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Ordinary course of business

ACS Deepika Chowdhary (Company Secretary) (280 Points)

21 May 2015

Hi, I have following query regarding "Ordinary course of business"

My company is into Food & Beverage retail segment say we have been operation food outlets. For example Dominoes outlet etc. My company has made a sale of raw material to a group company at competitive cost i.e. at arm's length. Such sale is within threshold thus, we do not need SR at all.

However, our query is with respect to that whether this sale will be fall within "Ordinary course of business" or not as we will have to proceed for Board approval in case it does fall in "Ordinary course of business".

Please answer query as company is esentially in resturant service, can we made supply of raw material as part of ordinary course of business. Main object of Memorandum are not clearly enough.

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3 Replies

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 21 May 2015

Hi Deepika,

The facts of your case suggest that company's transaction with group company doesnot fall in the phrase "ordinary course of business", because company's business is restaurent outlet , so such supply of raw material is an exception unless such raw mat. are used by co. in its restaurent businee.

However,since threshold limit not crossed so need to pass SR as you mentioned.

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ACS Deepika Chowdhary (Company Secretary) (280 Points)
Replied 21 May 2015

Hi Saurabh, thank you for replying. Yes such raw material is utlised by the company in its resturant services. Will that be considered in ordinary course?

Pl. provide supporting for taking this view.

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 21 May 2015

As per my understanding, Since its sale of materials used in rest. the activity is in ordinary course of business(because such sale may be to other companies also) ,had it been sale of fixed assets or transaction of borrowings then the same would be out of purview of ordinary course of business(bcoz such transactions are not the companies main or ancillary business objects or activities).