The Board of directors of Wood Ltd. are authorised to borrow money upto ₹ 2 crore. The Board of directors got sanctioned a loan of ₹ 30 lakh from a Bank for payment of debt liabilities of the company. But the Board of di
CS Executive · Company Law · PYQS · December 2018
The Board of directors of Wood Ltd. are authorised to borrow money upto ₹ 2 crore. The Board of directors got sanctioned a loan of ₹ 30 lakh from a Bank for payment of debt liabilities of the company. But the Board of directors used this amount towards payment of their travelling & tour expenses. Will Wood Ltd. be held liable for repayment of the loan? Discuss.
Answer & Explanation:
In a decided case of V.K.R.S.T Firm v. Oriental Investment Trust Ltd. under the authority of the company, its managing director borrowed large sums of money and misappropriated it. The company was held liable stating that where the borrowing is within the powers of the company, the lender will not be prejudiced simply because its officer have applied the loan to unauthorized activities provided the lender had no knowledge of the intended misuse. Applying the principles of the above decided case in the given case Wood Ltd. will be held liable for repayment of the loan of Rupees 30 lakhs which well within the sanctioned limits of the company.
Topics: Board of Directors and Meetings
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