Section 295

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udit sharma (Querist)
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30 November 2010 Hi...

A company ABC Ltd. has 3 Directors A,B,and C. Now, Mr.D is a relative of Mr. A.If we propose to give a loan to Mr.D then the provisions of section 295 have to be complied with.

XYZ Ltd. is a holding company of ABC Ltd. Mr. R is a relative of Mr. X who is a Director in XYZ Ltd. If Mr. R apporaches the Company ABC Ltd. for a loan of Rs.50 Crores, then whether provisions of section 295 ofthe Act are applicable?

To summarise, whether the provisions of section 295 get attracted and will have to be complied with in case the Company proposes to give a loan to a person who is a relative of a Director of its Holding Company??????? Pl. clarify its urgent???????

Ankur Garg

Ankur Garg (Expert)
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30 November 2010 Hi,

It is not possible to give loan to Mr. R without CG's approval bcoz section 295 is applicable in the given case. As per my interpretation of section 295(1)(a) this clause includes the following persons:

1. Director of Lending company

2. Director of Lending company's Holding company

Both the above 2 comes under the word "such" being used in clause (a) of section 295(1).

3. Any partner or ralative of such director.

So your case is falling under point 3 above. Mr. R is relative of such director covered under point 2 above.

Thank you

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