Section 293(1)(d) of companies act

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 November 2011 Co has received a sanction proposal from Bank which includes the following:

Cash Credit: 8.25 cr
LC : 7.00 cr
BG : 0.20 cr
FC/Derivative: 0.24 cr
Term Loan: 6.90 cr

Out of the Term Loan of 6.90 cr, 5.05 cr has already been availed as on 30th Sept.
The repayment of the term loan shall start from April, 2012. However, we have been paying the monthly interest for the same.

As on 30th Sept, 2011 our paid up capital is 4.98 Cr, Rev Reserve: 0.39 Cr, P/L: 2.05 Cr, all totalling to 7.42 Cr.

As on 30th Sept, The balance sheet shows Unsecured Int free loan of 2.58 Cr from promoter. Also theres a car loan of 0.04 Cr.

Please advise on the following points:
1) If i avail the facilities sanctioned, whether i count on the limits as on the last limited reviewed result i.e. as on 30th Sept, 2011, or as per last audited result i.e. 31st March, 2011 or on a current date.

2) Whether int o/s on term loan should be counted for the purpose of calulating limits under 293(1)(d) of cos act

3) whether the int free loan from promoters be treated under the above stated section? This loan is in compliance with a condition from the bank that we have to bring in a portion from promoters as our contribution to equity.

4) whether the Co. can take shelter within the limiting factor of sec 293(1)(d)?

Theres no resolution passed in the general meeting for excess borrowing.

need an early reply...

Thanks...

Charu Srivastava

Charu Srivastava (Expert)
Follow

21 November 2011 1). You have take into account 30th Sept, 2011
2). Section 293 (1)(d) of the Companies Act, 1956 states that public Company and Private Company which is Subsidiary of Private Company requires the Shareholders Consent if the Company borrows money together with the Money already borrowed by the Company exceeds paid up Capital and free reserves.
This section clearly says borrowed amount not interest Charged thereon. Therefore, no interest is counted for the purpose of determining limits under Section 293 (1) (d) of the Companies Act, 1956.
3).No, loan taken from Promoter is not included for reckoning the limits.
4). Shareholder approval is not required as the amt borrowed is less than Paid-up and free reserves.