Q.6 Justify the Following Statements – Class 12 Secretarial Practice (SP)

In the Class 12 Secretarial Practice (SP) examination, Question 6 usually asks students to “Justify the following statements (Any TWO)”. This question carries 8 marks, where each justification is worth 4 marks. Students must justify the statement by explaining the meaning, reasons, and logic behind it. These statements are based on concepts from chapters.

Below is a detailed explanation of important justification statements, written in a simple and scoring format.

Q. 6. Justify the following statements (Any TWO) : [8 Marks] Important Questions with Answers 

Q. 6. Justify the following statements (Any TWO) : [8 Marks]

1️⃣ Bondholder is creditor of the company.

Justification:

1. A bond or debenture is an acknowledgement of loan taken from the public. 
2. Bondholders give long-term finance to the company but do not get ownership rights. 
3. They receive a fixed rate of interest, even if the company makes no profit. 
4. The company must repay the principal amount on maturity. 
5. Since the company borrows funds from bondholders, they are treated as creditors, not owners. 
6. Bondholders can recover their money by enforcing the charge on the company’s assets, if created. 

Example: If Tata Steel issues bonds of ₹1,00,000 at 10% interest, the bondholder becomes a lender, not a shareholder.

2️⃣ A company has to create charge on its assets for issuing secured debentures.

Justification:

1. Secured debentures are issued against security of assets of the company. 
2. The company must create a fixed charge (on specific assets) or a floating charge (on general assets). 
3. This security protects investors if the company fails to pay interest or repay principal. 
4. Charge must be registered with the Registrar of Companies, making it legally valid. 
5. This ensures investor confidence and makes debentures attractive to lenders. 
6. Without creating charge, the debentures will be considered unsecured, increasing risk. 

Example: A company creating charge on its machinery worth ₹50 crore for ₹20 crore secured debentures.

3️⃣ Capital market is useful for corporate sector.

Justification:

1. Capital market provides long-term funds, essential for fixed capital needs. 
2. Companies can raise finance by issuing shares, debentures, bonds, public deposits, etc. 
3. It enables expansion, modernization, and diversification of companies. 
4. It ensures liquidity, as existing investors can sell securities anytime. 
5. Capital market provides proper valuation of company securities. 
6. It increases investor confidence through SEBI regulation. 

Example: Reliance Industries raises crores of rupees by issuing shares in the capital market to expand its refinery.

4️⃣ SEBI is the regulator for the securities market in India.

Justification:

1. SEBI controls and supervises all stock exchanges in India. 
2. It protects investors from fraud, insider trading, and manipulation. 
3. It issues guidelines for public issue of securities, pricing, disclosures, etc. 
4. It regulates intermediaries like brokers, underwriters, merchant bankers. 
5. SEBI ensures fairness, transparency, and efficiency in trading. 
6. This creates trust among investors and promotes capital market growth. 

Example: SEBI penalizing companies involved in insider trading to protect investors.

5️⃣ Stock exchange works for the growth of the Indian Economy.

Justification:

1. Stock exchange mobilizes savings and channels them into productive investments. 
2. It provides liquidity to securities, encouraging people to invest more. 
3. It enables companies to raise large funds for expansion and modernization. 
4. Through price signals, it shows which industries are performing well. 
5. It encourages entrepreneurship and promotes industrial growth. 
6. It also generates employment and contributes to national income. 

Example: Companies like Infosys raised funds through stock exchange and expanded globally, contributing to Indian economy.

6️⃣ Approval of members is not needed for interim dividend.

Justification:

1. Interim dividend is declared between two Annual General Meetings. 
2. According to the Companies Act, Board of Directors has the power to declare interim dividend. 
3. Shareholders’ approval is required only for final dividend, not interim. 
4. Interim dividend is usually declared when company earns excess profit mid-year. 
5. It helps maintain investor confidence by rewarding shareholders quickly. 
6. Articles of Association also authorize BOD to pay interim dividend. 

Example: If a company earns high profit in September, BOD may declare interim dividend without AGM.

7️⃣ The Board of Directors can refuse transfer of shares.

Justification:

1. The Articles of Association (AOA) give the Board of Directors the authority to accept or refuse the transfer of shares. 
2. They may refuse transfer if the transfer instrument is incomplete, invalid, forged, or not properly stamped. 
3. They can also refuse if the transfer goes against the interest of the company or violates rules. 
4. The Board must give valid reasons for refusal within the prescribed time. 
5. The power helps prevent entry of undesirable persons as shareholders. 
6. This ensures smooth management and protects the company’s reputation. 

Example: If a person submits a torn or unsigned share transfer form, the Board can legally refuse the transfer.

8️⃣ Unpaid dividend cannot be used by the company.

Justification:

1. Dividend declared but not claimed within 30 days must be transferred to an Unpaid Dividend Account. 
2. This money legally belongs to shareholders, not to the company. 
3. The company must keep it separately, and it cannot be used for business purposes. 
4. After 7 years, the amount must be transferred to the Investor Education and Protection Fund (IEPF). 
5. This ensures safety of shareholder funds and prevents misuse. 
6. Company officers are held responsible if they misuse unpaid dividends. 

Example: If a shareholder forgets to claim dividend, the company cannot use that money for its operations.

9️⃣ A company can issue duplicate share certificate.

Justification:

1. If a share certificate is lost, destroyed, defaced, or torn, the company may issue a duplicate certificate. 
2. The shareholder must submit evidence, such as FIR, indemnity bond, or affidavit. 
3. The Board of Directors must verify the documents and pass a resolution approving issue of duplicate. 
4. The duplicate certificate must be marked “Duplicate” to avoid misuse. 
5. The company must keep proper records to prevent fraud. 
6. This provision protects shareholders in case of accidental loss. 

Example: If a shareholder loses a certificate in a fire, the company can issue a duplicate after verification.

🔟 A company can issue only certain types of debentures.

Justification:

1. Companies can issue secured or unsecured, redeemable, convertible, or non-convertible debentures. 
2. The Companies Act does not permit irredeemable debentures. 
3. Debenture issue must follow SEBI guidelines and legal provisions. 
4. Terms such as interest rate, maturity, and conversion must be approved by the Board. 
5. Debentures cannot be issued in any arbitrary form; only legally recognized types are allowed. 
6. This protects investors and maintains financial discipline. 

Example: A company may issue Secured Redeemable Non-Convertible Debentures (NCDs) but cannot issue perpetual debentures.

1️⃣1️⃣ All companies cannot accept deposits from public.

Justification:

1. Only public limited companies that comply with legal conditions can accept deposits from the public. 
2. Private companies are not allowed to accept public deposits. 
3. Eligible companies must issue a circular/advertisement, obtain credit rating, and maintain deposit repayment reserve. 
4. They must file documents with the Registrar of Companies (ROC). 
5. These strict rules protect depositors from financial loss. 
6. Hence, not all companies are allowed to accept public deposits. 

Example: A private company like “ABC Pvt Ltd” cannot accept deposits from public, but “XYZ Ltd” can if it follows the rules.

1️⃣2️⃣ Equity shares get last priority in payment of dividend.

Justification:

1. Preference shareholders get dividend first, at a fixed rate. 
2. Equity shareholders receive dividend only after preference dividend is fully paid. 
3. Equity dividend depends on profits — it is not fixed. 
4. If no surplus remains, equity shareholders may get no dividend. 
5. Thus, they bear more risk compared to preference shareholders. 
6. However, they enjoy higher return when profits are high. 

Example: If a company declares ₹10 lakh dividend, preference shareholders are paid first, equity shareholders get remaining amount.

1️⃣3️⃣ The firm has multiple choices of sources of financing.

Justification:

1. A firm can raise funds through shares, debentures, loans, public deposits, retained earnings, etc. 
2. It can choose between owned capital (equity) and borrowed capital (debt). 
3. Different sources vary in cost, risk, and availability. 
4. Finance manager selects the most suitable source depending on purpose. 
5. This flexibility helps in managing financial needs efficiently. 
6. Sources can be short-term, medium-term, or long-term. 

Example: For a new project, a firm may raise funds by issuing shares; for working capital, it may take a bank loan.

1️⃣4️⃣ Company has to fulfill certain provisions relating to issue of circular or advertisement.

Justification:

1. A company accepting public deposits must issue a circular or advertisement. 
2. It must include details like financial position, credit rating, terms of deposits, etc. 
3. The circular must be filed with the Registrar before issue. 
4. It should be approved by the Board of Directors. 
5. This ensures transparency and protects depositor interest. 
6. The advertisement must follow the format prescribed in the Companies (Acceptance of Deposits) Rules. 

Example: A company planning to collect fixed deposits must issue an approved advertisement giving all necessary information.

Short Answers

1️⃣ Bondholder is creditor of the company.

1. Debenture is an acknowledgement of debt issued by a company.
   
2. Bondholders lend money and therefore become creditors, not owners.
   
3. They receive a fixed rate of interest, even when the company has low profits.
   
4. The company must repay the principal amount on maturity.
   
5. Bondholders do not have voting or ownership rights.
   
6. Their money is secured by charge on assets if debentures are secured.

2️⃣ A company has to create charge on its assets for issuing secured debentures.

1. Secured debentures are issued against assets of the company.
   
2. For investor protection, the company must create a fixed or floating charge on assets.
   
3. Charge acts as a security in case the company fails to pay interest or principal.
   
4. The charge must be registered with the Registrar of Companies.
   
5. Creating a charge increases trust and reduces risk for debenture holders.
   

3️⃣ Capital market is useful for corporate sector.

1. Capital market provides long-term finance required for business growth.
   
2. Companies raise funds by issuing shares, debentures, bonds, etc.
   
3. It supports expansion, diversification, and modernization of companies.
   
4. It offers liquidity by allowing investors to buy and sell securities anytime.
   
5. Pricing of securities becomes fair due to market forces and SEBI regulation.
   

4️⃣ SEBI is the regulator for the securities market in India.

1. SEBI supervises and regulates stock exchanges and intermediaries.
   
2. It protects investors from frauds, insider trading and manipulation.
   
3. SEBI issues guidelines for public issue, listing, disclosures, etc.
   
4. It ensures fair, transparent, and efficient functioning of the securities market.
   
5. SEBI promotes healthy development of the capital market.
   

5️⃣ Stock exchange works for the growth of Indian economy.

1. Stock exchange mobilizes savings into productive investments.
   
2. It enables companies to raise large long-term funds.
   
3. It encourages industrial growth and entrepreneurship.
   
4. It provides liquidity, attracting more investors to the economy.
   
5. By promoting investment, stock exchanges contribute to economic development.
   

6️⃣ Approval of members is not needed for interim dividend.

1. Interim dividend is declared between two AGMs.
   
2. It is declared by the Board of Directors, not shareholders.
   
3. Members’ approval is needed only for final dividend.
   
4. Board can declare interim dividend anytime based on current profits.
   
5. Articles of Association authorize the Board to declare interim dividend.
   

7️⃣ The Board of Directors can refuse transfer of shares.

1. Articles of Association give Board the right to accept or refuse share transfer.
   
2. The Board may refuse if the transfer form is incomplete or invalid.
   
3. Refusal is allowed if transfer affects company’s interest.
   
4. The Board must give valid reasons for refusal.
   
5. This helps maintain proper control over membership.
   

8️⃣ Unpaid dividend cannot be used by the company.

1. Declared but unclaimed dividend must be transferred to Unpaid Dividend Account.
   
2. This amount belongs to shareholders, not the company.
   
3. Company cannot use it for any business purpose.
   
4. After 7 years, it must be transferred to Investor Education and Protection Fund (IEPF).
   
5. Law ensures the safety of shareholders’ money.
   

9️⃣ A company can issue duplicate share certificate.

1. Duplicate certificate can be issued if original is lost, destroyed or defaced.
   
2. Shareholder must provide proof and indemnity.
   
3. Board of Directors must pass a resolution approving the issue.
   
4. Duplicate certificate must be marked “Duplicate”.
   
5. Company must maintain records to prevent misuse.
   

🔟 A company can issue only certain types of debentures.

1. Companies can issue only legally approved debentures such as secured, unsecured, redeemable, convertible, non-convertible etc.
   
2. Issue of irreedeemable debentures is not allowed.
   
3. Debenture issue must follow Companies Act and SEBI guidelines.
   
4. Only permissible types ensure investor protection and compliance.
   

1️⃣1️⃣ All companies cannot accept deposits from public.

1. Only eligible public companies can accept public deposits.
   
2. Private companies are not allowed to collect deposits from public.
   
3. Eligible companies must issue circular/advertisement, obtain credit rating, etc.
   
4. They must follow strict rules under the Companies Act.
   
5. These rules protect the interest of depositors.
   

1️⃣2️⃣ Equity shares get last priority in payment of dividend.

1. Preference shareholders have first right to dividend.
   
2. Equity shareholders receive dividend only after preference dividend is paid.
   
3. Equity dividend is not fixed and depends on profits.
   
4. If profits are insufficient, equity shareholders may get no dividend.
   
5. Hence, they receive the last priority in dividend distribution.
   

1️⃣3️⃣ The firm has multiple choices of sources of financing.

1. A firm can raise funds through shares, debentures, loans, public deposits, etc.
   
2. It may choose between owned capital and borrowed capital.
   
3. Different sources have different cost, risk, and suitability.
   
4. Finance manager selects source based on purpose and requirement.
   
5. Thus, firms have many financing options.
   

1️⃣4️⃣ Company has to fulfill certain provisions relating to issue of circular or advertisement.

1. A company collecting public deposits must issue a circular/advertisement.
   
2. It must include details like financial position, deposit scheme, credit rating, etc.
   
3. The circular must be filed with ROC before issue.
   
4. Format must follow the Companies (Acceptance of Deposits) Rules.
   
5. These provisions ensure transparency and protect depositors. 

12th HSC Secretarial Practice Important Questions 2026 Maharashtra Board Commerce class 12