issues of shares in kind

Dear All

A company has taken loan from other company-as per the instructions of the company loan is converted to share capital and interest outstanding on the loan upto date of conversion is credited to interest payable account.  After one year the company wants to issue shares for the interest payable portion--

Can they do ?

Will it amount issue of shares in kind(other than cash)

What is the procedure the company has to follow for issue of shares for the interest outstanding amount as per companies act

Thanks in advance

joseph david