MCQ- CONSIDERATIONS IN ACQUISITION AND DISPOSAL OF PLANT AND MACHINERY IN INDIA
Question 1
What is the primary legislation governing the transfer of immovable property in India?
A. Indian Contract Act, 1872
B. Transfer of Property Act, 1882
C. Companies Act, 2013
D. Indian Trusts Act, 1882
Answer:
B. Transfer of Property Act, 1882
Question 2
Which act primarily governs the sale of goods including plant and machinery in India?
A. The Indian Contract Act, 1872
B. The Sale of Goods Act, 1930
C. The Companies Act, 2013
D. The Transfer of Property Act, 1882
Answer:
B. The Sale of Goods Act, 1930
Question 3
Under the Companies Act, 2013, what is required for a company to sell or dispose of its plant and machinery if it represents a substantial portion of the company’s assets?
A. Board resolution
B. Special resolution
C. Ordinary resolution
D. No specific requirement
Answer:
B. Special resolution
Question 4
What is the purpose of the Industrial Disputes Act, 1947 in the context of the disposal of plant and machinery?
A. Regulating the transfer of property
B. Ensuring proper valuation of assets
C. Protecting workers’ rights during closures or sales
D. Governing the taxation on sales
Answer:
C. Protecting workers’ rights during closures or sales
Question 5
Which section of the Companies Act, 2013 mandates the approval of shareholders for the sale of substantial assets of a company?
A. Section 180
B. Section 189
C. Section 271
D. Section 370
Answer:
A. Section 180
Question 6
What is the significance of due diligence in the acquisition of plant and machinery?
A. It helps in determining the age of the machinery.
B. It ensures compliance with legal and regulatory requirements.
C. It determines the manufacturing date of the machinery.
D. It ensures that the machinery is under warranty.
Answer:
B. It ensures compliance with legal and regulatory requirements.
Question 7
Under the SARFAESI Act, 2002, what is the primary objective regarding the disposal of assets, including plant and machinery?
A. Protection of debtor’s interests
B. Facilitation of asset transfer to government entities
C. Enforcement of security interest and recovery of dues
D. Regulation of the manufacturing industry
Answer:
C. Enforcement of security interest and recovery of dues
Question 8
In terms of taxation, what is a critical consideration during the disposal of plant and machinery in India?
A. The location of the machinery
B. The depreciation value
C. The purchase date of the machinery
D. The potential capital gains tax liability
Answer:
D. The potential capital gains tax liability
Question 9
What role does the Environmental Protection Act, 1986 play in the disposal of plant and machinery?
A. It mandates the valuation method for machinery.
B. It sets guidelines for environmental impact assessments.
C. It governs the financial transactions involved in the sale.
D. It regulates the transfer of ownership documents.
Answer:
B. It sets guidelines for environmental impact assessments.
Question 10
Which legal document is typically necessary to validate the transfer of ownership of plant and machinery in India?
A. Sales invoice
B. No objection certificate
C. Sale deed
D. Purchase order
Answer:
C. Sale deed
Question 11
Which authority must be informed in case of a substantial acquisition or disposal of plant and machinery by a listed company in India?
A. Registrar of Companies
B. Securities and Exchange Board of India (SEBI)
C. Reserve Bank of India
D. Ministry of Corporate Affairs
Answer:
B. Securities and Exchange Board of India (SEBI)
Question 12
What is the primary concern of the Competition Commission of India in the context of acquisition and disposal of plant and machinery?
A. Ensuring fair valuation
B. Preventing monopolistic practices
C. Protecting intellectual property
D. Regulating foreign investments
Answer:
B. Preventing monopolistic practices
Question 13
Which act governs the procedure for enforcing security interests over plant and machinery without court intervention?
A. The Companies Act, 2013
B. The Transfer of Property Act, 1882
C. The Insolvency and Bankruptcy Code, 2016
D. The SARFAESI Act, 2002
Answer:
D. The SARFAESI Act, 2002
Question 14
What is a crucial factor to consider regarding labor laws when disposing of plant and machinery?
A. The market value of the machinery
B. Compliance with worker compensation laws
C. The warranty period of the machinery
D. The age of the machinery
Answer:
B. Compliance with worker compensation laws
Question 15
Which document is essential for ensuring the proper transfer of title in the sale of plant and machinery?
A. Bill of exchange
B. Sale deed
C. Letter of credit
D. Partnership deed
Answer:
B. Sale deed
Question 16
Which financial document must be prepared to reflect the disposal of plant and machinery in a company’s accounts?
A. Balance sheet
B. Cash flow statement
C. Depreciation schedule
D. Profit and loss statement
Answer:
A. Balance sheet
Question 17
What is the main purpose of obtaining a No Objection Certificate (NOC) from relevant authorities in the context of disposal of plant and machinery?
A. To ensure no environmental harm
B. To confirm clear title and non-encumbrance
C. To determine the market value
D. To calculate depreciation
Answer:
B. To confirm clear title and non-encumbrance
Question 18
Which act provides the legal framework for the transfer of movable property in India?
A. The Indian Contract Act, 1872
B. The Sale of Goods Act, 1930
C. The Transfer of Property Act, 1882
D. The Negotiable Instruments Act, 1881
Answer:
B. The Sale of Goods Act, 1930
Question 19
What is the role of the Insolvency and Bankruptcy Code, 2016 in the context of asset disposal?
A. Regulating foreign direct investment
B. Facilitating the process of liquidation and insolvency
C. Setting standards for asset valuation
D. Governing environmental compliance
Answer:
B. Facilitating the process of liquidation and insolvency
Question 20
What is the primary reason for conducting an environmental impact assessment before disposing of plant and machinery?
A. To determine the market value of the assets
B. To comply with environmental regulations
C. To ensure financial transparency
D. To confirm the age of the machinery
Answer:
B. To comply with environmental regulations
Question 21
Which authority oversees the registration of companies in India?
A. Securities and Exchange Board of India (SEBI)
B. Reserve Bank of India
C. Registrar of Companies
D. Competition Commission of India
Answer:
C. Registrar of Companies
Question 22
Under which circumstance is a valuation report mandatory for the disposal of plant and machinery by a company?
A. When the disposal involves a related party
B. When the machinery is over 10 years old
C. When the transaction value exceeds INR 1 crore
D. When the machinery is imported
Answer:
A. When the disposal involves a related party
Question 23
Which document formalizes the agreement between the buyer and seller for the transfer of plant and machinery?
A. Lease agreement
B. Memorandum of understanding
C. Sale agreement
D. Partnership deed
Answer:
C. Sale agreement
Question 24
In the context of plant and machinery disposal, what does the term ‘as is where is’ basis mean?
A. The buyer must take responsibility for the machinery’s current state and location
B. The seller guarantees the machinery’s condition
C. The transaction is subject to future improvements
D. The buyer can demand relocation of the machinery
Answer:
A. The buyer must take responsibility for the machinery’s current state and location
Question 25
Which law requires public notice before the sale of plant and machinery in case of a secured loan default?
A. The Companies Act, 2013
B. The Transfer of Property Act, 1882
C. The SARFAESI Act, 2002
D. The Sale of Goods Act, 1930
Answer:
C. The SARFAESI Act, 2002
Question 26
What is the importance of obtaining a valuation certificate during the disposal of plant and machinery?
A. To confirm the age of the machinery
B. To establish the market value for the transaction
C. To verify the operational efficiency of the machinery
D. To ensure compliance with labor laws
Answer:
B. To establish the market value for the transaction
Question 27
Which type of resolution is typically required for a company to authorize the sale of its plant and machinery?
A. Ordinary resolution
B. Special resolution
C. Board resolution
D. No specific resolution
Answer:
B. Special resolution
Question 28
What is the role of a Chartered Engineer in the context of plant and machinery disposal?
A. To provide an environmental impact report
B. To conduct a legal audit of the transaction
C. To certify the condition and value of the machinery
D. To draft the sale agreement
Answer:
C. To certify the condition and value of the machinery
Question 29
Under which act is the concept of ‘public auction’ for asset disposal primarily governed?
A. The Companies Act, 2013
B. The SARFAESI Act, 2002
C. The Transfer of Property Act, 1882
D. The Sale of Goods Act, 1930
Answer:
B. The SARFAESI Act, 2002
Question 30
Why is it important to review the lease agreements associated with plant and machinery before disposal?
A. To assess the tax implications
B. To verify ownership and usage rights
C. To calculate depreciation
D. To determine the machinery’s age
Answer:
B. To verify ownership and usage rights
Question 31
Which regulatory body’s approval is necessary for the disposal of substantial assets by a listed company?
A. Reserve Bank of India
B. Competition Commission of India
C. Securities and Exchange Board of India
D. Ministry of Corporate Affairs
Answer:
C. Securities and Exchange Board of India
Question 32
What must be ensured about the plant and machinery before disposal to avoid legal complications?
A. That it is fully depreciated
B. That it has no outstanding loans or encumbrances
C. That it is in new condition
D. That it is insured
Answer:
B. That it has no outstanding loans or encumbrances
Question 33
Which act regulates the procedure for mergers and acquisitions involving plant and machinery?
A. The Companies Act, 2013
B. The Industrial Disputes Act, 1947
C. The Competition Act, 2002
D. The Insolvency and Bankruptcy Code, 2016
Answer:
C. The Competition Act, 2002
Question 34
What is the consequence of not obtaining necessary environmental clearances before disposing of plant and machinery?
A. Financial penalties
B. Criminal prosecution
C. Both A and B
D. No significant consequence
Answer:
C. Both A and B
Question 35
Which type of audit is critical during the acquisition of plant and machinery to ensure compliance with legal standards?
A. Environmental audit
B. Financial audit
C. Legal audit
D. Technical audit
Answer:
C. Legal audit
Question 36
What does the term ‘encumbrance’ mean in the context of asset disposal?
A. The market value of the asset
B. A legal claim or liability on the asset
C. The age of the asset
D. The operational efficiency of the asset
Answer:
B. A legal claim or liability on the asset
Question 37
Which document is crucial for the physical transfer of machinery across state borders in India?
A. Waybill or e-way bill
B. Sale deed
C. No objection certificate
D. Invoice
Answer:
A. Waybill or e-way bill
Question 38
In the context of acquisition, what is the purpose of an indemnity clause in the sale agreement of plant and machinery?
A. To ensure machinery is new
B. To protect the buyer against future claims or liabilities
C. To guarantee the machinery’s warranty
D. To confirm the purchase price
Answer:
B. To protect the buyer against future claims or liabilities
Question 39
Which factor is not typically considered during the valuation of plant and machinery?
A. Current market value
B. Depreciation
C. Future potential revenue
D. Historical cost
Answer:
C. Future potential revenue
Question 40
Under the Indian Stamp Act, 1899, what is essential for validating the sale deed of plant and machinery?
A. Notarization
B. Registration
C. Stamp duty payment
D. Witness signatures
Answer:
C. Stamp duty payment
Question 41
Which financial statement reflects the disposal of plant and machinery?
A. Balance sheet
B. Cash flow statement
C. Profit and loss account
D. Statement of changes in equity
Answer:
A. Balance sheet
Question 42
Which regulatory body oversees environmental compliance for industrial activities in India?
A. Ministry of Corporate Affairs
B. Central Pollution Control Board
C. Reserve Bank of India
D. Securities and Exchange Board of India
Answer:
B. Central Pollution Control Board
Question 43
What is a key consideration in the insurance policy of plant and machinery during its disposal?
A. Policy renewal date
B. Coverage and exclusions
C. Premium amount
D. Insurer’s reputation
Answer:
B. Coverage and exclusions
Question 44
What does the term ‘net book value’ mean in the context of plant and machinery?
A. The purchase price of the machinery
B. The current market value of the machinery
C. The original cost minus accumulated depreciation
D. The scrap value of the machinery
Answer:
C. The original cost minus accumulated depreciation
Question 45
Which document is essential for proving the ownership of plant and machinery?
A. Purchase order
B. Warranty card
C. Sale deed
D. Invoice
Answer:
C. Sale deed
Question 46
What is the role of a legal advisor in the acquisition of plant and machinery?
A. To assess the machinery’s market value
B. To draft and review the sale agreement
C. To conduct an environmental audit
D. To manage the physical transfer of the machinery
Answer:
B. To draft and review the sale agreement
Question 47
Which act governs the registration of charges on plant and machinery?
A. The Companies Act, 2013
B. The Transfer of Property Act, 1882
C. The Sale of Goods Act, 1930
D. The Indian Contract Act, 1872
Answer:
A. The Companies Act, 2013
Question 48
What is a critical aspect of the due diligence process during the acquisition of plant and machinery?
A. Verifying the manufacturing date
B. Checking the machinery’s operational efficiency
C. Ensuring clear title and absence of encumbrances
D. Confirming the machinery’s brand
Answer:
C. Ensuring clear title and absence of encumbrances
Question 49
What is the primary concern of the Reserve Bank of India regarding the disposal of plant and machinery?
A. Ensuring fair market value
B. Regulating the transfer of funds
C. Preventing financial fraud
D. Monitoring foreign exchange transactions
Answer:
D. Monitoring foreign exchange transactions
Question 50
Which aspect of the Companies Act, 2013, is critical when a company disposes of a significant portion of its assets?
A. Financial reporting requirements
B. Shareholder approval for major transactions
C. Environmental compliance
D. Employee compensation
Answer:
B. Shareholder approval for major transactions
