Written Interview Questions for Assessment Internship at Wadia Ghandy & Co,

Mumbai- General Corporate Law

1. State the exceptions to the rule of ‘No Consideration No Contract’

The general rule is “an agreement made without consideration is void”
However, sec. 25 also mentions some exceptions to the general rule. These exceptions
are given below:
A. Agreement made out of natural love and affection- A written agreement made without
consideration can still be legally enforced if it is based on natural love and affection
between parties who have a close relationship. However, for this exception to apply,
the agreement must be expressed in writing and registered in accordance with the law.
B. Agreement to pay a time-barred debt- If a written agreement is signed by the debtor or
their authorized representative, to fully or partially pay off a debt that is no longer
legally enforceable due to the statute of limitations, the agreement remains valid even
without any additional consideration. A debt becomes time-barred when it remains
unpaid or unclaimed for a period of three years, making it impossible to recover under
the Indian Limitation Act. Consequently, a promise to repay such a debt lacks
consideration, except in this particular exception.
C. Gift- A gift refers to the transfer of property without any consideration. It is important
to note that a gift does not require consideration in order to be considered valid. When
a donor gives a gift to a donee, it is legally recognized and enforceable. Once a gift has
been given, the donor cannot reclaim it by arguing that there was no consideration
involved. It is worth mentioning that a promise to make a donation is not considered a
gift, as it lacks consideration. Therefore, a promise for a donation is considered invalid
due to the absence of consideration.

2. What is time barred debt?

A time-barred debt refers to a debt that has surpassed the period specified by the statute
of limitations, and as a result, it cannot be legally collected under debt collection laws.
The specific duration of the statute of limitations varies from state to state, typically
ranging from three to six years, although it can be as long as 10 years in some states.
Moreover, the statute of limitations may differ depending on the type of debt involved.
Even after a debt has become time-barred, it can still negatively impact a person's credit
score as bad debts remain on a credit report for seven years. While borrowers may feel
a moral obligation to repay time-barred debt, it is crucial to understand that they are not
legally obligated to do so.

3. What is a mortgage?
A mortgage is a transfer of an interest in specific immovable property as security for
the repayment of a debt. If the borrower fails to meet the agreed-upon loan terms, the
lender has the authority to seize the property through a legal process as per various
recovery means.

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 Within the mortgage agreement, important information is specified, including the loan
amount, interest rate, repayment conditions, and the rights and obligations of both the
borrower and lender. Typically, the loan is repaid over a designated period through
regular payments, which encompass both the borrowed principal amount and the
interest imposed by the lender.

4. What are the key aspects and procedures involved in External Commercial
Borrowings (ECBs) in India?
ECBs are basically cross-border transactions. ECBs are commercial loans raised by
eligible resident entities from recognised non-resident entities and should conform to
parameters such as minimum maturity, permitted and non-permitted end-uses,
maximum all-in-cost ceiling, etc. External Commercial Borrowings Framework
enables permitted resident entities to borrow from recognized non-resident entities.
These parameters apply in totality and not on a standalone basis. Under the ECB
framework, ECBs can be raised either under the automatic route or under the approval
route. The procedure for raising ECB under approval route requires the borrowers to
approach the RBI with an application in prescribed format Form ECB for examination
through their AD Category I bank. Such cases are considered keeping in view the
overall guidelines, macroeconomic situation and merits of the specific proposals. ECB
proposals received in the Reserve Bank above certain threshold limit (refixed from time
to time) are placed before the Empowered Committee set up by the Reserve Bank. The
Reserve Bank takes a final decision taking into account recommendation of the
Empowered Committee. For conversion of ECB dues into equity, the exchange rate
prevailing on the date of the agreement between the parties concerned for such
conversion or any lesser rate can be applied with a mutual agreement with the ECB
lender.

5. Which SEBI Regulation talks about Ombudsman?

Ombudsman is an independent person appointed to hear and act upon citizen’s
complaint about government services. This concept was invented in Sweden and the
idea has been widely adopted. For example, various banks, insurance companies have
appointed Ombudsman to attend to the complaints of their customers. SEBI has issued
SEBI (Ombudsman) Regulations, 2003. Regulation 2(l) of the Regulations defines
Ombudsman as under: “Ombudsman” means any person appointed under regulation 3
of these regulations and unless the context otherwise requires, includes stipendiary
Ombudsman. Regulation 2(n) of the Regulations defines stipendiary Ombudsman as a
person appointed under regulation 9 for the purpose of acting as Ombudsman in respect
of a specific matter or matters in a specific territorial jurisdiction and for which he may
be paid such expenses, honorarium, sitting fees as may be determined by SEBI from
time to time. The regulations further deal with establishment of office of Ombudsman,
powers and functions of Ombudsman, procedure for redressal of Grievances and
implementation of the award.

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6. Which development banks in India cater to the needs of various sectors, including
small, medium, and large-scale enterprises, and aid in the promotion and
development of small-scale industrial units?
It includes those development banks which provide institutional credit not only to large
and medium scale enterprises but also help in promotion and development of small
scale industrial units.
Following are the banks which caters to the need for the growth of different sectors on
India: –
a. Industrial Development Bank of India (IDBI):- It was established in July 1964 as
an apex financial institution for industrial development in the country. It caters to
the diversified needs of medium and large scale industries in the form of financial
assistance, both directly and indirectly. Direct assistance is provided by way of
project loans, underwriting of and direct subscription to industrial securities, soft
loans, technical refund loans, etc. Indirect assistance is provided in the form of
refinance facilities to industrial concerns.

b. Industrial Finance Corporation of India (IFCI):- It was the first development finance
institution set up under the IFCI Act 1948. In order to pioneer long-term
institutional credit to medium and large scale enterprises. It aims to provide
financial assistance to industry by way of rupee and foreign currency loans,
underwrites/subscribes the issue of stocks, shares, bonds and debentures of
industrial concerns, etc. It has also diversified its activities in the field of merchant
banking, syndication of loans, formulation of rehabilitation programmes,
assignments relating to amalgamations and mergers, etc.

c. Small Industries Development Bank of India (SIDBI):- It was set up by the

Government of India in April 1990, as a wholly owned subsidiary of IDBI. It is the
principal financial institution for promotion, financing and development of small
scale industries in the economy. It aims to empower the Micro, Small and Medium
Enterprises (MSME) sector with a view to contributing to the process of economic
growth, employment generation and balanced regional development.

d. Industrial Investment Bank of India Ltd (IIBI):- It was set up in 1985 under the
Industrial reconstruction Bank of India Act, 1984, as the principal credit and
reconstruction agency for sick industrial units. It was converted into IIBI on March
17, 1997, as a full-fledged development financial institution. It assists industry
mainly in medium and large sector through wide ranging products and services.
Besides project finance, IIBI also provides short duration non-project asset-backed
financing in the form of underwriting/direct subscription, deferred payment
guarantees and working capital/ other short-term loans to companies to meet their
fund requirements.

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7. What are Qualified Institutional Buyers (QIBs) and what role do they play in the
investment process?
QIBs are investment institutions who buy the shares of a company on a large scale.
Qualified Institutional Buyers are those Institutional investors who are generally
perceived to possess expertise and the financial proficiency to evaluate and to invest in
the Capital Markets. According to SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009, “Qualified Institutional Buyer” means: Investment in the company,
either domestic or foreign, can be made by many types of investors who are governed
by specified sets of regulations. If the investor is not capable, either by his/her
individual financial limit or not permitted, to invest individually till he invests a
specified statutorily fixed amount, then he usually participates indirectly through
certain institutions, through which he can invest limited sums according to the viability
of both, himself and institution. The institution is usually a collective group of people
in which a large number of investors repose faith and the institution collects a whopping
investible sum from various investors to invest in the market. When investing through
the institution, investors usually have limited control on their investments in
comparison to the individual investment as they hand over the amount for investment
to the institution and they, in turn, keep experts to have a vigil on the market.
Accordingly, experts recommend the investments to be made and thus the institutions
in the spree invest in that market.

8. What is Private Equity?

Private equity is a type of equity (finance) and one of the asset classes who takes
securities and debt in operating companies that are not publicly traded on a stock
exchange. Private equity is essentially a way to invest in some assets that isn’t publicly
traded, or to invest in a publicly traded asset with the intention of taking it private.
Unlike stocks, mutual funds, and bonds, private equity funds usually invest in more
illiquid assets, i.e. companies. By purchasing companies, the firms gain access to those
assets and revenue sources of the company, which can lead to very high returns on
investments. Another feature of private equity transactions is their extensive use of debt
in the form of high-yield bonds. By using debt to finance acquisitions, private equity
firms can substantially increase their financial returns. Private equity consists of
investors and funds that make investments directly into private companies or conduct
buyouts of public companies. Capital for private equity is raised from retail and
institutional investors, and can be used to fund new technologies, expand working
capital within an owned company, make acquisitions, or to strengthen a balance sheet.
The major of private equity consists of institutional investors and accredited investors
who can commit large sums of money for long periods of time.

9. What is the Green Shoe Option and how does it operate in the context of public
offerings?
Green Shoe Option means an option of allocating shares in excess of the shares included
in the public issue and operating a post-listing price stabilizing mechanism in
accordance with the provisions of Regulation 45 of SEBI (ICDR) Regulations, 2009. A
company desirous of availing this option, should in the resolution of the general
meeting authorising the public issue, seek authorisation also for the possibility of

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 allotment of further shares to the ‘Stabilising Agent’ (SA) at the end of the stabilisation
period. GSO in the system of IPO using book-building method was recognised by SEBI
in India through its new. ICICI bank was the first to use Green Shoe Option in its public
issue through book building mechanism in India.

10. What is the role of market surveillance in ensuring market integrity and who is
responsible for conducting market surveillance in India?
Market surveillance plays a vital role in ensuring market integrity which is the core
objective of regulators. Market integrity is achieved through combination of
surveillance, inspection, investigation and enforcement of relevant laws and rules.
Globally market surveillance is either conducted by the Regulators or Exchanges or
both. In India, the primary responsibility of market surveillance has been entrusted to
Stock exchanges and is being closely monitored by SEBI. Millions of Orders are
transmitted electronically every minute and therefore surveillance mechanisms to
detect any irregularities must also be equally developed. Exchanges adopt automated
surveillance tools that analyse trading patterns and are installed with a comprehensive
alerts management system.

11. What is a Foreign Currency Exchangeable Bond (FCEB) and how does it function
in raising funds from international markets?
The FCEB is used to raise funds from the international markets against the security and
exchangeability of shares of another company. It means-
(i) A bond expressed in foreign currency.
(ii) The principal and the interest in respect of which is payable in foreign currency.
(iii) Issued by an issuing company, being an Indian company.
(iv) Subscribed by a person resident outside India.
(v) Exchangeable into equity shares of another company, being offered company
which is an Indian company.
(vi) Either wholly or partly or on the basis of any equity related warrants attached
to debt instruments.
It may be noted that issuing company to be the part of promoter group of offered
company and the offered company is to be listed and is to be eligible to receive foreign
investment. Under this option, an issuer company may issue FCEBs in foreign currency,
and these FCEBs are convertible into shares of another company (offered company)
that forms part of the same promoter group as the issuer company. Unlike FCCBs that
convert into shares of issuer itself, FCEBs are exchangeable into shares of Offered
Company (OC). Also, relatively, FCEB has an inherent advantage that it does not result
in dilution of shareholding at the OC level.

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12. What is an Indian Depository Receipt (IDR) and how does it enable foreign
companies to raise funds from the Indian Securities Markets?
An IDR is an instrument denominated in Indian Rupee in the form of a depository
receipt created by a domestic depository (Custodian of securities registered with SEBI)
against the underlying equity of issuing company to enable foreign companies to raise
funds from Indian Securities Markets. In an IDR, foreign companies would issue shares,
to a domestic (Indian) depository, which would in turn issue depository receipts to
investors in India. The actual shares underlying the IDRs would be held by an Overseas
Custodian, which shall authorize the Indian depository to issue the IDRs. To that extent,
IDRs are derivative instruments because they derive their value from the underlying
shares. Standard Chartered PLC is only company to offer IDR in the Indian market.
The foreign company issuing IDRs need to comply with the requirements of rules
prescribed under Companies Act, SEBI Regulations and RBI notifications/circulars.

13. What is ASBA and how does it simplify the process of applying for public issues
while reducing listing time for IPOs?
An ASBA investor submits an ASBA physically or electronically through the internet
banking facility, to the SCSB with whom the bank account to be blocked is maintained,
then the SCSB blocks the application money in the bank account specified in the ASBA,
on the basis of an authorization to this effect given by the account holder in the ASBA.
The application money remains blocked in the bank account till finalisation of the basis
of allotment in the issue or till withdrawal/failure of the issue or till
withdrawal/rejection of the application, as the case may be. The application data shall
thereafter be uploaded by the SCSB in the electronic bidding system through a web
enabled interface provided by the Stock Exchanges. Once the basis of allotment of
finalized, the Registrar to the Issue sends an appropriate request to the SCSB for
unblocking the relevant bank accounts and for transferring the requisite amount to the
issuer’s account. In case of withdrawal/failure of the issue, the amount shall be
unblocked by the SCSB on receipt of information from the pre-issue merchant bankers.
The process of applying for public issue, rights issue, etc has become very easy for
investors. The investors are no more required to wait for receipt of refund in case of the
public issue. The ASBA process has also helped to reduce the listing time for IPO to 6
working days from the date of the closure of the equity shares public issue.

14. What is dematerialization in the Indian securities market? How does electronic
trading improve efficiency and provide equal access to participants?
In the Indian securities market various products trade like equity shares, warrants,
debenture, etc. The trading in the securities of the company takes place in
dematerialised form in India. Dematerialization is the process by which physical
certificates of an investor are converted to an equivalent number of securities in
electronic form and credited to the investor’s account with his Depository Participant
(DP).Trading in the securities of the company takes place on the screen based platforms
provided by the Exchanges. Currently for equity shares the settlement cycle is (T+2
days) (T means trading day). Any shares which are traded on the Exchange is required
to be settled by the clearing corporation of the exchange on 2 working day. In electronic
trading order received are matched electronically on a strict price/time priority and

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 hence cuts down on time, cost and risk of error, as well as on fraud resulting in improved
operational efficiency. It enables market participants, irrespective of their geographical
locations, to trade with one another simultaneously. It provides full anonymity by
accepting orders, big or small, from brokers without revealing their identity, thus
providing equal access to everybody. It also provides a perfect audit trail, which helps
to resolve disputes by logging in the trade execution process in entirety.

15. What is venture capital and how does it work as a financing resource for
companies?
Venture Capital is one of the innovative financing resource for a company in which the
promoter has to give up some level of ownership and control of business in exchange
for capital for a limited period, say, 3-5 years. Venture Capital is generally equity
investments made by Venture Capital funds, at an early stage in privately held
companies, having potential to provide a high rate of return on their investments. It is
a resource for supporting innovation, knowledge based ideas and technology and
human capital intensive enterprises. Essentially, a venture capital company is a group
of investors who pool investments focused within certain parameters. The participants
in venture capital firms can be institutional investors like pension funds, insurance
companies, foundations, corporations or individuals but these are high risk investments
which may give high returns or high loss.

Commentary references-

1. Guide to SEBI, Capital Issues, Debentures & Listings, 5th ed

2. A Ramaiya: Guide To The Companies Act, 18th Edition 2014
3. M L Tannan : Banking Law & Practice in India, 25th Edition
4. SEBI and Corporate: Taxmann, 59/32
5. SEBI Monthly Bulletin : SEBI, Mumbai.

Website references-
1. SEBI- www.sebi.gov.in
2. NSE - www.nseindia.com
3. BSE- www.bseindia.com
4. RBI- www.rbi.org.ii
5. MCA- www.mca.gov.in