SWR is a director of MI Real Estate Ltd. whose wife Van, also works in the Company as part of the management. Van has applied for housing loan of ₹35 lakhs for construction of a house. Can the Company grant such loan? Ev

According to section 185(1) of the Companies Act, 2013 (the Act), no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt to, or give any guarantee or provide any security in connection with any loan taken by,- (a) any director of company, or of a company which is its holding company or any partner or relative of any such director; or (b) any firm in which any such director or relative is a partner. According to section 2(77)(ii) of the Act, a wife is covered as a relative with respect to her husband. According to section 185(4) of the Act, if any loan is advanced or a guarantee or security is given or provided or utilised in contravention of the provisions of section 185 of the Act. The following are the penal provisions: For Company The company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees. For officer of the company who is in default Every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees Other person to whom any loan is advanced or guarantee or security is given or provided The director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person, shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees, or with both. Accordingly, in the given circumstances the company should not grant Loan to Van. If the company grants the loan, the company, officer in default and other persons will be liable in accordance with the above mentioned penal provisions.