in not only having a grasp of the subject, your grip in the subject
will ultimately be reflected. Problems have been carefully chosen from various sources so that you
come across different application and its implication in practical situations.
This revised Practice Manual contains the questions and answers of 2012( May &
November) attempts as well updations in relevance to the answer as per the recent
amendments made in the law. Any kind of modification or changes carried out in the
Practice Manual are laid down in the bold italics, for the making out the difference.
Your valuable suggestions
All steps have been taken to make reading of practice manual, resourceful and useful. Since
amendments in law are a continuous process, we endeavor to update the answers in tune with the
changes wherever necessary. In case if you have any suggestions for fine tuning, mail us at
[email protected] , [email protected] or [email protected]

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© The Institute of Chartered Accountants of India
To end
Remember the words of Sir Francis Bacon, ‘Reading maketh a full man, Conference a ready man,
and Writing an exact man. We hope the Practice Manual will facilitate the students in
understanding where they lack in their self-study and steps to overcome them. Read the practice
manual wholly with diligence and attention.
We wish you a resourceful reading and good luck .

Happy Reading and Best Wishes!
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© The Institute of Chartered Accountants of India
Paper – 2: Business Laws, Ethics and Communication
Statement showing topic-wise distribution of Examination Questions along with Marks
Topics Term of Examination Total Avg.
May 2010 Nov. 2010 May 2011 Nov. 2011 May 2012 Mark Marks
s
No. Chapter Name Q M Q M Q M Q M Q M
1 The Indian Contract Act, 1(c)(i) 1 1(b)(II)(iii) 1 1(b)(I)(i) 1 1(a), 5 1(a) 5 57 11.4
1872 1(a) 5 1(b)(I)(ii) 1 1(b)(II)(i) 1 3(a), 8 3(a) 8
1(b)(ii) 1 1(b)(I)(i) 1 1(a) 5 6(c)(i), 1 6(c)(i) 1
1(c)(ii) 1 1(b)(II)(i) 1 1(b)(II)(ii) 1 6(c)(ii) 1 6(c)(ii) 1
1(b)(II)(ii) 1 1(b)(II)(iii) 1
1(a) 5
2 The Negotiable Instruments 1(c)(iii) 1 5(a) 8 1(b)(I)(ii) 1 5(a) 8 5(a) 8 39 7.8
Act,1881 3 5 5(a) 8
3 The Payment of Bonus Act, 1965 1(b)(i) 1 2(a) 8 2(a) 8 2(a)(i), 4 2(a)(i) 4 30 6.0
4 5

4 The Employees’ Provident Funds 5 5 7(a) 4 7(a) 4 7(a) 4 7(a) 4 21 4.2
and Miscellaneous Provisions
Act,1952
5 The Payment of Gratuity Act,1972 6 5 3(a) 8 3(a) 8 2(a)(ii) 4 2(a)(ii) 4 29 5.8
6 The Companies Act,1956
Preliminary 2(a) 5 7(b) 4 1(c) 5 4(a), 8 4(a) 8 75 15
2(c)(i) 1 1(d) 5 5(b) 4 6(a) 8
8 8 6(a) 8 6(c)(iii) 1 6(c)(iii) 1
7(b) 4 6(c)(iv), 1
7(b) 4
Prospectus 2(c)(ii) 1 1(c) 5 7(b) 4 1(b), 5 6(c)(iv) 1 35 7
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© The Institute of Chartered Accountants of India
1(d)(I)(i) 1 6(a), 8 7(b) 4
1(d)(I)(ii) 1 7(c) 4
1(d)(II)(iii) 1
4(a) 8
7(b) 4
Shares & Share Capital 2(b)(i) 1 4(a) 8 1(b) 5 23 4.6
7 5 5(b) 4
Meetings 2(b)(ii) 1 1(d)(I)(i) 1 7(c) 4 26 5.2
2(c)(iii) 1 1(d)(II)(ii) 1
9 5 6(a) 8
10 5
7 Principles of Business Ethics 2(b) 4 2(b) 4 14 2.8
3(b) 4
5(b)(ii) 2
8 Corporate Governance and 11(a) 2 ½ 7(c) 4 5(b)(i) 2 3(b) 4 7(d) 4 23 4.6
Corporate Social Responsibility 13(i) 2 ½ 7(d) 4
9 Workplace Ethics 4(b) 4 2(b) 8 4(b) 4 1(c)(1) 2 ½ 33 6.6
7(c) 4 6(b) 4 1(c)(2) 2 ½
4(b) 4
10 Environment and Ethics 11(b) 2 ½ 5(b)(i) 2 5(b)(ii) 2 1(c)(2) 2 ½ 3(b) 4 19 ½ 3.9
13(ii) 2 ½ 7(c) 4
11 Ethics in Marketing and Consumer 6(b) 4 1(c)(1) 2 ½ 2(b) 4 14 ½ 2.9
Protection 6(b) 4
12 Ethics in Accounting and Finance 12 5 4(b) 4 7(e) 4 17 3.4
7(c) 4
13 Essentials of communication 4(c) 4 4(c) 4 3(c) 4 1(d) 5 45 9
7(d) 4 5(c) 4 5(c) 4 3(c) 4
7(d) 4 7(e) 4 5(c) 4
14 Interpersonal communication 14(a) 5 6(c) 4 3(b) 8 2(c) 4 4(c) 4 25 5
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© The Institute of Chartered Accountants of India
skills
15 Group Dynamics 6(c) 4 4(c) 4 12 2.4
7(d) 4
16 Communication Ethics 1(d) 5 2(c) 4 9 1.8

17 Communicating Corporate 5(c) 4 4 0.8
Culture, Change and Innovative
18 Communication in Business 14(b) 5 5 1
Environment
19 Basic understanding of Legal 15 5 2(c) 4 6(b) 4 22 4.4
deeds and Documents 16 5 7(d) 4

Note: ‘Q’ represents question numbers as they appeared in the question paper of respective examination. M represents the
marks which each question carries.
The question papers of all the past attempts of IPCC can be accessed from the BOS Knowledge Portal on the Institute’s
website www.icai.org.

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© The Institute of Chartered Accountants of India
C
ONTENTS
CHAPTER – 1 The Indian Contract Act, 1872 1.1 – 1.65
CHAPTER – 2 The Negotiable Instruments Act, 1881 2.1 – 2.40
CHAPTER – 3 The Payment of Bonus Act, 1965 3.1 – 3.27
CHAPTER – 4 The Employees’ Provident Funds and Miscellaneous 4.1 – 4.21
Provisions Act, 1952
CHAPTER – 5 The Payment of Gratuity Act, 1972 5.1 – 5.12
CHAPTER – 6 The Companies Act, 1956 6.1 – 6.177
CHAPTER – 7 Principles of Business Ethics 7.1 – 7.7
CHAPTER – 8 Corporate Governance and Corporate Social Responsibility 8.1 – 8.8
CHAPTER – 9 Workplace Ethics 9.1 – 9.7
CHAPTER – 10 Environment and Ethics 10.1 – 10.6
CHAPTER – 11 Ethics in Marketing and Consumer Protection 11.1 – 11.8
CHAPTER – 12 Ethics in Accounting and Finance 12.1 – 12.8
CHAPTER – 13 Essentials of Communication 13.1 – 13.14
CHAPTER – 14 Interpersonal Communication Skills 14.1 – 14.7
CHAPTER – 15 Group Dynamics 15.1 – 15.6
CHAPTER – 16 Communication Ethics 16.1 – 16.3
CHAPTER – 17 Communication Corporate Culture, Change and Innovative 17.1 – 17.3
Spirits
CHAPTER – 18 Communication in Business Environment 18.1 – 18.11
CHAPTER – 19 Basic Understanding of Legal Deeds and Documents 19.1 – 19.9

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© The Institute of Chartered Accountants of India
1

The Indian Contract Act, 1872
UNIT – 1: BACKGROUND
What is a contract?
Question 1
Define Contract?
Answer
An agreement which is legally enforceable is a contract. Agreements which are not legally
enforceable are not contracts but remain as void agreements or as voidable agreements which
are enforceable by only one of the parties to the agreement.
Question 2
Ram invites Madhuri (a well-known film actress) to his daughter’s engagement and dinner
party. Madhuri accepts the invitation and promised to attend. Ram made special arrangements
for Madhuri at the party but she did not turn up. Ram enraged with Madhuri’s behaviour,
wanted to sue for the loss incurred in making special arrangements. Ram is seeking your
advice.
Answer
No. ‘Ram” cannot sue ‘Madhuri’ for his loss. Because the agreement was a kind of social
nature and lacked the intention to create legal relationship.
Question 3
State with reason whether there is any contract made in the following case as per the Indian
Contract Act, 1872:
“J accepts an invitation to dinner but fails to attend”
Answer
There is no contract in this case as the parties do not intend that the contract should be
attended by legal consequences.
Question 4
Cash is withdrawn by the customer of a bank from the automatic teller machine is an example of:

© The Institute of Chartered Accountants of India