PQR Ltd. has convened a Board Meeting on 25 th September, 2023 with one of the items of the agenda is to approve grant of loan of ₹125 crore to XYZ Ltd. for making new plant of Mug manufacturing with annual capacity of 5

As per section 186 of the Companies Act, 2013 there are some conditions on the Company to grant loan to any other body corporate or person. These conditions are as under- A resolution is to be passed in the Board Meeting with the consent of all the directors present in the board meeting and the prior approval of the public financial institution (PFI) concerned where any term loan is subsisting, is obtained. However, prior approval of PFIs is not required in case aggregate of loans and guarantees so made alongwith the amount of loan or guarantees proposed to be made does not exceed the limit prescribed under section 186(2) and there is no default in repayment of loan instalments or payment of interest thereon as per the terms and conditions of such loan to the public financial institution. [Section 186(5)] Approval of the members by special resolution required, if the limit specified under section 186(2) is exceeded. [Section 186(3)] No company which is in default in the repayment of any deposits accepted before or after the commencement of this Act or in payment of interest thereon, shall give any loan or give any guarantee or provide any security or make an acquisition till such default is subsisting. [Section 186(8)] The lending company shall make the required disclosure in its financial statements. [Section 186(4)] The company shall, within 7 days, enter the prescribed particulars in the register maintained as per section 186(9) In the given case, PQR Ltd. is the lending company which intends to grant a loan of ₹125 crore to XYZ Ltd. (borrowing company), the fact that XYZ Ltd. has taken loan from public financial institution or has accepted deposits from public are not relevant for the purpose of section 186. In the Board meeting of PQR Ltd. the approval to grant a loan of ₹125 crore was passed with consent of 4 directors out of 5 directors present in the Board meeting. However, section 186 provides that unanimous approval is required to make a loan to body corporate or person, thus the approval of 4 directors does not comply the requirement of section 186. Hence, PQR Ltd. cannot make a loan of ₹125 crore to XYZ Ltd.