Conversion of unsecured loan to equity

I assume loan taken is subject to section 185 of CA 2013.

Section  62(3) of CA 2013 is as below:

(3) Nothing in this section shall apply to the increase of the subscribed capital of a company caused by the exercise of an option as a term attached to the debentures issued or loan raised by the company to convert such debentures or loans into shares in the company:

Provided that the terms of issue of such debentures or loan containing such an option have been approved before the issue of such debentures or the raising of loan by a special resolution passed by the company in general meeting.

You can convert unsecured loan of a promoter company to shares by allotting them shares u/s 62(3)  of CA 2013 if, following two conditions of above sub-section and proviso are fulfilled.

1. There is an option as a term while raising the loan about conversion of loan to shares.
2. Terms of loan containing such  an option have been approved before the raising of loan by a special resolution passed by the company in general meeting.

If you are converting loan to shares u/s 62(3), then following the procedure u/s 42 - private placement is not required.

Dear Mr. Navale ,

Why Section 42 will not be applicable ??? pls give supporting .....

Because as per Companies Act there are following types of allottmets to 

1. Private placements

2.Rights Issue

3.Preferential Allotmment

4.Public Issue 

5.ESOPS/ESOS....

And Further if the allottment Procedure becomes so easy then for skipping procedure any company will take unsecured loan and then convert it to equity.Will it not be possible ?????

Thanks