Blue Star Limited has borrowed a sum of ₹ 50,00,000 from its director, Mr. Timothy Edwin. In this regard, the Company failed to obtain the prior approval of the Audit Committee constituted under the provisions of Section

As per Section 2(76) read with Section 177 (4) (iv), 188 of the Companies Act, 2013, and Rule 6A of the Companies (Meetings of Board and its Powers) Rules, 2014 following shall be the answers: As per Rule 6A of the Companies (Meetings of Board and its Powers) Rules, 2014, all related party transactions shall require approval of the Audit Committee and the Audit Committee may take omnibus approval for related party transactions proposed to be entered into by the company subject to the certain conditions. As per Section 177(4) (iv), every Audit Committee shall act in accordance with the terms of reference specified in writing by the Board which shall, inter alia, include approval or any subsequent modification of transaction of the company with related parties. Provided that the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company subject to such conditions as may be prescribed. Provided further that in case of transactions, other than transactions referred to in Section 188 and where Audit Committee does not approve the transaction, it shall make its recommendations to the Board. In the instant case, borrowings of sum of ₹ 50,00,000 by Blue Star Limited from its director Mr. Timothy Edwin reflects that they are related parties as per Section 2(76) and the transaction is a related party transaction though the transaction i.e. borrowings of ₹ 50,00,000 between them is not Related Party Transaction as per Section 188(1). Hence, in the given case, said transaction of borrowings, was a Related Party Transaction other than the transaction given under Section 188(1).