Sec. 186 and Sec. 185 dealing with loans and investments by companies speak about loan given to directors and employees and not about any investment made by one corporate body in another. Referring to the provisions of t

As per Section 185(1) of the Companies Act, 2013, no company can 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: any of its directors or of a company which is its holding company or any partner or relative of any such director; or any firm in which any such director or relative is a partner. However, Section 185(2) of the Companies Act, 2013, subject to fulfilling of certain conditions prescribed therein, does allow a company to advance any loan including any loan represented by a book debt, or give guarantee, or provide any security in connection with any loan taken by any person in whom any of the director of the company is interested. Further, Section 185(3) of the Companies Act, 2013 allows giving of loans by the companies to their Managing or Whole-time Directors if the loan is given as a part of conditions of service extended by the company to all its employees or pursuant to any scheme approved by the members by way of a special resolution. Whereas Section 186 of the Companies Act, 2013, is more of a procedural requirement only which prescribes that a company shall unless otherwise prescribed, make investment through not more than two layers of investment companies and that no company shall directly or indirectly give any loan to any person or other body corporate, give any guarantee or provide security in connection with a loan to any other body corporate or person and acquire by way of subscription, purchase or otherwise, the securities of any other body corporate, exceeding 60% of its paid-up share capital, free reserves and securities premium account or 100% of its free reserves and securities premium account, whichever is more unless previously authorised by Special Resolution. Accordingly, the statement, that "Section 186 and Sec 185 of the Companies Act, 2013 dealing with Loans and investments by companies speak about loan given to directors and employees and not about any investment made by one corporate body in another" is not fully correct as while Section 185 of the Companies Act, 2013 does talks about loans to directors and employees, Sec 186 of the Companies Act, 2013 specifically talks about loans and investments by one corporate entity into another.