Doubt-Intercorporate loans

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jagruti supekar

CA Final

335 Points Joined August 2009

Regarding Sec.372A(8):-

Whether Sec.372A is not applicable on a Infrastrcture Co.

Sec.372A is not applicable when a Co. gives/made Intercorporate loan/guarantee/investment to/in a Infrastructure Co.

Same doubt about the other Cos. mentioned in Sec.372A(8),like Banking Company,Insurance Co.,Housing Finance Co.,Pvt.Co. etc...

Problem in Nov.09 (old course) exam Q.6(a),where MDV Ltd. is an Infrastructure Co.

Let me clarify,Please.

If my Q.is not clear,let me know Please.

Thanks.

Replies (3)

CourseCart.in

Mentor at SHAYVIDZ Academy

3756 Points Joined September 2007

Originally posted by : jagruti supekar
	Regarding Sec.372A(8):- Whether Sec.372A is not applicable on a Infrastrcture Co. OR Sec.372A is not applicable when a Co. gives/made Intercorporate loan/guarantee/investment to/in a Infrastructure Co. Same doubt about the other Cos. mentioned in Sec.372A(8),like Banking Company,Insurance Co.,Housing Finance Co.,Pvt.Co. etc... Problem in Nov.09 (old course) exam Q.6(a),where MDV Ltd. is an Infrastructure Co. Let me clarify,Please. If my Q.is not clear,let me know Please. Thanks.

Dear Jagruti,

Sec 372A is applicable when the Loan is to be GIVEN or investment is to be MADE..

So non-applicability of Sec372A is wid respect to the GIVER / INVESTOR in all cases..

So if Banking Company, Insurance Company, Housing Finance Company, Infrastructure Company, Private company etc GIVES intercorporate-loan or MAKES intercorporate investments, then Sec372A is not required to be complied..

If u hv ny other doubt, then do tell me..

Adarsh

Ankur Garg

Company Secretary and Compliance Officer

114788 Points Joined January 2009

Lets understand by an example:

1. If a company gives inter-corporate loan or guarantee etc. to an Infrastrcture Co then section 372A is applicable.

2. If an Infrastrcture Co. gives inter-corporate loan or guarantee etc. to a Company then section 372A is not applicable and exempt by virtue of section 372A(8).

This interpretation is based on the use of word “By” under section 372A(8)(a). Revert if there is any doubt and correct me if I am wrong. Views of other members solicited.

Best Regards

jagruti supekar

CA Final

335 Points Joined August 2009

Thanks Adarsh and Thanks Ankur Sir.

I was taking the same interpretation of Sec.372A(8) as u both suggested but my doubt is because of Nov.09 Old course exam Ques.No.6(a).When I prepared for the exam,I took the same interpretation but when in exam hall I saw this Q.where the giver(MDV Ltd.)is an Infrastructure Co.,I thought that if I apply this interp. and answer in this way that Sec.372A is not applicable to MDV Ltd.u/s 372A(8) coz it is an Infrastructure Co.,there will be nothing special in this 8 marks Q.to write(If Sec.372A applies,we have scope of discribing/calculating ceiling limit,Existing+Proposed loan,(Paid up s.c.+Free reserves)60% etc.) thats y I wrote the ans. as if Sec.372 is applicable.I think it is wrong.

The Q. is as follows for ur referance-

Q.6.(a) MDV Ltd. is an infra-structure co. with paid up capital and free reserves of Rs.2 crores and 1 crore respectively.The Board of directors granted a loan of Rs.50 lakhs to ABC Ltd. and also gave a guarantee to IDBI for giving a loan of Rs.1 crore to RMA Co.MDV Ltd. has not given any other loan or guarantee to any one.A Group of shareholders of MDV Ltd. objected to the above deals on the ground that they are violative of the provisions of the Co. Act,1956. Applying the provi. of the said enactment relating to inter-corporate loans and investments in the given case,decide:

(i) Whether the objection raised by the shareholders is tenable?

(ii) Would ur ans. be the same in case the amt. of loan granted is Rs.1 crore and the guarantee given is for an amount of Rs.1.5 crores?

(iii) What would be ur ans. in case MDV Ltd. is a Pvt. Co. not being the subsidiary of any public limited Co.?

What should be the Ans. to this Q.?

After Yesterday's -ve result, first of all, I finished this topic in Law except the above doubt.