Edge Ltd. was incorporated in November, 2021 in Odisha with the objective of manufacturing water purifier. The plant was commissioned in May, 2022 at a cost of ₹400 crore. It was financed partly by the promoters (80%) an

Section 186(2) of the Companies Act, 2013 stipulates that, no company shall directly or indirectly - a) give any loan to any person or other body corporate; b) give any guarantee, or provide security, in connection with a loan to any other body corporate or person; and c) acquire, by way of subscription, purchase or otherwise the securities of any other body corporate; exceeding 60% of its paid-up share capital, free reserves and securities premium account or 100% of its free reserves and securities premium account, whichever is more. Section 186(3) states where the aggregate of the loans and investment so far made, the amount for which guarantee or security so far provided to or in all other bodies corporate along with the investment, loan, guarantee or security proposed to be made or given by the Board, exceed the limits specified under sub-section (2) of Section 186 of the Act i.e. 60% of its paid-up share capital, free reserves and securities premium account or 100% of its free reserves and securities premium account whichever is more, investment or loan can be made or guarantee can be given or security can be provided only with the previous authorisation by a special resolution passed in a general meeting. Where a loan or guarantee is given or where a security has been provided by a company to its wholly owned subsidiary company or a joint venture company, or acquisition is made by a holding company, by way of subscription, purchase or otherwise of, the securities of its wholly owned subsidiary company, the requirement of section 186(3) of the Act shall not apply i.e. prior special resolution is not required. Sub-section 7 provides that no loan shall be given under section 186 at a rate of interest lower than the prevailing yield of one year, three-year, five year or ten-year government security closest to the tenure of loan. In the given problem, Edge Ltd. has to provide interest free loan to its wholly owned subsidiary. The maximum amount of loan Edge Ltd. can provide to other body corporate is ₹168 lakh [higher of {60% of (₹160+₹120)} or {100% of ₹120)}]. Edge Ltd. has already provided loan of ₹128 lakh to other companies. Thus, if Edge Ltd. proposes to provide loan beyond ₹40 lakh (₹168 lakhs - ₹128 lakhs = ₹40 lakhs), it requires shareholders' approval. However, Edge Ltd. can give loan to its wholly owned subsidiary without passing of special resolution. Again, the Section 186(7) of the Act prohibits giving interest free loan. So, Edge Ltd. cannot provide interest free loan even to its wholly owned subsidiary.