AIOU SOLVED ASSIGNMENT 2 CODE 460 SPRING 2016


SOLVED ASSIGNMENT 2 CODE 460 MERCANTILE LAW SPRING 2016

Aiou solved assignment number 2 for the mercantile law aiou code 460 for the semester spring 2016. This is the second solved assignment for business law or mercantile law code 460 for the current semester spring 2016 for B.com students of Open University Islamabad.
Q 1 a) Most of the business transactions are conducted on credit basis. Discuss various types of formal instruments of credit used in present business world. (10)
b) What is the most appropriate instrument to be used in domestic business transactions? Justify your answer by providing appropriate reasons. (10)

ANSWER a): Business Transactions:-
The business now-a-days is so developed and complex that it is very difficult to carry cash everywhere. Therefore most of the present day business transactions are conducted on credit basis. This credit may be granted on opening account or on the basis of a formal instrument of credit, i.e. a negotiable instrument.
(i) A negotiable instrument therefore means an instrument, which represents money or money’s worth and
(ii) (ii) The title of which can be transferred from one person to another by endorsement and delivery.
(iii) (iii) The legal provision relating got negotiable instruments are governed by the Negotiable Instruments Act, 1881.
Negotiable Instruments:-
Definition: Negotiable Instrument is a transferable, signed document that promises to pay the bearer a sum of money at a future date or on demand. Examples include checks, bills of exchange, and promissory notes. A written promise or order signed by the maker to transfer a specified sum of money on demand or at a fixed future time to the person named on the instrument or to the bearer. A negotiable instrument is usually in the form of a check, draft, bill of exchange, promissory note or acceptance. A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Section 13 of the Negotiable Instruments Act, a negotiable instrument means a promissory note, bill of exchange or Cheque payable either to order or to bearer. So, there are just three types of negotiable instruments such as promissory note, bill of exchange and Cheque. Cheque also includes Demand Draft [Section 85A]. More specifically, it is a document contemplated by a contract, which
(1) Warrants the payment of money, the promise of or order for conveyance of which is unconditional; (2) Specifies or describes the payee, who is designated on and memorialized by the instrument; and
(3) Is capable of change through transfer by valid negotiation of the instrument.

Characteristics of Negotiable instruments:-
A negotiable instrument has following special characteristics as compared to any other document evidencing a contractual debt. A negotiable instrument may be transferred by mere delivery without the necessity for a formal assignment. The only exception to this rule is represented by bills of exchange payable to order which in addition to delivery also require an endorsement. Where a negotiable instrument is properly transferred or negotiable the transferee, provided that he has given valuable consideration for it acquires a good title irrespective of the quality of the contractual right is “subject to equities” a negotiable instrument is transferred ‘free from equities’ in that the title of the holder for value does not depend on the title of his predecessor.

Types of Negotiable Instruments:-
Under section 13 of the negotiable instruments Act, 1881, a negotiable instrument includes.
(i) A bill of exchange
(ii) (ii) A promissory note or
(iii) (iii) A cheque Payable either to order or bearer. Although tinder this section only above three types of negotiable instruments are mentioned but it has been ascertained from the cases of law that if an instrument satisfies the following two conditions, it can be treated as a negotiable instruments.
(i) If it is such a form which entitles the holder to sue in his own name and
(ii) (ii) If it is transferable.

The Parties to Negotiable Instrument:-
The parties to a negotiable instrument (bill of exchange, promissory note and a cheque) are discussed in detail:-

Parties to a bill of exchange
1. The Drawer: The person who draws a bill of exchange is called the drawer.
2. The Drawee: The party on whom such bill of exchange is drawn and who is directed to pay is called the drawee.
3. The Acceptor: The person who accepts the bill is known as the acceptor. Normally the drawee is the acceptor. But a stranger can also accept a bill on behalf of the drawee.
4. The Payee: The person to whom the amount of the bill is payable is called the payee.
5. The Endorser: When the holder transfers or endorses the instrument to any other person the holder becomes the Endorser.
6. The Endorsee: The person to whom the bill is endorsed is called the endorsee.
7. The !folder: Holder of bill of exchange means any person who is legally entitled to the possession of it and to receive or recover the amount due thereon form the parties. Ile is either the payee or the endorsee. The finder of a lost bill payable to bearer or a person in wrongful possession of such instrument is not a holder.
8. Drawee in case of need: The drawer of a bill or even an endorser may write in the instrument the name of a person directing the holder to resort to such person in case of need. Such a person is called a drawee in ease of need. He is merely in the position of a drawee who has not accepted the bill. The bill cannot be presented to him for acceptance but only for payment. Where a drawee in case of need is mentioned in the bill such a bill is not dishonored until it has been dishonored by such a drawee in case of need. The effect of this provision is to make the presentment to the drawee in case of need obligatory on the part of the holder.
9. Acceptor for Honour: Any person may voluntarily become a party to a bill as an acceptor by accepting it for the honour of the drawer or of any person.. When the original drawee refuses to accept or refuses to furnish better security when demanded by a notary, any person may step in to safeguard the honor of the drawer or any endorser and bind himself by an acceptance. The effect of such acceptance is that the bill is treated as alive and is not considered to be dishonored till it is dishonored by the acceptor for honor.

Parties to a promissory note:-
1. The Maker: He is the person who promises to pay the amount stated in the promissory note.
2. The Payee: The person named in the promissory note to whom the money is payable.
3. The Holder: He may be either the payee or someone else to whom the promissory note has been endorsed.
4. The Endorser: When the holder transfers or endorses the instrument to any other person the holder becomes the Endorser.
5. The Endorsee: The person to whom the bill is endorsed is called the endorsee.

Parties to a cheque:-
1. The Drawee: He is the person who draws the cheque.
2. The Drawee: The banker on whom the cheque is drawn.
3. The Payee: The person to whom the amount of the bill is payable is called the payee.
4. The Holder: Holder of bill of exchange means any person who is legally entitled to the possession of it and to receive or recover the amount due thereon form the parties. He is either the payee or the endorsee. The finder of a lost bill payable to bearer or a person in wrongful possession of such instrument is not a holder.
5. The Endorser: When the holder transfers or endorses the instrument to any other person the holder becomes the Endorser.
6. The Endorsee: The person to whom the bill is endorsed is called the endorsee.

The Competency of Parties to Negotiable Instruments Legal Competence:-
Section 1-Legal Competence:-
1. A person shall become legally competent when attaining the age of 18 years. A legally competent person shall be competent to manage his or her personal and financial affairs.
2. A person not legally competent by reason of minor age who enters marriage shall be legally competent as from when the marriage takes place.

Section 2- Personal Competence:-
Subject to other provisions of law, a person possessing personal legal competence shall be competent to manage any of his or her personal affairs other than financial affairs.

Section 3-Financial Competence:-
Subject to other provisions of law, a person possessing financial legal competence shall be competent to manage any of his or her financial affairs

ANSWER b):-
The most appropriate instrument to be used in domestic business transactions Under section 13 of the negotiable instruments Act, 1881, a negotiable instrument includes.
(i) A bill of exchange
(ii) A promissory note or
(iii) A cheque Payable either to order or bearer. Although under this section only above three types of negotiable instruments are mentioned but it has been ascertained from the cases of law that if an instrument satisfies the following two conditions, it can be treated as a negotiable instruments.
(i) If it is such a form which entitles the holder to sue in his own name and
(ii) If it is transferable. The Panics to Negotiable Instrument

The parties to a negotiable instrument (bill of exchange, promissory note and a cheque) are discussed in detail:

Parties to a bill of exchange:-
1. The Drawer: The person who draws a bill of exchange is called the drawer.
02. The Drawee: The party on whom such bill of exchange is drawn and who is directed to pay is called the drawee.
03. The Acceptor: The person who accepts the bill is known as the acceptor. Normally the drawee is the acceptor. But a stranger can also accept a bill on behalf of the drawee.
04. The Payee: The person to whom the amount of the bill is payable is called the payee.
05. The Endorser: When the holder transfers or endorses the instrument to any other person the holder becomes the Endorser.
06. The Endorsee: The person to whom the bill is endorsed is called the endorsee.
07. The Holder: Holder of bill of exchange means any person who is legally entitled to the possession of it and to receive or recover the amount due thereon form the parties. He is either the payee or the endorsee. The finder of a lost bill payable to bearer or a person in wrongful possession of such instrument is not a holder.
09. Drawee in case of need: The drawer of a bill or even an endorser may write in the instrument the name of a person directing the holder to resort to such person in case of need. Such a person is called a drawee in case of need. He is merely in the position of a drawee who has not accepted the bill. The bill cannot be presented to him for acceptance but only for payment. Where a drawee in case of need is mentioned in the bill such a bill is not dishonored until it has been dishonored by such a drawee in case of need. The effect of this provision is to make the presentment to the drawee in case of need obligatory on the part of the holder.
10. Acceptor for Honour:- Any person may voluntarily become a party to a bill as an acceptor by accepting it for the honour of the drawer or of any person. When the original drawee refuses to accept or refuses to furnish better security when demanded by a notary, any person may step in to safeguard the honor of the drawer or any endorser and bind himself by an acceptance. The effect of such acceptance is that the bill is treated as alive and is not considered to be dishonored till it is dishonored by the acceptor for honor.

Parties to a promissory note:-
01. The Maker: He is the person who promises to pay the amount stated in the promissory note. 7. The Payee: The person named in the promissory note to whom the money is payable.
02. The Holder: He may be either the payee or someone else to whom the promissory note has been endorsed.
03. The Endorser: When the holder transfers or endorses the instrument to any other person the holder becomes the Endorser.
04. The Endorsee: The person to whom the bill is endorsed is called the endorsee.

Parties to a cheque:-
01. The Drawee: He is the person who draws the cheque.
02. The Drawee: The banker on whom the cheque is drawn.
03. The Payee: The person to whom the amount of the bill is payable is called the payee.
04. The Holder: Holder of bill of exchange means any person who is legally entitled to the possession of it and to receive or recover the amount due thereon form the parties. Ile is either the payee or the endorsee. The finder of a lost bill payable to bearer or a person in wrongful possession of such instrument is not a holder.
05. The Endorser: When the holder transfers or endorses the instrument to any • other person the holder becomes the Endorser.
06. The Endorsee: The person to whom the bill is endorsed is called the endorsee.

Q 2 a) Enlist the contents of a partnership deed. (10)
Q 2 b) Distinguish between memorandum of articles and memorandum of association. (10)

ANSWER a): Definition and Characteristics of Partnership When the business expands to a greater extent, the business necessitates a combination of money, skill, and working experience. Thus two or more persons may joining hands with a view to carrying on a business together and share the profits derived there from, thereby avoiding the limitations of doing business by a person alone, namely lack of capital and inadequate managerial capabilities etc. This form of combined business is known as partnership. The partnership is a business carried on by all or any of them acting for all. The persons who form a partnership are individually known as partners and collectively as a firm. The law which regulates the partnership business in Pakistan is known as the Partnership Act, 1932. Under it, there cannot be more than 10 partners in a banking business and more than 20 partners in any other business. For those professions, however which are debarred from doing business in the form of a limited company, such as the physicians, attorneys and the accountants, this maximum limit does not apply. Section 4 of the Partnership Act defines a partnership as follows: “Partnership is the relation between persons who have agreed to share the profits of a business carried by all or any of them acting for all.” A partnership, as defined in the Act, must have three essential elements:
1. There must be an agreement entered into by two or more persons.
2. The agreement must be to share the profits of a business.
3. The business must be carried on by all or any of them acting for all.

Essential Elements of a Partnership:-
1. Voluntary Agreement:- The first element shows the voluntary contractual nature of partnership. A partnership can only arise as a result of an agreement, express or implied, between two or more persons. Where there is no agreement there is no partnership. But a partnership cannot be formed with more than ten persons in banking and twenty persons in other types of business. A partnership with persons exceeding the above limits must be registered under a Companies Act.
2. Partnership is not created by status:- Section 5 states that, “The relation of partnership arises from contract and not from status.” In particular the members of a Hindu undivided family carrying on a family business, as such, are not partners in such business.

Example:- The sole proprietor of a business dies leaving a number of hells. The heirs inherit the stock in trade of the business including the goodwill of the business but do not become partners until there in an agreement, express or implied, to carry on the business as partners.

3. Sharing of Profits of a Business:- The second element states the motive underlying the information of a partnership. It also lays down that the existence of a business is essential to a partnership. Business includes any trade, occupation or profession. If two or more persons join together to form a music club it is not a partnership because there is not business in this case. But if two or more persons join together to give musical performances to the public with a view to earning profit, there is a business and a partnership is formed.

4. Mutual Agency:- The third element is most important features of partnership. It states that persons carrying on business in partnership are agents as well as principals. The business of a firm is carried on by all or by any one or more of them on behalf of all. Every partner has the authority to act on behalf of all and can, by his actions, bind all the partner of the firm, each partner is the agent of the others in all matters connected with the business of the partnership. The law of partnership has therefore been called a branch of the law of agency.

Essential Elements of a Partnership Business:-
There are following essential elements of a partnership business:-
i. There must be an agreement between the parties concerned. Though it may be written or implied one.
ii. There must be a business, which means and includes any trade, profession or vocation.
iii. It must be carried on by all or some of the partners for the benefit of all of them. iv. It must be carried on for the purpose of earning profits which would be divided amongst the partners, in the agreed way or ratio.

Legal Provisions Regarding Accounts Maintained in Partnership Business:- There are no specific provisions in the law for maintenance of any special accounts in respect of partnership business. It has, however, necessitated some extra accounts to be maintained, e.g., capital and drawing accounts for each partner. Moreover, provision of law and partnership deed in respect of interest on capital and drawings, salaries to the partners’ loan from partners. In order that the partners may know what is the amount of their respective interest in the firm? It is clearly of the greatest importance that a proper system of accounting should be in force. It will be apparent that most of’ the problems peculiar to partnership accounts have some connection with ascertainment of the amount of each partner’s share in the profits and in the assets both during the continuance of the partnership and upon admission or retirement or death or dissolution of partnership. In connection with preparation of partners’ accounts and division of profits, the students must have a clear idea on the points given in following paragraphs.

Capital of Partners:- Nothing is provided in law to the effect that partners must bring capital in equal or in any stated proportions, and the matter rests absolutely with the partners to decide. It is even not necessary that every partner must contribute something towards the firm’s capital. By mutual agreement even the capital to be contributed by each partner need not necessarily consist of cash payment, but may be satisfied by the introduction of other assets than cash, such as Stock-in-trade, Fixtures, Plant, etc.

Drawings of Partners:- The Partnership Deed generally embodies a clause allowing each partner to withdraw a certain amount at each periodical interval in anticipation of his share of profits. Such drawings are debited to a separate Drawings Account of each partner. Whether such withdrawals are chargeable with interest is again a matter of agreement between the partners.

Distribution of Profits & Losses:- The Deed of Partnership will determine the ratios in which profits or losses arising from the business are to be divided between the partners. In the absence of any such agreement even where the capitals are in unequal amounts, the partners will be deemed by law to be equal shares, in profits or losses, on the ground that the Court cannot be expected to enter into questions of partners merits,. It is evidently left for the partners themselves to decide as to what would be the molt equitable mode of sharing profits or losses. Where the partnership deed provides for the profits being shared in a particular manner and there is no mention of how the losses should be borne, the assumption is that these should be borne in the same proportions. Further, it is quite legal and competent for the partners to arrange for the profits to be divided in certain proportions and the losses to be borne in quite other proportions. It is equally competent for the partners to agree to exempt one or more of them from bearing any losses. The share of profit applicable to each partner would be debited to the Profit and Loss Account and’ credited to his Capital Account. In case of a loss, the same would he adjusted by debiting each Partner’s Capital Account with his respective share and crediting the Prof and Loss Account.
Interest on Capital:- In case of a sole trader, it is not usual to allow any interest on capital but in partnership business where the capitals are contributed in certain proportions and the bearing of prof its or losses is not in proportion to capitals, interest on the capital of each partner is generally calculated at an agree rate per cent and is considered as a charge on the Profit and Loss Account before the determination of divisible profits. It may be remembered, however, that no such interest on his capital can be claimed by any partners as a matter of right, in the absence of an agreement to that effect. Interest on Capital is debited to Profit and Loss Account and credited to Capital Account of the partner concerned. Where, however, the capitals are agreed to be fixed, such interest; will be credited to the Current Account of each partner.

Interest on Drawings:- In case the partnership agreement provides for the allowance of interest, at a certain rate percent on the capitals of the partners, it does not necessarily follow that such interest should be calculated on the drawings. If it is desired that interest should also be charged on the drawings, there should also be charged on the drawings, there should be a distinct mention to that effect in the agreement. Where the capitals and the sharing of profits are equal and the drawings are in unequal sums, interest is usually charged on the drawings by mutual arrangement in order that the accounts of the partners may be equitably, adjusted liner-se. As has been said above, the question of interest on capital and drawings is purely a matter of agreement between the partner, and the partnership account will have to be prepared with due consideration to the terms and conditions of such an agreement, if there is any.

Salaries to Partners:- In case a partner devotes his entire time to the business whereas the others may not it is usual to allow the former an agreed salary before the ascertainment of the net profit. The practice of allowing salary usually exists in a firm where there are junior partners with hardly any capital contribution, who take a very small share of the profits and yet who devote the whole of their time and energy to the business. When such salaries are drawn in cash from month to month, they should be charged to Partners’ Salaries Account. Where, however, lump sum amounts are withdrawn at irregular intervals on account of salaries, these would be debited to the Drawings Account of the partner concerned and an adjustment would have to be made at the end of each financial period, debiting Partners’ Salaries Account and crediting the Capital Account of the partner with the annual amount of salary payable to him.

Loan by a Partner:- In case a partner advances any amount over and above his capital by way of loan the amount will carry 6 per cent interest by implication unless otherwise agreed upon; and this is irrespective of the fact whether the capitals bear any interest or not. But the partners by mutual consent may agree to allow a higher or lower rate of interest on such loan, in higher or lower rate of interest on such loan, in which case such agreement will hold good. A partner can claim a repayment of his loan, in the absence of any agreement to the contrary, although he cannot ask for a refund of his capital. In case of a dissolution, such loan by a partner would rank to be repaid in priority to the payment of capitals, but after the claims of all outside creditors arc satisfied in full. Loan by a partner must be credited to a separate account from his Capital Account and must be distinctly stated in the Balance Sheet. The interest on the loan will, of course, be credited to his Current Account.

ANSWER b):
Definition of Memorandum of Association
Memorandum of Association (MA) is the supreme public document which contains all those information that arc required for the company at the time of incorporation. It can also be said that, a company cannot be incorporated without memorandum. At the time of registration of the company, it needs to be registered with the ROC (Registrar of Companies). It contains the objects, powers and scope of the company, beyond which a company is not allowed to work, i.e. it limits the range of activities of the company. Any person who deals with the company like shareholders, creditors, investors, etc. is presumed to have read the company, i.e. they must know the company’s objects and its area of operations. The Memorandum is also known as the charter of the company. There is six conditions of the Memorandum:-
• Name Clause — any company cannot register with a name which CG may think unfit and also with a name that too nearly resembles with the name of any other company.
• Situation Clause — every company must specify the name of the state in which the registered office of the company is located.
• Object Clause — Main objects and auxiliary objects of the company.
• Liability Clause — Details regarding the liabilities of the members of the company.
• Capital Clause — Total capital of the company.
• Subscription Clause — Details of subscribers, shares taken by them, witness etc.

Definition of Articles of Association

Articles of Association (AOA) is the secondary document, which defines the rules and regulations made by the company for its administration and day to day management. In addition to this the articles contain the rights, responsibilities, powers and duties of members and directors of the company. It also includes the information about the accounts and audit of the company. Every company must have its own articles, however, a public company limited by shares can adopt Table A instead of Articles of Association. It comprises of all the necessary details regarding the internal affairs and the management of the company. It is prepared for the persons inside the company, i.e. members, employees, directors, etc. The governance of the company is done according to the rules prescribed in it. The companies, can frame its articles of association as per their requirement and choice.

SPRING 2016 Course: Mercantile Law Level: BA/ B. Com Code: 460 Assignment No: 2

Q 3 Why is the constitution of partnership firm changed? Discuss the procedure to be followed for dissolving the partnership business through court. (20)

ANSWER: Why is the constitution of partnership firm changed? During the course of the business, some situation may arise like:-
 The Place of business may change.
 The Partners may decide to change the name of the Firm.
 There may he admission of new partners in the Firm.
 The old partners may resign or leave from the Firm.
 There may he change in the name and permanent address of the partners.
 The minor Partner entered at time of constitution of firm may get the majority etc.

So, in all above such cases, the Partners are bound to inform the Registrar of Firms about such changes in the Partnership Finn. Consequent to which they are to draft a new Partnership Deed as per the changes and to file again the application along with required documents to the Registrar of Firms with the applicable fees.

Change in the constitution of the firm and its dissolution [Section 63(1):-
01:- When change occurs in the constitution of the firm, any of the new, continuing or the outgoing partner, while when a registered firm is dissolved, any person who was a partner immediately before the dissolution or the agent of any such partner or person specially authorized on his behalf, may give notice of such a change to the Registrar, specifying the date thereof. Under Section 63(2), when a minor who has been admitted to the benefits of partnership in a firm attains majority and elects to become or not to become a partner, he or his agent specially authorized in this behalf, may give notice to the Registrar that he has or has not become a partner.

Procedure for Changes in the Constitution of the Firm:-
I. Draft a new Partnership Deed as per the changes in the constitution of the Firm
2. Fill Form in Capital Letters in Form No. (As given above as per the requirement)
3. Pay the Challan Fees with the respective Bank
4. Submit the application with the concerned Registrar of Firms of the State along with following Documents:-
(i) The copy of Old Partnership Deed (Drafted at time of Constitution of Firm), duly attested by the Notary of concerned town where the Registered Office of the Firm is situated.
(ii) The copy of New Partnership Deed (Drafted at time of Changes in the Constitution of Firm), on a Stamp Paper of Rs. 1000 (Stamp Paper of Rs. 1000 applicable In Punjab as per the State Stamp Act) duly attested by the Notary of concerned town where the Registered Office of the Firm is situated.
(iii) ID Proofs of all the partners. along with the new admitted partners, if any, duly attested by Notary, Guested Officer.
(iv) (iv) Passport size photographs of all the partners along with the new admitted partners, if any.
(v) Copy of Receipt Challan (Form PTR 16 Rule 107 of PTR Volume I) deposited in the Bank.
(vi) Ownership proof of the new place of business, if place of business has been changed
(vii) The copies of Certificate A and C, issued at time of constitution of the Firm, duly attested by Notary, Guested Officer. After the application is submitted with the Registrar of Firms, the Registrar will look after the application and when the Registrar of Firms is satisfied that the application is complete in all respects and the applicant have duly complied all the provisions of the act, he shall record an entry of the statement in the Register of Firms and issue a Certificate A and Certificate D stating the Changes in the Partnership Firm.

Partnership Dissolution Law:- Section 39 of partnership act 1932 cover the Dissolution of partnership between the all the partners of the firms or organization.

What is Dissolution?
Dissolution of Partnership: When one or more partners set aside from partnership due to any reason like death, retirement, insane or insolvency but others continue the business in partnership, it is called Dissolution of partnership.

Dissolution of Firms: If one partner is set aside from partnership clue to death, retirement or insolvency and other partners don’t continue the business in partnership, it is called Dissolution of firm. It means that Dissolution of firm include Dissolution of partnership.

Explanation: Suppose Mr. A, Mr. B and Mr. C were partner in a firm and Mr. A, retired or insolvent from firm the “Partnership firm” and also “Partnership” will dissolve. But if it is already decided in the agreement of partnership that in case of death, retirement or insolvency of a partner, firm will not dissolve. In such case partnership will dissolve but firm will continue its business under same name.

Modes of Dissolution:-
A partnership is dissolved in the following circumstances and also in the following manner:-

(1) Dissolution by Agreement:- A partnership firm may be dissolved with the consent of all the partners or in accordance with a contract between partners. A partnership firm continues as long as the partner’s desire and when all of them agree to dissolve the firm, it can be dissolved. Thus in order to dissolve a firm consent of all the partners in necessary. It will also be dissolved in accordance with a contract between the partners. Thus if partners have agreed that the firm will be dissolved on the happening of a certain event, then it is dissolved on the happening of that event. It is not necessary to obtain the consent of the partners on the happening of that event, because the partners have already agreed beforehand that dissolution will take place on the happening of that event.

(2) Compulsory Dissolution: A partnership is dissolved when all the partners or all the partners but one are adjudicated insolvent. It is also dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or for partners to carry on the business in partnership.

(3) Dissolution on the Happening of Certain Contingencies:
(a) • A partnership is dissolved on the expiry of the term for which it was constituted. Thus where a partnership was constituted for a fixed term, it will expire as soon as the term is completed.
(b) When partnership is constituted to carry out one or more adventures or undertakings, then it will be dissolved as soon as those adventures or undertaking are completed.
(c) A partnership is also dissolved by the death of a partner.
(d) It is also dissolved by the adjudication of a partner as an insolvent.

(4) Dissolution by Notice of Partnership-at-will:- When a partnership is at will, it may be dissolved by any of the partners giving a notice in writing to all other partners of his intention to dissolve the firm. In such a case dissolution will take effect from the date mentioned in the notice as the date of dissolution.

(5) Dissolution by a Court:- A partnership is dissolved by the Court when a partner files a suit for dissolution on one of the following points, namely:-

(a) When a partner has become of unsound mind. In such a case the suit for dissolution can be brought by any other partner or by the next friend of the partner who has become of unsound mind.
(b) (b) When a partner other than the partner, suing, has become permanently incapable of performing his duties as a partner.
(c) When it is shown that a partner is guilty of any conduct which is likely to affect prejudicially the carrying on of the business.
(d) When it is shown that a partner willfully or persistently commits breach of agreements in respect of management of the affairs of the firm or the conduct of business.
(e) When a partner transfer the whole of his share to a third party.
(f) When it is shown that the business of the firm cannot be run except on loss.
(g) The Court can also dissolve a firm on any other ground not mentioned above which renders it just and equitable that the firm should be dissolved.

Q 4 The government has taken serious notice difficulties faced by the employees and made law for various types of benefits to be provided to employees. Considering the statement, state various types of benefits available to employees and their dependents under Provincial Employees’ Social Security Ordinance, 1965. (20)

ANSWER: Provincial Employees’ Social Security Ordinance, 1965 An Ordinance to introduce a scheme of Social Security for providing benefits to certain employees or their dependents in the event of sickness, maternity, employment, injury or death and for matters ancillary thereto. 35.

Sickness benefit:-
(1) A secured person who is certified, by a medical practitioner authorised by the Institution in the manner provided in the regulations to give such a certificate, to be incapable of attending to his work on account of sickness shall, subject to regulations, be entitled to receive sickness benefit at such rate as may be fixed by Government by notification, in consultation with the Institution, if during the six calendar months immediately preceding the date on which his incapacity or work was so certified, contributions in respect of him were paid or payable for not less than ninety days.

(2) A secured person shall be entitled to receive sickness benefits throughout the period of sickness: Provided that during a continuous period of three hundred and sixty-five days such benefit shall not be allowed for a period exceeding:-
[(a) three hundred and sixty-five days, in ease he has been suffering from Tuberculosis or Cancer which render an employee incapable to earn his livelihood]; and
(b) one hundred and twenty-one days, in case he has been suffering from any other disease: Provided further that he shall not be entitled to receive such benefit for the first two days of his sickness if such sickness does not, within fifteen days, follow the previous period of sickness for which he received or was entitled to receive such benefit.]

3. Maternity benefit:- A secured woman shall, subject to regulations be entitled to receive maternity benefit at such rate as may be fixed by Government by notification, in consultation with the Institution, if contributions in respect of her were paid or payable for not less than one hundred and eighty days during the twelve calendar months immediately preceding the expected date of her confinement as certified by a medical practitioner authorized by the Institution in the manner provided in the regulations to give such a certificate, and such benefit shall be paid for all days on which she does not work for remuneration during a period of twelve weeks, of which not more than six weeks shall precede the expected date of confinement.
4. Medical care of dependents:- Where a secured person dies other than due to any employment injury, his dependents shall, subject to regulations, be entitled to medical care for one year from the date of death of the secured person: Provided that the deceased secured person had been in continuous employment of an establishment for not less than twelve months immediately preceding his death: Provided further that where the deceased secured person was a seasonal employee, his dependents shall be entitled to medical care for six months from the date of death of such secured person: Provided also that the deceased had been in employment of an establishment for not less than six months during two continuous seasons immediately preceding his death.

5. Injury benefits:- A secured person shall, subject to regulations, be entitled to receive injury benefit at such rate as may be fixed by Government by notification, in consultation with the Institution, in respect of any day including the day on which as a result of an employment injury, he is certified by a medical practitioner authorized by the Institution in the manner provided in the regulations to give such a certificate to be incapable of work, but for not more than one hundred and eighty days.

6. Disablement pension:-
(1) A secured person who sustains total or partial disablement shall, subject to regulations, be entitled, upon the expiration of his entitlement to injury benefit, to receive disablement pension, according to the degree of disablement determined from time to time. At such rates for different degrees of disablement as may be fixed by Government by notification, in consultation with the institution.
(2) Disablement pension shall terminate with the death of the recipient or when disablement ceases, or ceases to be total or partial disablement: Provided that if a disablement pension has been paid for five years it shall be payable for life.

7. Disablement gratuity
(1) A secured person who sustains minor disablement shall, subject to regulations, be entitled to a disablement gratuity at such rates for different degrees of disablement as may be fixed by Government by notification, in consultation with the Institution.
(2) Where a person receiving disablement pension ceases to suffer from total or partial disablement but continues to suffer from minor disablement he shall, on the termination of his disablement pension, be entitled to disablement gratuity under this section.

8. Survivor’s Pension:-
(1) Where a secured person dies as a result of an employment injury, a survivor’s pension shall, subject to regulations, be payable to each of his dependents as follows that is to say—
(a) To the widow, widows, or needy widower, during life, at a rate equal to three-fifths of the rate of total disablement pension to which the secured person was, or would have been entitled, and where there are two or more widows, the pension shall be divided equally between them;
(b) To each dependent child, at a rate equal to one-fifth of the rate of such total disablement pension: Provided that if the child is a full orphan, the rate shall be two-fifths of the rate of the total disablement pension: Provided further that if and so long as the total of the survivor’s pensions would otherwise exceed the rate of such total disablement pension, the pension of each of the survivors shall be reduced proportionately so that the total pension’s payable to them does not exceed the rate of the said total disablement pension.

(2) In case the deceased person does not leave a widow, or needy widower, a survivor’s pension shall be payable for life to a dependent father, if he be alive, and if he be not alive, to a dependent mother, if she be alive, at a rate equal to one-fifth of the rate of the total disablement pension to which the secured person was or would have been entitled.
[(2-A) In case the deceased person does not leave a dependent, a survivor’s pension shall be payable for life to a dependent father if he be alive, and if he be not alive, to a dependent mother, if she be alive and if she be not alive, to dependent brothers and sisters in equal shares, at a rate equal to one half of the rate of total disablement pension to which the secured person was or would have been entitled.] [(2-B) Where only father or mother is entitled to the survivor’s pension and the recipient dies leaving behind the other parent, such surviving parent shall be entitled to the survivor’s pension equal to the amount being received by the other parent at the time of the death of that parent subject to the condition that the surviving parent is the real father or mother of the deceased secured worker.
(3) Survivor’s pension shall be payable upon the death of the secured person and shall terminate—
(a) Upon the death of the survivor; or
(b) Where the survivor is a widow, upon her remarriage; or
[(c) Where the survivor is a dependent child-
(i) On attaining the age of nineteen years, in case of a female child; and
(ii) Twenty-one years, in case of a male child,] and in any such case the pensions of the remaining survivors shall, if necessary, be adjusted within the maximum laid down in the second proviso to sub-section (1).

9. Death grant in case of death while in receipt of injury benefit or total disablement pension.— Where a secured person dies while he is in receipt of injury benefit or of a total disablement pension the widow, widows or needy widowers, or, if there is no widow or needy widower, the person who provided for the funeral, shall, subject to regulations, be entitled to a death grant equal to the daily rate of the injury benefit or of the total disablement pension, as the case may be, multiplied by thirty, but in no case less than ‘[one thousand and five hundred] rupees.

10. Medical care in the case of employment injury:-
(1) When medical care is required as a result of an employment injury—
(a) No conditions as regards payment of contributions shall apply; 2[and]
(b) It shall include dental care in addition to the services referred to in section 45;
(2) . A person in receipt of injury benefit, disablement pension for loss of earning capacity not less than fifty per centum of a survivor’s pension shall be entitled to medical care for so long as the injury benefit, disablement pension or survivor’s pension, as the case may be, continues, and, in the case of a disablement pension being received by the secured person, for six months after the termination of the pension.

11. Extent of medical care:-
(1) Medical care shall include—
(a)General practitioner care, including domiciliary visiting;
(b) Specialist care in hospitals for in-patients and out-patients and such specialist care as may be available outside hospitals;
(c) Essential pharmaceutical supplies as prescribed by a medical practitioner;
(d) Hospitalization where necessary, including cases of pregnancy and confinement;
(e) Pre-natal confinement and post-natal care, either by medical practitioners or by qualified midwives.

Social Justice is the best way to ensure sustainable peace and eradicate poverty. It is believed that people coming together organizing, joining forces, making their voices heard.
• Promote and realize standards and fundamental principles and rights at Work
• Create greater opportunities for women and men to secure decent employment and income
• Enhance the coverage and effectiveness of social protection for all
• Strengthen tripartism and social dialogue.

Worker’s Right
(a) Right to work, wage and welfare.-lt is the right of a worker to work according to the job assigned and to receive wages as per agreed terms and conditions of employment and to such welfare benefits and safety measures as one is entitled to according to law, agreement settlement and award.
(b) Right to freedom of association and collective bargaining and other rights secured or guaranteed under this Ordinance and other laws.-Worker has inherent right to trade unionism and collective bargaining and the right to enjoy the benefits guaranteed to him under the law, rules and regulations, settlement, award or agreement.
Worker’s Duties:-
(a) Worker will perform his duty, as assigned by the employer or his representative, according to his best ability with due diligence, care, honesty and commitment.
(b) Worker will fully observe norms of organizational discipline.
(c) Worker, in exercise of his right, will fully respect the rights of the employer and will cooperate with him in the efficient performance of the business of the establishment or, as the case may be, enterprise.

The legal procedure for the dismissal of a workman:-
This Act may be cited as the Termination of Employment of Workmen (Special Provisions) Act, No.45 of 1971.
( 1 ) No employer shall terminate the scheduled employment of any workman without
(a) the prior consent in writing of the workman: or
(b) the prior written approval of the Commissioner.
(2) The following provisions shall apply in the case of the exercise of the powers conferred on the Commissioner to grant or refuse his approval to an employer to terminate the scheduled employment of any workman
(a) Such approval may be granted or refused on application in that behalf made by such employer: a copy of which application shall be served on the workman concerned, who shall be afforded an opportunity of being heard.
(b) the Commissioner may, in his absolute discretion, decide to grant or refuse such approval;
(c) the Commissioner shall grant or refuse such approval within three months from the date of receipt of an application in that behalf made by such employer:
(d) the Commissioner shall give notice in writing of his decision on the application to both the employer and the workman:
(e) The Commissioner may. in his absolute discretion, decide the terms and conditions subject to which his approval should be granted, including any particular terms and conditions relating to the payment by such employer to the workman of a gratuity or compensation for the termination of such employment; and
(f) any decision made by the Commissioner under the preceding provisions of this subsections shall be final and conclusive, and shall not he called in question whether by way of writ or otherwise
(i) in any court, or
(ii) In any court, tribunal or other institution established under the Industrial Disputes Act.
(2 A). It shall be the duty of the Commissioner or receipt of an application under subsection (2), to call upon the workmen concerned within three days of the receipt of such application, by the Commissioner, to submit his response to such application within seven days of the receipt of the same by such workmen: Provided however, that where the workman fails to respond within the above period, the Commissioner may grant a further period not exceeding seven days, upon his being satisfied that such failure was due to circumstances beyond the control of such workmen.

(3)Any person who fails to comply with any decision made by the Commissioner under subsection (2) shall be guilty of an offence and shall, on conviction after trial before a Magistrate, be liable to a fine not exceeding one thousand rupees or to imprisonment of either description for a term not exceeding six months or to both such fine and imprisonment.
(4) For the purposes of this Act, the scheduled employment of any workman shall he deemed to be terminated by his employer if for any reason whatsoever, otherwise than by reason of a punishment imposed by way of disciplinary’ action, the services of such workman in such employment are terminated by his employer, and such termination shall be deemed to include –
( a) Non-employment of the workman in such employment by his employer, whether temporarily or permanently, or
(b) Non-employment of the workman in such employment in consequence of the closure by his employer of any trade, industry or business.

(5) Where any employer terminates the scheduled employment of any workman by reason of punishment imposed by way of disciplinary action the employer shall notify such workman in writing the reasons for the termination of employment before the expiry of the second working day after the date of such termination.

Q 5 Discuss the role of Securities and Exchange Commission of Pakistan (SE(‘P) in the development and governance of business in Pakistan. (20)

ANSWER: The role of Securities and Exchange Commission of Pakistan (SECP) in the development and governance of business in Pakistan. Every company has to keep at its registered office proper Books of Accounts in respect of following:
a) All accounts of money received and expended and relevant matters connected with such receipt or expenditure.
b) All sales and purchases of goods.
c) All assets.
d) All liabilities. e) In case of company engaged in production, processing, manufacturing or mining activities and such particulars relating to utilization of materials or labour or other inputs or prescribed items of cost if such class of companies is required by the Corporate Law Authority (CLA) by a general or special order to include such particulars in books of accounts. The books of account and other books shall be open to inspection by the directors during business hours. The Ordinance requires that books of account of at least preceding ten years have to be preserved in good order by every company.

Inspection of Books of Accounts by Registrar:- The books of account and books and papers of every company shall be open to inspection by the Registrar of Joint Stock Companies or his representative if he considers it necessary to do so. Every director and officer of the company must provide full cooperation and assistance to the Registrar or his representative in this respect.

Annual Accounts and Balance Sheet:- The requirements of law in respect of these are summarized below:-
(a) The directors of every company must present at the annual general meeting the balance sheet and profit and loss account or in the case of a company not trading for profit, an income and expenditure account.
(b) The statements mentioned in (a) above must he presented according to following timings:
i. Within not later than eighteen months after its incorporation in case of a new company.
ii. Once at least of a new company.
(c) These financial statements must be prepared for a period not exceeding twelve months and should not be made up to a date which is more than six months from the last date of the meeting. Moreover, these statements should start form;
i. The date of incorporation in case of first accounts; and
ii. The date of proceeding accounts subsequently.
(d) The balance sheet and profit and loss account or the income and expenditure account must be audited by an auditor. The auditor’s report has to be attached with these statements.
(e) Every balance must send a copy of the audited balance sheet or income and expenditure account along with auditor’s report to every member at least twenty-one days before the meeting at which it is too he laid before the members.
(f) The balance sheet and profit and loss account are required to be approved by the directors and signed by the chief executive and at least by one director. In case of the absence of the chief executive from the country the accounts may be signed by two directors but a statement containing reasons for non-compliance is required to be annexed to such accounts.

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