MAA Engineering Works Pvt. Ltd. advanced an amount of ₹25 lakh to GP Construction Solutions, a firm in which the Managing Director of MAA Engg. Pvt. Ltd. is a partner in the firm. The paid up capital of MAA Engineering W

Section 185 of the Companies Act 2013 governs provisions as to loans to directors. Ministry of Corporate Affairs (MCA) vide its notification dated 5th June, 2015 provides that section 185 shall not apply to a private company;- in whose share capital no other body corporate has invested any money; if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up capital or fifty crore rupees, whichever is lower; and such a company has no default in repayment of such borrowings subsisting at the time of making transactions under this section. As per facts mentioned in the case under consideration, borrowing of the company from financial institution is ₹10 crore which is more than twice its paid up capital of ₹1.06 crore. Thus, all the conditions of notification for exemption are not satisfied. Therefore, the company should have complied with the provisions of section 185 of the Companies Act, 2013 while granting of loan of ₹25 lakh by the company to firm where managing director of the company is partner in the firm.