CA Foundation Jan 2026 Expected Paper Pattern, MTP-2 Questions

CA Foundation Jan 2026 Expected Paper Pattern: This analysis of Mock Test Paper 2 (MTP-2) aims to equip students with a robust understanding of expected exam patterns and crucial legal concepts. While facing examinations, it is vital to maintain a positive and confident mindset. (Remember, just as a company "wears" its legal rights, you should metaphorically "wear" positivity and confidence when approaching your exams). This approach is essential for optimal performance.

Enroll Now for CA Foundation Courses

Analysis of the MTP-2 Paper Pattern

The paper pattern observed in MTP-1 and MTP-2 for the current attempt aligns with the traditional exam structure seen before September 2025. A comparison of exam patterns is as follows:

Expectation for the Upcoming Exam: It is highly probable that the final exam will follow the traditional, pre-September 2025 pattern. While minor adjustments are possible, a complete repeat of the heavily case-study-oriented September 2025 pattern is unlikely.

Question 1: Validity of Contracts

This question examines the validity of different agreements based on principles from the Indian Contract Act.

Question on Small Company (Companies Act, 2013)

This question tests the definition and exceptions related to a Small Company.

For the exam, the applicable limits for a Small Company are:

• Paid-up Share Capital (PUC): Not exceeding ₹4 crores.

• Turnover: Not exceeding ₹40 crores.
  A company must satisfy both conditions. However, specific types of companies can never be classified as a Small Company, regardless of their PUC and turnover.

Key Exceptions: The following companies can never be Small Companies:

• A holding company or a subsidiary company.

• A Section 8 company (charitable objects).

• A company or body corporate governed by any Special Act.

Question on Quorum and Entrenchment Provisions (Companies Act, 2013)

Scenario: Justice Pvt. Ltd., with 9 directors, has an Article of Association (AoA) setting the board meeting quorum at 1/3rd of total strength or 2, whichever is higher (3 directors). The company wishes to amend this to 1/3rd of total strength or 4, whichever is higher (4 directors), making it more restrictive.

Analysis:

Making an AoA provision more difficult to alter is known as including an entrenchment provision. This can be done at formation or by subsequent amendment.

Procedure for Amendment:

The procedure differs by company type:

• For a Private Company: Requires the consent of all the members.

• For a Public Company: Requires a Special Resolution (SR).

In both cases, notice of the entrenchment provision must be given to the Registrar of Companies (RoC).

Conclusion:

Since Justice Pvt. Ltd. is a private company, it must obtain the consent of all its members to amend its AoA and make the quorum requirement more stringent. If it were a public company, passing a Special Resolution (SR) would suffice.

Question 2a: Sale by Description & Mixed Goods (SoGA, 1930)

Scenario: A buyer (RK) orders 2000 kg of Chhattisgarh Basmati rice in 25 kg pink bags. The seller (CK) delivers 1800 kg of Maharashtra rice in 30 kg white bags, mixed with 200 kg of Chhattisgarh rice in 25 kg bags.

Question: Does the buyer have the right to reject the entire quantity?

Analysis:

1. Sale by Description: Goods sold by description must correspond with that description. Here, the goods differed significantly in origin, packaging size, and color.

2. Delivery of Mixed Goods: When a seller delivers goods mixed with goods of a different description, the buyer has two options:

• Accept the conforming goods and reject the rest.

• Reject the whole consignment.

Conclusion: Yes, the buyer has the right to reject the entire quantity of rice, as the goods did not correspond to the description in multiple aspects.

Question on Price Fixation by a Third Party (SoGA, 1930)

Scenario: Kartik agrees to sell a laptop to Vasant, with the price to be fixed by Kusum. Kartik intentionally withholds information, preventing Kusum from making the valuation. Kartik then refuses to sell.

Question: What are Vasant's legal remedies?

Analysis:

If a third party cannot make the valuation, the agreement is avoided. However, if the third party is prevented by the fault of either party, the party not at fault is entitled to sue for damages.

Conclusion: Since Kartik (the seller) was at fault for preventing the valuation, Vasant (the buyer) has the right to sue Kartik for damages.

Question 3a: Liability of an Incoming Partner (Partnership Act, 1932)

Scenario: The firm ABC & Co. has a pre-existing debt of ₹50 lakh. A new partner, D, is admitted. Before his admission, partners A, B, C, and the creditor agree that D will be liable for this old debt.

1. Is D liable for the pre-existing debt?

• Rule: An incoming partner is not liable for any acts or debts incurred before becoming a partner.

• Exception: Liability for prior debts requires a novation, a tripartite agreement involving existing partners, the new partner, and the creditor.

• Conclusion: D is not liable as he was not a party to the initial agreement between ABC and the creditor.

2. What if D was a minor?

• Rule: A minor admitted to the benefits of a partnership is liable only to the extent of his share in the profits and property, with no personal liability.

• Conclusion: A minor D would not be liable for the pre-existing debt.

3. What if D, admitted as a minor, later attains majority?

• Rule: Upon attaining majority and electing to become a partner, he becomes personally liable for all firm acts from the date he was first admitted to its benefits.

• Analysis: This liability applies to acts after his admission. The ₹50 lakh debt was incurred before his admission.

• Conclusion: Even after attaining majority, D would not be liable for this specific pre-admission debt.

Question on Doctrine of Ultra Vires (Companies Act, 2013)

Scenario: A company's object clause permits only "trading in property." Directors enter the "construction business" and take a ₹5 crore loan for this, without member approval. The company refuses to repay.

Question: What are the remedies available to the finance company (the lender)?

Analysis:

The act of entering the construction business is ultra vires (beyond the powers) the company's Memorandum of Association (MOA). An ultra vires transaction is void ab initio and has no legal effect. The lender is deemed to have constructive notice of the MOA.

Despite the contract being void, the lender may have the following remedies:

1. Injunction: If the borrowed money is unspent, the lender can obtain an injunction to restrain its use for the ultra vires purpose.

2. Tracing: The lender remains the equitable owner. If the money or assets acquired are identifiable, the lender can trace and recover them.

3. Subrogation: If the company used the funds to pay off its own lawful debts, the lender can "step into the shoes" of the paid creditors and recover that amount from the company.

Question 5a: Sale on Approval or Return Basis (SoGA, 1930)

Scenario:

1. Ashok delivers a camera to Mangesh on a "sale or return" basis.

2. Mangesh delivers it to Rahul on a "sale for cash only or return" basis.

3. Rahul, without paying Mangesh, delivers it to Vishal on a "sale or return" basis.

4. The camera is lost from Vishal's possession.

Question: Who is liable for the loss of the camera?

Analysis of Ownership Transfer:

1. Ashok to Mangesh: When Mangesh offered the camera to Rahul, it was an act inconsistent with Ashok's ownership, signifying Mangesh's acceptance. Ownership passed from Ashok to Mangesh at this moment.

2. Mangesh to Rahul: The terms were "sale for cash only or return." Ownership would only pass upon cash payment. Since Rahul did not pay, ownership did not pass to Rahul. Mangesh remained the owner.

3. Rahul to Vishal: As Rahul was not the owner, he could not pass title (Nemo dat quod non habet). Ownership did not pass to Vishal.

Conclusion: At the time the camera was lost, the legal owner was Mangesh. Therefore, Mangesh is solely responsible for the loss and must bear the financial consequences (i.e., pay the price to Ashok).

Case Study: Termination of the Right of Stoppage in Transit (SoGA, 1930)

Scenario: Seller Ansari delivers goods to carrier Chetan for buyer Baburam. While in transit, Chetan wrongfully refuses to deliver the goods to Baburam.

Question: Can the unpaid seller exercise the right of stoppage in transit?

Analysis:

The right of stoppage in transit is available to an unpaid seller if the buyer becomes insolvent and goods are in transit. However, transit is deemed to end when the carrier wrongfully refuses to deliver the goods to the buyer.

Conclusion: In this case, because the carrier wrongfully refused delivery, the transit is considered at an end. Consequently, Ansari's right to stop the goods in transit is lost. Baburam can claim damages from Ansari for the loss incurred due to non-delivery.

Case Study: Applicability of Section 138 of the Negotiable Instruments Act to Gifts

Scenario: Ram buys a car from Rohan for ₹5 lakh, paying ₹4 lakh upfront and promising ₹1 lakh later. Ram fails to pay the balance. Later, Ram sends Rohan a cheque for ₹51,000 as a wedding gift. Rohan deposits it, but it is dishonored.

Legal Question: Can Rohan hold Ram liable under Section 138 for the dishonored cheque?

Legal Analysis:

• Section 138 applies only when a cheque is issued for a legally enforceable debt or other liability.

• A cheque given as a gift or donation is a moral obligation, not a legally enforceable one.

• The ₹51,000 cheque was explicitly a wedding gift, separate from the outstanding car balance.

Conclusion: Rohan cannot initiate proceedings against Ram under Section 138. The dishonor of a cheque given as a gift is not a punishable offense under the Act, as it does not pertain to a legally enforceable debt.