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Sec 185 - clarification

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Ajay Kumar

37 Points Posted on 27 January 2014

Hi Members,

How do we interpret Ordinary Course of Business in following section.

185(1)(b) - a company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the bank rate declared by the Reserve Bank of India.

Is it like the main business should be providing loans (NBFC)

any ancillary clause providing loans / guarantees - will be ordinary course of business.

Replies (2)

CA CS SUMIT GUDDEWAL

Employed

297 Points Posted on 27 January 2014

it it is mentioned in moa of the company then it can be construed as ordinary in the course of business

P C Agrawal

Registered independent director Past Ch

8229 Points Posted on 01 February 2014

We all know the way Object Clause of MoA is drafted in most of the cases. It covers lot many activities which the company has never undertaken during its lifetime. Hence I feel simply by mentioning an activity in MoA cannot be termed as 'in ordinary course of business' for the company. It will be only the actual business being undertaken by the company that will determine this, e.g. NBFC.