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 envis aged 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 discrimi nation 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 Moser Baer Karamchari Union v. Union of India, 2023 SCC Online SC 547)
In which of the following cases, it was held by the Supreme Court that although a company is a separate legal entity distinct from that of its members, the corporate veil may be lifted and the corporate personality may be ignored?
Show Hint
- Life Insurance Corporation of India v. Escorts Ltd. (1986) 59 Comp Case 548
- R. K. Dalmia vs Delhi Administration, AIR 1962 SC 1821
- Dale And Carrington Invt. P. Ltd. v. P.K. Prathapan AIR 2005 SC 1624
- Rohtas Industries Ltd v. S.D. Agarwal, AIR 1969 SC 707
The Correct Option is A
Solution and Explanation
The question asks to identify the case in which the Supreme Court affirmed the principle of a company being a separate legal entity but also established that this "corporate veil" can be lifted to ignore its distinct personality in certain circumstances.
Step 2: Detailed Explanation:
The doctrine of "lifting the corporate veil" means disregarding the corporate personality and looking behind the real persons who are in control of the company. The court may do this to prevent fraud, protect public policy, or when the corporate form is used for improper purposes.
Life Insurance Corporation of India v. Escorts Ltd.: In this landmark case, the Supreme Court extensively discussed the concept of corporate personality. Justice O. Chinnappa Reddy observed that a company is a separate legal entity, but the corporate veil can be lifted in situations where the corporate form is being used to commit fraud, for improper conduct, or where the corporate facade is a sham. The court held that while the corporate veil is not to be lifted lightly, it can be pierced to ascertain the true character and economic realities behind the legal facade. This case is a key authority on the subject.
Other options: While the other cases also touch upon principles of company law, including fraud and mismanagement, the LIC v. Escorts Ltd. case is particularly noted for its comprehensive discussion on the doctrine of lifting the corporate veil in the context of identifying the real controllers of the company.
Step 3: Final Answer:
Based on the analysis, the case of {Life Insurance Corporation of India v. Escorts Ltd.} is the most appropriate answer as it directly deals with the principle of lifting the corporate veil while acknowledging the separate legal entity status of a company.
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?
Show Hint
- Corporate manslaughter
- Lifting the corporate veil
- Corporate criminal liability
- Corporate social responsibility
The Correct Option is C
Solution and Explanation
The question asks for the legal term that describes holding a corporation (a legal person) criminally responsible for its actions or the actions of its employees.
Step 2: Detailed Explanation:
(A) Corporate manslaughter: This is a specific criminal offense in some jurisdictions (like the UK) where a corporation's gross negligence leads to a person's death. It is a subset of corporate criminal liability, not the general term.
(B) Lifting the corporate veil: This is a legal procedure to disregard the separate entity status of a company to hold its members or directors liable, which is different from holding the corporation itself criminally liable.
(C) Corporate criminal liability: This is the correct and broad legal doctrine that holds a corporation liable for criminal offenses. It establishes that a company, as a legal entity, can be prosecuted and punished for crimes committed by its agents or employees within the scope of their employment.
(D) Corporate social responsibility (CSR): This is a self-regulating business model and ethical framework that helps a company be socially accountable. It is not a legal doctrine for criminal liability.
Step 3: Final Answer:
The correct term for holding a corporation criminally liable for its acts and omissions is Corporate criminal liability.
In which of the following cases, the constitutionality of the Insolvency and Bankruptcy Code, 2016 was upheld by the Supreme Court?
Show Hint
- RPS Infrastructure Ltd. v. Union of India, 2023 INSC 816
- Paschimanchal Vidyut Vitran Nigam Ltd. v. Union of India, AIR 1971 SC 862
- Union Bank of India v. Financial Creditors of M/s Amtek Auto Limited, (2023) IBC Law.in 85 SC.
- Swiss Ribbons v. Union of India, (2019) SCC Online SC 73.
The Correct Option is D
Solution and Explanation
The question asks to identify the landmark Supreme Court case that affirmed the constitutional validity of the Insolvency and Bankruptcy Code, 2016 (IBC).
Step 2: Detailed Explanation:
The Insolvency and Bankruptcy Code, 2016, was a significant reform in India's commercial laws. Its constitutionality was challenged on various grounds, including alleged discrimination between financial creditors and operational creditors.
Swiss Ribbons Pvt. Ltd. v. Union of India (2019): This is the seminal judgment where the Supreme Court comprehensively examined the provisions of the IBC and upheld its constitutional validity. The Court reasoned that the classification between financial and operational creditors is not discriminatory but is based on an intelligible differentia, given their different nature and roles in a company's finances. The Court emphasized that the IBC's primary focus is on the revival of the corporate debtor and not merely recovery, making it an economic legislation designed to bring value.
Other options: The other cases listed deal with different aspects of insolvency or company law but are not the primary judgment that upheld the overall constitutionality of the IBC.
Step 3: Final Answer:
The Supreme Court upheld the constitutionality of the Insolvency and Bankruptcy Code, 2016 in the case of Swiss Ribbons v. Union of India.
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
Show Hint
- Founding Director
- Promoter Director
- Independent Director
- Associate Director
The Correct Option is C
Solution and Explanation
The question provides a definition and asks for the corresponding type of director as per company law. The key characteristics are: not a managing/whole-time/nominee director, and no material pecuniary relationship with the company, except for remuneration.
Step 2: Key Formula or Approach:
The definition of an "Independent Director" is provided in Section 149(6) of the Companies Act, 2013. We need to match the question's description with this legal definition.
Step 3: Detailed Explanation:
According to Section 149(6) of the Companies Act, 2013, an independent director is a non-executive director who:
is not a managing director, whole-time director, or a nominee director.
does not have any material pecuniary relationship or transaction with the company, its promoters, its directors, its senior management, or its holding, subsidiary or associate company, which may affect their independence. The remuneration received as a director does not count as a pecuniary relationship in this context.
The description in the question perfectly matches the definition of an Independent Director under the Companies Act, 2013. Their role is to provide an independent judgment and oversight to the board's functioning.
Step 4: Final Answer:
The director described in the question is an Independent Director.
Which among the following is not a duty of a Director of the company?
Show Hint
- To file return of allotments
- To disclose interest
- Duty to call upon the shareholders to attend the Board meetings
- To convene General meeting
The Correct Option is C
Solution and Explanation
The question asks to identify which of the given options is not a duty or responsibility of a company's director.
Step 2: Detailed Explanation:
Let's analyze each option based on the Companies Act, 2013 and general corporate governance principles:
(A) To file return of allotments: While the company secretary or other officers may handle the physical filing, the Board of Directors is ultimately responsible for ensuring compliance with statutory requirements like filing the return of allotments (Form PAS-3) with the Registrar of Companies. This falls under their collective responsibility.
(B) To disclose interest: This is a specific and crucial duty of a director under Section 184 of the Companies Act, 2013. Directors must disclose their personal interest, direct or indirect, in any contract or arrangement with the company.
(C) Duty to call upon the shareholders to attend the Board meetings: This is incorrect. Board meetings are meetings of the directors, not shareholders. Shareholders do not have a right to attend board meetings. They attend General Meetings (like the Annual General Meeting or Extraordinary General Meeting). Therefore, a director has no duty to call shareholders to a board meeting.
(D) To convene General meeting: The Board of Directors has the duty and power to convene general meetings of shareholders as required by law (e.g., the AGM) or when necessary (e.g., an EGM).
Step 3: Final Answer:
The statement that is not a duty of a director is the Duty to call upon the shareholders to attend the Board meetings.
Top Questions on Company Law
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Conclusions:
I. If a company fails to furnish the DIN, it can be penalized.
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Questions Asked in CLAT PG exam
The document presents a critique of the United Nations (UN) organization, arguing that it has failed to carry out its charter-mandated tasks, specifically to ”maintain international peace and security” and ”to achieve international cooperation” in solving global problems. The author notes growing public frustration with catastrophic humanitarian situations and the failure of peace-keeping operations, leading to widespread scepticism about the possibility of ”revitalization”.
UN Reform Approaches
Discussions on UN reform are divided into two main categories: the conservative approach and the radical approach.
1. Conservative Approach:
The conservative view considers the existing Charter ”practically untouchable” and believes in improving ”collective security” as defined in Chapter VII. Key positions include:
- US Position: Prioritizes its own interests, supports better management and the creation of an Inspector General, favours enlarging the Security Council (to include Germany and Japan, mainly for financing peace-keeping), and associates the UN with regional organizations like NATO for peace enforcement. The US remains reluctant to allow full application of Chapter VII and views collective security restrictively.
- Secretary-General’s Position (Boutros Ghali): Advocated for the full implementation of ’collective security’ as envisaged in 1945, including the use of the Military Staff Committee (Article 47) and the conclusion of special agreements (Article 43) for providing armed forces. He also proposed ’peace enforcement units’ under the command of the Secretary-General and wider use of ’preventive diplomacy’. The report candidly recognized the Security Council’s incapacity to deal with threats from a major power.
2. Radical Approach:
The radical approach criticizes the principles of the present system and proposes an overhaul. It reflects increasing doubts about the value of the Charter’s collective security system, especially in intra-State conflicts. Radical proposals include:
- Establishing an Economic Security Council.
- Modifying the Charter with less reluctance.
- Reforming the IMF and World Bank.
- Developing a new global security system .
- The creation of a consultative parliamentary assembly at the world level.
Future Outlook:
The author asserts that no major or minor reform has any chance of being implemented now, primarily because the Charter’s amendment procedures (requiring a two-thirds majority including all five permanent Security Council members) preclude agreement. However, he concludes that the continuing deterioration of the global situation, driven by economic integration, rising inequality, and intra-State conflicts, will inevitably lead the political establishment to define a new global institutional structure. This future debate will become highly political.
- CLAT PG - 2026
- International Law
“Section 55 of the Indian Contract Act says that when a party to a contract promises to do a certain thing within a specified time but fails to do so, the contract or so much of it as has not been performed, becomes voidable at the option of the promisee if the intention of the parties was, that time should be of the essence of the contract. If time is not the essence of the contract, the contract does not become voidable by the failure to do such thing on or before the specified time but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. Further, if in case of a contract voidable on account of the promisor’s failure to perform his promise within the time agreed and the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance he gives notice to the promisor of his intention to do so.
Sections 73 and 74 deal with consequences of breach of contract. Heading of Sec tion 73 is compensation for loss or damage caused by breach of contract. When a contract is broken, the party who suffers by such breach is entitled to receive from the party who has broken the contract compensation for any loss or damage caused to him thereby which naturally arose in the usual course of things from such breach or which the parties knew when they made the contract to be likely to result from the breach of it. On the other hand, Section 74 deals with compen sation for breach of contract where penalty is stipulated for. When a contract is broken, if a sum is mentioned in the contract as the amount to be paid in case of such breach or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled whether or not actually damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or the penalty stipulated for.”
tracted from: Consolidated Construction Consortium Limited v Software Technol ogy Parks of India 2025 INSC 574- CLAT PG - 2026
- Contract Law
“Law treats all contracts with equal respect and unless a contract is proved to suffer from any of the vitiating factors, the terms and conditions have to be enforced regardless of the relative strengths and weakness of the parties.
Section 28 of the Contract Act does not bar exclusive jurisdiction clauses. What has been barred is the absolute restriction of any party from approaching a legal forum. The right to legal adjudication cannot be taken away from any party through contract but can be relegated to a set of Courts for the ease of the parties. In the present dispute, the clause does not take away the right of the employee to pursue a legal claim but only restricts the employee to pursue those claims before the courts in Mumbai alone.
... the Court must already have jurisdiction to entertain such a legal claim. This limb pertains to the fact that a contract cannot confer jurisdiction on a court that did not have such a jurisdiction in the first place.”
Extracted from: Rakesh Kumar Verma v HDFC Bank Ltd 2025 INSC 473- CLAT PG - 2026
- Contract Law
- “The law is well settled that a constitutional court can award monetary compen sation against the State and its officials for its failure to safeguard fundamental rights of citizens but there is no system or method to measure the damages caused in such situations. Quite often the courts have a difficult task in determining dam ages in various fact situations. The yardsticks normally adopted for determining the compensation payable in private tort claims are not as such applicable when a constitutional court determines the compensation in cases where there is a viola tion of fundamental rights guaranteed to its citizens.
... In D.K. Basu v. State of W.B. [(1997) SCC 1 416], a Constitution Bench of this Court held that there is no straitjacket formula for computation of damages and we find that there is no uniformity or yardstick followed in awarding damages for violation of fundamental rights. In Rudul Sah case [Rudul Sah v. State of Bihar, (1983) 4 SCC 141] this Court used the terminology ’palliative’ for measuring the damages and the formula of ’adhoc’ was applied. In Sebastian Hongray case [Se bastian M. Hongray v. Union of India, (1984) 3 SCC 82] the expression used by this Court for determining the monetary compensation was ’exemplary’ costs and the formula adopted was ’punitive’. In Bhim Singh case [Bhim Singh v. State of J & K, (1985) 4 SCC 677], the expression used by the Court was ’compensation’ and the method adopted was ’tortious formula’. In D.K. Basu v. State of W.B. [(1997) SCC 1 416] the expression used by this Court for determining the compensation was ’monetary compensation’. The formula adopted was ’cost to cost’ method. Courts have not, therefore, adopted a uniform criterion since no statutory formula has been laid down.”
tracted from: Municipal Corporation of Delhi, Delhi v Uphaar Tragedy Victims Association (2011) 14 SCC 481- CLAT PG - 2026
- Constitutional Laws
- It is well recognized that actionable negligence in context of medical profession involves three constituents (i) duty to exercise due care; (ii) breach of duty and (iii) consequential damage. However, a simple lack of care, an error of judgment or an accident is not sufficient proof of negligence on part of the medical professional so long as the doctor follows the acceptable practice of the medical profession in discharge of his duties. He cannot be held liable for negligence merely because a better alternative treatment or course of treatment was available or that more skilled doctors were there who could have administered better treatment.
A medical professional may be held liable for negligence only when he is not pos sessed with the requisite qualification or skill or when he fails to exercise reasonable skill which he possesses in giving the treatment. None of the above two essential conditions for establishing negligence stand satisfied in the case at hand as no ev idence was brought on record to prove that Dr. Neeraj Sud had not exercised due diligence, care or skill which he possessed in operating the patient and giving treatment to him. When reasonable care, expected of the medical professional, is extended or rendered to the patient unless contrary is proved, it would not be a case for actionable negligence.
tracted with edits and revisions from Neeraj Sud v Jaswinder Singh 2024 INSC 825- CLAT PG - 2026
- Law of Torts