Can a pvt ltd company repay employee education loan using fds created for the loan?

A pvt Ltd company creates FDs for an employees education loan as a guarantee to the bank. Nationalised bank then provides the loan to the employee for higher education. Employee then works at the same company after education and repays most of the loan. Then the company decides to liquidate the FDs that were created to repay the outstanding loan balance. Employee is the future director of company and child of the existing owner and MD. Is this an acceptable practice? How would the company accounts be able to show this transaction without raising any red flags? Is this legal?