The following figures were extracted from the books of X Ltd (audited). Paid up share capital ₹100 Lakh Reserve & Surplus General Reserve ₹50 Lakh Security Premium Account ₹25 Lakh Re-valuation Reserve ₹25 Lakh Total

As per section 180(1)(c), the board of directors of a company with the consent of the company by a special resolution shall borrow money, where the money to be borrowed, together with the money already borrowed by the company will exceed aggregate of its paid-up share capital, free reserves and securities premium, apart from temporary loans obtained from the company's bankers in the ordinary course of business. Temporary loans means loans repayable on demand or within six months from the date of the loan such as short-term, cash credit arrangements, the discounting of bills and the issue of other short-term loans of a seasonal character, but does not include loans raised for the purpose of financial expenditure of a capital nature. In view of the above provision the eligible amount which can be borrowed by the Board is given below: Particulars Amount (₹ Lakh) Paid up share capital 100 Reserve & Surplus General Reserve 50 Security Premium Account 25 Total (Paid up share capital + Free Reserves + Securities Premium) 175 Re-valuation Reserve is not treated as free reserve as per Section 2(43). The total borrowing of the company for the purpose of this sub section is - Particulars Amount (₹ Lakh) Long Term Borrowings 125 Temporary Loan for construction of Building 25 Total 150 Short Term Borrowings (Cash Credit Loan) of ₹50 Lakhs is considered as temporary loan and loan for construction of building in not consider as temporary loan as per the explanation for temporary loan mentioned above. Therefore, the company can borrow a further sum upto ₹25 Lakh (₹175 Lakh - ₹150 Lakh) without seeking the approval from the members. So, the board cannot borrow a sum of ₹50 Lakh as Long Term Loan without obtaining the consent of the members in general meeting by special resolution. In case of private company the provision of section 180 does not apply vide exemption notification dated 05th June, 2015, hence the board can borrow without approval.