The Board of Myriad Ltd had taken loans from its Directors and their relatives, thereby contravening the provisions of Section 186 of the Companies Act, 2013. Further it was also found that the directors had diverted the

If a company contravenes the provisions of section 186 of the Companies Act, 2013 , every officer of the company who is in default including directors shall be punishable with imprisonment for a term which may extend to two years and with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees. Further, as regards the misappropriation of the funds borrowed by the company, the Directors, by diverting the funds for their personal investments instead of utilising them for the company's benefits, have violated their fiduciary duties towards the company including those specified under section 166 of the Act and for that violation they shall be liable for penal action under Sec 172 of the Act . Further, the act of fraudulently diverting the company's funds for their personal investments and then having lost the money, making it unrecoverable, the directors shall also be liable for punishment under Section 447 of the Act . Further, the company may also initiate action against the Directors for criminal misappropriation of the Company's funds under Section 403 and Criminal breach of trust under Section 405 of the Indian Penal Code, 1860 . Alternate Answer 4(d) In the given case the loan has been taken by the company from its Directors and therefore Section 186 of the Companies Act, 2013 (relating to loans given and investments made by the company) is not applicable and therefore in the matter of obtaining loans from Directors and relatives, the question of non-compliance of Section 186 by the company does not arises. Further, with respect to obtaining of the loan from the Directors and relatives by Myriad Ltd, it is relevant to note that, as per Rule 2(1)(c)(viii) of the Companies (Acceptance of Deposits) Rules, 2014 , while the loans obtained by the company from its Director shall not considered as a Deposit, a loan taken from the relatives of a Director of a public company is deemed to be Deposits in view of the fact that only in the case of Pvt Ltd company, the loan taken from relatives of a director are to be excluded from the definition of Deposits. Accordingly, while the loan obtained from the Directors as well as relatives shall both be in compliance of Section 179(3)(d) and Sec 180(1)(c) , as regards the part of the loan taken only from the relatives of the Directors, the company shall be additionally liable to ensure compliance of Section 76 of the Act , but only with respect to the loans obtained from the relatives of the Directors, failing which the company shall be liable for penal consequences under Section 76A of the Act . Further, as regards the misappropriation of the funds borrowed by the company, the Directors, by diverting the funds for their personal investments instead of utilising them for the company's benefits, have violated their fiduciary duties towards the company including those specified under section 166 of the Act and for that violation they shall be liable for penal action under Sec 172 of the Act . Further, the act of fraudulently diverting the company's funds for their personal investments and then having lost the money, making it unrecoverable, the directors shall also be liable for punishment under Section 447 of the Act . Further, the company may also initiate action against the Directors for criminal misappropriation of the Company's funds under Section 403 and Criminal breach of trust under Section 405 of the Indian Penal Code, 1860 .