Alok, the Managing Director of Yellow Ltd., borrowed a large sum of money and misappropriated the same. Later, when the lender demanded his money, the company refused to repay, contending that the money borrowed by Manag

The problem as asked in the question is based on the decision given in the case of V.K.R.S.T. Firm vs. Oriental Investment Trust Ltd. AIR 1944 Mad 532 . In this case, under the authority of the company, the 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 has applied the loan to unauthorized activities provided the lender had no knowledge of the intended misuse. Therefore, applying the above decision in the given case asked in the question, the lender is not aware of the end use and hence loan is recoverable from the company. The lender thus will succeed in this case and recover the money from the company.