Commercial International Ltd., a listed company, secures an accommodation for the residence of one of its directors by entering into a lease agreement under which the company has to deposit ₹ 10 lakh with the landlord to

As per Section 185 of the Companies Act, 2013, a company shall not directly or indirectly advance any loan to its directors or any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person. In the present case, Commercial International Ltd. has provided a housing accommodation to one of its directors. It does not amount to a loan because of the following reasons: The company has not given any deposit or advance to the director. The amount deposited with the landlord cannot be said to be an 'Indirect loan' to director; It is usual practice to give a security deposit to the landlord with whom a rent or lease agreement is entered into. Thus, the company has made the security deposit on account of bonfide business considerations; and It is of no concern of the director as to the terms on which the company secures housing accommodation for him. Thus, it is the company and not the director who has entered into the lease agreement and company can at any time use the accommodation for any other purpose and the director will have to vacate the accommodation, as and when desired by the company. Hence, this amount will not be considered as a loan to the director.